As international marketing consultant of Mackie's of Scotland, the ice cream maker, it is my duty to consider the possibilities of expanding the business
By: DANIEL CAPARROS ILLESCAS
As international marketing consultant of Mackie’s of Scotland, the ice cream maker, it is my duty to consider the possibilities of expanding the business into new overseas markets, successfully. The Scottish ice cream market will be researched thoroughly. The UK target market of Mackie’s will be analysed. Finally a suitable country will be chosen to market the product to. The countries that will be selected from will be Saudi Arabia, Germany or Ireland.
The UK ice cream market is estimated to be worth £1.25 billion. Mackie’s of Scotland have been making ice cream in Aberdeenshire since the 1960’s, although they have been farming since before the turn of the century. Ice cream has been in existence since 618A.D but is rumoured to have been invented in 200B.C in China. The first documentation of ice cream in Britain is dated in 1672 during the reign of Charles II. The uniqueness of Mackie’s ice cream is that firstly it is made in Scotland, it is made with the help of Jersey and Angus cows, it is run by a Scottish family/workforce, Mackie’s is the market leader in Scotland with 45% of the market and has an 11% UK wide market. Mackie’s aim is to strengthen its UK market position and then look into potential export opportunities. These factors mean that the company and product are idea and ripe for expansion into foreign markets.
Mackie’s trademark symbol is a milkmaid milking a cow in a field. The traditional flavour of the ice cream is represented by blue packaging. It is not called vanilla but simply traditional. No flavours are added to Mackie’s Traditional. Other flavours in the range include Honeycomb Harvest, Strawberry and Cream, Caramel Choc Mint, Absolutely Chocolate as well as Organic Ice Cream. Traditional is available in 120ml tubs, 500ml, 1 litre, 2 litre, 5 litre and 10 litre tubs. Honeycomb Harvest, which has orange, blue and white packaging, is available in all sizes except 2 and 10 litre tubs. Strawberry and Cream, which has red, blue and white packaging, is available in all sizes except 500ml, 2 and 10 litre tubs. Caramel Choc Mint, which has green, blue and white packaging, is available in 1 and 5 litre tubs. Absolutely Chocolate, which has brown, blue and white packaging, is available in all sizes except 500ml, 2 and 10 litre tubs. Organic ice cream is available in 1, 2 and 5 litre tubs and is coloured green, orange and blue in packaging. Organic Strawberry is available in only 500ml tubs and is packaged with red orange and black colours. Organic ice cream costs roughly £2.99 for a 1 litre tub. Other flavours are cheaper at about £2.40 for a litre tub.
Mackie’s would want to expand internationally for a number of reasons. The UK market is relatively congested with a number of different companies competing for the highest share of the market. Wall’s ice cream is the branded leader in every segment in the market. They have been producing ice cream for 38 years longer than Mackie’s, and therefore have been able to firmly establish themselves as the UK’s favourite ice cream company, as well as in other developed and developing countries. Wall’s has a share of 31% of the UK ice cream market. Hagen Dazs controls 19% of the market. Ben and Jerry’s have 15% of the market. Mackie’s, as previously mentioned controls a respectable 11% of the market. Mars Ice Cream has 7% of the market. Tonitto has 4% of the market and other ice cream manufacturers make up 13 % of the market. Mackie’s have to look to foreign markets that have not been as clinically tapped as the UK. Countries where the ice cream market has not been fully realised, are the same countries that budding ice cream companies like Mackie’s can expose, exploit and profiteer in. Reasons to expand into foreign markets would include the rapid boom in technology which means that communication over long distances is no longer a major problem. Transportation of goods can be done much cheaper and quicker than before. A growth in the market place for the company’s product could lead a company overseas. The rise of the amount of middle class people and families could lead to better sales and expansion. The raising awareness of the product domestically means that it will be becoming better know by foreigners. Strong economic growth in countries could lead to opportunities for foreign businesses. Smaller household sizes means that more money is spendable income, this trend is in more developed countries. More working women again means a lot of their money is not taken up by their offspring or husbands, and can be spent on themselves. This trend is again in more developed countries. People being more health and environmentally conscience means there are more opportunities for healthy and/or organic products across the world. Some governments offer export subsidies which are payments from the government to a company to put their product on the global market place, these are used to decrease competition domestically.
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Mackie’s target market is the luxury end of the ice cream market. Buyers of Mackie’s would typically be adults between the ages of 21-50. Adults would buy the product partly because of their own taste and partly for the rest of their family or friends to enjoy, as it would be a change from the norm of Wall’s Cream of Cornish to Mackie’s Cream of Scottish.
The strengths of Mackie’s ice cream are that from the year 1994 Mackie’s concentrated their efforts almost solely on the manufacture of ice cream products, making them specialists in the field. Another strength is that Wall’s have been investigated 4 times by the competition commission for disallowing rival competitors to use their freezers, but now a change in the competition rules means that a little bit more space has been freed for rival companies. Thus opening the door for Mackie’s to increase its market share. Mackie’s sells organic ice cream which is an ever increasing market segment. Mackie’s ice cream has highly innovative flavours. Jersey and Angus cows produce ‘designer milk’ for the ice cream. The process from milk to ice cream takes only 24 hours. Mackie’s are unafraid of implementing new technology into their business. A new £600000 robotic milking system has just been installed, that will increase the milk yield by 15%. Mackie’s can improve profits substantially by entering foreign markets. The ‘Traditional’ flavour of Mackie’s has no added flavours. In ’96 Mackie’s built a New Product Development Kitchen that cost £1 million. Several new innovative products have been conceived and created in the kitchen since then.
The weaknesses of Mackie’s would be that in many smaller shops, the shop keeper is likely to have an agreement with Wall’s ice cream. The agreement usually means that the shop keeper can only keep Wall’s ice cream products in the freezer that Wall’s have provided the retailer with free of charge. This obviously results in a lack of variety in ice cream products, as a shop keeper is unlikely to purchase another freezer for a few miscellaneous ice cream products. Another weakness of Mackie’s is that it cannot compete with the big ice cream manufacturers in terms of marketing and promotion of ice cream products. Wall’s spent roughly £38 on advertising for their range of ‘wrapped impulse products’ in 2001 alone. This is totally unfeasible for Mackie’s. Differentiating brands and placing products in prominent positions, for smaller manufacturers is a very tough task to say the least. Wall’s have the British ice cream market sown up with 31% of the market.
Saudi Arabia is one of the possible countries that could be chosen to introduce Mackie’s into. Politically Saudi Arabia is one of the most stable countries in the Middle East. Saudi Arabia has a monarchy as its form of government. The King is head of state and makes all the big decisions in the country. The Saudi’s have a number of major trading partners. They include the United States of America, UK, South Korea, Holland, France, Italy and Singapore. Saudi Arabian law is based on Sharia, the sacred law of Islam, which is derived from the Holy Qu’ran.
Economically Saudi Arabia is one of the wealthiest countries in the Middle East. The major imports of Saudi Arabia are transportation equipment, machinery, basic metals, textiles, chemicals, chemical products, food products, animals and animal products. The major exports of Saudi Arabia are crude and refined petroleum and petrochemicals. Saudi Arabia have been net importers of food for a long time. This is because only 1% of land in Saudi Arabia is fit for farming. The gross domestic product is $173.3 billion. 5.58 Riyals are equivalent to £1. The government is the largest employer in Saudi Arabia, employing about 34 percent of the workforce. Industry employs 28 percent, including 5 percent in the oil industry, while 22 percent are in trade and other services, and 16 percent in agriculture or fishing.
Socially Saudi Arabia could come across as quite backward because of Islamic Sharia law. 99% of the 23.5 million population are muslim, who speak Arabic. Women are covered up completely except their eyes. Animals have to be slaughtered in a certain way before they are eaten. Pigs cannot be eaten at all. Gelatine products and items like it, are not allowed to be eaten, as they contain animal and insect bones. Every year a pilgrimage is made to Mecca by millions of people. This is required to be undertaken once in the lifetime of a Muslim. Visits to the country are also made throughout the year by Muslims. The main cities they visit are Mecca and Medina. Both cities allow only Muslims within their territories. Education in Saudi Arabia is free but not compulsory. Roughly 65% of Saudis are literate. Young qualified Saudis are increasingly enrolling for advanced studies at educational institutions in the UK and US.
As with most developing countries Saudi Arabia, technologically, has a long way to go to catch up with the western countries. Yet progress is made very quickly with these types of countries as their previous technology was so primitive, they can adapt quickly to a completely new system. The wealth of the nation means modernisation can take place quicker than in poorer countries, and quicker than countries that have to have legislation and funding go through a tedious governmental process. However advances in technology have benefited the military forces in Saudi Arabia.
Germany is another country that Mackie’s ice cream could possibly be sold in. Germany is a democracy whose head of state is a president who has a 5 year term. The president appoints a chancellor who is responsible to the Bundestag, the lower house of parliament. Law is passed in Germany by a Bundestag majority vote. Germany has many political parties and therefore elections are not usually won outright because of proportional representation. Political parties have to form coalition governments, much like Labour and Liberal Democrats in Scotland. Germany’s major trading partners are France, Holland, Italy, the United States of America, UK, Belgium, Luxembourg, Austria and Switzerland. Germany is politically divided into 16 states.
Economically Germany is one of the strongest countries in Europe. Even though the division of Germany from 1945-1990 damaged the country’s economy badly, the recovery has been remarkable. It was East Germany that was the main problem, this is because West Germans had to pay high taxes to fund infrastructure, environmental and industry improvements. Now Germany is a powerhouse again with a gross domestic product of $1.87 trillion. Germany now uses Euros as its currency. 1.57 Euros are equivalent to £1. Major imports include road vehicles, food products, clothing and accessories, petroleum and petroleum products, electrical machinery, office machines and data processing equipment. The major exports of Germany are machinery, transportation equipment, chemicals, textile yarn and fabrics, clothing, iron and steel, power generating equipment, precision instruments, office machines and data processing equipment. 56% of the working population are in services, 40% in industry and 4% in agriculture, forestry and fishing.
Germany has a population of 83.3 million. 71% of Germans are Christians. 2% are Muslims and 27% are other which includes Jewish and non religious. Schooling in Germany is free and compulsory for children between 6-18. Almost all Germans are literate. East Germany was heavily influenced by Soviet values and social system. Since reunification though, East Germany has abandoned these values in favour of the specialised system of the west. Germany’s cultural life lies within art, music and theatre. Germany has 4000 museums, 15000 libraries, 60 opera houses, 300 other theatres and more than 150 major orchestras.
Germany is the 3rd largest manufacturer of cars in the world. Among the producers are Mercedes, Volkswagen and BMW. Germany’s manufacturing industry is concentrated in several areas within the country. Stuttgart, Cologne, Dusseldorf, Hamburg and Berlin in particular produce state of the art automobiles, electronic equipment and office machinery as well as other products. Bosch, Siemens, the mentioned cars manufacturers and many other companies make up the cutting edge of technological know how. Germany has won 26 Nobel prizes for chemistry, physics and medicine. Technological innovations and scientific discoveries have helped Germany’s growth industrially.
The Republic of Ireland since 1937 has been an independent, sovereign, democratic state. In ’49 it became a republic when ties with the British Commonwealth were severed. Much like in Germany proportional representation is used in elections which means there might not be an outright winner, and so coalition governments are created. The Republic has always has an interest in the Northern section of the country since they were separated in 1925. Catholics and Protestants were continually in dispute, with the IRA conducting terrorist activity within and outside of the Republic. The Irish joined the European Community now called the European Union in 1973 and have abolished the Irish Pound for the Euro. Ireland’s main trading partners are the UK, Germany, the United States of America, France and Japan.
The economy of Ireland has traditionally been agricultural. More recently however the country’s industrial base has expanded which led to mining, manufacturing, construction and public utilities accounting for 40% of Ireland total gross domestic product. Ireland’s gross domestic product is $95.5 billion. Major imports of Ireland are machinery, transport equipment, petroleum and petroleum products, chemicals, cereals and foodstuffs, textiles, and iron and steel. Major exports are electrical and electronic equipment, livestock, meat, dairy products, chemicals and textiles and clothing. Two third of all exports are to EU countries. Tourism for Ireland has been big business. In the early 90’s 3.7 million tourists from overseas generated roughly $1 billion, every year, for the economy of the country. Nowadays 6 million visit the country spending $2 billion. As previously mentioned Ireland now uses Euros which have the same value across Europe of 1.57 Euros to £1. Ireland has a labour force of 1.3 million, 8% of which are engaged in agriculture, forestry and fishing.
The population of Ireland is estimated at only 2.8 million. This is due to mass emigration from 1840’s until the 1970’s, when in a period of 130 years 6.5 million people left the island. The population increased at a sluggish rate until recently, as it has again begun to slide. Ireland is a rare country in the sense that its population trends are on a downward slope. Unsurprisingly there are more Irish-Americans than there are Irish in the world today (45 million). 94% of Irish people are Catholic and less than 4% are Protestant. Roughly 2% are of other religions including Muslim, Jewish, Buddhist and non religious. Almost everyone in Ireland speaks English but about a quarter also speak Irish or Gaelic. Both Irish and English are considered official languages. Ireland has a free public school system which is compulsory for 6-15 year olds. The Irish are very outgoing, and don’t hold back when there is something worth celebrating. St. Patrick’s Day on March 17th is the most important national holiday in Ireland. 1.3 million people celebrated it this year, including thousands from overseas. National sports of Ireland include hurling, which is a game similar to hockey, it is currently featured in an advert for an Irish alcoholic beverage. Gaelic football is another national sport which resembles football. The Irish are also keen on horse racing. Interest in the theatre in Ireland is also quite strong.
Technologically in Ireland is steadily progressing with the country becoming the main European centre for the high technology sectors in manufacturing. Other major industries which have benefited from technology advances are the financial services, which largely have information computerised as do the government. The pharmaceutical industry has moved forward with the aid of technology and sophisticated devices. Technology has benefited tourism with websites set up, basically, selling the country’s advantages to foreigners. Technology has helped the military forces of Ireland, in particular the air force and navy. Deep sea fishing, which is one of Ireland’s main industries has been aided by advancing technology in terms of navigational equipment.
Sources of information which allow PEST analysis information to be gathered are internet websites, e-mailing, encyclopaedias, written reports, newspapers, television, radio, CD ROM’s and interviews with nationals of chosen nations. Sources used by me specifically included an e-mail from William Thain the Mackie’s Information Manager, the Encarta ’95 CD-ROM, Encarta ’97 CD-ROM, Principles of Marketing 2nd European Edition, Principles of Marketing 3rd European Edition, , , www.unilever.co.uk, The Sunday Herald and .co.uk.
A number of points have to be addressed when choosing a country to export or make a product in. Firstly can the strong points of the product be made, like Mackie’s being a high quality, luxury ice cream, made the way ice cream should be made with quality ingredients. The Saudis might find the high quality products appealing. The Germans would find the fact that the ice cream is of high quality but affordable price strong points to buy it. The Irish would appreciate the high quality of ingredients as they themselves produce and export dairy products.
It should be considered if a branded item like Mackie’s cream of Scottish would sell. As the fact that the item carries Scottish name and possibly its stereotypes could be unbeneficial to the product as a whole. The Saudis would be unaffected whether the ice cream was from Wales, Scotland or England. Their opinion of the product would be the same. Products from the UK would all be in the same category for them. The Germans would be generally of the same opinion but if the Scottish brand could be pushed enough, then maybe the Germans would try it. The danger is if the product is discarded as a typically inferior British product. The Irish would be a slightly different story. The similarities between Scotland and Ireland could be significant. The Irish speak Gaelic as do some Scottish but with a slight variation. The Irish are Celts, whereas a number of Scottish people have Celtic or Irish ancestry.
Mackie’s has to be a business with a face, which people can relate to and is easily accessible. The Saudis would not really be able to relate with the product of the company. A faceless organisation suits them fine. The Germans might be able to relate to the company but the product would not be very easily accessible, without setting up information in German websites, phone lines and posters. The Irish market would be able to relate to the product very easily as it could almost be mistaken for an Irish product or company. As the Irish are English speaking it would be relatively easy to make the company accessible with phone lines, extra Irish features on the website and poster campaigns.
It has to be made sure that the intended export consumers are not offended by the product. The Saudi as mentioned cannot eat certain food items but Mackie’s is suitable for vegetarians, and therefore OK. The Germans are unlikely to have a problem with the product except labelling which would have to be checked for insulting words. The Irish would have no problem with the product whatsoever.
Distribution channels would have to be considered. It could be extremely difficult to transport large amounts of ice cream to Saudi Arabia as land and sea transports would have to uses, which is not ideal. Ice cream delivered to Germany would most likely be in an articulated lorry, which would take a number of days and relatively small amounts of the product could be delivered at a time. The ice cream delivered to the Irish would be through road and sea transport. As Ireland is quite close there is little chance of the product being ruined in transport.
Currency exchange rates would have to be monitored in order to make sure Mackie’s don’t go into a market that can’t afford the product. If the product is too expensive by the export country’s standard then no-one will by the product. The product should be competitive within the market. The Saudis use Riyals the Germans and Irish operate on Euros.
The country that I would choose to market the ice cream to would be Ireland. Politically Scotland and Ireland use similar techniques, they trade with similar countries, agriculture and industry are the main sources of income. Economically Ireland is stable. The amount of tourists that visit Ireland is quite phenomenal and it would be an opportunity wasted if Mackie’s don’t enter the market there. Ireland has a low population which could be seen as a good attribute, this is because Mackie’s are already market leader in Scotland, which has a population of 5 million. Therefore 2.8 million people to target would be relatively cheap, and another market could belong to Mackie’s. Technologically Ireland is advancing. However only ice cream giants like Wall’s will have far superior ice cream making equipment than Mackie’s. Technology advances in the country could help Mackie’s in Scotland. I feel that Saudi Arabia would not accept the product with specific Scottish branding. Germany being a very nationalistic country would also reject the ice cream as they would favour German brands of ice cream.