Published on Feb 15, 2016
Small companies from newly emerging markets are usually limited in their growth strategy by lack of market in their own countries. This is mainly due to low purchasing power of the population in their countries. Therefore the companies seek possibilities to grow by establishing themselves on foreign markets.
However, due to insufficient resources, the SMEs are not in a position to do enough research on the nature of the new environment they will be faced with.
As a result, they do not actually know how to position themselves strategically in terms of marketing efforts. The purpose of this thesis is to investigate the ethnic food segment of food industry and to analyze how a small foreign company manufacturing ethnic food can position itself strategically on the Swedish market. We have used a South African SME -- Ethnic Cuisine Investment Ltd (ECI) as our case company.
In order to analyze the elements of importance in ECI’s strategy, we briefly investigated the macro-environment in order to identify the drivers in this industry. However, our main focus is on the ethnic food segment of food industry, in order to understand its logic. We also scrutinize the firm’s resources and capabilities, so that we can identify the gaps that need to be filled in order for it to succeed in the Swedish market.
The complexity and dynamism of the Swedish mrket for ethnic food poses several challenges to a small foreign actor. Thus to act efficiently, the company will need to be very committed and goal oriented. The success of the small actor entering this market will depend on how well the company can organize itself in order to achieve effectiveness in its operations.
SMEs without enough financial resources tend to diversify through alliances with distributors or manufacturers in the new markets. Through such alliances, the SMEs hope to benefit from the other partners’ customers and market experience. Apart from this advantage, SMEs particularly those from emerging markets stand to benefit from the fact that they are helped by their partners in their attempt to penetrate mature markets in the developed world by drawing on the experience accumulated by the partner.
Furthermore, alliances between the SMEs from the emerging market and partners from the developed world benefit the two in that, they are able to enhance their national image by developing an international image. The overall strategy pursued by the SMEs on entry to the new market in this case is very much dependent on the distributors positioning strategy. The distributor’s positioning strategy dictates the key elements that the SME involved should focus on in order to survive the challenges facing the two partners in the business environment.
The Food Industry – Global Perspective
Although our thesis will focus on the ethnic food in Sweden, it has to be understood that this is just but a segment of the food industry. Thus, there is a need to first understand the trends and driving forces in the food industry in general within the global perspective as a background to our case. The activities involved in this industry includes; food processing, manufacturing, distribution and food service, all of which involves different activities aimed at creating value demanded by the final consumer.
In this industry today, there are several forces that are acting on and within each stage of the value chain. Such forces include issues related to food safety, production technology influences, and the desire for increased profitability, which has led to mergers and acquisitions.1 The diagram below shows the value chain in the food processing sector and the forces that are evidence in every sector in the chain.
Author: Limon Tamar, Misic Aleksandra, Wambugu Hannah, School of Economic and Commercial Law Göteborg University