Discuss about the Global Business Development Entrepreneurship & Organization.
The organisation, Leung Kai Fook is centred on their principal product that is Axe universal oil. The recent trend of Argentinian, Malaysian and Singaporean companies flourishing in Argentina, have opened up avenues before the marketers of Axe Oil to promote the product in that country. This report aims at studying the market conditions of Axe Oil in Argentina.
Since the last three decades, the strong pharmaceutical industry of Argentina have prevented any peering foreign medicinal companies of foreign origin to flourish in Argentina. The jittery markets and the political turmoil with a constant strife between military rule and political dominance have discouraged foreign companies from entering the Argentine market.
However, as per Haugen, 2018, the Asian companies that have been able to penetrate into the consumer market of the country before the recent inflation of 380% that shook the country, will be able to gain market share of the retail market in Argentina. However, the percentage of success would vary from sector to sector. .
The orthodoxy of the Peronists and the policy of industrial protectionism are major hindrances for entering the foreign markets (Herrera, 2016). However, since it is a low run economy with major section attributing micro economic transactions, major retailing companies that have the potential to generate business at a high rate will get assured market penetration in Argentina.
The Axe oil is multipurpose product aimed at treating travel sickness, bites of insects, rheumatic pain, stomach ache and so on. This medicinal product is a unique formula in its category, formulated by the Leung Kai Fook Company of Singapore. The management of Axe oil’s parent company chose outdoor, transit and online advertising as the ultimate tool for promoting the product in Argentina. The organisation is very cautious about placing the advertisements and 4nsures that the placements are effective. Axe oil marketers use the media of TV, radio and newspaper depending on the pattern of the target market. The ISO 9000 awarded product has not secured registration of sales contract from the Argentine government. Hence, it the early stages of market penetration, the sales activities of the product have not been effective.
In the 1990s, the Argentine pharmaceutical sector went through large deregulation. Market prices were liberalised and many market barriers were obliterated. This market scenario initially attracted the attraction of the marketers of Axe Oil, who were busy in promoting the product in the neighbouring Asian countries till then. However, in 2002 a stringent regulatory procedure after political shuffle in the country brought trade of medicines in the country to a standstill. 19 foreign firms closed down business and Axe Oil marketing went to a state of dormancy.
Work Breakdown Structure
Since 2006, the market started to rise again, owing to the recent trend of medicinal research in the Latin American zone. Neighbouring Brazilian company Alnifolia or similar companies
of Uruguay and Venezuela shoved upon Argentina, the need to shuffle her medicine industry. This was interpreted by Leung Kai Fook as another opportunity for market penetration. Axe Oil was still a new product in Argentina, yet to inaugurate its sales. Proper marketing strategies could help Axe Oil to gain benefits of the investment appetite in Argentina.
The product is based on secret recipe formulated by a German physicist Dr. Schmeidler. The recipe was aimed at relieving all sorts of pains that people living in tropical humid climates mostly suffer. Hence, according to the views of Pederzoli and Kuppelwieser (2015), the product is supposed to have a long life range in the south American climate.
Up to the middle of the 20th century, Axe Oil was a product that was manufactured in Singapore and exported to its foreign market. Hence the price of the product included the import duties also. Moreover the product was available in a single size of 56 millilitres bottle only. However in order to make the product cheap and easy to transport in Argentina, Leung Kai Fook introduced new 28 ml bottles available for sale in Argentina.
Alternatively the product is highly cost effective also. This is because the product serves multiple purposes. A single product is applicable to members of all age groups in a family.
Axe universal oil is a product that has catered to the foreign markets for many decades. Therefore, the organisation has created a customer base in a major part of the European and Asian market. After achieving brand loyalty in the European and Asian market, the organisation should target the Latin American domain including Argentina. In Argentina, after the economic crises and the inflation, the peering foreign medicinal companies have retracted themselves. Cassasco, Bayer and other allied companies have stopped sales in Argentina. However, as per Shi, Chen and Wang (2016), the business opportunity in the market of Argentina is huge. The working class comprises of the major part of the Argentine population. Young professionals, middle aged men and women who primarily faced stress, sprain and owing to long working hours of working in computers and mobile phones are the victims of back pain and headache.
The life expectancy rate of the Argentinians is high on average. As an outcome, the old aged customers can also avail this product to relief themselves from various physical discomforts.
Globalisation and its impact upon sale of Axe Oil
The tariff license for exporting Axe oil have been received by Leung Kai Fook. However, in the recent years the import license of the organisation needed to be revised. In Argentina, the labour cost is lower than Singapore. However, the fully automated facilities do not involve manual interventions. Tariff includes packing charges, insurance premiums, and freight charges along with the charges of other formalities required before the unloading of the product at their destination (Thimann, 2016). Owing to the protectionism policy of Argentina, the Externqal tariff rate is high. It is around 20%. Again a VAT of 10.5% is imposed on top of that. Again, the rtail sales of Axe Oil would incur 3% sales profit tax with 1.5% gross profit tax. (Wang and Lu, 2016).
The parent company of Axe Oil is on a quest to achieve a patent for the product in Argentina according to the decree number 260. The product has not yet been sanctioned by the Argentinian Business authority also.
Among the Argentinian customers ere is a trend of prioritising the native product brands, particularly in the pharmaceutical industry. As per Wood, Coe and Wrigley (2016), the traditional medicines in Argentina are simple in their chemical composition. However, being an innovative medicinal product the Axe universal oil is supposed to gain a market entry easily, since no parallel product exists in the market of the country. The Axe Oil have been proven to be very effective for the treatment of rheumatoid arthritis. Nowadays, medical products like the Axe Oil are also publicised as premium products. Assuming usage of a particular product that is communicated by neighbours, relatives or friends or colleagues, is considered to be of positive social value by the Argentinian customers.
The retail sector of Argentina is controlled highly by the central authority. As an outcome, the small micro sales activities are all controlled by the authorities. However, the company is initially attempting to introduce the product through private sales via e-commerce. The local government is trying to convert the street markets that are recognised as the wet markets in to scheduled markets under the organised sector. That is however, going to be an added advantage for the small scale retail businesses (Wu and Parkvithee, 2017). The Leung Kai Look Company with single product in the industry will definitely enjoy the benefits of this market change. The entry of their products in the organised sector would be easier. The other side of that is that tax coverage of their business would be more.
Explanation of the Product
Moreover, as per Xu (2017), the government is now putting high emphasis on enhancing the size of the open market that was kept latent to the internal small scale companies in the early half of the 20th century. The recent stagnancy in the GDP growth of the country compelled the government to open up the scope of the market oriented economy. The consumers have a conception that the drugs of the native companies are 40% cheaper than the imported drugs. Therefore the organisation feels that Axe Oil should not be projected as a premium product in Argentina. Hence the packaging has been done with two basic colours blue and white.
The GDP growth rate had stunted from 11.2% to almost 8% in the last decade. However, the overall wage rate of the customers have increased. This would decrease the impacts of the slow GDP growth on the purchasing power of the customers. According to Yang, Craig and Farley (2015), the corporate income tax rate for the pharmaceutical companies is 25% which is lesser than that of the allied Asian countries where the rate is 30%.
Marketers of Axe Oil in Argentina are going to enjoy Word of Mouth publicity. They do not have the idea of launching the advertiseme3nt campaign in the near future. The product is going to be promoted through websites and e-commerce platforms only.
The vast extension of the landmass and poor network infrastructure have made it mandatory to establish warehouses at locations which might serve as connecting points for a lot of places. In this regard, the best move would be teaming up with a local distribution agency that have extensive local knowledge. As per Yin and Jamali (2016), lesser knowledge of market demographics would make it difficult to find local suppliers who have comprehensive IT capabilities to integrate the product into an existing distribution system.
The generic drug medicine manufacturers of Argentina have an acclaim of producing low effluents. The companies that does product recycling in Argentina are favoured with rebate in corporate taxes. As per Zhang et al. (2016), in case if the organisation may align their business operations to these guidelines, being a multinational company they can profit profusely.
The two specific government polices of monopoly control and protectionism of the native proponents of business might limit the chances of market occupation. Along with that, large and complex licensing criteria along with limited restrained access to the raw materials are other aspects that Axe Oil marketers need to consider.
Reasons for Export of the Product to Argentina
New entrants are gradually increasing in the Argentine pharmaceutical market. . As per Zhang, Zuo and Zheng (2016), major European companies like GSK, Roemers and Bago, Roche or Abbott are spreading business in the Argentine market. However most of the companies’ in Argentina are selling generic drugs or may be therapeutic medicines. Hence the market competition that axe oil is going to face in the Argentine market is high.
In Argentina, the Leung Kai Fook Company is going to spread their business through the partnership model. In Argentina, the partnership cost charges are not much high. It is around $2, 50,000 to $750,000. Hence, companies like Leung Kai Fook who are trying to penetrate the Argentinian market should try to establish private partnership business model in the country. In the prime sales locations, they should have partners to execute business, in 25% of the cases. The company should also have a net sales target, which the partners should try to fulfil. Paid promotions do not have scope in the sales model right now.
The new market entrants like Werner Cautreels, Selecta Biosciences and other few important companies are attempting to penetrate into the 270 billion Argentine Peso worth pharmaceutical industry of Argentina. Since Leung Kai Fook have a market experience of 50 years, they would be able to safeguard their own market in Argentina.
There are a range of local suppliers in Argentina. Most of the potential pharmaceutical MNCs have their own chemical farms. However, in Axe Oil firms, the raw materials are imported from Singapore, where their indigenous labs are situated. Hence, supplier power is supposed to ineffective on Axe Oil.
Since the product is a universal purpose body oil, the market coverage is high. Hence, the customer holdings is naturally high for the company. However, in order to increase the revenue generation from Argentina, the buyers’ power have to be considered with caution. Buyers do not have any much alternative choice for a product like Axe Oil.
At present, Axe Oil is s unique product of its category. Therefore, the threat of new substitute products is low. Although products like Dragon Balm and Tiger Balm are alternatives to Axe Oil, the market standings of Axe Oil is much higher.
The present R&D investment to dales conversion ratio is 27:10 in Argentina. New drug discovery and innovation is low in the country. Hence, the medicinal demand has created scope for the peering rivals of Axe oil.
Company background of Leung Kai Fook
The ISO 9000 awarded product has secured registration of sale and promotion under the Argentine Sales Syntax. At the advent of the product in Argentina, the sales activities were not high. However, the marketers of the organisation took to promoting the product for almost 5 years with the sales value depreciating by 0.47% every year.
In Argentina, the product has a high place, since the market competition is negligible. This would help the company to attain brand equity for Axe Oil in major parts of Argentina.
At present, the company manufactures 11 ml and 28 ml bottles in Argentina itself. However, the 56 ml bottle are still imported from Singapore to Argentina. This has helped the company to keep the prices of products below $10 pounds. As per Zhao and Wu (2017), Argentina is still a low end economy market. However, the huge population provides a large customer base for the product.
An attractive strategy was used by him to popularise the sales of the product and promote it in more medical shops around the country. He would have pamphlets distributed with famous and inspirational short stories printed on one side and the advertisement of axe oil printed on the other.
Analysing the marketing campaigns of Axe Oil in Argentina, it can be concluded that the Leung Kai Fook is not yet set to make full-fledged sales campaign of Axe universal oil in Argentina. However, they are engaged in third party sales and e-commerce sales. These sales approaches confirm that the company would conduct survey of the Argentine market for the next 2 to 3 years before they launch direct sales of Axe Oil. However in light of the medicinal advantages of the product, it can be concluded that there is a naturally large market available in Argentina. The low end economy would favour this budget product.
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