Contents
1.
Introduction ............................................................................................................................................... 3
2.
Problem formulation ................................................................................................................................. 4
3.
Methodology ............................................................................................................................................. 4
3.1 The overall approach ............................................................................................................................... 5
3.2 Research design ....................................................................................................................................... 5
3.3 Research purpose ..................................................................................................................................... 6
3.4 Data collection ......................................................................................................................................... 7
3.4.1 Primary and secondary data .............................................................................................................. 7
3.5 Semi-structured phone interviews ........................................................................................................... 8
3.6 Limitations............................................................................................................................................... 9
4.
Market overview ..................................................................................................................................... 10
5.
Theory ...................................................................................................................................................... 16
5.1 PESTEL ................................................................................................................................................. 16
5.2 Positioning map ..................................................................................................................................... 16
5.3 Integrated Marketing Communications ................................................................................................. 17
5.4 Porters five forces .................................................................................................................................. 21
5.5 Distribution channels ............................................................................................................................. 21
5.6
The Boston model............................................................................................................................ 25
6. Analysis ........................................................................................................................................................ 25
6.1 The PESTEL.......................................................................................................................................... 25
6.1.1 Political factors ............................................................................................................................... 26
6.1.2 Economic factors ............................................................................................................................ 27
6.1.3 Social factors .................................................................................................................................. 30
6.1.4 Technological factors ..................................................................................................................... 30
6.1.5 Environmental factors..................................................................................................................... 31
6.1.6 Legal factors ................................................................................................................................... 32
6.2 Porter’s 5 forces ..................................................................................................................................... 33
6.2.1 Competitive Rivalry within an Industry ......................................................................................... 33
6.2.2 Threat of new entrants .................................................................................................................... 34
6.2.3 Threat of substitute products .......................................................................................................... 35
6.2.4 Bargaining power of customers ...................................................................................................... 36
1
6.2.5 Bargaining power of suppliers ........................................................................................................ 36
6.2.6 Conclusion of Porter’s Five Forces model ..................................................................................... 37
6.3 Boston Model ........................................................................................................................................ 38
6.3.1 Concluding on the Boston model ................................................................................................... 40
6.4 Distribution channels ............................................................................................................................. 40
6.4.1 Deciding factors when choosing a distribution channel ................................................................. 40
6.4.2 Entry modes .................................................................................................................................... 43
6.5 Interviews’ analysis ............................................................................................................................... 48
6.5.1 Interviews’ conclusion .................................................................................................................... 50
6.6 Positioning map ..................................................................................................................................... 50
6.7 Integrated marketing communications .................................................................................................. 51
7.
Conclusion ............................................................................................................................................... 55
8.
Literature list ........................................................................................................................................... 57
9.
Appendix nr. 1 - Interviews ..................................................................................................................... 59
10.
Appendix nr.2 – Dark chocolate tablets .............................................................................................. 62
11.
Appendix nr. 3 – The store check ........................................................................................................ 63
2
1. Introduction
Chocolate has always found its way through people’s hearts. Nowadays, it is a very popular
product; more and more people are buying chocolate products not only for special occasions but
also for everyday life.
Kalev is an international Estonian confectionery company; they are selling confectionery products
in Estonia, Latvia, Lithuania, Russia and Scandinavian countries (Finland and Sweden). The
company has more than 200 years’ experience and strong traditions. Now, they want to enter
Danish confectionery market but it is not easy because of increasing competition. There are lots of
products that look exactly like others, so it is hard to differentiate and product differentiation is very
important part of marketing and selling the product.
According to the article, called “Chocolate consumption and taste preferences”, Denmark takes
place number 7th in the consumption of the chocolate in the world, which makes is even more
attractive market to enter.
Due to the market becoming worldwide, companies in various industries have to upgrade their
products, implement an extra something that can be a key for selling a product. It is hard to decide
which countries to enter, how to price their products, how to adapt the production on a new market
but to do a successful market research it is obligatory to choose the right strategy.
We think that Kalev has a possibility to attract customers with a high quality chocolate because
Denmark is a high-income country, so customers take care not only about the price but also
quality is very important.
Denmark has heavy excise taxes for confectionery products, which makes it even more difficult to
enter the market. That is why, the cost-effective solution must be found in order to make the right
investments and gain the position in this competitive market. Large investments in product
development and marketing is necessary because people tend to buy the brands of chocolate they
know. It is extremely difficult for the smaller companies like Kalev to compete with the dominant,
huge companies, such as Toms since they already have a recognizable brand and positive image
toward customers.
3
Furthermore, the aim of this project is to estimate what entry strategies Kalev could use, to analyse
the competitiveness and attractiveness of the market, and to give a general overview of customers’
needs and demands. And if the company will understand the importance of customer’s needs, the
way they are thinking, they will have a possibility to interact successfully their new products on the
Danish market.
2. Problem formulation
The problem statement for this project is as follows:
Estonian confectionery company Kalev is considering to enter the Danish market. What actions
could be seen effective for Kalev in order to enter the Danish market?
To be able to answer the main problem statement, four research questions have been formulated:
1) Which of Kalev’s products might be most successfully exported to the Danish consumers?
2) What is the competitive situation in the Danish chocolate market?
3) What entry strategies Kalev should use?
4) What market communication strategies the company should consider so to reach the
potential customers in the new market?
3. Methodology
In this chapter, the methodological stances of the thesis will be revealed. It will be discussed what is
the overall approach of the project, what research design and research purpose was chosen, what
data research methods were applied in order to answer the problem statement. Limitations of the
project will be discussed as well. Methodology will help to understand the process of collecting
data, analyze and interpret the information.
Here, the process of the research is illustrated:
4
Defining the problem
and formulating the
research topic
Reviewing the literature
Planning the research
method and other
methodological aspects
Formulating conclusion
and proposals
Analyzing the data
Collecting the data
Made by: Gitana Pabrezaite
3.1 The overall approach
We rely on social constructivist point of view which states that knowledge is constructed by
learners/researchers by interacting with the environment. According to Vygotsky (1968), the
developer of social constructivism theory, language and culture play an important role both in
human intellectual development and in how humans perceive the world. The cultural values play an
important role in people’s perception and understanding of the world and like Derry (1999) states
knowledge is socially and culturally constructed that is influenced by the group and its
environments. The cultural values in different groups/nations impact their purchasing decision and
their understanding of the item that was purchased.
The analysis in the project takes an interpretivist form. Interpretivist strategy requires the respect of
the differences between people and the objects of the natural sciences (Bryman, 2012). We believe
that there is no single reality. There can be multiple realities depending of the surrounding
environment. Taking into consideration interpretivism could mean that this research will come up
with some surprising findings, since the researcher is providing an interpretation of others’
interpretations (Bryman, 2012).
3.2 Research design
The research design chosen for the thesis is a case study. This method can be defined in many
different ways. According to Bromley (1990), the case study method aims to investigate an event or
an organization with an intention to describe and explain in. It is a detailed examination of a single
object, in this case company, called Kalev. Case study of the specific organization/company, can be
5
defined as the systematic gathering of information about that organization to allow the researcher
insight into the life of that organization (Berg & Lune, 2012).
The researchers argue that cases studies cannot be generalized, which means that the strategies that
Kalev could apply for successfully entering the Danish market could not have the same effect for
other confectionery companies willing to enter the market. The solution to the problem was chosen
after carefully analyzing the company, its brand image, operations, product portfolio and etc.
However, some parts of the research can be generalized, for example, the requirements for entering
the Danish market, the economic situation in the market and etc. can be applied to other cases as
well.
3.3 Research purpose
The research purpose depends on the objectives of the research and the question, the researcher
seeks to answer: How Kalev should enter the Danish market?
There are three different research purposes that can be applied:

Exploratory;

Descriptive;

Explanatory.
The research purpose used in this project, is the combination of exploratory and descriptive studies.
Exploratory research seeks for new insights about the phenomenon. This method is useful because
the research wishes to clarify the understanding of a problem. There are three different ways of
conducting exploratory research (Sounders, Lewis & Thomhill, 2009):
1) A search for different kind of literature;
2) Making interviews with the ‘experts’ in the subject;
3) Conducting focus group interviews.
It was decided to use the first (a search for literature) and the second (interviewing the ‘experts’)
ways of conducting the exploratory research. The literature search was made in order to find
relevant theories and information about the company. Interviews with the specialists from Dansk
Supermarked and Coop Denmark were made in order to get accurate information of what Kalev
should consider if they want to enter the market using these intermediaries as a channel.
6
The biggest advantage of using exploratory studies is that it is flexible and easy to change. If the
new data is revealed while searching for the literature or after making an interview, the direction of
the research can be changed. Initially, the research focus is broad but it progressively narrowed
down as the research progresses (Sounders, Lewis & Thomhill, 2009).
The second purpose of the research is to describe accurate persons, events or situations. This might
be called as an extension of exploratory research. From the other hand, it is not enough simply to
describe ‘things’, because there is a possibility of being to descriptive. The conclusions from the
described data have to be made. This is the main purpose of using descriptive studies.
3.4 Data collection
In the literature there are two types of data: qualitative and quantitative. This subchapter will
present both of them. Qualitative research can be defined as any type of research that produces
findings that did not arrive from the statistical sources of information or mean of quantification
(Kuada, 2012). Such researches are conserved about cases and contexts. This methods is mainly
based on literature, unstructured or semi-structured interviews, questionnaires and etc. Qualitative
method might also allow the participants of the research to raise issues that the research might not
thought of before and that can be critically investigated (Kuada, 2012).
Quantitative data seeks to find numerical answers to specific elements of the research questions
(Kuada, 2012). This method helps to investigate the relationship between variables, so the
researcher will be allowed to indicate how one variable is affected by another one and is there a
connection at all.
This thesis will use both ways of collecting data: quantitative and qualitative. The decision to enter
the Danish market with tablets was based on the analysis of the numerical data provided by
Euromonitor. Semi-structured interviews, reports from Euromonitor and literature are sources for
qualitative data.
3.4.1 Primary and secondary data
During the research the primary and secondary data will be used, mainly by concentrating on
secondary data because for the research projects that require a comparison for different products,
secondary data will provide more benefits and address the objectives (Sounders, Lewis & Thomhill,
2009).
7
Quantitative and qualitative secondary data will be used by analyzing various reports,
correspondence, books and etc. This kind of sources will help to compare and discuss different
issues related with the main problem statement and its sub-questions. What is more, academic
literature, especially the books will give the basis for describing various models that were used as a
framework for the research.
The primary data was collected by using interviews. The interview can be structured, unstructured
or semi-structured. Structured interview requires to say the questions word by word without any
deviation. This type of interview is mostly used by quantitative researchers. The unstructured
interview is mostly flexible compared with the structured or semi-structured interviews. It does not
require to have precise questions prepared before the interview. The interviewer writes down the
topics he wants to discuss with an interviewee. This technique is mostly useful when the researcher
wants to get as much information as possible about the topic. This is more like a conversation than
an interview because the interviewee has a possibility to change the direction of the question.
Finally, the semi-structured interview is in the middle of both – structured and unstructured
interviews. There are questions prepared that need to be answered but the interviewee has a
possibility to explain what he means and give more information. Data sets obtained with semistructured interview will be larger if compared with structured interview but small than
unstructured.
After considering all types of interviews the semi-structured phone interview was chosen. There are
clear questions regarding the area of interest that need to be answered but additional information
can be added if the interviewee sees it relevant and useful.
3.5 Semi-structured phone interviews
After analyzing the entry possible entry modes for Kalev, it was decided that indirect entry mode,
would give more benefits for the company. Especially the cooperation with such intermediaries as
Dansk Supermarked and Coop Denmark that have most of the market shares. So, as mentioned
earlier, the qualitative, semi-structured phone interviews were used to get primary data from those
intermediaries. The first interview was made with the representative of Coop Denmark – Peer
Wejse, who is a Category manager in the company. The second interview was made with the
representative of Dansk Supermarked – Nina Færch, The Confectionery purchasing coordinator.
Telephone interviews lack face-to-face nonverbal cues that the researcher could use to pace the
interviews and to determine the direction to move in (Berg & Lune, 2012). However, the main
8
reason behind the choice of telephone interview is the location of the interviewer and interviewee.
Both interviewees were located in Copenhagen and interviewers in Aalborg.
Qualitative telephone interviews are better when the researcher has specific questions in mind, so
wants to use structured or semi-structured interviews (Berg & Lune, 2012).
The initial call to the interviewees was made in order to convince the subject that it is important for
the researchers to conduct the interviews. It was agreed that the researchers will send the
information about the company (Kalev) and the questions, so the interviewees can prepare to
answer those questions via the phone call. The interview questions and answers can be seen in
appendix 1.
According to Bryman (2012), very often there is a lack of quality while having telephone
interviews. For that reason, after conducting the interview, it was decided to send the answers to the
interviewees, so they can confirm that these are the right answers, and that they were not impacted
by the personal opinions and attitudes of the researchers.
3.6 Limitations
The decision of entering the market with tablet chocolates was made based on the secondary,
quantitative data gathered from Euromonitor, so the researchers decided not to make an analysis of
the customer and his preferences for chocolate.
What is more, it was decided to rely on business-to-business customers rather than business-toconsumers. The answers gathered from the semi-structured interviews does not ensure that the endcustomer thinks in the same way as the intermediary. The answers were based on the personal
opinion of the interviewees, which makes it more difficult to make the decisions based on the
interviews. To add more, some of the answers were no fully completed because of the limited
amount of information that was given to the interviewees.
To make the project more specific, it was decided to concentrate on one category of confectionery
products – tablet chocolate and later on, based on the information gathered from the interviews and
other data, to make it even more specific – dark chocolate tablets.
To make the positioning map, it was necessary to compare Kalev prices for dark chocolate tablets
with its competitors. The market prices for the competitors’ products were made by doing the store
check. However, the researchers are not aware of what price the Kalev would offer for the Danish
9
consumers, so it was decided to take the price that is used in other export markets. This price will
represent the price for Kalev’s chocolate in the Danish market.
The aim of the store check was to find out the brands of dark chocolate that can be found in the
market, and its prices. However, it was decided to take few stores from Dansk Supermarked chain
and few from Coop Denmark. What is more, only the local shops in Aalborg were checked, there is
a possibility that the product range of chocolate products is different in other locations.
4. Market overview
In the recent years can be seen a trend of increasing interest in the food and the food quality by the
Danish consumers. They started to pay more attention to the ingredients of the products that they
are using in a daily base and be aware of the food and drinks that can make their live unhealthy.
Also many of the Danish consumers are more and more interested in premium varieties, which
brings more pleasure to the customers and talk about their status. This is the case with the chocolate
consumers and in general the confectionary buyers. The small chocolate manufacturers which offer
very fine premium products can show the same interest trends as the big chocolate producers like
Toms Gruppen and Kraft Food.
The calendar period 2013 reached a market growth of 1% which is higher than the expectations.
The reason for the low expectations can be the early prepared forecast, which is influenced by the
financial crisis in 2009.
In 2012 the tax on chocolate and sugar goods rise a bit to 24.61 dkk per kg. This trend with
combination of the rise in cocoa price and increasing the popularity of premium confectionary
products led to a 2% unit price increase in the last year period.
10
Source: Euromonitor International from official statistics, trade associations, trade press, company research, store
checks, trade interviews, trade sources
As we can see from the table above, tablets are very popular in Denmark, and correspond for 27%
of total category sales in 2013. The consumers prefer the tablets, because they provide good quality
and brings a value that is reasonable for the price. The most popular represents for the chocolate
tablets and the plain mild and filled ones, with different flavour inside. However, due to the healthy
trend that Denmark is keen on in the recent years, the dark chocolate tablets are gaining more
market shares and becomes the preferred chocolate typo for many of the Danish families.
Source: Euromonitor International from official statistics, trade associations, trade press, company research, store
checks, trade interviews, trade sources
Another interesting trend on the market, is the interest for Organic chocolate confectionary. It led
growth up to 100% compared to the review period. It is presented on the Danish market by Irmas
Økologisk Balance and Änglamark (both from Coop Danmark A/S) in the form of tablets.
In the category “Other chocolate confectionary” is included “pålægschokolade”, which are plates of
chocolate that Danes eat on a piece of bread. The sales per capita from this category is the highest in
Western Europe
11
Another developing representative of the chocolate confectionary are the snack and muesli bars,
which sales are with 9% higher than the expectations.
The confectionary in Denmark is spitted in to 3 groups. Chocolate confectionary, gum
confectionary and sugar confectionary. With almost majority share is the chocolate confectionary
(49%), followed by the sugar confectionary (44%) and the last place but not in significance takes
the gum with around 8% of the branch shares. The competition among them is not really visible and
direct, because in most of the cases they are targeting different consumer groups. In the recent years
the boom of the premium products led to even more popularization of the chocolate confectionary,
but at the same time the permanent and loyal customers of gum and sugar confectionary are mainly
children and their families, which trend does not change much in the recent years. The premium
chocolate is mainly consumed by adults for pleasure and relaxes but also for showing status.
The most preferable and famous brands in the chocolate confectionary in the recent 2 years were
Toms, Marabou, Anthon Berg, Kinder Surprise and Ritter Sport. More information about the
producers can be found in the Porter’s five forces chapter of the project.
As a clear leader on the market is distinguished Toms Gruppen with 32% value share.
The second and third place are taken by Kraft Foods Denmark A/S and Mark Denmark A/S
A great success and increase in the sales with 12% reached ARC A/S which is part of the huge
chocolate giant Lind.
As a very crucial factor for the success on the chocolate market can be seen the innovative ideas.
Consumers are more and more interested in new variations and combinations of different flavours.
Therefore, some of the Danish producers are trying to use the typical Danish products like liquorice
in order to make a product that is close to the local culture. Another innovative idea is the
combination of chocolate and pepper and salt (Marabou Snax Cranchitos, Lindt). Taste which will
not be trustfully accepted by the majority of the consumers.
Chocolate confectionery is dominated by domestic/Nordic brands, such as Toms, Marabou and
Anthon Berg, which have a strong tradition from decades on the Danish market.
As we already mentioned above Lind has launched the variant “A touch of sea salt”, and became a
part of the manufacturers which trying to combine chocolate and salty tastes. The competitors
12
presented by Toms’/Anthon Berg’s and their super-premium brand A Xoco, has launched a self-line
based on a combination of chocolate, carrot, chilli and hazelnut. The interesting fact with these two
innovations is that they are quite welcomed on the Danish market.
The premium wave is also encouraging the producers to think about new tools for integrated
marketing communication. Example of this is Kraft Foods’ Marabou Premium, which are
developing TV adverts In order to catch consumer’s attention and bring them to companies’ home
page where the potential buyers can find interesting articles and news about the chocolate
production and recipes.
Another strategy of adding more premium feel to the product is the upgrade of the packaging. Many
marketers will say that the outlook is selling the good, so some of the chocolate manufacturers are
working a lot in this direction. For example Toms are using jars rather than plastic bags for their
line A Xoco.
Private labels is another way of adding more value to the product but also making it more pricy.
They are represented by luxury brands and possess share on the market. For example Irma’s
Økologisk Balance and Änglamark are achieving success and continue to attract more and more
premium oriented customers. The market expectations are for even more popularization of this type
of products.
Source: Euromonitor International from official statistics, trade associations, trade press, company research, store
checks, trade interviews, trade sources
As we can see from the table above, no major changes are expected in chocolate confectionery over
the forecast period. The tablets will be again the most preferable representative of the chocolate
13
confectionary straight followed by the other chocolate confectionary. The premium wave is
expected to continue reaching more and more customers by introducing new flavours and varieties.
The dark and organic tablets will continues to extend their share on the market as health and
wellness category are expected to remain growth areas.
From another point of view, the fact that people are keener on their healthy life is declining the
volume on the chocolate market. People prefer to less chocolate, but with a better quality.
The expectations for the non-health chocolate products are for really fast growth for the twist
wrapped miniatures. Big player in this field is Anthon Berg with Sweet Moments which reached
high sales in the review period. It seems that this is a perspective product and more innovative
variations are expected to be launched.
Source: Euromonitor, Chocolate Confectionery in Denmark
14
Even though, the consumers are more and more interested in premium products the, grocery
retailing are planning to implement new promotion strategies which will not leave a place for higher
prices. The discount policies of the retailers will work in favour of the customers.
As we can see from the table above, they are the main distribution channel for the confectionary
producers. Therefore they need to stick together and work towards achieving common targets.
Based on the fact that the grocery retailers are well supplied with wide selection of health and
organic chocolate, their sales will decrease in the health food stores for the forecaster period.
The expectations can be also seen as having the organic and super-premium products as a niche for
the small producers. The big players on the market are facing difficulties to attract the attention of
the buyers in this segment. The trends will continue to be in the same way. Namely, the mainstream
players will be leaders on the standard and mid-priced products, which of course does not mean that
they will not offer premium high quality products.
The market overview provided us, the researchers with very essential and critical information on
our way of answering the problem statement. One of the most important aspects that leads for
successful integration of Kalev on the Danish market is the product that they will present to the
potential buyers. Based on the statistics and investigations in the market overview we concluded
that it will be beneficial if Kalev launch their dark premium chocolate tablets with different flavours
to the Danish consumers. As we already know, the premium products are demanded here and Kalev
offers some varieties that will be innovative for the buyers.1
1
Chocolate Confectionary in Denmark
15
5. Theory
5.1 PESTEL
Source: www.dineshbakshri.com
The PESTEL model is adjustable in finding the important key issues. It is a framework of six
subjects, which are essential when the market has to be explored. After making analysis, research is
able to exclude opportunities and threats, which can be used for making further analysis.
Framework consists of political, economic, social, technological, environmental and legal factors.
Usually there are some basic bullet points for each of them, however the researched can use these
standard inspirations and add some self-selected key drivers as the market is changing all the time,
and for making up-to-date analysis it is good to consider common and new things which can affect
the market.2
5.2 Positioning map
Positioning map or perceptual map shows graphically where on the market certain product or brand
is situated. In the two ends of the chart are written the criteria’s by which the product takes defined
position on the map. In most of the cases different products or brands are compared by price and
quality, so the reader can have visual illustration of the comparison. Normally, the map shows the
actual consumer’s view of the products position, but it can be done as a consumer’s ideal point of
view which is not really useful for the marketers. Their intent is to obtain information of how the
2
www.dineshbakshi.com
16
customers assimilate certain products and brands and work towards this direction. Therefore, they
need to be careful with the validity of the information and how representative is their sample. 3
Source: http://www.marketingteacher.com/lesson-store/lesson-positioning.html
5.3 Integrated Marketing Communications
In the 21st century the marketing and communication are developing rapidly in order to make the
functionality of many economic and business processes easier. Nowadays, the commutation and
information flow are one of the most important resources. From one point of view, the information
is all round us, but the process of selecting and finding the one that is essential for our needs is a
hard part. One of most massive sources of information is the Media. It supports the people all over
the world with the latest news, create opinions and have huge influence on how the reader will
assimilate the presented information. From this point of view, they create the public opinion about
important events and political, economic and social occasions. The media is expected to be
objective and represent the information is the way it is supposed to be, but it many cases it is
manipulated in a good a bad manner. From another point of view, the media is the link between the
manufacturer, dealer and the end users. With the information flow that it provides, all these three
3
http://www.marketingteacher.com/lesson-store/lesson-positioning.html
17
parts of the communication can make a connection between each other and work towards
partnership. The media is making awareness and evoke the first steps in this complex process. 4
The media has different forms which are all around us in our everyday life. TV, radio, internet,
billboards, newspapers, magazines, leaflets and etc. can provoke our interest by presenting
information useful for us. From long time ago, the marketers and big international corporations are
using the media as a powerful weapon for manipulation. If the information or advertisement is
presented in a strategic and interesting way, it can strongly influence the mind-set of a person and
transform him to a loyal client. In the recent years as a result in the economic changes, strong
competition, news in the consumer needs and a higher requirements for the product quality, the
development of the technologies and expansion of the world markets changes the environment of
the companies and develop customer oriented market which is mainly based on marketing
strategies.
As a priority in the companies policies is set the use of mass marketing and advertisements by using
different communication channels in order to reach the customer.
Very important for every company is development of a positive image and brand loyalty, which is a
result of its production, marketing and firm policy, together with their aims and mission for the
future perspectives.
Recently, the competition for market shares and new clients and mainly connected with key
strategies and techniques for long term influence on the potential buyers. The way of
communication and emotions that the customer connect with the company name or brand are
crucial for their future relationship and the way this person can influence to the public image of the
organization. .
It became so hard for the companies to produce different and at the same time interesting messages
to the audience. People today are overloaded with plenty of information and variety of offers. Also
at any time everybody can find the information that he needs by looking in internet or using another
easy access source of information. That is why many of the organizations are using the integrated
marketing communications as a link to their customers (IMC).
4
Advertising and promotion/ An integrated marketing communication perspective, 6 th edition
18
From more than 10 years the IMC are broadly used by marketing and PR agencies all over the
world. The modern communication way between the companies and consumers includes
advertisements, sales promotions, direct marketing and PR depending on the type of product and the
marketing campaign. The different ways of communication should correspond to each other and
follow the same idea. For the client it is very important how the new product or service is presented
to him. Based on this, he collects all the available product information and based on experience
formulate certain image in his conscious. Therefore, the synchrony between the different types of
communication is so important and became key condition for building a strong image for the
audience. 5
This strong relation between the communications channels lower the risk of representation of
conflicting messages to the potential buyers. For example, the TV ad is building an image that
connect the product with prestige and high quality and at the same time sales and special
promotions are announced by another communication source which undermines the marketing
image.
When using the integrated marketing communications, the aim is to keep and maintain the
collaboration between the different channels for a long time. The best practice shows that IMC
works perfectly when all ways of reaching the customer complement each other. This can be
achieved by consistently and logical presentation of the messages in full harmony between them.
All communications of the company have to follow the same idea and logic in order to be
assimilated in the right way by the consumer. In that way the influence on the auditorium is very
broad, which useful for low budget campaigns. Here come the power of the integrated marketing
communications. By using several of communication channels and having synchrony between
them, the point of creating one concentrated image in the consumer’s mind-set is achieved.
In the integrated marketing communications, based on the campaign the agency has a certain budget
and needs to divide it between the different communications that they are planning to use in an
optimum way.
5
Advertising and promotion/ An integrated marketing communication perspective, 6 th edition
19
The Public relations (PR) is an essential part of the communication policy of a corporation. It
creates a trust among the people and navigate their interest in the right direction. This trend follows
all upcoming messages from the organization marketing campaign. Therefore, the Public Relations
are accepted as core element of the integrated marketing communications.
The flexibility of this technology provides the possibility for the corporation to precise its messages
to the customers, leading them to the actual public interest. It is very important for the agency to
develop campaign which is updated with the current events which are part of our everyday life.
Some of the leading marketing agencies are offering complex packages with include PR services.
This is one of the reasons for the huge development of the marketing agencies in the recent years.
Another reason for opening new offices or buying existing small agencies, is the ability of servicing
two competitors at the same time. In order to avoid conflict of interests, the competitors are using
different representatives of the same organization. 6
The best Integrated marketing communications practices consists of:

Sequence of the messages and company’s targets by using a variety of communication
channels;

Strategic approach with clear and realistic business aims;

Mechanism for feedback which stimulate the communication flow with customers, retailers
and employees;

Focusing on the information collection and its usage for maintaining the communication
with key clients;

6
Realistic estimation of the financial efficiency of the communication efforts
Advertising and promotion/ An integrated marketing communication perspective, 6 th edition
20
5.4 Porters five forces
Source: http://catalog.flatworldknowledge.com/bookhub/reader/5229?e=fwk-133234-ch02_s03
Model is useful for evaluating current competitive advantage, where the power in the industry lies.
After capturing the threats in the market, company can make adjustments in the strategy and make
tactical decisions. So it gives the picture of current situation and at the same time leads to
improvement of companies’ position to get into better place.
There are five main forces, which have to be taken into consideration, if the company wants to
avoid danger and succeed: competitive rivalry, threat of new entry, buyer power, supplier power
and substitutes.7
5.5 Distribution channels
A distribution channel is the method a company uses to get their products into the marketplace for
consumer use (Root, 1996). The two types of distribution channels are indirect and direct.
Indirect export
Here the company will not export its products directly but will use intermediaries. The company
will sell using the primary indirect channels. Indirect export can be divided into the following
subcategories:
Different distribution channels of indirect export
Type
7
Explanation
http://catalog.flatworldknowledge.com/bookhub/reader/5229?e=fwk-133234-ch02_s03
21
Through external distributor
Parts of (or total) the export-activities are carried
out by external distributors.
Business exporter
An independent company trading in its own
name and at its own risk. This takes over the
entire export function.
Export agent
Independent company trading in its own name,
but the manufacturer carries the costs and the
risks. This takes over the entire export function.
Procurement office
The procurement department (situated in the
home country of the manufacturer) of a large
foreign company, This procurement office is
focused on the importers interests and takes over
the entire export function.
Trading organization
Is somewhat the same as the ‘business exporter’
and is often used when the export market is
situated on distant countries and when the deals
are made as buy-backs.
Piggy backing
The manufacturers’ product is part of a larger
and active product-portfolio at the export
market.
Through co-operation
The exporting company enters a co-operation in
carrying out the export activities.
Strategic alliance
A long term co-operation between two (or more)
companies - with the common goal obtaining
synergy-advantages on the targeted export
market. Such co-operations can be in both
productions, marketing and sales.
Export-group
A voluntary co-operation between two (or more)
independent companies - with the goal of
executing parts of the export functions together.
Contractual co-op with sub-supplier
Is when the exporting company acts as subsupplier to another company in the home
country - who then exports the products as part
of the finished product. This type of indirect
export is commonly known as OEM-strategy
(Original Equipment Manufacturers).
Source: based on Michael E. Porter (1980) – Competitive strategy: Techniques for analyzing industries & competitors
As shown in the table above: If the company chooses an indirect export, they will maintain control
over product development, procurement and production. The remaining activities (the export
activities) will be controlled by other parties. This also means that company will not be in control of
22
which marketing strategy there will be applied on the export market, but on the other side it also
means that the company will not have to deal with the administration of customers and does not
need a big sales-department (Peters, 2005). In other words; the company escapes having to deal
with a lot of costs and problems, which will be dealt with by the external company that in reality
handles the export.
There are - of course - both advantages and disadvantages connected with doing indirect export:
Indirect export
Advantages
Disadvantages
• No (or very few) marketing-costs on the export market.
• Only a small salesforce is needed.
• Will not receive bad will.
• Less burden of administration.
• Less risk all in all.
• Does not need any export experience.
• Language skills are not required.
• No control over the sales-effort.
• Will not receive goodwill.
• No feedback from the export market.
• Will not get any experience with the export
market.
• High exit barriers to escape the contract.
Source: based on Tom Peters (2005) - Leadership
One of the primary disadvantages with doing indirect export is that the company will not obtain
knowledge about the export markets. This can be a great disadvantage if the company would like to
handle the export themselves in the future.
Direct export
If the company wants a more direct approach, exporting the products various distribution channels
located on the targeted export market, there are also a few different ways to choose from:
Different distribution channels of direct export
Type
Explanation
Through external distributor
Parts of (or total) the export-activities are carried
out by external parties.
Importer
Independent company that buys the products and
distribute the products in its own name and at its
own risk.
Sales agent
Independent company that distributes the products
in the name of the manufacturer, but at its own cost
23
and risk.
Distributor
Independent company trading in its own name and
at its own cost and risk.
Through own channels or by co-operation
The export functions are carried out by the
company themselves or by co-operation with other
parties.
Own sales personnel
The company will distribute its products by the
effort of its own sales personnel, trading in the
name of the company and at the company’s cost
and risk. The sales personnel is directly connected
to the manufacturers company in the home market.
Sales subsidiary company
Physically located on the export market,
distributing the products in the name of the
manufacturer - and at the cost and risk of the
manufacturer.
Export co-operation
A co-operation between two (or more) companies,
joining interests in exporting their respective
products.
Contractual sub-supplier
The company is a sub-supplier to a foreign
company, which sells the products as part of
finished products at the export market (OEM).
Source: based on Michael E. Porter (1980) – Competitive strategy: Techniques for analyzing industries & competitors
As with indirect export; direct export also presents some advantages and disadvantages:
Direct export
Advantages
Disadvantages
• Controls the entire (or part of) marketing strategy and effort.
• Goodwill will go directly to the manufacturer.
• Provides a good knowledge of the export market.
• Possibility of picking up tendencies on the export market very
fast and sufficient - and will then be able to quickly adapt to
these changes.
• Greater possibility for larger profit.
• Has the burden of the marketing
costs.
• Has the burden of the risks.
• Requires a large sales organization.
• Bad-will goes directly to the
manufacturer.
Source: based on Tom Peters (2005) - Leadership
The direct export provides a higher level of control than the indirect export - thus the company can
directly decide the employed export strategy along with the parameters of the marketing mix.
24
However; the direct export also presents some disadvantages as the company will need a certain
knowledge of the export market and a large sales organization to execute distribution on both the
home market and the export market - possibly with large environmental distances between them.
The direct export approach places a higher demand to the manufacturer about insight and
knowledge than the indirect export approach (Peters, 2005).
5.6 The Boston model
The aim of the Boston model is to rank the company’s products in different categories according to
market shares and growth rates. The four different categories are:
1) Cash cows – are were the industry is in a slow grow but the company has high market
shares. The companies are not willing to invest in these kind of products because the
investments would be wasted in a slow growing industry.
2) Dogs – these are the products that are also in the slowly growing industry but opposite to the
cash cows with low market shares. Dogs are not the profitable products, so the company
should sold them out.
3) Stars – are the best products the company could have. The industry is in a fast-growth and
the units are with a high market share. Stars also requires lot of investments so to fight with
the competition and maintain the growth rate.
4) Question marks – products that are operating in a high market growth but have low market
shares. Usually these kind of products are the newly launched ones. These products have the
potential to get more market shares and become stars.
6. Analysis
6.1 The PESTEL
The PESTEL analysis is a business model that describes a framework of the political, economic,
social, technological, environmental and legal factors at macro-level environment. The model is
used for scanning environment (environmental scanning). Furthermore, it is used as an external
analysis of the strengths and weaknesses, market research and provides an overview of the macroenvironment for an organization. It is a useful strategy technique to understand the market growth
or decline, business position and business operations.
25
6.1.1 Political factors
Political environment in the country where the company wants to operate is very crucial, since the
political stability, corruption, transparency; can make a huge impact in company’s decision to enter
the new market.
First of all, the level of corruption must be examined. According to Euromonitor International
Mapping perceptions of global corruption in 2011, on a scale of 0-10, where 0 means that a country
is perceived as highly corrupt and 10 means that a country is perceived very clean, Denmark is
scored between 9 and 10. It means that Denmark is one of the least corrupt countries in the world.
For Kalev, it means that they can operate in a transparent, honest way, with equal opportunities.
Secondly, it is important to know taxation policies, so the company can easier estimate the possible
spending and profits. Ministry of foreign affairs of Denmark states 10 reasons why Denmark is an
attractive location to do business8. We will mention few of them. First of all – flexibility of labor
regulations; hiring and firing practices, minimum wages, etc. According to the statistics (2013),
Denmark is one of the top two countries regarding the flexibility of labor regulations, so it easier for
businesses to adjust the size of its workforce in Denmark.
Secondly, as you can see in the table below, Denmark is in a 3rd place when talking about corporate
tax rate (This is a tax paid by businesses on the amount of profit they make). In 2014 it was reduced
to 24.5%, and till 2016 it will be reduced till 22%.
8
http://www.investindk.com/Establishing-a-business-in-Denmark/Taxation
26
Source: http://www.investindk.com/Why-Denmark/Compare-Denmark/Business-costs/Corporate-tax-rate
The reduction of corporate tax in Denmark would mean higher profits for the companies. This is
especially beneficial for Kalev, since the entry to the market will require lot of investments, and the
reduction of corporate taxes would improve net returns. From the other hand, the reduction will
boost the competition in the country, which is not favorable for Kalev, since the competition is
intensive already.
What is more, Denmark pursues an active foreign policy, combined with Danish core values of
democracy and human rights. Based on these values, the Danish foreign policy aims at increasing
international security and stability.
Furthermore, the Danish government has announced the abolition of saturated fat tax (introduced in
2011), which affected various industries, such as chips, chocolates, cheese, bacon and etc. By
adding this tax, the government expected to reduce the consumption of unhealthy food and improve
public health, obesity levels (The Economist: Denmark’s food taxes). However, the tax was
criticized, since it boosted the prices of the products that were not seen as unhealthy, it affected
various businesses, especially the small ones. Due to the increased prices for various products that
have saturated fat, people started to purchase more in the cross-border shopping centers (One study
have found 48% of Danes doing some cross-border shopping), which reflected into the huge tax
loses for the Danish government. So, the abolition of the ‘fat’ tax, is another advantage for Kalev
while setting the prices for its products.
6.1.2 Economic factors
The main economic factors like economic growth, interest rates, exchange rates and the inflation
rate have major impacts on how businesses operate and make decisions. For example, interest rates
affect a firm's cost of capital and therefore to what extent a business grows and expands. Exchange
rates affect the costs of exporting goods and the supply and price of imported goods in an economy.
Kalev should consider all the economic aspects that can have influence on trier way of entering the
Danish market. Most of them should be carefully followed in order to reach fast on the dynamics
economy sphere.
Denmark has an industrialized market economy and is depends on imported raw materials and
foreign trade. Within the EU, Denmark advocates a liberal trade policy. Its standard of living is
27
among the highest in the world, with a GDP per capita of $ 46314.50.9 This makes Denmark the
18th richest country in the world in 2010.
The Gross Domestic Product (GDP) in Denmark contracted 0.8% in the third quarter of 2011 over
the previous quarter. Historically, from 1991 until 2011, Denmark's average quarterly GDP growth
was 0.41%. They reached an historical high of 3.57% in June of 2005 and a record low of -2.59% in
December of 2008. 10
The inflation rate in Denmark was last reported at 0.50% in February of 2014. From 1981 until
2010, the average inflation rate in Denmark was 3.39%. They reached an historical high of 13. % in
June of 1981 and a record low of 0.70% in March of 2004. The inflation rate refers to a general rise
in prices measured against a standard level of purchasing power. (Figure 2) 11
Figure 1
Source:http://www.tradingeconomics.com/
9
http://www.tradingeconomics.com/denmark/gdp-per-capita
http://www.tradingeconomics.com/denmark/gdp-growth
11
http://www.tradingeconomics.com/denmark/inflation-cpi
10
28
Figure 2
Source:
http://www.tradingeconomics.com
The interest rate in Denmark was last reported at 0.2 %( figure4). In Denmark, interest rates
decisions are taken by the Board of Governors of the Central Bank of Denmark (Denmark’s
Nationalbank). The main interest rate is the lending rate. The Danish central bank follows the ECB
(European Central Bank) and the lending rate will be raised or lowered when the ECB changes the
refinance rate. From 1972 until 2010, Denmark's average interest rate was 6.23%. They reached an
historical high of 13% in February of 1980 and a record low of 0.75% in January of 2010. (Figure
3)12
Figure 3
Source: http://www.tradingeconomics.com
12
http://www.tradingeconomics.com/denmark/interest-rate
29
Figure 4
Source: http://www.tradingeconomics.com
6.1.3 Social factors
In 2030, Danish population will reach 5.9 million, an increase of 6.1% from 2012 (Euromonitor:
Denmark in 2013: the future demographic).
Danish people are basically well-educated and well-informed. So, it can be assumed that they care
more about their surrounding environment, like what they eat, how the products are made, what is
the image of the manufacturing company.
While talking about consumer buying patterns, the customer in Denmark are not very loyal to the
particular retail brand. Danish grocery shoppers are more concern on price and quality
(Euromonitor: Consumer lifestyles in Denmark). So, it is very important for Kalev to create an
image of a company with high quality standards. Especially because Eastern European countries do
not have a very positive image on quality for the Danish customers.
Food, including confectionery products, is becoming a source of pleasure and status since as
mentioned before Danes are becoming more informed and educated. Buying premium grocery
products, including premium chocolate, has become important to maintain a high social status.
What is more, Danes believe that premium products, with higher prices, are healthier than the
cheaper alternatives (Euromonitor: Chocolate confectionery in Denmark).
6.1.4 Technological factors
Technology has progressed fast over the past few decades, and have positive benefits. Although
innovation has led to a growing problem of technological obsolescence and the rate of obsolescence
is increasing.
30
The Danish system of innovation is characterized by many small and medium sized enterprises
(SMEs) with only a few (in international terms) large firms. The specialization pattern is dominated
by products with low R&D intensity. However, Danish firms are innovative (making product
innovations, processes innovations, and organizational innovations). But the innovations provide an
increase value in products and processes. Only a small part of the Danish firms introduce new
products to the world market.
The innovations often reflect a practical and experience based interaction between skilled labour,
engineers, and marketing people. The firms build up competencies by employing experienced
labour on a flexible labour market and by intensive inter-firm collaboration. 13
Kalev should consider the level of technology development in the chocolate production in
Denmark. They could use the assistance of local experts, in order to follow the trends on this
market.
6.1.5 Environmental factors
Danish society has become better at caring for the environment. In a number of sectors, the growth
in production has been successfully increased without increasing the pressure on the environment.
Examples are the emissions to the atmosphere from energy production and discharge of nutrients
from industry and households. Over the past 10 years, the economic in Denmark has an averaged
growth of approximately 20%. Agriculture has become more efficient and consists larger, more
specialized companies. The energy sector uses more natural gas and renewable energy. Road traffic
has grown by around 3.5% annually. This trend is expected to continue.
Moreover, the air has become cleaner. In the towns, the main environmental problem is now the
particles emitted by traffic. The aquatic environment receives much less nutrients than 15 years ago.
Contamination of the groundwater is an increasing problem, while consumption of water has
decreased by just over 30% since 1989. 14
13
14
http://www.business.aau.dk/ike/upcoming/NSI_Feb05.pdf
http://www.mex.dk/uk/vis_nyhed_uk.asp?id=4275&nyhedsbrev_id=542
31
6.1.6 Legal factors
Each European country operates a clear system of labour legislation and judicial enforcement. This
is often closely linked to the process of collective bargaining and social partner consultation
arrangements.
The Danish competition law is similar to the corresponding EU legislation. The Danish system
contains four core subjects, regulated by the Danish Competition Act: (1) prohibition on anticompetitive agreements, (2) prohibition on the abuse of a dominant position, (3) merger control
regime and (4) state aid. However, the Danish regime does operate with its own defined exemptions
in relation to both anti-competitive agreements and merger control. 15
The Danish labour market is characterised by a high unionisation rate. In January 2014,
approximately 2.6 million employees were members of a trade union, equivalent to 80% of the total
work force in Denmark.
16
On the Danish labour market, employment conditions are generally
regulated by collective agreements reached by trade unions and employer associations. For
example, they determine working hours, minimum salaries and terms of notice. In the Danish
labour market, 67% of Danish workers are members of a trade union (2010).17 Foreign workers and
companies can also become members of the Danish organisations. Moreover, it is only in
exceptional cases that labour market conditions are regulated by law. However, there are minimum
requirements set by law in some areas. Examples of these include: the Danish Holidays Act, the
Danish Employment Contract Act, the Danish Act on Equal Treatment, and the Danish Act on
Allowance for Illness or Parental Leave.
If an employer is not a member of an organisation or has concluded an adhesion agreement, the
terms of employment are regulated by the contract agreement between the employer and employee
and the legally stipulated minimum requirements. 18
Kalev should be well informed about all types of legislation that are connected with their business
in Denmark. Both Denmark and Estonia are countries in the European Union, but still they have
some local laws that should be clear for both sides of the trading process. In order to be in touch
with the most relevant and updated legislation, Kalev could use local lowers when they have
difficulties.
15
http://www.mwblaw.dk/Doing%20Business%20in%20Denmark/Competition%20law.aspx
http://www.worker-participation.eu/National-Industrial-Relations/Countries/Denmark/Trade-Unions
17
http://www.worker-participation.eu/National-Industrial-Relations/Countries/Denmark/Trade-Unions
16
18
https://www.workindenmark.dk/
32
6.2 Porter’s 5 forces
Source: http://globaleduc.wordpress.com/2012/09/17/book-review-competitive-strategy-by-michael-porter/
In this part of the report, the competition on the Danish market is going to be analyzed by using
Porter’s Five Forces model.
6.2.1 Competitive Rivalry within an Industry
The Danish chocolate confectionery market has a lot of global producers’ names. The most sold
chocolate is plain milk. However, in recent years it is a tendency to buy dark chocolate. For that
reason, the most successful brands are different dark chocolate tastes. Major producers who sell in
this market dark chocolate have the biggest shares of chocolate market. Danish consumers demand
for healthy, high-quality and sustainable products, so producers try to construct an environmentally
friendly image (Euromonitor report: Health and Wellness in Denmark). Below we will describe
some of the top producers of chocolate, who take the biggest market shares in the Danish chocolate
industry.
Toms Group A/S
Toms Group A/S is a domestic manufacturer of chocolate confectionery in Denmark and has a long
history and strong traditions.
The company has the first position in the chocolate market according to market shares, 32 % of
Danish chocolate confectionery market in 2013 (Euromonitor: Chocolate confectionery in
Denmark). Toms Group owns such well-known brands as Anthon Berg, Guld Barre, and Yankie.
33
The company is more focused on standard mid-priced segments but recently is thinking of taking
more focus on premium segment.
Toms Group is a strong competitor because it is a local producer. They understand Danes living
style and know how to advertise themselves. They mention the importance of healthy living and
have been supporting different types of sport such as speedway, boxing, football and handball. The
company has a strong image on the market.
Kraft Foods Denmark A/S
Kraft Foods Denmark A/S belongs to Kraft Foods in Scandinavia. It is the second biggest player in
the market. They produce such brands as mid-priced and the premium-priced Marabou, Twist and
Daim. Marabou is the third best-selling chocolate brand in Denmark (Euromonitor: Chocolate
confectionery in Denmark).
The company amplifies the engagement to society, focus on children sponsorship and is a sponsor
of different kind of sports. Their sponsorship has led them to a positive image and increased sales,
so they try to involve different kinds of activities to their sponsorship list and in this way attract
different customer segments.
Mars Dannmark
Mars is the third largest player in the confectionery industry in Denmark. The company operates not
only in the chocolate industry but also pet care and food. As it is stated in the official website, the
company focuses on five principles19: quality, responsibility, mutuality, efficiency and freedom. As
the other main player on the market, Mars Danmark, pays a lot of attention on corporate
responsibility which is very important so to create a strong image on the Danish market and
globally.
6.2.2 Threat of new entrants
Both countries (Denmark and Estonia) are a part of the EU, so there are no quotas or tariffs on
exports to Denmark. There is a high-income economy in Denmark and takes the first position at
“Best countries for businesses”. So it is natural that foreign investors try to enter this market.
19
http://mars.com/denmark/en/who-we-are.aspx
34
Imported goods volume is rising every year20. Competition is really high (according to the business
competitive index - Denmark is at fifth place). On that account, Danish producers tend to find new
markets for business e.g. expand to Eastern European countries. However, entry and exit barriers
are not high. Of course, it is important to have enough capital and to invest it safely and profitable.
Other companies are well-known and have big market shares and thus Kalev should try to change
buyers’ habits to buy the favorite brand chocolate and convince to try their production. So for a new
entrant, it would be a huge task - how to represent a product and find a buyer.
There would not be a language barrier because the predominant second language is English in
Denmark (it is used as business language too). Danish culture is open-minded and equality is very
important. Maybe for that reason the politics is not corrupt in this country. The political risk in
Denmark is very low21.
Usually a common entry barrier comes from distribution channels; however the supermarkets’
system is well developed in Denmark. Kalev can confront this threat if other competitors will resist.
All producers fight for the best place on the shelves.
For example, a company such as Toms Group which has an intensive distribution, it means they sell
at almost every market because this company puts its money on trade through as many negotiators
as possible to get as large yield as possible. Distribution is an important factor because the company
wants to know which distribution channels their competitors use. By that, they have the possibility
to find out if they have any chance to sell their product on that market.
6.2.3 Threat of substitute products
There are lots of other companies which produce chocolate and they are competitors to Kalev. That
also means that there are lots of products which can substitute Kalev’s products.
Moreover, it can be snacks, gum, ice-cream, fresh fruits, dried fruits, marshmallows, cake and
biscuits, muffins. Some of them are more healthy than chocolate while other are more unhealthy. As
mentioned before, people take care to have a healthy lifestyle so they consider what to eat. As
salaries are high, they can try more alternatives. However, the recent years have showed that Danes
20
21
http://www.fita.org/countries/denmark.html
http://www.ducroiredelcredere.co.uk/Webduk/WebSite.nsf/AllWeb/Denmark?OpenDocument&Disp=1
35
do not prefer cakes and biscuits. Sellers try to provide the best fresh fruit assortment. Eco-labels are
also very popular now. Of course chocolate producers make much more advertisement, so people
still tend to buy chocolate. However, they prefer dark chocolate with high cocoa content.
Furthermore, if a consumer buy another chocolate than a company’s own chocolate, it is typical a
cheaper chocolate which look or taste like the company’s chocolate – just cheaper. If the product
does not have something unique it is easy to substitute. And it also has to be a reasonable price so
the consumer does not buy the competitors’ products.
The company should be aware that substitute products can come in many shapes and sizes and do
not always come from traditional competitors. It is more difficult for a company to try to raise
prices and make greater profits if there are close substitutes and switching costs are low.
So the company should stay closely with customer preferences and differentiate its product by
branding.
6.2.4 Bargaining power of customers
Many companies see a threat from their buyer – if the buyer drops the companies’ product to buy
the product from one of their competitors they will lose income. So the company has to live up to
the demand from the consumer which could be a demand of price, taste or quality.
If Kalev’s competitors have positioned themselves in the mind of consumers, it can be difficult for
Kalev to get into the mind of their target group because the consumers already prefer other brands.
If looking at the buyer power, the Danish market is not attractive because retailers are concentrated.
So, retailers have a chance to lower Kalev’s production prices. It is very important to find wellskilled negotiators to save the fixed price and to get a better place on the shelves.
6.2.5 Bargaining power of suppliers
Any business requires inputs – labor, raw materials and services. The cost of the inputs can have a
significant effect on the company’s profitability. If suppliers will have a possibility, they will sell
the necessary ingredients to the company at the highest price and will provide with no more services
than necessary. So it is very important to negotiate and find the best agreement between the
company and its suppliers or if it is possible to find suppliers that can offer you better conditions.
But also switching from one supplier to another can be costly.
36
Suppliers can have lot of power if there are only a few suppliers of a specific ingredient. Sometimes
the supplier influences the company, if the supplier has too many decisions of terms of delivery or
prices for delivery, and the company does not have anything to say, it can end up by having an
effect of the price of the product, when the supplier has too much power.
Ghana is one of the main suppliers of cocoa beans in chocolate market. Kalev and some other
companies from the above mentioned brands in Denmark buy this raw material from Ghana.
Because of that Kalev can confront not “clear games” between other producers (price rising, the
lowering of the quantity).
It would be a good idea for Kalev to support supplier’s countries because usually wages in these
countries are not high and also there is a possibility that children can become an employee of a
supplier. In high-income countries such as Denmark, this behavior is not acceptable. Chocolate
producers cannot stop this. Just because of that reason that they buy these raw materials from
suppliers they can ruin their image. That is why companies are supporting suppliers’ countries
(sport, children education and etc.).
6.2.6 Conclusion of Porter’s Five Forces model
After analyzing competition by using Porter’s Five Forces model, we figured out that Kalev has a
good possibility to find a niche on the Danish market because they have a wide range of different
kinds of chocolate, especially dark tablet chocolate.
There are a lot of supermarkets, hypermarkets, and retail shops but they have a high buying power,
nonetheless Kalev is from Eastern Europe, it gives some advantages. First of all, lower prices, it is
natural that the chocolate would cost cheaper than Danish manufacturers’ products (the quality is
still very high). Also, lower prices can attract retailers. Secondly, there will not be any language
barriers.
To sum up, there is one barrier for Kalev – competition. Competitors are trying to enter the market
with the new products but they do not want to create new brands (they keep on old brands) and
Kalev would be an unknown factor on the Danish market.
37
6.3 Boston Model
Taking into consideration the information that was found about Danish Chocolate Confectionery
market, it was decided that Boston Model will be the most appropriate to analyze and see the trends
of the market, which products are profitable now, which will be profitable in the future and which
are just a deadweight. This model will also help to decide which types of chocolates can be
successfully introduced to the Danish market.
There are 6 main chocolate confectionery product types on the market according to the
Euromonitor:
• Tablets
• Countlines
• Bagged Selflines
• Boxed assortments
• Seasonal chocolate
• Chocolate with toys
Source: Euromonitor: Chocolate Confectionery in Denmark
38
Source: Euromonitor: Chocolate Confectionery in Denmark
Cash cow
Considering data from the tables above, we can see which product can be stated as a cash cow.
Despite the fact that Boxed assortments is expected to have the decrease in volume from 2013 till
2018, it still has high market share (the 2nd place in the sales by volume) and the second table shows
that its value growth has been decreased by 6.6% during 5 years period. So it fits the definition of
Cash Cow – a product with a great market share, but at a market with a dying market growth. Also
need to take in consideration that these were the years of deepest recession and when the economic
situation in Denmark will become stable again the growth rate might turn back into positive despite
the fact the forecast is not favorable for boxed chocolate.
Dog
While analyzing the second table, it is clearly seen that according to Boston model – countlines is a
“Dog” product, having the largest drop in current value growth. “Dog” – means product range that
poorly contributes to the company’s profit. Nowadays marketplace is experiencing a substitution
effect between the two product types’ tablets and countlines. The last have higher price per unit and
lower quality, thus it is obvious that Danish people who want to be healthier and cut the expenses
will choose product which will suit their needs best of all and countlines are not following customer
needs anymore.
39
Star
Tablets is a product that has to be considered as a “Star”. In terms of actual market value, tablets
sale expanded the most in 2018. Its positive growth was closely consisted to the Danes’ increased
taste for premium-quality products, health issues and growing demand for value for money. Tablets
typically consists of better-quality chocolate and a have a lower unit price than, for example,
countlines. Taking in consideration trend of Danish taste in chocolate confectionery, tablets are the
most attractive product to invest in and develop. Increase in tablets consumption is counted as 9.8%
since 2008 till 2013. When economic situation is going to improve, this field will grow even faster.
However, as this business area is the most attractive it has the most intensive competition.
The most successful premium tablet brands are - Anton Berg, Lindt and Marabou premium, all
marketed on their high cocoa content. Banking on recent years’ brand development of its premium
dark tablet range Marabou Premium, the company took a large share of the market. This
information shows that it will be difficult to enter this market. Kalev will need to spend a lot of
money on marketing their products to make Danish customers being attracted of buying it.
Question mark
Chocolate with toys has low market share – 450.2 tones comparing to tablets that have 5.781 in
2018, but still the “Euromonitor” forecast says that tablets and chocolate with toys are the two
strongest categories in chocolate confectionary. According to this information, it would be good
idea for Kalev to think about making some new production in chocolate with toys field.
6.3.1 Concluding on the Boston model
Summarizing all information and analyses that were made above, we can state that there is clearly
seen trend of Danish people choosing more tablet chocolate, which is also seen as a healthier
alternative compared with other confectionery products. However, there is a very hard competition
in this business area, Marabou, Anton Berg and Lindt are the leaders and share most part of the
market, so Kalev needs to make much deeper analysis of this market field to see all of the
prospective and risks. This conclusion was made according to Euromonitor.com “Danish chocolate
confectionary market” report.
6.4 Distribution channels
6.4.1 Deciding factors when choosing a distribution channel
Kalev’s choice of distribution channel must find its basis in analyzing the external factors on the
targeted export market, and the internal factors of the Kalev Company itself.
40
External factors on the export market
By external factors we mean such factors as geographical size, growth and competitive situation.
The larger the geographical size of the export market in target, the more effort the exporting
company has to put in. Companies choosing to establish exports to countries with large
geographical size often needs to be present on the market themselves - in order to pick up changes
in the particular market. In such cases it will probably not be wise to let other parties handle the
distribution (Lymbersky, 2008). However; Denmark must geographically be considered a small
market.
The environmental distance
The next factor playing a deciding role in the choice of distribution channel, is the environmental
distance between the home market and the targeted export market.
When handling the economic factors, it will in most cases concern the current account of the
targeted export market. Countries with deficit on the current account will hardly stimulate the
import of foreign products. In such cases it is probably best for the exporting company to directly
invest within that particular country. However; Denmark has a relatively large surplus (and
continuous growth) in its current account. The political system of the targeted country is also of
significant importance when deciding on the distribution channel. Countries that places large tariffs
on imported goods are often interested in attracting funds – which makes solutions such as joint
ventures, licensed production or perhaps even direct investments, the attractive choice when
exporting to such countries. However, as mentioned previously, tariff barriers have fallen among
the member states of the European Union. In other countries here can be very attractive taxcircumstances, with the goal of attracting foreign investments. But, as mentioned previously,
Denmark is an extremely high taxed country.
Cultural differences
The greater the cultural differences between the home country and the targeted export country, the
greater the communicational problems are bound to be. In such cases it is often successful to
employ locally aware importers.
Geographical factors
Geographical factors are in this connection meant as climate factors, physical distance (in
kilometers), along with availability via seaways, airways or land-transportation.
41
The physical distance to the targeted export market plays a significant role in relations to logistics as companies producing large objects, which are difficult to move, often will have the best
profitability from producing the products in that country.
However; from Estonia to Denmark there are several relatively good ways of both seaways and
land-transportation, which can be used effectively.
Production factors
When investing in establishing a production the export market, it is crucially important that such
things as raw materials, labor force, etc., are relatively available in that particular country. If this is
not the case, it is often most profitable to ship the products to that market - as supposed to
producing them at the market. When exporting chocolate to Denmark, the production factors
immediately works against establishing production in Denmark. Although raw materials (such as
sugar) are present and other materials equally available in Denmark vs. Estonia - the work force and
taxes are relatively unfavorable. This is also consistent with the proclaimed over-capacity at Kalev’s
already established factories in Estonia.
Internal factors within the company
The internal factors within the company also have some degree of effect on the choice of
distribution channel.
Product- and production factors
The company’s product factors, including which competencies the company has with its products,
are important to analyze when choosing an international distribution channel. If the company
produces simple standard products, which is/can be produced in the targeted export country, there is
usually no basis for even exporting to that particular country (which is probably one of the reasons
that Toms Gruppen A/S is the undisputed leader of the chocolate-market in Denmark). But if the
products to be exported are sufficiently differentiated (such as “Ritter Sport” and “Kinder
Surprise”), there might be basis to establish the export. However, it also depends on how the
company and the customers see the product - as highly differentiated or not.
Again it is necessary to distinguish between what type of product the company wishes to export - if
the product requires much and fast service (like trucks and contractor machinery), it will often be
best to establish a daughter-company within the targeted export country.
42
The environmental requirements and production costs are two very coherent factors. In Denmark
the production costs are relatively high, which (in the same ways as the environmental
requirements) may cause companies to move their production to other countries. Thus it is probably
not attractive for Kalev to set up production in Denmark.
Resources
It takes a great many resources to export - including funds, work force and supply of raw materials.
Furthermore; it is important that the employees have the necessary language skills to communicate
with the targeted export country.
Commitment
The mangers’ commitment is crucial if the export is to succeed - both with the decentralized and the
centralized solution. If the company wishes to control the entire export, all the way to the end-user it will be necessary for the company itself to be present on the targeted export market.
6.4.2 Entry modes
When deciding which mode of entry to use, companies have many options. Usually the decision
between a small-scale and a large-scale entry can be decided upon considering the equity
(ownership) of a company (Hollendsen, 2010) as well as the extent of resources and the degree of
control the company wants to exercise. A large company will usually have more employees that can
be assigned to the task of achieving direct sales compared to a smaller company or a sole operator,
who may find indirect export more suitable for their size. Furthermore, if the company has much
capital and unlimited time to spend, then it does not have much lose by going directly. However, if
time is very important e.g. due to limited funds, the indirect channels are more likely to bring a fast
sale.
As described earlier, the Danish chocolate market is characterised by many competitors and fierce
competition. Therefore, choosing a non-equity mode (e.g. exports and contractual agreements) can
be a good idea since they usually reflect smaller commitments which means that e.g. the financial
stakes are not as high as compared to doing an equity mode such as joint ventures or subsidiaries
which will require a substantially larger investment.
43
If deciding to enter the Danish chocolate market through a non-equity mode, Kalev can consider
using direct export or indirect export. These two export modes have numerous advantages and
disadvantage. Both modes will be described as well as examined.
Direct export
Logistics
Costs are an important factor to consider for Kalev to export company’s products in Denmark. If
they do direct export than it may be more cost effective and Kalev will have more control on price
of their products. From the logistics point of view, Kalev costs include: production, transportation,
and warehouse cost. Those things will depend on Kalev: how they are going to maintain their costs.
The direct export provides a higher level of control than the indirect export - thus the company can
directly decide the employed export strategy along with the parameters of the marketing mix.
However; the direct export also presents some disadvantages as the company will need a certain
knowledge of the export market and a large sales organization to execute distribution on both the
home market and the export market - possibly with large environmental distances between them.
The direct export approach places a higher demand to the manufacturer about insight and
knowledge than the indirect export approach.
The choice of a direct export is often based on a desire to gain a greater profit - as there are fewer
parties to share with.
Order preparation time means how frequently Kalev can meet customer demand from the market. If
it is direct export than order preparation time could me more than indirect export. If Kalev could not
fulfil market demand at a right time than there will be a chance to lose market share and damage
brand loyalty from customer perceive value.
From the logistics point of view, time is an important factor for Kalev to export their products to
Danish chocolate market. To acquire more positive product image, brand image, customer
perceived value, and market share, Kalev has to deliver the right product, at a right time, to the right
customers. So time efficiency will depend on how Kalev transports their products from Estonia to
Denmark and how they are reached to their end customers.
Stock level: if Kalev would like to do direct exporting, then they may need a warehouse in
Denmark, where they have to keep their products but it never is a good idea to store huge amount of
chocolate in store room in order to cost holding minimized. Although chocolate products are non44
perishable for a certain time period, so that is why they need to balance their stock level according
to the market demand in spite of speculative idea.
If Kalev choose direct exporting, then they will have more control in the market in terms of product
pricing, to their employee in Denmark, and product promotion. So if Kalev’s choice is direct
exporting, there will be no doubt that they can take control over the production. Kalev will get a
direct understanding of the buyer or the end-user needs and ability to customize their products.
Customer relationship will be important factor for Kalev to control over market. When Kalev has
control over the market, they might be able to identify new opportunities.
Indirect export
When considering entering the Danish chocolate market, numerous factors needs to be taken into
consideration, such as intermediaries and logistics, in order for Kalev to make sure that they do the
right things without spending unnecessary resources which could be saved or spend elsewhere more
efficiently.
Intermediaries
Kalev needs to consider what type of intermediaries they want to conduct business with. If they
choose to go indirectly. There are different options which have different advantages and
disadvantages but some of the most common intermediaries to choose from are wholesalers, export
management companies and agents. By using an intermediary, Kalev most likely can count on
having a partner that knows the Danish chocolate market very well and thus will be able to provide
e.g. supermarkets and convenience stores with the best product combinations possible. Furthermore,
by using Danish intermediaries, Kalev may be able to profit by their current networks and contacts
in the market thus giving them a better possibility of making more deals and as well as them being
profitable.
When looking at some of the major Danish intermediaries a few stand out. These are the two retail
chains, Coop and Dansk Supermarked, who combined provide chocolate products for many of the
Danish supermarkets and hypermarkets including Fakta, Kvickly, Super Brugsen, Føtex, Bilka and
Netto. Therefore, considering doing business with one or both of these intermediaries can turn out
to be a very good decision for Kalev, as they will be able to benefit from the two retail chains’ large
distribution networks and have their products distributed to many of the major supermarkets and
hypermarket in Denmark. In connection with choosing which type of intermediaries to conduct
45
business with another thing to consider is the costs of intermediaries. Some intermediaries may be
more expensive to do business with than others and may be able to bargain a lower price, higher
commission fees, bulk discounts, etc. which in turn can lower the possible profits for Kalev. Some
intermediaries may be cheaper to work with in the beginning but can turn out to be more expensive
in the long run and give smaller profits than hoped for.
It will also be important for Kalev to analyse the quality of the available intermediaries in regards to
what they wish to get from doing business together. The conflicts that can arise may be due to
different goals between the parties or different strategies as how to market and sell Kalev’s
products. Therefore, making sure to have a good relationship with intermediaries is very important
and may give some unexpected benefits.
If Kalev choose an indirect export, they will maintain control over product development,
procurement and production. The remaining activities (the export activities) will be controlled by
other parties. This also means that company will be in control of which marketing strategy there
will be applied on the export market, but on the other side, it also means that the company will have
to deal with the administration of customers. In other words; the company escapes having to deal
with a lot of costs and problems, which will be dealt with by the external company that in reality
handles the export.
One of the primary disadvantages with doing indirect export is that the company will not obtain
knowledge about the export markets. This can be a great disadvantage if the company would like to
handle the export themselves in the future
Logistics
Kalev not only has to consider many factors regarding intermediaries but also has to consider the
logistics behind getting their products to their intermediaries in order to optimise the supply chain
and make it efficient. This includes transportation costs, costs associated with having a high level of
customer service, warehousing, order-processing and inventory carrying costs among others (Grant
et al, 2006).
Also included are: choosing the right type of transportation as transporting by ship or truck means
different time consumption and administration and also has different costs associated with them
such as wages, payment and freight insurance.
46
Customer service is also a very important part of any business and it is essential to form a good
relationship with customers and build long-term relationships. Being able to provide a high level of
customer service includes many things and it will be very important for Kalev to concentrate on
providing the best service possible. Providing this high level of service includes among others
ordering services, written statements of policies, product availability, order information, lead-time
and product tracking (Karunkaran, 2008). These are some important factors that Kalev must ensure
are working as efficiently as possible. Another important reason why Kalev must aim for having a
high level of customer service is that Danish intermediaries may not want to cooperate with Kalev if
the service is inadequate and thus the company will miss out on potential sales.
A high level of competition on the Danish market requires a greater commitment to customer
service and Kalev must invest the time, energy, and money needed to achieve excellent customer
service as this can give Kalev a competitive advantage which may be necessary in order to compete
with Danish companies.
As Kalev will be sending shipments of varying sizes to the intermediaries, it will also be necessary
to have a certain amount of stock in order to be able to meet the demand from the intermediaries as
well as to be able to respond to unexpected orders and increasing demand which may be
unforeseeable. Therefore, making considerations about inventory management will also be very
important in order to achieve high customer service levels (Grant et al, 2006).
As seen in the demand analysis, the volume and value of chocolate has been increasing and is also
projected to continue increasing. This increase in sales means that customers are buying more
chocolate every year and this will most likely result in a higher demand from distributors who need
to be able to meet the demand from customers and therefore Kalev needs to consider production and
stocking very carefully.
On the Danish chocolate tablet market there is much competition and apart from the major
companies, i.e. Toms Group A/S, Kraft Foods Denmark A/S, Alfred Ritter Gmbh & Co. KG and
the private labels such as Coop and X-tra, there are also several smaller tablet brands trying to
compete for market shares on the market. Therefore, if deciding to use indirect export, Kalev will
be able to keep their focus on the domestic market as well as other foreign markets which may be
demanding more resources or be more attractive and at the same time still be able to start doing
47
business in Denmark. In this way they can keep their focus on markets where they already are
successful but still getting products into the Danish chocolate market.
By choosing indirect export, Kalev will have less control of different factors as the intermediary
will take over more responsibilities. These are factors such as promotion of products and the Kalev
brand, product pricing, consumer proximity and distribution. Kalev cannot be totally sure to who
and where all their products will be sold and thus they lose some control of the market to the
intermediary. However, as some of the most dominant Danish intermediaries, such as Coop and
Dansk Supermarked, are distributing to supermarkets and hypermarkets all over Denmark, Kalev
might be able to rely on their products getting distributed to and sold in the right places as well as
covering a large geographical area as well.
6.5 Interviews’ analysis
As it was mentioned in the methodology section, it was decided to make an interview with the
possible intermediaries of the Kalev with an intension to get some information that would help to
get an overview of the tablet chocolate market in major Danish supermarkets, hypermarkets and
discount stores.
When asked to mention the trends in the market, both respondents agreed that people became
keener on health, and even knowing that the economic situation influenced customers’ purchases in
a negative way in many sectors, chocolate industry stayed stable. It is also confirmed by
Euromonitor report – Chocolate confectionery in Denmark: “The recent years’ strong growth trend
in premium brands thus continued, although it moved closer to maturity”.
The respondents believe that premium, qualitative chocolate is very promising, and the demand for
a better value for money became more evident during the start of financial crisis.
The official statistics that were discussed previously have shown that the demand for tablet
chocolate is growing. The interviewees expressed the same opinion. However, Peer Wejse believes
that the demand for chocolate depends on the season/occasion. The sales on Christmas and Easter
period is higher, while on the normal days it is lower.
Nina Færch states that the demand for chocolate is growing but not in all categories, which means
that some types of chocolates are more popular than the others. From the other hand, both
respondents in their answers mentioned the “stable”. Which means that the demand for chocolate
may reached the maturity stage.
48
Peer Wejse sees the price and brand image as the most important characteristics for the Danish
consumer while making a purchase decision. So, the brand reputation is very important here.
According to Kalev, they are a company that follows corporate social responsibility and cares about
the people. That could be a positive thing while entering the market. However, the respondent
mentioned before that the quality is very important, so it is normal that for a qualitative product, the
customer is willing to pay a higher price. The important issue for Kalev to consider here, is to find a
price that stands for high quality but at the same time is not very high. Packaging was evaluated as
the least important determinant while making the decision (2 in a scale 1-5), and the origin of the
brand got 3 points, which might also show, that customers have some believes about particular
countries. The eco-label was evaluated quite high, too, with 3 points. It shows that customers want
to buy a product that is ecologic, made of natural ingredients and healthier.
The representative of Dansk Supermarked - Nina Færch as the most important determinant sees the
price. So again, it means that even for a premium chocolate customers do not want to pay a price
that seems too high for this kind of product, which is not of first priority.
While taking bout the different types of chocolates, like dark chocolate, milk chocolate, white
chocolate or flavored chocolate, both interviewees see dark premium chocolate as the most
promising. Kalev can offer a premium dark chocolate with high cacao content and various dark
chocolates with flavors, like dark chocolate with raspberries, dark chocolate with orange and green
tea, and etc (see appendix, nr.2). Nina mentions that unique, premium brands are mostly expected in
the shops like Salling, were also, according to the Store check, the variety of dark chocolate is
largest. So, there might be a good idea to sell using intermediaries but only use specific stores,
where the product should be presented.
What is more, the demand for milk chocolate is increasing as well. So, Kalev has a possibility to
introduce milk chocolate together with the dark chocolate or at first dark chocolate, which is the
most demanded and then continue the penetration in the market with the milk chocolate.
There are lots of criteria that the company wanting to collaborate with Dansk Supermarked and
Coop Denmark should consider. The responded, as well as their customers care about the brand
image and quality due to the fact that the products they sell represents their image, too. Since the
competition is very intensive in the market, the company has to be innovative. Kalev can offer a
little differentiation advantage by offering unique flavors to its tablet chocolates. None of the brands
49
listed in the store check have dark chocolate with raspberries, cherry, grapefruit, orange & green
tea. This can be their competitive advantage.
Finally, the interviewees concluded that Kalev might be a potential supplier. However, it is not a
simple decision and to give a more precise answer, they should get more detailed information about
the company, its capacity and what they can offer to the market.
6.5.1 Interviews’ conclusion
From the data gathered from the interviews, we would recommend for Kalev to present their brand
with different kinds of dark chocolate at a reasonable price. By reasonable price, we mean the price
that would not be higher than its main competitors Lindt and Toms. What is more, it is very
important to create a positive image of the brand in the minds of customers. Despite the fact, the
company would use intermediaries, they have to invest money in the image creation, present their
company, mission, vision, values, and what is different they can offer to the market full of various
kinds of tablets.
6.6 Positioning map
Lindt
Kalev Toms Marabou
Ritter Sport
Based on the information that we got from the store check (See appendix 3) in 4 of the biggest
supermarkets in Denmark, we can illustrate how the big players on the chocolate marked are
positioned compared to the Estonian confectionary producer Kalev. By visualizing them, we can
50
see how they differ according to the price and quality as criteria. As it is already mentioned above,
the prices of the different brands we got from our store check, but the quality is another issue that
sometimes is hard to determine. In our case we measured the quality as combination of the
ingredients that the different chocolate manufacturers use (their origin and quality) and the quality
of the production process. The quality control in the production site is really important for the
characteristics of the end product. Most of the big confectionary producers have ISO, FSSC and
OHSAS standards certificates for quality control, environmental management, safety and energy
management. In order to defend that they bring high quality chocolate to the end consumer, all
confectionary manufacturers have to comply with high standards of operation in every part of the
supply chain. All raw materials suppliers should be carefully selected and be able to fulfil the
production quality requirements.
As we can see from the graph, Kalev is offering as high quality as some of the biggest players on
the market, but on a consumer friendly price.
6.7 Integrated marketing communications
As was mentioned in the theory section, integrated marketing communications consists of various
promotional tools, such as advertising, personal selling, sales promotion, public relations, direct
marketing and others. Before deciding on which promotional tools to combine, Kalev should think,
which promotional strategy would be the best in relation to its products. The choice can be made
between pull and push promotional strategies. The choice of the strategy depends on the type of
product and its life cycle stage.
The researcher argues that pull strategy would be the most effective for Kalev. Pull strategy will
motivate customers to seek for the brand in an active way. Kalev will promote directly to the
customer and motivate him to look for its products in the particular retail shops. In this way, the
customer created the demand for the chocolate and encourages the reseller to have its products in
stock.
For the pull strategy to be effective the company should use such promotional tools as advertising,
sales promotion, and the internet.
Advertising
In Danish television it is increasingly common to find foreign commercials, which are then often
dubbed to Danish language. TV advertising is costly alternative of advertising but is a good way of
51
advertising since it can reach large audiences. Kalev could create a standard advertising strategy,
which means that all ads would have something in common. For example, Coca-Cola uses
standardization with its one-sound, one-sight, and one-appeal philosophy. What is more, language
sometimes might be a barrier, however in some cases might act positive to the brand, if that
language or country has a specific, positive image in the minds of customers. Volkswagen and
Audi can be perfect examples of - when they brand them self with the slogans “Das Auto” and
“Vorsprung Durch Technik” respectively, adding on to the “German” brand.
In the Estonian TV adverts, Kalev use the funny thematic with little scathes from their kitchen and
how they prepare the chocolate together with classic advertisements which reminds for the premium
quality of the brand. These two themes of TV adverts are broadly used all over the world and can be
easily understood and welcomed by the Danish consumers as well.
An analysis of the extent of advertising adaptation that is necessary can be assisted by separating
the advertising proposition from the creative presentation of that proposition. The advertising
platform is the aspect of the seller’s product that is most persuasive and relevant to the potential
customer: it is the fundamental proposition that is being communicated. The creative presentation is
the way in which that proposition is translated into visual and verbal statements. Advertising
platforms, being broad statements of appeal, are more likely to be directly transferable than the
creative presentations. If this is the case, the solution is to keep the platform across markets but
change the creative presentation to suit the local demands of the targeted export market.
Furthermore, country’s image may also have an important role to play in a given consumer’s
selection of goods or services to purchase. For example; a negative image of a country may
influence a consumer’s attitude towards products originating from that country. That is why it could
be a good idea if Kalev presents some positive information about Estonia, when they start
advertising the products in a new geographic market. In that way they can influence consumer’s
opinion about the chocolate home country or build it if the people do not know anything about
Estonia as a confectionary producer. That is how the Country of origin can however also from time
to time be used positively in a marketing effort abroad (exporting), when this associations are
believed to be favorable - and the extent to which the national image is considered suitable for the
specific type of product being marketed. For example Switzerland is knows as a good producer of
high quality chocolate. If a Swiss unknown brand is trying to enter a new market, the potential
52
buyers will make the decision of buying it easier than an Estonian product like Kalev chocolates. If
the country is well known as a quality producer in few sectors, this can have a favorable influence
in the mindset of the customer. If such an information is not widely presented. It could be the
producer’s strategic task to do so, as it was mentioned above.
Kalev probably will not get as much success as possible distributing their luxury products in
Denmark if they re-use their advertising from the home country (or from Sweden for that matter).
The company and its products are foreign and have an eastern European image, which unfortunately
still raises general question marks in Danish minds. Especially, while taking about the quality and
social responsibility. These factors sometimes vary from country to country and the standards can
be different. Therefore, Kelev should pay attention to the competitor’s way of advertising in order
to offer something new and interesting and at the same time served in a friendly and close way to
the Danish customers.
For Kalev a very individual and very specially tailored marketing campaign will probably give the
best result. It will be best to use an advertising agency with a very good feel of the Danish market.
Probably a Danish agency will be preferable for the initial entry campaign - and then later on, when
Kalev is somewhat established with a share of the Danish market, an international agency can
handle the further campaigns. In that way the first steps that Kelev do on the Danish market will be
strategically chosen from experts that are familiar in details with the customer’s way of perceiving a
foreign brand.
What is more, advertising is seen as a one-way communication, and its main purpose is to inform
prospects about the products/services.
The Internet
As we mentioned in the Market overview, Danes became more and more interested in the products
that they consume in the everyday life. In many of the cases they search online information about
the product, before making the decision to buy it. Therefore, Kales should pay more attention to the
information that they offer in their website. Even though more than 80% of the Danish population
speak English, Kalev’s webpage should be translated in Danish language, so everybody willing to
check their products or read about the company can do so in their mother tongue. This will be the
sign that company tries to adapt to the local culture and make it easier for the customers to reach
them and get all the needed information.
Of course, as one of the core features of the site, should be that it offers extremely detailed product
portfolio, nutrition information and etc. It is also a good idea if the visitors can also find in the web
53
many useful articles about Kalev history, company’s structure, their initiatives, financial reports and
future aims.
What is more, the company should understands that to create and after that keep the conversation
with the customers, they need to be modern and adapt to the changes. Customers’ expectations are
increasing, so the user of social media expect to find their beloved brands in every social channel.
However, it is not enough just to be on social media, it is also important to be active and to respond
to the questions. Ignoring them would create a negative impression about the company and would
lead to the loss of customers.
As it was mentioned before, the country of origin of the product might be very important. The
customers might be willing to get more information about the company and its activities.
Especially, the customers that are keener on health and corporate social responsibility. For that
reason, Kalev could use Google AdWords. The company has to create some advertisements that
will be used online and then choose keywords, which can be words or phrases (for example:
premium dark chocolate, healthy chocolate and etc.) related to the company and the products. It is
very important to choose the right keywords, so the company should think of how its potential
customer describes/perceives the chocolate and for what kind of information he can look for. When
people will use one of company’s chosen keywords while searching on Google, the ads might
appear next to the search results. In this way, the advertising will reach the audience, which is
somehow already interested in the product but might not be aware of a particular brand. Using
Google AdWords is cost effective since there is no minimum sending requirements that you need to
comply with. Kalev would pay only for the results, which means only if the customer clicks on the
ad. Also, in this way, the company can see, how many people were interested in the advertisement.
The usage of social networking sites is huge nowadays. It became normal to look for information
about the products and services via Facebook or Twitter. For that reason, Kalev should think of
creating campaigns online that would make people more aware of the brand. A competition on
social networking sites, could be an effective way to get people to try the product, for example, by
giving various different kinds of chocolates as a prize.
Sales promotion
In the Danish market, Kalev’s name and its products will be unknown during the introduction stage.
Very often customers are afraid to try new, unknown products. For that reason, it could be a good
idea to have some small samples of chocolate in the retail shops, so the customer can try it get some
54
more information about the brand or the quality of the product. This strategy is widely used in the
food sector but is usually short-term.
The media and the marketing channels are the connection between the producers, suppliers and the
end consumers by the information which they provide to the audience for products and services.
The advertisements are all around us. In the TV, radio, newspapers, magazines, billboards and etc.
By having the right partners and using the knowledge about customer’s needs and interest, ads can
be transformed in a powerful weapon for making loyalty and reaching new buyers. Therefore,
Kalev should use their international experience and contacts from the other company initiatives and
adapt them to the Danish market in a way that will be welcomed by the potential customers.
7. Conclusion
After analyzing the data we have collected, it was decided that tablet chocolate is the most
promising type of confectionery product in the Danish market. According to the statistics, the
demand for tablet chocolate is slightly growing every year, which provides opportunities for the
new entrants.
Moreover, considering the fact that Danes tend to care more about what they eat, it was decided that
dark chocolate could be the most suitable to satisfy customer needs. What is more, the information
that was collected from the interviews revealed the importance of the quality for decision making
process.
Despite the fact, the competition is very intensive, because of such big players like Toms Gruppen
and Kraft Foods Danmark. So, to fight with the competition, Kalev could offer its unique dark
chocolate product portfolio (dark chocolate with orange and green tea; dark chocolate with cherry,
dark chocolate with grapefruit, and dark chocolate with raspberries) and high quality.
After making an analysis of the Danish chocolate market and looking into the two types of nonequity entry strategies, i.e. direct and indirect export, we have come to the conclusion that indirect
export will be the better solution for Kalev in the current market situation.
As there is strong competition in the Danish chocolate market with many companies and brands, it
may be difficult for Kalev to get into some of the various supermarkets, hypermarkets, etc. without
the right network. This might be possible by using intermediaries such as Coop Denmark and
55
Dansk Supermarked which are distributing directly to many of the larger Danish supermarkets and
hypermarkets and thus this will be a good way to get one foot into the market. These retail chains
already know the market very well and with their expertise, Kalev may have a better chance of
being successful.
Even though indirect export will give Kalev less control of their operations compared to direct
export, it will still be a good idea since the company will not be risking too much of their
investment as they will be cooperating with experienced intermediaries who know the Danish
market.
For the future of Kalev on the Danish market, doing indirect export can be good as a start and at
some point when the company has established itself on the market, it can decide to change to
another type of strategy which can improve the chances of success even more as the market
situation possibly has changed.
Even though, Kalev would use the indirect entry mode, and some of the advertisement will be
carried out by the intermediaries, they should still work on their brand image, which can be created
by using different kind of tools for integrated marketing communications.
By taking the initiative to enter the Danish market, Kalev should consider that there will be some
difficulties regarding customers’ attitude towards the image of the brand and the country of origin.
Therefore, they should pay attention not only on the market situation but also how they present
themselves and their products to the potential buyers.
56
8. Literature list
Books:
 Alan Bryman (2012) Social research methods, 4th edition;
 Kirti Dutta (2012) Brand management, principles and practice;
 John Kuada (2012) Research methodology, a project guide for University students, 1st
edition;
 Tom Peters (2005) Leadership;
 Michael E. Porter (1980) Competitive strategy: techniques for analyzing industries &
competitors;
 Franklin R. Root (1996) Entry strategies for international markets, 2nd edition;
 Christoph Lymbersky (2008) Market entry strategies: texts, cases and readings in market
entry management;
 Svend Hollensen (2010) Global Marketing: A decision-orientated approach, 5th edition;
 David B. Grant, Douglas Lambert, James R. Stocks, Lisa M. Ellram (2006): Fundamentals
of Logistics, European edition;
 L.S.Vygotsky (1996) Culture, communication and cognition;
 Mark Saunders, Philip Lewis, and Adrian Thornhill (2009) Research methods for business
students, 5th edition;
 Philip Kotler, Kevin Lane Keller, Mairead Brady, Malcolm Goodman, and Torben Hanen
(2009) Marketing Management, 13th edition;
 Ramachandra, K; Chandrashekara, B; Shivakumar, S (2010) Marketing Management;
 K. Karunkaran (2008) Marketing Management;
 George E. Belch and Michael.A.Belch(2003) Advertising and promotion/An integrated
marketing communication perspective, 6-th edition;
Reports:
 Euromonitor: Health and wellness in Denmark (2011);
 Euromonitor: Chocolate Confectionery in Denmark (2014);
 KPMG: The Chocolate of Tomorrow, (2012);
 Euromonitor: Consumer Lifestyles in Denmark (2013);
 Euromonitor: Sweet and savoury snacks in Denmark (2014);
57
Websites:
 http://www.investindk.com
 http://globaleduc.wordpress.com
 http://mars.com/denmark/en/who-we-are.aspx
 http://www.fita.org/countries/denmark.html
 http://www.ducroiredelcredere.co.uk/Webduk/WebSite.nsf/AllWeb/Denmark?OpenDocume
nt&Disp=1
 http://catalog.flatworldknowledge.com/bookhub/reader/5229?e=fwk-133234-ch02_s03
 www.dineshbakshri.com
 http://www.tradingeconomics.com
 http://www.business.aau.dk
 http://www.mex.dk/uk
 http://www.worker-participation.eu
 https://www.workindenmark.dk/
58
9. Appendix nr. 1 - Interviews
1st interview with Peer Wejse (Coop Denmark)
1) In your opinion, what are the trends in the Danish chocolate market?
Answer: If taking into consideration the financial crisis, the chocolate confectionery
industry has stayed flat. Despite the fact, the disposable income felt down, customers were
still buying a lot of chocolate, which was taken as a sign that even more expensive, luxury
chocolate can be affordable. As a result, the segment of premium, dark chocolate is
expecting to growth.
2) Do you think the demand for tablet chocolate in Denmark is growing?
Answer: It depends on the season of the year, for example, on Christmas period or Eater,
the demand is growing for most types of chocolate, but in general, according to the sales, the
demand is growing or at least is stable.
3) In your opinion, how important are these product characteristics in chocolate market for
the Danish customer? (In a scale from 1 to 5, where 1 is “not important at all”, and 5 is
“very important” )
a. The country of provenance o the brand;
b. The packaging;
c. The eco-label;
d. The price;
e. Brand image
Answer: a – 3, b -2, c – 3, d – 4 ( it depends if the customer looks for a qualitative chocolate or just
budget orientated chocolate) , e – 4(usually all our suppliers have a positive brand image, at least as
far as we know)
4) What type of chocolate tablet is mostly preferable by customers? (Dark chocolate, white
chocolate, milk chocolate, flavored chocolate)
Answer: Dark chocolate with high cacao content and dark chocolate with special flavors.
Milk chocolate has also strong position on the sales.
59
5) What the company wanting to enter the Danish market should consider if they want to
introduce their products through Coop Denmark?
Answer: Since our goal is to be most effective procurement company in the world, we care
about our suppliers/partners image, innovative vision, competitive price, and quality of the
products.
6) Can you see Kalev as a potential supplier for chocolate tablets? If not, why?
Answer: According to the information you have sent to me, it seems that Kalev could enter
the market, since they are also operating in other Scandinavian countries. But to give a more
precise answer, we have to get more information and maybe a detailed offer from Kalev.
2nd interview with Nina Færch (Dansk Supermarked)
1) In your opinion, what are the trends in the Danish chocolate market?
Answer: The local brands tend to pay more attention to the niche segment and offer
premium or ultra-premium brands. Also, health concerns became an important factor while
making the decision of buying confectionery products. Customers believe that dark
chocolate is healthier, so this category became more prominent.
2) Do you think the demand for tablet chocolate in Denmark is growing?
Answer: Chocolate products are always very popular and have a stable demand. It is
growing slightly but not in all categories.
3) In your opinion, how important are these product characteristics in chocolate market for
the Danish customer? (In a scale from 1 to 5, where 1 is “not important at all”, and 5 is
“very important” )
a. The country of provenance o the brand;
b. The packaging;
c. The eco-label;
d. The price;
e. Brand image
60
Answer: a – 2, b – 2, c – 3, d – 4, e – 3
4) What type of chocolate tablet is mostly preferable by customers (Dark chocolate, white
chocolate, milk chocolate, flavored chocolate)?
Answer: The demand for premium dark chocolate is higher in the stores like Salling because
customers expect to find unique, premium products there. All types of chocolate tablets you have
listed are popular, maybe except the white chocolate.
5) What the company wanting to enter the Danish market should consider if they want to
introduce their products through Dansk Supermarked?
Answer: Just to mention few, all our suppliers have to send a specific declaration form to the
Danish Institute for Informative labelling. If the company (Kalev) cannot warrant the general rules
settled in the declaration, the partnership is not possible.
6) Can you see Kalev as a potential supplier for chocolate tablets? If not, why?
Answer: As I mentioned before, the company has to comply with the general rules, required by
Dansk supermarked. If Kalev sees itself as the company that can comply, then there are
possibilities.
61
10. Appendix nr.2 – Dark chocolate tablets
62
11.Appendix nr. 3 – The store check
Chocolate type
LINDT EXCELLENCE Dark chocolate 70% Cocoa(100gr)
LINDT EXCELLENCE Dark chocolate a touch of sea salt(100gr)
LINDT EXCELLENCE Dark chocolate chili(100gr)
LINDT coco nut intense (100gr)
LINDT intense mint (100gr)
LINDT CREATION, mint supreme 70% Cocoa(150gr)
LINDT CREATION, pure chocolate 70% (150gr)
TOMS Guld Barre (100gr) Mint Skildeplade(80gr)
TOMS Guld Barre mørk (100gr)
TOMS extra mint plus karamel (100gr)
TOMS extra mørk chocolate 70% cocoa (100gr)
TOMS 80% cocoa(100gr)
TOMS extra apelsin (100gr)
TOMS extra lakrids (100gr)
MARABOU Mørk choklad (180gr)
MARABOU premium, 75% cocoa (100gr)
MARABOU premium, cocoa, orange (100gr)
MARABOU premium, cocoa, pistachio (100gr)
MARABOU premium, cocoa, mint (100gr)
MARABOU premium, 70% cocoa (100gr)
MARABOU premium, 86% cocoa (100gr)
MARABOU premium, french nougat (130gr)
RITTER SPORT, dark whole hazelnuts(100gr)
RITTER SPORT, marzipan(100gr)
RITTER SPORT, Peppermint(100gr)
RITTER SPORT, cocoa musse(100gr)
Anthon Berg, 72% Cocoa (100gr)
Björnsted, 85% cocoa organic, (100gr)
CARLETTI, Mørk kæmpeplade, (200gr)
SUPERIOR extra dark 80 % (100gr)
Björnsted Ecuador
Cailler Sublim intense, dark chocolate with cacao nibs(100gr)
Mork belgisk chocolade(85gr)
SUPERIOR extra dark 80 % (100gr)
Jackoutc nero, 72% Cocoa
Savannah mint, 72% Cocoa
63
Fotex
24.95
24.95
24.95
24.95
24.95
33.5
33.5
Salling
24.95
24.95
24.95
24.95
24.95
33.5
33.5
Netto
Fakta
12.5
22.95
20.28
20.28
20.28
20.28
20.28
29
21
21
21
21
21
21
27
14.85
22.96
20.25
20.25
20.25
20.25
20.25
29
21
21
21
21
21
14.85
14.85
14.85
19.25
19.25
18
18
18
18
12.95
12.95
14.85
21.94
18.36
18.36
18.36
20
11.95
17.36
16
21.25
30.25
13.5
11.95
19.95
64