Small companies from newly emerging markets are usually limited in their
growth strategy by lack of market in their own countries. This is mainly due to
low purchasing power of the population in their countries. Therefore the
companies seek possibilities to grow by establishing themselves on foreign
markets. However, due to insufficient resources, the SMEs are not in a position
to do enough research on the nature of the new environment they will be faced
with. As a result, they do not actually know how to position themselves
strategically in terms of marketing efforts.
The purpose of this thesis is to investigate the ethnic food segment of food
industry and to analyze how a small foreign company manufacturing ethnic
food can position itself strategically on the Swedish market. We have used a
South African SME -- Ethnic Cuisine Investment Ltd (ECI) as our case
company.
In order to analyze the elements of importance in ECI’s strategy, we briefly
investigated the macro-environment in order to identify the drivers in this
industry. However, our main focus is on the ethnic food segment of food
industry, in order to understand its logic. We also scrutinize the firm’s
resources and capabilities, so that we can identify the gaps that need to be filled
in order for it to succeed in the Swedish market.
The complexity and dynamism of the Swedish mrket for ethnic food poses
several challenges to a small foreign actor. Thus to act efficiently, the company
will need to be very committed and goal oriented. The success of the small
actor entering this market will depend on how well the company can organize
itself in order to achieve effectiveness in its operations.
SMEs without enough financial resources tend to diversify through alliances
with distributors or manufacturers in the new markets. Through such alliances,
the SMEs hope to benefit from the other partners’ customers and market
experience. Apart from this advantage, SMEs particularly those from emerging
markets stand to benefit from the fact that they are helped by their partners in
their attempt to penetrate mature markets in the developed world by drawing on
the experience accumulated by the partner. Furthermore, alliances between the
SMEs from the emerging market and partners from the developed world benefit
the two in that, they are able to enhance their national image by developing an
international image. The overall strategy pursued by the SMEs on entry to the new market in this case is very much dependent on the distributors positioning
strategy. The distributor’s positioning strategy dictates the key elements that
the SME involved should focus on in order to survive the challenges facing the
two partners in the business environment.
The Food Industry – Global Perspective
Although our thesis will focus on the ethnic food in Sweden, it has to be
understood that this is just but a segment of the food industry. Thus, there is a
need to first understand the trends and driving forces in the food industry in
general within the global perspective as a background to our case.
The activities involved in this industry includes; food processing,
manufacturing, distribution and food service, all of which involves different
activities aimed at creating value demanded by the final consumer. In this
industry today, there are several forces that are acting on and within each stage
of the value chain. Such forces include issues related to food safety, production
technology influences, and the desire for increased profitability, which has led
to mergers and acquisitions.1 The diagram below shows the value chain in the
food processing sector and the forces that are evidence in every sector in the
chain.
Author: Limon Tamar, Misic Aleksandra, Wambugu Hannah,
School of Economic and Commercial Law Göteborg University
Source: https://gupea.ub.gu.se//bitstream/2077/2386/1/Tamar_2001_44_inlaga.pdf