Exporting from Australia to Chile: A Case of Pangkarra Foods
Executive Summary
This paper discusses about the expansion of Pangkarra Foods based in South Australia in Chile. Pangkarra Foods is an Australian based medium size enterprise which produces healthier wholegrain pasta, chickpeas and puffs. Having a strong presence in Australian market, winning several awards and already exporting to South Asia, the company is looking for further expansion. Chile is a good market where its products can be valued. Although a tough competition already exist, the quality products and human resources help the company gain competitive advantage and do well in Chile. Moreover, Chile has a stable democratic government with solid business practices which further helps the company to easily enter the market. The youth in Chile is inclined towards healthier snack option which can be fulfilled by Pangkarra. The export strategies involves direct exporting via a distributor which will involve the established supermarkets in Chile. Transportation would be done via seaport. However, above all, the cultural differences shall be taken care of. Where Chileans tend to focus on relationships and strong networks, Australia too is inclined towards mateship but low as compared to Chileans. Chileans presentation style involves an emotional aspect along with facts and figures while humor is a part of Australian while presenting their ideas. Moreover, Chileans consider a leader very strong and follow them as they say while Australians connect with their subordinates and they are a part of decision making. All these aspects shall be properly taken into account before making negotiations.
1. Introduction
Globalization of Small and Medium Enterprises (SMEs) has gained a lot of attentional internationally in the past few years. A small-medium sized firm can be defined to have a maximum of 200 full-time employees (ABS, 2001). The reduction of barriers in the global economy has provided opportunities for emerging markets which can face high competition from the already established international competitors. Thus, internationalization can become a tool of growth, survival and sustainability when globalized (Alon et al., 2009). This paper, therefore analyses the export readiness of Pangkarra Foods, a medium sized company operating in South Australia to Chile. It will evaluate how the company will export, the strategies and the modes to export and what difficulties it might have to face.
2. Company Background
Pangkarra Foods is a family owned and operated business started in 2011. Having 33 employees with a revenue of around 6.9M, the company is based in Clare Valley in South Australia and the family business is being continued by Jim and Katherine Maitland (Zoom Info, 2019). The company deals in a range of premium products which include wholegrain dry pasta, wholegrain lavosh, stone milled wholegrain durum flour, gluten-free pasta, chickpea puffs and cooked and roasted legumes (Pangkarra, 2019). Having a great presence at IGAs, gourmet food shops, Foodlands and online, the entire range of pulses has managed to grab 4.5 health star rating on 5 by Australian Federal Government’s Health Star Rating System (AFN, 2016). The paddock-to-plate approach and sustainable farming methods are quite popular and has helped the company to sell across Australia and export to south-east Asia and grab Telstra Small Business Award in 2014 (Agribusines,s 2016). Additionally, the company is listed in Australia’s Top 100 Food & Drink companies as analysts agree they have a strategic advantage (FDB, 2015).
3. Export Readiness of Pangkarra Foods
Not all firms succeed in the international market and without preparedness, firms shall not go for exporting. Export readiness is necessary to analyze and it is mainly related to three key areas; resources, competitive advantage and objectives. Resources and capabilities help in gaining competitive advantage. The physical and financial resources along with innovative processes helps a firm promote value creation (Ferreira and Simoes, 2016). Talking about Pangkarra, the quality has been controlled at every step in the supply chain. Organic fertilizers along with sustainable practices is done to ensure organic farming. Conventional milling separates the grains ensuring nutritional value in the wholegrain. Being procedures completely natural, they are high in protein and fiber with low glycemic index (Agribusiness, 2016). Thus quality of the produced along with the environmental standards can help it in gaining competitive advantage.
Competing on price has rather become difficult for the company as paddock-to-plate approach to food production leads to increase in supply-chain costs but products resonate with people looking for healthier options. Moreover, it started exporting to south-east Asia in 2015 (Agribusiness, 2016). The importance of ‘wholegrain’ along with great marketing efforts and PR has made recognition and sales of the brand. Along with this, the whole production process is done by them including manufacturing, packaging and people and everything originating there (Beerenberg, 2019). Thus the companies’ resources are adequate to meet demands of the existing market. This can help them to further grow as their goal is to look for growth of the business and make sure it is sustainable for their children (Beerenberg, 2019).
The wholegrain goodness and new Gluten Free products can help people provide nutritional value. Moreover, the pulses are an excellent option with those having gluten sensitivities, nut allergies and look for a convenient snack (Agribusiness, 2016). The quality, resources, capabilities and the goals show that the firm can export in Chile gaining a competitive advantage. However, it is important to understand the competitors also. Chile exports most of its food and beverages from the US. There are many competitors which include Walmart Chile under the Lider Express, Lider and Ekono brands. Cencosud under Santa Isabel and Jumbo brands, SMU under Unimarc brand and Tottus are the competitors. However, the private label brands have around 10% of revenues in Chile. They have expanded with food product categories by increasing their variety and presence (Herrera, 2019). This shall be adopted by Pangkarra and further the resources and capabilities will help them gain competitive advantage.
4. PESTLE Analysis
The acronym PESTLE stands for Political, Economic, Socio-cultural, Technological, Legal and Environmental which is strategic planning tool. PESTLE helps in allowing managers to identify and take care of these macro-economic variables for the development of business (Alanzi, 2018). This section analyses Chile as the prospective market for the Pangkarra Foods.
The political-legal environment of Chile is very stable. Chile is a prosperous, stable and highly ranked country in international indices relating to transparency, economic freedom and competitiveness. It has stable democratic government, solid business practices and zero tariffs. Moreover, it performs well in terms of advanced financial market development, openness to foreign trade, low levels of corruption and low inflation (Export.gov, 2019). Additionally, nutritional labeling law has been mandatory. Economic environment shows a strong signal towards food consumption. With a population of 18.8 million and a GDP of US$290bn, the country has free trade agreements with Australia which allows companies easily to trade in Chile. The middle class is growing, hence educated Chileans with increased disposable income could be witnessed. Moreover, Santiago is most densely populated with 7.5bn citizens where most food consumption occurs as disposable income is high (Herrera, 2019). The healthy food and beverage amarket has reached $3.0bn annually with an annual growth of 12.5% and represents 19% of all retail food sales (Gonzalez, 2018).
Chile imports several food and beverages for its daily consumption. Talking about socio-cultural environment, Chileans used to be loyal to brands and focus on brands traditionally, however, they have become increasingly informed, look and compare for variety and promotions before purchasing. They do not purchase everything from one store because of price, rather search for best products and are now less loyal (Herrera, 2018). Healthy food products have high potential in the Chilean market because of the increasing number of millennials, growing dual working families with higher income. Increasing health awareness and disposable incomes have led the demand for healthier options high (Gonzalez, 2018).
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5. Export Planning Guidelines and Strategies
5.1 Export Entry Strategy
The mode of export entry chosen for Pangkarra is direct exporting though a local distributor. This is so as direct exporting will eliminate intermediaries thus allowing direct marketing and profit maximization (Hill, 2013). This is appropriate for the company as the cost of the product is high due to high quality and involving intermediaries will save additional costs. Hence, major hypermarkets and supermarkets like Censoud, SMU and Tottus will be contacted to display Pangkarra products and maximize sales as these markets have good revenue (Herrera, 2019).
5.2 Logistic Issues
The company already maintains high quality in its products. However, proper packaging and labeling shall be done as per Chile’s regulations. As seaports tend to be the most important points of entry for merchandises in Chile, many modernized warehouses and new distribution centers is seen in the country and hence such transporters who can take the merchandise from Australia to Chile via seaport would be taken into consideration. This means intermediaries in terms of transporters shall be involved at both sides to move the merchandise from Australia to Chile.
5.3 Regulatory Issues
Clear rules and transparent regulations by the Government have helped in fair competition. Moreover, Chile has free trade agreement with Australia which means no duties will have to be borne by the company. Temporary export to Chile is possible through ATA 12 documentation, which allows him for commercial samples. In terms of food, all products should have nutritional label. Use of synthetic ingredients used in food shall have authorization purposes and follow technical standards. Organic food shall be certified as ‘organic’, ‘ecological’, and ‘biological’ (Gonzalez, 2018).
5.4 Cultural Issues
The GlobeSmart cultural dimensions helps in understanding several aspects of cultures for both the countries. The business community in Chile is tightly boned and their interdependence in personal relationship is important as well-developed network would provide more opportunities, more access and greater chance of success. It is always important that their country’s accomplishments are appreciated and physical presence of people in business is important. Australia too, has a culture of ‘mateship’ which focuses on strong bond of relationship. Hence, both the cultures focuses on relationship which shall help them in better business values (GlobeSmart, 2019). Regarding the presence of Pangkarra, the Maitland family can travel and meet the local distributors time to time and develop relationships.
Chile’s traditional style of management is parental and hence they value a strong leader and support top-down decisions. Moreover, employee morae and possible discontent shall be looked upon the manager closely. Getting information indirectly and informally becomes important as they directly do not disagree. They need to demonstrate their status. However, that is something different in Australia. Here the leader needs to prove himself before being recognized and shall avoid everything that self-promotes him for the manager. They involve employees in the decision making as per expertise. Moreover, emphasis on relationships, approaching and treating others respectfully is given (GlobeSmart, 2019).
While presenting ideas, Chileans expect several things like being punctual, presenting a professional image and use of visual aids. Where presentations need to short, focused and crisp, it should have an emotional element along with data and statistics. Also, Spanish handouts shall be provided if speaking in English. On the contrary, there is no aspect of emotions in Australia and they just focus on facts, examples and data and straightforward in their approach. They rather being emotional put a light humor in their presentations (GlobeSmart, 2019). Hence, the Maitland family shall arrange for Spanish handouts and create an emotional appeal while presenting their business ideas to Chileans.
As Chileans value their leader who solve their problems, the employees value hierarchy and respond to authoritarian leadership. A top-down approach rather a bottom-up approach is perceived in Chile. On the contrary, Australians do not give much importance to hierarchy. They minimize hierarchical levels and defer to expert in the particular field while taking decisions. He is more a tie breaker in the egalitarian society (GlobeSmart, 2019).
Chileans take pride in displaying their status and financial success. It is similar to actually possessing it. A wealthy image implies success and use of technology across class lines shows and command respect. Moreover, being in a well-known group means a person is very important unnecessary of the fact that he holds that expertise. There is no such increased status shown in Australia. Respect is shown to everybody and employees are involved while taking decisions (GlobeSmart, 2019). Hence in meetings, Maitland family shall understand the status and group orientation in Chile to avoid any issues.
6. Conclusion
To conclude, globalisation has become an important aspect in small and medium enterprises also. This paper shows how an Australian medium size enterprise, Pangkarra Foods which deals in healthy wholegrain pasta and snacks can expand in Chile. Being a recognized brand in Australia, it exports in South-Asia already and have a potential market in Chile. The quality, processes and all at home manufacturing process helps the company to create advantage and the human resources are well educated to make this possible. Chile is a potential country where political, legal and social environment tends to be positive for the company. With people approaching healthier options and a stable, democratic government will help the company to expand its market. As the prices of the product is high due to quality and healthier aspects, direct exporting via a distributor seems best. However, Pangkarra shall be aware of the cultural aspects before thinking to target Chile. Differences could be witnessed in terms of language, hierarchy, presentation styles, leadership style and involving people in decision making.
References
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