Introduction
During the time of major globalization, companies strive to not only maximize their revenue and improve technological processes but also expand overseas. For example, one such company is Saputo, a Canadian-based dairy producer. Cheese, milk, and cream goods with an extended shelf life, cultured goods, and dairy components are only a few of the high-quality dairy products that Saputo develops, sells, and exports (Saputo, n.d.-a).
Saputo is among the ten leading dairy manufacturers worldwide, the primary dairy producer in Australia and Argentina, and Canada’s major supplier of cheese, milk, and cream (Saputo, n.d.-a). Products from Saputo are offered in a number of nations under both premium brands and market-leading trademarks. As a result, it is in Saputo’s best interest to expand to other countries, such as Brazil, to seek opportunities in fast-growing markets.
Motivation
The motivation to expand is that both the supply and demand for milk are growing. Brazil’s milk output is anticipated to increase by about 3.6 percent in 2023 and reach 24.5 MMT (USDA, 2022). Moreover, Brazil’s milk consumption is predicted to decrease by about 4% but then increase by 3% in 2023 (USDA, 2022). However, the concern is that in 2023, the Brazilian dairy industry will still be struggling with issues like high production costs and unpredictably fluctuating economic situations (USDA, 2022). Still, expanding to a developing country with big milk supplies can be beneficial in terms of Saputo’s technological processes and financial health.
Ownership Advantage
Trade secrets and varied ownership rights of Saputo are examples of ownership advantages. Saputo is an organization known for its unique ingredients and approaches in the production of cultured dairy foods. The craftsman at Saputo have proven their dedication to innovation and perfection ever since the company was founded in 1954 (Saputo, n.d.-b).
Saputo converts around 11 billion liters of milk annually into a variety of cheeses, in addition to a full line of dairy goods and ingredients marketed in more than 60 nations (Saputo, n.d.-b). In addition to products having their own brands, the company also offers goods with the brands of both retail and food service clients (Saputo, n.d.-b). Therefore, the ownership advantage of Saputo is its brand name and trade secrets connected to cultured goods.
Location
When it comes to location, in Brazil, it is necessary to apply the CAGE framework. Cultural distance implies the distance in terms of North American and South American approaches to business operations and values. For instance, although Brazil had 1.3 million dairy farms in 2006, more than 80% of them were family-run and supported more than four million people economically (Bánkuti et al., 2018).
As for the administrative distance, it can be seen through differences in currencies. The following distance, the geographic distance, illustrates both countries’ access to waterways. However, in terms of size, Brazil is smaller than Canada. Finally, economic distance shows the differences between countries via labor and levels of consumer wealth.
In Brazil, milk production has a significant social purpose in addition to its economic importance, considering the country’s low minimum wages (Bánkuti et al., 2018). Numerous individuals are employed in the dairy industry, which also promotes regional growth (Bánkuti et al., 2018). Additionally, Brazil is the fourth-largest supplier of milk worldwide. Hence, the country’s dairy industry has been quite significant economically (Bánkuti et al., 2018). However, when considering risks, there are still some negative aspects, such as poor working conditions and issues with family succession.
Entry Mode
The chosen entry mode is franchising due to the fast and simple introduction of the products in a new market. Selling franchises is a well-practiced strategy for international growth. A firm provides a foreign company the rights to utilize its registered trademark and sell its goods or services under the terms of an overseas franchise system (Manuel, 2022). The franchisee is in charge of all company operations but also agrees to follow the franchiser’s specified business plan (Manuel, 2022).
In exchange, the franchiser often offers promotion, instruction, and help with new product development, and, considering that Brazil is a country with a different culture and values, it would be best to take small steps in terms of expansion. Still, although the system of support the company obtains as a franchise owner is one of its advantages, there is also a risk of conflict between Saputo and the franchisee.
Conclusion
Hence, Saputo should expand to other nations, including Brazil, in order to take advantage of business prospects in developing markets. The expanding milk supply and demand are driving the need for expansion. Examples of ownership advantages include trade secrets and various Saputo ownership rights. The company Saputo is renowned for using unusual ingredients and methods to produce cultured dairy meals. Brazil is the favored choice because of its strategic location and favorable economic conditions. Though there are differences in currencies and labor conditions, the country is preferable in terms of milk supply and rising demand. Due to the quick and easy launch of the items in a new market, franchising is the preferred entry strategy.
Reference List
Bánkuti, F. I., Damasceno, J. C., Schiavi, S. M., Kuwaraha, K. C., and Prizon, R. C. (2018). ‘Structural features, labor conditions and family succession in dairy production systems in Paraná State, Brazil,’ Cahiers Agricultures, 27(4), pp. 45004.
Manuel, L. (2022). Global marketing in a digital world. U.S.: Fanshawe College Pressbooks.
Saputo (n.d.-a) Our company. Web.
Saputo (n.d.-b) Our products. Web.
USDA (2022) Brazil: Dairy and products annual. Web.