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Al Ain Dairy Company’s Entry Strategy in the UK Report

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Updated: Jun 6th, 2020

Introduction

The globalization of trade has opened doors for private investors to venture into different industries and markets. Many companies have assumed a multinational status to enhance their market share, and to increase the rate of revenue generation. This has led to an increase in competition in different industries across various markets, thereby forcing some companies to close down, while others specialize in different industries. In addition to this, there are companies that have looked into enhancing their competitive power through innovation and seeking a first mover position in different business sectors. This paper looks into the development of camel milk as a potential alternative to cow milk, with a close focus on an entry strategy in the U.K. market. A critical look at this market reveals that camel milk has a high demand, and more consumers are growing into consuming it as an alternative to cow milk. An entry strategy for Al Ain Dairy camel milk products is also discussed.

Company Background

Al Ain Dairy was founded in 1981 in the UAE, with the goal of becoming the largest milk producer in the region. Over the years, the company has increased its customer base in the UAE and other states. The company has assumed the strategy of using online platforms to market and sell its products, and this ensures that it does not incur the liability of opening physical stores in different states. Al Ain Dairy sells its products in both retail and wholesale to milk distributors, and it is looking to increase its market share in the UAE through partnering with some of the biggest retailers.

Financial reports of the company reveal that it started out as a small business, and it attained the breakeven point within the first year of operations in the UAE. Al Ain Dairy’s supply chain includes its farms in the UAE, as well as farmers from different regions in the Middle East, who keep camels and cows in their fields. All the milk processed by the company is organic (“About Al Ain Dairy”)

Al Ain Dairy currently offers five different products from its camel milk brand, Camelait. These include fresh camel milk, flavored camel milk, camel milk laban, camel milk ice cream, and camel milk powder (“Camelait”). Al Ain Dairy has its pasteurization and packaging plants in the UAE. The majority of the raw milk is purchased from the local producers who have contracts with the company. The company has a delivery system that is quite efficient in delivering products across the region. Currently, Al Ain Dairy’s camel milk products are not venturing into the international market, but the demand for camel milk in different parts of the world, including the European region, poses an opportunity for the company to start supplying its products internationally.

Country and Market Analysis

One of the external factors that make the U.K. market attractive is the stability of the government. The political aspect of the economy is quite conducive for investors because it assures them that the foreign policy and other business-related laws will remain constant for a long time, which translates to lower risks of investments. The United Kingdom has a relatively controlled free market, which implies that foreign investors must meet some standards to get the necessary licensure for business in the market. There are strict standards applied in the European Union, especially in the food industry; hence, companies like Al Ain Dairy would have to meet these standards to start selling their respective products in the U.K.

There is a low corruption rate in the U.K; hence, the company will have to comply with all the required policies. The inflation rate in the market is also relatively low, which implies that the standard prices of products do not face the risk of frequent fluctuations. Much of the indebtedness of the U.K. economy, as a function of the GDP, has shifted from the private sector to the public sector over the past several years, which implies that the economy is still growing steadily (Peston par. 5).

The consumption of camel milk and its associated products in the United Kingdom is increasing steadily because of the introduction of various brands of the products. One of the most successful companies in the business is Camelicious, another brand from the UAE, which has quite a large consumer base. The competition for market share in the milk products field is quite intense, but camel milk producers have an edge over the cow milk producers.

It is apparent that camel milk products are yet to satisfy the current growing demand for the same; hence, Al Ain Dairy and any other company that will venture into the business has a very high chance of succeeding. The existing competition in the market produces similar products, but the quality requirements are similar for all players in the market; hence, the competition for market share is mainly based on pricing.

The food industry in the United Kingdom is regulated by the Food Standards Agency (FSA), which works closely with the EU to determine the quality of products that are acceptable in the European market. Basically, the U.K. gives licenses to private investors to import food products, as long as the quality of the products matches the requirements of the FSA. According to the Trade Information sheet No. 5, which covers the requirements for the importation of drinks, importer of animal products must possess health certificates and import licenses.

This gives the market a justification score of 10/10 in terms of the competitiveness because almost all products are similar in quality, which gives different business entities an equal chance to harness a profitable market share. (“Imported food trade information sheets” par. 2). If a foreign direct investor is looking to start up a business entity in this market, the cost of start-up is quite high. Most importers of dairy products have partnered with local retailers in the market to introduce their products. Labor cost in the United Kingdom is one of the lowest in the European Union, which gives it a justification score of 9/10 in terms of its competitiveness against other European nations (Wright par. 3). The transportation system in the U.K. is quite affordable; hence, Al Ain Dairy will be efficient in its delivery system.

Marketing Mix and Staffing Policy

Al Ain Dairy should look into assuming a marketing mix based on standardization of the quality of the products and their respective prices. The U.K. retailing market calls for standardization of products for companies to have a positive reception by the consumers. Consumer behavior in this market is greatly influenced by the quality and prices (Richter 27). Products in the food industry are particularly highly standardized in terms of quality; hence, most alternative products are very similar. Promoting a brand is also quite effective in harnessing a larger market for products. For instance, the Camelicious brand has gained popularity in this market; hence, it has succeeded. Al Ain Dairy should look into embracing a similar brand promotion strategy.

The company should also focus on providing consumers with a wider variety of flavors to differentiate its products from competitors. The placement of the products should be focused on the retail industry because it is highly profitable in the U.K. By targeting supermarkets and smaller retail stores, the company will harness a larger market share than its rivals. Al Ain Dairy should also start using online platforms like social media to market its products. The same level of success that has been recorded in the UAE can be achieved in the U.K. through intensive online marketing. The company should retain an online store where customers can purchase products from home.

The price of different camel milk products should be standardized to meet the competitors’ prices. The similarity of the alternative products dictates that their prices should be within the same price range. The company should ensure that the set prices are profitable (Richter 36). This implies that Al Ain Dairy may have to develop a more sustainable supply chain, and probably develop a production plant in the U.K. or in a host nation that will reduce the cost of production. The plant in the UAE is be quite profitable because of the availability of camel milk, and the proximity to the European region means that Camelait products can be exported easily to the U.K. The promotional aspect should be approached with caution in this market.

The Camelait brand by Al Ain Dairy targets adults in the UAE, especially members of the society who embrace healthy lifestyles. This implies that the company needs to promote its products through television advertisements, newspapers, social media platforms, billboards, and word of mouth. These approaches are relatively expensive, but the company needs to build a strong brand. In addition to this, the company should use an ethnocentric HRM staffing policy. The managerial positions should be held by expatriates who understand the business because they will enhance the competitive aspect of the company with their experience in marketing and management.

Market Entry Strategy

The most feasible entry strategy is to partner with various retailing business entities in the market. Al Ain Dairy should learn from other multinational food companies operating in the U.K. For instance, Camelicious from the UAE has developed partnerships with local supermarkets in the U.K. to distribute its products. A joint venture would be appropriate because the company will not need to establish business entities, and it will be easier to develop partnerships with local retailers. However, a joint venture will limit the decision making power of the company in the future.

Licensing is not a good option in this business because the company would like to be the sole producers of the products. Franchising may also be a viable approach, but the financial requirements for the same in the U.K. is quite high; hence, it is not an appropriate strategy. Exporting is probably the most cost effective strategy of entry for the company because the logistics are financially sustainable. Mergers and acquisitions are not a viable option in this business because there are no potential businesses that are ready to sell their entities. A fully owned manufacturing facility is a good strategy, as long as the supply chain in the region will be financially sustainable. In conclusion, Al Ain Dairy should start exporting its product to the U.K. because it is the most sustainable entry strategy.

Works Cited

About Al Ain Dairy 2015. Web.

Camelait 2015. Web.

Imported food trade information sheets. 2015. Web.

Peston, Robert 2011, . Web.

Richter, Tobias. International Marketing Mix Management: Theoretical Framework, Contingency Factors and Empirical Findings from World-markets. Berlin: Logos Verlag Berlin GmbH, 2012. Print.

Wright, Ben 2014, Britain is now the ‘lowest-cost manufacturing economy of Western Europe’. Web.

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