Strategic Marketing Plan: Danone S.A. in Australia

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STRATEGIC MARKETING FOR DANONE S.A. IN AUSTRALIA
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Executive summary
As the globalisation of the various business markets has reduced the international trade barriers,
many companies are aiming to penetrate the foreign markets in order to expand their business
overseas. In this report, the overall feasibility of Danone S.A., a France-based dairy retail
products manufacturer company, to penetrate the Australian market to sell their Bulgarian
yogurt. A PESTEL analysis has been conducted on the Australian dairy retail market, which
indicates that Danone S.A. has good prospects there. The most optimal market-entry strategy for
Danone S.A. in Australia is found to be strategic alliance, The target customer segment has been
recommended as Australian residents within 15-50 years age who are living in Urban and semi-
urban areas, and have a healthy lifestyle, and the optimal competitive strategy has been
recommended as cost leadership from Porter's generic strategy.

Table of Contents
Introduction......................................................................................................................................4
PESTEL...........................................................................................................................................4
Market-entry Options.......................................................................................................................9
Market Segmentation.....................................................................................................................11
Porter's Generic Strategy...............................................................................................................13
Conclusion.....................................................................................................................................15
References......................................................................................................................................16

Introduction
In the modern global business environment, many companies have been expanding their
businesses overseas by utilising various foreign market entry strategies. The aim of this report is
to identify the most optimal strategy for Danone S.A., a France-based dairy retail products
manufacturer company, to penetrate the Australian market in order to sell their Bulgarian yogurt
there. The objectives will be to determine the ideal penetration strategy, target customer segment
and proper competitive strategy for Danone S.A. in Australia. In this report, a detailed PESTEL
analysis of the Australian dairy retail market will be conducted, followed by identification of
optimal market-entry strategy and target customer segment for Danone S.A. Furthermore,
Porter's generic strategy will be used to identify strategies to gain competitive advantages.
PESTEL
As opined by Alston, Clarke and Whittenbury (2017), the Australian market of dairy retail
products is currently going through a change, as various international food restaurant chains are
penetrating the Australian market and starting their business there. In this context, according to
Regulations (2015), the feasibility of a new company like Danone S.A. to expand their dairy
retail business in the Australian market can be evaluated using a comprehensive PESTEL
analysis, which encompasses all the macro-environmental factors that affect the business
efficiency and effectiveness of a dairy retail company operating in the Australian market. The six
macro-environmental factors of a particular business market that affect the business operations of
a company the most are the political, economic, social, technological, environmental and legal
factors. These factors affect the Australian dairy retail industry as follows:

Political Factors:
As opined by Ratten and Dana (2017), the dairy retail industry in Australia has to follow many
political regulations and legislatures in order to properly and successfully conduct their business
in the Australian market. For instance, as argued by De Waal, Tiwari and McMurray (2018), the
dairy retail industry has to maintain the quality of their food products as per the standards set by
the Food Standards Australia New Zealand (FSANZ). Moreover, the process of treating dairy
retail products in Australia also has to be as per the detailed guidelines set by FSANZ. Apart
from these, Islam and Pattak (2017) opined that the dairy retail industry also has to align their
business process with the political decisions taken by the ruling parties in the Australian Federal
Government and the State Governments.
However, Santhanam-Martin, Bridge and Stevens (2019) opined that as the import-export tariffs
on food ingredients are gradually being reduced in Australia due to globalisation, this gives
Danone S.A. an opportunity to enhance their business profitability in Australia by importing
quality ingredients for Bulgarian Yogurts that fits the standard of FSANZ.
On the contrary, as opined by Ikutegbe, Gill and Klepeis (2015), the strict food safety regulations
can pose a threat to the business profitability of Danone S.A., which can be solved by Danone
S.A. optimising their quality control system.
Economic Factors:
According to Pagotto and Halog (2016), the economic conditions of the Australian market also
heavily affect the business feasibility of the dairy retail industry there. However, Sutton-Brady,
Kamvounias and Taylor (2015) argued that as the GDP per capita of Australia is approximately
53,799.94 USD and the inflation rate is approximately 1.3% in 2019, this indicates that the

purchasing power of the Australian residents is sufficiently high. Naturally, this enhances the
profitability of the dairy retail industry in Australia.
Moreover, Nettle, Crawford and Brightling (2018) argued that as the business sectors of the large
cities in Australia, such as Sydney and Melbourne, are booming, this presents an opportunity for
Danone S.A. to quickly expand their business in Australia by opening their stores in these cities.
On the contrary, as argued by Fawi and Osman (2016), the decreasing inflation rate may pose a
threat to the profitability of Danone S.A. in Australia, but this threat can be countered by
optimising the price of their dairy retail products such as Bulgarian Yogurts to stay competitive
in market.
Social Factors:
As opined by Suryanto and Komalasari (2019), the profitability of the dairy retail industry
heavily depends on the customer preferences, which is heavily related to the social trends. For
instance, Carter and Mérel (2016) argued that due to the increasing health consciousness among
the Australian residents, dairy retail products such as Bulgarian Yogurts are becoming extremely
popular among them. Moreover, during the various social and cultural festivals, the market
demands of dairy retail products also drastically increases in Australia, which greatly benefits
their dairy retail industry.
Ridoutt and Hodges (2017) argued that as the customer trends are gradually being changed due
to globalisation, it brings an opportunity for Danone S.A. to create new variety in their dairy
retail products to attract new customers, enhancing their customer base.

On the contrary, as opined by Kamal et al., (2015), not being able to properly predict the
upcoming social trends can become a threat for Danone S.A., which can be mitigated by properly
conducting market research of Australian society.
Technological Factors:
As opined by Zhang and Roberts (2016), the dairy retail industry of Australia is heavily
depended on the culinary and food-processing technologies developed in Australia. Alston,
Clarke and Whittenbury (2017) argued that as dairy retail products have to be properly packaged
and preserved before being sold to the customers, it requires the use of latest dairy technologies.
Therefore, the dairy retail industry in Australia has to keep note of the latest developments in the
technologies of food cooking, processing and preservation in order to meet the standards of
FSANZ and maintain customer satisfaction.
As opined by Ratten and Dana (2017), since currently food technology is being globally
researched on, Danone S.A. has the opportunity to utilise the latest technologies in order to gain
an edge in market competition.
On the contrary, Santhanam-Martin, Bridge and Stevens (2019) argued that since these
technologies are available to the market competitors of Danone S.A. as well, it might pose a
threat to the company. This can be countered by using the most cost-effective technology to
maintain product price of Bulgarian Yogurts at a competitive level.
Environmental Factors:
As opined by Ikutegbe, Gill and Klepeis (2015), dairy retail industry usually generates a
considerable amount of waste in the form of food, food ingredients and food packages.

Therefore, Sutton-Brady, Kamvounias and Taylor (2015) argued that the dairy retail industry in
Australia has to abide by the Waste Management and Resource Recovery Act 2016 while
disposing off their wastes. Moreover, they also have to limit the air pollution due to cooking
within acceptable limits in Australia.
According to Fawi and Osman (2016), as Danone S.A. is already experienced in managing
wastes and pollution in France and Spain, they have the opportunity to utilise that experience to
optimise their waste disposal system, and enhance their business sustainability.
On the contrary, Carter and Mérel (2016) argued that producing more dairy retail products than
market demand may result in increased waste generation, which may pose a threat to the
profitability of Danone S.A. This threat can be mitigated by adopting lean management approach
in their business operations.
Legal Factors:
According to Carter and Mérel (2016), as dairy retail industry in Australia is a business sector,
they have to strictly abide by all the relevant regulations and legislations of the Australian
Federal Government and the State Governments, such as the Fair Work Act 2009 and the
National Employment Standards (NES). According to Kamal et al. (2015), these regulations
dictate the minimum rights of employees in Australia, which applies to the dairy retail industry
as well. Furthermore, all companies operating in the Australian dairy retail industry has to abide
by the Corporations Act 2001 to become legal entities.
As opined by Zhang and Roberts (2016), since Danone S.A. is a legal dairy retail company
operating in France and Spain, this gives them an opportunity to project themselves as a legal
and trustworthy company in front of their potential Australian customers.

On the contrary, Regulations (2015) argued that having to abide by the Australian laws may pose
a threat to the business operations of Danone S.A., since they mainly operate in France and Spain
(World food company - Danone, 2019). This threat can be mitigated by properly structuring their
business policies in Australia so that it conforms to all legal requirements and restrictions.
Market-entry Options
There are various market entry strategies that a business organisation can adopt in order to
penetrate into the market of a foreign country (Ang, Benischke and Doh, 2015). Among these
strategies, the most effective strategies are the strategic alliances, mergers and acquisitions,
foreign direct investment (FDI) and many other market entry modes.
Strategic Alliances: Strategic alliance is practically a cooperative agreement between two or
more firms in order to conduct joint researches or joint ventures on the terms of equity
participations. Naturally, Collinson (2015) argued that it can be seen that unlike mergers and
acquisitions, strategic alliance has several advantages, as they are temporary in nature, and does
not require the participating companies to enter into a permanent binding contract. This allows
the companies to exchange technologies and reduce business risks. On the contrary, as opined by
Hollender, Zapkau and Schwens (2017), since it is temporary, it may not turn into long-term
business relationship between the companies. It can be seen that a company can enter a foreign
market by forming a strategic alliance with a suitable native company of that country, which
reduces the risk of foreign market penetration.
Mergers and Acquisitions: Merger is a particular business strategy of two companies by
merging their organisations into a single organisation with a single legal entity. On the other
hand, Laufs, Bembom and Schwens (2016) argued that acquisition is a particular form of merger,

where a company buys the organisation of another company and merges the two organisations
together. This makes the joining of organisations a permanent action and their customer
segments mostly get joined together, which increases the stability of the newly formed joint
organisation. On the contrary, Stoian, Rialp and Dimitratos (2017) argued that it reduces the
possibilities for the participating companies to split up again. Naturally, it can be used for
penetrating foreign market as well, although it may require the participating companies to face
several legal formalities and restrictions.
Foreign Direct Investment (FDI): FDI is one of the most popular and easiest methods of
foreign market penetration. According to Surdu and Mellahi (2016), this is the process of a
company purchasing the shares of a foreign company in order to enter that foreign market. In this
process, the company that purchases the shares has to face significantly less hassle to enter that
foreign market. On the contrary, Chetty, Ojala and Leppäaho (2015) argued that this may not
allow the purchasing company to directly sell their products into that foreign market.
From the above options, it can be realised that the best market-entry strategy for Danone S.A. to
penetrate the Australian dairy retail market will be strategic alliance. As Danone S.A. wishes to
sell their dairy products, particularly the Bulgarian Yogurt in Australia, following the route of
FDI will not be much beneficial. While investing in an Australian dairy company will let Danone
S.A. to earn profit, it may not allow them to sell their own branded dairy products (World food
company - Danone, 2019). Buying or merging with one of the native dairy companies in
Australia may become more effective for Danone S.A.to enter Australian market in the long run,
but it may incur a huge amount of initial cost while conducting the purchase process, and may
substantially increase the risk of business loss. On the contrary, forming a strategic alliance with
an existing native Australian dairy company will allow Danone S.A. to produce their dairy

products including Bulgarian Yogurt in Australia, and sell them in the Australian market with the
minimum production cost and least risk. Thus, if Danone S.A. forms a strategic alliance with an
Australian dairy retail company, it will allow them to start their business in the Australian dairy
retail market successfully while maintaining their business profitability and sustainability.
Market Segmentation
Market Segmentation for any company refers to the segmentation or division of the target market
within the region where the organisation is able to identify the potential customers for their
products or services in the market (Dibb and Simkin, 2016). For Danone SA, the target market of
Australia would be segmented under four major categories so that the company would be able to
market their dairy product to the customers successfully. These are:
 Demographical Segment: Demographical segmentation refers to the categorization of
the target market based on the aspects such as age, gender, race, income, and so on (Dibb
and Simkin, 2016). For the Danone SA and their dairy product, the target market selected
based on demographic segmentation would be the customers of any gender and having
preferably moderate level of income. However, the age group selected for their dairy
product would be the people from the ages of 15 to 50. The main reason for this is that
the dairy product of Danone SA would be suitable for any kind of people and especially
for younger group of people as well as up to the age of 50. However, anything beyond
that would be harmful for the people as it might increase their blood sugar level leading
to diabetes or even cause obesity.
 Geographical Segment: Geographcial segment refers to the categorization of the target
market based on the geographical aspects of the region such as Urban, Semi-Urban, and

Rural areas. For the Danone SA and their dairy product, the target market selected based
on the geographic segmentation would be the customers of mostly urban and semi-urban
areas. The main reason for this is the fact that in the urban and semi-urban areas, there
would be many consumers who would prefer to consume the dairy products and
moreover, there would be high amount of sales that would lead to high revenue
generation as well as profitability.
 Behavioral Segment: Behavioral segmentation refers to the categorization of the target
market based on the behavior of the population including their needs, their usages, their
behavior towards any brand, and so on (Venter, Wright, and Dibb, 2015). For the Danone
SA and their dairy product, the target market selected based on the behavioral aspects
would be the customers who love to consume dairy products and have a preference for
high quality products. This is because the company provides high quality dairy products
to its customers and the selection of these customers would be suitable for them.
 Psychographic Segment: Psychographic segmentation refers to the categorization of the
target market based on the psychographic aspects of the population such as their ideas,
values, beliefs, lifestyle, and so on (Venter, Wright, and Dibb, 2015). For the Danone SA
and their dairy product, the target market selected based on the psychographic aspects of
the population would be the customers who live a good lifestyle and want to live a
healthy life by consuming dairy products. This is because the company provides high
quality dairy products to its customers who want to live a healthy life and as such, the
selection of such customers would be suitable for the company.