Strategic Analysis: Iceland Foods Ltd's German Market Entry Strategy

This report provides a comprehensive analysis of Iceland Foods Ltd's proposed market entry into Germany. It begins with an overview and introduction, followed by a detailed PESTEL analysis of the German market, examining political, economic, social, technological, environmental, and legal factors. The report then explores various market entry strategies, including exporting and piggybacking, and discusses the importance of market segmentation. Iceland Foods Ltd's strengths, weaknesses, opportunities, and threats are also examined. The report focuses on the introduction of 'Zacusca,' an organic food product, and its potential in the German market. The analysis incorporates Porter's generic strategies to support Iceland Foods Ltd's market penetration and concludes with recommendations for successful market entry. This report aims to offer a comprehensive marketing strategy for Iceland Foods Ltd's expansion into the German market.

ICELAND FOODS LTD market entry in Germany
Module: Strategic Marketing (MG 624)
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Table of Contents
1. OVERVIEW.........................................................................................................................................3
2. INTRODUCTION..................................................................................................................................3
3. PESTEL ANALYSIS: GERMANY.............................................................................................................4
MARKET ENTRY STRATEGIES..................................................................................................................7
MARKET SEGMENTATION......................................................................................................................9
PORTER’S GENERIC STRATEGIES..........................................................................................................11
CONCLUSION.......................................................................................................................................12
REFERENCES:.......................................................................................................................................13
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1. OVERVIEW
Case study: ICELAND FOODS LTD market entry in Germany.
Product: Organic Food ‘Zacusca’
This report shall analyse and justify the ICELAND FOODS LTD store opening in Germany.
Precisely, the report shall contain Germany PESTEL analysis, Iceland Foods Ltd Weaknesses
and Opportunities, Overall market-entry methods, market penetration preferred by Iceland
Foods Ltd, German market segmentation, and other topics. The enumerated subjects will be
analysed and used as marketing tools to support the Iceland Ltd market penetration in
Germany.
As a new product to enter the German market, Iceland has carefully selected ‘zacusca’, a
traditional Romanian dish, which is a spreadable mixture of baked vegetables. This product
has been nominated because it could easily compliment a German breakfast or a snack and it
contains vegetables such as bell peppers and eggplants, which are commonly found in
German kitchens. What would make the product special is the combination of various
savours and aromas and the elaborate way in which it is prepared: the vegetables are baked,
peeled, minced, mixed and boiled at low temperature, for an intense flavour and better
preservation. Additionally, no chemical additives or preservatives are added to the recipe.
The product shall be 100% organic, a feature which is in trend nowadays, as people are
becoming more and more aware of the importance of a proper nutrition plan.
2. INTRODUCTION
Germany is a country located in the north-central part of Europe and comprises a wide-
ranging diversity of landscapes. Being one of the largest countries in Europe, its capital is
Berlin. Germany has a flourishing tourist economy, translating in numerous tourists visiting
the country yearly. The things that are appealing to tourists in Germany are the beautiful
nature, tumultuous history, art, music, literature, and gastronomy (counting its famous wines
and beers crafting culture). The population of Germany consists of eighty million people and
Germany is the second most famous country worldwide in regards to migration preferences.
(Britannica, 2018).
Nonetheless, Iceland Foods Ltd is a unique British food merchant encompassing more than
nine hundred supermarkets all over the United Kingdom, additional forty supermarkets in
Europe, and a world-wide distribution commerce. Iceland originated in the seventy’s by
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Malcolm Walker who released the first Iceland superstore in Oswestry, Shropshire, and
selling frozen foodstuff. Moreover, in the next five years, the company progressed to fifteen
additional supermarkets (Iceland, 2018).
3. PESTEL ANALYSIS: GERMANY
PESTEL analysis is a management tool, enabling professionals to evaluate the aspects of a
country that could impact or influence a business. The examination can be led for businesses,
ventures, and, as in this case, countries. PESTEL is the acronym for Political, Economic,
Social Technological, Environmental, and Legal.
Furthermore, Germany is one of the foremost governmental powers worldwide. In certain
domains, it is recognised as the world-wide high-tech and industrial leader.
Political
This factors is associated with the government influence over the industry or company. It
includes foreign trade policy, environmental laws, governmental policy, tax policy, stability
of government and instability of government.
Germany is an autonomous, democratic state. Germany political structure is functioning by
the regulations of a system named Grundgesetz. The most relevant political parties in the
country are the Social Democratic Party and the Christian Democratic Union.
The Constitution of Germany dictates the essential assembly of the administration, being the
key foundation of authority.
Germany currently upholds a system of two hundred and twenty nine ambassadorial
undertakings overseas and embraces associations with additional one hundred and ninety
states.
Germany is the main funder to the European Union financial plan, supplying over twenty
seven percent of the financial assistances and the third major provider to the United Nations
supplying eight percent of the financial assistances.
Additionally, Germany is a member of the NATO, the Organisation of Economic Co-
operation and Development, the G20, the World Bank and the International Monetary Fund.
In context to Iceland Food Ltd. Strong political background of Germany will provide positive
influences to this company while establishing their business in that country. Along with this,
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it will help company in following stable laws and supports them in adherences without any
complications.
Economic
Economic factors states economical status of the nation which includes interest rates,
exchange rate, inflation, unemployment, disposable income of consumers, economic growth
etc.
Germany is the foremost manufacturer of solar power equipment and wind turbines, majority
of other assets including natural gas and petrol being imported. Germany imports almost sixty
percent of the energy it uses, being the third biggest energy trader.
Moreover, seventy percent of the Gross Domestic Product comes from the service industry.
Manufacturing contributes the GDP with twenty eight percent and farming contributes with
less than one percent. The majority of produces are technology related, vehicles, equipment
and biochemical merchandises, while big municipalities in the country host some of the
biggest yearly global sales exhibitions.
German economy is the most prevalent economy among the European countries. Germany’s
utmost significant exchange associates are France, Great Britain and the United States of
America.
In context of Iceland Food Ltd., it has been analysed that there are numerous of large scale
companies who are operating their business in Germany which depicts that there is a huge
population in this nation with stable economic condition who will easily accept organic
product of Iceland Food Ltd. This shows opportunity for Iceland Food Ltd. In Germany
where they can easily expand their business with organic food product.
Social
This factor is associated with the various demographic characteristics such as values of
customers, norms, safety emphasis, lifestyle attitude, cultural barrier, income distribution.
Germany is the biggest European state in regards to inhabitants. The the social order is
shaped by a diversity of lifestyles. Although community transformed in years to modernism
and novelty, the family remains the furthermost significant social orientation. With reference
to Iceland Food Ltd., it can said that people of Germany are socially active and believes in
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accepting new things in their lifestyle as well as food. This shows that if Iceland Food Ltd.
Introduces organic food product in this country then its citizen will easily accept it. This leads
to increase in success of Zacusca in Germany.
Moreover, topics such as structural design, music, poetry, painting, drawing and sports mirror
Germany’s social and cultural prospects.
Technological
Technological factor is associated with the influence of technology over the operational
activity of the industry or the marketplace.
Germany supports science and machinery by accommodating self-governing workrooms, yet
likewise private exploration and research.
The nation offers capital for wide-ranging European study and advance, including researchers
and test centres. Additionally, the German academic society is big and diverse, encompassing
numerous institutions of higher education and seminaries that provide practical and
theoretical knowledge.
Germany has as a great asset the vehicle industry, and visual communication networks,
technological constituents, and countless additional novelties will probably be used in auto
mobiles. German auto mobile producers are anticipating that IT backing structures will
transform driving to be extra comfortable and safer.
Germany is one of the biggest car exporter, being also the third major vehicle manufacturer.
Mechanism, engines and plant construction, defining for the German industry, are as well of
exceptional global significance.
Besides, Germany is a global front-runner in regards to Biology and Biochemistry industry.
Yet, because the German biotech engineering, to exemplify, emerged really late, as it was
barely prevailing until 1995 and is even now trying to recuperate the late start. Although
German academies are undertaking outstanding exploration on nanotechnology, several
scientists are concerned that the state will not manage to transform that elementary
knowledge into produces.
Approximately 6 million cars are manufactured in Germany yearly, and more than five
million vehicles are manufactured abroad by German trademarks.
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German academics are doing outstanding elementary discipline in grounds fluctuating from
resources science to Biomedicine. German researchers and neuroscientists have made
significant assistances to exploration of the brain implants and in non-invasive brain-machine
interfaces.
With reference to Iceland Food Ltd., it has been identified that Germany is
technological advanced country which has various research centres within the nation only.
This seems to look like positive factor for Iceland Food Ltd. As the company can take
advantage of upgraded technology while spreading information about their new organic
product in that nation. Along with this, they will also get support at the time of using business
operations associated software in the company. As a result, with latest technology it can
easily execute their business in Germany.
Environmental
It has been analysed that the resources are becoming scarce day by day which states that all
businesses are required to take initiative towards performing their business activity in such a
manner which does not place any kind of negative influence over environment.
Germany, similar to numerous developed countries, has a noteworthy air pollution concern.
Also, mining and excavating in the country has caused important water contamination. In a
recent survey, more than thirty five percent of respondents answered that global warming is
the most significant ecological problem Germany is tackling nowadays.
However, Germany is frequently revealed amongst the international front-runners in clean
technology and the number of the national clean technology copyrights developed
impressively in the recent years.
Germany is presently implementing the so called ‘energy turn’, strategy, aiming to become a
forthcoming supplier of renewable energy expertise to other countries. In context of Iceland
Food Ltd., it can be said that the company is introducing completely organic food product in
Germany which does not have any kind of side affect over the environment as well as its
consumers health. As a result, it will influence interest of German citizens towards the
organic food product and influence to them to make purchase for the same product.
Legal
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This factor is associated with some specific laws like antitrust laws, consumer protection
laws, patent laws, health and safety laws etc.
The running of justice is distributed into five subdivisions: conventional, labour,
organisational, societal and pecuniary courts of law.
The legal structure of Germany has been moulded by constitutional legislature yet is
furthermore subjective to the legislation of the European Union and to the global regulations.
The legal stability is a strength that appeals to overseas businesses and is advantageous in
concerns to business investments and commercial undertakings. Competition is at the core of
German business experience. Brands and exclusive rights have robust and sturdy protection
in Germany. Additionally, Iceland Food Ltd. has to carefully take into account several factors
when it decides to export to Germany, such as: imposts and tariffs, value and ecological
criteria, and brand and market rivalry procedures.
MARKET ENTRY STRATEGIES
There are a diversity of modalities Iceland could use to penetrate the German market.
 Exporting
Exporting is an old-style recognised method of functioning in external markets. Although
exporting does not necessitate direct manufacturing, important marketing funding is
mandatory. Direct exporting is selling the goods and services directly into the market that are
choosing for the in the primarily instance for resources (David and David, 2013). For
instance: if Iceland Food Ltd. adopts this marketing strategy then they can established various
kinds of sales program that turn into the agents and distributors that in marketplace. By using
it organisation can deliver right kind of products and services to the ultimate consumers
without using less no. of mediators so that less time and cost should be consumed. Some of
the main benefits which could be gained by Iceland Food Ltd while adopting exporting are
described as below:
 Manufacturing is home grounded, meaning it imposes reduced risk
 Provides a chance to study foreign markets prior to spending in construction
 Decreases the impending risk of functioning abroad.
The detriment is mostly the lack of control, which is mainly in the hands of the the associates
and intermediaries.
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Piggybacking
Piggybacking implies that less export experienced businesses can use the services of an
experienced business. Communication is very much important for an organisation to deliver
right kind of value and information to the ultimate consumer base (McDONALD, 2016.).
Communication is duplex in nature and in that data should be transmitted in both side which
is a pair of simplex communication. In which every kind of link have a forward channel to
providing knowledge and information by sending to the acknowledging in right manner. With
the help of it traffic load should be doubled for each kind of data and statistics to remain
always competitive in marketplace. In context of Iceland Food Ltd., it has been analysed that
the if this company uses this strategy at the time of entering to Germany with new food
product that is Zacusca are described as below:
 It proved beneficial for organisation to send the data and information to the right
direction to receive the ultimate value to remain always competitive in marketplace.
 The receiver passes through the network layer in another data packet. So it proved
beneficial for organisation to deliver right kind of knowledge and information to get
optimum outputs.
Countertrade
Competitive power translates into further investment in marketing. In this circumstances, the
company might develop actions by functioning in markets where rivalry is smaller.
Countertrade is a reciprocal form of international trade in that goods and services should be
exchanged from the other goods rather than from the hard currency (Moutinho and Vargas-
Sanchez, 2018). That trade should be practised majorly in developing nations with the
limited kind of exchange or in between the credit facilities. In respect of Iceland food Ltd. If
company uses this tool or technique they can easily deliver right kind of product and services
in exchange of other goods that are potential in nature to get desirable outcomes.
 The major benefit of countertrade that it facilities the protection of foreign kind of
currency. With it gives employment opportunities, high level of sales and capabilities
utilization in positive manner and provides ease of entry into new market so that
potential outcomes should be achieved to remain always competitive in marketplace.
Licensing
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Licensing is demarcated as the technique of overseas process where a company in one state
approves a business in a different state to use the built-up, processing, brand, expertise or any
sort of proficiency delivered by the licensor. Licensing implicates slight expenditure and
participation, the main charge is signing the contract and regulating its application. With
reference to Iceland food Ltd., it can be said that the company could adopt this market entry
strategy as it will help in quick entrance into a foreign market. Along with this, it also
minimises capital requirement, risk(both financial and legal) and also contribute in reducing
influence of trade barriers.
Joint ventures
Joint ventures are initiatives where more shareholders share proprietorship and regulate on
property rights and function. It is considered as an effective business arrangement under
which two or more companies decides to combine their resources for attaining particular task
or objective. With reference to Iceland food Ltd., it can be said that the management team of
this company can adopt joint venture as its market entry strategy as it helps them in
approaching better resources, share risk, develops networks and relationships etc.
Ownership: The broadest method of sharing is one hundred percent proprietorship, involving
the utmost liability in investment and decision-making. The aptitude to connect and regulate
one hundred percent might overshadow the detriments of joint ventures and licensing.
Nevertheless, return of earnings and resources have to be prudently checked. The more
unbalanced the background the less likely is the ownership stratagem a choice (FAO, 2018).
On the basis of above mentioned report, it has been analysed that Joint venture is best
market entry strategy for Iceland food Ltd. While entering to Germany with Zacusca. It can
be said that this product is completely organic and new Germany. Therefore, the company
will definitely require support of another partner or partners who could support Iceland Food
Ltd. With their resources. Along with this, it will also support Iceland food Ltd, in sharing
their financial and legal risk.
MARKET SEGMENTATION
Market segmentation breaches a market into diverse sections in order to allow a trade to an
enhanced target of its merchandises to the pertinent clientele.
There are several approaches a company can practise to segment a market. There are four
diverse kinds of market segmentation and all differ in application:
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 Demographic segmentation
Demographic subdivision is less pretentious and extensively used kind of market
segmentation. Furthermost businesses practise this method of segmentation to access the right
people in buying and consuming their merchandises. Segmentation usually distributes a
population based on features, meaning that demographic segmentation also has its specific
characteristics like age, gender category, revenue, job, faith, ethnic group, etc.
 Behavioural segmentation
This kind of market segmentation distributes the residents on the grounds of behaviour. This
category of market segmentation is flourishing particularly in the smartphone market. It is an
kind of process to divide market into smaller groups that are based on the buying patterns of
the consumers (O'shaughnessy, 2014.). It is done on the basis of customers such as frequency
of usage, loyalty of consumers and regarding benefits and various occasions to provide
products and services accordingly to provide major advantages. With the help of it
organisation can be build suitable products and services to give delighted experiences to
consumers in proper manner. In context of Iceland Food Ltd. They segment and build
products and services as per the interest of consumers to remain always competitive in
marketplace.
 Psycho graphic segmentation
Psycho graphic segmentation uses daily routine of people, their undertakings, attitudes and
views to define a market niche. The psychological segmentation also considers customers
standard of living, the social status, actions, feelings and thoughts (Proctor, 2014. ). In that
kind of segmentation that are used for group prospective, about the shared personality and
traits with values, attitudes and some other factors to give best products and services as per
the consumers taste and preferences to remain always competitive in marketplace. In context
of Iceland food Ltd. They by using that attributes classify their consumers and their interest
areas so that they can formulate products and services accordingly.
 Geographic segmentation
This kind of market segmentation distributes persons based on their location. The prospective
clientele will have dissimilar requirements grounded on the place where they are located
(Marketing 91, 2018). In geographic segmentation that is one of important strategy that helps
to divide market on kinds of basis that are various regions, geographic (Shank and Lyberger,
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2014). In context of Iceland food Ltd they divide divide and interest areas of people on that
live on similar areas or regions so that organisation can build products as per the consumer
needs and demands. In context of Iceland food ltd. They focus on specific region and
accordingly so that they can attract the attention of large no. of consumer base to remain
always competitive in marketplace.
In that aspect one of most important for an organisation to choose one of most important
segment by which organisation can build products and services as per their interest. In
context of Iceland food Ltd. They by using the behavioural and geographical segmentation
build the products and services so that best results should be achieved (West, Ford and
Ibrahim, 2015). Along with this, it can be said that in terms of geographical segmentation the
company is planning to expand in Germany as its citizens are health conscious and also gives
preferences to all new food products which are developed in organic manner. This will result
in overall growth and development as firms are expanding their business operations.
PORTER’S GENERIC STRATEGIES
The Generic Strategies enable companies to establish their strategic path. Michael Porter
reveals four stratagems to be used by any company, stating that a business that selects a clear
progression that will enable it to overcome the competition:
 Cost Leadership
An extensive market has to be targeted and presented the lowest potential fee. There are
basically two choices: to maintain prices as low as possible or to make certain that a bigger
market will be shared using typical costs. Businesses that use this approach effectively
typically have considerable savings, well-organized logistics and low expenses in regards to
resources and workforce. The company is usually concentrated on in-house developments.
 Differentiation
The business targets a wider market and the merchandise has unique characteristics. With this
stratagem, the merchandise has to remain as special and unique as possible, obtaining this
way competitive advantage. Excellent study of the market, growth, novelty and the skill to
deliver excellence are compulsory in order to use this stratagem effectively and successful.
Operational efficient marketing is crucial, so that the market appreciates the advantages of the
unique merchandise. It is also vital to adapt rapidly in a varying market. This type of
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