Acknowledgements

I would wish to express my sincere gratitude to Professor Mr. Ewoud Jansen (my tutor) in University of Fontys Business Management. He has given me a great hand by guiding me though this project. Without his help, the thesis would not have been possible.

Next, as to Mr Nando Kitwich, the CEO of KV Connections, I am heartily thankful. Because of him, I could get this precious opportunity to reach the real business world. He has made his support available everywhere. With his patient guidance and abundant knowledge, I have learnt a lot.

Lastly, I am indebted to my colleague Mr Shufan Hu in KV connections, who help me go through my internships.

Preface

This report will enable Vendee concept to make a decision on whether they should enter the Chinese market with their Poultry processing equipment or not. Furthermore, this report will enable Fontys University of Applied Science in Eindhoven to evaluate the competencies of the trainee.

This report is structured in seven chapters; readers from Vendee concept can overlook

It is hoped that this report is satisfactory for our stakeholders Vendee concept and Fontys University of Applied Science.

Acknowledgements. II

Preface  III

List of figures. VI

List of tables. VI

Executive Summary. 1

Part 1 project analysis. 2

1.1 Problem definition. 2

1.2 Research objective. 2

1.3 Research plan. 3

1.3.1 Research question. 3

1.4 Methods of collecting and analysing information. 4

2.1 company introduction. 7

2.2 Corporate Vision. 7

2.2.1 Mission. 7

2.2.2  Market & Strategy. 8

2.3 Financial results from 2010 to 2012. 8

2.4 Business model of VENDEE CONCEPT. 9

2.5 Marketing mix of  VENDEE CONCEPT. 9

2.6 Strengths and Weaknesses. 13

Part 3 External analysis. 14

3.1 Macro analysis: 14

3.1.1 Demographic & Economic aspect: 14

3.1.2 Legal & political factors: 14

3.1.3 Technology. 15

3.1.4 Product life cycle. 16

3.2 Competitor analysis. 16

List of figures

Figure 1Market& Strategy. 8

Figure 2 Financial results. 8

Figure 3 Processing software. 10

Figure 4 Region. 12

Figure 5 Distribution of potential markets. 14

Figure 6Key elements for customers to choose equipment 22

Figure 7 Market entry model 30

Executive Summary

Vendee Concept was founded in June 1991 by Christophe Favre on the West coast of France. During the last few years the company has grown remarkably in the European market. Expanding into the Chinese market became the company’s next development step. The aim of this project is to examine how to export to the Chinese market with their poultry processing equipment.

Internal analysis: For Vendee concept’s poultry processing equipment business, distribution outlets are the ones who directly deal with customers. Products are supplied to customers through these outlets and the perform post-sale services such as maintenance and repairs. Vendee concept has already gained reputation in Europe and its European sales area has relatively had the highest share by approximate 54%.

External analysis: the overall commercial environment regarding the poultry processing equipment industry is attractive for Vendee concept, with Beijing area having been defined as the most attractive target region, because it has relatively the most number of potential customers and distributors. The competitive situation regarding the VC’s poultry processing equipment among competitors is fierce, because the technology of several competitors is almost at the same level. They are trying to capture market share by setting price and improve their service package.

SWOT: Chinese market offers good market opportunities for Vendee concept. The main competitive advantage of Vendee concept is their comprehensive service which includes free installation and preventive maintenance. A weak point of Vendee concept is that the company does not have any knowledge of the Chinese market.

Implementation plan: Vendee concept will mainly use customer intimacy as an entry strategy. This means the need to apply its value-added services at a premium price. The focus is on CRM, exceeding customer expectations, reliability and being close to the customers. End distributors will be chosen as the export method.

Financial plan: A financial plan of the organizational consequence and an implementation plan is given. It is estimated that the total revenue for the first year is 7,546,500 RMB.

Part 1 project analysis

1.1 Problem definition

KV connection is a strategic partner for its customers. They assist clients in establishing a sound strategy and its implementation. Therefore during the entire process – from start to finish – they are deeply involved in their clients’ activities. What starts with detailed market research, often goes further with the necessary services to provide ongoing support, all designed to service their clients.

Vendée Concept is a customer of KV Connection Company; Vendée Concept has a mature European market in their core business. They already export to most regions of the world except China. On the other hand, the increasing number of competitors in Europe are threating Vendée Concept’s stability of their business in recent a few years , Therefore Vendée Concept is seeking new markets by market penetration, which is the core investigation of this project. This project is therefore important because Vendée Concept sees potential in China to help them establish a new market and with that the ability to expand their business.

1.2 Research objective

At the date 28-02-2013 the investigation of the Chinese market for the poultry processing machine will be started to help Vendée Concept enter the market with their product line of the poultry processing machine. This project will be completed on the date 29-6-2013.

Contingent upon the findings of the research, a feasible export strategy will be accomplished to support operational business plan. The thesis will serve the central question:” what entry strategy should VENDEE CONCEPT use in China with their poultry processing products?

The export strategy is formulated and based on the company’s strength and opportunities, and to overcome the company’s weakness and to counter market threats. Through a series of marketing analysis, it is advised that VENDEE CONCEPT can export their existing product (poultry processing equipment) to get into a new market (China).

1.3 Research plan

1.3.1 Research question

The research questions are obtained from the problem definition. The results of these sub-questions will answer the central question. The research output consists of four parts; internal analysis, external analysis, the export strategies formulation, implementation plan and recommendations.

1.3.1.1 Internal analysis

1. What are the internal factors of Vendée Concept’s that influence the export strategy formulation?

Research deliverable

• Vendée Concept’s vision and mission statement
• Business model of Vendee Concept
• Product-marketing combination
• Financial situation of Vendee Concept
• Vendée Concept’s Current business and strategy
• Vendée Concept’s product USP
• Export experiences and result
• Strengths and weaknesses of Vendee Concept.

1.3.1.2 External analysis

2. What are external factors to Vendee concept that influence the export strategy formulation?

Research deliverable

• Macro analysis (DETP)
• Potential Customer analysis
• Competitor analysis
• Threats and opportunities of Vendee Concept

3. What strategy can be formulated based on the SWOT analysis?

Research deliverables

• SWOT analysis
• Confrontation matrix
• Distribution analysis
• Objectives of VENDEE CONCEPT

4. What is the feasible implementation plan for the formulated strategies?

Research deliverables

• Entry model
• Level of market dominance
• Marketing Mix
• Distribution decision
• A communication plan
• Financial plan

1.4 Methods of collecting and analysing information

The information has been used in this report is obtained extensively from secondary research – mainly from desk research and phone call interviews. This information has been analysed and crossed- checked in a consistent style.

The following research method has been applied:

Chapter 2 answers the first research question dealing with internal analysis. This is accomplished by collecting primary information on Vendee concept. The data are collected through a series of inside information about Vendee concept, which allows to list the strengths and weaknesses of Vendee concept.

Chapter 3, the second research question is answered, by examining the external situation of Vendee concept business using primary and secondary information. These sources are mainly about the Chinese poultry processing industry, also about the potential customers and competitors of Vendee concept. The research approach to this step is a descriptive research. The External study is performed using secondary information obtained on the internet. The search sources are via a B2B and exhibition website. Afterwards the potential customers are recorded in a list with company information and contact info. The data collection for the Chinese poultry processing industry market is from secondary information and telephone interviews. In the telephone interview, a short introduction about Vendee concept and its poultry processing equipment will be used, furthermore, the questionnaires will be asked for helping Vendee concept to get to know their purchasing behavior, upgrade cycle of the processing equipment that they are using, and if they are interested in the Vendee concept product. 35 telephone interviews have been conducted for potential customers (25 customers were willing to answer questions) and 5 telephone interviews for competitors. (Questionnaires in the telephone interview can be found in Appendix 2)  Moreover, major threats and opportunities for Vendee concept will be identified.

Chapter 4, the third research question will be answered. SWOT analysis of Vendee concept will be used to meet the needs of potential customers and which competitors either do not have or not strongly as VENDEE CONCEPT do. In addition, the confrontation matrix will be used to determine how far VENDEE CONCEPT’s poultry processing machine adapts to the export market and discover where the real challenges and obstacles are. Subsequently, the Potential Distributors for Vendee concept are recorded in a list with company information and contact info. The data collected Potential distributors are from secondary information and to benchmarking competitors of Vendee concept to know who they cooperate within China. The smart model will be used to set objectives of VENDEE CONCEPT. Moreover, Market entry modes have been used to analysis the level of market control and   The Ansoff Product-Market Growth model has been used for company to grow the business.

Chapter 5, the las research question is answered by designing the implementation plan based on the strategies from chapter 5, which includes the selection of entry model, Marketing Mix, Distribution decision, communication plan and a marketing budget. The entry methods will be selected based on the historic successful entry experience (in the business model of VENDEE CONCEPT, Chapter 1). Furthermore, A study by Otto de Leeuw ( 1995) mentioned that regular exporters that find they are more successful when using the price and promotion elements in export marketing. As Vendee concept aims to start the regular export process in China, the thesis will focus on price and promotion elements. After that, the distribution decision is given based on the entry methods. In addition, a communication plan will be induced to approach its customers, and the financial plan interacts with the export marketing program and it confirms that the marketing plan is aligned with realistic costs, having a financial support system is a must. Finally, within all outcomes from the sub-research questions the conclusion and recantation are made to address the central question. The research  structure is identified in the following figure.

Figure 1 Research structure

Part 2 Internal analysis

2.1 company introduction

Vendee Concept was founded in June 1991 by Christophe Favre on the West coast of France. Its location allows the company to work closely with the dense network of food processing companies in the area. They started to batch poultry and oysters. It evolved to cover a wider range of food products: seafood, salad, Belgian endives and bakery goods. Since 2007 VENDEE CONCEPT has expanded. Its buildings cover 5000 sqm, including 3500 sqm for the shop floor where the machines are manufactured and it employs a workforce of 500 people by 2010. As a European leader on the in-line-grading market; VENDEE CONCEPT is an expert in food processing, from project design to commissioning for the poultry, seafood, fresh and cured meat sectors.

2.2 Corporate Vision

2.2.1 Mission

• Vendee Concept aims to increase  their market share of the highly competitive French meat and seafood processing market
• Vendee Concept will meet and exceed customers’ expectations by delivering reliable products at the right time
• Innovation and quality will drive Vendee Concept’s growth and profitability
• Vendee Concept employees share the same values and commitment to their customers

2.2.2  Market & Strategy

Figure 2Market& Strategy

2.3 Financial results from 2010 to 2012

Figure 3 Financial results

The bar chart shows VENDEE CONCEPT’s revenue has a stable growth from 2010 to 2012. Nevertheless, there was a gradual decrease in EBIT form 2012. This might be influenced by the European economic crisis and the increasing number of competitors are threatening VENDEE CONCEPT’s stability of their business in a few recent years.

2.4 Business model of VENDEE CONCEPT

VENDEE CONCEPT provides quality products and services to the manufacturers of food processing industry throughout the world. This is accomplished through three steps:

• Product Development & Engineering
• Manufacturing & Assembling
• Customer Service

For VENDEE CONCEPT’s poultry processing equipment business, distribution outlets are the ones who directly deal with customers. Products are supplied to customers through these outlets and the perform post-sale services such as maintenance and repairs.

In international markets, many of the outlets do not have significant capital alliances with VENDEE CONCEPT, therefore, helping local distribution outlets to make sufficient profit have been the key for VENDEE CONCEPT to successfully promote their products. VENDEE CONCEPT has enabled visualization of the status of equipment by giving free installation and obtain information from customers. Not only can this be used for product development, but this has also enabled VENDEE CONCEPT to differentiate itself in support services. Distribution outlets can now be proactively involved in post-sale services. VENDEE CONCEPT has successfully built win-win-win relationship between manufactures, distribution outlets, and customers.

2.5 Marketing mix of  VENDEE CONCEPT

VENDEE CONCEPT is an innovator and accommodator. From project design to on-site installation, VENDEE CONCEPT offers their customers a customized solution combining quality, performance, flexibility, safety and fast ROI. They develop new products with the customer in mind. They are able to keep in touch with their customers in two principal ways:

• Time spent in Distributors around the country
• Regular and extensive market research that allows them to talk directly to representatives of all their customers – end-users, distributors.

Information learned from customers translates into improving existing products and developing innovative products that improve the consumer’s food production and processing experiences.

Product

VENDEE CONCEPT offers their customers a wide range of machinery covering the needs of the food processing industry in terms of grading, batching, automation, in-line controls, conveying and handling.

VENDEE CONCEPT is a European market leader in in-line weighing; the equipment integrates 99 grading programs. Simply input the container’s desired weight and the machine will group the food products in a buffer tray until the target is reached.

To optimize overall throughput the conveyors upstream and downstream of the weighing station are laid out according to customer’s shop floor’s configuration.

VENDEE CONCEPT’s IT specialists have developed application-specific software. The team’s level of expertise and experience in food processing guarantees your lines will gain in efficiency and overall quality.

Figure 4 Processing software

VENDEE CONCEPT is known for producing high quality products; one way of achieving this high quality is by implementing lean manufacturing techniques. VENDEE CONCEPT wants to continuously improve their products to maintain high standards. In the VENDEE CONCEPT’s factory the 5S system is implemented. The employees are reminded to continuously use this production system.

Price

VENDEE CONCEPT’s equipment is being sold and responsible for post-sale services by local and worldwide distributors. VENDEE CONCEPT has capital alliances with European distributors, but those capital alliances do not exist in other countries.

Post-sale services are required continually after the sale of the equipment. As the equipment sold and held continues to produce income through replacement of parts and sales of consumables. VENDEE CONCEPT provides its distributors an adequate space to price equipment and service contract with customers. VENDEE CONCEPT’s equipment is at reasonable (middle to upper market) prices in the high-tech poultry processing industry

Place

VENDEE CONCEPT has an extensive global network over 5 continents. Their distributors dedicated staffs knows the local markets and its requirements.

Figure 5 Region

(Source: Vendee Concept Annual report 2012)

VENDEE CONCEPT has an imbalance in their geographic coverage; its European sales area is relatively having the highest share by approximate 54%. This imbalance is a result of VENDEE CONCEPT’s home base and historic growth.

The market share in Spain is 5% which is the highest amongst all the export countries, with an average of 23 machines annually. (Vendee Concept Annual report 2012)

Promotion                                                                                                                                         Currently, VENDEE CONCEPT is using their website and their contacts from the exhibitions to promote their products and services. For promotion VENDEE CONCEPT’s equipment uses the following “tools” at the moment:

• Brochures (French and English language)
• Advertisement: the use of newspaper and other publications press releases. Yellow pages in phone book. Large business sign in front of office.
• Encouraging distributors to promote VENDEE CONCEPT’s equipment to get substantial profits.
• VENDEE CONCEPT’s promotion strategy includes; internet advertising, mailing list, cooperate partner contracts, newspaper advertising, and signboards.

2.6 Strengths and Weaknesses

With the internal information from Vendee Concept, it is possible to determine the strengths and weaknesses of the company in relation to their existing poultry processing equipment, the strengths and weaknesses of Vendee concept can be formulated as follows:

Strengths

Weaknesses

Part 3 External analysis

3.1 Macro analysis:

3.1.1 Demographic & Economic aspect:

The poultry industry is believed to see further consolidation in its domestic slaughtering and processing sector, with the number of large-scale commercial slaughterhouses growing and outdated slaughterhouses & processing plants being modernized. It is expected that demand for advanced slaughter & processing equipment and quality assurance systems will therefore increase as well. According to the Food Institute China, in 2012, there were 7,000 establishments in poultry processed manufacturing. A growth of about 4000 establishments from 2005, With the rising demand for poultry in Chinese market, the poultry processing industry is expanding. According to the Chinese poultry information Sciences, China imports 674.2 million worth of high tech poultry processing equipment over the past 2 years. Furthermore, Beijing area is determined as the most potential target area for Vendee Concept. This conclusion is based on the population of poultry processing industry, the population of distributors and economic environment. To be more specific, it is important to know where the potential customers and distributors are in China. In figure below, an overview of the distribution of potential markets is shown.

Figure 6 Distribution of potential markets

3.1.2 Legal & political factors:

Liberalization of the livestock market has led to higher levels of poultry production, but a negative side–effect for the Chinese government has been the rise of individual butchers whom dominate the slaughtering sector with a share of more than 80%. Individuals are permitted to operate a slaughtering household if they accept epidemic prevention and health standards issued by the government, but many households attempt to evade quarantine and inspection fees. Therefore, the large number of slaughtering households combined with a lax implementation of regulations has led to a significant amount of contaminated meat which finds its way to the market through illegal slaughtering (Brown and Waldron, 2008). This fragmented, decentralized, small-scale setting is seen as the main constraint to the development of china’s poultry industry.

During the world meet congress 2008, chairman of the Chinese Society of Animal products processing, told his audience that the Government will make a response to enable large and medium meat processors will have a 70% of the market by 2020 supplying mainly large supermarkets. Which means Vendee concept will gain a large commercial customer base in China.

Moreover, Low current per capita consumption rates and a growing acceptance of eating poultry meat amongst the younger generation in China (Chenjun Pan, analyst commented),  creates a strong growth potential that should enable the industry to take a meaningful share of meat consumption, establishments will put more investments on poultry processing market as well.

3.1.3 Technology

(1) Scale applicability. The equipment used by the poultry processing enterprises in China is mainly divided into large, medium and small scale. Focus on the development of the medium and large scale production), and the small-scale production enterprises should fend for themselves in accordance with the law of the market economy (N.I.P & China’s industrial development). However, China’s poultry machinery manufacturing production equipment is mainly to equip small businesses. Therefore, the medium and the large equipment are still imported.

(2) Technical applicability. The existing technology level of poultry machinery in China is mainly divided into high, medium and low level. Focus on the development of medium and high-end technology level, the low-grade technical level should not focus on supporting, which will be phased out with the development of the industry (N.I.P &China’s industry development). However, the level of China poultry cutting machine manufacturing production equipment is mainly medium and high-end; the high-tech products still rely heavily on foreign companies to supply.

The product assortment, especially the VENDEE CONCEPT food processing machine, is high-tech in nature. Therefore, VENDEE Concepts’ products have enough features to persuade the medium and large poultry processing enterprises in China.

3.1.4 Product life cycle

The product Lifecycle of newly sold poultry processing equipment requires overhaul after three years to five years. Overhaul means disassembling parts, washing , and reassembling them. By doing so, the equipment regains the performance level like a brand new machine. Large poultry processing equipment is scrapped after this overhaul process is repeated two times. In general, the price of poultry processing equipment is relatively cheap in Europe. In North America and Asia, the price of machinery is around 10% higher than that in Europe.

3.2 Competitor analysis

After due consideration to the level of Chinese poultry Processing machine manufacturing production equipment is mainly medium and high-end; the high-tech products still rely heavily on foreign companies to supply. Two foreign based Competitors and one local competitor that focus on manufacture High-tech poultry processing equipment and have had a place in the Chinese market are traced.

Table 1 Stork poultry processing

Table 2 Fomaco

Table 3 Connect group

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