Currently, the Chinese market is figure of "El Dorado" for Western firms facing maturity or saturation of traditional markets. With more than a billion potential consumers, the steady rise in living standards, and the impressive growth rates of coastal areas, has convinced many companies to expand into the Chinese market with a product offering in many cases identical to that of Western markets, and a total disregard of the Chinese mentality.
For several years, the obvious enthusiasm of the 60 to 100 million "most creditworthy" Chinese for mass consumption, especially for new products to display conspicuously to successful "western" buyers, have maintained the illusion that all products, regardless of their design and packaging, could appeal to Chinese consumers.
The strategies of Western companies were few cases of consumers themselves, their approach to products and their logic of consumption. This spectacular development of the middle kingdom has pushed to understand the specifics of the Chinese market.
In addition, it is true that over the last five years some high profile failures have highlighted the need to pay closer attention to Chinese consumers and their logic of consumption. Indeed, Chinese consumers are subjected to complex influences, and the references are evolving very rapidly.
The DanoneGroup has successfully integrated and developed in parallel with the democratization of China. In addition, reflecting the main subject that was asked to address: choice of internal or external strategies of international development, a few questions were asked before reaching the final choice of this case: - What are companies that perform one or more of these growth strategies? - Are there really companies that do one of two strategies? - How to deal with companies that have chosen predominantly a growth strategy to develop? - Which countries and companies would be most interesting to study?
Recognizing that virtually all firms adopt both strategies at some point in their development, it was found to be difficult to choose just two companies following the strict sense, of one or the other strategy for growth.
The Danone Group is present in 120 countries and achieved a turnover of 13.1 billion € in 2003. Danone owns many brands such as Lu, Evian, Wahaha and Danone course. These four brands together account for 53% of the turnover of the group. Then, the group has other brands such qu'Actimel, products Taillefine, Volvic, Bledina, Danacol, or Pepito.
Groupe Danone is the world leader in fresh dairy products and bottled water (by volume) and No. 2 worldwide in the biscuit market worldwide.
On the beverage market, sales of Danone Group amounted to over 3.4 billion euros thanks to strong positions in Europe (No. 1 in Spain, Germany (flat water) and Poland, No. 2 in France), Latin America (No. 1 in Argentina, Mexico) and Asia (No. 1 of packaged water in China and Indonesia).
Its main competitors are in the areas of bottled water and fresh products, Nestlé. In cookies, these were mainly of United Biscuits (but in some countries, including Belgium, Lotus Bakeries).
The development of the Group is based on three principles:acquisitions of existing companies to rapidly build a strong position in the market, creation of new activities and natural growth markets driven by innovation and quality.
Tags: Danone Group, presence in China market, growth strategy
[...] The Danone biscuit market in China 1. Background Danone entered the Chinese market fifteen years ago, and today it has 30% market share in the biscuit market in China. Asia alone ensures over 50% of global growth of the biscuit market. Danone has built a new factory in Suzhou China. Equipped with a production line, it has a production capacity of 17,000 tons / year (eventual capacity tons) and Danone manufactures cookies & Milk, and the TUC crackers. However, in the Asian markets, the challenge is to develop nutritional products which can be afforded to the greatest number of people. [...]
[...] This is actually a strategy of locally adapt an existing product. The product is a flagship brand in New Zealand and is regarded by New Zealanders as a sports drink. In China Danone is changing the format by increasing the size of the drink from 800 to 600 ml, and making it slightly sweeter taste to suit the Chinese taste. Well versed in the Chinese distribution network, consumer habits, the economic, and political and legal practices through its local presence, Danone can then afford to launch and run foreign products in this market by adapting them to the margin. [...]
[...] Today Danone owns a majority stake in the company. Wahaha Hangzhou is located 200 kilometers west of Shanghai. Danone controls 51% of the activities of Wahaha, which makes two-thirds of its sales in China. However, in fact, Mr. Zong has a wider influence than Franck Riboud, the CEO of Danone who managed to establish one of his men Stephen Yau, in Hangzhou in 1996. Stephen Yau is in charge of finance. It is important to note that in China the situation of distribution is very different from that in Europe. [...]
[...] We note that things change slowly. The Chinese government tries to encourage people to eat more dairy products. In China today, the yogurt is the equivalent of a soft drink, and consumed in the street, with a straw. The lid has been the subject of much research: it was manufactured in such a way that is both easy to pierce and strong enough to withstand shocks. The outlook for the group to five or ten years are to develop the fresh market that is still timid and expand the share of sales made in China to reach between 15 to 20%. [...]
[...] This raises a legitimate set of questions. These include the following: Is the reallocation of corporate assets essentially an industrial redevelopment activity or a purely financial portfolio diversification? Should we fear an alternative financial investment in physical capital or consider takeovers as a necessary condition for greater competitiveness of firms in the long run? Among the many hypotheses proposed to explain the rise of the acquisitions of Group Danone, we consider the search for industrial and commercial synergies a factor that should be retained. [...]
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