Bachelor assignment 2007/2008
In cooperation with
Prepared by:
Øyvind Nesbø – 20073458G Christina Niemi – 20073375L Jeanette Rønningen – 20073442D Gitte Merete Aasheim – 20073396F
Academic supervisor:
Associate Professor Joan Henderson
Academic Year:
2007/2008
Acknowledgements
When writing this we are at the end of a long and educational journey. This project would not have been possible without some key persons that have helped us along the way. We would like to express our appreciation to
everybody that has contributed to this project. However, some persons deserve special attention.
Firstly, we would like to thank Vigour for giving us an exciting project-topic, as well as good guidance throughout the writing process.
Furthermore, we would also like to thank our supervisor, Associate Professor Joan Henderson for all her help, support and useful feedback.
We would also like to thank Alan Choy Chee Hau at the NTU Library for guidance when it comes to literature review and referencing.
Lastly, we would like to thank all the respondents that were willing to
participate in our survey, providing us with useful information that made the basis of our analysis.
Thank you!
i Executive summary
Vigour is a newly established company located in Norway and is led by two young
entrepreneurs. The company wants to explore the market potential for their Arctic Seaweed Complex-series (ASC) in Singapore.
The aim of this research study is to examine the market potential for Vigour in Singapore.
Singapore can be characterized as an attractive location for Norwegian businesses due to the open economy and stable political environment. Furthermore, with the government’s pro- business policies, it is easy for international companies to do business.
By running a descriptive analysis of the data collected, it showed that the awareness regarding seaweed based products was low, only 36% of the respondents stated that they knew about products of this kind. Furthermore, the survey showed that most respondents preferred pharmacies or health food stores as retail outlets when it came to purchase of health supplements. There existed some differences among the respondents, when it came to price they were willing to pay. Most respondents stated that they were willing to pay S$20-29, for a month’s supply of a seaweed based product. Overall, the respondents wanted to achieve better health by using health supplements. Moreover, Vigour wanted to explore if the country of origin would have an effect in the Singaporean market. The survey shows that most
respondents had no associations when it came to Norway and Arctic Norway, and if they had, salmon and cold climate were the associations that ranked the highest.
ii
In order to get an understanding of the differences between the groups, a cross tabulation was conducted. The results derived from this analysis, showed that single men and women aged 20-29, were the most interested in trying seaweed based products. Secondly, the analysis showed that most male and female respondents aged 20-29, would spend S$20-29, for a month’s supply of these products.
In order to identify the company’s strength and weaknesses, an internal analysis has been thoroughly conducted. Furthermore, an external analysis, by using PESTEL and the Globality of Industry as a framework, was conducted in order to find the company’s opportunities and threats in the Singaporean market. This analysis showed that the
Singaporean market is fragmented and relatively price-sensitive. An industry analysis was also conducted to determine the attractiveness of the health supplement industry in
Singapore. This was done by the use of Porter’s Five Forces which showed that there exists strong rivalry in the industry with low barriers to entry. In conclusion, the analysis showed the Singaporean health supplement industry to be an attractive industry.
The results from both the internal and external analysis are summed up in a SWOT analysis.
Based upon the analytical part, three critical success factors for Vigour’s export strategy were identified; distribution channel, awareness and segmentation.
It has been recommended that Vigour use a focused differentiation strategy in Singapore, by emphasizing on a narrow market with differentiated products, the aim is to try to reach a niche market.
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There exists several ways of entering the market in Singapore and this has been thoroughly discussed in the strategic part. It has been suggested that Vigour should use an importer as entry strategy, as this seems like the most suitable for Vigour’s current situation.
Furthermore, recommendations for design of the marketing mix have been given.
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Table of Contents
EXECUTIVE SUMMARY... I
CHAPTER 1 ... 1
OBJECTIVE AND PROBLEM DEFINITION ... 1
INTRODUCTION... 3
BACKGROUND... 4
1.1 VIGOUR HEALTH...4
1.1.1 Vigour’s products ...5
1.2 COUNTRY BACKGROUND...5
1.3 DOING BUSINESS IN SINGAPORE...6
1.3.1 ACRA ...7
1.3.2 “Setting up business within the hour”...7
1.3.3 Registration procedures...8
1.3.4 Halal Certification ...8
1.3.5 HSIAS & IADSA ...9
1.3.6 GST...10
1.3.7 Regulatory framework ...10
CHAPTER 2 ...11
RESEARCH METHODOLOGY AND ANALYSIS...11
2.1 COLLECTION OF DATA...11
2.1.1 Secondary data ...11
2.1.2 Primary data ...11
2.1.3 Problem Definition ...12
2.1.4 Research Objective...13
2.1.5 Research Questions...13
2.1.6 Research Design...14
2.1.7 Sampling Procedures ...14
2.1.8 Questionnaire Design...15
2.1.9 Pretest of Questionnaire ...16
2.1.10 Data Collection...16
2.1.11 Data analysis...17
2.2 LIMITATIONS...17
CHAPTER 3 ...19
DATA ANALYSIS...19
3.1 SAMPLE...19
3.2 PREPARING THE DATA...19
3.3 FREQUENCIES...19
3.4 CROSS‐TABULATION...27
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3.5 SUMMARY OF FINDINGS...29
3.6 IN‐DEPTH INTERVIEWS...30
3.7 CONCLUDING REMARKS...33
CHAPTER 4 ...34
INTERNAL ANALYSIS ...34
4.1 VIGOUR’S CAPABILITIES AND RESOURCES...34
4.1.1 Resources ...35
4.1.2 Capabilities ...38
4.1.3 Core competencies...39
4.2 THE ACE‐MODEL...40
4.2.1 Attitudes: ...40
4.2.2 Competencies...41
4.2.3 Embodiment...41
4.3 THE COMPANY’S INTERNATIONALIZATION ABILITY...42
4.3.1 International business culture...42
4.3.2 Market‐share in reference market...43
4.3.3 The importance of market network ...43
CHAPTER 5 ...45
EXTERNAL ANALYSIS...45
5.1 PESTEL ...45
5.1.1 Political ...46
5.1.2 Economical...48
5.1.3 Social...50
5.1.4 Technological ...52
5.1.5 Environmental...54
5.1.6 Legal...55
5.2 PORTER’S FIVE FORCES...58
5.2.1 Bargaining power of buyers...59
5.2.2 Threat of substitutes ...62
5.2.3 Threat of new entrants ...63
5.2.4 Bargaining power of Suppliers...66
5.2.5 Degree of rivalry ...67
5.2.6 Concluding remarks ...68
5.3 GLOBALITY OF INDUSTRY...69
5.3.1 Competitive Structure ...70
5.3.2 Forces of Globalization ...72
5.4 COMPETITOR ANALYSIS...73
Figure 5.3: The competitive structure in the health supplement industry ...74
5.4.1 Identification of competitors ...75
5.5 SWOT ANALYSIS...80
CHAPTER 6 ...82
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STRATEGY ...82
6.1 STRATEGIC PROBLEM DEFINITION:...82
6.2 CRITICAL SUCCESS FACTORS...83
6.3 SOLBERG’S NINE STRATEGIC WINDOWS...85
6.3.1 Seek international niches ...86
6.4 BUSINESS‐LEVEL STRATEGY...87
6.5 INTERNATIONAL CORPORATE‐LEVEL STRATEGY...90
6.6 INTERNATIONAL ENTRY MODE...91
6.6.1 Confirming House ...92
6.6.2 Importer ...93
6.6.3 Agent...94
6.6.4 Sales department...95
6.7 CHANNEL MANAGEMENT...97
6.7.1 Distribution channel strategy...97
6.7.2 Potential Challenges in a Distribution Channel...98
6.7.2 Concluding Remarks...99
CHAPTER 7 ...100
MARKETING MIX ...100
7.1 PRODUCT...100
7.1.1 Product Life Cycle...101
7.1.2 The brand...102
7.1.3 Packaging...102
7.2 PRICE...103
7.3 PROMOTION...105
7.3.1 Target audience ...106
7.3.2 Promotion objective...107
7.3.3 Message strategy...107
7.3.4 Promotional budget ...107
7.3.5 Promotional mix...108
7.3.6 Evaluation ...109
7.4 PLACE...109
7.4.1 Webshop ...110
7.5 CONCLUDING REMARKS...112
BUDGET PROPOSAL ...113
LIMITATIONS TO THE PROJECT...114
CHAPTER 8 ...115
RECOMMENDATIONS ...115 BIBLIOGRAPHY ... I
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Table of Figures
Figure 2.1: Research Methodology...12
Figure 3.1: Knowledge regarding seaweed supplements...20
Figure 3.2: Attitudes towards health supplements ...21
Figure 3.3: Use of health supplements ...21
Figure 3.4: Regularity of use of health supplements...22
Figure 3.5: Reasons for using health supplements...23
Figure: 3.6: Interest in buying health supplements ...24
Figure: 3.7: Preferences regarding retail outlets ...24
Figure 3.8: Price prepared to pay ...25
Figure 3.9: Perceptions regarding Norway ...26
Figure 3.10: Perceptions regarding Arctic Norway...26
Figure 3.11: The relationship between usage age and marital status...27
Figure 3.12: The relationship between age, gender and price...28
Figure 3.13: Differences between gender and achievement by using health suppl. ...29
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Figure 5.1: Porters Five Forces...59
Figure 5.2: Share of industry value in 2006 ...71
Figure 5.3: The competitive structure in the health supplement industry ...74
Figure 6.1: Solberg’s Nine Strategic Windows...85
Figure 6.2: Five Business‐Level strategies...88
Chapter 1 –
Background
1 Chapter 1
Objective and Problem Definition
Vigour wants to explore the Singaporean market and is therefore interested in detecting whether there is market potential for them in the Singaporean health supplement market.
Problem definition and objectives were created in collaboration with Omar Paulsen Bekheet (Entrepreneur and Manager in Vigour) and our supervisor, Associate Professor Joan
Henderson.
The problem definition for the project is:
How do Singaporean consumers perceive healthcare products containing seaweed and Norway in general? If the analysis suggests that there is a market in Singapore, how should Vigour proceed with particular reference to entry strategy and distribution channels?
The main objectives for this project include:
• To detect the level of interest among consumers about health supplements, with particular reference to products containing seaweed.
• Discuss Vigour’s internal environment which will have an impact on the operations in Singapore.
2
• Examine the external environment which Vigour will be operating in.
• Give strategic recommendations, with particular reference to distribution channels, based on the findings.
Definitions
By health supplement we mean; “A product that is used to supplement a diet, with benefits beyond those of normal nutrients, and/or to support or maintain the healthy functions of the human body.”1
By biotechnology we mean; “Any technological application that uses biological systems, living organisms, or derivatives thereof, to make or modify products or processes for specific use."2
By the biotechnology industry we mean; “Companies primarily involved in the development, manufacturing or marketing of products based on advanced biotechnology research.”3
1http://www.hsa.gov.sg/publish/hsaportal/en/health_products_regulation/complementary_medicines/supplements.html (entered 21.01.08)
2 http://en.wikipedia.org/wiki/Biotechnology (entered 07.03.08)
3http://www.marketlineinfo.com.ezlibproxy1.ntu.edu.sg/library/DisplayContent.aspx?Ne=4294855136&N=210+429485410 1 (entered 07.03.08)
3 Introduction
Vigour is a newly established Norwegian company within the health supplements industry.
In this paper we will propose a strategic plan as to how Vigour should introduce their products to the Singaporean health supplements market, if the analysis suggests market potential. In order to do this, the following areas will be covered:
Firstly, a primary research will be conducted. This will be done by the use of a questionnaire and by in-depth interviews. Conclusions regarding the interest and awareness of health supplements, especially those containing seaweed, among end consumers will be drawn.
Secondly, an analysis of Vigour’s internal environment will be conducted in order to find their strengths and weaknesses. This will be done by looking at Vigour’s resources, capabilities and core competencies, in order to identify their competitive advantages.
Furthermore, an analysis of Vigour’s position towards export will be illustrated in the ACE- model, and Vigour’s internationalization ability will also be explored.
Thirdly, an analysis of Vigour’s external environment will be carried out to get an overall view of the Singaporean market and to identify the attractiveness of the health supplement industry. PESTEL and Porter’s Five Forces will be used to determine this. The globality of the industry will also be analyzed in order to get a better understanding of the industry and to provide strategic implications. A competitor analysis will also be conducted.
Fourthly, a chapter on strategy will be presented. In this section, we will implement Vigour’s internationalization ability and the globality of industry into Solberg’s Nine Strategic
4
Windows. In addition, we will discuss the different options Vigour has regarding international entry mode. Moreover, we will discuss how Vigour can manage their distribution channel and how they should adjust their marketing mix in the most efficient way.
Lastly, based on the findings, a strategic recommendation will be given on how Vigour should proceed with regards to the Singaporean market.
Background
1.1 Vigour Health
Vigour Health is a Norwegian company which aims to become a wholesaler of health supplements with raw materials gathered from the Arctic parts of Northern Norway, with seaweed as a base component. Vigour was established in 2006 by Omar Paulsen Bekheet and John Ivar Andre Fjerdingstad. It is characterized as a newly founded company in the genre of biotechnology/life science and health food, and has not yet generated sales.
Vigour’s mission is to provide the customers with the essentials needed to lead a healthy lifestyle. Vigour is not only about health supplements, but about a healthy way of life. Their goal is to, on a short term basis, have a significant market share in Scandinavia by the year 2009. On a long term basis they want to bring the concept of Arctic food supplements to targeted markets throughout the world, and ultimately become an all embracing lifestyle
5
company. Vigour’s aim is to project an exclusive profile with its unpolluted and pure raw materials from above the Arctic Circle.
1.1.1 Vigour’s products
The product group Vigour has chosen to focus on in its first period is called Arctic Seaweed Complex (ASC) and offers pure:DETOX, figure:BALANCE and daily:PROTECTION. All of the manufacturing and R&D takes place in Norway. Vigour does not manufacture the products, but has rather outsourced the production activities to Faun Pharma. Faun Pharma is a privately owned contractor with a long experience in the industry.4 In addition, they have aligned themselves with external expertise and can contribute to both R&D and further development of existing product ranges.
1.2 Country background
Singapore was founded as a British trading colony in 1819. They were part of the Malaysian Federation from 1963 to 1965, and have experienced massive economic development since its independence in 1965. They have gone from being a third world country, with everything it implies, to a global financial centre. According to CIA´s World Factbook, Singapore has become one of the world's most prosperous countries, much due to the country´s strategic geographical position. This includes strong international trading links, and per capita GDP equal to leading countries in Western Europe.5
4 http://www.faunpharma.com/home.aspx?docid=225 (entered 20.02 08)
5 https://www.cia.gov/library/publications/the-world-factbook/geos/sn.html (entered 12.01.08)
6
Governing a small country without significant natural resources makes the external changes critical. Due to the increasing globalization, and lack of natural resources, the Singaporean government can be expected to continue their pro-business policy. This is to stay
internationally competitive in the New Economy in the years to come.
These factors contribute to the overall attractiveness of Singapore as a market for business.
(See Appendix-1a)
1.3 Doing Business in Singapore
Singapore and its government provide an open and flexible economy for doing business, both for domestic and foreign companies. Innovation Norway identifies Singapore as a good starting point for business, when planning to do business in Asia6. Consisting of people from different countries and cultures, Singapore will be a helpful market for testing out new products. Furthermore, there are over 120 Norwegian companies present in Singapore today, which is the largest concentration in the Asian region. This shows the attractiveness of the country for Norwegian companies in particular, and the trust these companies have placed in Singapore. Innovation Norway also identifies the Singaporean Biotechnology sector as one of the most promising and fastest growing in the country, which will be of interest for Vigour. In addition, considering the trade agreements between Singapore and Norway, like WTO and EFTA, Singapore and its market can be considered as promising for Norwegian business, including Vigour.
6 http://www.innovasjonnorge.no/Internasjonale-markeder/Kontorer-i-utlandet/Singapore/Markedsinformasjon/Markedet/
(entered 23.01.08)
7
The World Bank ranks Singapore as number 1, in the world, when it comes to ease of doing business. Furthermore they rank Singapore as number 9 worldwide, with reference to starting a business. (See Appendix-1b)
Still, there are certain factors that need to be considered when doing business in Singapore.
Some of these will be explored in the following sector.
1.3.1 ACRA
Establishment of a business in Singapore needs to go through the Accounting and Corporate Regulatory Authority of Singapore (ACRA). ACRA is the main Singaporean body for dealing with business. Their mission is “to provide a responsive and trusted regulatory environment for businesses and public accountants.” 7
Through ACRA, the company wanting to set up business in Singapore can register both the business and company name. Requirements for setting up business, including the different procedures, can be found on ACRA’s homepage.8
1.3.2 “Setting up business within the hour”
The Singaporean government is encouraging foreign businesses to set up business in Singapore, and according to Rikvin, it has never been a better time than now.9 Rikvin Consultancy Pte Ltd. is a company specializing in reducing the effort and time it takes to set
7 http://www.acra.gov.sg/About_ACRA/Our_MissionVisionandValues.htm (entered 05.04.08)
8 http://www.acra.gov.sg/Services/Business/ (05.04.08)
9 http://rikvin.com/Setup-Singapore-Company-within-60-minutes.html (entered 05.04.08)
8
up a business in Singapore. One of their services includes, through close cooperation with ACRA, reducing the process of registering and setting up a business, to a mere 60 minutes.
This “express” service includes providing a business address and bank account, in addition to the processing of various documents with ACRA. Such efforts can arguably be considered as contributors to Singapore´s position on the World Bank´s list of country attractiveness. (See Appendix-1b)
1.3.3 Registration procedures
The company setting up business in Singapore needs to apply for a Central Registration (CR) number and import permit. This is done through Singapore Customs.10 The CR number is essential, as it gives companies’ access to Tradenet. (See Appendix-1c) According to Singapore Customs, companies wishing to “declare Customs permits for either itself or its clients for the import, export or transshipment of goods in Singapore is required to be registered.”11 The registration procedure can be seen in Appendix-1d.
1.3.4 Halal Certification
According to Dr Yaacob Ibrahim, Minister-in-charge of Muslim Affairs, Halal certification is essential for companies wanting to extend their reach to bigger markets overseas. He also points out the fact that the Halal industry has expanded beyond food to include, amongst
10 http://www.customs.gov.sg/leftNav/trad/Registration.htm (entered 03.04.08)
11 http://www.customs.gov.sg/leftNav/trad/Registration.htm (entered 03.04.08)
9
others, health supplements.12 Majlis Ugama Islama Singapura (MUIS) is the Singaporean body for dealing with Halal certification. Registration and processing of applications can be done through their homepage.13 Due to the need for Halal certification for Muslims to consume any product, this will be of importance for companies doing business in a multi- cultural country, like Singapore.
1.3.5 HSIAS & IADSA
The Health Supplements Industry Association Singapore (HSIAS) represents 90% of the companies in the Singaporean market. They are in constant contact with the government, and keep their members updated on regulations and general trends in the industry. Membership would be of great importance for Vigour, should they decide to enter Singapore. Registration form and information regarding HSIAS can be found in Appendix-1e.
The International Alliance of Dietary/Food Supplement Associations (IADSA) is an umbrella organization for trade associations like HSIAS when it comes to health supplements. This organization represents the views of the industry, referring to its members, regarding the development in health supplement policies and governmental regulations. (See Appendix-1f)
12 http://business.asiaone.com/Business/News/SME%2BCentral/Story/A1Story20080125-46596.html (entered 16.03.08)
13 http://www.muis.gov.sg/cms/services/hal.aspx?id=210 (entered 16.03.08)
10 1.3.6 GST
Despite the trade- and free trade agreements, companies exporting to Singapore need to be aware of the Goods & Services Tax (GST), currently at 7%. This is a tax on domestic consumption.
1.3.7 Regulatory framework
Regarding the regulatory framework, the Health Science Authority (HSA) provides guidelines for health supplements. These guidelines will be discussed in Chapter 5.
In short, these guidelines exist because there are no requirements for pre-market approval or licensing for such products. Companies can get their products classified, through the Health Sciences Authority, by submitting an enquiry form. (See Appendix-1g)
The previous discussion reveals Singapore as an attractive market to do business in, with a stable economy and a pro-business government. This is supported by the World Bank who has ranked Singapore as number 1, with regards to ease of doing business. We will explore Singapore more in the external analysis in Chapter 5.
In general, the above mentioned tasks will mostly be performed by the Singaporean importer should the company decide only to export from Norway, thus not being its own importer.
Chapter 2 –
Research Methodology
11 Chapter 2
Research Methodology and Analysis
In the following chapter we will describe how we have conducted our research. Firstly, we will describe the collection of data, problem definition and the research objectives. Secondly, we will go through the research design and the sampling procedures. Thirdly, we will
illustrate how we went forward with the questionnaire, the collection of data and the analysis of the data. Lastly we will explain the limitations of the data followed by our conclusion.
2.1 Collection of Data
We have derived information from both secondary and primary data.
2.1.1 Secondary data
In our secondary data research we have used journals, books, the Internet and reports as sources for retrieving information.
2.1.2 Primary data
We found primary data collection necessary when we could not find the data needed in secondary sources. In our research we have made use of both qualitative and quantitative research for deriving information. With regards to the quantitative research we made use of a questionnaire while in the qualitative research an in-depth interview was conducted. We will first elaborate on the methodology for the quantitative research and thereafter go through the
12
qualitative research. Figure 2.1, depicts the various stages of the research process which will be discussed in this chapter.
Figure 2.1: Research Methodology
2.1.3 Problem Definition
In collaboration with Vigour we developed the following problem definition:
How do Singaporean consumers perceive healthcare products containing seaweed and Norway in general? If the analysis suggests that there is a market in Singapore, how should Vigour proceed with particular reference to entry strategy and distribution channels?
13
Our objective was to detect whether there was any market potential for Vigour in Singapore.
By providing answers to these questions we could draw certain conclusions about the Singaporean market and give necessary strategic recommendations to Vigour.
2.1.4 Research Objective
The main objective of the consumer questionnaire was to detect the level of interest among consumers in Singapore about health supplements that contain seaweed, and in what kind of retail outlet they would consider purchasing the product. An additional aim was to examine whether the country of origin would have any effect on the consumer’s decision.
2.1.5 Research Questions
To reach our objectives, a set of research questions were developed that would keep us focused and additionally would shape the final questionnaire.
• What are the consumer’s perceptions and knowledge of health supplements containing seaweed?
• What do the consumers like to achieve by using health supplements and what is the regularity of usage?
• Is there interest among the consumers to try health supplements that contains seaweed?
14
• In what kind of sales outlet would the consumers consider buying the product and for what price?
• What are the consumer’s perceptions and associations of Norway and Arctic Norway respectively?
2.1.6 Research Design
It was determined that the most suitable design to apply in this research was a descriptive design. A descriptive design in the form of a questionnaire would provide us with the quantitative data we needed to achieve our research objectives and derive some
understanding of the Singaporean market. Furthermore, a questionnaire would also provide us with useful information about consumers and their preferences with regards to health supplements containing seaweed in particular. Due to the nature of the assignment, we did not find it appropriate to generate a hypothesis.
2.1.7 Sampling Procedures
The target population for the questionnaire was both Singaporean and non-Singaporean residents over 20 years old. To be able to derive sufficient information regarding the population, the sample frame was set to 300 respondents. The samples were collected through convenience sampling.
15
2.1.8 Questionnaire Design
When designing our questionnaire we used the guidelines provided by Dr. Burgess.14 The survey consists of 22 questions. These questions are based on findings in the secondary data as well as requests from Vigour, and lastly in cooperation with our supervisor. A copy of the questionnaire can be found in Appendix-2a.
The questions developed in the questionnaire were intended to answer the research questions.
• Research question 1: was answered by questionnaire question 10, 13, 14 and 19.
• Research question 2: was answered by questionnaire question 9, 8, 11, 12 and 15.
• Research question 3: was answered by questionnaire question 16.
• Research question 4: was answered by questionnaire question 17 and 18.
• Research question 5: was answered by questionnaire question 20 and 21.
The questions were designed to be easy to understand. We arranged the questions so that the personal data questions would come first. This served two purposes, firstly we had decided to exclude people under the age of 20 and this allowed us to do so in an efficient manner.
Secondly, the personal data questions served as a method to prepare the respondents.
Hopefully, this would allow the respondents to get familiar with the questionnaire before the more difficult questions started.
14 http://www.leeds.ac.uk/iss/documentation/top/top2.pdf (entered 29.01.08)
16
We designed our questionnaire with Fixed-Alternative Questions which provided us with the possibility of comparing, tabulating and ultimately interpreting the data. However, in a number of questions the respondents were given the possibility to add comments.
Furthermore, different scales were applied in the questionnaire, simple-dichotomy questions and attitude rating scale, where we made use of the Likert Scale.
2.1.9 Pretest of Questionnaire
Firstly, we conducted an in-class pretest on the questions regarding the perceptions of Norway. This was due to the fact that we were curious if we had captured all the relevant options. We found that there were some minor changes we had to make in order to proceed.
Secondly, the first proper pretesting was conducted using a convenience sampling method.
20 random people in Orchard Road were asked to fill out the questionnaire. The aim of the pretest was to detect possible questionnaire problems. We encountered some minor problems with a few of the questions which were revised.
Thirdly, to ensure that the revised questions were in order, a second pre-test was conducted.
After this, the questionnaire was judged to be ready.
2.1.10 Data Collection
The respondents for the questionnaire were approached at Orchard Road, Marina Bay, Holland Village and Singapore Conference Center at Suntec City in early March, 2008. We chose to distribute the questionnaire in these areas due to the high presence of young
17
professionals and other relevant segments. The respondents were asked either face-to-face or by a self administrated method. Due to our presence we were able to clarify any inquiries the respondents had and in addition make sure that all of the questionnaires were completed. The collection of the 300 questionnaires was completed within 2 days.
2.1.11 Data analysis
Excel and SPSS were used in order to process the data and give us relevant information.
Excel was used in order to enter the raw data and make tables. This was done for practical reasons. In SPSS we ran descriptive tests as well as cross-tabulations. This will be returned to and elaborated on in Chapter 3.
2.2 Limitations
Firstly, we faced time constraints during the development of the questionnaire when this was more time consuming than expected. Secondly, we are aware that sampling errors have occurred. For example 85.5% of the respondents are under the age of 39 years old.
Furthermore, we experienced some difficulties with the question regarding occupation when 48.6% of the respondents answered “other” as their occupation. Therefore we cannot draw any conclusion on the basis of the respondent’s income. The sampling errors could cause problems at some stage in the analysis because the standard deviations are incorrect. There will also be differences in confidence intervals. We tried to limit the sampling errors by having a fairly big sample size. Thirdly, it is a disadvantage that we used a non-probability
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sampling, more specifically convenience sampling-technique, which reduces the ability to generalize upon the results. If we had more time we could have distributed the questionnaires at more locations which would have allowed us to obtain a more diverse set of respondents.
Fourthly, a response bias might have occurred if the respondents did not feel comfortable with answering us truthfully when interviewing them face-to-face. Lastly, some
administrative errors occurred when entering the raw data. The obvious errors were corrected, but when entering the data manually there is a possibility that errors occur. All these are possible limitations of the research, and may affect the validity and the reliability of the results, and the conclusions drawn from them. Nevertheless, the data collected was judged sufficient for the purpose of the exercise.
Chapter 3 –
Analysis
19 Chapter 3
Data Analysis
3.1 Sample
Initially, 300 questionnaires were distributed, but due to errors in 9 of them, the data was gathered from 291 questionnaires. All the data frequencies and other analyses can be viewed in Appendix-3a.
3.2 Preparing the data
Before conducting any analysis we had to clean the data for extreme and missing values.
Furthermore we needed to re-categorize the data due to some of the questions having the possibility for multiple answers. This was done by treating them as individual questions and giving them the value 1 for “yes” and 0 for “no”.
3.3 Frequencies
In order to get a better understanding of the level of interest and attitudes among the
consumers, and the preferred retail outlets, we ran a descriptive - frequencies analysis. Some of the most interesting results, that will answer the research questions, will be presented in the summary of findings.
20 Knowledge
The figure below shows that 64% do not know that there exist health supplements that contain seaweed while 36% are aware of products of this kind.
Figure 3.1: Knowledge regarding seaweed supplements
As Figure 3.2 shows, 47% of the respondents agree that health supplements have a positive effect on their overall health. 41% of the respondents state that they are neutral about whether health supplements have a positive effect on their health. The fact that almost half of the respondents are neutral makes the results less distinctive. On the other hand, only 3% of the respondents disagree with the fact that health supplements have a positive effect on their health.
21
Figure 3.2: Attitudes towards health supplements effect on health
Usage
The chart below shows that 54% of the respondents have used health supplements. On the other hand, 46% of the respondents state that they have never tried health supplements.
Figure 3.3: Use of health supplements
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The table below shows that 47% of the respondents do not use health supplements at the present. Furthermore, 19% state that they use health supplements 7 days a week. Lastly, 34%
of the respondents use health supplements 1-6 days a week.
Figure 3.4: Regularity of use of health supplements
Achievement
The chart below shows that 57% of the respondents would like to achieve better health by using health supplements. 19% would like to achieve more energy while 12% would prefer achieving a detoxification.
23 Figure 3.5: Reasons for using health supplement
Price and Place
The chart below shows that 69% of the respondents state that they are neutral when it comes to the level of interest in actually purchasing a health supplement containing seaweed. Due to the large number of neutral respondents, it will be hard to draw a conclusion based on this chart. On the other hand, 20% state that they agree while 1% strongly agree and are therefore interested in making such a purchase.
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Figure 3.6: Interest in buying health supplements with seaweed
As seen below, 44% of the respondents would prefer purchasing their health supplements at pharmacies while 36% would prefer health food stores. Furthermore, only 4% of the
respondents would like purchasing health supplements online.
Figure 3.7: Preferences regarding retail outlets
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With regards to price, 37% of the respondents are willing to pay S$20-29 for a month’s supply of health supplements containing seaweed. In addition, 31% would pay S$10-19 for a month’s supply. Only 8% would be willing to pay more than S$40 for a product of this kind.
Figure 3.8: Price prepared to pay
Perception of Norway and Arctic Norway
Questions 20 and 21 in the questionnaire were intended to detect the respondent’s potential associations of Norway and Arctic Norway. As the chart below shows, 39% of the
respondents do not have any perceptions regarding Norway while 34% associate Norway with salmon. Furthermore, 15% associate Norway with nature.
26 Figure 3.9: Perceptions regarding Norway
With regards to Arctic Norway, 39% of the respondents have no associations while 33%
believe it is cold. In addition, 17% think Arctic Norway has a clean environment.
Figure 3.10: Perceptions regarding Arctic Norway
27 3.4 Cross-Tabulation
Cross-tabulation is used in order to inspect the differences among groups and to make comparison, it is a joint frequency distribution of observations on two or more sets of variables15.
Firstly, in order to better understand the appropriate target audience and segments, a cross- tabulation on age, usage and marital status was conducted. The results are presented below.
Figure 3.11: The relationship between usage, age and marital status.
Figure 3.11 shows that most single people, aged 20-29, have used health supplements.
Furthermore, the respondents that are married, aged 30-39, is the group that scores second.
15 Zikmund, William G. (2003) "Business Research Methods” 7th Edition. P.476
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This can give pointers regarding which segment that Vigour should direct their market communication towards.
When it comes to price it might also be interesting to find out if there exists any difference when it comes to age and gender. The figure below shows that females in general are willing to spend more for a health supplement containing seaweed.
Figure 3.12: The relationship between age, gender and price.
Furthermore, this figure shows that most respondents aged 20-29 are willing to pay S$20-29 for the product. In addition, the figure also shows that there does not exist any major
differences between males and females when it comes to the price they are willing to pay.
There is only a few respondents that state that they would pay S$40 or more for this kind of product. The results also illustrates the limitation mentioned earlier, regarding the sampling error that occurred due to a high frequency of respondents under the age of 39.
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Figure 3.13: Difference between gender and achievement by using health supplements
Figure 3.13 illustrates that the female respondents are most interested in achieving better heatlh. Furthermore, the biggest difference between the male respondents and female respondents are found in the interest of gaining a slimming effect.
3.5 Summary of findings
By running an analysis on the data collected, we made several findings. The most interesting findings, which can help to answer the research questions, will be presented in this summary.
When it comes to knowledge, 64% of the respondents stated that they had not heard about seaweed based health supplements, and 46% stated that they had never used health
supplements. Furthermore, 47% of the respondents stated that they believed that health supplements had a postive effect on their health.
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Thirdly, one of Vigour’s spesific requests was to find out more about country of origin and if it should be used in the market communications. On both questions regarding Norway and Arctic Norway, most respondents stated that they had no associations; those who had, responded that salmon or cold climate was their main association. This might imply that the country of origin effect for Norway is not that strong in Singapore. This will be discussed further in the strategic part.
When it comes to retail outlets, the survey showed that pharmacies and health food stores were the most preferred retail outlets. This might be useful for Vigour to know when deciding which distribution channels to focus on.
The cross-tabulation tests that were run showed that the respondents, who most frequently used health supplements, were the single respondents aged between 20-29 years.
Furthermore, by running the same test on price, gender and age, it was clear that only slight differences existed in terms of price willing to pay. However, female respondents tended to be willing to spend slightly more money than the males. Moreover, there were few
differences between the genders and what they wanted to achieve. However, the female respondents showed greater interest in the slimming effect compared to the male respondents.
3.6 In-depth Interviews
In order to answer the second part of the problem definition, we needed a deeper insight into the Singaporean healthcare industry. An exploratory design was therefore seen as the most
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appropriate due to the fact that our knowledge of the problem area was limited. We chose to proceed with in-depth interviews with key people in the industry with particular regards to distribution channels. After approaching a number of players in the health supplement industry, it became clear that this was difficult to achieve.
The findings in the questionnaire revealed that 36% would prefer purchasing food
supplements in health-food stores while 44% would prefer purchasing food supplements in pharmacies. On that basis, we wanted to conduct in-depth interviews with companies that represented both of these retail outlets in order to make a comparison. Therefore, we sent a request to NTUC Health Care Pharmacy, GNC, Nature’s Farm and Guardian regarding an in- depth interview, but only got a response from NTUC Health Care Pharmacy, hereby referred to as NTUC. Initially we asked for a face-to-face interview, but due to a request by NTUC the interview was conducted through email correspondence. The interview, with Irene Tay from NTUC, will be summarized in the following paragraphs. (See Appendix-3b)
According to the interviewee from NTUC, there are several ways to gain access to the health supplements market in Singapore. The most common, however, is for the products to be imported by the distributors and then sold to the most common retail outlets for health supplements in Singapore, which are pharmacies and health food stores. This is consistent with the findings in our primary research among the end consumers. Some of the health stores, such as GNC and Nature’s Farm also import their own products.
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Regarding the structure of the health supplement market, NTUC states that for a wide range of products it could be characterized as fragmented, but for some it could be characterized as concentrated.
Specific requirements regarding getting the products into the different retail outlets would differ. In NTUC, the distributor needs to produce a Certificate of Analysis and Good Manufacturing Practice from the manufacture. This is to ensure NTUC of correct usage of the ingredients. In addition to this, they need to submit a marketing plan for the product.
Regarding which factors a producer should emphasize on to stay competitive in the market, NTUC states that they should focus on quality and the efficacy of the products and the marketing plan.
According to NTUC, it seems there is no current trend among Singaporeans to purchase their goods over the internet. This is due to the fact that Singapore is a small country, and
therefore it is convenient to visit the physical store, and at the same time get direct answers to their queries. This statement is consistent with the findings in the primary research, which shows that only 4% of the respondents are interested in purchasing health supplements online.
In conclusion, the statements of NTUC are consistent with the findings in the primary research when it comes to distribution channels. Additionally, we managed to derive some other useful information regarding distribution channels, such as the different requirements for the manufacturer. However, we only got the chance to conduct one in-depth interview
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and a comparison between the two retail outlets distribution chains was therefore not possible.
3.7 Concluding remarks
The primary data, both the quantitative and qualitative research, helped us derive some useful information concerning the Singaporean health supplements market. The information will be made use of in Chapter 6, where strategy is discussed.
Chapter 4 –
Internal Analysis
34 Chapter 4
Internal Analysis
In order to identify Vigour’s strengths internally, it is important to analyze their internal environment. In the following chapter, the resources, capabilities and core competencies have been identified in order to find the company’s competitive advantage. Furthermore, an
analysis of Vigour’s internal position on exports will be presented based upon application of the ACE-model. Lastly, the company’s internationalization ability will be explored. It is important to specify that Vigour is a newly established company that is lacking experience.
This has imposed limitations on the internal analysis, as not all information has been available to us. Some of the findings in the following analysis will be returned to and elaborated on in Chapter 6.
4.1 Vigour’s Capabilities and Resources
In the following section, we will identify Vigour’s competitive advantages. Resources, capabilities and core competencies are the foundation of competitive advantages. Resources are the source of a firm’s capabilities, and are bundled to create organizational capabilities.
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Capabilities in turn are the source of a firm’s core competencies, which are the basis of competitive advantages.16
4.1.1 Resources
A company’s resources are divided into tangible and intangible resources, which will be discussed below.
Tangible resources
Tangible resources are assets that can be seen and quantified. Production equipment, manufacturing plants, and formal reporting structures are examples of tangible resources17. We have chosen to focus on organizational resources and physical resources in the following analysis. In addition, we are aware of the importance of the financial resources, but due to limited access to information we will only briefly discuss this.
Financial Resources
Vigour is in the process of finalizing their budget, therefore the financial information is not available. However, information provided by Vigour states that the amount they have set for the marketing budget in Singapore is S$326, 000 (based on an exchange rate of 3, 6806). In addition, they are financially supported by Innovation Norway and NorInnova. On the other
16 Hitt, Ireland and Hoskisson (2007) Strategic Management, 7th edition. P. 79
17 Hitt, Ireland and Hoskisson (2007) Strategic Management, 7th edition. P. 79
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hand, Vigour has not started to generate sales, which suggest that their financial resources are quite limited.
Organizational Resources
Vigour was founded by two energetic entrepreneurs with qualifications in international marketing and they have focused on trying to establish an efficient business model. An overview of the business model can be seen in Appendix-4a. They intend to manage design, packaging, branding, market communications and research in-house while outsourcing the rest of the operations; through this they aim to be a flexible organization. This flexibility may assist them to adapt rapidly to market changes. This model also emphasizes cost efficiency, which is important due to the fact that Vigour is a small organization with fairly low financial resources. In addition, Vigour has secured Intellectual Property rights that will work as an advantage when further expansion is made.
Physical Resources
Vigour’s headquarters is located in Northern Norway. Macro algae (seaweed), which serves as one of the most important raw materials, is extracted in Northern Norway. Due to the unpolluted surroundings, this can serve as a competitive advantage for Vigour when
competing in an international market. Therefore, Vigour’s aim is to keep production facilities located above the Arctic Circle, which will also serve as an important factor in their brand building.
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Intangible resources
Intangible resources include assets that typically are rooted deeply in the firm’s history and have accumulated over time18. Due to Vigour’s short history, the intangible assets are limited compared to more experienced companies.
Human resources
Vigour’s human capital consists of two entrepreneurs with a broad knowledge of the
food/health market. They work closely together with a network of qualified scientists within the Biotechnology field in Norway. This commercial relationship enables Vigour to develop a uniquely composed product. As the company grows, they wish to hire knowledgeable people within the areas of pharmacy, marketing and logistics to secure the future expansion.
Innovation resources
Vigour’s use of seaweed and other extracts makes the product unique compared to many competing products. Due to their focus on R&D, Vigour can use scientific breakthroughs to explore potential market possibilities. At the present, Vigour has established its own internet page that in the future might function as a high-end web shop. This is an attempt to follow the internet trend.19
18 Hitt, Ireland and Hoskisson (2007) Strategic Management, 7th edition. P. 79
19 http://www.consumerlab.com/news/Merchants_Rated_Highest_by_Dietary_Supplement_Consumers/1_23_2008/ (entered 15.03.08)
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Reputational resources
Due to the fact that Vigour is in its starting phase, they have yet to establish a reputation with regards to their brand. In addition, it is important for the company to establish a good
working relationship with their suppliers. This is especially important due to the fact that their production is outsourced. If a mutually beneficial relationship is not established with the supplier, this may damage the future overall reputation. This is particularly important as the company is new on the market.
4.1.2 Capabilities
Capabilities exist when resources have been purposely integrated to achieve a specific task or a set of tasks. Capabilities are often based on developing, carrying, and exchanging
information and knowledge through the firm’s human capital20.
A specific functional area where Vigour exhibits capabilities is within marketing. Their competence within marketing should help them to project a desired image, and by handling these matters themselves they will be able to save costs. In addition, through outsourcing Vigour might be able to achieve further cost efficiency. Managing the creative operations in- house will give the company flexibility and control when it comes to marketing. This is important in order to maintain a customer oriented focus.
With regards to R&D, Vigour has a network of scientists within Biotechnology that can provide them with valuable knowledge that might assist them to continuously innovate and expand their product line.
20 Hitt, Ireland and Hoskisson (2007) Strategic Management, 7th edition. P. 83
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On the other hand, capabilities often evolve and develop over time, especially knowledge possessed by human capital21. Due to the fact that Vigour is a newly established company with limited experience this might pose a challenge for Vigour. As the company grows in size it is important to create an environment that allows knowledge to be easily transferred.
4.1.3 Core competencies
Capabilities are the foundation of a firm’s core competencies. These in turn are the sources of competitive advantage. On the other hand, not all capabilities are core competencies. Only capabilities that are valuable, rare, costly to imitate and non-substitutable can be seen as the firm’s competitive advantages.22
On the basis of the discussion above, Vigour has a competitive advantage when it comes to their product. The unique composition of ingredients is both valuable and rare since few have access to the extracts growing above the Arctic Circle. Furthermore, it might be costly for others to imitate due to high degree of R&D. On the other hand, the product can be seen as substitutable due to the fact that there exist some similar products in the Singaporean market.
This will be discussed in the competitor analysis. Still, Vigour has an advantage due to the distinctive emphasis on Arctic surroundings in their market communications that can serve as a differentiation factor.
In order to be successful in Singapore, it is important that Vigour utilize their capabilities and exploit their external environmental opportunities, while avoiding competition in areas of
21Hitt, Ireland and Hoskisson (2007) Strategic Management, 7th edition. P. 83
22 Hitt, Ireland and Hoskisson (2007) Strategic Management, 7th edition. P. 84
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weakness. However, it is important to emphasize that Vigour will have limited capabilities in an international market and it will be challenging for them to compete in an international market with strong, global competitors.
4.2 The ACE-Model
The company’s internal commitment to, and support for, internationalization will determine whether it will succeed with its operations abroad. Therefore, the company’s attitudes, competencies and embodiment, with regards to export activity, will be explored through application of the ACE-model. (See Appendix-4b)
4.2.1 Attitudes:
Vigour’s management shows very good attitudes towards working in an international market when their ultimate objective is to become an all embracing life style company, with a strong international focus. The internal attitudes towards being market oriented can be seen through their use of market research. This is demonstrated in Vigour’s business model. (See
Appendix-4a) Furthermore, Vigour acknowledges the importance of innovation. To achieve this, they will continue the ongoing collaboration with schools, research institutes and pharmaceutical experts. Moreover, according to Vigour, they want to use daring and
unorthodox methods to achieve a unique market position. This suggests that they are willing to take risks. Lastly, the company has a high degree of cultural understanding when it comes to their potential target markets and they are very ambitious when it comes to global
expansion. The fact that the entrepreneurs have experienced living and studying in China might have given them first hand experiences of foreign cultures.
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We can therefore conclude that Vigour shows signs of a positive attitude when it comes to exporting.
4.2.2 Competencies
Market research has provided Vigour with in-depth knowledge about the global health care market. As mentioned, Vigour has ongoing cooperation with experts in the field, and the current nutrition research community in Norway is of high standard and growing in size.23 Vigour’s core competencies are likely to be within brand building and marketing and they are constantly paying attention to international trends within healthcare markets. One of the entrepreneurs, Omar Paulsen Bekheet, has previous experience with the import and export of health supplements through being the founder and managing director of ScandinNorth Nutrition. Nevertheless, competencies are something that evolves over time, and given that Vigour is in its starting face, they are lacking relevant experience. However, we can conclude that Vigour appears to possess relevant competencies that will come in handy for further expansion.
4.2.3 Embodiment
Due to the fact that Vigour is in its initial phase, they have not yet started to employ staff.
The two entrepreneurs behind Vigour are both energetic and creative, and when expanding they are looking for qualified employees that will share the same view. Vigour has already
23 http://www.nordforsk.org/text.cfm?id=390 (entered 12.03.08)
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developed a business model designed to be efficient, which most likely will support them during their international expansion.
In order to be a successful exporter it is important that these three elements are fulfilled and integrated. As of today, we see that Vigour has some potential to succeed with their exports.
On the other hand, it is difficult to predict their future as they are in the initial phase of business.
4.3 The Company’s Internationalization Ability
The company’s internationalization ability represents the Y-axis on The Nine Strategic Windows model which will be returned to and elaborated on in the strategy in Chapter 6.
By analyzing the company’s internationalization ability, we can determine the company’s ability to adjust to large and demanding customers. Furthermore, it will also have
implications for how Vigour can compete in international markets. In order to determine this, the international business culture, market-share in reference market and the importance of market networks will be analyzed. Furthermore, the conclusion from this analysis will reinforce the conclusion derived from the application of the ACE-model.
4.3.1 International business culture
Vigour is at the present not dependent on exports, as they are in their initial phase and exporting has not yet started. The company has for the time being not made any investments
