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Liquid Gold Industry: Coffee from Madagascar

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Coffee is liquid gold, not only in America, but in many other countries as well. In the country Madagascar, coffee is something that was once a high dollar export, but since the fall of the economy, they have to push farmers to grow coffee beans just to supply their own country. Coffee is not just something that people in a rush drink when they are tired and late for work. Coffee is an art that many people in today’s world value. People can grab a cup of coffee on their way to work, if they are tired, but people also sit down and enjoy a hot cup of coffee when they are watching the morning news or want to sit down and catch up with friends and family. In my personal beliefs, Madagascar would greatly benefit from Kaiser Coffee Beans.

Environment

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Coffee is one of the major agricultural crops in Madagascar. This is a source of income for thousands of people living in the country. The coffee industry is an important employer with each step of their daily lives, this being that coffee is a very present part of Madagascar. In the late 1900’s and early 2000’s Madagascar, along with other countries in Africa had a fall in exports. As you can see in the graph below, Africa’s numbers have dropped throughout the years.

Graph below indicates coffee crops

Around 80% of the total production of coffee is consumed within the country; the fall of coffee exportation is still relevant in today’s time in Madagascar. Every stage of coffee production is laborious and poorly paid; the most difficulties are faced by small-scale coffee vendors. Most of these small-scale coffee vendors spend their days hunching over small fires to roast and prepare the coffee. This coffee is prepared in homes, workplaces down narrow alleys, and in improvised street cafes. Thousands of street coffee vendors flood the streets every day, making Madagascar a competitive market. These street vendors know that it is imperative to get the perfect roast in order to make enough money to survive. The consumers in this country are all local consumers. The people of Madagascar maintain traditional consumption patterns because of the economic structure.

Cultural Influences

Culture is a subtle state that all states, towns, communities, and groups are accustomed to. Culture both affects and describes human behavior and it very crucial in international marketing as well as international business. Culture is the value and norms, the rituals, the heroes, and so much more to these communities. Madagascar culture is a little different than the culture of Americans, but all in all, their culture is still important and very well respected. The people of Madagascar consume a great deal of coffee, totaling around 40% of the country’s production.

The coffee beans grown local to Madagascar is predominantly the lower grade Robusta coffee bean. The Robusta coffee bean is the second most popular coffee in the world. Robusta coffee beans can be described as bitter, and to have a rubbery/grain-like flavor. Robusta coffee beans have more caffeine and less sugar that Arabica beans, meaning it has a stronger and harsher taste than Arabica.Although Robusta is what is grown, as of recently, Arabica is now being cultivated in the country. Approximately 90% of Madagascar coffee production is now Arabica. Arabica beans generally have a sweeter, softer taste with tones of sugar, fruit, and berries. There are many differences between the two beans, once roasted they all look the same, but the taste is something significant. Arabica coffee beans are softer and sweeter, while Robusta beans are strong and harsh and contain twice as much caffeine as Arabica beans. Robusta beans are also considered to be of inferior quality compared to Arabica.

Coffee is the way of life in Madagascar. Every restless city and small village market is guaranteed to have coffee. The vendors set up under shade trees, awnings, umbrellas, or an improvised kiosk. Everyone in Madagascar is a coffee drinker and there is no shortage of sellers to meet the public’s demands. Coffee is consumed at all hours of the day, not just in the morning on the way to work or in the afternoons because a pick me up is needed, these street vendors roast and sell coffee all throughout the day.

Hofstede’s dimension of uncertainty avoidance is the extent to which there is an expectation that social norms, rules, and procedures will alleviate future unpredictability. ) On the scale below, you can see that Uncertainty Avoidance for Madagascar is at a 49, which means this country has a low preference for avoiding uncertainty. Madagascar maintains a more relaxed attitude in which practice counts more than principle.

Madagascar does not try to avoid uncertainty, this ties into coffee beans because this once was a huge export for this country, but it is now something that the country consumes a substantial amount of. Coffee is just a way of life in Madagascar and the people of this country does not seem to think coffee will ever run scarce.

Research Methods

The main and current method of research that I am using is secondary research. There are many advantages as well as disadvantages to primary and secondary research. Primary research is conducted to gather first-hand information while secondary research is gathered originally by primary research. Advantages of primary research are it is based on raw data by the researcher himself and is also very involved. However, a disadvantage is that it is very high cost and takes a very long time. On the contrary, secondary research is very low cost, it is rapid and easy and take a very short time to conduct, the disadvantages of secondary research is that it is something that is analyzed and interpreted by someone else, which may or may not be accurate based on their interpretations.

Entry Mode Selection

The entry mode selection that I would be presented to Kaiser about internationally expanding his coffee business would be indirect exporting. Exporting is the easiest way to enter an international market; this is how Kaiser would begin his international expansion into Madagascar. This selection mode means that Kaiser would sell the product to intermediaries that will then handle the foreign selling to the target market of Madagascar. Because the cost of exporting is the lowest among all of the other entry modes, Kaiser Coffee would be more likely to use entry mode as a way to get coffee into all markets around the globe. An advantage of this is that it will be low cost compared to opening up a distribution center or market in Madagascar, Kaiser would avoid these expenses by not establishing operations in this country. (Shaker, 2000)

However, Kaiser must have a way to distribute and market the coffee in Madagascar, which will be done through contractual agreements. When exporting indirectly, Kaiser would then choose an agent to represent Kaiser Coffee in that country. There are three different types of agents to choose from; export commission house, resident buyer, and broker. The agent that would make the most sense in this case scenario would be an export commission house. These agents represent foreign buyers in the domestic market. They are contracted by foreign companies and act as a purchasing agent. By using these, it portrays a simple and efficient method of exporting products to foreign markets. Kaiser would need to give thought to labeling, packaging, and pricing appropriately for the target market. Another factor in exporting is a need to translate something about the coffee into the language of Madagascar. This requirement may be drive by local regulations, but it would be wise for Kaiser Coffee to market this coffee in a local friendly fashion.

Market Segmentation

STP is an important process in the study of marketing. STP stands for segmentation, targeting, and positioning. The STP process establishes the links between the overall market and how the company will chose to compete in the market.

The market for coffee in Madagascar would be segmented by behavioral and psychographic. Behavioral segmentation would be the behaviors of the people who live in Madagascar, sure age, gender, social class, etc., are good to know to be able to identify the target market, it is more efficient in the long run to know things like the consumers purchasing habits, the usage of the product, the loyalty exemplified by the consumer, and occasion/timing. Of course some of these characteristics will stand out more than others, all things included; this will help determine the target market for coffee consumption in Madagascar. By using psychographic segmentation, Kaiser can divide his market into segments based on different personality traits, values, attitudes, interests, and lifestyles of consumers. Psychographic segmentation is advantageous because it allows the company to engage in coffee design and marketing in a focused manner.

The target market I would chose for Kaiser Coffee to be brought into would be young adults to older individuals. No matter the social class, gender, or age, coffee is a product that all people enjoy. Whether the people of Madagascar are going to work, coming home from work, or just out and about on any given day, coffee is something most people use as an energy booster or a pick me up. The target market would be essentially easier to sell coffee too because coffee is something that most children do not consume based on the amount of caffeine in the product. This generation of people in Madagascar is loyal, they drink coffee at any given time of the day, and the people are interested in coffee, especially because the only thing they know and have grown up around is coffee.

Positioning is creating a perception in a consumer’s mind regarding the nature of a company and

its products relative to competitors. International positioning involves changing or creating attitudes. In the United States, Kaiser Coffee is portrayed as being positioned slightly upscale and positioned for coffee lovers. Personally, I think that the positioning should remain the same when being internationally exported to Madagascar. The people of that country are avid coffee lovers so it is in a good position in that sense. However, some researches portray the people of Madagascar to be poor, but even people that are not wealthy like upscale things. However, Kaiser Coffee is something that is affordable and sustainable and would do well in Madagascar.

Conclusion

In conclusion, based on the research, I think it would be a great business move to provide coffee beans to a different country, Madagascar being a good move. The people of Madagascar are proven to consume coffee at various times of the day under all circumstances. The MSRP price of Kaiser Coffee is $13 per pound, which would essentially save the people of Madagascar money by buying the coffee per pound and roasting it themselves. Of course there would be a tight competition because of all the local street vendors, but by selling Kaiser Coffee packaged in grocery stores it would be a better market for buying Kaiser Coffee. Another advantage of Kaiser Coffee is that it is packaged in three different flavors. This would give the people of Madagascar something new to drink instead of the same Arabia and Robusta beans they are accustomed to. Exporting Kaiser Coffee would be a good change of pace for the people of Madagascar.

Since Kaiser is “flying under the radar” of other large US coffee companies, expanding internationally is one of the only ways to expand business. Madagascar would be a country to definitely consider in this expansion.                               

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