A GOLDEN OPPORTUNITY: EXPORTING EASY FLAME BARBEQUES TOARGENTINA? (Al Marshall)
Latin America is a continent comprising a series of markets thatmany Australian exporters do not usually consider. East Asia, NorthAmerica and Europe have far more prominence in exporters’ minds.Even the Middle East has more prominence among Australianexporters. This is despite regular airline and shipping links, andthe presence of Latin America communities in Australia fromcountries as diverse as Chile, Peru, Columbia and Argentina.Mariano Ferreyra, an Argentinean Australian who has been residentin Australia for a number of years, found this somewhat surprising.He has noted some of the similarities in lifestyle betweenAustralians and his fellow Argentineans, and having travelled toBrazil he could see similarities there as well. He of course notedmany of the differences as well between the predominant Anglo-Saxonculture in Australia and the Latin American cultures. Sincearriving in Australia Mariano has seen many products not availableat home in Argentina, or which, if they are available, generallyincorporate a lower level of technology. He has also noticedproducts available in Argentina that do not appear to be availablein Australia. The two economies are at different stages of economicdevelopment. However, he is wondering if there may be opportunitiesto export Australian products to Argentina or to import Argentineanproducts to Australia. His postgraduate degree undertaken sincearriving five years ago included a unit in International Marketingin which he acquired some formal skills in market opportunityidentification and in understanding the international marketingenvironment. At present two-way trade between Argentina andAustralia is relatively limited. Living in Australia it seemseasier for Mariano to identify products here that might be suitablefor exporting to Argentina as a lot of work would be requiredacquiring the identified products and organising their shipment.Accordingly he has decided to focus on exporting products toArgentina. He envisaged his family back in Cordoba (Argentina’ssecond largest city) being involved with receipt of the products inArgentina and their distribution in the marketplace. This decisionto focus on Argentina as a market was not without its concerns. Inrecent years the Argentinean economy has been in crisis. Economicgrowth rates have been extremely low, unemployment rates have beenhigh, many middle-class and wealthy people have lost their savingsin a banking collapse and there have been many street protests(among other events). Mariano has been more than aware of theseevents since his own family in Cordoba has been directly affectedby them. Argentina can be categorised as a challenging market. Atthe same time Argentina has many natural resources, a substantialpopulation, skilled human resources, a welldevelopedinfrastructure, considerable manufacturing capacity, membership ofa regional free-trade association and a large middle class. Inaddition, in the last year the economy has turned around, economicgrowth has returned and exports are booming. The large middle classhas regained confidence in the economy and their own economicprospects. In terms of stage of market development Argentina can becharacterised as an upper middle income country, while many otherLatin American countries are lower middle income countries.Argentina is, however, a less developed country than Australia,which has many consumer products at the maturity stage in theproduct life cycle. In Argentina these products may not exist ormay be at the introductory or the growth stage. In terms of productdevelopment Australia is an advanced country while Argentina is adeveloping country. Mariano is also aware that Australia isincreasingly becoming an exporter of manufactured products (alongwith services), and that internationalisation is an importantdriver of economic growth. Mariano had also been reflecting on hisown ability to become a potential exporter in his newly adoptedcountry. Aside from undertaking the unit in International Marketingas part of his degree he has no practical experience ininternational marketing (or particular types of internationalmarketing, like exporting). Neither does he have any contacts withAustralian exporting consultancies, exporting companies orArgentinean importing companies. He is, however, a native Spanishspeaker and has a strong understanding of Argentinean culture andsome understanding of business practices there, based on his workexperience in Cordoba prior to immigrating to Australia.Additionally his family in Cordoba has owned a series ofbusinesses, and his brother has a postgraduate degree in businessfrom a leading Argentinean university in Buenos Aires. Mariano hasidentified a brand of Australian gas-powered barbeques thatconsumers in Argentina might find appealing. The publicly listedcompany which manufactures these markets them on Australia’seastern seaboard through a chain of stores specialising only inbarbeques in New South Wales, Victoria and Queensland. The companyhas no international marketing experience, nor do its corporateplans (outlined in its publicly available annual report) indicateany desire to become an international marketer. The company offersthree gas models under the Easy Flame brand name—a compact modelwith a limited range of features, a medium-sized model with agreater range of features and a deluxe model with a full range offeatures. The compact model retails for $399, the medium-sizedmodel for $550 and the deluxe model for $899. The cost ofmanufacturing each of the three models is less than 50% of this,and the retailer markup is around 30%. Mariano has selectedbarbeques as a product because the barbeque (asaedo) is a centralfeature of Argentinean cooking, with meat (carne) having a centralrole in Argentinean food. The climate in most parts of the countryis generally warm like Australia, and Argentineans enjoy an outdoorlifestyle. Furthermore Mariano cannot recall seeing portable gasbarbeques in retail stores in Argentina. Possibly reflectingArgentina’s developing country status compared to Australia’sadvanced country status, people typically build their own barbequeswith bricks and mortar. They then either have to make or purchase agrill on which to cook the food. Portable gas barbeques withbuilt-in features might have great appeal. Mariano feels that thecompact model might be suitable for middle-class people living inapartments with small terraces or balconies in big cities likeBuenos Aires, Cordoba and Rosario. While the medium-sized modelmight appeal to middle-class people living in suburban houses andthe deluxe model to those with more disposable income who do a lotof home entertaining. With this in mind he is consideringapproaching the manufacturers of Easy Flame with a proposition.This would involve purchasing the barbeques in bulk at a belowwholesale price. Mariano would take legal title to them, and foreach sale made in the Argentinean market the manufacturers wouldreceive an additional payment. He has prepared a business plan onthis basis, though the plan does not involve sales forecasts sincehe feels that it is too difficult to estimate likely sales in thefirst few months. The market has instead to be tested. He envisagesthe first shipment being enough to fill a single shipping containerwhich he would organise to be delivered to the manufacturers’factory. He would undertake all the necessary paperwork and arrangethe shipment to Argentina. On arrival in Argentina the containerwould then be transported by road or rail to his family in Cordobawho would store the barbeques in a secure warehouse. Marianoenvisages his brother with the business degree then approachinglocal retailers to convince them to stock the products. Heenvisages department stores, kitchen stores or camping stores asbeing possible retail outlets. Mariano has several concerns,however. These include whether an opportunity does in fact exist toexport the Easy Flame barbeques to Argentina, whether he has theability to undertake the export process successfully and whetherthere is sufficient demand to make the venture economicallyfeasible. He is also aware that there is considerable manufacturingcapacity in Argentina, and that gas barbeques like the Easy Flamebrand could be copied by local manufacturers. He wondered ifAustralia enjoyed comparative advantages in the production ofproducts like portable barbeques. He considers the task ofunderstanding all the uncontrollable factors in Australia andArgentina quite intimidating in addition to the marketing mixdecisions (involving product, price, promotion and distribution)that would need to be taken in order to design and implement asuccessful exporting marketing strategy.
1 Many export activities begin in this way; however, there are anumber of issues Mariano has overlooked. Name five of these.
2 Mariano has chosen indirect export as his initial mode ofentry—discuss the advantages of this compared to other possibleentry modes Mariano might have chosen.
3 How might Austrade be able to help Mariano with his proposedinternational marketing venture? Identify the types of servicesthat Austrade offers.
4 In what ways will Mariano’s background and skill set assisthim in undertaking this venture? What skills might he lack? Is hisgeneral approach one that you would personally recommend?
5 In what ways would exporting the barbeques to Argentina differfrom distributing the products to other parts of Australia wherethey are currently not available (such as Western Australia)? Arethere advantages to internationalisation?
6 What uncontrollable factors in Argentina could impact onMariano’s chances of success in his proposed internationalmarketing venture? In particular review the role of economic andfinancial conditions.
7 Assuming the Easy Flame manufacturers are interested inselling the products what are some of the important decisionsMariano needs to make in formulating an export marketingstrategy?
Answer to A GOLDEN OPPORTUNITY: EXPORTING EASY FLAME BARBEQUES TO ARGENTINA? (Al Marshall) Latin America is a continent comprising…