La Teresita-106 - case study PDF

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LA TERESITA Team No. 106

Name

Email ID

Country

Role

Clement Dhap

[email protected]

France

Shared ideas and gave suggestion for each section

Muhammad Umair Qureshi

[email protected]

Pakistan In-charge of section 3

Alia Jenn Zukerman

[email protected]

USA

In-charge of Section 2

Claire Kartz

[email protected]

USA

In-charge of section 1

Overview and key Recommendations: 1. Best suited entry modes have been discussed. Wholly owned subsidiaries is the least suited option. 2. Online retailers (Amazon) and partnership with local distributor and/or retailer seems attractive. 3. Colombia and USA are on great terms when it comes to trading. Selling to USA would be ideal. 4. Distribution to be handed to third party 5. Pricing must be competitive. Somewhere between 15-18 cents per tea bag.

Entry modes: Perhaps the most important decision to make is how to sell the product. It is not necessary to confine yourself to just one medium or one channel, rather its more beneficial in most cases to sell through more than one channel. We will be presenting you a list of options for entering a new market while also weigh the pros and cons of each option. 1. Wholly owned subsidiaries: This is the option in which the company will have the most authority over its decisions but this is also the costliest method as the set-up cost is immense. This would be the least recommended method, especially as an entry mode.

2. Partnership with local distributor and/or retailer: This strategy would be much suited for the company as you would be selling to the retailers in bulk and wouldn’t have to sell

to the customers directly. Secondly partnering with distributors will take of the burden of creating your own distribution channels and it will also lower your inventory costs. Following are some options of companies that could provide distribution services,

1. W.W.Grainger

11. DistributionNow

2. HD supply

12. Wurth

3. DGI supply

13. Vallen Distribution

4. Motion Industries

14. Interline

5. Fastenal Company

15. Edgen Murray

6. McMaster

16. Wolseley Industrial Group

7. MRC Global Corp.

17. KDG Karman Distr Group

8. Winsupply

18. Hydradyne

9. MSC supply

19. DXP enterprises

10. AWC Inc.

20. ERIKS North America

3. Online retailing platforms: Online retailing platform is the trend nowadays. Larry Page even says that “if you are not selling online then you are not selling at all”. Selling online is convenient, its cheap and it is accessible to everyone. A research showed that most people who shop online are aged 35-54 years old (Connie Hwong, 2018), which is consistent with the target audience of La Teresita. Secondly, its not necessary to sell through your own website, online retailers such as Amazon, Ali Baba and plenty others are providing such services.

Amazon provides multiple programs for individual and professional sellers. Firstly, you will have the option of either to sell to Amazon or to sell on Amazon. If you choose the former, you would be selling your products at wholesale rates to Amazon and then it would be Amazon’s responsibility to market and sell the product. Benefits of selling to Amazon includes: a. Free from the burden of pricing, shipping and logistics. b. Reduces marketing costs. c. Bulk purchases by Amazon. There is also the option of selling on Amazon. This way your product will be listed on Amazon.com and you would be selling it as a third party. Choosing this option will require more work and effort from the seller but this also means more control over the operations. Amazon has also provided a certain cost structure which varies from industry to industry. An individual seller is charged $0.99 per item sold plus a certain sales percentage fee (varies with industry), on the contrary a professional seller is charged a fixed fee of $39.99 per month plus the sales percentage fee. The Sales percentage fee in your case would be 15%. To further understand the procedure of selling-to-Amazon or to sell-on-Amazon, the following link can be useful, -

https://www.cpcstrategy.com/blog/2018/08/sell-on-amazon/#2

To access the form of selling to or through Amazon, visit the following link, -

https://www.amazon.com/sell-products-online/b?ie=UTF8&node=12766669011

Logistics: Trade Regulations: Unites states and Colombia has signed a bilateral free trade agreement, also called the FTA, to establish a strong two-way trading relationship between the two countries. This agreement provided both countries with duty-free access in each other’s economies. USA is also the largest trading partner for Colombia. (EmbMa)

Shipping: The company would not need to ship the product directly to the end user. If selling to or through Amazon, then amazon would take care of the shipping responsibilities and to sell through retail outlets, such as Walmart, La Teresita would first ship to the distributor and then the distributor would spread the products to the retail outlets. Setting up your own distribution network is a costly and difficult process. Its better to focus on your own core competence and outsource the distribution to a third party. In the early part of this section some probable companies are mentioned with whom a partnership could be discusses regarding the distribution responsibilities.

Pricing: When a consumer thinks of purchasing a product of a new brand, he is always price sensitive. Which means the consumer may not want to pay more money for something he is not fully aware of. From our research the price interval at which most brands are selling tea in the United States is 10 cents to 20 cents per tea bag. Consumers will not be willing to pay for more than 20 cents per tea bag for a relatively new brand.

Celestial Seasonings is a tea brand in the US and it sells a box of 20 tea bags at $2.37, which means almost 12 cents for a tea bag. Yogi tea is another brand, which is quite popular as well, it sells a tea bag at around 18 cents per tea bag. La Teresita’s core competence is its high quality, but since it’s a competitive market the company will need to follow a competitive pricing strategy. We suggest that the company must sell its product somewhere between 15-18 cents per tea bag. This will also indicate that La Teresita is by no means a low tier tea brand and that it gives great value proposition for its price.

References (n.d.). Massachusetts : Embassy of colombia. Connie Hwong. (2018). E-Commerce Demographics – Who Shops Online? Consumer Insights....