Famous Amos Essay Example For Students

Famous Amos Essay 1. Executive Summary Famous Amos is one of the most recognizable cookie brands in the world and its products are positioned as premium quality. Initiated by Wally Amos in 1975, the brand currently belongs to the Kellogg Company and is available in most parts of the world. However, it remains alien to China and this report is dedicated to Famous Amos’ entry into Shanghai. Its products include bite-sized chocolate cookies, sandwiched cookies and muffins that come in various flavors. Apart from that, it offers customized wrapping services at its specialty stores. Parallel with the goals of its parent company, Famous Amos is focused on achieving sustainable growth through the expansion of its operations. It was identified that Famous Amos practices the differentiation, market penetration and market development strategies. To enter the market, it can select to either export its products or entry through acquisition. Shanghai, as one of the largest metropolitan, serves as the heart of finance and economic activities of China. With a large population and rising income level, it provides many opportunities for Famous Amos to grow its business. Not only is Shanghai culturally and socially diversified, its people are also early adopters and are open to western cultures. Its strong currency and steady stock market performance indicates economic strength which add to its attractiveness. The drawbacks are that its political conditions are slightly instable due to the ongoing process of reformation and its legal structure is still developing. An analysis on competition level in Shanghai revealed that its main competitors will be Kraft, Mars and Cadbury. Besides that, Famous Amos also faces a threat from Hershey’s should it enters the market. The SWOT analysis was also included to highlight the strength and weaknesses of the brand along with the opportunities and threats poses by the external environment. Listed marketing objectives for the first year mainly revolve around building brand awareness, capturing market share, innovation and establishing an effective distribution network. A few targeted segments were identified, which are the affluent group, the working class, children and students. The characteristics of these segments are discussed in the report. A marketing plan of is formulated for Famous Amos’ first year in Shanghai. In terms of promotional activities, Famous Amos will engage in heavy advertising, promotions and public relations to build brand awareness, consistent with one of the marketing objectives. Examples of promotional activities are such as distribution of free samples in schools, giving away complementary merchandises and introducing loyalty programs. New flavors such as almond, green tea and red bean will be introduced to suit local taste in to capture market share efficiently. Distribution channels selected such as specialty stores, retailers and convenience stores will provide wide geographical coverage to make its products accessible. An implementation chart is then laid out to highlight the type of marketing activities to be carried out at different periods such as launching of orange-zest topped cookies during the Chinese New Year and so on. Famous Amos does not practice standardized pricing in all its markets, rather it sets different price for each market. As it is a premium brand, it will not slash it prices but rather sell in smaller packages so that it can be afforded by children and students. The prices of its products remain relatively constant throughout the whole year except for special student rate during promotion. Finally, an evaluation chart is provided followed by a conclusion of whether Famous Amos should enter the Shanghai market. In fact, our research has found more than enough information to support that the entry of Famous Amos into Shanghai is feasible. 2. 0 Background Information The Kellogg Company is the world’s leading cereal and snacks producer; marketing more than 1500 products in 180 countries (Our Company 2009). The firm employs around 32000 employees worldwide and has 59 manufacturing facilities located in 19 countries (Kellogg Company 2008). Its portfolio consists of famous brands such as Kellogg’s Corn Flakes, Pop-Tarts, Froot Loops, Cheez-It and Famous Amos. Famous Amos was initiated by Wally Amos in 1975 specializing in cookie-making and became a huge hit grossing over $5 million within five years of operation (Frost 2002). Due to mismanagement, the brand went through numerous ownerships from Bass Brothers to Shansby Group; and currently belongs to the Kellogg Company. Famous Amos cookies are available in most countries and come in flavors like No Nuts Chocolate, Macadamia and Raisins. Its line includes sandwiched biscuits in Vanilla, Peanut Butter and Oatmeal Macaroon flavors. It also offers customized and ready-packed gifts for celebration of all kinds. Famous Amos is positioned as the world’s best chocolate chip cookie, where its premium quality is unrivalled in the cookie industry. It won the Automatic Merchandiser Magazine Readers’ Choice Award as the most requested product for three straight years (Automatic Merchandiser 2007). Cookies sold at its specialized stores are freshly baked whereas those sold in retailers are pre-packed for convenience. As a brand under the Kellogg Company, Famous Amos shares similar mission, goals and strategies as its parent brand. 2. 1 Vision and Mission At the Kellogg Company, the vision is to be the food company of choice with a mission to drive sustainable growth through innovation and expansion of its operations. The mission of growth is well communicated and employees across all operations know what they are expected to contribute to achieve it. In 2008, it met all sales targets and achieved geographical expansion to Russia and China through acquisitions (Kellogg Company 2008). Its cereal and snacks operations recorded growths of 4% and 9%, respectively; in addition to the 5% increase in sales (Kellogg Company 2008). The firm is optimistic that it can continue to fuel growth through expansion, innovation and cost-saving. 2. 2 Goals and Strategies The Kellogg Company’s revenue in 2008 amounted to $12. 82 million and operating profit was reported as $1. 95 million (Kellogg Company 2008). The company is positive that growth is achievable despite the weak global economy as consumers will purchase more convenient foods and prepare more meals at home. Focus will be placed on cost efficiencies and innovations across all operations to increase profitability. The following are the goals of the company which are shared by Famous Amos: †¢ Sales are expected to grow by 3% 5% in 2009. †¢ Operating profit is targeted to increase by approximately 5% in 2009. †¢ Annual cost savings will add up to $1 billion by 2011. Apart from the stated goals, few corporate strategies can be inferred for Famous Amos using the Porter’s Model, the Ansoff’s Matrix and the Expansion Method Matrix. 2. 2. 1 Porter’s Strategy Michael Porter’s 4 generic strategies, as explained by Cruz (2006): †¢ Cost-leadership: Achieving lower total costs compared to competitors to appeal to all customers. †¢ Differentiation: Differentiation of products from rivals to attract all customers. †¢ Cost-focused: Based on cost-leadership and concentration on attracting buyers from a narrow segment. Differentiation-focused: Based on offering niche customers customized attributes that satisfy their demands. Famous Amos uses the differentiation strategy where it positions its products as superior to others and charges premium prices. Its cookies are made with the finest ingredients and are baked to perfection. Besides that, it provides excellent gift-wrapping service which is not offered by any other cookie sellers. To date, there has been no successful attempt of other cookie producers to tap Famous Amos’ market share as its recipe remains well-kept. 2. 2. 2 Ansoff’s Matrix Of greater relevance is the matrix proposed by Igor Ansoff, which outlines four growth-related strategies: market penetration, market development, product development and diversification. Market penetration involves increasing market share by promoting existing products to existing customers while market development involves selling existing products in new markets (Ansoff 1957, 116). Product development is the marketing of new products to existing customers whereas diversification involves introducing completely new items to the market and can be divided into related or unrelated iversifications (Ansoff 1957, 117). To achieve sustainable growth, Famous Amos practices the market development and market penetration strategies. Not only does it seek to increase sales through promoting its products in existing markets, it also looks into expansion into new markets. Particularly, this paper studies the expansion of Famous Amos into Shanghai. 2. 2. 3 Market-entry Strategies The expansion m ethod matrix provides methods of expansion by examining the internal and external networks that offer growth opportunities (Lynch 2000, 582). Entrance into foreign markets using external networks can be through acquisition, joint ventures or franchising whereas with internal efforts, it is achieved through exporting and establishing subsidiaries. Famous Amos can enter Shanghai through exporting or acquisition. 2. 2. 3. 1 Exporting Famous Amos can also make its products available in Shanghai through exporting which involves shipping its products overseas with the help of intermediaries such as logistics firms, exporting agents, wholesalers and retailers to carry its pre-packed cookies. . 2. 3. 2 Acquisition Acquisition is basically buying over a firm for rapid entry into a market or acquiring technical expertise. Famous Amos can take advantage of the fact that the Kellogg Company had acquired China’s own cookie and cracker manufacturer (Zhenghang Food Company) in 2008 and turned it into its manufacturing facilities (China Food Drink Report Q1 2009 2009). Apart from being able to produce locally, Famous Amos is subje cted to less legal entry barriers into Shanghai and can ride along Zhenghang’s existing distribution networks. . 3 Social Responsibility As a part of the Kellogg Company, Famous Amos is dedicated to reducing greenhouse emissions in its operations and improving society’s welfare by donating to the less-fortunate (Corporate Responsibility 2009). In 2008, Famous Amos Hong Kong donated its proceeds from sales on Mother’s and Father’s Day to provide tutoring and sports training for kids from low-income families (HKFYG 2008). 3. 0 Environmental Analysis of Shanghai, China Although available in most countries, Famous Amos remains alien to China consumers. China’s transition from a planned to market economy made it one of the largest emerging markets in the world (Ellis and Gadiesh 2006, 6). Firms such as Coca-Cola, Unilever and Danone earn 10-15% of total revenues from three of the largest emerging markets in Asia: China, India and Indonesia (Shankar et. al 2008, 19). To target China as a single market for entry is ridiculously ambitious and therefore, Shanghai has been selected for initial entrance. Shanghai is the most populous city and is dubbed the heart of trading in China. An analysis on the political, legal, economic, financial, technology, social and cultural factors is carried out to determine if it is feasible to expand into Shanghai. 3. 1 Political Environment China’s political system is based on bifurcated authoritarianism, which places power in the hands of a leader who exercises it arbitrarily (Allen 2008). Under reformation, the central government gradually withdraws from direct control of businesses, empowers local authorities in making decisions and frees business activities from strict policies. The Economist Intelligence Unit’s report on political instability revealed that China’s political risk is lower than U. S. , France and Spain. China scored 4. 8 on the scale of 10 which indicates moderate risk, putting it at par with countries such as Singapore and India (China politics: Is China less risky than the US? 2009). However, the level of political risk is still concerning due to possible political violence, terrorism and asset seizure. 3. 1. 1 Political Violence China experiences political instability due to the ongoing process of reformation. As a result, backlash against the government erupts in forms of attacks and demonstrations. For instance, over 10,000 people attacked government buildings and set fire to police stations in Guizhou in June 2008 (Li 2008). Another violent attack occurred in Zhejiang in July 2008 where police officers were injured by over 1,000 angry foreign workers (Li 2008). Political instability leads to uncertain economic conditions such as labor strikes and decrease in consumers’ willingness to spend which would affect Famous Amos’ operations. 3. 1. 2 Terrorism Activities of terrorism in China are done by the Uighur Muslims in Xinjiang region. Such behaviors are retaliations to the government’s control on religious activities and to the dissatisfaction on government’s economic policy (Branigan 2008). Violence of the Uighur community peaked in 1997, where they engaged in bus bombings and riots after a peaceful protest was suppressed. There were also speculations of terrorist attacks by the East Turkestan Islamic Movement (ETIM) days before the launch of Olympic 2008 (Branigan 2008). To promote stability, the government allocated billions of Yuans to develop Xinjiang and is reducing business restrictions in the region (Paperny 2008). Besides that, the government is strengthening its antiterrorism measures by legislating terrorism laws and collaborating with the European Union to explore antiterrorist issues in theory and in practice (BBC 2006). Although concerning, terrorism occurs in Xinjiang which is located far away from Shanghai and thus, Famous Amos’ operations in Shanghai are unlikely to be impacted. 3. 1. 3 Seizure of Assets There have been several cases of expropriation in China. Expropriation is the governmental action of disposing an investor or foreign company, often with unreasonable compensation. In 2000, the Beijing government invited local and foreign investors to drill oil-wells and signed contracts to enforce the agreements. Few years later, the government breached the contract and seized all privately owned oil-wells, paying compensations that were only 1/3 of the investors’ investment outlays which caused them to make losses (King 2005). The practice of expropriation is exercised mainly on land, building and resources and thus, its effect on Famous Amos is not large. But it could affect the operation if its manufacturing plant is seized. 3. 2 Legal Environment China does not practice common law alongside with other countries. It practices the civil law in conjunction with influences by Confucius. General Principles of Civil Law of People’s Republic in China (1986) was introduced to help clarify the scope of civil law. People of China and foreign investors must abide to the Constitution of the People’s Republic in China (1982). Standardization Law of the Peoples Republic of China was issued on December 1988 and implemented in April 1989. This law contains five components ranging from general to supplementary provisions (Standardization Administration of the Peoples Republic of China Standardization Administration of the Peoples Republic of China 2007). . 2. 1 Intellectual Properly Rights (IPR) Since joining the World Trade Organization (WTO), China strengthened its legal framework and amended its IPR to comply with the WTO Agreement on Traded-Related Aspect of Intellectual Property Rights (TRIPs). Today, the State Intellectual Property Office (SIPO) is responsible for granting patents, regist ering semiconductor layout designs, and enforcing patents; as well as coordinating domestic foreign-related IPR issues involving copyrights, trademarks and patents (China Gateway 2006). Protection of IP in China follows a two-track system. The first and most prevalent is the administrative track, whereby an IP rights holder files a complaint at the local administrative office. The second is the judicial track, whereby complaints are filed through the court system (China Gateway 2006). Through stronger statutory protection, Famous Amos need not worry that its copyrights, trademarks and patents will be plagiarized. 3. 2. 2 Food Laws Chinas legislature had recently approved the Food Safety Law, providing a legal basis for the government to strengthen food safety control from the production line to the dining table (Yee and Wu 2009). The law, which went into effect on June 2009, will enhance monitoring and supervision, toughens safety standards, recall substandard products and severely punish offenders. These would include risk evaluation, the making and implementation of safety standards, and the monitoring of about 500,000 food companies across China, as well as circulation sector (Yee and Wu 2009). Based on this new law, consumers will have more confident on consuming food product from China which has a dire reputation of food product. 3. 2. 3 Quality Control Laws Damages caused by inferior products are major concerns of consumers in China. The laws on liability for defective products are the General Principles of Civil Law and the Product Quality Law (China Orbit n. d. ). Under these laws, a manufacturer is liable for any damage caused by a defect in its product. China’s law does not impose punitive damages (damages intended to punish the manufacturer). The closest analog in China would be what translates roughly as hardship damages. The cap on these damages is RMB 50,000, regardless of severity. 3. 2. 4 Taxation FDI and enterprises in China are governed by â€Å"Rules for the Implementation of the Income Tax Law of the  People’s Republic of China for Enterprises with  Foreign Investment and Foreign Enterprises† (Taxation Law n. d. ). China had recently announced the possibility to cut business tax as part of its efforts to prop up the slowing economy. The government is very likely to soon cut the business tax for enterprises by one percentage point (China to Cut Business Tax 2008). Famous Amos can benefit from the lower tax should the cut is carried out. 3. 2. 5 Corporate Social Responsibility In recent years, China experiences issues related to corporate social responsibility. Few unethical MNCs have evaded the minimal social responsibility in China. For instance, authority discovered that Shenzhen’s Haagen-Dazs kitchen was operated without hygiene permit (People’s Daily 2006). Also, handful multinational employees gave bribes and evaded taxes illegally, some practiced lower labor standards while other foreign-funded enterprises produced sub-standard products in the country (People’s Daily 2006). Consequently, the related companies’ reputations suffer. Famous Amos must be attentive in practicing social responsibility to set a reputable image and ensure that they would not repeat the mistakes that others had done. 3. 3 Economic Environment Ever since it embarked on market economy, China emerged as one of the world’s fastest growing countries. Averaging more than 10% annual growth in GDP, China’s economy sits firmly in third in the world’s nominal GDP ranking; following closely after the United States and Japan with a nominal GDP of $4. 222 trillion in 2008 (China 2009). It is the second largest exporter after Germany, with value of exports up to $1. 65 trillion while imports are valued at $1. 156 trillion for 2008 (China 2009). Although the recent financial crisis has severely impacted many economies, China remains strong with a current account surplus of $440 billion (China’s Balance of Payments Surplus Slows Down 2009). Additionally, the central bank announced that its foreign exchange reserves rose 16% to $ 1. 954 trillion at the end of March 2009, making it the largest reserves holder (Sabloff 2009). It appears that China’s economy is only slightly, if otherwise unaffected, by the recent crumble of the U. S. economy. China’s economy is mainly driven by Shanghai the heart of trading in China. Shanghai’s economy has grown substantially since economic reformation and recorded a growth of more than 10% for 15 consecutive years since 1992 (Shanghai Economy 2009). GDP of the region was reported as $46. 33 billion in the first quarter of 2009 and it hosts the world’s fastest growing share market – the Shanghai Stock Exchange. 3. 3. 1 Demographics of Shanghai As one of the largest metropolitans in the world, Shanghai’s population is approximately 18. 88 million (Population and Employment 2008). The age and gender structures of the Shanghai population, as inferred from a 2005 sample survey (Population and Employment 2008) are as below: †¢ 8. 88% are aged 0 – 14. †¢ 79. 17% are aged 15 – 64. †¢ The remaining 11. 95% are aged 65 and above. †¢ 51. 4% are males while females made up for 48. 6% of the population. Trends in Shanghai’s demographics that should be highlighted are the increase in aging citizens, the rise of the affluent and childless family groups. As a result of lower fertility rate and greater life expectancy, Shanghai faces a problem as its citizens age faster than the youth group’s growth. In 2006, those aged 65 and above grew 4% from 2005 to reach almost 26% (Population and Employment 2008). Another trend is the emergence of a group with higher education and income level; known as the affluent. This group consists of mainly young males with a taste for luxury and very family orientated. Some of the new families in Shanghai are childless due to the reluctance of younger couples to give birth (Li 2009). Younger couples prioritize success in the working field and enjoy life with less financial burden and thus, have higher spending ability. . 3. 2 Labor In 2005, Shanghai employed 8. 613 million people and unemployment rate was 4. 4% (Population and Employment 2008). Minimum wage in Shanghai was raised 14. 3% from 840 Yuan to 960 Yuan due to the increase in cost of living, making minimum wages there the highest in the country (Shanghai Lifts Minimum Wage for Residents 2008). Shanghai has a relatively well-trained labor force, with many well educate and skilled at complicat ed technical manufacturing tasks. The higher minimum wage means higher cost for Famous Amos. Felony Murder Rule Criminal Law EssayLuxury brands such as Versace, Rolex and Moet Chandon have entered China to benefit from the rise of the affluent group. Below are the characteristics of this group according to Wong (2007): †¢ Busy: Most of them have an average leisure time of 15 hours a week. †¢ Family-orientated: As they are always occupied, they value time spent with family highly. †¢ Knowledgeable: They are heavy readers of magazines and newspapers, which also made them skeptical. †¢ High spending: They believe in paying premium prices for higher quality. †¢ Values: Convenience, self-pampering and status. This segment can be reached through advertising in magazines and newspapers. As they are skeptical, public relation may be a more persuasive form of communication. The affluent people have high discretionary incomes and are willing to pay premium for quality and convenience, both offered by Famous Amos. 6. 2 The Working Class Another identified target market is the working group which includes the blue and white collar workforce. People in this group aged 18 to 55, has substantial income and mostly living a hectic lifestyle. Most of the people works in private sectors as 60. 4% of jobs in Shanghai are provided by private firms (Shanghai Jobs: Overall Outlook for Surrounding Area 2007). According to HKTDC (2006), Shanghai has the highest labor cost and highest cost of living in China. In 2005, the average annual salary in Shanghai was 26,823 Yuan up 9. 9% year-on-year (HKTDC 2006). The working class is generally well-paid which means that they have considerable purchasing power. The working class makes up for most of China’s 250 million middle-class population (Wang 2009). Middle-class people tend to own at least a house and a car, to eat-out and to be familiar with foreign brands and ideas (Chang 2008). In fact, the middle-class people are aspired to be affluent. They learn English, wear branded apparels, use expensive gadgets and consume premium goods for a taste of luxury (Chang 2008). This segment is concentrated in the urban area, which makes marketing efforts easier. Activities to target the affluent group also work well for this group as they aspire to be rich and consume like the rich. Since most of the working people are well-educated, they can be reached through communications in reading materials and the internet. 6. 3 Children In China, there are currently more than 800 million children ages from 4 to 12 years with an estimated of 3. 7 million located in Shanghai. 70% of the children are from the urban and 30% from rural areas (McNeal and Yeh 1996). These children have three main sources of income which they receive as gifts from seniors on special occasions, regular allowances and money from grandparents (McNeal and Yeh 1996). Children in Shanghai are just like children from other parts of the world who are carefree and dependent on adults. They do not place much value on the products they purchase as long as it is tasty and available. Children are chosen as a target market because they are the major consumers of confectionaries and are easily influenced to try new products. Additionally, they have income in the form of pocket money from seniors which they could spend without saving. 6. 4 Student The size of China’s student population has doubled to 23 million in less than eight years. Currently, China accommodates approximately 2. 5 million foreign students (International Workshop on Higher Education Reforms in Shanghai 2008). Shanghai itself has over 450,000 students in 2005 and the number is growing rapidly due to the concentration of education institutions in the region (Students Tout Travel to Peers 2005). This indicates the tudent segment is also a potential market for Famous Amos. The student segment consists mostly of individuals aged 18 to 24 that are still studying in colleges and universities. This group is mainly concentrated in the urban area where education institutions are located. Students ty pically spend their time in campus, on the internet or in shopping malls socializing. Although majority are financially dependent on parents, there are some who work part-time to earn extra income. Many of them are living away from home and therefore, will be making choices over which brand to purchase for the first time. Hence, attracting students at this time will result in high brand loyalty over their lifetime. Additionally, students are influencers as majority of them are early adopters and innovators (Target Market – Innovators, Early Adopters, Influencers n. d. ). They will then influence people around them to try out new products. 7. 0 Marketing Mix Strategies Although Shanghai is an attractive market, Famous Amos’ expansion is complicated by obstacles such as competing on unfamiliar ground dominated by local firms, introducing a new category of food items, communication barriers and coping with deep-seated social and cultural customs. All that can be overcome with the right marketing mix and a change of attitude to a more globalized perspective. The four elements of marketing mix are discussed in the following sections. 7. 1 Products Product is a collection of attributes, tangible or intangible, which provides satisfaction to the buyer or end-user (Fletcher and Brown 2005, 286). The scenario chosen by this study is the confectionary product done by Famous Amos. This includes cookies and other same genre type items such as muffins, etc. A competitive advantage of Famous Amos is that its products come in both pre-packed and freshly baked form. The emphasis is on freshly baked products such as cookies are due to the fact that Famous Amos is the first foreign company to do so in Shanghai. 7. 1. 1 Brand Famous Amos is a highly recognizable brand and is labeled as the world’s best chocolate chip cookies. As mentioned earlier, the objective is to achieve 75% customer awareness within one year among the targeted segments and therefore, it is important to highlight the benefits of its products. Famous Amos is positioned as a premium brand where its consumption is associated with self-pampering and status. This fact will be particularly attractive to the affluent and working classes as they value premium quality. Another way is to position its cookies as the ideal breakfast snacks along with Kellogg’s Breakfast Plan which will induce frequent consumption. 7. 1. 2 Standardization vs. Adaptation One of the issues in international marketing and product development is the degree to which a company adapts its products according to the market (Czinkota and Ronkainen 1995, 157). Standardization means offering a common product on a global basis whereas adaptation means changing a product to satisfy local needs (Chee and Harris 1998, 375). Since it is entering a new market with different cultural and social backgrounds, it needs to customize its products according to the market’s needs. Apart from its existing 9 flavors, Famous Amos has to modify its products according to local taste to ensure that they will be accepted by the targeted segments. The customizations are necessary to plant awareness and to capture market share. It was specify in one of the marketing objectives that Famous Amos needs to develop at least 4 new flavors for the Shanghai market. One way to alter its products is to introduce local ingredients such as adding orange zest and almond nuts to its cookies or rolling out new flavors such as green tea and red bean chocolate cookies. For a healthier option, there are the oatmeal cookies while vegetarians can opt for egg-free chocolate cookies. 7. 1. 3 Packaging and Labeling Famous Amos’ standard packaging is only available in yellow colour. More attractive packaging patterns need to be incorporated as Shanghai people value aesthetics highly. For instance, red and orange bags can be used to package cookies during Chinese New Year and heart-shaped boxes can be used on Valentine Day. It is also proposed for its packaging to be split into smaller sizes for children and students as their pocket money may be insufficient to buy large packets. Since Mandarin is the official spoken and written language, it is wise for Famous Amos to label its products in dual-language (Mandarin and English). Ingredients labeling are especially important since consumers are getting more health conscious and fanatic about hazardous chemicals such as melamine. 7. 1. 4 Services Famous Amos provides a very unique service where it helps customers to wrap their purchases. This serves as one of the reasons for many to patronize its specialty stores during festivities. Gifts are wrapped in many ways such as hampers, boxes, bouquets with items such as soft toys, cups, tins, and chocolates. 7. Pricing Price is an integral part of a product. It is difficult to talk about a product without considering its price as a product cannot exist without a price. Price is one of the marketing mixes that the company uses to achieve its marketing objectives. Pricing decisions must be coordinated with product design, distribution and promotion decisions to form a consistent and effective marketing program (Kotler et. al 2003, 335). There are various factors that can affect price. For instance the law of supply and demand, cost, exchange rate, tariffs and distribution cost, etc. , they are all highly influential to the company’s pricing decision. 7. 2. Dual Pricing Famous Amos uses dual pricing instead of worldwide pricing. Having said, we compared the prices offered by Singapore and Malaysia for instance. The 200gram cookies-in-bag sold in Singapore cost S$8. 20 (equivalent to RM19. 75) while in Malaysia, it cost RM14. 90 for the same amount of cookies (Famous Amos Singapore 2008). This is mainly due to the cost differences, along with the contrast of tariffs imposed and distribution cost in the two different counties. However, Famous Amos is still considered as premium cookies in the two countries as they are both priced higher than the other ordinary shelf cookies. 7. 2. 2 Product Line Pricing Famous Amos specialized in making cookies and only cookies. Hence, they have a vertical product line, whereby their cookies are priced according to the weight (Famous Amos Singapore 2008).. For instance, freshly baked cookies sold in specialized stores comes in 100g is sold for RM7. 70, 200g (RM14. 90), 300g (RM22. 70), 400g (RM29. 90) while the 500g for RM37. 70 in Malaysia. 7. 2. 3 Price-Bundling Price bundling here defined as offering two distinct products and offer them in a single bundle sold at a single price, with the aim of appealing two different market segments with contrasting willingness to pay with one offer and improve profits (Smith 2008). Despite offering just cookies, Famous Amos also offers its cookies together along other stuffs (wines, chocolates, candies, teddy bears, free delivery) in gift forms for every occasion. For example, the Chinese New Year Abundance gift set offered in Singapore, it includes a bottle of Australian wine, 4 different types of cookies with tin, a box of chocolate, a greeting card and free delivery to anywhere in Singapore (Famous Amos Singapore 2008). 7. 2. 4 Premium Pricing Strategy Famous Amos positions itself as superior cookies above other as all of its cookies are baked to perfection with the finest ingredients. Hence, it uses a premium pricing strategy in every country to maintain its standards. Moreover, it does not practice price dumping and price penetration at all in order to remain itself as a premium brand. With such high quality, Famous Amos’s level of competence has yet to be achieved by its main competitors. It is suggested that Famous Amos can price its cookies sold in Shanghai in two ways: ? Direct conversion from United States prices. ? Charge higher price above competitors prices in Shanghai. 7. 3 Promotion Promotions are tools used to communicate marketing messages to target consumers such as advertising, public relations and sales promotions. Famous Amos’ promotion tools are advertising, sales promotions and public relations. 7. 3. 1 Advertising Advertising is any form of non-personal presentation that is paid for. Famous Amos will focus on informative advertising since it is new in Shanghai. To boost popularity, it can sign endorsements with well-known local actresses like Gong Li, Zhang Zi Yi and basketball player Yao Ming to be its spokespersons. To build brand awareness, it has to expose itself through advertising in television, printed materials and the internet. †¢ Television Radio Famous Amos can take up advertising space when the viewing rate is high such as after-working time to target the working class. †¢ Billboard/Magazines/Newspapers In terms of print advertisements, it can advertise on newspapers, magazines and billboards. This form of communication is very effective to reach the affluent and working groups as they are regular readers. †¢ Internet Since the usage of internet is high in Shanghai and students spend a lot of time online, it can posts notifications on its latest products and promotions on its Shanghai based website to create awareness. 7. 3. 2 Sales Promotion Sales promotions are techniques used to stimulate short-term response (Dahringer and Muhlbacher 1991, 480). Examples include product sampling, trade-shows and patronage rewards. †¢ Flyers, pamphlets and discount vouchers Flyers and pamphlets along with discount vouchers can be distributed in housing and office area. This distribution can help customers get the latest promotion information and special discount for them, and therefore, the awareness of new brand Famous Amos can be increased. Furthermore, this point of purchase will induce impulse buying. †¢ Festivals promotion with launching of new products In conjunction with celebrated occasions such as Chinese New Year and Valentines Day, new flavors will be introduced along with promotions. ? 14th February 2010: Chinese Lunar New Year Introduce the orange-zest topped cookies and hampers in conjunction with Chinese New Year celebration. ? 14th February 2010: Universal Valentines Day Launching of almond and green tea flavored cookies as research showed that consumers are interested in local flavors. ? 16th August 2010: Qi Xi (Chinese Valentines Day) Red bean flavored cookies are launched. ? 25th December 2010: Christmas Special Christmas themed packaging and advertisement scheme. ? Throughout the year: Roll-out of oatmeal and vegetarian cookies for health-conscious consumers. Provide free-samplings to stimulate trial. †¢ Joint promotion with colleges/universities and schools. As students and children are two of the targeted segments, Famous Amos can promote its cookies in colleges, universities and schools. Apart from free samples, it can offer special student rates for immediate purchases. †¢ Complementary merchandises To show appreciation of customer support, they will receive gifts for purchases until a certain level. Below 500grams Pen 500grams-1kg Cup (1 liter) Above 1kg Umbrella †¢ Patronage Reward Offer Frequent-Purchase cards with 30 stamps. For every purchase of above 250grams, customers are eligible for 1 stamp. After 30 stamps are collected, customers will be rewarded a free 250 grams of any choice of cookies during the next purchase. This can induce loyalty in Famous Amos customers. 7. 3. 3 Public Relations Public relation activities like fund-raising and sponsorships yield reports from third-party which adds to the credibility of a brand and helps create brand awareness. Famous Amos may use press releases to inform people of its contributions to the community, the environment and nutrition to build reputable image. It can sponsor for 10% of Shanghai City Children’s Welfare for the whole year and also sports events such as China Basketball Association Playoffs. 7. 4 Distribution The distribution process involves all stages from the making of a product until it reaches the end-consumer. Specifically, it includes the physical handling of goods, the passage of ownership and the negotiations that take place in between. In this case, distribution activities can be classified into two broad categories: activities that make Famous Amos available in Shanghai and the local distribution networks in Shanghai. 7. 4. 1 Making Famous Amos Available in Shanghai Famous Amos can enter Shanghai through one of these two methods: exporting or acquisition. Depending on the entry strategy, the types of intermediary used will vary. Famous Amos can export its products into Shanghai through domestic or foreign middlemen. Domestic middlemen, located in the manufacturing firm’s country, provide marketing services from a domestic base (Cateora and Graham 2002, 419). Examples are global retailers, export management companies (EMC) and export merchants. For its pre-packed products, Famous Amos can utilize global retailers that operate in Shanghai such as Marks Spencer, Wal-mart and Parkson. It can also engage in EMCs that handle all matters from exporting to storing and distributing. However, the cost associated with the use of EMC is high. Alternatively, it can seek the service of foreign middlemen which operate from foreign base, performing similar tasks as domestic middlemen. Since its parent company is a successful global firm, t could perform direct export into Shanghai using its internal network. The Kellogg Company had recently acquired the Zhenghang Food Company as an entry strategy into China. The acquisition includes two manufacturing facilities, as well as the company’s sales and distribution networks (China Food Drink Report Q1 2009 2009). Famous Amos benefits from this as it can eliminate substantial amount of transport costs when its products are manufactured in China. Besides that, their in-country distributions (Zhenghang’s existing network) are also sufficiently established. 7. 4. 2 Local Distribution in Shanghai When its products made way into Shanghai, it is then concerned with the in-country distribution network. As it is a new brand, it needs to establish a distribution network that has high coverage so that its products can be accessed by targeted segments. This can be achieved by selling through specialty stores, retailers and convenience stores. Franchising is an agreement where a licensee purchases a brand name, pre-packaged goods and operating methods of a firm (Lynch 2000, 583). The presence of Famous Amos specialty stores in the global market is due to its effective franchising. Famous Amos offers high level of franchising support such as staff training, location analysis, site renovation, equipments, operation manual and field support (Support and Training n. d. ). This method of growth involves lower risk, less supervision and the licensor splits profit with the franchise holder. It is likely that many will be interested in taking up its franchise as it is a profitable and credible brand. Specialty stores are mostly set up in shopping malls, although there have been scenarios where franchisees have allocated a stand-alone shop just for selling cookies. Consumers prefer to buy from its specialty stores as the cookies are freshly baked and gift-wrapping services are provided. To achieve its objective of establishing 15 franchises by the end of 2010 is relatively easy as there are many shopping malls, mostly high-end malls, in Shanghai such as Plaza 66, Citic Square, Westgate, Grand Gateway and Times Square. The presence of specialty stores in these malls will help to promote brand awareness and capture market share as these malls have high human traffic. Famous Amos can also sell its pre-packed products through convenience stores, global and local retailers. Selling through retailers seemed to be the rational thing to do when Shanghai’s retail sector is booming. Retail sales in March 2009 jumped 15% since December 2008 to $430 billion, as citizens’ incomes rise and savings pile up (Zhang 2009). Apart from global retailers such as Parkson, Wal-mart, Carrefour, Isetan and Marks Spencer; Famous Amos can also sell through major local retailers such as Roly China, Hualian and Bailian (all based in Shanghai). Through these retailers, Famous Amos’ products will be sold at hundreds of stores across Shanghai which will generate greater sales and penetrate into more areas. Similarly, its products can be distributed through convenience stores like 7-11, Lawson, Family Mart and C-store. 7. 4. 3 The Internet High internet usage in China has opened up a whole new market for online retailing. In 2008 alone, Shan