International expansion strategy : international strategy for Seamore

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International Expansion Strategy

International strategy for Seamore

Author: Gunnar T Gudmundsson (11389885)

Contact: gunnartorfi88@gmail.com

Supervisor: Dr. Edward Huizenga

Program: Amsterdam MBA (Full Time - 2016-17)

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Executive Summary

This research project was done on Seamore, a Dutch food start-up, looking to export their brand into foreign markets. With limited resources and a fragile position, the choices Seamore makes on what markets they emphasize and how they are entered can have a big effect on their brand performance.

Seamore is currently aiming to raise €2 million, in order to grow the brand. This capital will be used to fuel a growth strategy that extends to the end of 2018. Included in Seamore’s growth strategy, is a list of 12 markets, new and current, they aim to be active in, in this period. They have however not specified an entry mode or a prioritization for these markets. It became the responsibility of the researcher to make a theoretical framework which could facilitate the analysis.

Combining theory from business strategy, marketing strategy and international business, the researcher was able to assemble a framework, fit with the company’s situation. After assessing the company’s performance in current markets, entry barriers in new markets and taking the current position of the company into account. The researcher gave recommendations for modes of entry into new markets and recommendations of what markets they should penetrate, based on the capital at hand.

The researcher gave distinct recommendations for entry modes in small markets within Europe, large markets within Europe and large markets in other continents. In small markets a partnership with experienced, organic focused, importers are the ideal fit. In larger markets in EU and worldwide, a combination of partnerships with logistics/fulfillment partner, local sales team working for commission and a local PR agency is the ideal situation.

By looking into capital requirements, suitability for products, customer purchasing power, access to distribution channels, government policy, competition and seller concentration in the twelve markets, the researcher created five scenarios based on how successful Seamore is a raising capital.

If Seamore does not manage to raise any capital, the researcher recommends minimal activities in the current six markets. A capital of €1.000.000 would allow them stay active in ten markets in Europe and full €2.000.000 would add Japan & The U.S. to the list.

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Preface

While on a family holiday in Ibiza in 2013, Seamore’s founder Willem H. Sodderland, ordered a plate of seaweed salad, so when the waitress served him a plate of what appeared to be tagliatelle, he assumed his order got mixed up. After a confusing conversation with the waitress, he demanded to speak to the chef, who indeed confirmed that he had been served a plate of “Himanthalia”, a pasta like seaweed.

After returning back to Amsterdam from his trip, Willem started researching his new discovery and in 2015 “I sea pasta” came on to the market as Seamore’s first product. With a team of three full-time employees and two interns, Seamore was able to get into retail stores in the Netherlands. In 2016 Seamore launched their second product, “I sea bacon” and begun selling their products in a handful small specialized retail stores in Germany and the UK.

I joined Seamore in 2017 and stayed with the company for 2,5 months, from the middle of May till the end of July. At this point, Seamore was growing from a start-up to a scale-up. At that point the company had grown to a team of 4 full-time employees and 7 interns. In June 2017, Seamore was already in 562 retailers in six countries in Western-Europe. The founder explained to me that he had the ambitious goal to bring out three additional products, get the product into to 3000 retailers and be active in 12 markets in the next 18 months.

Seaweed products still have a very niche market in Europe, but are slowly catching on. It is a common path for niche food products to start in specialty stores and slowly grow into mainstream retailers. Therefore Seamore was relying heavily on getting their products into new markets, in order to reach new points of sale.

With limited resources and a small team, Seamore needed to set priorities and focus on the markets that are most likely to respond well to the product. My task until would be to work as an active member on the sales team, in order to understand the practicalities and the challenges the company is faced with, while entering and maintaining its markets. Combining this with knowledge from my MBA studies along with relevant literature and frameworks, would result in a practical international strategy that the company could use until the end of 2018.

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Chapter 1 - Introduction

In the first chapter I will introduce the underlying theoretical background of this study. Then I attempt to explain the current situation of the company that has already been introduced in the preface. Finally I cover the scope and highlight the deliverables of this research.

A. International strategy generation for Seamore

Still in its start-up phase, Seamore lacks structure and focus when it comes to expanding internationally. The company is aiming to be active in twelve markets by the end of 2018. Due to lack of capital they are not able to fully penetrate the six markets they are currently active in and attempting to add on new markets is causing the firm to lose focus.

Thus the aim of this research became to create an international strategy for Seamore. Seamore is currently not able to turn in profit and is seeking an investment of €2 million in order to grow the product. This international strategy generation will take into account that the full amount may not be reached.

The international strategy has two parts, entry modes into new markets and prioritization of activities in new and existing markets based on capital at hand.

B. The company and their current situation

Founded in 2015, Seamore makes seaweed alternatives to popular food products. Seamore currently has two products on the market, “I sea pasta” and “I sea bacon”. With new products on the horizon, such as “I sea wraps”, “I sea hummus” and “I sea bread”. The company is currently active in six markets (Netherlands, United Kingdom, Germany, France, Denmark & Iceland) with 562 retailers carrying their products as of June 2017.

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The CEO, Willem Sodderland, has set a goal for the firm to have products in 3000 retailers by the end of 2018, with plans to enter into six additional markets in the same period. Seamore’s team consists of 4 full-time employees and the average 4 to 7 interns. With five departments, employees often have to be involved in two or three teams. Below I have described, in percentages, how the resources are

allocated between the departments. This ratio is likely to stay the same as the company grows.

- Sales team: 18%

- Marketing team: 25%

- R&D team: 38%

- Operations team: 12,5%

- Funding team: 6,5%

Although the company’s owner is looking to expand his full-time team and get a foothold of more markets, he has not been successful in raising the financial needs, the expansion requires. Besides the commercial director, there is currently only one intern who is able to give 50% of her time to maintain interactions with current markets and establish partnerships in new markets. This leaves sales activities very limited within the company and therefore it is very important that the company prioritizes their global sales activities, making informed and educated decisions on what markets to be active in.

The six new markets Seamore wishes to enter are United States, Japan, Belgium, Sweden, Norway and Finland. Except from Sweden, where Seamore is already on the brink of sealing a partnership with an importer, there has not been much prospect of getting a foothold into these markets.

C. Scope of the study

The main deliverable of this study is to create an international expansion plan for Seamore. This should be based on theory in relation to what I have studied in the MBA as well as practicality, taking the company’s current situation into account. In the theoretical part I aim to use a combination of literature and frameworks that are applicable for the company that is being studied. I spent 2,5 months, from mid-May till the end of July, working as an active member of the sales team.

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Key deliverables of the project

• Entry modes into new markets

• Prioritization of activities in new and existing markets based on capital at hand • One-page strategy map

The sales team should be able to use this international strategy as a guideline that they can use until the end of 2018. A set of recommendations for entry modes into new markets will be given, based on what has been working well for the company in its current markets. This mainly covers the type of

partnerships Seamore should be involved in, in foreign as well as local markets.

The prioritization of activities in new and existing markets takes into account the amount of capital Seamore is able to use. Recommendations will be based on five different amounts, which the Sales team can use as a guideline in the coming 18 months. The research covers the capital requirements needed stay active in these markets as well as assessing them based on suitability for products, customer purchasing power, access to distribution channels, government policy, competition and seller concentration.

Although Seamore’s CEO has set clear goals for the coming 18 months, the official strategy of the company has never been mapped out. In order to fully understand Seamore’s current capabilities, I will map out Seamore’s current strategy, by looking at the current performance of the firm. This will result in a one-page strategy map.

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II. Chapter 2 – Theoretical Background

For the purpose of this research I will use a combination of literature from business strategy, marketing strategy and international business. The purpose of business strategy literature is to define the

company’s current strategy. Using literature from marketing strategy, I attempt to define Seamore’s customers. International business literature will be used to look into the entry barriers and determinant factors for choice of foreign markets.

A. Business strategy

Before an organization can make choices about where and how they do business overseas, they need to truly understand their strategy. While Seamore has defined their mission, vision, short-term and long-term goals, they have never mapped out a detailed strategy.

In “The Strategy Handbook”, Jeroen Kraaijenbrink says that an actual strategy of an organization is reflected on what they actually do on day to day basis. By looking into company’s resources, their partners, customers and competitors, a company gains an in-depth understanding of their current strategy. Once a strategy has been mapped out, it becomes easier to communicate and discuss strategy within a firm. In addition to revealing blind spots & ambiguities. (Kraaijenbrink, 2015)

Jeroen’s strategy is composed of ten elements which can be made into an easy to follow 1-page strategy sketch. His ten elements of strategy include 1. Resources & competences, 2. Partners, 3. Customer &

needs, 4. Competitors, 5. Value proposition, 6. Revenue model, 7. Risks & costs, 8. Values & goals, 9. Organizational climate, 10. Trends & uncertainties.

By going through this step-by-step strategy generation process, asking yourself relevant questions along the way, it becomes easier to summarize an actual strategy of a company and it often reveals

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B. Marketing Strategy

Rudy Moenart says that in order to understand where and how companies compete today, they must be able to analyze the internal and external environments of the company. Companies should be customer driven and emphasize on the customer value proposition, while taking the industry and macro

environments into account. In order to define one’s business Moenart suggests the use of Abell-framework. Abell argues that the choices of technologies, functions and customers to serve should be the focus when defining one’s business, not the products the company offers. The products offered should in fact be the result of these choices, not vice versa. (Moenart & Robben, 2013)

The Abell-framework is ideal for defining who Seamore’s customers are. His framework can be simplified to three easy to follow questions.

- Who do we serve? - What do we offer? - How do we do that?

Who: This part focuses on the customer segmentation, the different customer groups that the company distinguishes.

What: Focuses on the current customer value proposition and how the customer segment benefits from the company’s offering.

How: Focuses on the competences and assets needed to be acquired in order to fulfill the customer value proposition.

Once the company has defined its business, it’s time to focus on a way-to-market analysis. While end-users of a product may not always be the ones who pay companies directly for the product, companies still have to focus on the end consumer. Therefore it can be tricky making a decision on which focal customer a company should focus on. Moenart mentions three key questions to figure out who the true customers are:

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- Who makes the choices? - Who pays?

- Who consumes?

C. International Business strategy – Foreign location determinant factors

Bradley A. Winn discusses common determinants of firm’s choice of foreign location in his article “Expanding Globally: Where in the World Should We Go Next?” Although his article focuses more on financial and human resources, the factors he discusses are applicable to a wide variety of firms, including the one covered throughout this paper. As Bradley mentions, each company has do decide on how important and applicable the determinants are to their specific company and situation. (Winn, 2014)

Winn has drawn up a framework of common determinants factor that should influence firm’s choice of foreign locations. His framework is written with large corporations in mind. For the purpose of this paper, I only use determent factor’s relevant to Seamore’s business model. I cover this in more detail in chapter III - C. (Winn, 2014)

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D. International Business strategy – Entry Barriers in consumer and industrial

markets

In their paper, Barriers to Entry and Market Entry Decision in Consumer and Industrial Goods, Karakaya & Stahl tested entry barriers in consumer and industrial markets. By studying market entry decisions of 137 executives in 49 major US corporations, Karakaya & Stahl found the most important factors to be cost advantages of incumbents, product differentiation of incumbents, capital requirements, customer switching costs, access to distribution channels and government policy. As with Winn’s framework, I choose only to use the factors that are most relevant to Seamore’s situation. A detailed description can be found at the beginning of chapter III - C. (Karakaya & Stahl, 1989)

E. Strategy Assesment

Jeroen Kraaijenbrink’s strategy handbook covers a section on strategy assessment. By going through nine strategy checks, one can assess a company’s current strategy in a structured and systematic way. It is important to do the strategy assessment before making a new, improved strategy and after having covered the company’s current strategy, which is the why I do place the strategy assessment before the managerial recommendations. (Kraaijenbrink, 2015)

Although each of the nine steps is not always necessary, it is good to do at least few of the most relevant checks to find out if the strategy is in need of improvement. I have chosen five of the most relevant strategy assessments, for the purpose of this paper. This is described in more detail in Chapter III – D. (Kraaijenbrink, 2015)

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III. Application of Strategy Frameworks

This part can be split into four sections. Beginning with strategy generation, which gives a better image of the firm’s day-to-day activities and capabilities. Then looking into the customer segmentation and value proposition of the firm. Once the company has been analyzed from these different perspectives, I will look at the criteria that determine choice of foreign locations and entry barriers in foreign markets. Finally I will make a strategy assessment, in order to evaluate the strategic performance, before giving the firm recommendations.

A. Strategy Generation

Following the ten elements of strategy generation in Jeroen Kraaijenbrink’s, “The Strategy Handbook”. I have created a 1 page strategy map, summarizing Seamore’s current strategy. The company seems to have a well defined value proposition and a simple revenue model. Their values, goals and marketing communication fits with their customers. On the downside, they have very limited financial resources, have operational problems due to choice of logistics partners and are heavily reliant on seaweed becoming a popular trend in western markets.

The 1 page strategy map is on the page below and each element is described in detail hereafter.

Resources & Competences

Seamore’s key competency is their marketing capabilities. The founder & CEO, Willem Sodderland, has a strong marketing background which feeds into the company. Seamore’s product look very appealing, the company is very good at storytelling and has a strong online presence.

Besides this, the company has a very experienced commercial director who has over 30 years of

experience in the food industry, both in large corporations and his own company. The R&D team boasts one of Holland’s leading seaweed experts and have now for the first time since the start of the firm, begun to create their own, unique products out of seaweed. (The two products already on market are 100% dried seaweed)

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Partners

Seamore has various importers, distributers, sales agents & wholesalers in six different markets within Europe. A detailed overview of Seamore’s partners, overseas, can be found in the section on Access to distribution channels and overseas partners. In order to make this section more concise, I will list Seamore’s strongest and weakest partnerships, along with the advisory board.

Most valuable partnership

Seamore has a strong partnership with its harvesters in France and Ireland. They have made an exclusive agreement with their harvester in Ireland and were the first firm to order enough Dolse in France that makes it possible to scale and grow Dolse off-shore.

Least valuable partnership

Seamore’s logistic partner, CJ Hendriks, stores Seamore’s stock and handles all their shipments. They have proven to be extremely un-reliable. Seamore recently ran out of stock in England, due to a shipment that was not delivered on time, due to mismanagement on their behalf. Similarly a product launch in Iceland was delayed by a month due delayed shipment. On time delivery becomes even more important once Seamore goes into mainstream retailers, who are less flexible and tolerant to

operational errors than small, specialized retailers.

Seamore’s advisory board

The advisory board consists of financial, legal, business & seaweed experts. These are Stefan Kraan, a Seamore investor and president of the International Seaweed Association. Rob Baan, CEO of Koppert Cress, an advisory board member and business coach Seamore’s CEO, Willem Sodderland. J.W. Sodderland, a legal consultant.

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Customer & needs

Seamore’s end consumers are generally health conscious consumers, who frequently buy specialty grocery items. Seaweed fits with consumers who have special dietary need, which has been a selling point for the product. Seaweed also fits very well with consumers who are concerned about

sustainability in products.

Competitors

An extended overview of Seamore’s competitors can be found in the section: Competitors & seller concentration. To follow up on the strategy map, Seamore’s three key competitors are discussed briefly here.

Algamar has been in the seaweed industry for over 20 years, harvesting Himanthalia from the coast of Spain. Their products are high in purity, but lack the market appeal that newer brands have.

Kulau, is an attractive and appealing German brand. Offering pure seaweed, seaweed chips & seaweed smoothies.

Halo, is an US based company, mainly focusing on seaweed chips. While their products are high in market appeal, they are very processed and lower in purity than Seamore’s products.

Value proposition

Seamore creates seaweed alternatives to popular food products. By making seaweed more assessable than ever before, Seamore is able to increases sustainability and health in food products.

Revenue model

Seamore’s revenue model is very simple. They purchase dried seaweed from harvesters in France & Ireland, who package the products for them. Then they put a 51% margin on to the buying price and sell it to retailers, distributors and wholesalers.

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Risks & costs

Seamore’s greatest risk is being reliant on investors to grow the company. The company is currently neither able to turn in profit nor attract new investors. Their largest investors recently announced that he is not willing to put in more money into the company. This creates a large distress as Seamore’s current budget can only keep the company alive for the next three months.

Values & goals

Seamore is on a mission to turn seaweed into everyday food. Their goal is to introduce seaweed into the plates of Europeans and North-Americans, and get them comfortable with the idea of seaweed as a regular food. By doing so they aim to increase sustainability in food products.

Organizational climate

Semore’s company culture is still very entrepreneurial, although they’ve been in business for over 2 years. The founder has tried to insert more structure into the company, but its proven to difficult. The work environment is flexible and personal. Although small, the company has problems with

communication within the company.

Trends & uncertainties

Seamore’s success is heavily correlated with seaweed becoming a popular trend. Their selling point is that all of their products have a high amount of seaweed in them. Besides the financial troubles the company is having, this is their greatest risk.

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B. Customer Segmentation, Value Proposition & Focal Customer

Seamore’s customers can be split into two categories. First we can define business-to-business (B2B), which includes the importers, distributors and retailers, as a customer. Then we have the end consumer, defined as business-to-consumer (B2C), which buys and consumes the product, usually through on- or offline retail store. When defining the customer segmentation, value proposition and the consumer, I cover B2B and B2C separately.

Customer Segmentation and Value Proposition

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Who is the focal customer on which the company should concentrate?

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C. Foreign location determinants & Entry Barriers

To keep this paper concise, on on-to-point and to avoid overlap. I have picked the most relevant factors from Winn’s and Karakaya & Stahl’s papers and combined them into one section. Before looking into the six factors that I have chosen, I will describe them shortly and explain why they are relevant for Seamore.

Suitability for product use

Seamore’s products are very niche and their biggest challenge till this day has been to convince consumers to consume seaweed. They have also noticed that their most loyal end consumers have a tendency to purchase organic and vegan products. Therefore, suitability for product use will be measured on the amounts of vegans in the population and percentage of organic products bought in retail in a given market.

Customer purchasing power

Although Seamore’s products are relatively inexpensive compared to other seaweed based products, they are still considered very expensive compared to mainstream grocery items. Therefore the customer purchasing power has been given a high weight. Measures of customer purchasing power include consumer price index (CPI) and household final consumption expenditure (HFCE).

Capital requirements

Entering and being active in foreign markets can require extensive financial resources. While large markets require more than smaller markets, they tend to give greater return and have possibilities for scalability. Capital requirements and Seamore’s capital resources weigh very heavily in determining what markets they are able to penetrate.

Access to distribution channels

Partnerships that companies enter into overseas have a large effect on the distribution capabilities of their products. In this section I will give a special attention to the partnerships Seamore has already entered and the types of partnerships they are likely to have access to in new markets.

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Government policy

Government policies do not have as much effect on small firms who are exporting products overseas as large firms who are directly involved in activities in foreign markets. However, if products do not meet the minimum requirements to enter foreign markets they are not able to compete in those markets.

Competitors & Seller concentration

I have combined “Seller concentration” and “Competitor locations” into “Competitors & seller concentration”. Drawing up a brief overview of the seller concentration in the space that Seamore competes and looking at Seamore’s key competitors.

These are the six factors, combined from Winn’s and Karakaya & Stahl’s frameworks, that were most relevant for Seamore. Starting from the following page, I will look into these factors in detail.

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Suitability for product use

Seamore products have been doing best in specialized retail and are favored amongst consumers who buy organic and vegan products. Therefore I will look into the amounts organic products sold and amounts of vegans by country, in order to assess the suitability for the product.

Market Percentage of organic groceries Percentage of vegetarians

United States 5% 1 _3,3%2 Japan Unknown 4,7%3 Germany 4,8%1 6%4 United Kingdom 1,8% 3%5 France 2,5% 1,5%6 Netherlands 3,8% 4,5%7 Belgium 1,8% Unknown8 Sweden 7,9% 10%9 Denmark 8,1% 4%10 Finland Unknown8 2%11 Norway 1% 2%12

Iceland Unknown8 Unknown8

Table [1] – Suitability for product use.

1_{https://www.rabobank.nl/images/thema_update_october_2016_biologisch_29877233.pdf} 2_{http://www.vrg.org/nutshell/Polls/2016_adults_veg.htm} 3_{http://www.arcj.org/information/00/id=560} 4_{http://www.mintel.com/blog/food-market-news/veggie-sweets-go-mainstream-in-germany} 5_{http://www.food.gov.uk/multimedia/pdfs/publicattitudestofood.pdf} 6 https://www.theguardian.com/lifeandstyle/wordofmouth/2011/oct/26/french-government-banning-vegetarianism-schools 7_{http://www.trouw.nl/deverdieping/overigeartikelen/article847086.ece/Een_dag_geen_vlees_is_een_dag_niet_g} eleefd

8_{Reliable data was not available for this market.}

9_{http://www.thelocal.se/20140321/one-in-ten-swedes-is-vegetarian-survey}

10_{https://coopanalyse.dk/analyse/mange-%E2%80%9Dopfatter%E2%80%9D-sig-selv-som-vegetarer} 11_{https://www.ruokatieto.fi/uutiset/reheva-kasvisruokavalio-hyvaksi-terveydelle-ja-ymparistolle} 12_{https://issuu.com/alsiano/docs/foodnews_october_2012}

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Customer purchasing power

In order to evaluate the customer purchasing power by markets, I’ve decided to three two metrics, the consumer price index (CPI), household final consumption expenditure (HFCE) and GDP Per Capita. The consumer price index measures the price changes of consumer goods and inflation, which decreases the amount of goods consumers are able to purchase.13_{The household final consumption expenditure is a} measure that represents overall consumer spending for a market. It measures the purchases made by households on individual consumption of goods and services.1616_{HFCE is also a good measurement of} total market size. GDP Per Capita, shows the standard of living by country.14

Market HFCE

(millions of USD)

Consumer Price Index (CPI)

GDP Per Capita in USD

United States 11,484,34015 _244.0516 _57,46717 Japan 2,999,59815 _100.2016 _41,47017 Germany 1,857,401.2815 _109.4016 _48,73017 United Kingdom 1,709,176.4715 _103.3016 _42,60917 France 1,356,094.4315 _100.9916 _41,46617 Netherlands 384,47815 _102.0516 _50,89817 Belgium 270,81915 _105.1516 _46,38317 Sweden 270,76215 _321.9716 _49,17517 Denmark 164,35215 _102.0016 _49,49617 Finland 147,44015 _101.1016 _43,05317 Norway 210,14315 _106.1016 _59,30217 Iceland 6,19015 _442.9016 _51,39917

Table [2] – Customer Purchasing Power.

13_{http://www.investopedia.com/terms/c/consumerpriceindex.asp} 14_{http://www.investopedia.com/terms/p/per-capita-gdp.asp} 15_{http://data.worldbank.org/indicator/NE.CON.PRVT.CD?year_high_desc=true} 16_{https://tradingeconomics.com/country-list/consumer-price-index-cpi} 17_{http://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?view=chart}

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Capital requirements

When looking into the amounts of what Seamore has exactly been spending on in the markets its active in, the numbers did not add up. Since this has not been recorded in an effective manner, it is difficult to quantify the capital needed to stay active in foreign markets based on current expenses. Seamore does not have the staff needed to fully handle all the markets they are active in, so their current expenses do not give an accurate image of the costs of staying active in markets. Together with the CFO and the Commercial Director of Seamore, we made an estimation of the capital needed to stay active in foreign and local markets. For the six markets Seamore is currently active in, we based our estimations partially on current expenditures and estimation taken from financial projections. Included in these projections are marketing expenses, traveling costs and employee expenditure.

Practicalities of the calculations:

• Marketing expenses are budgeted for the Marketing Team, Travels and Staff, are expenses budgeted for the Sales Team.

• This marketing cost covers in-store marketing, bloggers, influential’s and in some cases PR agencies.

• Employees generally travel twice per year to foreign markets.

• A full time employee on the sales team costs between €3000 to €4000, based on experience and should be able to handle two large markets, like Germany and France, or three to four smaller markets, such as Denmark, Iceland and Netherlands.

• The capital requirement projection is a monthly average, for the next 12 months.

Marketing Travels Staff

United Kingdom €2200 €250 €2000 Germany €2800 €200 €2500 France €2200 €200 €2000 Netherlands €1250 €100 €1000 Denmark €700 €100 €500 Iceland €200 €50 €250

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In addition to this, we made a projection of the capital required for the markets Seamore has yet to enter. The projection is also made on monthly basis and taking into consideration the additional capital required to get a foothold into a market, we made an average of monthly costs over a 12 month period. In order to stay active and enter Japan and the U.S., Seamore will have to hire a local sales agent, which will increase staff costs. Capital requirements in Belgium, Sweden, Finland and Norway will be minimal if Seamore manages to find the right importer in those markets. The cost in those markets are likely to decrease once a successful partnership has been established.

Marketing Travels Staff

United States €5500 €460 €4500 Japan €4500 €460 €3500 Belgium €900 €100 €500 Sweden €900 €120 €500 Finland €600 €120 €500 Norway €600 €120 €500

Table [4] – Capital Requirements – New Markets

Access to distribution channels

As has been pointed out in the section above, Seamore has very different partnerships in the markets it is active in. Different market requirements demand different types of partnerships. Some of the

decisions for choosing partners were made in the early stages of the company, when Seamore was not in a position to hand-pick their overseas partners and had to leverage up on their options.

When asked, Seamore’s founder and CEO, Willem Sodderland, gave very mixed responses regarding the ideal partners he wanted to have overseas. In some occasions he has mentioned that an importer with an organic portfolio in every country is the ideal situation for Seamore, while at other times he has said that importers in general never represent the brand as well as the company does. In this section I

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will highlight the types of partnerships Seamore has in the markets they are active in and what options they have or are likely to get in the markets they have yet to enter.

Netherlands: Seamore has been selling directly to retail in the Netherlands since it launched in 2015. Their two largest partners are Plus and Albert Heijn. A small portion of their sales are going through small online retailers and wholesalers, such as Sligro and Deli XL.

United Kingdom: To get a foothold into the market, Seamore made partnership with the London based organic distributor, Marigold. Since Marigold was not willing to buy Seamore’s products in bulk, they made an arrangement to ship the products over on credit and receive a payment after the products have been sold by Marigold. Their reach does not extend London and is mainly limited to organic stores. Marigold does not promote Seamore’s products in any way. In order to get into retailers, Seamore hired a small organization called Organic Hunter, who gets a high commission for every store they got

Seamore’s products into. This proved to costly and therefore Seamore ended their partnership. Seamore recently made a partnership with the organic wholesaler, Suma. Suma has a nationwide distribution and mainly offer healthy organic products. Although they do not actively promote any products, they do have standardized services that can be used to promote products in return for a reasonable fee.

Germany: Seamore is currently selling directly to retailers in Germany, with Bio Company, Biomarkten and Nordsee being their largest clients. Seamore recently found a logistics partner that can store and ship their products nationwide throughout Germany. Seamore has also made a partnership with an organization called Blickfeld, who push their products into retailers in return for a percentage of the revenue for sales to those retailers they make contract with, until the end of 2018.

France: Seamore is also going directly to retail in France. They have made a deal with one large retail chain, called Naturalia, launching their product into 40 stores this summer.

Denmark: Seamore has been working with a small importer in Denmark, called Jeroen Fredriks. He runs a one man importing operation called By Fredriks. Jeroen only has a handful of small brands in his portfolio and runs operations from his garage in Copenhagen. Despite this, he has been able to get Seamore into the Copenhagen based retailer, Irma, with three locations in the city.

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Iceland: An importer called Lifraen Matvaeli from Iceland started to import Seamore’s products this summer.Lifraen Matvaeli has a very good portfolio, with over 10 popular organic brands and over 50 products. They have a nationwide distribution with all the major mainstream and specialized retailers in the country.

Sweden: Seamore is currently entering a partnership with Biofood in Sweden. Biofood have been importing and distributing organic products for over 30 years. They are one of Sweden’s leading importer of organic products, with a large range of products and access to both mainstream and specialized retailers.

Norway: The two largest organic importers in Norway have not been willing to take on Seamore’s products. Seamore still has plans to enter Norway and are now talking to a small importer, that carries a handful of cosmetic products.

Finland: One of the major organic importers in Finland, called Organic Health, rejected Seamore’s products. Since that Seamore has neither tried to establish connection nor had interest from other importers in the market.

Belgium: Although Belgium is on Seamore’s expansion list, as a market they want to be active in, they have tried to establish any contact or had any interest from potential partners in Belgium. Seamore’s commercial director, Bob Gutjahr, has mentioned that the ideal partner in such a market is an importer such as the one Seamore is in contact with in Sweden and Iceland.

Japan: Seamore’s founder along with a member of the R&D team visited Japan on an invitation from an importer in May this year. The importer found the product to be too costly after transportation and taxes had been paid. Seamore has been in contact with other potential leads. Those are all Tokyo based importers, who do not communicate well in English. To increase their chances of working with a

Japanese partner, they would need to have a correspondent who is based in Tokyo.

United States: Seamore has not been able to grasp the situation in the US very well. A Dutch trade specialist located in the US has said that the prices and scalability that Seamore is currently able to offer does not allow them to enter into a nationwide distribution yet. Although the US market is high on Seamore’s priority list, they have not been able to make a decision on what part of the US they should target first and how they should go about it. Seamore has had some interest from US based retailers,

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trade agents and distributors, but no one has been gone through with taking the step of bringing Seamore into the US.

Seamore’s choice in partnership is very inconsistent and there does not seem to be any criteria made for partners overseas. In some countries they go direct to retailer, others they have an importer and in others they use a distributor in combination with a sales team. Seamore only started two years ago and as their CEO has repeatedly said, they were not able to cherry pick the ideal partners in the beginning. The first two overseas partners, Marigold in the UK and By Fredriks in Denmark, are not the ideal partners for Seamore. Marigold offering limited support and distribution and By Fredriks moving the product very slowly and requiring a lot of support from Seamore. In the Netherlands, Seamore has been going direct to retail from the beginning. This seemed to work well on the early stages of the company, but after Seamore took on more markets, the growth has stopped within the Netherlands. Seamore works with an experienced importer in Iceland. Although the product was recently launched, he has been able to get the product into both specialized and mainstream retailers, without any support from

Seamore. Germany is also relatively new on the horizon for Seamore, yet they are well on the way to surpass sales in the UK. Using a combination of a commission based sales team and a local distributor.

Iceland and Germany should become a benchmark for other markets and Seamore needs to make a clear criteria of what the qualities overseas partner needs to posses.

Government policy

Food products have to get the correct certification to be allowed to enter foreign markets. Seamore already meets the requirements of the Netherlands, Belgium, France, Germany, Sweden, Denmark Finland, Norway and Iceland. Interestingly, Seamore is allowed to sell their product in small retailers in the United Kingdom, but large mainstream supermarket chains require products to have BRC

certification (British Retail Consortium), which Seamore does not have.

In order to enter the United States, food products have to get FDA certified. This mostly requires the correct labeling on packages. To enter the Japanese market, products need to be HACCP certified.

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Competitors & seller concentration

Seller concentration refers to the degree of low numbers of large players dominating a certain market. When concentration is low, its generally easier to enter, since there are no dominant players. In general, these types of markets tend not to have high rewards. High concentration raises the barrier to entry, but generally raises the rewards as well. (Karakaya & Stahl, 1989) Around 80% of all seaweed sold for human consumption is sold in South-East and East Asia. (Organic Monitor, 2015) These markets are crowded with brands, mostly competing in the snack industry. Tao Kei (Korean) and Hi Tempura

(Japanese) are some of the major players, however this industry is easy to replicate and is overcrowded with brands.

The European and North-American landscape is very different. The convenient, daily consumption, seaweed products from the East have not gained popularity amongst consumers in these markets. There is a handful of small players competing in small and niche markets. Most of which has been produced and sold France, Germany, United Kingdom and Spain. Accounting up to 80% of the entire European consumption. Over the past 20 to 30 years, European seaweed products have mostly been pure, dried, seaweed. Over the past five years, this market has started to see a shift, with new entrants, making seaweed more appealing to Western consumers and increasing the convenience of the product. (Organic Monitor, 2015)

Kulau is a Germany based brand, producing organic products with high focus on seaweed. Although they currently have limited distribution and

high pricing, they’re products are very appealing, high in quality and convenience. They sell pure seaweed, seaweed chips & seaweed smoothies.

Algamar is one of the more established players. They have been in market for over 20 years, offering plain seaweed for most part, with distribution all over Europe. Once they started to see new, innovative, entrants to the market, they started to produce more convenient seaweed products, such

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as seaweed crackers, sea vegetables for salads and instant sea vegetables paste for cooking. They’re packaging and overall market appeal is rather outdated, but they are coming out with new, up-to date look in the beginning of next year.

Marinoe, a French brand with a wide range of seaweed products. Including

seaweed spices, seaweed chips and seaweed paste for cooking. Founded in 1992, focusing on pure seaweed for the most part, but just like Algamar, they started to change their strategy once new entrants started to emerge. They have already gone through the market appeal transformation and now have a very appealing packaging.

The UK based, Atlantic Kitchen, was founded in 2012. They have two types of seaweed product on market, dried seaweed and ready-to-eat seaweed soups. They have very trendy and appealing brand image, but they’re distribution is limited to the UK.

Ocean’s HALO is located in the United States. They are competing in the seaweed snacking market space, offering similar products as are common in Asian markets. Their point of parity over Asian producers is their brand image and positioning. Although they gained nationwide distribution within the US, they are struggling to fight low cost Asian competition.

The competitive landscape in the European and North-American seaweed market seems to be changing. Companies are making seaweed more attractive and accessible. There are a few companies following a very similar strategy to Seamore. While these companies are still competing for a small audience, there is a huge un-tapped potential in the market.

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D. Strategy Assessment

According to Jeroen Kraaijenbrink, a company’s strategy is what it does on day to day basis. Now that I have dug into and drawn up the activities Seamore partakes in, it is time to assess their performance. By judging and testing their strategy in a systematic way, I become better equipped at evaluating the quality of their international strategy and give recommendations towards future activities for the company. (Kraaijenbrink, 2015)

In Jeroen’s strategy guidebook, he mentions nine strategy checks that can be used for strategy

assessment. However, he recommends the usage of the strategy checks that are the most applicable for the firm at hand. I have decided to limit the strategy assessment to five strategy checks; coherence check, effectiveness check, flexibility check, robustness check and scalability check.

Coherence check

“Good strategy is coherent and without too many contradictions.”

When exploring the types of partners Seamore has overseas, there is a great deal of inconsistency. Although this can be partly explained by the fact that they are start-up, transforming towards a scale-up, and have had to use the options at hand. They have not made an official strategy or a clear vision of the types of partnership they want to enter into, in foreign markets. It seems as though Seamore’s strategy is a mix of trial and error.

Efficiency check

“Are all the elements used up to their maximum potential? Can they be better exploited?”

Seamore has faced some resistance when trying to enter the United Stated, Japan and mainstream retail chains in the United Kingdom, because they lack the correct certification. The process to standardize the products across markets can be time consuming, but mainly requires that the labeling of the product meets the standards of each market. Although Seamore is now at the final stages of designing new products, there does not seem to be a high priority to meet the criteria of these markets.

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Although Seamore does a great deal of online marketing, they have not been active in working with their partners overseas to do in-store promotions and maintain growth once they have a foothold in a market. There are currently no marketing or sales activities being done within the Netherlands, where the company gets 66% of their sales.18

Although the company has gained a foothold into six different markets, there is still huge untapped potentials in those markets.

Effectiveness check

“Does the strategy work? Are you achieving what you want and getting an adequate performance?”

Despite being inconsistent, Seamore’s strategy does lead to sales. Their partner in Denmark, who has a lack of experience and limited resources, has been able to push their products into a retail chain. However, this took a long lead time. However, established retailers who are already in business with large network of retailers are able to push relevant products in, within a matter of weeks. As turned out to be the case for Lifraen Matvaeli in Iceland.

Flexibility check

“Is the strategy sufficiently flexible? Can it easily be adapted to changes if necessary?”

Once an partnership which leads to sales has been established, it is very difficult to enter out of it. As is the case for Marigold in the UK. Now that Seamore has another partner that pays up front and

distributes their products nation-wide, it would be a lot easier to have them serve the retailers that Marigold is currently serving and move their stock away from their depot. Some specialized retailers within London, prefer however to order their products from Marigold and hence it makes the decision to end the partnership difficult for Seamore.

Robustness check

“Can the strategy survive for a long time? Is it not too sensitive to changes in the environment?”

There is currently not enough staff at Seamore for them to handle their current markets and expand into new markets at the same time. Seamore’s overseas activities are sensitive to the amount of capital

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the company is able to raise. If the company is able to reach their full funding goal, they are able to hire enough personnel compete in all 12 markets, while no further funding is likely to make the company go bankrupt in the next two to three months.

A full-time employee on the sales team costs between € 3000 to 4000 per month and is able to handle one large market and one small or mid-sized market at the same time.

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IV. Chapter 4 -Managerial Recommendations

The managerial recommendations have been split up into four sections. I begin by covering the modes of entry for different types of markets. After that I give recommendations on which of the six new markets Seamore has plans to enter are most likely to become a successful.

A. Modes of entry

Different modes of entry are needed for different types of markets. While its possible to work with a single importer in small markets, larger markets have more complex distribution systems and giving an exclusivity to an importer may hinder growth potentials. Competing in markets outside of Europe, such as Japan and the U.S., also requires a different approach, due to both cultural and practical reasons. Therefore I will distinguish between three types of markets. Small markets within Europe, large markets within Europe and large markets in different continents. I consider small markets to be nations with a population under 20 million and large markets everything above.

Small markets within Europe

These markets include the Netherlands, Belgium, Sweden, Denmark, Finland, Norway and Iceland. While these markets are small and easier to conquer than larger markets, there is less scalability. What seems to have worked well in the case of Iceland, is to work with an importer who has a portfolio of organic brands and has already established relationship with retailer through those brands. Going direct to retailers or working with an importer that is still building up a portfolio and has yet to establish relationships with retailers, as in the case of Denmark, takes too much time and capital away from the firm.

Seamore has begun to see an increased interest from organic and specialty product importers from these markets and therefore I recommend them not to enter into partnerships with importers that do not meet their criteria, as it can be difficult to exit out of a partnership.

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Entry mode for small markets, within Europe:

• Partnership with a local importer

• The importer has to meet the following criteria

➢ A brand portfolio of minimum 5 organic or vegan products ➢ Nation-wide distribution

➢ Products in both mainstream and specialized retailers

Large markets within Europe

Large markets within Europe include the United Kingdom, Germany and France. The mistake Seamore did when entering the UK, was to work with a distribution partner that was not able to deliver outside of London. Working with an importer in these markets is also difficult, since an importer will demand exclusivity of the product and is often not able to penetrate the whole market. In Germany, Seamore works with a logistics/fulfillment partner in a combination with a sales team that pushes the products into stores.

Seamore has been working with a local PR agency in Germany, which has helped them to organize events, get media coverage and advice them on how to market in Germany. This relationship has proven to be very successful for Seamore’s expenditure in Germany. Seamore used to have a local sales agent from September 2016 until May 2017, located in Berlin, which had to go due to lack of financial resources. A local sales agent is very helpful for both acquiring new customers and to maintain relationship with existing customers. I recommend that Seamore hires a local sales agent when they have reached 100 points of sales in large markets within Europe.

Entry mode for large markets, within Europe:

• Partnership with a logistics partner, with a nation-wide distribution • Partnership with a commission based sales team

• Partnership with a local PR agency

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Large markets in other continents

Large markets in other continents include the United States and Japan. Seamore has not had much success of getting into these markets themselves. These markets can be difficult to grasp and therefore it’s necessary to work with a local sales agent that knows the ins and outs of the market, although the cost of such an agent is too high for Seamore at the moment being. I recommend to Seamore to hire a local sales agent, once they have enough capital at hand.

Before Seamore can begin to compete in these markets, they have to get the correct certification to be allowed to export their products. The process of getting the required certification has proven to be too time consuming for the limited staff that Seamore has at hand. I recommend Seamore to hire a

specialist who can aid them to get the correct certification, once Seamore has enough capital at hand.

Besides the recommendations above, I recommend Seamore to follow a similar path as in Europe, and enter into a partnership with a local PR agency, logistics partner and a commission based sales team. Although this can change, depending on insight information from a local sales agent.

Entry mode for large markets in other continents:

• Hire a specialist to get the certification needed to stay active in these markets

• Hire a local sales agent, from the beginning, with a minimum of 10 years experience in importing foreign food products

• Partnership with a logistics partner, with a nation-wide distribution • Partnership with a local, commission based, sales team

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B. International Expansion Strategy

The number of markets Seamore is able to enter and stay active in, is limited to the financial resources of the company. In this section I will give set of recommendations based on the capital Seamore manages to raise.

As mentioned in the introduction, Seamore spends about 18% of its resources on the Sales Team. Besides the cost associated with the sales team, the heaviest cost of staying active in foreign markets are marketing costs. Out of the 25% budgeted for the Marketing team, close to 15% are direct costs such as in-store marketing, bloggers & influential’s and PR related costs. Seamore is currently aiming to raise €2 million. My recommendations take into consideration that Seamore is able to invest 33% of total capital raised to grow the product in existing and new markets.

If Seamore is able to raise €500.000 this results in a budget of €165.000 to grow the product in existing and new markets. The amount needed, for sales and marketing activities, in the six markets Seamore is currently competing in, is €18.500 per month. Besides taking capital requirements into account, I also look into suitability for products, customer purchasing power, access to distribution channels,

government policy, competition and seller concentration.

I give my recommendations based on five scenarios. 1. No capital has been raised. 2. €500.000 has been raised. 3. €1.000.000 has been raised. 4. €1.500.000 has been raised. 5. € 2.000.000 has been raised.

1. No capital has been raised

As it is, Seamore is not able to fully penetrate the markets that they are active in. They can, however, not simply pull out of a market, especially since it is the belief of the CEO that an investment is around the corner. Seamore is currently about to enter a partnership with an experienced importer in Sweden. Although it is not ideal to add on a new market with the resources at hand, the CEO needs to show growth in order to attract investors.

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2. €500.00 has been raised

If Seamore is able to raise half a million Euros, they should drive up growth, in current markets, by spending capital on online and in-store marketing, increase points of sales by the use of freelance sales agents and support their importers. I recommend Seamore to enter into Sweden and Norway.

Sweden is a great fit for Seamore’s products. It has the highest number of vegans per capita and the highest percentage of organic groceries bought, out of the six markets Seamore has yet to enter. The purchasing power in Sweden is also relatively high. Besides, Seamore is already entering into a partnership with an importer, that meets the criteria described in entry modes, in Sweden.

Although the market in Norway is similar to Belgium and Finland, in terms of “Suitability for product use”. Norwegian consumers have more money to spend on average and therefore Norway becomes a higher priority.

Conclusion: Fully utilize growth in existing markets, enter into Norway and Sweden

3. €1.000.000 has been raised

In addition to what has been described above, I recommend Seamore to enter into Belgium and Finland, before attempting to move into Japan and the U.S. Although Japan and the U.S. have far greater growth potential than Belgium and Finland, a move into these markets is highly risky.

The Japanese market is highly concentrated with seaweed products and the U.S. market has far greater entry barriers than Belgium and Finland. In addition, Seamore could replicate what has been successful in similar markets to Belgium and Finland, which reduces risk and uncertainty.

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4. €1.500.000 has been raised

In addition to steps two and three, I recommend that Seamore attempts to enter into the United States, before attempting to enter into Japan. It seems that Seamore’s investors are very excited about the U.S. market and there are far less competitors than in the Japanese market. There is also a far greater cultural proximity between the Netherlands and the U.S. than to Netherlands and Japan. Seamore already has a wide variety of marketing material in English and for administrational purposes, there are no language barriers, as Seamore’s staff is all fluent in English.

Conclusion: Following up with step two and three, enter into the United States

5. €2.000.000 has been raised

While the barriers to entry are high in Japan, there are high growth potentials. The Japanese market for seaweed comes in second world wide, after China. (Organic Monitor, 2015) Although there are huge opportunities, I recommend that Seamore attempts to enter Japan after gaining experience and stable sales in other markets. Entering Japan can be highly risky, due to a high concentration in the market and cultural distance.

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V. Chapter 5 – Conclusion

This research was severely limited by lack of data from the company. Expenses have not been effectively recorded in the past which made it difficult to accurately estimate the cost of the six markets Seamore is currently active in. The company’s expenses in current markets are, however, a lot lower than they would be, if the company were not in a financial distress. Therefore I suggest that the company should make use of the estimates for the cost of staying active in a market, made by myself, the CFO and Commercial director.

The recommendations given for entry modes should be taken into consideration for existing markets as well as new markets. Several partnerships made on the early stages of the company are hindering growth. The company is currently in a much better position to attract the partners that meet the given criteria, than it was a year ago.

In the time I spent with the company, I noticed a lack of focus in the sales team. There was no structured plan for what markets should be next on the horizon and how much time should be spent for fueling growth in existing markets. This causes employees to be involved with a wide range of activities, which do not end in any results for the company. The sales team should be limited to a certain amounts of markets, based on the resources at hand.

In the future the company should make use of this framework, expanding or excluding elements, depending on the company needs. I further recommend that entry modes and prioritization of activities in new and existing markets, is updated on semi-quarterly basis.

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VI. Chapter 6 – References

A. Literature

• Kraaijenbrink, J. (2015). The Strategy Handbook. Effectual Strategy Press.

• Karakaya, F. & Stahl, M. J. (1989). Barriers to Entry and Market Entry Decisions in Consumer and

Industrial Goods Markets. Journal of Marketing Vol. 53 , 80-91.

• Winn, B. A. (2014) Expanding Globally: Where in the world should we go next? People and Strategy Vol. 37.3, 14-16.

• Moenart, R. & Robben, H. (2013) Marketing Strategy and Organization. LanooCampus. • Marijn, R., Hans, H. & Sebastiaan, S. (2016). Biologisch – de Haarlemmerolie van de

voedingsindustrie. Rabodank Food & Agribusiness Research, 4.

• Organic Monitor (2015). The European Market for Sea Vegetables [Online]. Available from:

www.organicmonitor.com [Accessed: 18/07/2017]

B. Websites

• https://www.rabobank.nl/images/thema_update_october_2016_biologisch_29877233.pdf • http://www.vrg.org/nutshell/Polls/2016_adults_veg.htm • http://www.arcj.org/information/00/id=560 • http://www.mintel.com/blog/food-market-news/veggie-sweets-go-mainstream-in-germany • http://www.food.gov.uk/multimedia/pdfs/publicattitudestofood.pdf • https://www.theguardian.com/lifeandstyle/wordofmouth/2011/oct/26/french-government-banning-vegetarianism-schools • http://www.trouw.nl/deverdieping/overigeartikelen/article847086.ece/Een_dag_geen_vlees_is_een_dag _niet_geleefd • http://www.thelocal.se/20140321/one-in-ten-swedes-is-vegetarian-survey • https://coopanalyse.dk/analyse/mange-%E2%80%9Dopfatter%E2%80%9D-sig-selv-som-vegetarer

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• https://www.ruokatieto.fi/uutiset/reheva-kasvisruokavalio-hyvaksi-terveydelle-ja-ymparistolle • https://issuu.com/alsiano/docs/foodnews_october_2012 • http://www.investopedia.com/terms/c/consumerpriceindex.asp • http://data.worldbank.org/indicator/NE.CON.PRVT.CD?year_high_desc=true • https://tradingeconomics.com/country-list/consumer-price-index-cpi • http://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?view=chart

C. Figures

• Fig. [1] – Common Determinants of Foreign Location Choice. Source: Winn, B. A. (2014). • Fig. [2] – Strategy Sketch. Source: Kraaijenbrink, J. (2015).

• Fig. [3] – Customer Segmentation & Value Proposition Source: Own

• Fig. [4] – Who is the focal customer on which the company should concentrate? Source: Own

D. Tables

• Table [1] – Suitability for product use. Source: Own • Table [2] – Customer Purchasing Power. Source: Own

• Table [3] – Capital Requirements – Existing Markets. Source: Own • Table [4] – Capital Requirements – New Markets. Source: Own

International expansion strategy : international strategy for Seamore