Andres Delgado
Seth Lewis
Lisa Mazza
SavasCaf
Sommer Andrews
Oreo Term Project
Company Mission
Mondelez, “Our dream is to create delicious moments of joy – and that’s exactly what our tasty snacks do. They’re that stolen moment for just you” (Our Dream, 2014). The very name Mondelez means delicious world, “monde” the Latin word for world and “delez” a made-up word meant to suggest “delicious.” (De La Merced, 2014). Mondelez is powerhouse company that not only lives up to its mission, but it embodies its name by creating a great portion of the products that consumers steal delicious moments of joy from. Mondelez does this by wielding the reputation of a variety of companies such as Nabisco, Kraft Foods, Cadbury, and Christie. These companies command over 50 well known and reputable brands worldwide such as Ritz, Tang, Trident, and of course the topic of interest for this project, Oreo. Mondelez is global company that has a polycentric orientation to global marketing rather than an ethnocentric one that entails the belief that the home country and their products are superior to all others. Mondelez exhibits their polycentric orientation by augmenting their product lines and packaging for specific cultures. For instance in the Asian markets the logo and description has been translated into the language and font of that country. The packaging is also quite different, the shapes and portion sizes are smaller. Another prime example is the flavors being offered. In Japan, China, and South Korea Oreo offers cookies that have a green tea flavored cream. This flavor is popular because green tea has a deep cultural background within most Asian societies and is a staple for many people that is enjoyed with at least one meal daily.
Oreo is currently in the maturity stage of the product life cycle within the United States. When this stage occurs, proactive companies look towards additional markets in which they can experience new growth stages. Mondelez must expand the brand Oreo into new countries in order to maintain the level of profits the company has become accustomed to.
With a strong presence and a continued success in Asian markets such as China and Japan, expanding to South Korea was a logical progression for the Oreo brand. In addition to the success that has been experienced in other Asian markets by Oreo, there are more elements that play a large role in the decision to expand. South Korea also has a healthy economy that provides a viable customer base and has a strong infrastructure. These two components allow Oreo cookies to be both accessible and profitable which is essential if the brand is to have any semblance of success. South Korea ranks 18th in GDP worldwide and is geographically classified as a peninsula. (Rajewski, 2014).Being that it is a peninsula, creates opportunities for importing and exporting goods and materials. The ease of importing and exporting not only makes it convenient for Mondelez to get their products there in an efficient manner but it can also make setting up a manufacturing facility in the future less complicated. The fact that South Korea is not landlocked also simplifies the import and export process. The only authorities that need to be dealt with are the North Korean government. In a landlocked country that has no direct access to the ocean, importation and exportation can get expensive. This is caused because the product now has to move through multiple countries that have different policies and taxes on items being transferred across borders.
Internal and External Environment Assessment
Opportunities are the driving factor for any company wanting to expand, whether it be locally or nationally. Many of the evaluations used to determine the decision to expand into a new country or territory can be classified as opportunities. As previously mentioned, Korea has a strong economy that ranks 18th in GDP. Some of the world’s leading products are being designed and manufactured in South Korea. Reputable brands such as Samsung and Hyundai create products that can be seen on a daily basis all over the world. These companies stand as examples that South Koreas economy is flourishing. The fact that companies and the economy are doing well is great, but the economy and large companies do not buy Oreo cookies. People buy Oreo cookies. Granted, the economy being in a stable and growing stage of the life cycle means that companies have a higher probability of also performing well economically. This has a direct effect on the public because a flourishing economy means Koreans are finding jobs and, on average, making a decent living. Since dessert products are not often viewed as a necessity by the general population, disposable income is needed in order to make the purchase. The economy in South Korea provides it citizens with jobs that do just that. The minimum wage for South Korean workers is just $3.36 shy of the Florida minimum wage.(Wages, 2014).This translates to South Korea’s economy being a large opportunity for Mondelez and specifically, the Oreo cookie brand. South Korea has a population of over 49 million people and most of which are making a decent wage that can provide them with the amenities of life. (The World Factbook, 2014). Much of the success of the economy of South Korea can be related to its geographic location. This provides great opportunities for import and export into the country and also provides a good deal of national stability. Historically countries that are landlocked have had considerable issues with exploitation. The surrounding countries that have access to major waterways can make trade very difficult for a landlocked nation and South Korea has no such problem. In addition to the opportunities brought from South Korea’s geographic location, the viable population, and the strong economy is the country’s culture. In the food and beverage industry, cultural taste will greatly influence the success of any product. Fortunately, South Korea’s population has a fondness for confectionery foods. The sweet tooth of the population is made obvious by the Korean Blog that lists the top ten snacks in South Korea. Eight of the ten top rated snacks are sweet.(Chung, 2011).
Even thoughThe South Korean fondness for sweets is a great opportunity, it can also be a double edged sword. One might ask how a plethora of people demanding sweet snacks have the potential to be a bad thing for a company that specializes in confectionary goods. The answer lies within the simple concept of supply and demand. If there is a great demand for a product or for an entire industry, like sweets in South Korea, there will surely be other companies looking to fulfill the consumer’s unsatisfied needs. The competition in the confectionary market in South Korea is tough and plentiful. As stated above, eight of the ten top rated snacks in South Korea are sweet, and all eight of these snacks are produced by separate companies. This means that there is a strong presence of companies within the cookie market and the overall market is being divided between an abundance of competitors. Oreo’s largest competitor is the producer of Choco Pies, Orion. Choco Pies are essentially the staple cookie of all Korea, both north and south and resemble the essence of an Oreo cookie, 2 chocolate halves with cream filling in between the cookies. To put in perspective of the impact of Choco Pies in Korea, North Korea banned the cookies from being sold in the country, so the citizens of South Korea filled 50 giant bags with 770 pounds of Choco Pies and floated them across the border to North Koreans anxiously awaiting their arrival on the other side. (Nelson, 2014).In addition to the cult following of Choco Pies, South Koreans are also loyal to two other cookies, Sando and Kancho. Sando is the oldest confectionery snack in Korea, founded in 1961, and it is a basic cream-filled cookie sandwich. Kancho cookies are similar to both Oreos and Sando cookies but what sets them apart from the other cookie competitors is that they are in the shape of Koala Bears. The love of other well established cookies is a very large hurdle to overcome but it is not the the only one by a long shot. Other external factors have the potential to be a problem. The lack of experience in the South Korean market is substantial. Some companies that expand their products to a new market have existing products of different types already in this market, unfortunately this is not the case for Mondelez in South Korea. Mondelez will also have significantly low brand loyalty since the Korean market has minimal exposure to Mondelez and Oreo brand. Another very important factor is political unrest. Political unrest is always something that should be considered when a company is moving into a new country to do business. South Korea itself is very stable but its only bordering neighbor is North Korea. North Korea is a very hostile and militaristic country. The two countries have a history of conflict and as recently as May 13, 2014, North Korea threatened to wipe out South Korea’s government (Kim, 2014). On top of the potential for political unrest Mondelez must consider cultural shifts. Through a SWOT analysis done for Oreo two factors regarding culture came into perspective as a problem. Overall there is a decline in snack food purchases due to younger generations becoming more health consensus and generalized lifestyle changes in all consumers concerning improved eating habits. (SWOT, 2012).
The topic of health transitions from an external threat into an internal threat. The same SWOT analysis points out that Oreo cookies themselves have low nutritional value, are high in fat content, and use palm oil. The nutritional value and the fat content are not easily overcome, due to the very nature of desserts such as cookies. On the other hand, palm oil is a problem that has the potential to be amended and serve as a public relations endeavor. The use of palm oil has been gaining negative attention not because of health concerns, but rather environmental concerns. Palm oil production is causing mass amounts of land in sensitive rainforests to be slashed and burned at an unprecedented rate, decimating countless species. (Facts About Palm Oil, 2014).Mondelez can discontinue the use of palm oil and make it publicly known that it has done so therefore helping to position the company as an eco-friendly one. Eco friendly products and companies are very popular right now and only becoming more so.
Mondelez faces some very real and challenging obstacles but it also has some great strengths. Between Mondelez and the companies Mondelez has acquired, it boasts over 150 years of business experience. In addition to this internal strength, the brand Oreo is very well known and has the endorsement of various celebrities, the Double stuf racing league, and has been seen in a variety of movies and television shows. It is hard to live in any modern society and not have been exposed to the Oreo brand at least once. Externally Mondelez has a number of benefits. Asian cultures currently find American products and lifestyles as trendy or hip and let’s not forget the bank roll of Mondelez is rather large. The company has significant financial holdings and an abundance of resources including partnerships which it can utilize to penetrate the South Korean market.
Goals, Objectives, Strategic Alternatives, Implementation
The goal of Mondelez is to build Oreo into a known and trusted brand that owns a large percentage of the market share and ultimately enter into a new growth stage in the product life cycle. This new growth stage will result in continued revenues for the company and offset other markets where the Oreo brand has encountered the maturity stage. If Mondelez is going to accomplish its goal for the Oreo brand it must define solid objectives and efficiently augment any aspects of the marketing mix that that are in need of overhaul or are outdated.
The first part of the marketing mix is the product. Mondelez has already augmented its product line in order cater to the tastes of the South Korean culture. Additionally they have made changes in packaging size and shape and have also implemented a new translated version of the Oreo logo.
Mondelez is also using a two pronged approach when it comes to its advertising campaign. In one approach they utilized the classical message that Oreo cookies are a family tradition passed down from generation to generation. This message is clearly seen in two commercial ads. The first being with two young Korean siblings. One child is old enough to have a cup of milk that an Oreo cookie can be dipped, while the younger child has a sippy cup in which he pours the milk on to the cookie. ( The second of the ads is a Korean family that has a grandparent, parents, and children all twisting off the tops of Oreo cookies and enjoying them. ( This set of commercials can be seen her in the United States with almost identical scenarios except the actors are American. The other approach being taken appeals more to the edgy South Korean culture. The most notable one is of an infant child suckling on the tit of the mother while holding an Oreo cookie which reads “Milk’s favorite cookie” (Polis, 2012). This ad is so edgy that it sparked considerable controversy in the United States but it has worked well in South Korea. The two pronged approach seems very solid and it is recommended that Mondelez continue in this direction.
Although some of these changes are necessary there are still elements of the marketing mix that need attention. The first items in need of change are the Oreo brand logo and the price point. It is recommended that Mondelez abandon the translated version of the Oreo logo. All packages should have translated text such as ingredients and description but the Oreo logo itself should remain the classic one. The reason for this is that Oreo does not have a true definition therefore there is no gain in actually converting the letters into Korean text. In fact there may be a loss of recognition. As mentioned above Oreo cookies have been endorsed by famous actors and have been placed in a variety of television shows and movies. Although these movies may not be directly Korean, Koreans still have access to many of them and may already have some recognition of the classic Oreo logo.
Next is price. As covered previously, South Koreans make a decent wage and are capable buying the brands that they desire. Currently the Oreo cookie is comparably priced to Choco Pies. Since Choco Pies are so favored and have tremendous brand loyalty it is hard for the Oreo cookie to compete. Mondelez should adopt a price penetration technique. The Oreo cookie should be priced as low as possible. Another aspect that must be considered with pricing is distribution. Mondelez should also adopt a very wide distribution strategy. The reason for this is because of the South Korean markets. A very large percentage of South Koreans shop on a daily basis in food markets. These markets are comprised of local farmers and fisherman that provide fresh food to the populace on a daily basis. This poses a significant obstacle that is not encountered in the United States. South Koreans are exposed far less to commercial products than individuals from societies that do most of their shopping in grocery stores. To offset this lack of exposure Oreo cookies need to be everywhere they can be. They need to be in pharmacies, gas stations, grocery stores, and vending machines. If a store in South Korea carries commercial products Oreo cookies need to be offered there. Coupled with the quality of the cookies, the low price, and the wide distribution technique, the Oreo brand should be able to make headway. Once Oreo has built up a customer base and gained recognition, the price can be raised in the future.
Now that Mondelez’s current activities have been addressed it is time to look towards the future and implement new objectives that can help establish the Oreo brand. Mondelez needs to build brand awareness for Oreo by participating in PR events and making it known that they are socially active in the communities in which they do business. Mondelez needs to look at companies that have a strong track record for philanthropic endeavors and take cues from that. Dominos is an excellent example, they give large amounts of pizza to orphanages every month and the program has had a tremendous impact not only on the poor children but also on how dominoes is viewed in the community. Mondelez should follow suit and provide lunches to children in orphanages and in each meal there should be Oreo cookies with milk as a desert. Activities such as this will produce positive publicity and will undoubtable create brand awareness and loyalty.