Continent comprising a series of markets

Latin America is a continent comprising a series of markets that many Australian exporters do not usually consider. East Asia, North America and Europe have far more prominence in exporters’ minds. Even the Middle East has more prominence among Australian exporters. This is despite regular airline and shipping links, and the presence of Latin America communities in Australia from countries as diverse as Chile, Peru, Columbia and Argentina. Mariano Ferreyra, an Argentinean Australian who has been resident in Australia for a number of years, found this somewhat surprising. He has noted some of the similarities in lifestyle between Australians and his fellow Argentineans, and having travelled to Brazil he could see similarities there as well. He of course noted many of the differences as well between the predominant Anglo-Saxon culture in Australia and the Latin American cultures. Since arriving in Australia Mariano has seen many products not available at home in Argentina, or which, if they are available, generally incorporate a lower level of technology. He has also noticed products available in Argentina that do not appear to be available in Australia. The two economies are at different stages of economic development. However, he is wondering if there may be opportunities to export Australian products to Argentina or to import Argentinean products to Australia. His postgraduate degree undertaken since arriving five years ago included a unit in International Marketing in which he acquired some formal skills in market opportunity identification and in understanding the international marketing environment.

At present two-way trade between Argentina and Australia is relatively limited. Living in Australia it seems easier for Mariano to identify products here that might be suitable for exporting to Argentina as a lot of work would be required acquiring the identified products and organising their shipment. Accordingly he has decided to focus on exporting products to Argentina. He envisaged his family back in Cordoba (Argentina’s second largest city) being involved with receipt of the products in Argentina and their distribution in the marketplace. This decision to focus on Argentina as a market was not without its concerns. In recent years the Argentinean economy has been in crisis. Economic growth rates have been extremely low, unemployment rates have been high, many middle-class and wealthy people have lost their savings in a banking collapse and there have been many street protests (among other events). Mariano has been more than aware of these events since his own family in Cordoba has been directly affected by them. Argentina can be categorised as a challenging market. At the same time Argentina has many natural resources, a substantial population, skilled human resources, a welldeveloped infrastructure, considerable manufacturing capacity, membership of a regional free-trade association and a large middle class. In addition, in the last year the economy has turned around, economic growth has returned and exports are booming. The large middle class has regained confidence in the economy and their own economic prospects. In terms of stage of market development Argentina can be characterised as an upper middle income country, while many other Latin American countries are lower middle income countries. Argentina is, however, a less developed country than Australia, which has many consumer products at the maturity stage in the product life cycle. In Argentina these products may not exist or may be at the introductory or the growth stage. In terms of product development Australia is an advanced country while Argentina is a developing country.

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Mariano is also aware that Australia is increasingly becoming an exporter of manufactured products (along with services), and that internationalisation is an important driver of economic growth. Mariano had also been reflecting on his own ability to become a potential exporter in his newly adopted country. Aside from undertaking the unit in International Marketing as part of his degree he has no practical experience in international marketing (or particular types of international marketing, like exporting). Neither does he have any contacts with Australian exporting consultancies, exporting companies or Argentinean importing companies. He is, however, a native Spanish speaker and has a strong understanding of Argentinean culture and some understanding of business practices there, based on his work experience in Cordoba prior to immigrating to Australia. Additionally his family in Cordoba has owned a series of businesses, and his brother has a postgraduate degree in business from a leading Argentinean university in Buenos Aires. Mariano has identified a brand of Australian gas-powered barbeques that consumers in Argentina might find appealing. The publicly listed company which manufactures these markets them on Australia’s eastern seaboard through a chain of stores specialising only in barbeques in New South Wales, Victoria and Queensland. The company has no international marketing experience, nor do its corporate plans (outlined in its publicly available annual report) indicate any desire to become an international marketer. The company offers three gas models under the Easy Flame brand name—a compact model with a limited range of features, a medium-sized model with a greater range of features and a deluxe model with a full range of features. The compact model retails for $399, the medium-sized model for $550 and the deluxe model for $899. The cost of manufacturing each of the three models is less than 50% of this, and the retailer markup is around 30%. Mariano has selected barbeques as a product because the barbeque (asaedo) is a central feature of Argentinean cooking, with meat (carne) having a central role in Argentinean food. The climate in most parts of the country is generally warm like Australia, and Argentineans enjoy an outdoor lifestyle. Furthermore Mariano cannot recall seeing portable gas barbeques in retail stores in Argentina. Possibly reflecting Argentina’s developing country status compared to Australia’s advanced country status, people typically build their own barbeques with bricks and mortar. They then either have to make or purchase a grill on which to cook the food. Portable gas barbeques with built-in features might have great appeal. Mariano feels that the compact model might be suitable for middle-class people living in apartments with small terraces or balconies in big cities like Buenos Aires, Cordoba and Rosario. While the medium-sized model might appeal to middle-class people living in suburban houses and the deluxe model to those with more disposable income who do a lot of home entertaining. With this in mind he is considering approaching the manufacturers of Easy Flame with a proposition. This would involve purchasing the barbeques in bulk at a below wholesale price. Mariano would take legal title to them, and for each sale made in the Argentinean market the manufacturers would receive an additional payment. He has prepared a business plan on this basis, though the plan does not involve sales forecasts since he feels that it is too difficult to estimate likely sales in the first few months. The market has instead to be tested. He envisages the first shipment being enough to fill a single shipping container which he would organise to be delivered to the manufacturers’ factory. He would undertake all the necessary paperwork and arrange the shipment to Argentina. On arrival in Argentina the container would then be transported by road or rail to his family in Cordoba who would store the barbeques in a secure warehouse. Mariano envisages his brother with the business degree then approaching local retailers to convince them to stock the products. He envisages department stores, kitchen stores or camping stores as being possible retail outlets. Mariano has several concerns, however. These include whether an opportunity does in fact exist to export the Easy Flame barbeques to Argentina, whether he has the ability to undertake the export process successfully and whether there is sufficient demand to make the venture economically feasible. He is also aware that there is considerable manufacturing capacity in Argentina, and that gas barbeques like the Easy Flame brand could be copied by local manufacturers. He wondered if Australia enjoyed comparative advantages in the production of products like portable barbeques. He considers the task of understanding all the uncontrollable factors in Australia and Argentina quite intimidating in addition to the marketing mix decisions (involving product, price, promotion and distribution) that would need to be taken in order to design and implement a successful exporting marketing strategy.

Question: What are the external factors in Argentina that could impact on Mariano’s chances of success in his proposed overseas venture? To what extent are these factors controllable?

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