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Hotel chocolat an internationalisation strategy

Hotel Chocolat (HC) was founded over 15 years ago with one goal: to accomplish a bigger blazon of amber accessible to UK consumers apathetic by the “mediocrity of that available…” (Hotel Chocolat, 2009). HC started as a archive business. Afterward the success of this business, the aggregation set up an accolade acceptable website with the aboriginal of abounding HC food actualization on the high.street in 2004. Since its success in the UK, HC has activated an consign action to the US via an online acclimation site. This action enabled the aggregation to minimise accident afore absolutely committing to adopted absolute advance (FDI). Already able appeal for the artefact was assured, HC opened its aboriginal American abundance in Boston and now has affairs to added aggrandize throughout North America. There are currently 43 food amid in the UK with an added 23 operating central John Lewis’ stores. It is acceptable that the aggregation has broadcast as far as it can domestically and should now focus its absorption on all-embracing markets.

In adjustment to appraise HC’s adeptness to internationalise the afterward should be considered. HC is ‘Britain’s fastest-growing clandestine aggregation with 225% sales advance per year (Fasttrack100, 2008) and sales equating to £18 actor in 2008. From this, one may infer that HC does absolutely accept acceptable assets for internationalization. However, it is ambiguous whether the aggregation is able to undertake all-embracing investments, due to the self-funding amplification action pursued so far.

This commodity will now present an internationalisation action for HC by applying approach and cartoon aloft claimed acquaintance with the Japanese External Barter Organisation (JETRO), the UK Barter and Advance aggregation (UKTI) and HC representatives, as able-bodied as quantitative abstracts from accessory research.

Global abstracts for amber sales accommodate acute incentives to added internationalise. In 2008 all-around amber sales were $62.16 billion (Datamonitor, 2009a). Contrasting these abstracts with the UK shows astronomic sales potential. Currently the UK bonbon bazaar is admired at $13.4 billion, with amber sales accounting for 67.5%. Added tellingly, however, are the annal for anniversary advance of bazaar bulk amid the years 2004-08 (Datamonitor, 2009b) which appearance a absitively slow-down in the bulk of growth. Although the bread-and-butter bottomward about-face will accept played its role in the adding of these figures, we can be assured that the UK amber industry is operating aural the complete date of the artefact activity cycle. This is ambiguous for HC as Kotler (2008 p.575) argues: “A arrest in sales advance after-effects in an overcapacity of competition, which can ultimately advance to a abatement in profits.” Furthermore, the calm amber industry is bedeviled by Cadbury, Mars and Nestle who collectively authority a 59.8% bazaar allotment (Datamonitor, 2009c). Expanding internationally into ahead beginning markets may be the best band-aid to advantage any abeyant losses acquainted domestically as Hill (2009, p.426) states; “Expanding globally allows firms to admission their advantage and bulk of accumulation advance in agency not accessible to absolutely calm enterprises”.

An basic allotment of any internationalisation action is the country screening action in which hundreds of accessible countries charge be systematically eliminated. There are abundant agency to do this and, back done professionally, a all-inclusive bulk of assay will be undertaken afore any decisions are made. HC, as ahead stated, accept already amorphous amplification into North America and accept fabricated affairs to aggrandize into the Middle East (Retail week, 2009; Walker, 2009). For these reasons, we will not be because either region. Europe will additionally be disqualified out as the European affluence amber bazaar is already awful saturated with battling brands from Belgium, France and Switzerland (RTS, 2009). The abutting accumulation filtration date was to appearance the political adherence array (CIFP, 2007) of the actual regions and leave abandoned those scoring highest. This date around abandoned Africa and Latin America, abrogation predominantly the Asia Accordant region. Finally, the actual countries were ranked in adjustment of GDP per capita (CIA Apple Factbook, 2008) and all but the top eight were eliminated. This left: Hong Kong, Japan, China, Australia, New Zealand, South Korea, Malaysia and Singapore. Scrutinising these eight countries and cartoon aloft a array of unequally abounding factors a country affability basis was formulated for each. Ultimately Japan was begin to be the optimal host country with the greatest basis score.

Haak afresh appear that: “no aggregation can acquiesce to carelessness the activating Asian bread-and-butter region” (Haak, 2008 p.1). Aural this region, Japan in accurate “assumes a key position” (Haak, 2008 p.1) due to its arduous admeasurement and its ‘wealthy and sophisticated’ consumers (JETRO, 2008). In adjustment to formally appraise Japan’s affability as a host country, assertive aspects of Dunning’s all-embracing archetype accept been applied. Absorption on affairs and area factors; the accommodation to absolutely advance in Japan can be justified (Dunning, 1988). Furthermore, area factors can be burst bottomward into three advantages: economic, political and social. Japan is advised a above apple banking hotspot with the 2nd accomplished cardinal of millionaires residing there and domiciliary burning amount abstracts beyond those of best nations. This goes duke in duke with aerial chump purchasing ability and a appeal for aerial affection produce. Perhaps one of the arch affidavit for advance in Japan is its abeyant as a aperture to the Asian-Pacific markets. As these markets abound rapidly, the bread-and-butter affiliation amid countries in the arena continues to strengthen. This links to an affairs advantage that HC can achieve. Entering the Japanese bazaar will acquiesce admission to another Asian markets over time and accommodate economies in both calibration and scope. In contempo years government behavior accept become an added important agency affecting FDI (Brewer, 1993). The Japanese government accept assorted adopted advance behavior which incentivise investment. Japan, already akin of trade, has now afford this angel and is alluring accretion levels of FDI. Admitting best civic governments focus on banking incentives, the Japanese government follows a 3-step archetypal which provides abutment for abeyant investors (Watanabe, 2003). As discussed after in this essay, this blazon of allurement reduces the charge for adopted firms to admission bounded ability by agency of collective adventure (JV) or merger.

Knowledge of civic cultures is frequently apparent as “a prerequisite to the able admission into new markets” (Chinta, Capar, 2007p.213), and is declared as such in the Scandinavian action model. However, assorted studies accept begin no abutment for this antecedent (Barkema et al, 1996). It could additionally be argued that Japan is culturally centermost amid all nations, appropriately apprehension the Scandinavian archetypal bombastic in this altered case. Ronen and Shenkar (1985) articular eight culturally akin blocks of countries, suggesting that firms account added from adventures in another countries aural the aforementioned block. Japan, on the another hand, was not allotted a array and according to Barkema et al, (1996), no cultural block is adapted for Japan. Therefore, Japan was allocated its own absolute cultural block. This suggests that it would not be accessible for a abutting to gradually body empiric ability for Japan. This would partially abutment the accommodation for HC to anon admission the market. However, this altercation suggests that ability of Japan would not admission compassionate of another Asia Accordant markets, as ahead thought. Nevertheless, the admeasurement to which Japan does not accord to some beyond cultural block is disputable.

Western investors are generally afraid off by the character of the Japanese business model. However, this ‘uniqueness’ can accommodate a host of opportunities to adopted firms adulatory to admission Japan’s affluent consumers (Kensy, 2001). Porter’s design approach can be activated to Japan in adjustment to appraise its aggressive advantage as the host country. In agreement of inherent endowments such as land, labour and citizenry size, it may appear that Japan is economically disadvantaged in allegory to ample Asia Accordant states such as China. However, Porter argues “a nation’s competiveness depends on the accommodation of its industry to innovate and upgrade” (Porter, 1998, p155). Based on these assumptions it can be recognised that a cogent civic allusive advantage is captivated by Japan. Immediate antagonism in the Japanese amber bazaar is low but promises to abound decidedly (Datamonitor, 2009d). This appeals to both Porter’s 5 armament archetypal and the Design model, as it provides easier admission followed by greater burden to innovate and accretion a all-around advantage.

It is now advantageous to accede any disadvantages, in adjustment to accretion a greater compassionate of the risks involved. The Japanese market, as discussed, is one that is culturally unique. Therefore, in adjustment to survive, HC would accept to advance time and money reviewing cultural practices and accept new administration styles to clothing Japan. Referring to Porter’s bristles armament analysis, the blackmail of acting would assume to be an inherent botheration in best markets, with Japan actuality no exception. Theoretically, HC would apprehend to face antagonism from another industries in the allowance and bite markets. A contempo address by Datamonitor (2009d) stated: “confectionery articles are accessible to the blackmail from substitutes such as savoury candy and beginning fruits, due to low switching costs and burning patterns in altered geographies”. In reality, aggressive animosity is accounted as abstinent in this market, with branding accidental to a aerial akin of chump loyalty. Therefore, “price animation and artefact adverse abandoned comedy a baby allotment in the aggressive animosity of the confectionery market” (Datamonitor, 2009d). According to the electronics maker Canon “Once a aggregation is alive in the Japanese market, it is three times harder to abort in business” (Melville, 1999, p.113). However, Melville additionally addendum that: “it is three times harder to become acknowledged in Japan in the aboriginal place”.

To summarise; Japan deserves the adapted absorption of all-embracing companies, which in contempo years accept generally “neglected this bread-and-butter ample in an generally dark activity for the Chinese market” (Haak, 2008, p.3). The aerial GDP and ample spending ability of Japan provides the absolute exchange for a aerial quality, avant-garde product. As continued as risks are advised and the bazaar is entered into carefully, there should be no acumen why HC cannot acquire the benefits.

In an assay of what motivates firms to move into new markets, Buckley suggests, “there are three key motives: (1) Bazaar gluttonous FDI, (2) Ability gluttonous FDI (3) Cost-reduction or ability gluttonous FDI.” (Buckley, 2000 p.146). Buckley additionally believes that for any abutting absorbed in advance in Japan, one of these key goals charge be met. Furthermore, the basic motive for any FDI into Japan will about be bazaar seeking. This is abnormally the case for any abutting bearing chump appurtenances such as HC.

It is basic to accept the aggressive mural of the bonbon bazaar in Japan, in adjustment to codify an optimal bazaar action for HC. Japan’s bonbon bazaar consists mainly of bounded companies alms a aggregation of brands bearing amber and sugar-based products. 48.1% of the bonbon bazaar is bedeviled by three companies: Lotte Group, Meji Seika Kaisha, Ltd. and Ezaki Glico (Datamonitor, 2009d). So area can HC fit into this market? Best confectionery articles are mass-marketed and bogus in abundant aggregate to abate costs so as to accommodate aggressive prices whilst authoritative a profit. Potentially, a added amount affable advantage for the aggregation is to “enter the bazaar in a small-scope, for example, by authoritative high-value, low-volume articles in a ability action rather than a automatic process.” (Datamonitor, 2009d). Coincidentally, this fits HC’s aerial quality/exclusive cast image.

Japan’s demographics accommodate a advanced array of abeyant consumers for HC. The primary ambition accumulation is Japan’s ‘silver market’: the older, chargeless spending allocation of the population. Japan has an crumbling citizenry and appropriately a growing bazaar articulation for HC. This accumulation already has aerial affairs ability and furthermore, JETRO are forecasting advance of €30billion in the bazaar for chief citizens. Another acceptable articulation in Japan is that of bachelor women over 30 (Haak, 2008). This accumulation is abundantly affluence orientated and represents a financially able bazaar articulation for HC to exploit. Moreover, in the acquaintance of the UKTI, Japanese consumers are admiring to articles that are healthy, aerial end and quintessentially British. All of these factors will accord to HC’s aggressive advantage over Japan’s bounded producers.

This commodity will now altercate the accessible strategies that HC could undertake, applying both approach and applied ability to formally assay all accessible modes of entry. The approach of admission accommodation is acute to any company, as it can accept an “ongoing aftereffect on a firm’s all-embracing performance” (Chung and Enderwick, 2001 p.443) it is accordingly important to formally appraise all accessible modes. All-embracing bazaar admission modes can be classified according to akin of control, ability charge and accident captivation (Kim & Hwang, 1992). Table 2 takes these three classifications and applies them to specific modes of entry.

As able-bodied as the classifications acclimated in table 2, it is basic to accede ability and how a approach of admission fits in with the company’s abiding objectives. Back firms admission into a adopted market, they charge argue with the civic culture. However, back firms partake in JVs, they face ‘double layered acculturation’ (Barkema et al 1996; Zacharakis, 1993); this can affectation problems for a abutting and admission the associated risk. JVs additionally crave a abundant accord of capital, accomplishment and trust. Additionally, JVs with Japanese firms may be decidedly chancy as “learning furnishings may be agee … in JVs Japanese managers focus added on acquirements and beneath on admonition sharing…” (Barkema et al, 1996, p.164). Nevertheless, the ability bare to accomplish in a adopted bazaar is not calmly acquired, and in the aboriginal stages of bazaar admission a built-in accomplice is acerb recommended to accommodate admission to bounded bazaar knowledge.

Therefore, we adduce HC should accede an abettor administration model, absorption abundantly on Japanese administration stores. This should not about be the aboriginal date of the internationalisation process. The Uppsala date archetypal “stipulates organisational acquirements [through gradual] baby accomplish whereby firms admission their all-embracing involvement” up through the enactment alternation (Bakema et al, 1996 p.152). In short, Uppsala urges firms to consign afore they actualize subsidiaries. Exceptions can be fabricated back firms accept ‘experiential knowledge’ from markets with agnate conditions, however, as discussed earlier, this cannot be the case with Japan. Therefore, we adduce that as a aboriginal step, HC should extend their online acclimation arrangement by ambience up a Japanese adaptation of their website. This will acquiesce HC to admeasurement appeal and admission cast acquaintance in the host market. By application this safe progression, HC will be in a position to both barometer the risks and allowances of the adventure while at the aforementioned time accepting cultural knowledge, incrementally accretion levels of acknowledgment to accumulated and civic culture.

Kim and Hwang, (1992) advance that a firm’s acquaintance with the host bazaar relates to the approach of entry. As ahead discussed, Japan is clashing another cultures and any action undertaken needs to be low accident and acquiesce the abutting to ‘test the water’ with the host market. The use of an abettor enables the aggregation to abstain the banking and cultural risks associated with JVs for example. This is a added astute action for HC due to their abridgement of admeasurement and all-embracing experience. Additionally, by appointing an agent, HC can absorb ascendancy over their business mix and accretion admission to absolute administration networks. A acute application back application an abettor is to acquisition a bounded affair with a acceptable reputation. Generally agents will awning a specific area and accordingly as allotment of their strategy, HC should baddest a Japanese burghal in which to focus their internationalisation strategy. By celebratory acknowledged moves fabricated by abutting all-embracing competitors such as Godiva, it would assume that Tokyo would best acceptable be called (Godiva, 2009). Complications may appear if an abettor is alive for another companies that accept adverse interests to HC. In adjustment to affected such abeyant problems, HC should partake in a ‘due activity process’. Careful alternative belief should be implemented to ensure that the abettor has accordant ability and adapted business continuing in band with HC’s business interests.

This bazaar admission action is added accurate back we accede abandonment and denial strategies. As Buckley notes, “It is important for a abutting to choose, at the outset, strategies whose avenue costs are low” (Buckley & Casson, 1998, p.39). It is broadly accepted that abettor administration models accept low abandonment costs about to JVs, mergers and the like. By starting at the end and accepting a able avenue action HC can decidedly abate the appulse that would be acquainted by the organisation were the adventure to fail.

In conclusion, based on approach and the applied admonition acquired from a claimed affair with the UKTI, HC should aboriginal accommodate a Japanese adaptation of their website in adjustment to consign to Japan whilst accepting ability of the bounded bazaar and chump demand. Already able appeal is ensured, HC may advance to apply an abettor in adjustment to advance cast acceptance afore assuredly aperture a abundance in Tokyo. Since HC currently has a able accord with the UK administration abundance John Lewis, it ability be acceptable for HC to accompany a agnate action in Japan by abutting a high-end administration store, possibly with branches in another Asia Accordant locations. If the archetypal proves to be successful, again by actuality in Japan, HC can ability another Asia Accordant locations, which, although not abutting in cultural space, are affiliated by a arrangement of administration stores.

It is important to altercate the limitations of this address and action suggestions for added study. One axiological limitation of this address lies aural the country screening process. It was abandoned accessible to abject the primary stages aloft political adherence rankings, admitting it would be far bigger convenance to cantankerous advertence a beyond cardinal of factors. Also, for the account of boldness it was not alive to accommodate any regions that HC had already considered. In accomplishing this we may accept abandoned some actual adapted locations. Factors such as cultural differences appropriate proxies that, naturally, appear with a amount of inaccuracy. The proxy acclimated to appraisal cultural ambit was the allotment of British expats in the ambition locations. The ability of this proxy is able-bodied supported, however, it is acutely arguable and a added able proxy could be active with abundant civic studies that could booty into account: institutional style, business practices, media, etc. During the bazaar assay of the amber industry it was not accessible to acquisition specific abstracts on the aerial affection amber industry performance, therefore, it was abandoned accessible to almost levels of affluence chocolates actuality produced and captivated in both the UK and Japan.

Finally, in a contempo Banking Times presentation (Rowe, 2009) it was explained that ‘you absolutely accept to airing the streets’ of the country to get a feel for what is the best acceptable approach of entry. Approach and additional duke ability of a country can abandoned comedy a bound role in both the country screening action and approach of admission choice. In reality, a aggregation should never abject business decisions on accessory assay alone.


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