Exportation of Lucero Olive Oil to China
As part of the Business in Global Environments course, the students are assigned to create a research paper that explores how an American company undergoes international trade. This first paper presents an American company looking to expand its product internationally to a particular country. In my particular case, Lucero Olive Oil will be exporting its olive oil to China. Lucero is an olive and olive oil producer in Northern California. Its olive production has been prominent for 27 years, starting in Corning California. In 2005, Lucero Olive Oil began marketing olive oil and quickly became a prominent extra virgin olive oil ...view middle of the document...
Impressively, the company incites new customers with the Lucero's Olive Oil Club. By joining the Club, customers receive shipping and cost benefits from both the website and their catalog. This customer minded mentality combined with its diversity of products provides Lucero Olive Oil a strong foundation to launch into the international olive oil market (Lucero Olive Oil,2012).
The international olive oil market is a highly competitive field with its top firms located around the world. In total, the International Olive Oil Council estimates at least 3.2 million tons of olive oil were produced in the year 2013. The top olive oil producing countries are Spain, which produces 1.5 million tons, Italy (500,000 tons), and Greece (230,000 tons) (Butler, 2013). In this market, the top firms are determined in international competitions. One of the most prestigious is the New York International Olive Oil Competition with 702 entries from 22 countries. In this competition, the highest award for each olive oil blend and variety is "Best in Class". Two of the top performers included Frantonio Franci (Italy), and Cobram Estate (Australia) (Best Olive Oils, 2013). Another prestigious source, World's Best Olive Oils, determined the top three brands based on 18 international competitions. They were Venta de Baron (Spain), Rincon de la Subbetica (Spain), and Oro Bailen Reserva Familiar (Spain) (World's Best Olive Oils, 2013). Due to this variety of competitions and rankings, the leaders of the market can fluctuate based on the yearly performance.
Lucero Oil Oil's products should expand into the Chinese market in order to gain first mover advantages. Due to a lack of major Chinese olive oil producers, the Chinese market remains and untapped consumer course. Another benefit of absent domestic suppliers is an increased demand, by the growing middle and upper class, for foreign olive oil. Since no firm currently has an absolute advantage in Chinese growing olive oil market, Lucero Olive Oil could potentially become a major supplier due to its close geographic location and organized business model.
The main attractiveness of China as a potential market is its massive population and increasing economic power. In 2012, the population was estimated at 1.35 billion people. Besides a large population base, the real domestic demand growth was 10.5% from 2008-2012 (EIU, 2014). In terms of our target consumers, China's upper middle class (income of $16,000 to $34,000) is composed of approximately 200 million consumers, which account for 15 percent of urban consumption. By 2020, this percentage will jump to 56% of urban private consumption. In combination of this rising demographic, with the China's affluent class (income greater than (greater than$34,000) will be responsible for 25% urban private consumption power (“Mapping China’s middle class | McKinsey & Company,” n.d.). In terms of transportation, China contains 3,453,890 km of paved roadways,...