GMMSO: The Case of Sweetlix

MBA 681 Global Strategic Management

Fall Semester 2005
Basil Janavaras
Minnesota State University
By: Dustin Sedars and Dave Grosland

_______________________ _______________________

December 12, 2005

GMMSO: The Case of Sweetlix

Executive Summary
Purpose
The purpose of this document is to present a study of the opportunities for
Sweetlix to expand its business globally and to make an initial proposal that
Sweetlix pursue opportunities in Brazil. Sweetlix has focused on its United States
market, but opportunities exist to penetrate global markets.

Methodology
In order to complete this analysis, we used web-based Global Marketing
Management System Online (GMMSO), which is a strategic planning and
marketing tool designed to help complete global marketing analysis. Additional
research for this project was completed through visiting with Sweetlix’
International Marketing Manager and through independent research using the
Internet.

Phase 1 - Key Findings

Sweetlix is a leading manufacturer of feed block supplements for cattle in the
United States but has minimal business overseas. After an evaluation of Sweetlix,
its products, strategies, international involvement; the overall feed industry; the
market; and the competition, our analysis indicated that global opportunities exist
for entry by Sweetlix. The global readiness analysis suggests Sweetlix use a
Foreign Sales Branch.

Phase 2 - Key Findings

Seven countries were evaluated using a macro screening methodology. Cattle
population, land area, vegetation and land use, climate, and gross national product
were identified as factors that would affect potential sales. These criteria were
weighted to give a relative score for each country in an effort to narrow down our
selection. Next, market accessibility was evaluated for our three remaining
countries for Sweetlix and its block product. Protection of patents, transportation
systems, tariffs, trade embargos, company attitude toward foreign investors, and
location of country were each evaluated and scored to give another relative
weight, which narrowed our selection to Brazil and Australia. Finally, a micro
screening process of the level of competition and the local products was
evaluated, and the results identified Australia and Brazil for further evaluation.

Phase 3 - Key Findings

Brazil and Australia have an abundance of cattle and would be ideal for Sweetlix
to enter the market with its block supplement products. Through our analysis, we
determined that Brazil appears to have the greatest potential because of its cattle
population and the fact that no competitors exist in the block supplement feed
business. All supplements are currently purchased as loose minerals. Our
contacts are much stronger in Australia due to it being the headquarters of Ridley
Corporation, Sweetlix’ parent company, but existing contacts with Brazilian feed

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manufacturers have previously been established. Based on this information,

Brazil was selected for further analysis.

Phase 4 - Key Findings

We have determined through our analysis that a manufacturing joint venture
would be the best entry strategy into Brazil for Sweetlix. Sweetlix will
incorporate the pricing, distribution, and promotional strategies used in the United
States into this new market in Brazil because the products are not affected by
culture or product use and because the same distribution channels exist in Brazil.
Overall, Sweetlix should continue to rely on its strengths (which include superior
quality), its patented products, and diverse product line. In addition, Sweetlix
should develop its brand like it did in the United States. Based on this analysis,
we believe that by the third year Sweetlix could realistically achieve $9.6 million
in earnings from an initial $27.5 million investment.

Conclusions
Sweetlix is a leading manufacturer of block feed supplement products in the
Unites States but has limited global experience. Opportunities exist for Sweetlix
to pursue global markets using its existing strengths. These opportunities show
promise for improved returns for Sweetlix based on the industry market potential.
Sweetlix’ superior quality, patented products, and diverse product lines are the
framework for global success. A joint venture would be the best mode of entry
for Sweetlix in Brazil and would result in a profitable investment.

Recommendation
We believe that Sweetlix should pursue establishing a foreign sales branch, likely
through a manufacturing joint venture, and make its global entrance into Brazil.
Further research should be completed prior to making the initial investment. We
would recommend starting with additional market research completed within
Brazil while simultaneously seeking potential partners. These partners must be
able to provide the links needed for Sweetlix to become a dominant competitor in
the industry. Once Sweetlix has established itself within Brazil, it must continue
its quest to enter other global markets.

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Table of Contents
I. Introduction..................................................................................................... 5
II. Phase I Report ................................................................................................. 6
A. Company Background ................................................................................ 6
B. Company Mission Statement ...................................................................... 7
C. Sales and Profits for the Last Three Years.................................................. 7
D. Sweetlix’ Product Lines.............................................................................. 8
E. Sweetlix’ Strategies .................................................................................... 9
F. Sweetlix’ International Involvement........................................................... 9
G. Industry Analysis ...................................................................................... 10
H. Target Market Profile................................................................................ 11
I. Product Profile .......................................................................................... 11
J. Global Readiness ...................................................................................... 12
K. Strengths, Weaknesses, Opportunities, and Threats (SWOT Analysis) ... 12
L. Phase I Conclusions and Recommendation .............................................. 13
III. Phase II Report.......................................................................................... 14
A. Country Selection...................................................................................... 14
B. Macro-Level Criteria Screening ............................................................... 14
C. Indicators of Market Accessibility............................................................ 15
D. Micro-Level Criteria Screening ................................................................ 16
E. Phase II Conclusions and Recommendation............................................. 16
IV. Phase III Report ........................................................................................ 17
A. Contacts and Competitive Analysis .......................................................... 17
B. Country Markets and Sweetlix Sales Potential......................................... 18
C. Market Entry and Channel Structures....................................................... 19
D. Determining the Best Target Market Country .......................................... 20
E. Phase III Conclusions and Recommendation ........................................... 20
V. Phase IV Report ............................................................................................ 21
A. Entry Mode ............................................................................................... 21
B. Market Segmentation ................................................................................ 22
C. Sales, Profits and Market Penetration....................................................... 22
D. Pricing Strategy and Plan.......................................................................... 23
E. Promotion Strategy and Plan .................................................................... 24
F. Distribution Strategy and Plan .................................................................. 24
G. Budgeting.................................................................................................. 25
H. Phase IV Conclusions and Recommendation ........................................... 27
VI. Summary, Conclusion and Recommendations ......................................... 28
VII. Bibliography ............................................................................................. 29
VIII. Appendices................................................................................................ 30

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GMMSO: The Case of Sweetlix

I. Introduction
The purpose of this document is to present a study of the opportunities for
Sweetlix to expand its business globally and to make an initial proposal that
Sweetlix pursue opportunities in Brazil.
In order to complete this analysis we have used web-based Global Marketing
Management System Online (GMMSO), which is a strategic planning and
marketing tool designed to help complete global marketing analysis. Additional
research for this project was completed through visiting with Sweetlix’
International Marketing Manager and through independent research using the
Internet. This research along with the GMMSO tool allowed us to prepare a
thorough analysis of Sweetlix and its products in order to present global
opportunities.
The following document includes background information developed to establish
a basis for Sweetlix’ current position and assisted with a strengths, weakness,
opportunities, and threats analysis (SWOT analysis). Further analysis includes
identification of global opportunities for Sweetlix along with selection criteria
used to determine two optimal countries Sweetlix’ products would be best suited.
Following this analysis we analyzed the market potential and sales potential for
the two countries we had identified for Sweetlix and determined the best target
market country. Finally, we developed entry strategies and marketing plans and
give our conclusions and recommendations for pursuing this global opportunity,
which we have identified as Brazil.

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II. Phase I Report

The objective of Phase 1 was to conduct an in-depth situation analysis to establish
a basis to assist in determining an organization’s opportunities to compete on an
international basis. The following presents this scenario for the case of Sweetlix.

A. Company Background
Sweetlix is a leading manufacturer and distributor of feed supplements for
livestock, dairy cattle, beef cattle, horses, sheep, goats, and wildlife. Feed
supplements are a component of the feed industry. Based in Mankato, MN,
the company has plants in three locations: Syracuse, Indiana; Montgomery,
Alabama; and Fort Worth, Texas. Sweetlix was founded in May of 2000 by
Joe Brotherton and acquired by Ridley in July 2004.
Ridley Inc. is a Canadian based company that is headquartered in Mankato,
MN and was established by Ridley Corporation Limited of Australia in May
1994. Ridley manufactures and distributes animal feed and nutritional
supplements throughout North America with sales in excess of $500 million.
Approximately 30% of the Ridley’s sales are from Feed-Rite, the Canadian
operation and 70% are from Hubbard Feeds, Ridley Block Operations and
Sweetlix, the U.S. Operations. Both Feed-Rite and Hubbard were early
proponents of scientifically formulated feed rations for livestock animals and
became two of the largest feed suppliers in North America.

The map shows the locations of the three Sweetlix plants along with the four
Ridley Block plants, which also competes in the feed supplement industry.

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B. Company Mission Statement

Sweetlix’ mission is to be the industry leader in providing animal health and
growth products in the free choice supplement feed category by being an
innovator in product development. Sweetlix will be a leader by developing
high quality products that are cost-effective and provide a positive return on
investment to its customers. Sweetlix will also foster long-lasting customer
relationships by maintaining high standards of product quality, customer
service and technological development.
Sweetlix will provide a safe and rewarding working environment for all
employees and will create an environment that fosters innovation in product
development. In order to achieve and maintain market leadership, Sweetlix
will only enter markets where there is a growth trend in the livestock
headcounts.
This mission must be accomplished while generating above average returns
for its shareholders.

C. Sales and Profits for the Last Three Years

The following table illustrates Sweetlix’ income statement and balance sheet
for the past three fiscal years, which end on June 30th.
Year 1 Year 2 Year 3
(Most Recent)
INCOME STATEMENT
Net Sales 30,063,000 29,345,000 28,192,000
Cost of Goods Sold 20,635,000 20,481,000 19,399,000
Gross Profit (Loss) 9,428,000 8,864,000 8,793,000
Operating Income (Loss) 2,954,000 2,138,000 1,933,000
Net Profit (Loss) After Taxes 1,567,000 1,147,000 1,028,000

BALANCE SHEET
Cash 250,000 165,000 110,000
Marketable Securities - - -
Accounts Receivable 3,150,000 2,759,000 4,044,000
Inventory 2,879,000 3,064,000 2,776,000
Long-term Assets 11,293,000 5,940,000 6,306,000
Total Assets 17,572,000 11,928,000 13,236,000

Current Liabilites 1,755,000 1,321,000 1,709,000

Non-Current Liabilities 8,967,000 5,324,000 7,391,000
Preferred Stock - - -
Total Common Equity 6,850,000 5,283,000 4,136,000
Total Liabilities and Equity 17,572,000 11,928,000 13,236,000

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The following table illustrates the key performance indicators for Sweetlix
using various ratio analyses:
Year 1 Year 2 Year 3
(Most Recent)
RATIOS:
Current Ratio 3.58 4.53 4.06
Quick Ratio 1.94 2.21 2.43
LEVERAGE
Debt to Equity 1.57 1.26 2.2
ACTIVITIY
Receivables Turnover 10.18 8.63 N/A
Inventory Turnover 6.94 7.01 N/A
Asset Turnover 2.04 2.33 N/A
PROFITABILITY
Net Profit Margin 5.0% 4.0% 4.0%
ROE 26.0% 24.0% N/A
ROA 8.0% 9.0% N/A

D. Sweetlix’ Product Lines

Sweetlix offers a complete line of mineral, vitamin, protein and medicated
supplements in a variety of forms and sizes. The company offers products
for six different categories of animals: beef cattle, dairy cattle, horses, goats,
sheep, and wildlife with the core categories being beef and dairy cattle.
Under those categories, more subcategories further identify the need of
consumers. For example, health, forage, nutrition, and growth are different
needs a buyer might have for their livestock.
The product forms, which make up the core product lines, include poured
blocks, pressed blocks, and loose minerals. The following describes the
qualities of the three products:
• Poured blocks - produced by mixing molasses and dry feed ingredients
with a binding agent that hardens the mixture after it has been poured into
a container. Poured blocks have higher moisture content than other types
of blocks, which adds to its weight, volume, and freight cost.
• Pressed blocks – produced by mixing a small amount of molasses with
dry feed ingredients, vitamins and minerals and compressing the mixture
in a pressing machine to form dense blocks. Pressed blocks are less
durable than other forms of blocks but they are suited for smaller package
sizes where appearance and cleanliness of the product (in a retail
environment) are important.
• Loose minerals - contain macro-minerals such as calcium, phosphorus,
magnesium, potassium, and sulfur, as well as trace minerals such as
copper, cobalt, iodine, iron, manganese, selenium, and zinc. Free-choice
loose minerals balance the natural minerals obtained from hay, grass and
other natural roughage.

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GMMSO: The Case of Sweetlix

All three products belong to the product category called "free-choice

supplementation", which means the products are provided separate from
the feed ration and are normally made available as the animal is foraging
on pastureland and can freely access the supplement source.

E. Sweetlix’ Strategies
Production
Sweetlix production strategy is to promote a consistent quality approach
within Sweetlix’ culture. Sweetlix uses a Total Quality Management (TQM)
philosophy along with an organizational objective to achieve the International
Standards Organization (ISO) accreditation through the Quality Standard ISO
9001 at every business within the group. The attainment and maintenance of
this quality standard will ensure that business processes at all sites are
continuously improved to deliver the highest levels of customer service and
product quality.
Distribution
Sweetlix currently markets its products through dealers and distributors. The
current distribution strategy allows Sweetlix to target traditional feed
customers through traditional channels. This helps reduce costs associated
with establishing new channels.
Marketing
Sweetlix seeks to develop new products and new markets through a
diversification strategy. This is accomplished by being a product innovator
and by seeking expansion with existing products and newly developed
products.
Human Resources
Sweetlix seeks professionals in its office and production management
positions and PhD’s for its nutritionist and R&D positions. The company
also seeks to have a dynamic culture within the organization.
Global Involvement
Currently Sweetlix has limited experience at marketing products
internationally, but the company continues to research opportunities to
market its product overseas. In today’s environment this has become a core
strategic initiative for Sweetlix.

F. Sweetlix’ International Involvement

Sweetlix’ international involvement is currently limited to direct exporting of
products through distributors in Asia, Africa, and South America. These
sales make up less than 1% of Sweetlix’ current business. Sweetlix’ largest
U.S. competitors are also involved internationally but have already
established export agents, overseas distributors, and joint ventures throughout
Asia and to a lesser degree South America and Africa.

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Sweetlix is in the initial phase of determining how they can establish

themselves overseas. They have identified an objective to compete
internationally but lack a defined strategy. Therefore they do not have an
established entry mode strategy. The global strategy will be developed
following the completion of country and industry research.

G. Industry Analysis
Sweetlix is in the animal feed and nutrition industry but operates within a
sub-group that specializes in "free-choice supplementation". Total feed
industry sales are approximately $85 billion worldwide of which feed
supplements is a component. The feed industry is overall a mature industry
and is growing at a rate of approximately 1.6% annually. The feed
supplement industry although is in the growth phase in the U.S. and around
the world where there are limited competitors making the nature of
competition an oligopoly. Industry regulation is moderate but has been
increasing as concerns continue to rise about food safety with consumption of
animal products.
Economic Trends
The price of cattle directly effects the consumption of livestock feed
supplements. As the price of cattle decreases, the producers generally begin
decreasing the cattle’s ration of feed and feed supplements. The producers
are willing to let the animals grow slower on pasture grass because the
economics no longer support feeding costly supplements to expedite growth.
Other economic trends include consolidation within this mature feed
industry. In general, the feed industry is becoming integrated with the animal
producers. The exception at this point is beef cattle and dairy cattle, although
dairy cattle producers are likely the next to integrate.
Technological Trends
New byproducts that can be used to make supplements continue to arise as
organization continue to find new uses for corn and soybeans. Often these
byproducts can be purchased for a price that is lower than importing molasses
from Mexico. The industry may continue to evolve toward these new
byproducts as supply exceeds demand and drives the price down further on
the byproducts.
Legal, Regulatory and Political Trends
The major trend in the livestock feed industry is regulation for importing and
exporting cattle and regulations on ingredients used in feed. The regulations
are becoming stricter with the goal of protecting the consumer from diseases
caused by consuming beef, pork and poulty infected with disease.
Demographic and Socio Cultural Trends
The trends in these areas are typically fads that come and go and include
changes in peoples diets including Atkins diet, low-carb diets, cholesterol
scare from eating eggs or milk, and other fads that are usually driven by
media putting temporary fear in consumers.

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Major Competitors in the Industry

The following companies each produce more than 4.5 million tonnes of feed
per year:
• Cargill - US
• Charoen Pokphand - Thailand
• Zennoh - Japan
• Nutreco - Europe
• Agribrands - USA
• Purina Mills – US
• Land O’Lakes - US

H. Target Market Profile

Domestic Target Market
The end users of livestock feed supplements are cattle producers, which are
located throughout the world. These cattle producers are typically
geographically located in less densely populated areas where grazing is
available. The majority of beef cattle producers are therefore located
throughout grassy plains regions but can be located anywhere in the world
through the use of livestock feed and supplements.
The cattle producer business mostly consists of private family owned
businesses. The decision maker under this structure is the owner who makes
all major purchasing decisions. Key selection criteria include selecting a
product that provides the greatest improvement in production, resulting in the
greatest benefit. Cattle producers are willing to pay a premium for feed
supplements that improve growth of beef cattle, increases milk production for
dairy cows, or improves the health of the animals.
Foreign Target Market
The end user in foreign markets will be similar to those in the United States.
The industrial user is typically a family owned business that will use the same
value criteria for making purchasing decisions.

I. Product Profile
Sweetlix’ products are considered an industrial good that is used in the
production of cattle for human consumption. Sweetlix competitive
advantages include brand awareness in the United States, Food and Drug
Administration approvals in the United States, and a high quality product that
delivers improved production in the cattle producer industry. The main
competitive disadvantages include inexperience in overseas business and
working with foreign governments.
In the United Sates, Sweetlix is overall entering the maturity phase as a
company and industry but is in the growth phase for the feed supplement
products. On an international basis Sweetlix and its products are between the
introduction and growth phase.

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Sweetlix’ products carry a high level of quality but are sold at a price of
approximately $310 per ton, which is considered average in the feed
supplement industry. The technology level of these products is considered
high in comparison to traditional feed products sold within the feed industry.
Sales potential for Sweetlix products will mostly be affected by the country’s
headcount of cattle. This will be the main determinant of how much
livestock feed and supplements potential there is in the country. Additional
factors affecting sales include the climate and geographic conditions which
affect the need for additional nutritional supplementation. Weather that is
either too hot or too cold can reduce forage growth and increase demand for
nutritional supplements.

J. Global Readiness
Through the use of a questionnaire consisting of 22 questions on the
company’s product and entry strategy in comparison to international
competitors we were able to determine whether Sweetlix is ready to export its
products. In addition the results gave a suggested entry strategy. Based on a
company score of 94 out of 110, scoring an 85%, it was suggested that
Sweetlix use a foreign sales branch.

K. Strengths, Weaknesses, Opportunities, and Threats

(SWOT Analysis)
The following SWOT Analysis captures key strengths and weaknesses within
the company and describe the threats and opportunities facing Sweetlix.

Strengths
• Sweetlix has created strong brand reputation for its products.
• The products are considered high quality and provide financial value to
cattle producers.
• Sweetlix possesses Food and Drug Administration (FDA)-controlled New
Animal Drug Applications (NADAs) for the production of certain high
value-added medicated blocks in which the supply is restricted to certain
facilities.
• Sweetlix has a diverse product line, which is beneficial for filling a full
product offering for distributors and customers.

Weaknesses
• Sweetlix is highly dependent on the beef market. Negative effects to the
beef market directly affect Sweetlix’ volume and profitability.
• Sweetlix relies on molasses as the main ingredient in all of its products.
Some competitors use grain byproducts for their energy source. Any
disruption to the source of molasses could directly affect the way
Sweetlix produces its products.
• Sweetlix lacks international presence.

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GMMSO: The Case of Sweetlix

Opportunities
• Sweetlix has a manufacturing facility in Alabama that is near a port and is
beneficial for shipping overseas.
• New byproducts, which are often less costly than molasses, continue to
evolve as new uses of commodities are discovered and create these new
byproducts.
• Additional research for new NADAs would create new products to
enhance Sweetlix’ existing product line.
• New market applications include goats, sheep, equine and wildlife.
Sweetlix has developed these new products but has not developed the
right channels for marketing and distribution.
• Sales opportunities exist in South America where cattle production is
large and growing, availability of molasses s tremendous, and
competition has minimally penetrated the market.

Threats
• Reduction or elimination of the availability of molasses in the United
States would be catastrophic to Sweetlix’ business. Sweetlix has already
begun to feel pressures on the supply of molasses in the United States.
• Decrease in demand for beef caused by a loss of consumer confidence in
beef impacts the sale of Sweetlix’ products. This could be associated with
either a real or perceived negative affect from consuming beef or dairy
products.
• New development of NADAs by competition could threaten the viability
of Sweetlix’ existing products.
• Significant growth of byproducts (that cannot be used in Sweetlix’
existing manufacturing process) could cause development of products
that compete in the livestock feed supplement market. Development of
these products could come from either new or existing competitors.

L. Phase I Conclusions and Recommendation

The information presented for Sweetlix and the livestock feed supplement
market suggests that Sweetlix establish a Foreign Sales Branch. It is
recommended that research be completed to determine which countries are
best suited for establishment of a foreign sales branch.

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III. Phase II Report

The objective of Phase 2 was to identify high potential country markets for
Sweetlix’ products for the purpose of either exporting or manufacturing products
in selected markets. The following presents this analysis for the case of Sweetlix.

A. Country Selection
We reviewed seven possible countries where Sweetlix could enter its
products into the foreign market. The main drivers for determining the list of
countries to review included the estimated size of the cattle population by
country and the overall trend of meat production in the given country.
The countries chosen for review, based on the stated criteria, included the
following:
• Brazil
• Chile
• South Korea
• China
• Japan
• New Zealand
• Australia

B. Macro-Level Criteria Screening

In order to determine Sweetlix’ ability to internationalize its products we
selected the following macro-level variables to analyze each identified
country. It is believed that the following variables will impact Sweetlix’
success in these foreign countries:
• Cattle Population
• Land Area
• Gross National Product
• Vegetation and Land Use
• Climate
We determined that cattle population is the most critical variable, giving it a
weight of 50%. The high weighting is because it is absolutely vital to
Sweetlix’ success that the country is a producer of cattle. This is because
Sweetlix’ product is solely used by cattle and animal producers.
We weighted land area as the second most important criteria giving a weight
of 20% because land area is a major determinant in where cattle are raised.
There must be an abundance of land area for cattle to be raised.
Gross national product, vegetation and land use, and climate are also an
important factor in determining success of cattle production. Each were
given a weight of 10%.

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Gross national product is important because the country must have enough
wealth where citizens and cattle producers are willing to pay for feed
supplement.
Vegetation and land use and climate are also important for cattle production.
The colder the temperatures, the more requirements there are for feeding
supplements during the colder months. In addition, extremely warm climates
cause forage to stop growing and results in the same affect as cold climates.
Both result in requirements of supplements to keep cattle healthy and
growing.

C. Indicators of Market Accessibility

In order to determine Sweetlix’ ability to internationalize its products we
selected the following variables to analyze market accessibility for each
identified country. It is believed that the following variables will impact
Sweetlix’ success in these foreign countries:
• Protection of Patents and Trademarks
• Transportation Systems
• Tariffs/Duties
• Embargos
• Attitude Toward Imports
• Attitude Toward Foreign Direct Investments
• Location (distance from national operations)
Protection of patents/trademarks/copyrights is the most important criteria
under market accessibility and was weighted 25%. This is critical in order to
protect our legal assets, which is one of our competitive advantages.
Transportation is also an important variable and was weighted 20%. Even if
our customers can and will use our product, there has to be a way to get the
product to the distributors and ultimately the cattle producers.
We felt tariffs/duties were important and ranked it with 15% because if the
tariffs or duties were too high, it would cut into our profit margin and may
make exporting impossible or not logical.
Embargos, attitude toward imports, attitude toward foreign direct investments
and location from Sweetlix’ national operations are also important and we
weighted each of them with 10%.
Embargos are an obvious importance because if the United States doesn't
allow us to trade with the country in question, we can't do our business
overseas with them.
Attitudes are definitely important. We have to make sure the attitudes
towards imports are good and that the attitudes towards foreign direct
investments are also good otherwise a company like Sweetlix would spend
unnecessary energy and money establishing the business.

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Finally, if the product is to be shipped overseas from the national operations,

the location of the country will be important because it will impact shipping
costs and ultimately margins.

D. Micro-Level Criteria Screening

In order to determine Sweetlix’ ability to internationalize its products we
selected the following micro-level variables to analyze each identified
country. It is believed that the following variables will impact Sweetlix’
success in these foreign countries:
• Local Production of Comparable Products
• Local Competitors
• International Competitors
• Export of Sweetlix Products
• Competition Intensity
Local competition is the most critical variable in this category and we
weighted it with 30%. The more local competitors, the harder it will be to
penetrate the market.
Local production of comparable products is also important and we gave it a
weight of 30%. It will be important that the industry within the country is not
flooded with local competition that results in margin erosion.
International competitors are also important and we gave it a weight of 20%.
International competition could try to export their product into the identified
countries, which also can erode margins and volume.
The existence of exporting of our product is also important. We will want to
initially export our product to these countries while we are establishing an
arrangement to produce within the country.
Finally, competition intensity is important in any market or any industry and
cannot be ignored. High competitive intensity will result in eroded margins
in a segment of the industry that requires technology for innovation and must
allow for healthy margins.

E. Phase II Conclusions and Recommendation

According to the analysis in Phase 2, Australia and Brazil prove to be the best
options for developing Sweetlix’ products overseas. The other countries
analyzed, Chile, South Korea, China, Japan, and New Zealand, were cited as
having less opportunity for Sweetlix to be successful than compared to
Australia and Brazil. Of the two countries accepted, it appears that Brazil is
the better choice of the two based on the scores. Brazil scored an 89 out of
100 and Australia scored a 75 out of 100. Our recommendation is that we
continue to analyze our options of producing and marketing Sweetlix’
product in Brazil and Australia.

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IV. Phase III Report

The objective of Phase 3 was to identify the best target market country for
Sweetlix and its products. The following presents this analysis for the case of
Sweetlix.

A. Contacts and Competitive Analysis

BRAZIL
We identified three contacts within Brazil. Two of our contacts are sales
agents that could help us establish our international business and help line us
up with feed manufacturers that we could develop a relationship with to
potentially create some form of an alliance. The third contact is a reputable
feed manufacturer that our international marketing director has developed a
relationship.
Total Market Potential
The total sales market potential for feed supplements in Brazil is estimated at
$595 million. This estimate is based on a prediction that 30% of all cattle in
Brazil consume feed supplements and that each cattle can consume 80
pounds of supplements per year at an estimated selling price of $310 per ton.
Company Sales Potential
The total sales potential for Sweetlix operating in Brazil is estimated at $238
million based on the total market potential multiplied by the desired market
share, which is 40%. This high projected market share is based on the fact
that there are currently no competitors in the feed supplement market in
Brazil that provide the block products that Sweetlix manufactures.
Market Competition
We identified two competitors in Brazil and completed a comparative
analysis of each to Sweetlix. The competitors identified in Brazil do not
produce a block supplement product similar to Sweetlix’ and sell only
complete feed and loose mineral supplements. Part of the reason for this is
the fact that molasses is not sold to the feed industry but is used in alcohol
production. Research shows that there is an abundance of molasses available
and could be acquired at a price that is well below the rate in the United
States.
The pricing of products appears to allow for margins that can sustain a
healthy business and the overall environment is not intensely competitive.
This coupled with the opportunity to introduce a new product that can create
added value is a positive sign for Sweetlix.
The quality and service provided by the two competitors is similar to or
below the standards that Sweetlix is accustomed to delivering.

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AUSTRALIA
We identified two contacts within Australia. One of our contacts is a sales
agent that could help us with our international business. The second contact
is Ridley Corporation, which is the parent company of Ridley Inc. There is
an abundance of resources that exist in Australia that Sweetlix could use to
establish its foreign operations in Australia.
Total Market Potential
The total sales market potential for feed supplements in Australia is estimated
at $286 million. This estimate is based on a prediction that 30% of all cattle
in Australia consume feed supplements and that each cattle can consume 80
pounds of supplements per year at an estimated selling price of $310 per ton.
Company Sales Potential
The total sales potential for Sweetlix operating in Australia is estimated at
$43 million based on the total market potential multiplied by the desired
market share, which is 15%. This market share estimate is based on the fact
that block products already exist in Australia but Sweetlix would be able to
tap into Ridley Corporations distribution network.
Market Competition
We identified two competitors in Australia and completed a comparative
analysis of each to Sweetlix. The competitors identified in Australia produce
a block supplement product similar to Sweetlix. Overall the target market
and products are comparable to the U.S.
The pricing of products allows for a margin of $140 per ton before variable
manufacturing costs, which is comparable to or slightly better than the U.S.
The quality focus in Australia is similar to the U.S. with ISO manufacturing
standards being achieved. Neither company provides additional services to
the end customer for nutritional services or consulting. This is a lower
standard compared to Sweetlix.

B. Country Markets and Sweetlix Sales Potential

BRAZIL
Since there are virtually no competitors in the block supplement market in
Brazil, the unrealized market potential is the full $595 million, which we
originally established as the total market potential. We realize that the loose
mineral manufacturers are serving the feed supplement market but the
potential exists to convert these consumers to block products, which have
benefits that outweigh the cost difference and ultimately improve cattle
producers’ returns. Based on this information we estimated that Sweetlix
could potentially achieve 40% of this market potential.
AUSTRALIA
Block supplement sales in Australia were approximately $160 million
compared to the estimated market potential of $286 million, which leaves

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$126 million in unrealized market potential. Sweetlix estimates that it could

achieve 15% of the total market potential by establishing a presence in
Australia and using Ridley Corporation’s distribution.

C. Market Entry and Channel Structures

BRAZIL
Payment and Financing Methods
The products will be sold through an already existing dealer network in
Brazil and will be sold based on terms currently used in Brazil. The terms
typically include payment due within 10 to 20 days of sale or the end of the
month.
Import and Export Regulations
Importing feed products into Brazil requires certification that the products
have not been manufactured using animal byproducts.
Licensing, Registration and Regulation
Brazil requires registration of patents as does the United States and Australia
in order to protect product rights. Brazil manufacturing has not embraced the
same ISO and HAACP requirements that more developed countries like
Australia and the U.S. The feed industry in Brazil is in the process of moving
towards a more regulated industry because of the sensitivity to food safety
throughout the world.
Transportation and Documentation
Brazil has 13 ports of entry for shipping and receiving products via water. In
addition, Brazil has 461 airports with paved runways. Transportation within
Brazil is not well established in areas where agricultural needs are the
greatest. This will result in less efficient transportation to get the product to
the end user.
AUSTRALIA
Payment and Financing Methods
Australia is a developed country with banking that is well established.
Payment terms in Australia are similar to the United States. Common terms
are Net 20 days after End of Month.
Import and Export Regulations
Importing feed products into Australia requires certification that the products
have not been manufactured using animal byproducts.
Licensing, Registration and Regulation
Australia and New Zealand together have partnered under the Food and Drug
Institute to form Food Standards Australia New Zealand (FSANZ). This
entity overseas safety of food and drugs distributed for human and animal
consumption with the goal of creating overall food safety for human
consumption. This group is similar to the FDA in the United States.

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Transportation and Documentation

Australia has 14 ports of entry for shipping and receiving products via water.
In addition, Australia has 139 airports with paved runways. Once in
Australia, the country has well developed highways and uses transportation
typical to the United States.

D. Determining the Best Target Market Country

Based on the in-depth analysis completed in Phase 3 we graded Brazil and
Australia based on the following criteria giving a score of 1 to 20.
• Contacts – Quality and Strength
• Market Competition – Degree and Level of Competition
• Market Entry – Market Entry Conditions
• Market Channel Structure – Suitability of Market Channel
• Market Sales Potential – Total Potential
The results of the scores were 82 of 100 for Brazil and 75 of 100 for
Australia, with Brazil achieving the highest score. The higher score for
Brazil was mainly based on the low level of competition in Brazil along with
the size of Brazil’s market potential.

E. Phase III Conclusions and Recommendation

Based on our in-depth market analysis and sales potential for each country
we graded Brazil and Australia under five categories including quality and
strength of our contacts in each country, the degree and level of market
competition in each country, the most suitable market channel structure in
each country, the most favorable market entry conditions in each country, and
the highest market potential in each country. From this analysis it was
determined that Brazil has the best target market for Sweetlix' products.
It is our recommendation that Sweetlix develop an entry strategy and a local
marketing plan for manufacturing, selling and distributing its products in
Brazil.

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V. Phase IV Report
The objective of Phase 4 was to develop entry strategies and marketing plans for
entering Brazil that are based on Sweetlix’ strengths relative to the competition.
The following presents this analysis for the case of Sweetlix.

A. Entry Mode
In order to determine the best entry mode strategy we evaluated twelve
possible modes of entry and evaluated them based on ten drivers. The
following table presents the results from that analysis:
Drivers
Total
Entry Mode A B C D E F G H I J Score
Confirming Houses 2 3 4 3 3 3 2 5 2 2 29
Indirect Export 5 4 4 4 2 2 3 4 3 3 34
Direct Export 3 5 2 3 2 2 3 4 4 4 32
Foreign Based Sales Branch 2 4 2 3 4 3 3 3 4 4 32
Foreign Based
Marketing Subsidiary 2 3 2 3 4 3 3 3 4 4 31
Wholly Owned
Manufacturing Subsidiary 5 5 3 4 5 4 5 2 4 4 41
Joint Venture
(Manufacturing) 5 5 5 5 5 5 5 3 5 5 48
Joint Venture
(Marketing) 3 4 4 5 5 5 5 4 5 5 45
Franchising 2 2 4 4 5 5 5 5 3 4 39
Licensing 2 2 4 4 5 5 5 5 3 4 39
Management Contract 3 3 4 4 5 5 5 5 3 4 41
E-commerce 1 5 3 2 5 3 1 5 2 3 30
Drivers Key
A = Goals/Objectives
B = Control
C = Resources
D = Experiences
E = Competition
F = Regulations
G = Market Size
H = Risk
I = Flexibility
J = Feedback

The entry mode with the highest score was a manufacturing joint venture.
This suggests that Sweetlix should develop a manufacturing joint venture as
its entry mode strategy for Brazil. The results are based on Sweetlix desire to
maintain control and involvement in production. In addition this arrangement
along with some type a marketing arrangement would allow Sweetlix to learn
about operating and marketing within Brazil from the local company.

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B. Market Segmentation
In order to determine the target market that Sweetlix will pursue in Brazil we
developed three variables that will help distinguish the target market. The
following table presents these variables and the identified target classes to be
pursued in Brazil:
Variable Variable Class Target Class
Species Beef Cattle Beef Cattle
Dairy Cattle Dairy Cattle
Sheep Sheep
Swine
Goats
Horses
Wildlife

Distribution Indirect Wholesale Indirect Wholesale

Indirect Retail
Direct

Product Purpose Growth Growth

Health Additive Health Additive
Dietary Supplement Dietary Supplement
Full Nutrition Requirement

This analysis shows that Sweetlix will pursue the beef cattle, dairy cattle and
sheep through dealers (indirect wholesale) and will focus on products that
improve growth, perform health improvement, and provide dietary
supplements.

C. Sales, Profits and Market Penetration

Since no competition currently exists in the Brazilian market, opportunity
exists for Sweetlix to literally achieve 100% of the market during entrance.
The reason for the assumed decline in both the worst and best case market
share is because there is high likelihood that new competitors will enter the
market following Sweetlix' success, which will have an eroding effect on
these companies' traditional feed business.
The following table shows our estimates of worst-case and best-case
scenarios for market share, sales, and profits for the first three years of
operation in Brazil:

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Year 1 Year 2 Year 3

Market Share
Worst Case 70% 55% 40%
Best Case 100% 90% 80%

Sales
Worst Case $ 28,000,000 $ 55,000,000 $ 100,000,000
Best Case $ 40,000,000 $ 90,000,000 $ 200,000,000

Profits
Worst Case $ 700,000 $ 1,500,000 $ 5,000,000
Best Case $ 1,500,000 $ 5,500,000 $ 14,500,000

The overall assumption is that Sweetlix and/or other competitors will capture
7% of the entire $595,000,000 market potential by the first year followed by
17% by the second year and 42% in the third year. Since this is a new market
for these products it is believed that it will take four to seven years for the full
market potential to be realized.

D. Pricing Strategy and Plan

Sweetlix will use price skimming as it enters the Brazilian feed supplement
market because there are no similar products in the market. Sweetlix will use
a cost-plus pricing because the ingredients are all commodities that fluctuate
daily. The price will be set based on an assumed longer-term cost and
adjusted as costs rise outside of an acceptable threshold.
The variable cost of Sweetlix’ products in the U.S. are approximately $270
per ton and the established retail price is $420 per ton with Sweetlix selling to
the dealer at 75% of suggested retail. This gives Sweetlix approximately $50
per ton to cover fixed costs and the dealer approximately $100 to cover both
its variable costs and fixed costs.
The variable cost of Sweetlix products in Brazil is estimated to be $210 per
ton and we have estimated a suggested retail price of $400. Sweetlix would
sell to the dealers at 75% of suggested retail, which would give the dealer
$100 in margin. Since cattle feed and loose minerals sell for a margin of $30
to $45 per ton in Brazil this will entice the dealers to sell the Sweetlix
products.
This lower cost is possible because molasses, which is a main ingredient in
Sweetlix products, sells for approximately $60 per ton less than in the U.S.
and because labor costs are lower in Brazil.

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E. Promotion Strategy and Plan

PROMOTION MIX
Advertising
Sweetlix will use print advertising to reach the end consumer. The
advertising will be included in trade magazines for cattle producers. In
addition, Sweetlix will develop a publication on food safety and will
distribute through its dealers. The publication will have articles that explain
basic food safety for cattle producers and will be used as a platform to
explain the benefits of Sweetlix' products.
Sales Promotion
Sweetlix will use a push strategy by creating a dealer incentive program that
will encourage and reward dealers for selling Sweetlix products. The
incentive program would give points to be used for advertising of Sweetlix
products or for attending dealer meetings. The points would be earned based
on total volume sales of Sweetlix points.
Personal Selling
Sweetlix will have its own sales staff that establishes and maintains dealer
accounts. In addition, Sweetlix will use Nutritionists (PhD's) to visit the
larger consumers and help them establish feeding programs. Quarterly dealer
meetings will be held to give the dealers an opportunity to meet and discuss
their strategies and actions to help pool the dealer's knowledge. This will
also give Sweetlix an opportunity to gather this knowledge for distributing
throughout the organization and to new dealers.
Publicity
The main publicity to be used will be trade shows, which is explained in
more detail in the following section.
TRADE SHOWS
Sweetlix and the feed industry use organized trade shows to bring the
consumer and the manufacturers in the agriculture industry together.
Sweetlix would use this opportunity at South American trade shows to
display its products and spread the word about the product benefits.
TYPES OF MEDIA
As explained in the "Promotion Mix" above, Sweetlix will use magazines to
promote its products. In addition, Sweetlix will use its web page to allow
users to browse the company and product information. Direct mailings to the
cattle producer will also be completed in coordination with the dealer. These
mailings will include the food safety publication and current product
promotions.

F. Distribution Strategy and Plan

We have determined that the best strategy for distribution is a push strategy
and the mode of transportation will be trucks. We identified this strategy

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because an existing feed manufacturer will likely produce Sweetlix products

in Brazil. Sweetlix will establish an arrangement where the feed
manufacturer will produce the product and Sweetlix will market the product.
The distribution of the product will go from the feed manufacturer/Sweetlix
joint venture to the dealer network that currently exists for selling traditional
feed and loose minerals. The objective would be to target a feed
manufacturer that already has successfully established a dealer network in
South America. The dealer will then sell the Sweetlix products to the cattle
producers that the dealers currently sell feed.
The push strategy becomes most effective because the dealer is given an
incentive, the higher margins, to show the customer that the feed supplement
block has benefits that can improve their returns in cattle production.
Especially in this part of the world it will be critical for our message to be
passed from the dealer to the customer. It will be the most successful method
of reaching the targeted customer.

G. Budgeting
The following chart illustrates the projected income statement for Sweetlix
for the first three years of operation within Brazil. All figures are in US
dollars.
Projected Income Statement
Year 1 Year 2 Year 3
INCOME STATEMENT
Ton 100,000 220,000 460,000
Price per Ton $300 $300 $290
Net Sales $ 30,000,000 $ 66,000,000 $ 133,400,000
Less:
Variable Cost of Goods 21,000,000 46,200,000 96,600,000
Fixed Manufacturing Costs 3,000,000 6,000,000 12,000,000
Gross Profit (Loss) 6,000,000 13,800,000 24,800,000
Less: 60 63 54
Operating Expenses 1,500,000 2,500,000 3,000,000
Costs of Entry 1,100,000 700,000 400,000
Taxes 1,360,000 4,240,000 8,560,000

Net Profit (Loss) After Taxes $ 2,040,000 $ 6,360,000 $ 12,840,000

Estimated 50% Equity 50.0% 50.0% 75.0%
Sweetlix Earnings from Alliance $ 1,020,000 $ 3,180,000 $ 9,630,000

It was assumed that Sweetlix would initially establish a joint venture with
50% equity in this new business but would increase the equity to 75% by
year three. This assumption is based on Sweetlix management’s belief that a
partner may not have available capital to expand at the aggressive rate that is
identified. It is assumed that the partner would receive a portion of the
earnings based on their respective equity percentage.
It is assumed that the partner would already be established and would have an
existing dealer network in Brazil. In addition, it is assumed that one single

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plant can handle approximately 100,000 to 120,000 ton of block supplement

production and sales per year and will require approximately $4 million in
working capital and $2 million in capital for buildings and equipment to
manufacture the new products, which is displayed in the following balance
sheet projection. Based on these estimates the projected volume will require
four production facilities requiring a total investment of $27.6 million by the
third year.
The earnings stated above assume sales at $300 per ton offset by variable
manufacturing costs, which are mostly ingredients, of $210 per ton. We
assumed that as competition grew we would need to reduce sales to $290 per
ton by year three. We also identified fixed manufacturing costs of
$3,000,000 per plant. Operating expenses for administration, accounting and
other support functions were estimated at $1.5 million, $2.5 million and $3.0
million for years one, two and three respectively. Costs of entry are
estimated at $1.1 million for year one, $700,000 for year two and $400,000
for year three.
The costs of entry for year one include: $500,000 for market research,
consulting, and customer surveys; $300,000 for advertising agents,
advertising, publications, promotions, and other sales training; $200,000 for
legal costs to create the partner arrangement and for licensing, registration
and patents; and $100,000 for travel and other costs to establish business in
Brazil.
Projected Balance Sheet
Year 1 Year 2 Year 3
BALANCE SHEET
Cash $ 200,000 $ 300,000 $ 400,000
Marketable Securities - - -
Accounts Receivable 3,000,000 6,600,000 13,340,000
Inventory 3,000,000 6,600,000 13,800,000
Long-term Assets 2,000,000 4,000,000 8,000,000
Alliance Share (4,100,000) (8,750,000) (8,000,000)
Total Assets $ 4,100,000 $ 8,750,000 $ 27,540,000

Current Liabilites 1,875,000 4,058,333 8,300,000

Non-Current Liabilities 2,225,000 3,671,667 15,040,000
Preferred Stock - - -
Total Common Equity - 1,020,000 4,200,000
Total Liabilities and Equity $ 4,100,000 $ 8,750,000 $ 27,540,000

The following break-even analysis shows that the break-even sales in year
one is $26.6 million based on one production plant. The reason for the break-
even sales being somewhat high is due to some of the one-time costs of entry.
Year two and three break-even sales increase only because we are estimating
additional fixed costs for expanding into additional plants. The same can be
said for break-even tons, which are estimated at 88,667 tons in year.

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Break-Even Analysis

Year 1 Year 2 Year 3

Percentage Gross Profit

Sales $ 30,000,000 $ 66,000,000 $ 133,400,000
Gross Profit 9,000,000 19,800,000 36,800,000
% Gross Profit 30.0% 30.0% 27.6%

Break-Even Sales $
Fixed Costs $ 7,980,000 $ 16,620,000 $ 27,170,000
Contribution Margin % 30.0% 30.0% 27.6%
Break-Even Sales $ $ 26,600,000 $ 55,400,000 $ 98,491,250

Break-Even Tons
Fixed Costs $ 7,980,000 $ 16,620,000 $ 27,170,000
Contribution Margin per Ton $ 90 $ 90 $ 80
Break-Even Tons 88,667 184,667 339,625

H. Phase IV Conclusions and Recommendation

Sweetlix should enter a manufacturing joint venture with an existing
Brazilian company. The identified target market for Sweetlix in Brazil are
categorized by species type, distribution type and product purpose. Based on
this Sweetlix should focus on serving the beef, dairy, and sheep markets
through the use of indirect wholesalers and will be selling products that
promote growth, improved health, and include dietary supplements.
This identified market holds enough volume for Sweetlix to attain a large
portion of the market share and ultimately be profitable starting in the first
year. This can be accomplished through the identified pricing, promotion,
and distribution strategies.
We recommend that Sweetlix establish a joint venture with a local feed
manufacturer in order to establish its block supplement business in Brazil.
Sweetlix should focus on the identified cattle and sheep markets and should
develop the identified pricing, promotion, and distribution strategies that
were previously discussed.

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VI. Summary, Conclusion and Recommendations

A detailed analysis of the global opportunities for Sweetlix and its block
supplement products has been completed using the GMMSO tool and through
discussions with Sweetlix’ International Marketing Manager. The analysis
illustrates that opportunity exists for Sweetlix to compete globally and that certain
markets are a better match for its first global venture.
After a thorough review, we have determined that Sweetlix should make its first
global appearance in Brazil. The main reasons Brazil was selected over other
countries is due to Brazil’s population of cattle, which is one of the largest in the
world, and the fact that there are no competitors in the block supplement business.
Currently all cattle in Brazil are fed loose minerals, which is a much less efficient
feeding method and is not as easily controlled. The total market potential for
block supplement feed sales is estimated at $595,000. The other reasons for
Brazil being selected for global entrance is because other environmental factors
are positive and include, weather, governmental regulations, transportation, dealer
network in the feed industry, and their attitude towards foreign direct investments.
We have determined through our analysis that a manufacturing joint venture
would be the best entry strategy. This will allow Sweetlix to enter the market
with a lesser investment because they will not have to duplicate certain facility
costs. Furthermore, this will allow Sweetlix to use the existing dealers to move
product toward the customer and will not have to reestablish a new distribution
channel. Additional sales staff may be required, but for the most part the existing
staff will continue to work with the existing dealer’s to sell the block supplement
products.
Sweetlix will incorporate a price skimming strategy early on because of the
limited competition in the block supplement business and will use a cost-plus
approach for developing pricing because of the nature of the ingredients, which
are mostly commodities. The price will be initially set at a $400 per ton retail
price and $300 per ton dealer price. This will give the dealer more margin than
they currently make on traditional loose minerals and will give the Sweetlix joint
venture $90 per ton to cover fixed costs.
The promotional strategy will include advertising, a dealer incentive promotion,
personal selling, dealer meetings, trade show appearances, and the use of the
company website. Advertising will include articles and advertisements in
industry trade magazines, an internal publication on food safety that will be
distributed to the dealers and customers, and direct mailings to the end customer
for current product promotions.
We believe that Sweetlix should pursue the approach described in this report and
make its global entrance into Brazil. We have analyzed the earnings potential and
believe that by the third year Sweetlix could realistically achieve 9.6 million in
earnings from an initial $27.5 million investment with 75 percent equity in the
business. The initial equity would be 50 percent, but it is assumed that Sweetlix
may need to increase its equity to continue the growth. This assumption is based
on the joint venture partner not having capital to expand at the identified pace.

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VII. Bibliography
Phase Phase Phase Phase
1 2 3 4
Electronic Source
www.Sweetlix.com X
www.nationmaster.com X X
www.worldbank.com X X
www.nutron.com.br X
www.tortuga.com.br X
www.worldclimate.com X
www.odci.gov/cia/publications/factbook/geos/
as.html X X
www.exportid.com X
www.ridleycorp.com X X
www.nutrisul.com.br X
www.usda.gov/nass X

Other Sources
George Ferre, International Marketing
Manager for Sweetlix X X X X

"The Consoldidating Feed Industry" market

study completed by Rabobank International in
1999 X X X X

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VIII. Appendices
Appendix A (See Attached Reports)
Phase 1 Report
Phase 2 Report
Phase 3 Report
Phase 4 Report

Appendix B (See Attached Report)

Power Point Presentation Outline

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