Peru may be a difficult market to enter, but it is possible.
I would consider this market as difficult due to the cultural challenges, especially the chocolate market currently in decline.
When is the best time to enter the market?
According to Euromonitor International, the best time to enter the chocolate market would be during the colder season (May to October). This is due to there being a higher demand during the colder months.
How to reach consumer?
The best option for entering the market to reach a new customer base in Peru is through indirect exporting. OCHO can supply their product(s) to buyers who then sell forward to the consumer. Traditional grocery retailers dominates chocolate confectionery distribution throughout Peru, making it a strategic move for OCHO to reach a bigger customer base, faster.
Trade Agreement
New Zealand and Peru are currently strengthening trade and economic ties through the Trans-Pacific Partnership. Peru has also shown their support with New Zealand who wish to have a free trade agreement with the pacific alliance.
Customisation or Standardisation
With chocolate being such a global delicacy, OCHO does not need to customise their product to suit Peru, however OCHO could consider creating a plain milk flavour to appeal to the large group who favour this flavour. Customisation would have to take place in packaging with information being provided in Spanish so locals can understand what the product(s) have to offer.
Standardisation, referred to as ‘one size fits all’, is achieving maximum productivity through standardisation of service product, service design and delivery, achieving global economy of scale and lowest unit cost. Standardisation can result in multiple benefits which include efficiency and quality. Due to low variation in product(s).
Chocolate is a delicacy that many enjoy worldwide in all its forms, therefore is often a product that can be standardised throughout multiple markets.
The straight product extension is a strategy for standardisation. This means taking the company’s current products and selling them in other countries without making changes to the product. The advantages of this strategy are that the company doesn’t need to invest in new research, development, or manufacturing. modifications may be made in packaging and labelling to suit different countries/regions, therefore these changes are driven by local regulatory requirements. The disadvantages, however, are that its products may not be well suited to local needs and that the products may be costlier due to higher manufacturing and labour costs.
Current chocolate flavours available in New Zealand
Customisation
Customisation refers to the tailoring of the campaign according to the needs of an individual or group of individuals. These are high margin products where the volumes are low and the buyers are few. Customisation could work in a market such as Peru as Ocho could offer flavours of chocolate that are favourable to the locals. However, customisation can also be a slower, more expensive option.
If you were to compare the cultures between New Zealand and Peru, you would notice straight away some differences. Being two variously different cultures, there are likely to be some cultural challenges that OCHO Chocolate could face doing business in Peru.
New Zealand Culture
Peru Culture
Language Barriers
According to World Travel Guide, the official languages of Peru are Spanish and Quechua, and only in the major tourist destinations is English spoken. This factor can be a challenge for Ocho as they could face miscommunication with potential business partners in Peru. It is important for each party to be considerate of each others languages. OCHO Chocolate should consider their packaging and offer a Spanish packaging for their Peru market.
Time Difference
New Zealand is 17 hours ahead of Lima, Peru. It is important for doing business with foreign markets to be considerate and aware of the differences. When making an international phone or video call, be conscious of the time zone differences and make sure to set a reasonable time for all involved parties to interact. Asking for availability prior to making the call is the best way to avoid any confusion.
Peru’s own chocolate market is suffering
According to research done Euromonitor International, the percentage of consumers who are aware of the need to follow a healthy diet and control their weight is rising, affecting the overall consumption of chocolate confectionary in Peru. As well as this mindset, those who do consume chocolate, 95% seem to prefer plain milk chocolate over flavoured options. This is a challenge for OCHO Chocolate due to their unique variety of flavoured chocolates including short black and salted caramel.
It is important Ocho Chocolate to consider a variety of different methods of entering the market in Peru to ensure they choose the right one for them. This is crucial if Ocho Chocolate wants to succeed in international markets. In this blog post, I will discuss different methods for Ocho to consider then suggest with best option for our brand in Peru.
When choosing a entry strategy, it is important to consider the above criteria’s status.
Exporting
Exporting is one of the most common approaches to starting international expansion for a company, however gives the company the least amount of control of the entry strategies. There are two forms of exporting; direct exporting (company sells to overseas customer) and indirect exporting (company sells to buyer, who then markets the product in target country).
Contractual Agreement- licensing
Licensing is a strategy often used my small to medium-sized businesses to help gain a foothold in foreign markets. A licensing agreement is made between two parties, in which the licensee pays the owner in exchange for the right to sell the product.
Direct Foreign Investment
Also known as Greenfield agreement, DFI involves setting up a business which duplicates the same values as the principal company. The strategy of DFI involves starting from scratch in a foreign market. DFI has a risk level of risk attached which could be threatening to OCHO chocolate.
The best option?
For OCHO Chocolate, of the three different entry strategies discussed, I would recommend indirect exporting. OCHO can have a contract with another business already established in Lima/Peru and make most of their channels and customer bases to sell their products to. I would suggest doing business with companies such as grocery stores or dairy-like stores that offers food and supplies to customers in the area. This would be a faster strategy to get to customers rather than direct exporting because OCHO can gain more brand awareness being advertised in local stores.
In this blog, I will be discussing some key aspects of Peru’s culture that will be important for Ocho Chocolate Company who are considering exporting to a new country.
Considering Hofsrede’s six dimensions of culture, we get a glimpse into Peru’s cultural profile and are able to compare it to New Zealand.
Power Distance: the fact that all individuals are not equal within society. As you can see from the graph above, New Zealand has a much lower number than Peru, meaning everyone in New Zealand’s society is considered more equal than those in Peru.
Individualism: The degree of interdependence a society maintains among its members. Peru does not have a strong value of interdependence, meaning many individuals do not get to make decisions and act on things individually, and always has to consult others or are influenced. Influences on individuals could be, for example, family or government.
Masculinity: A high score indicates a society driven by competition, achievement and success. A low score means the dominant values in society are caring for others and quality of life. In this section, it shows Peru’s culture values to be more focussed on caring for others and quality of life. This could have a positive impact on Ocho Chocolate in the Peru market as many may buy nice chocolate for their loved ones as a sign of care.
Uncertainty avoidance: has to do with the way society deals with the fact that the future can never be known. Do we try control it or let it happen?
Long Term Orientation: How every society has to maintain some links with its own past while dealing with the challenges of the present and future.
Indulgence: The extent to which people try to control their desires and impulses. Often influenced by the degree to which small children are socialised. Peru has a lower indulgence number, meaning the people of Peru tend to indulge into their desires and make impulse decisions. Chocolate is often considered a desires that many indulge in which is a positive revelation for Ocho Chocolate.
History overview
Major History key points that are important in the way that they shaped Peru into the country it is today include:
1532-33 – Spanish conquistadores defeat the Inca Empire, which afterwards becomes part of the Vice-royalty of Peru with its capital in Lima.
1824- Peru gains independence from Spain, the last South American colony to do so.
1866 – Peruvian-Spanish war.
1879-1883- Peru looses territory to Chile during pacific war.
1948 – Military government installed following coup.
1980 – Return to civilian rule.
1980-2000 – Civil war involving Shining Path, with guerrillas seeking to overthrow the government. The conflict claimed an estimated 70,000 lives.
This brief history time-line shows a lot of conflict and wars occurring that had large impact on the country. This is different to New Zealand as there have been a much smaller amount of conflict with others throughout New Zealand history. The main reason because of this is largely due to New Zealand not bordering with any other countries. Peru is nestled in with other countries such as Brazil, Bolivia and Ecuador. This makes for potential conflicts over land especially.
It is estimated through Peru’s Government Statistics Department that approximately a third of Peru’s population live within Lima. Within this population group, there are a variety of different ethnic groups. the most predominant groups are:
Peru has a market orientated economy and is ranked the 39th largest in the world by GDP. This means Peru has an impressive market value of all their goods and services produced each year (annually). In 2018, Peru’s GDP grew 3.5% according to World Bank.
Peru’s key industries that provide a main source of income include:
Peru is divided into three main geographical zones. These include the coast, the mountains and the jungle. Some of the most famous geographic features throughout Peru include Andes Mountain Range, Amazon River and Playa Roja Beach.
Amazon River in Peru
Peru-Andes Mountains
Playa Roja (Red Beach)
The population of urban Peru is approximately 77%, meaning a major percentage of Peru’s overall population live in large towns or cities. This is a large number of people who will have access to resources and products such as our chocolate if we were to enter the market in Peru.
“Going to Peru is, well, if you ever have an opportunity in your life to go there, you should do it because it is absolutely mind boggling.” – Dean Stockwell, actor.
Lima, Peru.
Peru Culture
Peru Map
I have been more than fortunate to be travelling to Lima for my job at Ocho Chocolate to see if our product would suit entering the international market, starting in Lima, Peru. During my visit I will learn all I can about Lima, from their demographic to their culture and cuisine, and researching as far into their weather! All this research is vital to see whether Peru is an ideal market for Ocho Chocolate to consider entering into. I look forward to this work experience and cannot wait to update you as you choose to join me on my adventure.
Some facts about Lima:
Capital of Peru
Population: approximately 9 million, making it the fifth largest city in South America.
Official language: Spanish
Founded in 1535 by Spaniard conquistador, Francisco Pizarro.
The best time of the year to travel is a personal preference but for traveling for business I have decided November is the best month to visit Lima. November is during Peru’s Autumn season, making the average temperature of 16-22 degrees celsius. These temperatures are mildly enjoyable as they are similar to what I am used to in New Zealand. As well as this, November is a dry month meaning there is low risk of rainy days.
To get to Lima, I will be using air travel. Through some online research via Air New Zealand (https://www.airnewzealand.co.nz) and Buenos Aires, I have conducted prices from Auckland to Lima on the dates 4th November to 12th November 2019.
For these particular flights, travel time would take approximately 19 hours and 35 minutes to Lima, and approximately 30 hours and 20 minutes to Auckland. Though long, these are standards flight times for travelling to Peru from New Zealand with layovers. Since I am travelling for business and needing to be comfortable to get further work done while travelling in both preparation for Peru and returning to New Zealand after gaining my research, I will be travelling business class. Fortunately, New Zealand citizens do not require a visa to visit Peru and can stay within Peru for up to 183 days.
Accomodation
During my visit to Lima, I will need somewhere to stay. Using https://www.tripadvisor.co.nz/ I have been able to find a variety of different types of living quarters ranging from luxurious hotels to quaint B&Bs. From here, I have decided on booking my accomodation at HOTEL MONTREAL. Based in the centre of Lima only 8km from the Airport and surrounded by 19 different restaurants in less than a kilometre radius. For one guest, the best price (found via tripadvisor) is $267NZD. Prices ranged to both very different ends of the spectrum, but HOTEL MONTREAL was of good value considering their offerings and location.
Travel to Lima, Peru 