CATOLIC UNIVERSITY

FACULTY OF BUSINESS SPECIALTIES

CAREER OF INTERNATIONAL TRADE AND FINANCE

INTERNATIONAL MARKETING

TOPIC
Collaborative Project “Guangala´s Chocolate”

AUTHORS:
Acosta Sandoval, Libia Valeria
González Zambrano, Marianella Maricruz
Salcán Lema, Roxana Paola
Suquinagua León, Maitte Elizabeth
Vásconez Acosta, Félix Andrés

INSTRUCTOR:
Eng. Echeverria Bucheli, Mónica Patricia

Semester A-2019

Date: June 17th, 2019

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Content
Content of Chart .............................................................................................................................. 4
Content of Figures........................................................................................................................... 5
1. Identify the country of origin, the target markets, the type of customer ................................ 6
1.1. Origin Country ................................................................................................................. 6
1.2. Target Markets ................................................................................................................. 6
1.3. Type of Customers ........................................................................................................... 6
2. Describe the company (LSE/SME), the product, the value chain .......................................... 6
2.1. The Company ................................................................................................................... 6
2.2. The Product ...................................................................................................................... 7
2.3. Value Chain ...................................................................................................................... 7
3. Find guidance on the management of the company's international operations (EPRG
context). .......................................................................................................................................... 8
4. The model of the 9 strategic windows of the global market and perform an analysis based
on this selection............................................................................................................................... 9
5. Motives for internationalization and internationalization triggers........................................ 10
5.1. Motives for internationalization ..................................................................................... 10
5.1.1. Proactive ................................................................................................................. 10
5.1.2. Reactive................................................................................................................... 11
5.2. Internationalization Triggers .......................................................................................... 11
5.2.1. Internal triggers ....................................................................................................... 11
5.2.2. External triggers ...................................................................................................... 11
6. Barriers hindering the process of internationalization .......................................................... 12
6.1. General Market Risk ...................................................................................................... 12
6.2. Commercial Risk ............................................................................................................ 12
6.3. Political Risk .................................................................................................................. 13
7. Recommendations for the barriers hindering the process of internationalization ................ 13
7.1. General Market Risk ...................................................................................................... 13
7.1.1. Competition from others firms................................................................................ 13
7.2. Commercial Risk ............................................................................................................ 13
7.2.1. Exchange rate fluctuations ...................................................................................... 13
7.2.2. Delays and/or damage in the export shipment and distribution process ................. 14
7.3. Political Risk .................................................................................................................. 14
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7.3.1. Foreign government restrictions ................................................................................. 14

8. The Internationalization Model............................................................................................. 14
9. PESTAL Analysis ................................................................................................................. 15
9.1. Political Factors .............................................................................................................. 15
9.2. Economic Factor ............................................................................................................ 16
9.3. Social Factors ................................................................................................................. 16
9.4. Legal Issues .................................................................................................................... 17
9.5. Technological Factors .................................................................................................... 17
9.6. Ecological Issues ............................................................................................................ 18
10. Psychic distance and physic distance ................................................................................. 18
10.1. Psychic Distance ......................................................................................................... 18
10.2. Physic Distance........................................................................................................... 19
11. Bibliography ...................................................................................................................... 20
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Content of Chart

Chart 1 .......................................................................................................................................... 9
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Content of Figures

Figure 1: Global Cocoa-Chocolate Value Chain. Taken from (Nicholas School Masters Project,

2013) ............................................................................................................................................... 7

Figure 2: Value Chain. Adapted from (Hollensen S. , 2008) ........................................................ 8

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1. Identify the country of origin, the target markets, the type of customer

1.1. Origin Country

Guangala is an Ecuadorian company founded in 1978 by Mr. Vicent Zeller, German, with

German bases and Ecuadorian development. Its beginnings were invested in the coffee business,

but due to various social and economic factors that were not profitable. This is how it begins to

take an interest in the cocoa market, becoming exporters and leaders.

1.2. Target Markets

Thanks to its success, it has achieved a 10% share in the international markets that export

cocoa to the United States, Germany, Italy, Spain, Holland, Japan and Switzerland. It is also

located in sixth place in export, in front of Nestle S.A.

1.3. Type of Customers

Guangala seeks to provide an optimal service to its customers, who are international

suppliers and customers who seek cocoa of good taste and appearance.

2. Describe the company (LSE/SME), the product, the value chain

2.1. The Company

SME (small-to-medium enterprise) is a convenient term for segmenting businesses and

other organizations that are somewhere between the "small office-home office" ( SOHO ) size

and the larger enterprise . The European Union has defined an SME as a legally independent

company with no more than 500 employees. (Rouse, 2011)

Guangala is a Small and medium-sized enterprises (SMEs), because are a non-subsidiary,

independent firms which employ fewer than 250 of employees.

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2.2.The Product

It offers a series of services and products, such as training and service to the farmer. It also

has finished products such as chocolate, which has 3 types: milk, bitter and white.

The focus will be milk chocolate, which is a chocolate without added vanilla or flavorings,

where we pay special attention to the selection of milk and sugar that form a 100% natural flavor.

2.3. Value Chain

Value chain “is a business model that describes the full range of activities needed to

create a product or service.” Companies that produce chocolate are guided by a segmented global

value chain. (Tardi, 2019)

Guangala follow these 6 steps in order to be taken and distributed to the final consumer:

Figure 1: Global Cocoa-Chocolate Value Chain. Taken from (Nicholas School Masters Project, 2013)
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Infrastructure of the company: Management, finance, legal, planning

Human resources management: Professional development, employee relations,

performance, recruiting, competitive wages, training programs
Development of technology: Machinery to produce chocolate

Purchases: Purchase raw materials, supplies, materials.

Marketing
Internal and sales: Post sales
Operations:
logistics: services:
External -Pricing
-Local and
-Location of logistics: -Delivery
international Communication
distribution distribution of -Order -Call
facilities the processing -Promotion center
-Trucks merchandise -Product based
on community
-Inventory needs

Figure 2: Value Chain. Adapted from (Hollensen S. , 2008)

3. Find guidance on the management of the company's international

operations (EPRG context).

The nature of the firm’s response to global market opportunities depends greatly on the

management’s assumptions or beliefs, both conscious and unconscious, about doing business

around the world. This world view of a firm’s business activities can be described according to

the EPRG framework with the four orientations. (Hollensen S. , Global Marketing, 2014)

Businesses with a polycentric orientation adopt the belief that every country is unique and

needs a different approach to match cultural and societal norms. (Wright, 2018)
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Therefore, Guangala is a polycentric company because it respects the differences of other

countries. For example, when it is exported to the United States changes label to English version

according to the USA policies.

4. The model of the 9 strategic windows of the global market and perform

an analysis based on this selection.

To analyze in what section is Guangala, is necessary to know that the nine strategic

windows is a model uses industry globalism and the firm's preparedness as criteria for deciding if

the firm should go abroad, internationally or rather to stay at home. (Stavrou, 2015)

Guangala is an adolescent potencially global company because it considers to expansion

in more international markets and is going to make alliances in the future.AQUI VALERIA

DIJO QUE YA IBA A VER XQ NOSE SI ESTE BIENNNNN EL PORQUE ELEGIMOS ESO

Chart 1

The model of the 9 strategic windows

Industry Globalism
Local Potencially global Global
Mature
Preparedness for
Adolescent Guangala Company
internationalization
Inmature
Note: Adapted from (Stavrou, 2015)
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5. Motives for internationalization and internationalization triggers

5.1. Motives for internationalization

The decision to internationalize must be supported by many strong reasons as this process is

not only complicated throughout it, but rather in the risk and time incurred by the company when

it decides to complete each stage that has the internationalization.

Today it is common to hear, almost daily, that internationalization is an irreversible necessity

for the company. Growing up is a basic reason. But another key reason is that

internationalization is a way to gain competitiveness. Entering this virtuous circle of

internationalization-competitiveness is a solid path to the prosperity of business and society at

large. There are four main reasons why companies become internationalized: a) growth, b)

competitiveness, c) diversification of markets, d) ensure the supply of inputs for their production.

(Fanjul, 2017)

5.1.1. Proactive

Profit and growth goals.

According to the company they decide to internationalize because they want to maximize

the profitability of the company.

Foreing markets opportunity

Today, consumers worldwide are looking for a new trend of eating more natural foods.

Especially internationally it represents a rising market, in front of a consumer who wants treats

or a sweet pleasure, but without affecting their heal, something difficult to achieve in products

with a high sugar content.

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5.1.2. Reactive

Domestic market

In the United States and Europe there are many chocolates on the market and well-known

brands that prevent internationalization.

5.2. Internationalization Triggers

The international triggers are the internal or external taking place to initiate

internationalization. In the internal triggers have perceptive management, specific internal event

and importing as inward internationalization. On external triggers have market demand,

competing firms, trade associations and outside experts. (Hollensen S. , 2011)

5.2.1. Internal triggers

Perceptive management

Many times, the experience allow it to grow to a point that allows them to

internationalize, in the case of Guangala, experience in the cocoa market makes them take

advantage of this 100% raw material to produce the final product that everyone wants.

5.2.2. External triggers

Competing firms

United States and Europe have many brands than sale a similar chocolate, and for that

reason exist a lot of Competence in those markets.

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6. Barriers hindering the process of internationalization

6.1. General Market Risk

Competition from others firms.

General market risk is the risk of a broad market movement unrelated to any specific

securities. The long and short position in the market would be calculated on a market-by-

market basis, i.e. a separate calculation would have to be carried out for each national market in

which the firm held equities. (Riskinstitute.ch, s.f.)

Within United States and Europe, we can find big brands that have a high position in te

market, therefore these are our direct competitors within the cocoa market. In Unites States we

have companies like: M&M1, Hershey´s, Reese´s, and others. Also in Europe we have

companies like: Toblerone, Treuscher, Sprüngli, Lindt, Cailler-Nestlé.

6.2. Commercial Risk

Commercial Risk can be defined as Financial Risk taken by a seller while extending credit

without securing any collateral or recourse. It generally includes all risks other than the Political

Risk. It refers to probable losses arising from the business partners or from the market. In order

to reduce Commercial Risk, it is very important to ensure that the trading partners are reliable.

(Mbaskool, s.f.)

The possible commercial risk that Guangala had in this process of internationalization

were: a) Exchange rate fluctuations; b) Delays and/or damage in the export shipment and

distribution process

1
M&M.- Mars and Mars
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6.3. Political Risk

Political risk is the risk an investment's returns could suffer as a result of political

changes or instability in a country. Instability affecting investment returns could stem from a

change in government, legislative bodies, other foreign policy makers or military control.

Political risk is also known as "geopolitical risk," and becomes more of a factor as the time

horizon of an investment gets longer. (Chen, 2018)

According to the research, the political risk is mostly reflected with the United States

as with Europe it maintains a harmonic relationship. Such as the non-signing of the free trade

agreement with the United States.

7. Recommendations for the barriers hindering the process of

internationalization

7.1. General Market Risk

7.1.1. Competition from others firms

We think that the company must gain a better knowledge of the market and its needs, so

it can think of a strategic alliance with the big brands and so that it can be better scope and

market share.

7.2.Commercial Risk

7.2.1. Exchange rate fluctuations

The Company need to use a currency option, where you can protect a certain exchange

rate but also be able to participate if market rates move in your favor.
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7.2.2. Delays and/or damage in the export shipment and distribution process

The Company must be aware of the consumers request in advance to avoid delays and
damage.

7.3. Political Risk

7.3.1. Foreign government restrictions

The restrictions that governments place should have a resounding and total change so that

free trade can exist and help each other economically between countries. This is recommended

for the signing treaties and reforms such as taxed that contributed to the free trade.

8. The Internationalization Model

According to Kenton “Internationalization describes the process of designing products to

meet the needs of users in many countries or designing them so they can be easily modified, to

achieve this goal. Internationalization might mean designing a website so that when it's

translated from English to Spanish, the aesthetic layout still works properly.” (2019)

There are several types of internationalization models, for Guangala we select the

traditional model, this model “reflects the traditional marketing focus on the firm’s core

competences combined with opportunities in the foreign environment. The cost-based view of

this tradition suggested that the firm must possess a ‘compensating advantage’ in order to

overcome the ‘cost of foreignness’.” (Hollensen S. , 2008)

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As we know Guangala is a chocolate producer, in order to have a place in the market and

be positioned in the market of the customer, it must have something that makes it different from

the other products. Guangala has a type of chocolate that is 85% chocolate and the other 15% is

of milk, sugar and butter. This means that the flavor of the cocoa beans is more intense and better

than the other chocolates this can help them to overcome the cost of foreignness.

9. PESTAL Analysis

It is an analysis of the external strategic macro environment in which the organization

works. PEST is an acronym of the factors: Political, Economic, Social and Technological

context. These external factors are usually beyond the control of the organization and, often, they

are presented as threats and at the same time as opportunities. (Universidad Nacional de

Colombia , 2010)

9.1. Political Factors

The United States of America constitutes a federal constitutional republic, with a

presidential regime as a form of government based on the separation of powers in three branches:

executive, legislative and judicial. (El Economista, 2010)

It has a bipartisan system where there are two political forces, which are the progressive

Democratic Party in the social sphere and is in favor of government intervention to regulate the

market economy. The other is the Republican Party which is conservative on the social level,

defends liberal capitalism and national defense. (Santander Trade, 2019)

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9.2. Economic Factor

The United States is the third largest country in the world both in total area and in

population. In addition, it has the largest national economy in the world, with an estimated gross

domestic product (GDP) of 16.62 billion in 2012, which represents approximately 25 percent of

global nominal GDP. Its national GDP in purchasing power parity is also the largest in the world,

approximately 20 percent of the world total. The United States has a mixed economy and has

maintained a stable pace of global GDP growth, a moderate unemployment rate, and high levels

of research and capital investment. (Studycountry, 2010)

The US economy is essentially based on services. The tertiary sector contributes more

than three quarters of GDP and employs more than 79.40% of the country's labor force. A large

part of the GDP is made up of the finance, insurance, real estate, rent and lease (18.2%) sector

and the education services, health and social assistance sector (8.2%). The government sector (at

the federal, state and local levels) contributes about 11% of GDP. The remaining 5.7% of the

labor force is classified as "independent non-agricultural". (Santander Trade, 2018)

9.3. Social Factors

The average American has access to many sources of recreation and entertainment, the

sport being the preferred one, especially so-called football, basketball and baseball. It is common

to say that there is an "exaggerated consumerism" in the United States. A good standard of living

and access to all kinds of products makes people want (and can) have it all. (Mequieroir.com,

s.f.)

There are department stores and shopping malls, a wide range of specialities and goods,

offers of all kinds called "sales", and in general an organized and equipped trade that provides a
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good service. The average American consumes five times more than a Latin American, 10 times

more than a Chinese and 30 times more than a Hindu. (Mequieroir.com, s.f.)

9.4. Legal Issues

In this PESTEL analysis of the USA is the legal environment. Though a detailed

discussion on the legal environment of the USA is beyond the scope of this article, the article

addresses some of the key areas in brief. Each state in the USA has its own government structure

and legal scheme. Businesses come under the regulatory environment of the state in which they

operate. The country upholds equal treatment of nationals and foreigners. Expatriate employees

can expect an unbiased trial from the judicial system. The USA also offers a strong legal system

to protect Intellectual Property Rights. (Jo, s.f.)

The U.S. Constitution describes the functions of government. Then were added the 10

amendments called "Bill of Rights" or "10 Amendments" that limit the government's powers and

establish individual rights. These amendments are treasured by citizens because they represent

the struggle of many minorities for equality. (Mequieroir.com, s.f.)

9.5. Technological Factors

The USA is the global leader in science and technology. Americans have a longstanding

fascination for technology, and companies such as Apple, Microsoft, Google, Facebook, and

many others have addressed the technological needs of the Americans and the people around the

world. And in doing so, they have become the global leaders in their respective field. (Jo, s.f.)

The USA has been at the forefront for adapting and applying technologies in a wide

variety of fields. Technologies have changed the ways many things are done. Many jobs have

been transferred from the USA to other countries and production facilities have been relocated.
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While this has helped companies reduce their production costs, it has also made many Americans

upset. The rate of technological innovation and change is extremely rapid in the USA. However,

the country faces strong challenges from several countries e.g. China, South Korea, and India.

(Jo, s.f.)

9.6. Ecological Issues

The USA has an extremely diverse geography, climate, and wildlife. This diversity

coupled with other factors has been a driving force to draw millions of tourists to the country.

(Jo, s.f.). The United States has an obligation to implement restrictions and activities that prevent

attacks on nature.

It was the first country to have such a large national park for its inhabitants and has

established several green areas throughout the country for that they have ecological ports where

goods are loaded and unloaded.

10. Psychic distance and physic distance

10.1. Psychic Distance

Psychic distance within the internationalization process is not only based on the nature of

the specific business and the degree of adjustment, but also on authoritative and administrative

qualities. Therefore, the distinction between different environments, the country of origin, as

well as the foreign marketplace establish the concept of psychic distance. (Korte, 2016)

 Language: In Ecuador they speak Spanish and in the United States they speak

English
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 Culture: In this aspect Ecuador and United States are very different by their

traditions since some celebrations are the same in these two countries but their

way of celebrating them are different as Christmas, Happy New Year, etc...

 Religion: In these two countries there are varieties of religion but in Ecuador the

Catholic religion is more predominant.

10.2. Physic Distance

The physical distance between two markers is measured with the number of nucleotides

between them. If these markers are 1000 base apart, the physical distance will be 1000 nt.

Physical distance can be measured with sequencing and counting the nucleotides. (Can, 2017)

According to the time difference between the Ecuador and New York, N.Y has one hour

ahead. To send goods to N.Y can be done by sea and by air and the difference in the distance line

between the country of origin and the country of destination are:

 4,810 Kilometers

 2,989 Miles

 2,595 Nautical Miles

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11. Bibliography

Nicholas School Masters Project. (2013). Evaluating opportunities for enhancing Mondelēz’
sourcing strategies to ensure sustainability of its cocoa supply. Obtenido de Duke
University: https://sites.duke.edu/adhoc_sitesdukeedusustainablecocoaso/methodology/
Tardi, C. (15 de Abril de 2019). Value Chain: Investopedia. Obtenido de Investopedia:
https://www.investopedia.com/terms/v/valuechain.asp
Stavrou, R. (3 de July de 2015). The Nine Strategic Windows Model: Global Marketing.
Obtenido de Global Marketing: https://globalorientation.blogspot.com/2015/07/the-nine-
strategic-windows-model.html
Fanjul, E. (2017). Iberglobal. Recuperado el 16 de 06 de 2019, de
http://iberglobal.com/index.php/escuela-de-comercio-exterior/1453-por-que-
internacionalizarse
Hollensen, S. (2011). Global Marketing. Obtenido de A decision-oriented approach:
https://nscpolteksby.ac.id/ebook/files/Ebook/Business%20Administration/Essentials%20
of%20Global%20Marketing%20(2009)/8.%20Chapter%202%20-
%20Initiation%20of%20internationalization.pdf
Riskinstitute.ch. (s.f.). Recuperado el 16 de 06 de 2019, de http://ifci.ch/141730.htm
Mbaskool. (s.f.). Recuperado el 16 de 06 de 2019, de https://www.mbaskool.com/business-
concepts/marketing-and-strategy-terms/11793-commercial-risk.html
Chen, J. (07 de 2018). Invetopedia. Recuperado el 16 de 06 de 2019, de
https://www.investopedia.com/terms/p/politicalrisk.asp
Kenton, W. (12 de June de 2019). Internationalization: Investopedia. Obtenido de Investopedia:
https://www.investopedia.com/terms/i/internationalization.asp
Hollensen, S. (2008). Global Marketing. Pearson Education.
Universidad Nacional de Colombia . (2010). Análisis PEST. Obtenido de
http://www.odontologia.unal.edu.co/docs/claustros-colegiaturas_2013-
2015/Guia_Analisis_PEST.pdf
El Economista. (2010). Sistema Político. Obtenido de
https://www.eleconomista.es/especiales/elecciones-estados-unidos/sistema-politico.php
Santander Trade. (2019). Estados Unidos: Politica y Economía. Obtenido de Santander Trade
Portal: https://es.portal.santandertrade.com/analizar-mercados/estados-unidos/politica-y-
economia?&actualiser_id_banque=oui&id_banque=0&memoriser_choix=memoriser#pol
itical
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Studycountry. (2010). Las actividades económicas de Estados Unidos . Obtenido de

https://www.studycountry.com/es/guia-paises/US-economy.htm
Santander Trade. (2018). Estados Unidos: Política y Economía . Obtenido de Santander Trade
Portal: https://es.portal.santandertrade.com/analizar-mercados/estados-unidos/politica-y-
economia
Mequieroir.com. (s.f.). Vida cultural y social. Obtenido de
https://www.mequieroir.com/paises/eeuu/emigrar/descripcion/vida-cultural/
Jo, D. (s.f.). PESTEL analysis of the USA: Howandwhat. Obtenido de Howandwhat:
https://www.howandwhat.net/pestel-analysis-usa/
Korte, D. (2016). The concept of "psychic distance" and its meaning for the global activity of
small, medium, large sized businesses operating in foreign markets. Obtenido de Grin:
https://www.grin.com/document/370223
Can, H. (13 de March de 2017). What exactly are physical distance and genetic distance on a
chromosome, and what are some examples? Obtenido de Quora :
https://www.quora.com/What-exactly-are-physical-distance-and-genetic-distance-on-a-
chromosome-and-what-are-some-examples
Rouse, M. (March de 2011). Small to medium enterprise (SME) . Obtenido de WhatIs.com:
https://whatis.techtarget.com/definition/small-to-medium-enterprise-SME
Wright, T. (05 de April de 2018). What Is Polycentric Orientation? Obtenido de Azcentral.:
https://yourbusiness.azcentral.com/polycentric-orientation-27300.html