Marketing mix and strategy for Ethiopia's coffee marketing


Term Paper, 2019
20 Pages, Grade: A

Excerpt

Contents

What to achieve? How?

Preface

Marketing Strategy Overview

Introduction of Ethiopian Coffee

A.Brief History
B.Vision and Mission
C.Core Value
D.Corporate Beliefs

The Coffee Global Value Chain

Coffee Marketing Strategy in Ethiopia

Analysis of Ethiopian Coffee Mix Marketing Strategy

I.PRODUCT STRATEGY
1.Product Segmentation
2.Product Diversification Strategy
3.Productivity & Quality:
4.Packaging
5.Branding

II.PRICE STRATEGY
1.Price segmentation
2.Minimize cost through boosting productivity
3.Comply with international market price

III.PLACE STRATEGY
1.Distribution Channels
2.Warehouse and processing unit

IV.PROMOTION STRATEGY
1.Public Relations
2.Coffee Museum
3.Coffee Festival
4.National and International Trade fair and Expo
5. Launching of new export promotion strategy

Conclusion

References

What to achieve? How?

Objectives:

1. Describe the general situation of Ethiopian coffee market
2. Apply theory of Marketing Mix 4P’s in analysing and evaluating Marketing Strategy in Ethiopia coffee processing and trading for the next 5-10 years.

Subject and Scope of Study:

- Subject: Marketing mix and strategy for Ethiopia’s coffee marketing
- Scope: Ethiopian Coffee / Ethiopia Trading Business Corporation /1

Method:

Analyzing information collected from: (i) Internet and mass media; and (ii) From different Website.

Preface

According to Philip Kotler and Gary Armstrong, the marketing mix is the set of controllable tactical marketing tools—product, price, place, and promotion—that the firm blends to produce the response it wants in the target market. Marketing Mix includes everything that company uses to affect its demand of product, which can be summarized into four groups of variables – Ps.

Abbildung in dieser Leseprobe nicht enthalten

Fig 1. Marketing mix

Product is the good-and- service and experiences that firms offer to market.

Price is the amount of money charged for a product or service as well as the total values that customers exchange for the benefit the gain from using product.

Place consist of all activities that company make product available to target consumers.

Promotion means activities that communicate the merit of the product and persuade target customers buy it.

Marketing Strategy Overview

Marketing is the process of planning production, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals, cited in Kotler, 2003). When we start marketing strategy, the same term apply to the words “objective” and “strategy”. The marketing objectives are the aims, the goal to which the entire marketing effort of the organization is directed. Marketing strategy therefore refers to the means by which the marketing objectives will be achieved. Marketing strategy determines the choice of target market segments, positioning, marketing mix, and allocation of resources.

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Figure 2: Framework of Marketing Strategy

Source: Adopted from Roger Brooks bank, 1994, pp.1014.

Introduction of Ethiopian Coffee

A. Brief History

World consumption of coffees is expected to increase by 0.8 percent from 2015/16 to 2016/17. Following this increases in world demand for coffee, volume exported by different countries is expanding. For instance in 2015/16, Brazil stands first for world coffee exports, which account for about 28 percent of the total exports, followed by Vietnam, Colombia, Indonesia and Honduras taking 24, 10, 7, and 4 percent of world exports consequently . In 2015/16, Ethiopia took ninth place according to this data, which accounted for about 3.12 percent of world total with export of 3520 thousand bags. Ethiopia which is considered as coffee’s birthplace produces high-quality Arabica coffee for both the domestic and international markets. Coffee plays a major role in Ethiopia’s economy and is deeply intertwined with cultural traditions and day-to-day living. According to (Tefera, 2016) there are an estimated 15 million people, or approximately 15 percent of the country’s total population, who derive their livelihoods from coffee. Annually, an average of about 150,000 tons of coffee is produced in Ethiopia. In contrast to other coffee producing countries, the Ethiopian coffee production is dominated by small holder agriculture, contributing with more than 90% of total harvest (Dercon, 2002). A special feature of Ethiopian coffee production is that domestic consumption is considerably high, as coffee is traditional beverage throughout the country, FAO estimates that about 50% of total harvest is used domestically, and that some farmers grow coffee only for home consumption (Dercon, 2002).

Ethiopia is the single largest African producer of coffee with about half of its production going for export. It plays a central role in Ethiopia’s economy and as the country’s leading export is an important source of foreign exchange. The coffee bean export business reserved for Ethiopia citizens. Out of the total number of coffee exporting companies, 93 percent are private companies, 5% are coffee growing farmers' cooperatives, and 2 % are governmental enterprise. The extent to which cooperatives and private, including previous Ethiopian Grain Trade Enterprise (EGTE) now named Ethiopia Trading Business Corporation (የኢትዮጵያ የንግድ ሥራዎች ኮርፖሬሽን) and state farms, play a role in coffee exports from Ethiopia. Currently coffee generates less than 35 percent of the total export earnings. For the last several years its relative predominance in the export sector is decreasing because of increased contribution of other agricultural products like horticulture and floriculture. Consequently, only a little over 26% percent of the total export earnings is contributed by coffee during the year of 2011 (FDRE, 2011). This is the lowest share earned from export of coffee in the history of economy.

B. Vision and Mission

- Vision: Producing, processing and delivering large volume of coffee with best quality and other side line products to the market and stand first among the rivals engaged in the sector via increasing its market share sustainability and play an important role being a model in transferring technologies for the beneficiaries in the vicinity.
- Mission: The mission of the Enterprise/Corporation is to coordinate its resources in producing & processing best quality of both washed and unwashed coffee with a minimum production cost, selling them in the domestic and export market so as to increases its sales revenue, creating employment opportunity, enhancing its contribution in foreign currency earnings of the country, become competent in the market, and ensure its profitability and playing a role of transferring technology for the farmers and other growers in the vicinity of the farms in the Enterprise.

C.Core Value

- Great ambition
- National and international spirit
- Unceasing creativity and breakthrough
- Good execution
- Value generation and sustainable development

D.Corporate Beliefs

- Coffee makes the world more prosperous
- Coffee is the fuel to the knowledge economy
- Coffee fosters harmony and promotes sustainable development

The Coffee Global Value Chain

Coffee is an economically strategic commodity for many equatorial LDCs. Production and processing activities employ nearly 26 million workers across all coffee exporting countries, combined (ICC, 2010). Coffee is also among the most widely traded commodities in the world economy, representing US$16.5 billion in gross annual trade (ITC, 2011). The coffee GVC includes several stages of transformation from inputs to final marketing, which typically take place in diverse locations around the world. Due to the inadequacy of global input-output data for the coffee industry, it is difficult to get precise figures on shares of value-added contributed at each stage of production. However, estimates indicate that the share of value captured by primary producers has declined over time, while the share of global buyers has increased. In the 1970s, it was estimated that primary producers captured 20% of the total value of the final product, while buyers retained about 50%. Recent evidence suggests that primary producers now capture only between 5 and 10% of the final retail value and buyers capture 75% (FAO, 2013).

The changing governance dynamics in the global market have increased opportunities for developing country producers to engage directly with roasters in the regular coffee segment and to benefit from increased interactions with buyers regarding issues of quality production and price. Over time, these interactions can potentially drive upgrading (Gereffi et al., 2005). However, small coffee producers have very little bargaining power in regular coffee GVCs due to limited economies of scale, undeveloped commercial skills, and poor access to information about conditions in end markets. Furthermore, they often lack the capital required to transport the product to port, relying on traders and roasters to provide financing and transportation. As a result, small producers often receive a very low share of the final value of the coffee produced. For example, as shown in Figure 4, in 2008, producers of Washed Arabica Coffee received approximately 5% of the final US$20 per lb retail price.

Figure 3. Distribution of Value for Washed Arabica Coffee by Actor, Ethiopia 2007/8

Abbildung in dieser Leseprobe nicht enthalten

Source: Light Years IP, 2011; USAID, 2010b

Coffee Marketing Strategy in Ethiopia

The Ethiopia Trading Business Corporation has been engaged in exporting coffee, oilseeds, and pulses, and local grain market stabilization. It serves the interest of Ethiopian coffee producer and coffee buyers by exporting coffee. It buys coffee from Ethiopian Commodity Exchange and process the coffee for exporting Arabica Green Coffee which is Yirgaceffe Grade 2, Sidama Grade 2/4, Harar Grade 4/5, Lekempti Grade 4/5 and Limmu Grade 2 high land grown coffee and major type of commercial coffee to the world market. The corporation export 53,840 quintal coffee in 2015/16 year which is 30% share out of the total exported commodity (Egte, 2016). Given its significant contribution in the national export earning, the unit serves the interest of Ethiopian coffee producer and coffee buyers by exporting coffee studying to assess coffee marketing strategy and practice.

Exporting companies should design their marketing strategy in order to build sustainable competitive advantages. A useful approach marketing strategy is to understand the performance differences between exporters, i.e. why are some firms more successful than the others in their export operations. It is because of different strategies or managerial attitudes. Katsikeas (2000) identified two main groups of explanatory variables of export performance: background variables and intervening variables. Intervening variables are those that have a direct influence on export performance, such as the company's targeting and marketing strategy. Relatively little empirical research has been developed to identify which elements of the marketing strategy are most associated with export performance. The key decision companies have to make in terms of their export marketing strategy is the level of standardization or adaptation of each element to the local conditions (Douglas and Craig, 1989).

Ethiopia has shown a significant growth in the exports of coffee over the last years. Although the importance of supply side factors like production cost and climatic conditions, the international market channelling factors of coffee may give insight for future policy implications. Given its significant contribution in the national export earning, and to serves the interest of Ethiopian coffee producer and coffee buyers, the Ethiopia Trading Business Corporation must design marketing strategy plan for five years to be competitive in the exporting sector. Therefore, the general objective of this paper is to design coffee marketing mix strategy of the Ethiopian coffee trading Business.

There are no specific governmental policies related to coffee production, though the GOE does support its production through various extension services (e.g. seedlings, research, etc.). Separately, there are market-related regulations that dictate how coffee is bought and sold in the marketplace. Several examples include: the prohibition on selling exportable grade coffee on the local market, even when the local market price is better than the international price; special business licenses are required for wholesaling, exporting, and roasting; storage limits; and the coffee business is exclusively limited to Ethiopian-owned companies.

Analysis of Ethiopian Coffee Mix Marketing Strategy

Earlier studies show that majority (41.9%) of the coffee trading companies in Ethiopia uses all 4Ps of marketing mix element. But, 11.6% of the traders use product and remaining 27.9% the company’s use price and distribution (Tizita, 2017). Regarding the competitor and the marketing strategies designs to win the competitor, competitor analysis help the company understand its competitive advantage relative to competitors. It also generate competitor past, present and most importantly future strategy. Moreover, it provides an informed basis to develop strategies to achieve competitive advantage in the future.

I. PRODUCT STRATEGY

1. Product Segmentation

We better provide our customers both consumer and industrial products. It means the customers have various choices to use our products as convenience ones as well as factor for conducting businesses. To meet the demands of enjoying coffee of different groups of customer, we need to create the variety in product range, which has been separately illustrated in 3 product segments: (i) General segment may include 3 or more product lines; (ii) Middle segment; and (iii) Premium segment. Each segment may have its own price range.

2. Product Diversification Strategy

Provide better quality and increasing market share increase volume of sale by offering competitive price as per customer demands and will effectively accomplished by improving the type, quality and quantity of the products, by discarding all out dated machines and substituted them with modern and state of the art for the preparation of the export coffee, the study indicate that the existing market segmentation of the company is geographical and behavioural.

2.1. Raw Coffee /Supply a Variety of Raw Coffee to the Market/

Specific Area Brand Coffee

There are a wide range of product exports different types of coffee for local and international market. The major coffee type was classified as washed and unwashed type (dry coffee). Another classification of coffee was based on the rank that coffee has based on their quality. These are Yirgacheffe-2, Sidama-2, 4, 5, Limmu-2, Jimma-4, 5, Harer-4, 5, and Nekemte-4, 5. Accordingly, these types of coffee were exported for the last five years. These coffees again grouped under washed and dry coffee type during export time and other than coffee.

Arabica coffee

There are two species of coffee grown for consumption: Arabica and Robusta. Arabica beans are typically considered to impart a superior taste compared to Robusta beans and therefore fetch a higher market price relative to Robusta (ITC, 2011; Ponte, 2002a). Arabica coffee trees thrive only in particular geographic conditions, such as an altitude of 1,000-2,000 meters and average temperatures between 15° and 24°C (ICO, 2013a). Arabica coffee is a high-quality coffee in the world and the developed countries are regular importers of the Ethiopian Arabica coffee. Germany, Italy, Saudi Arabia, the United Kingdom, the United States of America, Belgium, Spain, France and Sudan are the major importers of the Ethiopian Arabica coffee.

[...]


1 The Ethiopia Trading Business Corporation has been engaged in exporting coffee, oilseeds, and pulses, and local grain market stabilization. It serves the interest of Ethiopian coffee producer and coffee buyers by exporting coffee.

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Details

Title
Marketing mix and strategy for Ethiopia's coffee marketing
Grade
A
Author
Year
2019
Pages
20
Catalog Number
V494501
ISBN (eBook)
9783346005892
Language
English
Tags
marketing, ethiopia, Marketing mix in coffee business, Ethiopia's coffee marketing
Quote paper
Researcher Dereje Tesfa (Author), 2019, Marketing mix and strategy for Ethiopia's coffee marketing, Munich, GRIN Verlag, https://www.grin.com/document/494501

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