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Channel and Pricing Strategy 1

Running head: CHANNEL AND PRICING STRATEGY

Channel and Pricing Strategy

Marissa Estaya

Mervin Gabon

RaShaan Davis

Marketing/MKT 571

April 26, 2010

Gina Owens-Ricks, MBA


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Introduction

The RoboProduce also known as RoboPro, a power-driven fruit and vegetable picking

device or machine defined with an improved method of picking fruit and vegetables, using a new

rapid airborne technique method. This device or machine imitates various types of tractors or

other propelling equipment with various (mechanical arms) extensions to extend and decrease in

height to pick the required fruit and vegetable. This device or machine engages the stem of the

fruit or vegetable, disconnecting where pressure against stem causes separation of fruit or

vegetable from stem. During the motion, the fruits or vegetables are cleansed and packaged.

The device is manufactured at a reasonable size for utilization and storing. Our team was asked

to develop and market this product and apply marketing concepts during the research.

The objective of this case study is to elaborate on a business justification on channels of

distribution and pricing strategies for the RoboProduce product launch; based on trends, size of

market, growth rate, and profitability including both domestic and international markets. The

research of this paper will determine "what is feasible" in the internal and external environment

factors such as pressures of technological forces, globalization, demographic trends, changing

governmental political impacts, and strong economies impacts to the produce industry. This

paper will provide ramification to avoid the risks of changing environmental factors on

organizational choices for the domestic and international markets.

Business Justification

Our team selected another international market which is China; it has been reported to be

the world’s largest fruit and vegetable producer as illustrated in Figure 1.0 which was reported

by FAOSTAT (Food and Agriculture of the United Nation Statistics) in 2004. The statistics also

show China produces 19% of the world’s produce in 2003. Since this is the trends provides an
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obvious market for our product, we will launch our product in China. The sustainability of

RoboProduce is likely to succeed with the information as indicated in Figure 1.0, this illustrates

the China is consistently increasing their production outruns any other produce manufacturing

countries. China reports at a 6% average production growth rate in the period years of 1996 –

2003. Brazil was our primary international market which is another key producer including, the

United States of America (USA), Mexico, Chile, and South Africa. However, the production rate

in Brazil and the USA has been fairly stable over the periods of 1996 – 2003. The average annual

growth rate of Brazil is 0.34 % and 0.61 percent in the United States (FAS USDA, 2010).

Figure 1.0

Source:FAOSTAT,2004
Channels of Distribution

Our team research the profitability based on the channels of distribution such as China,

Brazil and the USA; and realized how well these different countries exporting performance in the

produce industries. The profitability can be accomplished as indicated in the statistics from

FAOSTAT based on the trends and make a sound decision to launch RoboProduce

internationally in Brazil, China and bring it back to the USA. We would expect our potential
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competitions to follow our marketing strategy internationally as Figure 1.0 Clearly identifies

production capacity (FAS USDA, 2010). As mentioned in an article on USA Today, many

companies worldwide are vulnerable to outsourcing to China as the labor is cheaper. One

example is Del Monte. Del Monte has stopped it’s productions in Hawaii for pineapple as Del

Monte reports, “it was no longer economically feasible to grow pineapple[s] in Hawaii because it

can be produced for less in other parts of the world.”(USA Today, 2006 para. 2). However, our

goal is to also make the USA more profitable so we do not have to outsource these industries,

RoboProduce is an American product that should contribute more to its place of origin in making

them the leading producer worldwide. RoboProduce can grow the production here in the USA

and be able to maintain the number one spot light in exporting produce.

Economic Environment

In regards to the economic environment, as marketer of the RoboProduce we should

focus on savings; debt, and credit availability. The debt ratios, in the US alone we are

experiencing a higher debt-to-income ratio; this slows down the purchasing power of a

consumer. In the case of the RoboProduce we have to determine the debt of the potential

distributors, resellers and the companies we sell to. If these entities are looking to cut cost, they

may not have the investment to buy or finance this type of equipment, they have to ensure the

can cover the cost to implement the product. Many times companies will not want to buy these

high priced items if the economy is not in the best situation. As a team we decided to provide

leasing options to our potential customers to avoid the risk of this economic factor (Kotler &

Keller, 2006)
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Social and Demographics

RoboPro is a new, exciting, economical, swift and advantageous machine that allows a

more rapid and effective outcome of productivity in the fruit and vegetable picking industry.

Research has shown that RoboPro executes at almost double the speed of 10 manual workers in

China. Our team reviewed certain factors before deciding to become a global firm, that operates

in more than one country and captures R&D, production, logistical, marketing, and financial

advantages in its costs and reputation that are not available to purely domestic competitors, as

recommended by Kotler and Keller (Kotler & Keller, 2007).

One of our competitors, Vision Robotics are currently building the scout and expect to

have a prototype ready next year, with the harvester to follow two or three years later. Engineers

claim it doesn't expect the mechanical systems to pose any serious problems, the hard work is

writing the software. After the scout robot makes a 3-D map of the tree, it has to evaluate each

piece of fruit. The robot needs to determine size, type of fruit or vegetable and color. It's a

question of gathering the information, and then judging whether it meets the parameters of

readiness. In entering this global industry, in which the strategic positions of competitors in

major geographic or national markets are fundamentally affected by their overall global

positions, RoboPro develops a strong following and raises a huge interest (Vision Robotics,

2010).

Pricing Strategy

The pricing strategy is simple and clear, RoboPro can target the competitor’s domestic

market by offering a stronger product or lower price. Potential customers consist of Brazilian

and Chinese farmers, small crop sharers, and large manufacturing distribution companies.

Several evaluations have proven the product is superior or advanced however; our team is
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convinced that selecting a penetration pricing technique is the best option during this economic

phase. The current cost to purchase one RoboProduce robot is $250, 000 and works at 10 times

the speed of the average crop labor worker. A pull strategy would with sales; this involves the

manufacturer using advertising and promotion to persuade consumers to ask intermediaries for

the product, thus inducing the intermediaries to order it. Another option would be the leasing

option, which is offered to our future customers’ and demonstrates the appreciation for the

Chinese business culture. A push strategy fits this option best which encourages the

manufacturer to use its sales force and trade promotion money to induce intermediaries to carry,

promote, and sell the product to end users. Good marketing and promoting will be essential to

the future success of the RoboPro robot.

The product adaptation in China would be a vast change and involves altering the local

usual conditions however, by adding a faster more effective way to pick fruit will add value to

the cultural diversity of both the organization and the country. Attracting foreign business can

improve the local economy, provide jobs, and improve infrastructure by targeting this particular

niche RoboPro establishes a footing in new markets (Kotler & Keller, 2006). RoboPro can be

considered a forward invention, as China is one of the world’s largest fruit manufacturing

countries which could benefit significantly.

Government Influences

In addition to cultural, cyclical, seasonal, and geographical differences that exist when

trying to decide when and where to launch a product into international markets, the RoboProduce

must also consider governmental and political bodies as these factors will either inhibit or

prohibit its legal use. When considering the agricultural industry, organizations must consider
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other countries legal entities. Each country, governed by its politicians, will have its own ideas

and views on legal policies, international trade, and import/export regulations.

Local governments and politicians play a very large role in the selection process of what

products enter its market. Understanding that products can either help or deter their economies,

policy and decision makers can heavily influence an organization’s choice to pursue market

penetration. For example, in the Aerospace industry, Northrop Grumman and the Boeing

Company both put in bids for a jet refueling plane. The Tanker, as it is called, is decided by the

US Government. Northrop Grumman faced heavy criticism as it partnered with the European

company EADS. According to Reuters.com (2010), “Congressional aides and military analysts

said that the European company would face a tough uphill political battle on its own, given U.S.

concerns about alleged European subsidies” (para. 8). Northrop Grumman eventually bowed out

of the U.S. Tanker bid. Ultimately, politics can sway which way decisions are rendered.

There are many risk factors involved when trying to enter into an international market.

The Chinese ‘New Technology’ regulations are the biggest concern for RoboProduce where

implications surround its profitability and innovation. According to TopNews.com (2010), “The

new regulations being adopted by China in order to encourage local technology are substantially

hurting US companies and making them lose sales” (para. 1). As a non-traditional agricultural

vehicle, the RoboProduce heavily relies on its programmable software and innovational

technologies. International regulations can play a large risk in market entry.

Innovation and Technology

The RoboProduce is built on the ideas of American agricultural industry vehicles and

innovative programming software. The vehicle design is based on the strength of American

industrial vehicles from companies like John Deere and Caterpillar. Using military
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reconnaissance information technology, global positions systems, and advanced programming

robotics, the RoboProduce integrates data into a useful aggregate agricultural machine.

The RoboProduce is equipped to run on its own using unmanned technologies. In

agriculture, the assumptions are that fields are segregated in linear fashion. This gives room for

easy navigational programming on the RoboProduce. Once its path is programmed, the

RoboProduce will run its course, collecting, identifying, selecting, and systematically picking

fruits. The programmable fruit selection process can be queried by an advanced discriminating

algorithm segregated by weight, color, size, tenderness, and even natural defections.

The ever changing, ever evolving rate of technology is the key to RoboProduce’s success.

It has technology similarity of the Kitchen Aid tool which improves due to innovative

attachments, RoboProduce will not only thrive with further innovations, but will remain the

market leader. Upon market entry, the RoboProduce will be a vehicle run on conventional means

such as gas and biodiesel. Innovative technologies will push the RoboProduce to run on

alternative sustainable energy. A hybrid engine is already being implemented but talks of hydro-

powered and other natural sources of energy are being produced. As the market shifts towards

‘greener’ products, the RoboProduce will eventually be green, for green, by green. Increasing

innovation and technology will guide the RoboProduce to success.

Conclusion

In comparing this similarly to the cotton gin in the Industrial Revolution, the

RoboProduce is created from developing technologies and is designed to improve the way we

gather resources. The RoboProduce is a powerful new breakthrough in the agricultural industry.

Using innovative technologies, the RoboProduce will select fruits and vegetables delivering

exceptional quality and lowering laboring costs for private and commercial agricultural sectors.
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The RoboProduce will launch in the Chinese and Brazilian markets as both shows a favorable

profitability pattern and is projected to maintain its exporting performances. As we considering

the economic environment and pricing, the RoboProduce will focus strategically on savings,

debt, and credit availability. Leasing options will be offered to customers to buffer against

economic conditions. Due to heavy influences from governmental and political entities, the

RoboProduce has been mindful of the international markets available and receptive to US

products. Major concerns with entering in an international market are the laws and regulations

governing these markets. China’s ‘New Technology’ regulations may prove to be a big challenge

when considering a launch in their market. However, because of its heavy focus in R&D,

pushing innovations and improving technologies will only allow the RoboProduce to become

more and more dominant in the agricultural industry.


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References

FASUSDA.gov. Food and Agriculture of the United Nation Statistics 2004. Retrieve on

April 25, 2010 from: http://www.fas.usda.gov/htp/Presentations /2004/

World%20Fresh%20Fruit%20Market%20%2808-04%29.pdf

Kotler & Keller. (2006). Marketing Management (12th ed.). New Jersey: Pearson-Prentice Hall.

Kotler & Keller. (2007). A Framework for Marketing Management (3rd ed.). New Jersey:

Pearson-Prentice Hall.

Reuters.com. (2010). Northrop quits U.S. tanker contest. Retrieved on April 27, 2010 from

http://www.reuters.com/article/idUSTRE6280B120100309

TopNews.com. (2010). New Technology Regulations by China Hurt American Firms. Retrieved

on April 27, 2010from http://topnews.us/content/213931-new-technology-regulations-

china-hurt-american-firms

USToday.com. Del Monte stops pineapple growing in Hawaii. Retrieved on April 26, 2010 from

http://www.usatoday.com/money/industries/food/2006-02-02-del-monte_x.htm

Vision Robotics Corporation. (2007). Retrieved on April 6,2010 from: http://visionrobotics.com/

(2007).