Sultan Halwa product is to launch in UAE and Saudi Arabia

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1. Introduction
Sultan Halwa is an Omani based company that distinguishes itself by quality
products serving high-income segments. It is mostly served in religious
occasions, wedding parties, and family gatherings. This report investigates
potential markets for Sultan Halwa. Middle east countries have similar
characteristics so marketing mix might be standardised. Here, Saudi Arabia and
UAE markets would be analysed including PESTLE, porters’ five sources,
prices, distributions, and value chain.

UAE:
UAE is a middle eastern country that has a high gross domestic product per
capita.

2. Macro Market Analysis

Dalirazar and Sabzi (2020) argue that PESTLE is a strategic technique that
investigates the influence of political, social, technological, economic,
environmental, and legal factors on market. UAE is a global business hub that
offers great opportunities for foreign companies.
Regarding political factor, UAE has a stable environment which consists of
seven emirates and they have good trade relations with most countries around
the world. UAE has high GDP per capita, and gain more money from foreign
direct investments. Many international companies focus on Dubai. Suppliers are
easily connected and diverse.
Social factor in UAE characterized by people earn decent pays which enhance
comfortable lifestyles. Globalization grants UAE to have mix of different
cultures. Religion has an impact on society. Technology is integrated widely in
business in UAE. Since people are wealthy, they use smart technology. Young
people are tech-savvy and utilize it in their projects and purchasing. UAE hosts
many technology and business forums.
Regarding legal factor, UAE apply trademark and 35 licensing. People in
UAE has similar religion rules, customs, and culture of neighbouring country
Oman. Environmental factor should be taken into account when delivering
business in UAE. Foe example, hot and dry climate makes it difficult to work at
certain times of the day. Long coast that UAE has eases the trade by the sea
(Hellgren, 2018).

Porters’ five forces:

Porter’s five forces is a model that is used to analyze an industry and develop a
business strategy. It determines attractiveness of a market based on five forces

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which are: the threat of substitution, the threat of new entrants, the
bargaining power of buyers, the bargaining power of suppliers and
competitive rivalry.

Bargaining power of buyers: it is easy for customers to switch from Halwa

shop to another because bargaining power of buyers is high.

Threat of substitution is low: Substitution of Sultan Halwa is not easy since

the competitors in the Halwa industry do not have power over the market.
Sultan Halwa is more appropriate for demands of clients.

Threat of entry: UAE market is promising due to high income individuals

and economy growth. Supply chain is well established that connects all UAE
areas, So distribution might be easy.

Power of suppliers: Sultan Halwa has high bargaining power over its suppliers.

competitive rivalry: UAE already has Halwa shops. Examples of them are
Zahran AlHarasi for Omani Halwa, AlSultania for Omani Halwa, Al Mahlawi
Oman Sweet, Alsarooj sweets, and AlKhuwairat for Omani Halwa.

Value chain:

Marketing Communication:

Digital marketing becomes the mainstream in marketing field in UAE due to

most people spend much time with their smart phones. Therefore, marketers
should have updated knowledge about digital trends (Banjo, 2013).

Distribution: UAE has effective supply chain system to distribute

manufactured products.

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Saudi Arabia:

Macro-market Analysis:

Political element:
Tensions with nearby country (Yemen)

Technological element:
Leveraging knowledge and technology in food production.

Economical element:
Implementing VAT in Saudi Arabia.

Legal element:
Labour reforms and regulations in Saudi Arabia.

PESTLE analysis for UAE:

PESTLE is a way which is used for analyzing macro-environment of a
company. It consists of six elements.

Political: Policies set by Saudi governments impact manufacturers and retailers.

It puts more pressure on manufacturers.

Economic: there is an annual growth of GDP which is reflected on the increase

of national consumption. It is believed more consumption rate would grow in
future. Individuals and organizations would demand more especially in seasonal
times (national days, Eids, Hajj, Ramadan). Saudi plans to be of the top ten
economic countries in the world. So domestic demand would increase.

Social: living standard of Saudi improves which allows individuals buy Halwa
that is characterized by high quality and reputation. Saudi people are generous
and want to provide their guests with high quality halwa. This would increase
Sultan Halwa sales and bring more revenue. Saudi Arabia has prestigious
universities with high education standards which attracts foreigners to study
who might be attracted by Sultan Halwa brand. Saudi is usually loyal to known
brands and help in building future success for Sultan Halwa.

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 Technological: Saudi established a campaign for digital transformation which
would be reflected in promoting Sultan Halwa positively. Qualified employees
for using technology would be available this might allow Sultan Halwa to
penetrate in Saudi market in a fast manner.

Porters’ Five forces:

Porters’ five forces analyses the attractiveness of a business through five
elements:

1- Industry competition: In Saudi Arabia the competition would be low so

Sultan Halwa would do whatever it wants to increase its profits. There are
existing Omani Halwa shops in Saudi Arabia like Al Diwaniya For
Omani Sweet,
2- New entrants into Saudi markets: There are more likely more companies
of halwa enter the market so the power of Sultan Halwa decreases.
3- Suppliers’ power: suppliers of Halwa ingredients (sugar, ) are many, so
their power to increase prices is less likely to happen.
4- Customers’ power: Customers have less bargaining power so they might
not drive Sultan Halwa price down.
5- Threat of substitutes: Sultan Halwa product is not easily substituted by
rivals and thus they do not form a threat to Sultan Halwa profitability.

This report shall highlight the most relevant PESTLE factors for Seed and Bean’s
consideration. An important political consideration is the outcome of Brexit, which
could have a significant impact in a variety of ways. Arguably the most important
impact Brexit may have is that according to Gov.UK (2018) the EU and Japan are
planning to create an EU Japan economic partnership agreement (EPA), which will
eliminate over 97% of export duties currently in place. These tariffs include export
duties on processed foods and agricultural products, which specifically pertains to
the products Seed and Bean would be exporting. This is particularly significant
because if the UK leaves the EU without a deal then the UK will not be included in
the EPA and will have to pay the current world trade organisation tariffs with Japan
of 10% (WTOData 2018), which makes the prospect of expanding to Japan
considerably less attractive. However, if the UK does not leave the EU, or negotiates
a leaving deal that will involve participation in the EU Japan EPA, then Seed and
Bean will be able to freely export their products or ingredients to Japan without
export duties. There are also other important economic factors to consider.

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According to BBCnews (2019), the Bank of England has recently increased the base
interest rate from 0.5% to 0.75% which means that the cost of borrowing for Seed
and Bean is likely to increase from the amount it would have cost previously.
Borrowing capital is likely to be necessary to implement this international expansion,
particularly if Seed and Bean plan to produce products in Japan. Furthermore,
according to Londonstockexchange.com (2019) the exchange rate of GBP to JPY
has fluctuated significantly in the last twelve months but has ended at a weaker
exchange rate i.e. 1 GBP can be exchanged for less JPY than it could have this time
last year. If the value of GBP continues to fall against JPY it could work favourably
for Seed and Bean in terms of product distribution, as Japanese retailers are more
likely to import Seed and Bean products from the UK, as they will be able to do this
at a relatively low cost. However, this could decrease profitability for Seed and Bean.
An important legal and technological factor relates to product packaging. According
to (USDA.gov 2017) Japan is planning to introduce new requirements for all
processed food products to display mandatory allergens such as milk and peanuts,
but also recommends that a further twenty allergens are displayed. As this legislation
loosely reflects EU legislation it may not be a problem for Seed and Bean as they will
have experience in this area. However, it is important to consider brand reputation,
as Seed and Bean market themselves as a luxury brand it is important to consider
complicity with Japanese regulations, for the expansion to be a success.
Furthermore, the USDA.gov (2017) also indicates that Japan is introducing country
of origin requirements, i.e. processed food products that are produced in Japan but
contain imported ingredients, must state the country of origin of the main ingredients
by weight. This will only be relevant if Seed and Bean decide to produce their
products in Japan, but this could be damaging to Seed and Bean’s reputation if the
countries of origin of product’s main ingredients are not considered luxurious, which
could suggest to consumers that Seed and Bean products are not high quality.

3. Micro Market Analysis (Porters five forces)

Analysis of the Japanese confectionery market illustrates that the market is very
lucrative e.g. in 2018 the chocolate confectionery market in Japan generated
JPY576B/£3.89B in revenue (Passport 2018), which is highly attractive for firms like
Seed and Bean that are considering venturing into this market. Furthermore,
Passport (2018) indicates that chocolate confectionery sales in Japan have grown
every year since 2012. This consistent market growth suggests a relatively low level
of risk in terms of product demand for Seed and Bean, although it may be
problematic due to the attractiveness of the market signalling to competitors a strong
market opportunity. The chocolate confectionery market in Japan is forecast to grow
every year until 2023, as well as market volume, which is forecast to grow by 0.7%
by 2022 (Passport, 2018 Marketline Advantage 2019). This suggests a long-term
market trend, which is a promising sign for a brand that is planning to expand into
this market, as it could maximise profit as well as reducing risk. However, the market
is diversified with 18 name brands comprising 62.1% of the market and 37.9% of
brands classed as ‘other’ i.e. retailers selling products produced by their own brand
(Passport 2018). This represents a large amount of competition, which increases the
risk factor for Seed and Bean if they choose to expand into the Japanese
confectionery market.

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Marketline Advantage (2019) suggests that there are relatively high costs for new
entrants when entering the Japanese confectionery market as foreign brands usually
set up production facilities in Japan, owing to confectionery products in Japan
usually being mass market. This could be problematic for Seed and Bean owing to
the previously highlighted increase in interest rates meaning there are currently
relatively high costs to set up foreign production facilities. However, Marketline
Advantage (2019) also suggests that it is possible to enter the market on a smaller
scale if providing a high-value artisanal product. This is beneficial for Seed & Bean
as their brand reflects the notion of high quality, with artisanal products. This also
means that they may be able to avoid foreign production which would incur vast
costs. On the other hand, the potential benefits of exporting rather than producing in
Japan may be offset if Seed and Bean incur the tariffs previously highlighted that are
associated with a no-deal Brexit.
A further consideration is that within the Japanese confectionery market the threat of
substitution is growing, due to increasing consumer awareness of the negative
health implications of products that are high in fat and sugar, which is leading to
growing consumer demand for crisps and fruit products (Marketline Advantage
2019.) This trend poses risk, as, despite market forecasts of growth amongst the
chocolate confectionery market, growth amongst healthier snack markets could take
retailer’s finite product display space away from confectionery products. However, to
an extent the threat of substitution is reduced due to there currently being reluctance
from retailers to stock these substitute products, as they have a greater storage cost,
faster rates of perishability, higher rates of wastage and in terms of fruit products
may require specialist merchandising equipment such as chilled fridges (Marketline
Advantage 2019). Finally, Marketline Advantage (2019) indicates a strong degree of
buyer power, as hypermarkets, supermarkets, and convenience stores comprise
65% of the confectionery market distribution, and these retailers often sell many own
brand chocolate products, which could impact Seed and Bean’s market share.
However, this is more of a threat to low-end market brands, and to an extent, this
issue can be mitigated with the successful branding of premium products (Marketline
Advantage 2019). Additionally, the risk of strong buyer power could be slightly
diminished if the value of GBP continues to fall against JPY, as retailers are more
likely to import luxury products if they can be procured at a relatively low price.

Value Chain Sultan Halwa UAE:

Inbound Logistics
Sultan Halwa

4. Value Chain Activity

4.1 Inbound Logistics
Porter (1985) suggests that a firm can derive sustained competitive advantage
through its value chain activities. After analysing Seed and Bean’s value chain
activities (see appendices 2) the most important activities will be discussed to assess
whether they generate sustained competitive advantage. Unless otherwise stated

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the information in this section is drawn from the case study (Comrie 2018). A
significant bundle of value chain activities that Seed and Bean engage in relates to
inbound logistics, i.e. acquiring ingredients for products from Ecuador and The
Dominican Republic. Marketline (2019) suggests that Japanese chocolate brands
often procure ingredients from Ghana, Brazil, and Indonesia. Jinap et al (1995)
tested consumer preferences to chocolate samples from different countries of origin
and found that chocolate produced in Brazil, Ghana, and Indonesia were perceived
as more flavoursome than chocolates produced in Ecuador and the Dominican
Republic. As this data is relatively old it is likely to be indicative rather than accurate.
However, relative to Seed and Bean’s potential competitors in the Japanese
confectionery market, these value chain activities are not likely to provide Seed and
Bean with a sustained competitive advantage. In this instance, Japanese chocolate
brands arguably hold a country-specific advantage i.e. they may be able to procure
ingredients from these countries more easily and cheaply than Seed and Bean, due
to geographic proximity. However, in terms of inbound logistics Seed and Bean
demonstrate their brand's core value of sustainability by packaging products in
entirely recyclable foil and packaging made from plant cellulose that is
biodegradable. These activities may generate sustained competitive advantage for
Seed and Bean, as a Marketline Advantage (2019) report indicates that consumers
in the Japanese confectionery market have a preference for ethical practices and
sustainability.
4.2 Operations & Outbound Logistics
Seed and Bean’s operations are likely to help generate sustained competitive
advantage. For example, Seed and Bean have the competency of specialist
production expertise, i.e. they use small specialist batch sizes of 45 litres compared
to industrial operations of 20,000-50,000 litres, which helps to reinforce the
company’s position as a premium chocolate artisan brand. Additionally, Seed and
Bean’s outbound logistics activity of distribution using reputable high-end retailers
such as Waitrose and Selfridges is likely to generate sustained competitive
advantage, as these activities suggest brand quality. Furthermore, outbound
logistics activities that are likely to generate sustained competitive advantage for
Seed and Bean include their success of exporting their products to 24 foreign
countries, including countries with a reasonably similar climate to Japan’s e.g.
Australasian countries, which means that Seed and Bean have the competency of
international expansion expertise.
4.3 Marketing & Sales
The value chain activities that arguably are most likely to generate sustained
competitive advantage for Seed and Bean relate to their marketing activities.
Compared to other leading Japanese competitors such as ‘Lotteco' and ‘Meijo,' Seed
and Bean's products can be classified artisan, whereas competitors’ product
portfolios include less luxurious products (Lotte.conf.co.kr 2019). Marketline (2019)
suggests that brands with artisan products are the most likely to succeed as new
entrants in the Japanese confectionery market, which increases the likelihood of
sustained competitive advantage for Seed and Bean. Furthermore, Seed and Bean
reinforce their core value of ethicality by being a Fairtrade company. However,
according to Marketline Advantage (2019), many brands within the Japanese

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confectionery market are compelled to follow Fairtrade practices, due to consumers
generally demanding Fairtrade products in this market. Therefore this activity may
not necessarily help generate sustained competitive advantage, as it is fairly typical
amongst the market, so this activity will not provide Seed and Bean with a unique
selling point. Finally, marketing activities undertaken by Seed and Bean that may
help generate sustained competitive advantage includes a recent rebrand involving
changing product packaging, which has proved to be more eye-catching and
indicative of the brands quality.

5. Evaluation
Overall, having discussed the most relevant factors for international expansion into
the Japanese confectionery market, it is advisable that Seed and Bean do expand
into the Japanese market. The primary reason for this relates to Seed and Bean’s
marketing activities, and competencies, in the face of market conditions. In the UK
chocolate confectionery market, Seed and Bean derive competitive advantage from
their firm-specific advantages, namely their ethical practices, which is valued
amongst consumers (Morgan Stanley 2016). Their ethical practices arguably
generate sustained competitive advantage over competitors such as Green & Blacks
or Divine. As an industry report from Marketline Advantage (2019) suggests that
success for a new entrant in the Japanese confectionery market would derive from
premium artisan products and an ethical brand, there is a clear alignment between
consumer demand and Seed and Bean’s firm-specific advantage. Seed and Bean’s
reputation as an ethical, premium brand will be a direct advantage if they choose to
enter the Japanese confectionery market, particularly as they have a presence in
twenty-five international markets, which is likely to have reinforced the brand’s
reputation globally. A critical success factor for Seed and Bean relates to their
competency of international expansion expertise. Seed and Bean's competency of
international expansion knowledge will be highly beneficial as they will have
expertise in logistical issues, such as product packaging, product transportation, and
product storage. Seed and Bean’s standardised products i.e. products are not
tailored to individual country’s markets means it is likely that ingredients and
packaging are designed to endure different conditions such as globally varying
temperatures and storage for various periods of time. This would be useful for this
international expansion venture as products would have to travel a great distance if
produced in the UK, and are likely to have to endure conditions in high temperatures.
Seed and Bean's product standardisation also indicates the brand's confidence in
the quality of its premium artisan products, as they have been successful in
distributing standardised products amongst countries that are likely to have varying
tastes. Additionally, as there is forecasted market growth for the next several years
within the Japanese confectionery market, it is arguably an opportune time for Seed
and Bean to expand into this market.
Despite this, there are areas of consideration for Seed and Bean before deciding to
execute this particular international market expansion. Most importantly, the result of
the Brexit outcome could have a huge impact on the success of this international
expansion venture. Whether the UK is included in the EU Japan EPA will have a big
impact on the success of the venture. Furthermore, it is important to consider the
volatility of exchange rates, as clearly it would not make financial sense to launch

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this venture if the value of GBP decreases too much against JPY. It is also important
for Seed and Bean to research the cost of borrowing, as previously indicated this
cost is increasing, and it could prove to not be financially viable to launch this
venture if the cost of borrowing capital continues to rise. Finally, it is worth Seed and
Bean doing further research surrounding the tastes of Japanese consumers, as
research has suggested consumers prefer chocolate that derives from countries of
origin often found in Japanese confectionery. However, as this research is relatively
old it may not be accurate, as factors such as climate change may have led to
decreased quality in the ingredients used in Japanese confectionery products.

6. Reference List:
BBC News (2018). Bank of England raises UK interest rates. Available at:
https://www.bbc.co.uk/news/business-45043776 [Accessed 20 Feb. 2019].
GOV.UK (2018) UK welcomes approval of new trade agreement with Japan.
Available at: https://www.gov.uk/government/news/uk-welcomes-approval-of-new-
trade-agreement-with-japan [Accessed 16 Feb. 2019].
Londonstockexchange.com (2018). ETFLJPYSGBPETP interactive chart (GBJP)
London Stock Exchange. Available at:
https://www.londonstockexchange.com/exchange/prices-and-markets/ETPs/
company-summary-chart.html?fourWayKey=JE00B3XR4V72JEGBXETCS
[Accessed 20 Feb. 2019]
Tariffdata.wto.org (2019) WTO | Tariff Download Facility: WTO tariff data base.
Available at: http://tariffdata.wto.org/TariffList.aspx [Accessed 22 Feb. 2019].
Lotte.co (2019) Crunky. [online] Available at:
http://www.lotteconf.co.kr/eng/Product/info.asp?mn=010600&pcd=LC605#n
[Accessed 26 Feb. 2019].
Comrie, C (2018) Potential Market Access Model. Global Marketing Management
[online] Available From:
https://blackboard.uwe.ac.uk/webapps/blackboard/content/listContent.jsp?
course_id=_303149_1&content_id=_6184307_1&mode=reset [Accessed
20/02/2019].
Comrie, C. (2018) Seed and Bean: A British organic chocolate company investigate
the Japanese confectionery market. Global Marketing Management [online]
Available from
https://blackboard.uwe.ac.uk/webapps/blackboard/content/listContentEditable.jsp?
content_id=_5270510_1&course_id=_284080_1&mode=reset [Accessed
20/02/2019].
Gain.fas.usda.gov. (2019). Revised Country of Origin Labelling Requirements for
Ingredients. Available at: https://gain.fas.usda.gov/Recent%20GAIN
%20Publications/Revised%20Country%20of%20Origin%20Labeling
%20Requirements%20for%20Ingredients_Tokyo_Japan_10-27-2017.pdf [Accessed
22 Feb. 2019].

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Jinap, S., Dimick, P. and Hollender, R. (1995). Flavour evaluation of chocolate
formulated from cocoa beans from different countries. Food Control, 6(2),
pp.105-110. [Accessed 24/02/2019].

Marketline Advantage (2019) Confectionery in Japan. John Carpenter House, John

Carpenter Street London. Advantage.Marketline.Com Available from
https://advantage.marketline.com/Product?ptype=Industries&pid=MLIP2886-0013
[Accessed 19/02/2019].
Morgan Stanley. (2019). Is Ethical Retailing Real?. [online] Available at:
https://www.morganstanley.com/ideas/ethical-retailing-consumers-survey [Accessed
26 Feb. 2019].
Passport (2018) Chocolate Confectionery in Japan. Place of Publication N/A.
Passport.euromonitor.com Available from:
https://www.portal.euromonitor.com/portal/analysis/tab [Accessed: 23/02/2019].
Porter, M.E. (1985) Competitive Advantage: Creating and Sustaining Superior
Performance. New York: Free Press. [Accessed 21/02/2019].

7. Appendices:
Appendices 1: A Full PESTLE Analysis

Political: EU Japan economic partnership agreement (EPA) will create world’s largest free trade area,
eliminating over 97% of export duties currently in place. (Gov.Uk)

Political: EPA will reduce tariffs on processed foods, agricultural products, beer, wine and whiskey.

Economic: in 2018 Japan experienced economic growth of 1.1% (IMF) and inflation has remained
just below Bank of Japan’s 2% target (IMF)

Economic/Legal: Japan’s parliament passed labour market legislation designed to set legal cap on
overtime work and ensure equal treatment for regular and non-regular workers.

Economic: UK bank of England has increased the base interest rate from 0.5% to 0.75%
(BBCNews2018)

Social: Japan’s population has shrank 0.26% (Worldpopulationreview.com)

Social: Japan has the greatest number of people aged over 65 in the world
(worldpopulationreview.com)

Technological: Japan as a country is highly technologically advanced, i.e. there is a large extent of
automation. Per 10,000 employees there are 303 robots/Artificial Intelligence, making Japan the 4 th
most automated country in the world. (JapanTimes)

Tech/Legal: New country of origin requirements i.e. food products manufactured in Japan will soon
require that it is stated which country the main ingredients by weight are manufactured. (FAS.USDA)

Tech/Legal: New legislation requires all processed food products to display any of the seven included
mandatory allergens e.g. milk, egg, buckwheat, peanuts. There are also twenty recommended
allergens which primarily include meat, fish and nuts. (USDA)

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 Tech/Legal: From 2015 a five year transition period began, whereby all processed imported food
products from companies with more than five employees must display nutritional information per
serving (USDA)

Legal: Japan has regional minimum wages, which is highest in Tokyo (Gov.uk)

Environmental: Japan prone to earthquakes and tsunamis (BBCNews)

Appendices 2:

A value chain tailored to Seed and Bean’s Activities

Firm Infrastructure: No information available on firm infrastructure.

Human Resource Management: Employs fewer than ten people

Margins

Technological Development: Product development i.e. new different flavours

Procurement: Small Scale Suppliers. Procurement of only organic ingredients.

Inbound Operations: Outbound Marketing & Service:

Logistics: Chocolate Logistics: Sales: Ethical Blog to
Entirely keep
Margins
handmade Distribution business
recyclable foil. in the UK. using high practices. customers
Packaging from Deliberately end retailers Premium up to date.
plant Celluose small batch such as products. Twitter
that is sizes of 45 Waitrose and Fairtrade Account
biodegradable Litres Selfridges. Practices.
Global
Distribution.

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