Smart Cookie: SWOT Analysis
Oreo's entry into China and India presented two different types of challenges to the successful American cookie company. Because these two cultures were different from the American culture that had made the cookie famous in the U.S. (and each different from one another), Oreo had to consider how best to approach these two markets in order to make its product a worldwide success. Both countries represented enormous market opportunities for the company -- and each posed their own unique obstacles. China, for instance, was not traditionally a cookie eating nation; India was the biggest cookie eating nation. The former demanded a longer term strategy than the latter simply because of the Chinese orientation to cookies in general (let alone to the Oreo brand itself). From a SWOT perspective, Oreo was in a position to build its brand in both markets if it adapted to the particular demands of each. This paper will discuss how one could determine which markets to target short versus long-term and how one could develop a strategy for a new product as well as measure its implementation in Capsim.
The lessons learned from Oreo's market penetration and eventual success in both China and India show that some situations require long-term planning while other situations can bring immediate gain through short-term planning. Context is everything in all cases, and the contextual setting of China's market revealed to Oreo early on that its approach was incorrect. It could not treat the Chinese culture as though it were the same as the American culture. Mattel would make that same mistake when opening its House of Barbie (Burkitt, 2013; Wang, 2012). The Chinese culture (like the India culture) was price-conscious -- far more than the American culture that Oreo was used to. Thus, the company's first mistake was adopting a short-term, short-sighted approach to the new market and pricing its products too high. The other mistake it made was thinking it could sell the same American cookie to the Chinese, who really were not oriented to eating cookies (unlike the Indians, who were). Oreo achieved minimal penetration as a result and Kraft was obliged to rethink the company's approach.
Thus, for a company like Oreo with a very American product, taking a short-term approach in a foreign market like China was the incorrect method. To establish itself there it had to target China long-term: identify the characteristics of the culture that made it unique, ascertain what it wanted in a cookie, develop the cookie according to Chinese tastes (flavor, look, texture), and market it (package and price)...
In effect, Oreo re-built its image and product from scratch -- it created a brand new cookie that the Chinese would like (one that looked nothing like the American Oreo) (Clements, Jain, Jose, Koellmann, 2013). This would enable the company to establish a footprint in the country -- a foundation upon which it could build its brand, which is exactly what happened. By taking the long-term approach and taking the time to learn the culture, it could ease its way into the country and into the consciousness and overtime implement its own American variation and method of eating (dunking the cookie in milk).
A SWOT analysis of the Oreo company entering China would reveal the following:
• Strength: Strong company, dominant in America.
• Weakness: Unappealing to Chinese consumer because expensive and the flavor was too bitter or too sweet; China was not traditionally a cookie-eating culture.
• Opportunity: Huge market potential in China; possibility of gradually introducing American concept of pairing Oreo's with milk after successfully launching a product that would appeal to the Chinese.
• Threat: Ignorance of the culture, refusal to find out what would appeal to the Chinese consumer.
Part of the strategic model that could be applied using Capsim for a long-term target would be to fund the initiative with long-term bonds. With today's low interest rates, this is a particularly appealing approach to acquiring the capital necessary for long-term investment (research and development, marketing, taste testing, consumer surveys -- all of this could be funded by corporate bond sales at low interest rates). The research and development could be slated for 1-2 years with a finished product developed and ready to be marketed in China thereafter. Brand development would follow and the Americanization of the product could be achieved once the culture had shown an interest in the "American" cookie and method of eating. A small R&D team is all that would be needed for this endeavor: a half dozen to a dozen individuals handling the various aspects of the cultural analysis (surveying, taste testing, etc.) while the product development crew could be the same size and be set in motion upon receiving the findings of the cultural assessment crew. Eventually, the brand would be able to build its way up to being a dominant player in the market by taking stock of its strengths (its dominance in America would make it simple to sell long-term bonds to investors), its weaknesses (ignorance of the Chinese culture, which would need to be…
