DON DON The Case of a Slovenian Gazelle Written by Vytautas Vasiliauskas

DON DONS Major strengths :

The company can adapt very quickly to the market, because it is medium-size company, comparing to competitors. Constant adaptation to changing customers eating habits. Continuous development and research of how to improve the quality of the products and all the production. Successful financial figures: From 1998 to 2003 the average annual growth rate was 62% which clearly indicates DON DONS fast growing nature. Big variety of products: three product lines (fried pastry leader) In general, the company itself differs from other competitors, they have created different brand name comparing to other big companies in the market which have kept they corporate name. Smart pricing system (market-pricing) policy

DON DONS Major weaknesses : In early stages the company did not pay dedicate much attention to its organizational and HR aspects of the business. Whole companys managerial system didnt look very strong as the company was managed by four members of the board and lost of each member could cost company a fortune. Low budget on advertising. This could well be an advantage and disadvantage of having the major part located in the western Slovenia. Production and distribution systems did not always run smoothly. The past two partners made some unfortunate decisions. They franchised production, which have made quality standards to drop.

DON DONS sources of competitive advantage. One of the biggest advantages comparing to the competitors was the IT system of DON DONS. The orders were not placed by customers, instead, they were placed by regional managers, who had the best knowledge to forecast sales. In this way the were able to adapt much quicker that the competitors. DON DON was the first Slovenian bakery to develop a separate brand name for fried pastry. In this respect, DON DON was a market innovator. The company positioned itself as a fried pastry leader. This strategic positioning also enabled the company to maintain its technological leadership.

Target market analysis Three investigated markets are: The Italian market; The German and Austrian market; The Visegrad group of countries. The Italian market Italy was the second largest consumer of baked products in the region in terms of volume and value. Italy seems to be good opportunity as it consumes a lot of high quality pastry and the DON DON is quite successful in this segment. However, the intermediaries system was quite complex and not very transparent. The image of Slovenian brand was relatively low and negative according to Mozeti because Italians viewed Slovenian companies mainly as subcontracting partners. The German and Austrian market The puff-pastry product category had potential in the Austria and Germany markets as these markets had a less negative perception of Slovenian brands. However, high entry barriers made market penetration difficult. For the first two markets mentioned a lot of advertising is needed, and the risk to fail is very high because of the brand unawareness. The Visegrad group of country There are some countries like Poland, Hungary and Slovakia which have a positive growth of the volume of retails sales of bakery products between 1998 and 2003. The changing lifestyle in these countries may also seem to be a good opportunity as the consumers became more busy and lacked time to shop, so the packaged bread and cakes became more attractive. The threat is that the market was slowly consolidating as multinational producers were gaining scale. This meant that the big companies could evade the market very quickly

Most suitable internationalization strategy The Italian, German and Austrian markets are not the best opportunity for DON DON. The company is not financially strong enough as it also should be bigger to enter these huge markets. The company would not be able to fill all the market, because there would be much bigger competitor which could offer more for less. The Visegrad group of country seems to be a better option. The entrance to the market would not be so hard and would not require so much money as entrance to the markets mentioned above. The Slovenian products also have a better reputation in this market, and the similarity of cultures would also be a big plus. But to enter the whole countries in the group would be way to optimistic. Instead, DON DON should choose one country or one market where they could sell their production. In my opinion, the best market to enter would be Poland as people lifestyle is changing rapidly and they need to be offered something that is healthy and well packed. DON DON could well offer that. The consumption of pastry products are also increasing quite rapidly, this only proves that Poland should be the best market to enter of all the markets listed.