A Golden Opportunity: Trader Joes and the Italian Market Developed By A-CARD Marketing Team Alejandra Villaverde Caleb

E Hansen Alex Lin Ramon Salgado Denny De La Vega

2 Executive Summary Trader Joes, a quirky West-coast based grocery chain, should consider expanding their unique brand into the international market. As Trader Joes has spread across the United States, customers have come to love the low cost choices offered by the retailer, from delectable dinners to wonderful wines. As globalization of services continues to expand, firms of all types must cast an eye toward international expansion, to avoid being left behind, or forced out of business. The first step toward international expansion can be difficult, but Trader Joes has an excellent opportunity in expansion to Italy. Recent trends indicate a shift away from traditional cooking and shopping in Italy, and Trader Joes unique blend of convenience, quality, and selection is perfectly suited to take advantage of the new market environment (The Italian Mass Grocery Retail Sector, 2007) .). While large supermarket chains and small hometown retailers are abundant in Italy, there are very few grocers that can match the global supply network and selection of Trader Joes, while providing exceptional value to consumers. Additionally, Italys strong agricultural establishment can be tapped to supply much of the organic produce at Trader Joes, creating a double-sided value proposition for Italian consumers. The community traditions and the changing demographics (increasing urbanization, a growing young professional population) present a strategic opportunity that must not be missed. Forming a short-term partnership with an Italian firm in the grocery industry will enable Trader Joes to avoid many of the early pitfalls of international expansion, allowing them to gain a stable footing for expansion throughout Italy, and eventually the rest of Europe.

3 Strategic Overview Trader Joes is a chain of grocery stores first opened in 1966 in the state of California. Currently, Trader Joes has 319 stores with locations in over 20 states and new stores are opening up in neighborhoods all across the country. Trader Joes is planning increased expansion along the west coast, mostly in California. They are a privately held company and all of their stores are company owned and operated. Some of their products include essential groceries like bread, dairy, produce and cereal. They also focus on selling gourmet, organic, and imported food as well as imported and domestic wines. Additionally, Trader Joes maintains a robust private label business for many of their products. For instance, Trader Giottos is their private label offered for much of their Italian food. ("Trader Joe's: Your Neighborhood Grocery Store"). Recent survey data indicates that 60% of customers cite the private labels as a major reason they shop at Trader Joes. (DeLaVega and& Villaverde, 2009) Despite the breadth and variation of their selections from around the world, about Trader Joes is that they only carry about 2,500 items, approximately one-tenth of what most large chain grocery stores carry ("Trader Joe's: Your Neighborhood Grocery Store"). Value is one of the most important characteristics of Trader Joes and they strive to offer low prices for their high quality products. Daiva Glizoris, a customers of theirs, stated, I shop at Trader Joes because it is convenient for me, its close to my house and I really like their prices. They have the products Im looking for at a very affordable price (Glizoris, 2009). While they offer above-union wages and health benefits to their nearly 7,500 employees, Trader Joes employs a variety of unique measures designed to drive costs down ("TJ'S Mystique: Cheap Thrills"). One such step is to eliminate the

4 traditional service departments, with employees designated for certain store areas. Instead, employees are able to work anywhere in the store, handling jobs from stocking to cashiering, reducing the total number of employees needed at any one time. Trader Joes also seeks to cultivate a unique and friendly environment, with exceptional customer service. Since their employees are well-rounded, able to serve customer needs anywhere, they have been able to implement a very unique communication system in their stores. A bell is rung to indicate assistance is needed, and the number of rings lets employees know what type of assistance is needed, whether it is for spill cleanup, restocking, or anything else ("Trader Joe's: Your Neighborhood Grocery Store"). Between 1990 and 2001, profits increased tenfold. In 20018, sales were estimated to be approximately $2.1 billion. Their revenues for 2008 reached approximatelywere estimated $at $7.2 billion, with their line of more than 2,000 private-label products accounting for about 70% of their sales (Trader Joes Market, 2009). There are estimates of sales approaching $2.6 billion, or aboutSales averaged $approximately $12 million per store during the 2008 fiscal year ("Trader Joe's Company"), which ends in June (Hoover's). Situational Analysis Italy can be classified as both an agricultural base and industrial economy. It has few natural resources and the majority of goods manufacturing is done through small family-owned companies. The economy has a high debt with growing budget deficits. Since the beginning of the current global recession, Italys GDP has decreased by 1% and is expected to continue its decline. However, it is one of the least expensive countries in

5 the European Union. This will benefit Trader Joe's because it may help reduce the cost of promotion and advertising. Although They Italys unemployment level in 2008 was only 6%, (the lowest level since 1992), corruption and poor labor management has led to very also have high unemployment in the south part of Italy while the more industrial and professional northern region has very low unemployment. and low in the north part. Employees are paid low wages and very limited benefits, compared to the standard benefits and worker protections found in the United States (Background Note: Italy). The UU.S-Italy economic conditions are very cooperative and in 2008, Italy was the U.Ss twelfth largest trading partner (Background Note: Italy). Cultural understanding is very important for businesses operating in Italy and there are a few key concepts that need to be kept in consideration. First of all, individualism is a value that Trader Joes would have to identify with ("Doing Business in Italy | Italian Social and Business Culture"). The Italian culture favors doing business with family, or people with whom they are really close. Second of all, Bella Figura is a term used to describe the Italian business culture. This emphasizes appearance and being able to present oneself in a decent manner ("Doing Business in Italy | Italian Social and Business Culture"). This is important because Trader Joes would have to be able to present their materials so that it is appealing to the Italian culture. Equally important is the ability to have affective communication. The Italian culture finds it important to have open expressions, thoughts, and feelings. This is vital to establishing relationships with business negotiators. In order to be successful in Italy, Trader Joes would have to earn the consumers trust, adapt their appearance and culture to Italian taste, and communicate clearly the added value they can bring to the consumer.

6 Additionally, political factors are a strong influence on the entry to a new market. If Trader Joe's wants to use distribution, they need to ensure the agreements with European Union and Member State national laws. As a member of the European Union, Italy participates in the single market agreement that involves the free circulation of goods, capital, people and services within the European Union. This agreement may create a barrier for Trader Joe's. However, the U.S. Commercial Service offers help to U.S. firms interested in expanding or entering the Italian market. Their main objective is to promote of U.S. goods and services. The U.S. Commercial Service offers market research and counseling, identification and qualification of potential Italian agents and partners, advocacy and facilitation of trade dispute resolution, and promotion of the company" ("Doing Business in Italy: 2009 Country"). SWOT Analysis The SWOT analysis will help illustrate Trader Joes main strengths, weaknesses, opportunities, and threats to determine their market potential in Italy. Strengths- Trader Joes provides a diverse line of groceries at affordable prices. Their prices are not set for the wealthy; rather they are set for the average grocery shopper. This is an advantage for the company because Italy is classified as country with relatively high (See graph, App. B p.33) per-capita income ($33,500 USD); therefore, Italian citizens are likely to be attracted to this type of pricing (Italy, 2009). Culturally, Trader Joes

selection is an excellent fit for the Italian market. The large wine selection offered at Trader Joes should be well received, because Italy leads the world in wine consumption, with annual per-capita consumption around 60 liters (Cellarnotes.net, 2009). The

7 gourmet food selection is also likely to appeal to the Italian consumer, as cooking and enjoying food with friends and family is a staple of Italian tradition. Weaknesses- The Italian culture is highly individualistic. Italian preferences are influenced by individualism and that is why they prefer to do business with people they are already familiar with. Trader Joes would have to dedicate significant effort and time to building strong consumer relations. This could lead to expensive promotion and advertising to make consumers familiar with the product. The south side of Italy is less developed, industrially, and more reliant on its own agricultural industry, rather than the retail food market, which could pose significant challenges as Trader Joes seeks to engage the local population. Opportunities-The south side of Italy is less developed and more agriculturally based. To offset this potential weakness, Trader Joes could take advantage of this opportunity to help the community. The company has a wide selection of organic products and an extended produce selection. They could stimulate the local economy by buying directly from farmers, ensuring quality produce and creating goodwill. More jobs will be available and eventually this will benefit the economy. Moreover, women in Italy are entering the workforce ("Doing Business in Italy: 2009 Country"). This is an advantage for Trader Joes because since they are working for their own money, they have the option of choosing products like the ones Trader Joes offer. Changing demographic and lifestyle trends can help draw consumers who aspire to return to traditional Italian cuisine, avoiding fast food and living a healthier lifestyle (CNN, 1997). Threats- Since Trader Joes has traditionally catered to young and urban customers, they may have difficulty entering Italy, and competing with tradition. Another significant

8 threat is the fact that U.S exporters face fierce competition from European and local companies, especially since the formation of the European Union. ("Doing Business in Italy: 2009 Country"). Also, Trader Joe's can face competition from local companies, particularly because of the high context emphasis on individualism and personal relationships. Mode In order to successfully enter the Italian market, Trader Joes must first select the appropriate mode of entry and initial locations. To ensure success, Trader Joes must remain true to its original vision, while adapting it for cultural and geographic differences. Franchising would likely be a poor option, because Trader Joes would have to relinquish much of its operational control, risking the dilution of its culture and vision. Since Trader Joes is a privately owned company, perhaps the easiest mode of entry would be to extend the wholly-owned enterprise. However, foreign companies are often poorly received in Italy, and Italians tend to favor Italian owned companies (Mallek, 2009). Because of this favoritism, a joint venture entry seems the most appropriate way to achieve initial success. Establishing a partnership with a small Italian store would help provide Trader Joes with some ready-made business relationships, and would allow the company to capitalize on the partners reputation. In entering a partnership Trader Joes should establish a flagship store, and gauge further expansion on the success of the first venture. Ideally, when the business is successful in Italy, the bias against foreign ownership would fade as Trader Joes becomes a trusted name. At this point, Trader Joes should consider buying out the original partner and pursuing any expansion plans with the wholly-owned approach that

9 has been so successful in the U.S. In order to ensure this plan remains an option, the initial joint-venture contract would have to specify that Trader Joes has a buy-out right that can be exercised at anytime. Establishing a partnership is a short-term vehicle for entry into this market, not intended to dilute ownership of the company. It is in the companys best interest to enter into a partnership for initial entry, so, so Trader Joes shouldJoes should look for a company with a strong reputation and cultural ties that would benefit from a short-term partnership. Location The country of Italy is divided into 15 separate regions, but for more effective analysis we have separated the country into 2 main regions: the North and the South. Italy is divided into a developed industrial northand a less-developed, welfaredependent agricultural south, with high unemployment. (Cia World Fact Book) This indicates that for initial entry, Trader Joes should focus on the north. The reasoning for this is that we are mainly a grocery store; we cannot compete head-to-head with farmers that plant and market their own crops. The south also has a multitude of open air markets that would compete with us directly and stymie growth in that region. By establishing a base of operations in the northern region, Trader Joes has strategic marketing opportunity. As an organization, Trader Joes takes pride in cutting out the middlemen and dealing directly with the farmers; by putting the flagship store in the north, Trader Joes has a chance to do business with the farmers and purchase crops from them to sell in our stores and market them as Italian grown. (Trader Joe's) This allows for greater profits, increases goodwill, and diminishes the competitive threat by making the farmers suppliers.

10 Another important reason for choosing the North as the entry location is the younger demographic and the growth rate of the urban population; 68% of Italys population is located in urban areas and locating the stores in urban areas will allow for a larger target market, while lessening the competition of the rural open air markets. Recent trends have indicated .4% annual% annual growth in urbanization, suggesting that the targeted urban market will continue to grow (Cia World Fact Book). Italian cultural experts are in agreement that Trader Joes would have greater success in the urbanized areas, atracting the younger, professional demographic without upsetting traditions or facing directing competition with the small-town, personal markets (Ambrusi, Grimaldi, Mallek & and Russo, 2009) The large cities in the north that have increasing populations and high levels of tourism are the most attractive sites for initial market entry. Naples and Milan both have populations over 1 million, with robust tourism, so Trader Joes should focus site survey in those two cities (Citymayors, 2009)

Target Market (segmentation analysis) Because of the current global economic crisis, investors throughout the world are much more cautious. Risk factors play a much larger role in investment considerations, as investors and business try to achieve sustainable profits. Despite the fact that Italys economy has suffered in this recession, it remains one of the most attractive international markets for Trader Joes. Italy has a relatively high income and a burgeoning retail food and drink market (Italy, 2009).

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11 According to the CIA World Factbook, Italy has nearly 300,000 sq km. of land (roughly the size of Arizona) with a population of 58 million people. Italys population density is approximately 6 times that of the United States (CIA). High population density suggests that when Trader Joes builds a store in Italy, there will be a much larger potential customer base. This could be very profitable for Trader Joes, because sales volume will be much higher in Italy than in comparable stores in the U.S. A successful market entry will lay the groundwork for sustainable profits and growth, but Trader Joes must consider how to protect their investment from strong competition. Due to relatively low levels of naturally resources, 71.3% of Italys is derived from sales and service industries. This is good for Trader Joes because it means there will be a large pool of experienced workers who can staff and manage the stores in Italy (CIA, 2009). In keeping with our proposal for a limited-term joint venture, Trader Joes can engage the local people to manage the store because they are professional and knowledgeable about the local market. Italy has the largest food and drink market in Europe and this market increased continuously during the last 5 years. According to the Union of European Beverages Associations, the Italian people avoid soft drinks because they are not healthy. However, the Italian bottled water market is the largest in Europe. Nestle and San Benedetto are two of the leading players in the sector. Over the last five years sales of bottled water have increased by 15% in volume terms suggesting that there is still some room to grow despite the maturity of the market. As such, BMI forecasts that sales of bottled water will increase by 10% in volume terms and 22% in value terms by 2013. Trader Joes has a strong presence in the healthy beverage market with an extended line of flavored and

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12 vitamin infused water, and could use that a selling point to draw Italian consumers. (Italy food and drink report). The Union of European Beverages Associations has also stated that Italians are beginning to gravitate toward ready prepared foods and the convenience foods market in Italy is still underdeveloped. Trader Joes offers an excellent selection of prepared and convenience foods including low sodium, fat free vegetarian, and heart healthy quick meals (Trader Joes, 2009). In the Italian market, the convenience food and healthy beverage arenas provide a distinct advantage for Trader Joes. For a long-term investment, the economic and political environments are also important to consider. According to a European Union Report, the Italian GDP has attained constant growth of around 2% each year throughout the last 30 years, until losing 1% in 2008. This long-term stability is indicative of a stable economy that will provide excellent returns on investment and provides an excellent basis for sustainable growth in the marketplace. 1. Today, all investors become more and more cautious because of economic crisis. Investors want to get more profit; however, in this economic environment, investors pay much more attention to lower the risk. Italy is one of the most attractive markets for Trader Joes because Italy has a higher income in Europe and a larger size retail market in food and drink. According to CIA World Factbook web site, Italy has about 294,020 sq km. land and 58 million people. Through the calculation, the population density of Italy is 197.27 people/sq km which is over 6 times than Americas. High population density means when Trader Joes build a store in Italy, there will be 6 times more people live around the

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13 store than America and more people will visit the store and spend money there. Because there will be more people spend money there, Trader Joes will get a higher profit than US. It is more difficult to maintain the business than build it. Since Trader Joes decide to build the store in Italy, the managers of Trader Joes have to consider how to protect their business from keen competition. From CIA web site, 71.3% of GDP in Italy is from service which means there will be a lot of professional people working in service and manage area. Trader Joes can engage the local people to manage the store because they are professional and know more about local market. To engage the local people can also lower the cost and risk for Trader Joes. The Italian has the largest food and drink market in Europe and the market is increasing continuously during the last 5 years. According to the Union of European Beverages Associations, the Italian does not like soft drink because it is not healthy. However, the Italian bottled water market is the largest in Europe, Nestle and AcquaMineralse San Benedotto are two of the leading players in sector. Over the last five years sales of bottled water have increased by 15% in volume terms suggesting that there is still some room to grow despite the maturity of the market. As such, BMI forecasts that sales of bottled water will increase by 10% in volume terms and 22% in value terms by 2013.the large number of opportunities to add-value in the sector, including with flavored and vitamin infused water. The Trader Joes is professional in selling healthy drink such as juice and vitamin add water, so it could be its advantage in market. The Union of European Beverages Associations also stated that Italian is changing in favor of greater use of ready prepared food and the convenience foods are still underdeveloped. As listing

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14 on Trader Joes web site, Trader Joes provide a lot of prepared and convenience food which including low sodium, fat free vegetarian, heart healthy and quick meal. I have been Trader Joes several times before, I found there are lots kinds of prepared food and convenience food in there and I bought some of them, I found they are healthy and delicious. In Italian market, the healthy food and drink is the most advantage for Trader Joes. For long-term investment, the economic and political environments are also important for considering. As the European Union report state, the Italian GDP never changed over 2% each year in the last 30 years and it keep growing around 2% per year. So if Trader Joes invest in Italy, their properties should be retained and the business in Italy will be better and better with the right strategy in market. Competitive Strategy The Italian mass grocery retail (MGR) sector is gradually changing its face from a highly fragmented industry, characterized by a plethora of small, traditional food retail outlets, to a more consolidated sector, in which foreign operators are gaining in significance, and, in response, local players are increasingly joining forces (The Italian Mass Grocery Retail Sector, 2007). In considering market expansion into Italy, Trader Joes must carefully consider the competition that may exist, and the competitive climate for foreign businesses, especially in the retail sector. Traditionally, Italians have relied on small, mom and pop type organizations for their retail grocery needs. However, increasing globalization, and growing foreign investment into the Italian retail market is causing a shift in traditional retail operations (Ibid). Typical American-style supermarkets can be found

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15 in most large cities, and often have smaller spin-off versions in the smaller towns and villages (Shopping at the Large Supermarkets, 2009). Over one thousand such supermarkets are operated by Coop Italia, the largest supermarket chain in Italy. Employing nearly 60,000 people, with annual revenues well over 10 billion Euros (over 13 billion USD), Coop Italia is a cooperative based organization that is capitalizing on the increasing trend of local players joining forces. (Ibid, &and COOP, 2009). Coop Italia provides a unified front for a variety of players that are struggling to survive amidst globalization and an influx of foreign investment into Italys domestic retail sector. As major global retailers, such as Wal-Mart, continue to spread throughout Italy, Coop Italias cooperative strategy has helped domestic Italian retailers retain the largest grocery market share, for the time being. (The Italian Mass Grocery Retail Sector, 2007). There are also many small and open-air markets, especially in the rural areas, that may provide competition, especially in the produce department, for, for Trader Joes as they expand throughout Italy (Shopping for Groceries, 2009). Specific Strategies In developing a competitive strategy, Trader Joes should model its Italian strategy on the differentiation that has been so successful in the United States. As a company, Trader Joes has differentiated itself by being a store where you can find the best organic products from around the world, as well as being a company that tries to cut cost by dealing directly with the sources and not suppliers and should extend this differentiation strategy to the Italian market (Trader Joe's, 2009).

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16 Trader Joes competitive strategy in the U.S., while utilizing differentiation, has also emphasized a focused low cost approach. Buying direct from suppliers around the world has driven a lower price model, while the selection at Trader Joes is very organic and environmentally friendly, differentiating the organization from other grocery retailers. This differentiated low-cost focus competitive strategy should be implemented in the Italian market as well. This means continue to seek high quality, gourmet foods and wines acquired from unique sources, continuing to expand the private label lines, and all while keeping costs and prices low. The low cost-focus and differentiation should merge well with the location and entry mode proposals, providing the framework guiding direct acquisition from farmers in the south, while providing fresh and unique products to customers in the north. Positioning Trader Joes should focus on being an organic store that offers products straight from the farmer, at excellent prices. The marketing will reflect that, and emphasize that, similar, similar to the U.S., Italy has few stores offering the same products and selections as Trader Joes. Unlike in the U.S., most Italians make a lot of their meals from scratch and they take pride in their delicious food (Grimaldi, 2009). Trader Joes must focus on the brand as a healthy, organic brand, and part of the marketing strategy should include education on the benefits of organic food. We have to brand the Trader Joes name we have to make our product stand out not only for it being organic but also because it is a Trader Joes product.

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17 By applying the same standards of customer service in a friendly and hip atmosphere will help build loyalty in the younger demographic as they become familiar with the Trader Joes brand. Trader Joes will be positioned as the new generation of retail grocery in Italy, the choice for the smart and responsible consumer. Trader Joes can emphasize the fact some of the products available in the Italian store are made by Italians for Italians, and that the company will continue to help out those Italian farmers that are in rural areas by delivering those crops to a larger market. Bringing Italian made goods into the store will help foster goodwill based on the strong sense of nationalism in Italy (See Country Matrix, Appendix A??). In relation to this, the power distance in Italy is relatively low, indicating that businessmenthat businessmen in the city would appreciate the farmers hard work and since they see themselves more as equals than their counterparts in the U.S., they may be swayed by the idea of purchasing products grown by an Italian farmer, purchased especially for the Italian market (Geert-Hofstede, 2009). These are the two routes we chose to go with in our global expansion. The Marketing Mix The first, and most crucial, consideration of the marketing mix for Italy is to determine the goods or services to be sold. Trader Joes already has a well-defined product mix, coupled with excellent customer service. The high-quality foods and beverages offered by Trader Joes are already sourced from around the world, including Italy, and should emphasize the Italian goods that it will carry. Just as it does in the United States, Trader Joes will offer Italian shoppers a unique and convenient location for all of their grocery needs. Trader Joes has attracted customers in the United States

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18 by offering quality healthy products at a comparatively low-cost, paired with a fun and casual attitude (Trader Joes, 2009). This product mix will be just as successful in Italy because in addition to providing for the basic human need for food, Trader Joes specific product mix is well-suited to the Italian culture. Promotion Since Italy is a high-context culture, different promotional strategies can be taken to make Italian consumers aware of Trader Joes. These promotional strategies need to have the context carry information as much as the words. They also need to have concrete thinking and the messages need to be implicit. One promotional strategy that can be effective in Italy is sampling. Sampling involves the opportunity for consumers to try the product at no cost (Keegan and Green 472). Trader Joes can have food stands so that consumers become familiar with their products. This promotional approach has strong potential for success because, culturally, Italians tend to take a very hands-on, experiential approach to life (Russo, 2009). This is an excellent promotional approach because the Italian culture is used to hands on experience. A different promotion tactic that can be used is personal selling. Many countries use personal selling as a communication tool because it builds relationships with the customers (Keegan and Green 476). Trader Joes offers a variety of wine and wine products, which are in high demand in Italy (CellarNotes, 2009). Italy is the worlds leading producer, exporter, and consumer of wine (Szvetecz, 2007). By providing such diversity and selection in wines, Trader Joes is matching the needs of Italian consumers and creating a two-way communication channel with the buyers (Keegan and Green 477). The downsides to personal selling are the political risks involved. Historically, Italians

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19 have struggled with political corruption, which could ultimately lead to stiff restrictions on the sales team. However, the political corruption in Italy is on the decline, and currently Italy is ranked as having lower corruption levels than approximately 75% of countries worldwide ("Facts About Italy"). To avoid challenges such as market unknowns, Trader Joes could do extensive market research to learn about the target market. This would help the personal selling approach because not only will they learn about the market, but also about competitors and their strategies (Keegan and Green 478). The support media is a more successful tool of promotion compared to television commercials (Keegan and Green 492-493). The Italian culture prefers the indirect rather than the direct form of expression. Therefore, Trader Joes can focus on creating ads that have minimal explanatory content. For instance, outdoor billboards can have more visual appeal rather than words. This would save Trader Joes money because advertising costs more if it is done through television. Unfortunately Italys heavy tax system can also affect Trader Joes promotion strategy by making it expensive ("Doing Business in Italy: 2009 Country"). Less money would then go towards advertising the company. Another effective component of promotion is sponsorship. Soccer is a huge part of Italian life, and many Italians follow it as football or baseball is fanatically followed in the United States (Italys Way of Life, 2009), especially since the Italians have won four FIFA World Cup victories (FIFA.com). This can be an advantage for Trader Joes because they can pay the Italian league to advertise their company and products at their stadium. Different types of advertisements would then be exposed to a great number of people and then they could tell other people through word of mouth. Sponsorship provides the opportunity for Trader Joes to be mentioned on air during the games, which

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20 will then create brand awareness to anybody watching or listening to the game. Sponsorship is a key element in helping the company reach global audience, which can help Trader Joes for further expansion into other global markets in the future. Product placement can be used to expose Trader Joes products and brand names into the Italian market before entering the country. Popular television shows as well as movies can help promote the products, generate awareness and develop brand association (Keegan and Green 496). Another idea to consider would be product endorsement, especially by a major soccer star or similar cultural icon who could emphasize the benefits of healthy eating and the organic, healthy products available at Trader Joes. Other types of promotions include flyers and radio ads. Currently in the United States, Trader Joes has something called the Fearless Flyer, which is a magazine that provides environmental awareness about their products ("Trader Joe's: Your Neighborhood Grocery Store"). This magazine can easily be printed in Italy and could then be distributed to multiple households. They also have a radio station on their website with live crew members describing the products ("Trader Joe's: Your Neighborhood Grocery Store"). These two types of promotions can be implemented in Italy. Since Italy ranks 10th in the world on Internet usage, with nearly 35 million users, an Italian language version of the web cast could be very successful in such a wired market (Top 20 Countries, 2009). (See graph in Appendix B, p.34)

Pricing

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21 The Italian economy is divided up into segments. The north consists of private companies while the south is a less-developed, welfare-dependent and agricultural-based ("Central Intelligence Agency: The World Factbook").That is why the pricing strategy for Trader Joes has to be positioned to fit the market. Since Trader Joes is a privately owned company its main focus should be entering the north sector. The market skimming pricing strategy can be used to draw in the Italian segment that is willing to pay a premium price for products such as their organic food. In addition, the pricing skimming strategy is suitable for new products entering the market because competition is limited (Keegan and Green 364). On the other hand, if Trader Joes is also in locations such as the south area of Italy, then the market penetration pricing strategy should be used. This strategy sets the price levels low so that the company builds market share. Consumers with low income are more likely to purchase their groceries from a store that has reasonable prices. Additionally, this strategy is recommended for the food industry because it achieves market saturation (Keegan and Green 365). Since Trader Joes is essentially home based in the United States, a common method for pricing their products and services outside their country is known as cost-plus pricing. This strategy is one of the simplest methods of pricing because the company calculates the cost of producing the product and adds on a percentage to that price to give the selling price (Keegan and Green 369). Inflation is an issue that many country markets face and it has to be kept in mind when it comes to pricing. If Italy devalues their currency, then the prices of imported goods from Trader Joes increases causing inflation. Also, if Trader Joes enters the

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22 Italian market during a high inflationary rate period they have to increase the selling price in addition to covering the rising costs (Keegan and Green 376). In order to protect themselves from the consequences of inflation, Trader Joes must be more technologically skilled. In contrast, low inflation should influence entering markets such as Trader Joes to lower their prices (Keegan and Green 376-377). Government policies and regulations that affect the pricing strategy to be used consist of dumping legislation, resell price maintenance legislation, price ceilings, and basic reviews of price levels (Keegan and Green 378). Trader Joes should be prepared in dealing with the dumping legislation. Dumping is defined as the sale of an imported product at a price lower than that normally charged in a domestic market or country of origin (Keegan and Green 385). In response, Trader Joes needs to be aware that there is a law called the Byrd Amendment that can be used to have antidumping revenues paid to them (385). The exchange rate for currency is a factor for setting prices when entering a new country market. The exchange rates are important because they could have one of two effects. If the currency of the home country is weak, it can still be profitable. If the domestic currency is strong the productivity progresses and there is cost reduction. Exchange rates expand the market, determine competitiveness, and affects profitability (Keegan and Green 374). Distribution Trader Joes should enter Italy primarily as aas a business to consumer business; as a retail organization, especially a grocery retailer, business to consumer is the only substantially viable distribution method. This is the framework for Trader Joes

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23 distribution network in the U.S. and will continue to be the same in Italy and any other markets Trader Joes may enter in the future. In essence the only business-to-business activities in which Trader Joes engages is on the supply side. Purchasing from growers and producers is a business-to-business activity, but that is simply what drives the business-to-consumer retail operations. In terms of workforce management, Trader Joes must utilize a direct involvement approach. This means that the company will have to find and manage its own sales force. This retains corporate control over store management, versus indirectly involvement through independent agents and distributors.(. (Keegan and Green 407.) Since the eventual plan is regain full control of the organization after establishing a foothold in Italy, it vital that Trader Joes retains control of the work force store management. If those duties are outsourced, or control of that aspect is relinquished, it will be much harder to build a unified brand, and may make it more difficult to take back full control of store ownership through a partnership buyout. In order for Trader Joes to grow as a company in Italy (or any other country in the world), they must look for a partnership with distributors capable of developing a market, not one that already has a widely established customer base (Keegan and Green 408). Doing so would allow Trader Joes to build its own customer base and positions itself as a new company that is growing and making a name for itself, instead of being seen as a company that already existed and just changed its name because of foreign investors. In addition to choosing distribution channels for the Italian market, Trader Joes must support them. Ensuring the success of a venture into Italy will require the financial

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24 backing for necessary expenses, especially marketing and promotions. The commitment to direct involvement requires that Trader Joes must put forth the money it will take to get the business running and successful (Keegan and Green 409). Going into a new country always carries a high risk; in order to ensure that the international venture adheres to the brand vision and mission, Trader Joes must not only be directly involved in workforce and management administration, but also maintain control over the marketing strategy. In establishing an initial partnership, Trader Joes must be sure to retain full control of what products are offered and how they are promoted in the stores(stores (Keegan and Green 407). Additionally, success of the plan is partially dependent on the successful implementation of strategic relationships with domestic Italian producers (I.e. local farmers and growing cooperatives), and this must be achieved as quickly as possible. In order for these relationships to be successful and useful to Trader Joes there must be open communication with the suppliers to be sure that the stores will have enough product to meet demand, especially as demand grows with the brand.

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25 Works Cited "Background Note: Italy." U.S Department of State. Mar 2009. 09 Apr 2009 http://www.state.gov/r/pa/ei/bgn/4033.htm COOP Coop Italia. 2009. 23 Mar 2009. http://www.e-coop.it/portalWeb/coop.portal "Doing Business in Italy: 2009 Country." Commercial Guide for U.S Companies. 2009. 09 Apr 2009. "Doing Business in Italy | Italian Social and Business Culture." Communicaid. 2007. 09 Apr 2009 http://www.communicaid.com/%5Ccross-cultural training%5Cculturefor-business-and-management%5Cdoing-business-in %5CItalian_business_culture.php "Facts About Italy." 22 Dec 2008. 09 Apr 2009 http://factsaboutitaly.blogspot.com/2008/12/corruption-in-italy.html Fast Food Threatens Italian Healthy Eating and Traditions. CNN Interactive. 1997. 19 Apr 2009 http://www.cnn.com/HEALTH/indepth.food/italian/italian.foodways/index.html "FIFA.com." Italy. 1994-2009. 09 Apr 2009 http://www.fifa.com/associations/association=ita/ranking/gender=m/index.html Glizoris, Daiva. Personal interview. 12 Mar 2009. Interview. "Hoover's." Trader Joe's. 2009. 09Apr2009 http://premium.hoovers.com/subscribe/co/factsheet.xhtml?ID=ckjrsffjttjjjj Grimaldi, R. Personal Iterview. 17 Mar 2009 Cultural Expert

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Hofstede Studies. Geert-Hofstede. April 2, 2009: http://www.geert-hofstede.com/hofstede_italy.shtml Italian Demographics. Cia World Fact Book. 2009. 17 Mar 2009. www.cia.gov/library/publications/the-world-factbook/ Italy Food and Drink Report Q1 2009 European Food and Beverage. 2009. 23 Mar 2009 http://www.researchandmarkets.com/reports/686760 Italy Comprehensive Indicator Report. 2009. 19 Apr 2009. http://hivinsite.ucsf.edu/global?page=cr10-it-00&post=19&cid=IT Italys Way of Life. 2009. 27 Mar 2009. http://library.thinkquest.org/J0112187/italy_way_of_life.htm Keegan, Warren, and Mark Green. Global Marketing. 5. Upper Saddle River, New Jersey: Prentice-Hall, 2008. Print. Mallek, M. Personal Interview. 17 Mar 2009. Italy Cultural Expert. Open Air Markets. Italylogue. 2009. Apr 10, 2009. www.italylogue.com/featured-articles/italian-food-markets-rules-vocabularymarket-days-in-italy.html Russo, D. Personal Interview.17 Mar 2009. Italy Cultural Expert. Shopping At the Large Supermarkets. Slow Travel Italy. 2009. 05 Mar 2009. http://www.slowtrav.com/italy/foodshops/supermarkets.htm Shopping For Groceries. Slow Travel Italy. 2009. 07 Mar 2009 http://www.slowtrav.com/italy/foodshops/smallshops.htm Szvetecz, Tynan. "Introduction to Italian Wine." Your Guide to Italy.com. 2007. 09 Apr 2009 http://www.yourguidetoitaly.com/introduction-to-italian-wine.html

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The 40 Largest Italian Cities. 2009. 19 Apr 2009. http://www.citymayors.com/gratis/italian_cities.html The Italian Mass Grocery Retail Sector. Business Wire. 2007. 05 Mar 2009. http://www.allbusiness.com/services/business-services/4352456-1.html "TJ'S Mystique: Cheap Thrills." 2005. 09 Apr 2009 http://www.privatelabelmag.com/pdf/nov2005/trader-joes.html Top 20 Countries with the Highest Number of Internet Users. Internet World Stats. 2009. 07 Apr 2009 http://www.internetworldstats.com/top20.htm

"Trader Joe's Company." Funding Universe. 2003. 09 Apr 2009 http://www.fundinguniverse.com/company-histories/Trader-Joes-CompanyCompany-History.html Trader Joes Market SuperMarket News. 2009. 05 Apr 2009. http://supermarketnews.com/profiles/top75/trader_joes_market09/

"Trader Joe's: Your Neighborhood Grocery Store." 2009. Trader Joe's. 09Apr2009 http://traderjoes.com/ "Welcome to the Italian Market." U.S Commercial Service. 2009. 17 Apr 2009 http://trade.gov/cs/ World Comparison Cellar Notes. 1996. 01 Apr 2009. http://www.cellarnotes.net/world_comparison.htm

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28 Fast Food Threatens Italian Healthy Eating and Traditions. CNN Interactive. 1997. 19 Apr 2009 http://www.cnn.com/HEALTH/indepth.food/italian/italian.foodways/index.html The 40 Largest Italian Cities. 2009. 19 Apr 2009. http://www.citymayors.com/gratis/italian_cities.html Italys Way of Life. 2009. 27 Mar 2009. http://library.thinkquest.org/J0112187/italy_way_of_life.htm Top 20 Countries with the Highest Number of Internet Users. Internet World Stats. 2009. 07 Apr 2009 http://www.internetworldstats.com/top20.htm The Italian Mass Grocery Retail Sector. Business Wire. 2007. 05 Mar 2009. http://www.allbusiness.com/services/business-services/4352456-1.html

APPENDIX A

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COUNTRY MATRIX

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0-14 years China Japan Germany Canada Italy Mexico Egypt Argentina Honduras Sweden 10 7 6 5 9 5 4 5 6 6 0.04

Age structure 15-64 years 10 9 5 4 8 5 6 5 4 7 0.05

65 and over 8 5 4 3 10 7 4 7 5 6 0.07

Population 8 7 5 4 6 7 5 6 4 5 0.04

GDP - per capita 4 5 6 7 9 6 4 5 3 7 0.07

GDP

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5 4 3 2 7 6 6 4 3 5 0.05

Pop. Growth rate 6 2 1 5 4 3 4 3 2 3 0.04

China Japan Germany Canada Italy Mexico Egypt Argentina Honduras Sweden

Gdp real growth rate Cost of living 8 5 4 3 3 2 3 2 2 4 0.04

7 4 6 5 8 4 5 3 4 6 0.06

Leisure and culture Economy 5 8 7 6 10 5 6 6 4 7 0.07

Environment 5 8 7 6 4 4 5 5 3 7 0.05 5 7 9 6 8 6 5 6 4 6 0.05

Health 5 9 9 6 9 6 6 7 4 6 0.04

Infrastructure 4 6 8 8 6 5 6 6 4 6 0.05

China Japan Germany Canada Italy Mexico Egypt Argentina Honduras Sweden

Freedom of the Country Risk Ratings Press Economic Freedom Global Competitiveness Tax Misery & Reform Index Ease of Doing Business Total 5 9 6 6 2 5 10 4 7 5 3 8 10 3 8 3 4 3 10 5 5 4 4 1 10 6 4 10 3 4 10 6 5 5 3 5 10 5 6 6 3 5 10 5 6 5 2 4 8 4 4 3 2 3 10 6 7 6 3 5 0.05 0.04 0.05 0.05 0.03 0.06

6.11 11 9 9 17 10 11 10 7 12 1

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Appendix B Misc Tables and Graphs]

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Italy USA US Italy

$ 93,700,000.00 307,212,123 $ 113,300,000.00 58,000,000

9,161,923 294,020

58,000,000 33.53 307,212,123 197.27

$ $47,000 1.62 $ $31,000 0.37

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Current Trade Population Volume(march 07march 08)

Land Space population population density

Volume per GDP person

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population both sex Total, All Age

population male

population female

total 2,551,912 2,699,136 2,678,668 2,817,095 2,896,537 3,366,464 4,337,927 4,857,357 4,944,476 4,389,046 3,865,902 3,669,158 3,415,061 3,169,574 2,811,168 2,390,441 3,285,399

percentage 4.39% 4.64% 4.61% 4.84% 4.98% 5.79% 7.46% 8.35% 8.50% 7.55% 6.65% 6.31% 5.87% 5.45% 4.83% 4.11% 5.65%

0- 4 5- 9 10- 1 4 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80+ age 0-19 20-49 50-64 65+ percentage

58,145,321 2,551,912 2,699,136 2,678,668 2,817,095 2,896,537 3,366,464 4,337,927 4,857,357 4,944,476 4,389,046 3,865,902 3,669,158 3,415,061 3,169,574 2,811,168 2,390,441 3,285,399

28,485,387 1,315,773 1,391,113 1,380,065 1,449,795 1,488,150 1,737,533 2,234,145 2,511,653 2,534,299 2,220,510 1,922,625 1,794,993 1,640,544 1,474,410 1,254,356 1,002,086 1,133,337

29,659,934 1,236,139 1,308,023 1,298,603 1,367,300 1,408,387 1,628,931 2,103,782 2,345,704 2,410,177 2,168,536 1,943,277 1,874,165 1,774,517 1,695,164 1,556,812 1,388,355 2,152,062

18.48% 42.64% 18.83% 20.05%

US Census bureau
www.census.gov

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age 0-19 20-49 50-64 65+

percentage 18.48% 42.64% 18.83% 20.05%

US Census bureau
www.census.gov

Hofstedes Chart

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Power Distance Index (PDI) As it is shown on the chart Italy has a low PDI which means that there is now a lot of difference or that they dont take into consideration between managers and regular employees. Individualism (IDV) Italy has a somewhat high individualism rating on the Hofstede chart. Masculinity (MAS) Italy has a high masculinity rating on the chart. Uncertainty Avoidance Index (UAI) Italy rates high on uncertainty avoidance on the chart. Found at http://www.geert-hofstede.com/hofstede_italy.shtml

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Appendix C PowerPoint Presentation Shopping For Groceries. Slow Travel Italy. 2009. 07 Mar 2009

http://www.slowtrav.com/italy/foodshops/smallsho ps.htm COOP Coop Italia. 2009. 23 Mar 2009.

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http://www.e-coop.it/portalWeb/coop.portal Shopping At the Large Supermarkets. Slow Travel Italy. 2009. 05 Mar 2009. http://www.slowtrav.com/italy/foodshops/supe rmarkets.htm

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