A Golden Opportunity:

Trader Joe’s and the Italian Market

Developed By A-CARD Marketing Team

Alejandra Villaverde

Caleb E Hansen

Alex Lin

Ramon Salgado

Denny De La Vega

Executive Summary

Trader Joe’s, a quirky West-coast based grocery chain, should consider expanding

their unique brand into the international market. As Trader Joe’s 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 Joe’s has an

excellent opportunity in expansion to Italy. Recent trends indicate a shift away from

traditional cooking and shopping in Italy, and Trader Joe’s 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

Joe’s, while providing exceptional value to consumers. Additionally, Italy’s strong

agricultural establishment can be tapped to supply much of the organic produce at Trader

Joe’s, 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 Joe’s 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.

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Strategic Overview

Trader Joe’s is a chain of grocery stores first opened in 1966 in the state of

California. Currently, Trader Joe’s has 319 stores with locations in over 20 states and

new stores are opening up in neighborhoods all across the country. Trader Joe’s 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 Joe’s maintains a robust private label business for many of

their products. For instance, Trader Giotto’s 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 Joe’s. (DeLaVega and& Villaverde, 2009) Despite the breadth and variation of

their selections from around the world, about Trader Joe’s 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 Joe’s and they strive

to offer low prices for their high quality products. Daiva Glizoris, a customers of theirs,

stated, “I shop at Trader Joe’s because it is convenient for me, its close to my house and I

really like their prices. They have the products I’m 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 Joe’s employs a variety of unique measures designed to drive

costs down ("TJ'S Mystique: Cheap Thrills"). One such step is to eliminate the

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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 Joe’s 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 Joe’s 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, Italy’s GDP has decreased by 1% and

is expected to continue its decline. However, it is one of the least expensive countries in

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the European Union. This will benefit Trader Joe's because it may help reduce the cost of

promotion and advertising. Although They Italy’s 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.S’s 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 Joe’s 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 Joe’s 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 Joe’s would have to earn

the consumer’s trust, adapt their appearance and culture to Italian taste, and communicate

clearly the added value they can bring to the consumer.

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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 Joe’s main strengths, weaknesses,

opportunities, and threats to determine their market potential in Italy.

Strengths- Trader Joe’s 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 Joe’s

selection is an excellent fit for the Italian market. The large wine selection offered at

Trader Joe’s should be well received, because Italy leads the world in wine consumption,

with annual per-capita consumption around 60 liters (Cellarnotes.net, 2009). The

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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 Joe’s 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 Joe’s 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 Joe’s 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 Joe’s because since they are working for their own money, they have the

option of choosing products like the ones Trader Joe’s 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 Joe’s has traditionally catered to young and urban customers, they

may have difficulty entering Italy, and competing with tradition. Another significant

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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 Joe’s must first select the

appropriate mode of entry and initial locations. To ensure success, Trader Joe’s must

remain true to its original vision, while adapting it for cultural and geographic

differences. Franchising would likely be a poor option, because Trader Joe’s would have

to relinquish much of its operational control, risking the dilution of its culture and vision.

Since Trader Joe’s 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 Joe’s with some ready-made business relationships, and would allow the

company to capitalize on the partner’s reputation.

In entering a partnership Trader Joe’s 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 Joe’s

becomes a trusted name. At this point, Trader Joe’s should consider buying out the

original partner and pursuing any expansion plans with the wholly-owned approach that

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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 Joe’s 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

company’s best interest to enter into a partnership for initial entry, so, so Trader Joe’s

shouldJoe’s 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 north…and a less-developed, welfare-

dependent agricultural south, with high unemployment”. (Cia World Fact Book) This

indicates that for initial entry, Trader Joe’s 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 Joe’s has strategic marketing

opportunity. As an organization, Trader Joe’s takes pride in cutting out the middlemen

and dealing directly with the farmers; by putting the flagship store in the north, Trader

Joe’s 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.

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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 Italy’s

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 Joe’s 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 Joe’s 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 Italy’s

economy has suffered in this recession, it remains one of the most attractive international

markets for Trader Joe’s. Italy has a relatively high income and a burgeoning retail food

and drink market (Italy, 2009).

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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. Italy’s population

density is approximately 6 times that of the United States (CIA). High population density

suggests that when Trader Joe’s builds a store in Italy, there will be a much larger

potential customer base. This could be very profitable for Trader Joe’s, 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 Joe’s must consider how to protect their investment from strong

competition. Due to relatively low levels of naturally resources, 71.3% of Italy’s is

derived from sales and service industries. This is good for Trader Joe’s 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

Joe’s 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 Joe’s has a

strong presence in the “healthy beverage” market with an extended line of flavored and

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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 Joe’s offers an excellent selection of

prepared and convenience foods including low sodium, fat free vegetarian, and heart

healthy quick meals (Trader Joe’s, 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 Joe’s because Italy has a higher income in Europe and a larger size retail market

in food and drink.

2. 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 America’s. High population density means

when Trader Joe’s build a store in Italy, there will be 6 times more people live around the

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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 Joe’s decide

to build the store in Italy, the managers of Trader Joe’s 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 Joe’s 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 Joe’s.

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 Joe’s 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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on Trader Joe’s web site, Trader Joe’s 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 Joe’s 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 Joe’s 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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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 Italy’s domestic

retail sector. As major global retailers, such as Wal-Mart, continue to spread throughout

Italy, Coop Italia’s 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 Joe’s as

they expand throughout Italy (Shopping for Groceries, 2009).

Specific Strategies

In developing a competitive strategy, Trader Joe’s should model its Italian

strategy on the differentiation that has been so successful in the United States. As a

company, Trader Joe’s 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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Trader Joe’s 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 Joe’s 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 Joe’s 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 Joe’s. 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 Joe’s 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 Joe’s name we

have to make our product stand out not only for it being organic but also because it is a

Trader Joe’s product.

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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 Joe’s brand. Trader Joe’s will be positioned as “the new generation of

retail grocery” in Italy, the choice for the smart and responsible consumer.

Trader Joe’s 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 farmer’s 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 Joe’s already has a well-defined

product mix, coupled with excellent customer service. The high-quality foods and

beverages offered by Trader Joe’s 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 Joe’s will offer Italian shoppers a unique and convenient location

for all of their grocery needs. Trader Joe’s has attracted customers in the United States

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by offering quality healthy products at a comparatively low-cost, paired with a fun and

casual attitude (Trader Joe’s, 2009). This product mix will be just as successful in Italy

because in addition to providing for the basic human need for food, Trader Joe’s 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 Joe’s. 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 Joe’s 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 Joe’s offers a variety of wine and wine

products, which are in high demand in Italy (CellarNotes, 2009). Italy is the world’s

leading producer, exporter, and consumer of wine (Szvetecz, 2007). By providing such

diversity and selection in wines, Trader Joe’s 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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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 Joe’s 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 Joe’s 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 Joe’s money because advertising costs

more if it is done through television. Unfortunately Italy’s heavy tax system can also

affect Trader Joe’s 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 (Italy’s Way of Life, 2009), especially since the Italians have won four

FIFA World Cup victories (“FIFA.com”). This can be an advantage for Trader Joe’s

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 Joe’s to be mentioned on air during the games, which

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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 Joe’s for further expansion into other global markets in the future.

Product placement can be used to expose Trader Joe’s 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 Joe’s.

Other types of promotions include flyers and radio ads. Currently in the United

States, Trader Joe’s 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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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 Joe’s has to be positioned to fit the market. Since Trader Joe’s 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 Joe’s 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 Joe’s 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 Joe’s increases causing inflation. Also, if Trader Joe’s enters the

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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 Joe’s must be more

technologically skilled. In contrast, low inflation should influence entering markets such

as Trader Joe’s 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 Joe’s 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 Joe’s 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 Joe’s 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 Joe’s

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distribution network in the U.S. and will continue to be the same in Italy and any other

markets Trader Joe’s may enter in the future. In essence the only business-to-business

activities in which Trader Joe’s 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 Joe’s 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 Joe’s 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 Joe’s 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 Joe’s 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 Joe’s

must support them. Ensuring the success of a venture into Italy will require the financial

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backing for necessary expenses, especially marketing and promotions. The commitment

to direct involvement requires that Trader Joe’s 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 Joe’s 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 Joe’s

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 Joe’s 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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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%5Cculture-

for-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

“Italy’s 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-vocabulary-

market-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-Company-

Company-History.html

“Trader Joe’s 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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“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

“Italy’s 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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Age structure

  0-14 years 15-64 years 65 and over Population GDP - per capita GDP Pop. Growth rate

China 10 10 8 8 4 5 6

Japan 7 9 5 7 5 4 2

Germany 6 5 4 5 6 3 1

Canada 5 4 3 4 7 2 5

Italy 9 8 10 6 9 7 4

Mexico 5 5 7 7 6 6 3

Egypt 4 6 4 5 4 6 4

Argentina 5 5 7 6 5 4 3

Honduras 6 4 5 4 3 3 2

Sweden 6 7 6 5 7 5 3

  0.04 0.05 0.07 0.04 0.07 0.05 0.04

  Gdp real growth rate Cost of living Leisure and culture Economy Environment Health Infrastructure

China 8 7 5 5 5 5 4

Japan 5 4 8 8 7 9 6

Germany 4 6 7 7 9 9 8

Canada 3 5 6 6 6 6 8

Italy 3 8 10 4 8 9 6

Mexico 2 4 5 4 6 6 5

Egypt 3 5 6 5 5 6 6

Argentina 2 3 6 5 6 7 6

Honduras 2 4 4 3 4 4 4

Sweden 4 6 7 7 6 6 6

  0.04 0.06 0.07 0.05 0.05 0.04 0.05

  Country Risk Ratings Freedom of the Press Economic Freedom Global Competitiveness Tax Misery & Reform Index Ease of Doing Business Total

China 5 9 6 6 2 5 6.11

Japan 10 4 7 5 3 8 11

Germany 10 3 8 3 4 3 9

Canada 10 5 5 4 4 1 9

Italy 10 6 4 10 3 4 17

Mexico 10 6 5 5 3 5 10

Egypt 10 5 6 6 3 5 11

Argentina 10 5 6 5 2 4 10

Honduras 8 4 4 3 2 3 7

Sweden 10 6 7 6 3 5 12

  0.05 0.04 0.05 0.05 0.03 0.06 1

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Appendix B

Misc Tables and Graphs]

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Population Land Space population density GDPUSA 307,212,123 9,161,923 33.53 $47,000Italy 58,000,000 294,020 197.27 $31,000

Current Trade Volume(march 07-

march 08)population

Volume per person

Italy $ 93,700,000.00 58,000,000 $ 1.62 US $ 113,300,000.00 307,212,123 $ 0.37

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population both sex population male population female total percentage

Total, All Age 58,145,321 28,485,387 29,659,934 0- 4 2,551,912 1,315,773 1,236,139 2,551,912 4.39%

5- 9 2,699,136 1,391,113 1,308,023 2,699,136 4.64%

10- 1 4 2,678,668 1,380,065 1,298,603 2,678,668 4.61%

15-19 2,817,095 1,449,795 1,367,300 2,817,095 4.84%

20-24 2,896,537 1,488,150 1,408,387 2,896,537 4.98%

25-29 3,366,464 1,737,533 1,628,931 3,366,464 5.79%

30-34 4,337,927 2,234,145 2,103,782 4,337,927 7.46%

35-39 4,857,357 2,511,653 2,345,704 4,857,357 8.35%

40-44 4,944,476 2,534,299 2,410,177 4,944,476 8.50%

45-49 4,389,046 2,220,510 2,168,536 4,389,046 7.55%

50-54 3,865,902 1,922,625 1,943,277 3,865,902 6.65%

55-59 3,669,158 1,794,993 1,874,165 3,669,158 6.31%

60-64 3,415,061 1,640,544 1,774,517 3,415,061 5.87%

65-69 3,169,574 1,474,410 1,695,164 3,169,574 5.45%

70-74 2,811,168 1,254,356 1,556,812 2,811,168 4.83%

75-79 2,390,441 1,002,086 1,388,355 2,390,441 4.11%

80+ 3,285,399 1,133,337 2,152,062 3,285,399 5.65%

age percentage0-19 18.48%20-49 42.64%50-64 18.83%65+ 20.05% US Census bureau

www.census.gov

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age percentage0-19 18.48%20-49 42.64%50-64 18.83%65+ 20.05% US Census bureau

www.census.gov

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Hofstede’s Chart

 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 don’t 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/

supermarkets.htm

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