Team 6/Section C - Corporate Strategy - EAC Nutrition Case

Which expansion option would you recommend to EAC? Why? What

criteria did you use to evaluate the options?
Background
EAC,

multinational,

primarily

specializes

in

four

business

segments, Nutrition, Industrial Ingredients, Moving and Relocations

Services. Based out of Singapore, EAC Nutrition develops three wet
and dry infant products for a corresponding price and age segments.
IFFO, for up to two year olds. GUM, for one year and above. Both are
established and regionally customized flavored products that are
priced at low-to-mid range and lastly; UHT, ready-to-drink milk for
school going children with rising growth margins
EAC

Nutritions

distribution,

manufacturing

and

packaging

strategies, as contrary to its competitor Wyeth, revolves around

alliances with local entities. Such cost-effective ventures have
allowed it to create a rooted foothold within East & South-East Asia
its area of operations. It currently enjoys leading market shares in
East

China,

West

China,

Malaysia,

Thailand

and

Singapore,

respectively.
EACs primary competitors include Nestle & Wyeth. The prior enjoys
tractions within Thailand, Indonesia & India, respectively through a
recognized brand name. The latter, a product and network
specialist, Wyeth remains dominant in the Philippines, North & South
China, respectively. The industry relies heavily on marketing and
awareness and has often faced regional legal hurdles along the way
vis--vis powdered vs. breast milk benefits. Nonetheless, EACs
competitive advantages - solid and locally partnered manufacturing
and distribution webs, country concentrations, and impactful
branding/awareness - have allowed it to remain a key player.
Options
EAC currently faces the dilemma of choosing one or several
pathways for regionally expanding to sell its products whilst
simultaneously increase shareholder value. Potential routes include;

Team 6/Section C - Corporate Strategy - EAC Nutrition Case

Expanding to India; Alliance with a local partner in India; Expanding
further in China; Introducing UHT in China and/or focusing on UHT
sales in familiar waters of Thailand and Malaysia.

It has to

incorporate a strategy that allows it use existing resources with

minimal risk and investment to maximize its growth and profit.
Solutions
India should be left out of the decision table, as the country is
exceptionally diversified with a high rural/urban populace that relies
on dairy milk due to abundant availability and religious significance.
Additionally, there is high import tax rate of 35% on powdered
products. Partnering can potentially backfire as well, due to the
same reasons. The investment may prove to be expensive and
cumbersome in terms of generating awareness in a multi-lingual
country.
EAC Nutrition short-term policy should be to introduce UHT into
Thailand/Malaysia by penetrating from the Philippines. It has a high
urban baby delivery rate that is centrifugal from Manila (686,000 in
2000 higher than Thai-Malay). Infant formula is one of the top
three commodities sold in the country with no prohibition on
advertising powdered products circa 2006. Moreover, it shares close
proximity to Thailand, Singapore & Malaysia - EACs local turfs - that
can allow the company to utilize its distribution and manufacturing
network in a cost-effective manner. Wyeth, a high-end competitor,
can provide obstacles, but through stable investment in an effectual
brand campaign, EAC can easily acquire a segment in an educated
market by penetrating with IFFO and subsequently introducing UHT,
simultaneously with Thailand and Malaysia first as highlighted in its
decision.
EACs long-term strategy should focus on North and South China.
The expansion policy should be carefully tailored due to cultural and
dietary contrasts that can be historically understood from farming
patterns. The region above the Yangtze is wheat-based and has
higher income per capita. More individualistic in mannerisms, there

Team 6/Section C - Corporate Strategy - EAC Nutrition Case

are more working mothers, thus a higher reliance on powdered milk
and spending power. The South is a rice-based culture that tends to
be more communal with varying lingual dialects and a decreased
dependency on milk due the early introduction of rice-products in
childrens diets.
Addiotnally, the Milk Contamination Scandal of 2006 led to the
demise of a Northern company Sanlu and contributed to a creation
of mistrust due to the poisoning. In terms of competiveness, Wyeth
controls a prominent market share in both regions signifying a
demand for powdered products. Lastly, the inter-province tariff
shouldn't be ignored especially if EAC wants to penetrate into the
South. EAC would need to assess whether its cheaper for them to
distribute products from the manufacturing facilities in the East or
West of directly distribute them via Thailand.
Based on these considerations, EAC should expand with IFFO and
UHT in the Northern region thereby avoiding competition in the
Wyeth

dominated

GUM

market.

Moreover,

Wyeth

has

not

customized its products to local market despite making a significant

investment. EAC can utilize its strong network and reputation within
the medical community to enter more cost-effectively and secure a
position that can increase its stock price. EAC has historical
experience within the country and a wide-ranging supply network
that can also benefit from the rise of international mega retail stores
such as Carre Four.
Regarding the South, as dependency on milk diminishes in ricebased cultures at an early stage, it would perhaps be a safer idea to
soft launch with IFFO and GUM due to similar preference patterns.
EAC may face competition from Wyeth, but due to a resourceful
network, in-house manufacturing and distribution facilities, EAC can
manage to secure a portion of the pie.
In summary, EAC needs to look into the Philippines and its existing
local turfs by introducing its products in the Southeast Asian belt.

Team 6/Section C - Corporate Strategy - EAC Nutrition Case

And secondly, it needs to develop a long-term strategy by prudently
entering the North and the South with the right product mix, due to
the cultural differences involved.