Benecol in the US – Step 1 of global expansion
The case study is about the international expansion of Benecol, a Finnish food brand for
cholesterol lowering products, into the US market. Mill provides us with many reasons for
going abroad: market access, resources access, diversification and competitive position.
Benecol decided to expand internationally in the US market, which is the largest market
for functional food. So, one can deduce that Benecol decided this global expansion to gain
market access. Indeed, this market expansion is supposed to increase Benecol growth
thanks to an increase in demands (customer base) and sales.
I. Theoretical framework
Benecol is facing three main issues regarding its international expansion. There is a gap
between the initial strategy thoughts by Benecol, the obtained results and the strategy that
McNeil is willing to develop. This is due to three main reasons: the choice of the entry
mode, the barriers of entry and the questionable choice of the market.
The first reason is the entry mode chosen. There are different entry modes, I mean
different ways for companies to enter and organize their business activities within a new
market: exporting, licensing, joint venture, M&A or Greenfield. (Hill, 2007: 493-501) The
strategy chosen by Benecol to enter the US market is an international licensing
agreement, that is to say “an arrangement whereby a licensor grants the rights to
intangible property to another entity (the licencee) for a specific period, and in return, the
licensor receives a royalty fee from the licensee” Licensing has the advantage of having
low development costs and low risks. Yet one of its drawbacks is to lose control over
technology know-how. (Hill, 2007: 501) Licensing is not really recommended for firms
that have technological advantages unless they want to benefit from the first-mover
advantage. That is to say if they want to take advantage of entering the market first such as
capturing the demand or selling massively on that market. (Hill, 2007: 502)
The second issue is that Bencol didn’t take into account the barriers of entry to the US
market. Barriers to entry are “factors that make it difficult or costly for firms to enter an
industry or market”. It can be local requirements or regulations, importation quota, tariff?
Etc. In that case the barrier to entry was the FDA, the US Food and Drug Administration.
This agency is responsible for protecting public health through regulations. (FDA website)
