ESSAY 1
Benecol in the US – Step 1 of global expansion
There are some key issues in the case, and entry mode is the main issue as well as the market research. The third issue is their future plans, strategy and interest differences, and the collaboration with McNeil has not turned out to be as good as they did hope it would be, and they therefore need some changes.
They have used an exclusive licensing agreement, “which is an arrangement whereby a licensor grants the rights to intangible property to another entity (the licensee) for a specified period and, in return, the licensor receives a royalty fee from the licensee”.1 Licensing agreements have both advantages and disadvantages for The Raisio Group. The advantages is that Raisio does not have to bear the development costs and risk associated with the opening a foreign market. The disadvantages are the fact that The Ratio Group looses the tight control for realizing experience curve and location economies.
A licensing agreement is good, but still it has some weaknesses. Raisio is completely dependent on McNeil’s commitment to Benecol and the success of the McNeil’s market strategy. McNeil was not interested in launching Benecol globally in a big scale, and the Raisio group’s vision was to become a leading international life science oriented chemical company. This means; they have different opinions on expanding and different visions/interests. Since Benecol already is in the Finnish market, Rabbe Klements believe that they have an advantage in Europe. With the existing contract, Raisio have no rights to enter Europe and try to pitch their products there.
The market in the US is not the same as in Finland. In Finland they started before they had any competitors with the same percentage results on cholesterol. The price was seven times the average margarine product, but it was still selling big time. They sort of have a monopoly, which involves charging whatever the market will bear. In the US, it is different. They got the approval from FDI two weeks after Unilever’s competitor “Take Control” got approval from the authorities. In general, “the more competitors they are, the greater consumers’ bargaining power will be and the more likely consumers will be to buy from the firm that charges the lowest price.” 2

They have spent 100$ million to make sure that the product would be known well all over the country, and over 80% of the supermarkets around the nation had Benecol products in store. Since this is not working out the way they expected it to, together they should also considering changes to income plans from low penetration rates with high margins, to medium-low penetration rates with medium-high margins. This recommendation may help their product to reach out to a wider percentage of the population in the countries they are trying to expand to. This is based on the fact that 30% of the Finnish population tried the product, and 3.5% continued to buy it.
Recommendations for Rabbe Klemets are to rewrite the McNeil licensing agreement, and develop a European strategy for Benecol. He claimed that “in the long run those functional food companies will survive, who see this as a separate future market and who are prepared to invest in the whole value chain”. He should include an agreement that acquire global rights to sell and market their product, so that they can create their own strategy, especially in Europe. This will give Raisio the option to expand in the way they want, but still have McNeil as a multinational firm and market their products in the US.
Raisio may also try to be included more in the market strategy for McNeil, and expanding their product base, so that McNeil will have faith and believe in the product and change their interests in launching Benecol globally to a bigger scale.
They need to do market research upfront before the starts to launch products in other countries. This can help them to find a price which the customers are willing to pay, so that they don’t need to adjust after the market price. Furthermore, Raisio may also need to consider expanding their production, based on their problems to meet its current sales volume.

References;
Hill, Charles W.L., International Business: Competing in the Global Marketplace. 8th edition. McGraw-Hill International Editions
1 Hill, Chapter 14
2 Hill, Chapter 15