FOREIGN TRADE UNIVERSITY HCMC CAMPUS

FACULTY OF INTERNATIONAL ECONOMICS

---------o0o---------

INTERNATIONAL MARKETING MANAGEMENT

QTRE435

Mid-term assignment

A GLOBAL MARKETING REPORT ON AN INTERNATIONAL

MARKET: A CASE STUDY OF LAY’S

GROUP 5

Name Student ID
Lê Nguyễn Phương Thuỳ 2212585025
Ngô Vũ Hào 2214585046
Phan Nguyễn Phương Thảo 2212585023
Võ Hoàng Tú Yên 2212585031
Nguyễn Lê Anh Thư 2212585024

Lecturer: Nguyen Thi Thu Thao

Ho Chi Minh City, September 26, 2024
 TABLE OF CONTENTS

1. Executive Summary 4
2. Global Overview of Lay's Potato Chips 4
3. Overview of China and India 5
4. Market Selection 6
4.1. Criteria Definition 6
4.2. Preliminary Screening 7
4.3. Fine-Grained Screening 11
4.3.1. Market’s Attractiveness 11
4.3.2. Competitive Strength 14
5. Market Expansion Strategies and Market Choice 20
5.1. Market Expansion Strategies 20
5.2. Market Choice 21
5.3. Points of Parity, Point of Difference 21
5.3.1. Points of Parity 21
5.3.2. Point of Difference 21
6. Market Operations 22
6.1. Internal Factors 23
6.1.1. Firm Size 23
6.1.2. International Experience 23
6.1.3. Product 24
6.2. External Factors 24
6.2.1. Sociocultural distance between home country and host country 24
6.2.2. Country risk/demand uncertainty 25
6.2.3. Market size and growth 25
6.2.4. Direct and indirect trade barriers 25
6.2.5. Intensity of competition 26
6.2.6. Small number of relevant intermediaries available 27
6.3. Desired Mode Characteristics 27
6.3.1. Risk averse 27
6.3.2. Control 27
6.4. Transactions-Specific Factors 27
6.4.1. Tacit nature of know-how 27
6.4.2. Opportunistic behavior 28
6.4.3. Transaction Cost 28
7. Marketing Program 28
 7.1. Brand Equity 28
7.2. Objectives 29
7.2.1. Mid-term objectives 29
7.2.2. Long-term objectives 29
7.3. 4P Strategies 29
7.3.1. Product strategies 29
7.3.2. Price strategies 30
7.3.3. Place strategies 30
7.3.4. Promotion strategies 30
8. Reference List 31
1. Executive Summary

The report presents the global marketing strategies of Lay’s in China and India. From
the context analysis of Lay’s and two markets compared to the competitors, and the
application of BERI scoring and the MACS matrix. The conclusion indicates that
China's market attractiveness is notably higher, driven by key economic factors and its
large population. Lay’s possesses strong competitive advantages in this market,
including a well-established brand, robust marketing capabilities, and advanced
technological resources. As a result, China has been selected as the primary market for
strategic focus. Utilizing the waterfall approach in market expansion and hierarchical
modes in operations, Lay’s can leverage its established brand equity and point of
difference to develop 4P strategies to catch up with consumer trends and boost market
presence and sales.

2. Global Overview of Lay's Potato Chips

Lay's is a global snack brand with a wide-spread presence in over 200 countries,
offering unique flavors tailored to local tastes, like “Magic Masala" in India or
“Wasabi Ginger” in Japan (Lay’s, n.d.). The company stands out from its competitors
by implementing a focused strategy on localization, adapting both products and
marketing campaigns to different culture aspects (The Enterprise World, 2023). This
constitutes the 'glocalization’ approach that is tremendously applied by firms - “the
development and selling of products or services intended for the global market, but
adapted to suit local culture and behavior” (Hollensen, 2013). Embracing the spirit of
'Think globally, act locally’, Lay's aims to implement innovative marketing and create
emotional connections with customers through campaigns that excite consumers, such
as “Do Us a Flavor” and "Smile Deke Dekho" in India (Lay’s, n.d.). As a PepsiCo’s
subsidiary, Lay’s has the competitive advantage of having a wide-spread distribution
network and substantial marketing resources. Lay’s seeks to expand market share,
introduce localized products, and promote sustainability to align with global consumer
expectations in emerging markets like Asia-Pacific and Latin America.
3. Overview of China and India

In this report, China and India are chosen as two emerging markets for Lay's
penetration strategy. Table 1 shows the overview of these markets based on the PEST
model (Hollensen, 2013). Using the PEST model, the chosen countries are analyzed
following the criteria relating to Political - Environmental - Social - Technological
aspects, which will paint a picture of the potential power of China and India.

India China

Geographic A diverse culinary landscape A massive population (1.4

Factors with varied regional tastes billion), vast potential consumer
base

Economic Increased demand for The F&B industry has grown

Factors convenient snack options significantly in recent decades

Technological Adapted promotional approach Leveraged extensive distribution

Factors based on market infrastructure, networks and marketing
utilizing local expertise to resources to penetrate
navigate complex logistics

Cultural Engaged with local Introduced flavors tailored to

Adaptation communities by sourcing Chinese tastes
ingredients from Indian farmers

Pricing and Considered local purchasing Leveraged its vast distribution

Distribution power and competitor landscape network, partnering with local
distributors and retailers

Table 1: Overview of China and India

 Source: (Mariadoss, n.d, Chapter 6); (The Enterprise World, 2023); (Guillén, 2024);
(Thirdeyeblindproductions, 2024); (Team, 2022).

Overall, it is highlighted in Table 1 that Lay’s approaches to market entry for each
market may differ significantly because of geographic, economic, cultural, and
technological factors. To be specific, India has a growing F&B industry which
benefits from a diverse culinary landscape, leading to increasing demand for
convenient snacks, gaining strong local engagement through ingredients sourcing
from Indian farmers. However, its varied infrastructure requires tailored promotion
strategies and rigorous logistics plans to ensure streamline distribution. Pricing
strategy also needs to be suitable for local purchasing power considering competition.
On the other hand, China benefits from having a large consumer base due to a big
population and a rapidly growing F&B sector, supported by extensive distribution
networks and local partnerships. Yet, Lay’s will need to constantly adapt its products
to cater to local tastes in China. In summary, though both countries offer tremendous
opportunities, China yields a larger consumer base and well-established infrastructure,
while India requires more locally-driven strategies.

4. Market Selection

4.1. Criteria Definition

According to Sakarya et al. (2007b), market size, growth rate, fit between customer
preferences and the product and competitive rivalry are the needed criterias for
preliminary screening. However, for each product or brand, it is important to identify
suitable criteria for research needs. The approach to assessing market entry
possibilities for emerging markets is a combination of traditional and modern methods
of incorporating micro analysis at the industry and customer levels into country level
macro analysis (Sakarya et al., 2007b). For the case of Lay’s, we provide a
comprehensive BERI analysis for the preliminary screening, followed by fine-grained
screening exploring the market's attractiveness and competitive strength in the chosen
markets, being China and India.
4.2. Preliminary Screening

Over recent years, there have been various indices developed to assess the risk factors
in the evaluation of potential markets. In this report, we use the Business Environment
Risk Index (BERI), which assesses countries several times a year on different
economic, political and financial factors on a scale ranging from 0 to 4 (Hollensen,
2013). The criteria included in the overall BERI index are illustrated below in Figure
1, providing a macro-oriented screening method.

Figure 1: Criteria included in the overall BERI index

Source: Hollensen (2013)

Based on the BERI index put forward by Hollensen (2013), we conducted a desk
research for justification of BERI score in Table 2 and calculated the overall BERI
score of each country in Table 3 shown below.

Criteria India China

Political stability - Political stability index (2022) -0.57 -0.44

Economic growth - GDP growth (2023) 7.6% 5.2%

Currency convertibility - Exchange rate regimes (2021) 7 5

Labour cost/productivity - Annual minimum wage $674 $2,642

(2020)

Short-term credit - Short term debt (2022) 20.9% 53%

Long-term loans/venture capital - Bank Lending Rate 10.25 4.35

(2024)

Attitude towards the foreign investor and profits - FDI 1.46% 1%

(2022)

Nationalization - Government effectiveness index 0.37 0.5

(2022)

Monetary inflation - Inflation rate (2023) 5.6% 0.2%

Balance of payments - Net errors and omissions (2023) -315.99 -37,925.85

million million
USD USD

Enforceability of contracts - Enforcing contracts score 41.2 80.9

(2020)

Bureaucratic delays - Judicial independence score 68 68

(2020)

Communications: phone, fax, internet access - Mobile 66.5 85.2

Connectivity Index (2023)
Local management and partner - Human Capital Index 0.5 0.7
(2020)

Professional services and contractors - Professional 1,025 3,231

services revenue (2024) million million
USD USD

Table 2: Justification for BERI analysis

Source: (TheGlobalEconomy.com, n.d.); (World Bank Open Data, n.d.); (Minimum

Wage by Country 2024, n.d.); (TRADING ECONOMICS, n.d.); (Enforcing Contracts
- Doing Business - World Bank Group, n.d.); (2024 – GSMA Mobile Connectivity
Index, n.d.); (Statista, n.d.-d).

Criteria Weight Score (rating) on a Overall BERI

s scale of 0–4 index

India China India China

Political stability 3 1 1 3 3

Economic growth 2.5 4 3 10 7.5

Currency convertibility 2.5 4 3 10 7.5

Labour cost/productivity 2 1 2 2 4

Short-term credit 2 2 4 4 8

Long-term loans/venture capital 2 2 1 4 2

Attitude towards the foreign 1.5 2 1 3 1.5

 investor and profits

Nationalization 1.5 3 3 4.5 4.5

Monetary inflation 1.5 3 4 4.5 6

Balance of payments 1.5 3 1 4.5 1.5

Enforceability of contracts 1.5 1 4 1.5 6

Bureaucratic delays 1 3 3 3 3

Communications: phone, fax, 1 3 4 3 4

internet access

Local management and partner 1 2 3 2 3

Professional services and 0.5 2 3 1 1.5

contractors

Total 61.5 75

Table 3: BERI score of India and China

According to Hollensen (2013), the score rating for BERI ranges from 0 to 4, with 0
being unacceptable, 1 meaning poor, 2 showing average conditions; 3 inferring above
average conditions and 4 indicating superior conditions. The score is then multiplied
by the weights for each criteria, which yields the total points for each country. From
Table 3, China has a total score of 75, meaning that it is not a very favorable market,
but still an advanced economy (Hollensen, 2013). This suggests that China seems to
be a more potential market with lower risks for Lay’s to implement its
internationalization strategy. As for India, the total score 61.5 indicates that it is an
immature economy but still has potential to invest in (Hollensen, 2013). In the next
section, a fine-grained screening is executed to further assess the potential of China
and India through market attractiveness and competitive strength.

4.3. Fine-Grained Screening

4.3.1. Market’s Attractiveness

Because the BERI analysis only provides a macro-oriented screening and focuses
mainly on the political risk of entering new markets, a broader approach assessing the
competences of the firm, including market’s attractiveness and competitive strength is
often needed (Hollensen, 2013). The criteria to analyze market's attractiveness is
illustrated in Figure 2 as follows, but in this report we only chose a few including
economic position, market growth, buying power of customers, market focus as
market access as we believe that they show significant and differential statistics
between China and India.

Figure 2: Dimensions of market/country attractiveness and competitive strength

Source: (Hollensen, 2013)

Applying the model, the justification and the total market’s attractiveness score of
each market is presented in Table 4 and 5 below.

CRITERIA INDIA CHINA

Economic position (GDP $2,239.25 $12,211

per capita, US$)

Market growth 8.39% (CAGR 2024-2029) 9.18% (CAGR 2024-2029)

Buying power of customers $3.95 trillion $18.533 trillion

Market focus (quality or Focus on a quality-driven Focus on a quality-driven

price) market strategy through market strategy
product innovation, brand
perception, consumer
engagement.

Market access 52.9/100 48.5/100

Beri index 61.5 75

Table 4: Justification for market’s attractiveness

Source: (Guillén, 2024); (Statista, n.d.-a); (Statista, n.d.-c); (International Journal of

Scientific Research in Science and Technology IJSRST, 2018); (BTI 2024 India
Country Report, n.d.); (The Heritage Foundation, n.d.).
 Criteria Weights Score (rating) on a scale Overall BERI index
of 1–5

India China India China

Economic 0.2 1 3 0.2 0.6

position (GDP
per capita, US$)

Market growth 0.2 3 3 0.6 0.6

Buying power of 0.2 3 5 0.6 1

customers

Market focus 0.1 5 5 0.5 0.5

Market access 0.1 2 2 0.2 0.2

Beri index 0.2 3 4 0.6 0.8

Total 1 2.7 3.7

Table 5: Market’s attractiveness of India and China

The analysis reveals that China is more favorable, with an overall score of 3.7 out of 5
compared to India’s 2.7. In addition, compared to India, China has a stronger
economic condition (GDP per capita) and significantly higher customer purchasing
power, making it a more attractive market. Both countries show equal potential for
market growth and strong market focus, though still facing similar challenges in
market access, scoring equally low. China's slightly higher BERI index also suggests a
more favorable business risk environment compared to India, which aligns with the
results from the preliminary screening stage.

4.3.2. Competitive Strength

Considering competitive strength analysis, we continue to assess the criteria put

forward by Hollensen (2013) to support the market choice of Lay’s
internationalization strategy, illustrated by Figure 2 above.

Applying this framework, this report will focus on analyzing Lay’s diverse flavor
profile and innovative marketing campaigns, which are the most important factors
making Lay’s stand out from its competitors. Thus, we have the justification for Lay’s
competitive strength in China and India demonstrated in Table 6 and 7 as follows.

Lay’s Pringles

1.Market share Market leader in China with Significantly smaller market

the highest market share share

2. Technology Lay's, as part of Pepsico, has a Pringles, as part of Kellog’s,

Position utilizes advanced technology made efforts in enhancing its
in production and packaging production capabilities by
and benefits from PepsiCo’s acquiring local plants, but still
investments in 10 food plants fails to catch up with PepsiCo,
across the country who has been in China for
much longer

3. Image Lay's has established itself as a While Pringles is a well-known

leading snack brand in China, global brand, its recognition in
recognized for its extensive China is not as strong as Lay's.
range of flavors that cater to It faces stiff competition from
local tastes. both local brands and other
international players, limiting
its visibility
4. Marketing Lay's stands out with its highly Pringles relies more on its
ability and targeted omni-channel unique product positioning and
capacity approach and ability to deeply broad appeal to compete in the
(country-specific connect with Chinese market.
know-how) consumers through emotional
storytelling and regional pride.

5. Financial Take advantage of Pepsico’s Pringles also has good

resources, access resources and its widespread financial backing and access to
to distribution networks distribution channels, but it
distribution operates on a smaller scale
channels compared to Lay’s, limiting its
reach

Table 6: Justification for competitive strength of Lay’s in China

Source: (Euromonitor International, 2022); (Kellanova - Financials -

Annual Reports, n.d.); (孙迟, n.d.); (Tbh, 2023)

Lay’s Kurkure

Market leader in China Significantly smaller

Market share with the highest market market share
share

PepsiCo's manufacturing technology in India is marked

by significant investments in modern facilities,
Technology Position
innovative production techniques, and a strong
commitment to sustainability.

Image Positioned as a premium Kurkure is marketed as an

snack brand, Lay's focuses affordable, fun snack that
on delivering a Western- fits into everyday life. It
style snacking experience. has carved out a niche as a
 It emphasizes quality and "finger snack" that appeals
indulgence to Indian consumers'
preference for spicy and
flavorful snacks.

Lay's marketing strategy Employs humorous and

in India effectively engaging advertising that
combines thematic resonates with Indian
storytelling, localized consumers' cultural
Marketing ability and
campaigns, digital nuances. Campaigns like
capacity (country-
engagement, and targeted "Tedha Hai Par Mera Hai"
specific know-how)
regional strategies. highlight the brand's
quirky personality while
fostering consumer loyalty
through relatable content.

Financial Resources, As a global brand, Lays While Kurkure also

Access to Distribution has access to significant benefits from PepsiCo's
Channels financial resources from resources, it has a more
its parent company, targeted approach to
PepsiCo. This allows Lays financial investments,
to invest heavily in focusing on understanding
marketing, product local consumer
innovation, and expansion. preferences and adapting
Lays leverages PepsiCo's its products accordingly.
extensive distribution Kurkure has developed a
network in India, which vast distribution network
includes modern retail that covers both urban and
formats like supermarkets rural markets. It is
and hypermarkets. available through
However, its reach is more supermarkets, kirana
 concentrated in urban stores, and even street
areas. vendors, ensuring wide
accessibility across the
country

Table 7: Justification for competitive strength of Lay’s in India

Source: (Euromonitor, 2022); (Jha, 2024); (PTI & PTI, 2024)

In the competitive snack markets of China and India, Lay's emerges as the undisputed
market leader and the top-of-mind brand for potato chips. Its strong presence is
reinforced by a carefully cultivated image as a premium snack brand, offering a
Western-style snacking experience that resonates well with local consumers. Lay's not
only prioritizes high quality but also tailors its diverse flavor offerings to align with
regional cultural preferences, enhancing its appeal.

PepsiCo's powerful distribution network and technological prowess further solidify

Lay's position in both markets, facilitating efficient product delivery and innovative
marketing strategies. This strategic advantage allows Lay's to maintain a favorable
stance against competitors like Pringles, which, despite its unique product design and
marketing efforts, struggles to achieve a comparable market presence.

In India, Kurkure capitalizes on its unique positioning and local flavor appeal but
faces challenges with brand recognition outside its home market and must adapt to
evolving consumer preferences. Overall, Lay's dominance in both China and India
showcases its effective adaptation to local tastes and robust operational capabilities.

From there, we have the results of the competitive strength of Lay’s as Table 8 below,
ranging from 1 to 5.

India China % Weight Result Result

factor (India) (China)

Quality of 4 3 20 0.8 0.6

 Distributors and
Service

Technology 3 5 20 0.6 1
Position

Market Demand 4 4 20 0.8 0.8

Communication 4 4 10 0.4 0.4

Financial 3 5 20 0.6 1
Resources,
Access to
Distribution
Channels

Etc. 3 4 10 0.3 0.4

TOTAL 100 3.5 4.2

Table 8: Competitive strength in India and China

Combining the results from market's attractiveness analysis and competitive strength
analysis, we have the market attractiveness/competitive strength matrix as shown in
Figure 3 and 4 below.
Figure 3: MACS matrix of China and India
 Figure 4: The MACS matrix

Source: (Hollensen, 2013)

5. Market Expansion Strategies and Market Choice

5.1. Market Expansion Strategies

Lay's primarily utilizes the waterfall approach as its market expansion strategy
through three aspects.

Firstly, Lay's adopts a sequential market entry approach, concentrating on one region
at a time before venturing into others. This method enables comprehensive market
research and product adaptation tailored to each specific region.

Secondly, Lay's implements localized strategies by customizing marketing campaigns

to resonate with the local culture. An illustrative example is the "Do Us a Flavor"
campaign, which solicits local input for developing new flavors that cater to specific
regional preferences.

Lastly, Lay’s uses gradual scaling by leveraging insights gleaned from previous
market successes to guide subsequent expansions into new markets. This iterative
process ensures a more informed and strategic approach to growth.
 Figure 5: The waterfall approach

Source: (Hollensen, 2013)

5.2. Market Choice

From the results of the MACS matrix (Figure 3), it can be seen that China scores
higher than India on market attractiveness and competitive strength, landing on the
“invest/grow” area (Figure 4). Therefore, Lay’s is fit for direct and long-term
investment in China and should select China to be the first market to focus on.

5.3. Points of Parity, Point of Difference

5.3.1. Points of Parity

In the Chinese market of potato chips in particular and snacks in general, points of
parity include diverse flavors, relatively cheap price, readily availability in
convenience stores and online platforms, as well as local adaptation, ranging from
taste, packaging, to marketing communication plans.

5.3.2. Point of Difference

Despite competitors’ attempts at local adaptations, Lay's point of difference still

shines as deep cultural localization, with a wide variety of flavors adapted to local
cuisines. Competitor's truth reveals that competitors may adjust the taste and have
various flavors for their snacks in each country but they hardly covered the depth of
cultural localization where they can bring signature cuisine into the flavors. As for
consumer truth, Chinese consumers are known for their great love for their national
cuisine. Finally, regarding company truth, Lay's is fully equipped with established
recognition and resources from parent company PepsiCo to develop culturally adapted
products that require great market understanding and R&D abilities.
 Figure 6: The various flavors of Lay’s in China

6. Market Operations

In China, Lay’s has adopted hierarchical modes as its current operations mode, which
will be analyzed through factors in Figure 6 below.
 Figure 7: Factors affecting the foreign market entry/operations mode decision

6.1. Internal Factors

6.1.1. Firm Size

Lay’s made an annual revenue of approximately $15.8 billion in 2023 (Frito-Lay

Revenue: Annual, Quarterly, and Historic - Zippia, 2023), with over 60,000
employees from more than 30 nationalities and over 200 technical professionals from
more than 20 nationalities. (Shastri, 2022) This reflects their extensive operational
scale and culturally diverse workforce.

6.1.2. International Experience

Today, Lay's is present in 200+ countries as a titan of the international snack food
industry (Guillén, 2024). Across China, Lay’s is present at over 4330 convenience
stores (“China Is a Big Prize,” 2013).
 6.1.3. Product

6.1.3.1. Product complexity

Lay's has tailored its offerings in China by introducing a variety of locally inspired
flavors such as Peking Duck, Sichuan Hot Pot, and Linyi Stir-Fried Chicken, which
require extensive research, development, and testing to resonate with consumers.
Collaborations with well-known Chinese food brands like Wu Fang Zhai and Zhou
Hei Ya further diversify the product line through unique co-branded flavors (Ada,
2023). In addition to traditional potato chips, Lay's has developed innovative formats
like Baked Lay's Salad Chips, alongside limited-edition collections inspired by global
cuisines such as Salt & Pepper Mantis Shrimp and Beef Wellington, adding
complexity to their portfolio through specialized production processes (Van Eijck,
2023).

6.1.3.2. Product differentiation

Lay's has built strong brand equity in China through its focus on localization and
innovation, consistently delivering products that cater to local tastes, which sets it
apart from competitors. By quickly adapting to local preferences, Lay's strengthens
brand loyalty and enhances its competitive position, distinguishing itself from less
flexible rivals (Team, 2022b). The company also leverages local partnerships,
utilizing licensing agreements with Chinese brands to tap into their expertise and
distribution networks, allowing it to reach a broader audience (Guillén, 2024).
Additionally, Lay's employs innovative marketing strategies, such as Douyin
challenges and fortune-telling chips, to engage consumers and create a strong
emotional connection with the brand (MMA Global, n.d.).

6.2. External Factors

6.2.1. Sociocultural distance between home country and host country

Regarding the similarities, Lay's is a leading snack brand in both the United States and
China with a strong commitment to product quality and variety, ensuring a consistent
product experience across markets. Their marketing strategies are effective and
engaging in both countries.

On the other hand, due to cultural differences, campaigns in China emphasize

community and family-oriented themes, while the United States individualistic values.
Competitive landscape also varies - Lay’s faces intense competition from numerous
local brands, necessitating a more aggressive localization strategy in China, whereas
in the United States, Lay’s market position is relatively stable.

6.2.2. Country risk/demand uncertainty

Looking at political risks, China's unpredictable political landscape and ongoing

geopolitical tensions with the US can create instability in the business environment,
potentially leading to trade barriers, tariffs, or boycotts against foreign brands.

Cultural differences affecting consumer perception and lifestyle also needed to be

studied for effective marketing.

6.2.3. Market size and growth

The potato chip market generates a revenue of 3.32 billion US dollars in 2024 and is
expected to grow 6.9% in 2025, following a projected CAGR annual growth of 9.18%
for the period 2024-2029 (Statista, n.d.-b).

6.2.4. Direct and indirect trade barriers

The direct trade barriers include tariffs and duties (MFN, GEN, FTA), declaration
norm, regulations and restrictions, CCC certificates, inspection and quarantine, and
anti-dumping or anti-subsidy, as presented by the exporting to China guidance below
(Figure 8).
 Figure 8: Exporting to China Guidance

As for indirect trade barriers, cultural values and consumer preferences are considered
major concerns in China.

6.2.5. Intensity of competition

Lay's emerged as the most popular chips brand among respondents, with an
impressive 72 percent indicating they had purchased Lay's products in the past three
months. This strong consumer preference highlights Lay's significant market presence
and brand loyalty in a competitive landscape. However, it is essential to note that
Lay's faces robust competition from domestic brands such as Three Squirrels and
Oishi, which are also popular among Chinese consumers. Three Squirrels, for
instance, has established itself as a leading player in the snack market by leveraging
its unique branding and extensive online presence, becoming the largest e-commerce
food enterprise in China. The brand's innovative marketing strategies, including cute
mascots and engaging advertisements, resonate well with younger consumers,
contributing to its rapid growth and popularity. Oishi, known for its diverse snack
offerings and strong distribution network, also competes effectively in this market.
The combination of Lay's established brand equity and the aggressive strategies
employed by local competitors underscores the dynamic nature of the Chinese snack
food industry, where consumer preferences are continually evolving (Statista, 2024).
 6.2.6. Small number of relevant intermediaries available

Due to limited export intermediaries and high market concentrations in China,

opportunistic behavior can take place, but may also be mitigated by establishing local
production facilities and direct sourcing relationships with hierarchical operations.

6.3. Desired Mode Characteristics

6.3.1. Risk averse

Although there are risks when Lay’s invests heavily on production facilities in China,
it helps reduce risks associated with import tariffs, trade barriers, and supply chain
disruptions, while ensuring compliance with local regulations. This investment in
local manufacturing reflects Lay's commitment of significant resources, demonstrating
a willingness to take on higher levels of risk to secure a stronger foothold in the
Chinese market. (Controlling of International Business, n.d.).

6.3.2. Control

Lay's local production facilities and direct sourcing relationships provide high control
over operations in China, allowing product adaptation, quality monitoring, and market
response, compared to export modes or licensing agreements.

6.3.3. Flexibility

While Lay's hierarchical mode in China offers strong control, it may limit short-term
flexibility due to the significant resource commitment required. However, Lay's
localization strategy, including the introduction of unique flavors tailored to regional
preferences, shows its ability to adapt its product offerings in response to changing
market conditions and consumer demands (Doering, 2024).

6.4. Transactions-Specific Factors

6.4.1. Tacit nature of know-how

Hierarchical operations in China are preferred to manage its complex know-how,

ensuring direct control over production and effective knowledge sharing. Investing
locally helps maintain quality and adapt to Chinese consumer preferences,
strengthening its competitive position in the snack market.

6.4.2. Opportunistic behavior

Lay’s has to face opportunistic behaviors from 3 entities:

Local suppliers might overcharge or neglect quality once contracts are in place,
knowing Lay's relies on them for key ingredients.

Distributors could prioritize their own interests by seeking higher margins or

exclusive rights, limiting Lay's pricing and distribution options.

Additionally, increased competition from local snack brands may lead consumers to
switch for better prices or perceived quality, lacking loyalty to Lay's.

6.4.3. Transaction Cost

Regarding information search costs, market research on local consumer preferences

and regulatory requirements in China can be resource-intensive.

As for negotiation costs, forming partnerships with local distributors or suppliers can
be time-consuming because of interest alignment and compliance with local practices.

Looking at monitoring costs, ongoing monitoring is needed to ensure local partners

adhere to Lay's quality standards, particularly concerning the tacit knowledge
involved in flavor development.

For contracting costs, drafting contracts that effectively capture the complexities of
tacit knowledge transfer often leads to higher legal and administrative expenses.

7. Marketing Program

7.1. Brand Equity

Lay's is known worldwide for its quality and variety, providing a strong foundation in
the Chinese market. By combining its global reputation with local adaptation, Lay's
focuses on authentic and familiar flavors from local dishes that resonate with Chinese
consumers can strengthen Lay's position against competitors.

7.2. Objectives

7.2.1. Mid-term objectives

Within the next 1-3 years, Lay’s can aim to increase market share by 5% and brand
recognition by 20% in the Chinese savory snack market.

7.2.2. Long-term objectives

Over 3-5 years Lay’s should focus on product innovation for new local flavors and
healthier options, and sustainability initiatives in packaging and production processes
to align with long-term consumer trends.

7.3. 4P Strategies

7.3.1. Product strategies

Lay's should enhance product cultural relevance with the introduction of flavors that
represent local delicacies (Sichuan Spicy Chicken, Peking Duck, Tea Egg…), earning
consumers’ favorability and differentiating from competitors. Another consideration is
limited edition for Chinese seasonal events, festivals (Mid-Autumn Festival, Chinese
New Year) to create buzz and encourage trials in new consumers.

Lay’s products can take on a more healthy image with product line expansion into
health-conscious options, Product lines should be expanded into more health-
conscious options, such as baked chips or chips from sweet potatoes or whole grains.;
and nutritional transparency via packaging and communications.

Nutritional transparency, especially the benefits and improvements, can be

emphasized through packaging and communications.

Lastly, Lay’s can take sustainability initiatives. Packaging can be transitioned to

biodegradable or recyclable materials. Ingredients used for localized flavors can also
be sourced more sustainably, such as from local farmers.
 7.3.2. Price strategies

Lay's can continue competitive pricing in multiple ways. Prices are set lower than
competitors for classic flavors (Original, Salted, Sour Cream and Onion), while at-the-
competition pricing is applied for regional and limited edition flavors. Additionally,
value packs offering more chips at a lower per-unit price can appeal to families and
groups.

Promotional pricing should be used during new product launches, including discounts
or "buy one, get one free" offers, to incentivize trial among new consumers. Loyalty
programs should be developed to reward repeat purchases with discounts or exclusive
access to new flavors.

7.3.3. Place strategies

Lay’s can expand distribution by strengthening partnerships with local distributors in

both urban and rural areas and increasing presence into convenience stores and
outdoor events, activities where modern consumers usually go for a snack
(Euromonitor International, 2024).

Major e-commerce platforms (like Tmall and JD.com) should also be leveraged for
can boost direct sales, ensuring a robust strengthening online presence that meets the
increasing demand for in the era of online shopping.

7.3.4. Promotion strategies

Social media engagement, including interactive content and influencer partnerships on

platforms such as Weibo and Douyin (TikTok) can be utilized to target and can be
leveraged to target younger audiences.

Communications should try to integrate Lay's products into cultural narratives for
stronger emotional connections with consumers. A suggestion can beis developing
impressive cultural campaigns for Chinese festivals and traditions.
In-store sampling programs may also be implemented at supermarkets and
convenience stores to encourage trials of new flavors, enhance the consumer
experience, and drive sales.

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