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BOS Brands: Challenges and choices faced by an

internationalising medium-sized South African venture

Teaching Case Study

A Research Report presented to

The Graduate School of Business

University of Cape Town

In partial fulfilment of the requirements for the Master of Business Administration Degree

Christopher Human December 2015

Supervised by: Professor Geoff Bick

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iBOS Brands: challenges and choices faced by an internationalising medium sized South African Venture

Abstract

Many studies have been conducted regarding the internationalisation strategies and processes

employed by large firms as they seek new markets for their respective products and services.

Increasingly, however, smaller entrepreneurial businesses are venturing abroad, often earlier in their

development and with significantly less capital than their corporate equivalents. This phenomenon,

referred to as "Born Global", is underrepresented in much of the existing literature. Current theory

typically focuses on larger multinational corporations, as do the vast majority of textbooks and the

case material usually encountered in the classroom. In addition, most teaching cases cover the

internationalisation of developed market enterprises, either into other developed markets or their

emerging market counterparts. There is thus a particularly notable shortage of cases that explore

internationalising SME companies from emerging market contexts.

BOS Brands is just such a company and provides an interesting and engaging case around which to

elaborate on the internationalisation experience of a Born Global firm. This medium-sized South

African business develops, distributes and markets Rooibos-based beverages in Southern Africa and

Europe, with eyes on a broader global presence. The resulting case provides insight into the

strategic decisions required to successfully take a medium-sized business into competitive foreign

markets without the capital and support enjoyed by many larger multinational corporations. Among

other issues, BOS Brands provides fertile ground to explore the selection of target country and entry

mode, overcoming cultural and physical distance, opportunity recognition and the roles of networks

and innovation.

The research report takes the form of a teaching case, designed to assist MBA level students of

Marketing, Strategy, Innovation and Entrepreneurship in understanding the many interrelated

challenges and issues that businesses and brands face as they move across borders. In addition, this

research report is designed to fulfil a secondary function: to inspire students in emerging market

contexts to contribute to the development of products, services and brands that can compete in

international markets.

Key Words:

Internationalisation, Born Global, Emerging Markets, South Africa, SME, Brand, Marketing,

Distribution, SME (Small and Medium Enterprises), FMCG (Fast Moving Consumer Goods)

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iiBOS Brands: challenges and choices faced by an internationalising medium sized South African Venture

Plagiarism Declaration I know that plagiarism is wrong. Plagiarism is to use another’s work and pretend that it is one’s own. I have used a recognised convention for citation and referencing. Each significant contribution and quotation from the works of other people has been attributed, cited and referenced. I certify that this submission is my own work. I have not allowed and will not allow anyone to copy this essay with the intention of passing it off as his or her own work - Christopher James Human HMNCHR001

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iii BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture

Table of Contents

1. Introduction and Context .................................................................................................... 1 1.1 Background .................................................................................................................................... 1 1.2 Case Theme and Purpose ............................................................................................................. 2 1.3 Learning Relevance and Objectives ............................................................................................ 3 1.4 Limitations ..................................................................................................................................... 6 1.5 Assumptions ................................................................................................................................... 6 1.6 Ethics .............................................................................................................................................. 6 1.7 Abbreviations ................................................................................................................................ 7

2. Literature Review ................................................................................................................. 8 2.1 Introduction ................................................................................................................................... 8 2.2 International Entrepreneurship .................................................................................................. 8

2.2.1 The “Born-Global” Firm .......................................................................................................... 9 2.2.2 Born-Global: Capabilities and Skills ..................................................................................... 10 2.2.3 Born-Global: Innovation Orientation ..................................................................................... 11 2.2.4 Born-Global: Performance ..................................................................................................... 12

2.3 Internationalisation ..................................................................................................................... 14 2.3.1 Opportunity Recognition ....................................................................................................... 14 2.3.2 International Market Entry..................................................................................................... 15 2.3.3 Internationalisation Stages ..................................................................................................... 17 2.3.4 Marketing and the Internationalising Firm ............................................................................ 19

2.4 Geographic, Psychic and Cultural Distance ............................................................................. 20 2.4.1 Geographic Distance .............................................................................................................. 20 2.4.2 Psychic and Cultural Distance ............................................................................................... 21 2.4.3 Product Acceptance of Foreign Brands ................................................................................. 22

2.5 Conclusion .................................................................................................................................... 25

3. Methodology ....................................................................................................................... 27 3.1 Case Study Content ..................................................................................................................... 28 3.2 Case Subject Selection ................................................................................................................ 28 3.3 Research Design .......................................................................................................................... 29 3.4 Data Sources and Collection ...................................................................................................... 31 3.5 Data Analysis ............................................................................................................................... 32 3.6 Teaching Note .............................................................................................................................. 33

4. Case Study ........................................................................................................................... 34 4.1 Introduction ................................................................................................................................. 34 4.2 Background .................................................................................................................................. 35

4.2.1 The Ice Tea Market ................................................................................................................ 35 4.2.2 The BOS Team ...................................................................................................................... 36

4.3 The BOS Brand ........................................................................................................................... 37 4.3.1 Positioning: Healthy and Fun ................................................................................................ 37 4.3.2 A Brand-Led Business ........................................................................................................... 39

4.4 Internationalisation ..................................................................................................................... 40 4.4.1 Born to be Global ................................................................................................................... 40 4.4.2 Target Region/Country .......................................................................................................... 41 4.4.3 Entry Mode ............................................................................................................................ 42

4.5 BOS in Europe ............................................................................................................................. 43 4.5.1 Internationalisation Stages and Timeline ............................................................................... 43 4.5.2 Competitive Environment ...................................................................................................... 44 4.5.3 Distribution and Sales ............................................................................................................ 46

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ivBOS Brands: challenges and choices faced by an internationalising medium sized South African Venture

4.6 Building an Effective Challenger Brand ................................................................................... 47 4.6.1 High-Touch Networks ........................................................................................................... 47 4.6.2 A Fresh Approach to Marketing and Brand Building ............................................................ 49 4.6.3 An Emphasis on Creativity and Innovation ........................................................................... 52

4.7 Ongoing Internationalisation Challenges ................................................................................. 53 4.7.1 Psychic/Cultural Distance ...................................................................................................... 53 4.7.2 Country of Origin Role .......................................................................................................... 54 4.7.3 Legislative and Legal Hurdles ............................................................................................... 55

4.8 Conclusion .................................................................................................................................... 56 4.8.1 Opportunities Near and Far.................................................................................................... 56

4.9 Discussion Questions and Assignment ...................................................................................... 58 4.9.1 Questions for General Discussion (for preparation before session 1) ................................... 58 4.9.2 Group Assignment (for preparation before session 2) ........................................................... 59

4.10 Case Exhibits ............................................................................................................................. 60 4.10.1 Exhibit 1. The Global Ice Tea Market (source: Bos, 2015) ................................................. 60 4.10.2 Exhibit 2. Ice Tea Market and Competitors – South Africa (source: Bos, 2015) ................ 61 4.10.3 Exhibit 3. Marketing and Activations 2015 – Netherlands (source: Bos, 2015) ................. 62 4.10.4 Exhibit 4. On-Premise / HORECA Merchandising Examples (source: Bos, 2013) ............ 63 4.10.5 Exhibit 5. Sales Contribution and Growth by Region (source: Bos, 2015) ......................... 64

5. Teaching Note ..................................................................................................................... 65

6. Conclusion ........................................................................................................................... 65

Reference List ............................................................................................................................. 67

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vBOS Brands: challenges and choices faced by an internationalising medium sized South African Venture

List of Figures Figure 1.1 BOS 275ml Ice Tea Cans (Source: BOS Brands, 2013) ............................................ 2

Figure 1.2 BOS Brands guerilla marketing activations (Source: BOS Brands, 2013) ................ 3

Figure 3.1 Teaching Case Research Process (Source: Adapted from Woodside, 2010, p.35) .. 30

Figure 3.2 Data Analysis Triangulation (Source: adapted from Woodside, 2010, p.35) ........... 32

Figure 4.1 BOS' Founding Team includes Dave Evans, Grant Rushmere, Richard Bowsher, Marié van Niekerk ................................................................................................................ 37

Figure 4.2 BOS' Current Ice Tea Range in Standard 275ml Tall Format Cans ......................... 38

Figure 4.3 BOS' Global Presence - 2015 ................................................................................... 42

Figure 4.4 BOS' Internationalisation in Europe 2010 – 2016 .................................................... 43

Figure 4.5 BOS Competitive Positioning Matrix (source: BOS, 2013) ..................................... 45

Figure 4.6 BOS' Target Audience Segments (source: BOS, 2013)............................................ 49

Figure 4.7 BOS famous cycling giraffes on the streets of Cape Town (source: BOS, 2012) .... 50

Figure 4.8 BOS Sport Drinks launched in January 2014 ........................................................... 52

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viBOS Brands: challenges and choices faced by an internationalising medium sized South African Venture

List of Tables Table 1.1 Case Relevance in Relation to Learning Objectives .................................................... 4

Table 2.1 Linkages between Literature, Teaching Objectives and Questions ........................... 25

Table 3.1 Case Study Type Matrix ............................................................................................ 27

Table 5.1 Teaching Plan 1: Single Lesson ................................. Error! Bookmark not defined.

Table 5.2 Teaching Plan 2: Double Lesson ............................... Error! Bookmark not defined.

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1BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture

1. Introduction and Context

1.1 Background

The expansion of FMCG brands and businesses across national and cultural borders is a well-

documented phenomenon, as is the increasing prevalence of international business and trade

(The World Trade Organisation, 2013). Traditionally such internationalisation has largely been

the domain of multinational corporations (MNCs), with the resources and knowledge to build

the required distribution channels and awareness of their products and services in foreign

markets (Brouthers, Brouthers, & Werner, 1996). More recently however, larger numbers of

SMEs and international new ventures have begun to venture abroad and many of these have

been founded with international ambitions (Karra, Phillips, & Tracey, 2008). Furthermore, an

increasing proportion of these firms, in turn, originate in developing markets (Luo & Tung,

2007).

BOS Brands (pronounced like rooibos) is just such a company. With rapidly increasing revenues

(2015 annual revenue growth to date is close to 100%) and income now in the region of R100

million per annum (BOS Brands, 2013), BOS is recognised as a local success story. To many,

their iconic ice tea cans (see figure 1.1) and 1 liter Tetrapaks are a familiar sight in the fridges of

local coffee shops, convenience shops and upmarket grocery stores.

BOS Brands’ product range is based on organic rooibos essence (with the raw rooibos

ingredient sourced from the Klipopmekaar farm in the Cederberg region of the Western Cape).

BOS’ flagship product is its lemon ice tea, which along with five other permanent and

occasional limited edition flavor variants, is available in 275ml cans, 500ml and 1 Liter

Tetrapak containers. BOS Brands also produces organic rooibos tea bags, an isotonic BOS

sports drink range and a new sparking ice tea variant.

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Founded by South Africa entrepreneurs Grant Rushmere, Dave Evans and Richard Bowser, the

business was launched in June 2010. The product development was largely informed by the

identification of a gap in the market (for healthy, trendy soft drinks) and the involvement of

Bowser, a partner and successful Silicon Valley entrepreneur who at that time owned the

Klipopmekaar rooibos farm. The business launched with shareholders that included the three

founders, local venture capital firm Invenfin, Endurance Trust and Sir Alex Ferguson (former

Manchester United manager) (BOS Brands, 2013).

African

symbolism and a distinctive rooibos taste imbue the brand with local associations however, the

BOS product, brand and business model were developed, from inception, with international

markets in mind (Evans, 2015). After considering a variety of global markets, the BOS brand

and management team settled on Northern Europe and began their expansion into the

Netherlands and Belgium. The selection of these target countries was based on considerations

that included market size, competitive environment and language / cultural similarities (Evans,

2015). The brand is now also present in France, Spain, Sweden and Switzerland and the BOS

management team is looking to continue on their international expansion path.

1.2 Case Theme and Purpose

The dominant theme of this teaching case is the critical role of strategic decision making in

informing the expansion of entrepreneurial ventures into foreign markets. Furthermore, this case

explores some of the complexities and nuances of international entrepreneurship, opportunity

Figure 1.1 BOS 275ml Ice Tea Cans (Source: BOS Brands, 2013) Copyright UCT


recognition and evaluation, international marketing and market differences (with particular

reference to cultural and psychic difference).

The purpose of this case is to provide students with a practical understanding and appreciation

of international entrepreneurship and the complexity of the internationalisation process and

related strategic choices as they apply to a medium sized entrepreneurial venture. The case’s

secondary purpose is to inspire business students to see the potential that lies within

strategically-driven emerging market ventures, especially those that have demonstrated the

vision and will to succeed in global consumer markets.

An effective case must be designed to engage their specific audience. This in turn requires an

interesting narrative that captivates and immerses the reader (Yin, 2009). BOS Brands is not

only a well-known and widely appreciated brand but also has a history of successfully

employing non-traditional and even irreverent marketing tactics (see figure 1.2 below). In

addition, BOS Brands’ South African character, youthful founders and ‘David and Goliath’

success in the saturated local soft drinks market increases the likelihood that this case will be

well-received by students.

Figure 1.2 BOS Brands guerilla marketing activations (Source: BOS Brands, 2013)

1.3 Learning Relevance and Objectives

Based on this teaching purpose, the primary target audience for this case can be specified as

business students and in particular students of marketing and of entrepreneurship. It is important

to specify this up front as cases must build upon the theory with which this audience is likely to

be familiar (Heath, 1998).

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In addition to its interest appeal, this teaching case derives value from its novelty in two

respects. Firstly, it illuminates a topic that is underrepresented in the contemporary MBA

classroom: international entrepreneurship. Secondly, it studies the specific case of a successful

South African (emerging market) firm. Sleuwaegen and Onkelinx (2014) find that international

new ventures experience significantly higher failure rates than their MNC counterparts. BOS

CEO Dave Evans (2015) confirms that the internationalisation process for a medium-sized

business such as BOS is characterised by challenging strategic decisions and tradeoffs. Yet

despite the growth of international entrepreneurship, many international marketing textbooks

include little or no content relating to this phenomenon (e.g. Onkvisit & Shaw, 2009; Kotabe &

Helsen, 2008; Burgess & Bothma, 2007; Bradley, 2002). As the government of South Africa

and other emerging countries look to support the expansion of local business abroad, there is an

opportunity to encourage discussions and learning about issues related to international

entrepreneurship.

The objective of this case is to assist students in synthesising and building on their knowledge of

the associated subjects (entrepreneurship and international marketing). As a result, the BOS

teaching case is designed to fulfill the following learning objectives:

Table 1.1 Case Relevance in Relation to Learning Objectives

LEARNING OBJECTIVE BOS TEACHING CASE

1. Consider the various factors informing the

decision of ‘born-global’ SMEs to

internationalise at or close to inception.

BOS’s business model and product were

developed with the intention to enter

international markets and this was based on a

variety of strategic reasons.

2. Analyse the decision-making process of the

internationalising SME in terms of

evaluating potential target countries and

entry modes.

A number of geographical target-country and

entry mode options were considered by BOS’

management.

3. Understand the complexities of marketing

BOS’ marketing team have come up against a

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in a foreign cultural and business context

(psychic and physical distance).

series of legislative and other hurdles in their

attempts to market their unique South African

product abroad.

4. Appreciate the ways in which

internationalisation challenges might be

different in the entrepreneurial (as opposed

to traditional) case.

As a relatively small beverage FMCG

company, BOS’ management has had to use

their agility and creativity to overcome

challenges in the absence of extensive

internationalisation budgets.

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1.4 Limitations

As a predominantly descriptive single-case study, it is important to note that the findings of the

research conducted apply to this particular case only and cannot be generalised to all cases of

international entrepreneurship. In addition, the case focuses on the experiences and strategic

decisions faced by the firm’s management and, in particular, CEO Dave Evans. Caution should

therefore be exercised that the resulting knowledge is not interpreted as an empirical and

unbiased picture of the organisation or an inference of broader organisational culture. The BOS

Brands case necessarily takes on a subjective character and students and lecturers are invited to

view the business situation from a management perspective. Only information made available

by the management team and cleared for dissemination in the public domain is included in this

account of the BOS Brands internationalisation case.

1.5 Assumptions

It is assumed that all information that has been provided by BOS Brands and its management is

accurate and factually sound. In addition, it is assumed that all information volunteered during

the interview stage of the research process is correct (where such information does not conflict

with information in the documentation provided or gathered during other in-depth interviews).

Where a conflict did arise, clarity was sought or the information was omitted.

It was further assumed that BOS Brands will remain a going concern over the research and case-

writing process.

1.6 Ethics

The preparation of this case and related research was done in accordance with a Memorandum

of Understanding agreed to by BOS CEO, Dave Evans on behalf of the organisation. In terms

thereof, it is noted that BOS and its appointed representatives retained the right to remove

content of a confidential nature from the final research paper and written case before

submission. It was further agreed that the final draft would be submitted for review by BOS and

its appointed representatives in due course. This process was completed 1 December 2015.

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Interview and case study research in general are highly susceptible to bias and inaccuracy due to

their potentially subjective nature and linear narrative style respectively (Fowler, 2009; Yin,

2009). Although certain information was altered to protect sensitive data, the author was

committed to retaining the integrity of the narrative and so did not fabricate material facts and

actively avoided bias in order to produce as accurate a reflection of reality in the classroom as

possible (Yin, 1994).

1.7 Abbreviations

To assist in achieving readability, certain abbreviations are employed throughout this research

report. These include the following, which have been used for ease of reference:

AH Albert Heijn (supermarkets) ATL Above The Line B2B Business to Business FMCG Fast Moving Consumer Goods HORECA Hotel, Restaurant and Café Trade (On-Consumption) MNC Multinational Corporation NPD New Product Development OLI Ownership-Location-Internationalisation Model PR Public Relations R&D Research and Development SME Small and Medium Size Enterprise

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2. Literature Review

2.1 Introduction

The purpose of this literature review is to provide a theoretical context to this BOS Brands case

ensuring that its learning objectives are met within the context of contemporary thinking on

related topics (Woodside, 2010). The teaching case describes a specific example of international

venturing as experienced by a South African “born-global” enterprise. Its emphasis is on market

and marketing related considerations and decisions by the BOS Brands management team (in

particular, its CEO) as the business expands into Europe and, possibly, beyond. This literature

review therefore examines the extant research and key theoretical models and paradigms as they

relate to the broader fields of international entrepreneurship, internationalisation (including

international marketing) and geographic, cultural and psychic distance.

2.2 International Entrepreneurship

The increasing prevalence of international entrepreneurship in recent decades has been

recognised as an important phenomenon worthy of academic enquiry (e.g., Gerschewski, Rose,

& Lindsay, 2015; Knight & Cavusgil, 2004). This is, in part due to the rapidly increasing

proportional contribution of such firms to global trade (Knight, Madsen, & Servais, 2004).

Oviatt and McDougall (1999) note further that the increasing incidence of internationalisation

among relatively small and new organisations has been widely observed. Karra, Phillips and

Tracey (2008) state therefore that the conception of international trade as the exclusive purview

of large multinational enterprises has come under scrutiny as a result.

The number of entrepreneurial organisations based in emerging markets and venturing abroad

has also been increasing rapidly (Luo & Tung, 2007). This is at least partly explained by the

general global international entrepreneurship trend driven by the improved availability of

communications technology and knowledge amongst other factors (Knight & Cavusgil, 2004).

Explaining the case of emerging market firms in particular, Luo and Tung (2007) propose a

springboard perspective by which emerging market firms attempt to overcome their latecomer

disadvantage by acquiring strategic resources, markets and knowledge abroad. Alternatively,

Kropp, Lindsay and Shoham (2006) adopt a resource perspective, emphasising the creative and

innovative nature of firms that have been developed in emerging market conditions and the

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appropriateness of these factors in international venturing. They further establish an empirical

link between the performance of international small and medium sized business ventures in

South Africa to their entrepreneurial orientation and their innovativeness and creativity in

particular (Kropp et al., 2006). It should be noted that these two perspectives are not mutually

exclusive.

Taken together, it would appear that the world of global business has been changing. This has

largely been reflected in the increasing academic interest in the topic of international new

ventures, which Oviatt and McDougall (1994) define as a growing and important type of startup

that “from inception, seeks to derive significant competitive advantage from the use of their

resources and the sale of outputs in multiple countries” (p.49).

2.2.1 The “Born-Global” Firm

The concept of born-global firms and of global start-ups as well as that of international new

ventures are broadly interchangeable (Knight et al., 2004). While the size of these entities and

the nature of their products and services are highly variable, they have in common a desire and

willingness to create new products and bring these products to new markets (Karra et al., 2008).

Knight and Cavusgil (2004) define “born-globals” as firms that seek to sell their services or

products in international markets on or near to their founding (p. 124). Born-global firms are

closely linked to the process and orientations associated with international entrepreneurship and

can be conceptualised as both its proponent and product. The period between establishment and

foreign market entry is frequently under three years (Knight & Cavusgil, 2004). While born-

global firms need not be small or medium sized enterprises, an increasing number are (Karra et

al., 2008). In comparison to larger multi-national enterprises, which are typically slower to

internationalise, these firms internationalise quickly but are often faced with a relative scarcity

of resources as a result (Knight & Cavusgil, 2004).

The increase in the number of born-globals in the 1990s is attributed by Madsen and Servais

(1997) to three factors: technological facilitation (particularly with regard to transport and

communication), more favourable market conditions and a more internationally minded

generation of entrepreneurs. Knight and Cavusgil (2004), on the other hand, point to two

contextual sources support for the rise of born-globals: globalisation of markets (including a

trend towards homogenisation of consumer tastes) and the proliferation of cost effective

communication and transportation technologies. In addition they point to the small size and

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related agility of these ventures as an advantage in a world that is changing with increasing

rapidity (Knight & Cavusgil, 2004).

2.2.2 Born-Global: Capabilities and Skills In addition to posing challenges, Knight and Cavusgil (2004) suggest that the small size of

Born-globals may also be an advantage as it allows these enterprises a degree of flexibility and

agility. Karra et al. (2008) further propose that three entrepreneurial qualities are critical to born-

globals’ success: “international opportunity identification, institutional bridging and a capacity

and preference for cross-cultural collaboration” (p. 440).

International opportunity identification is defined by Chandra, Styles and Wilkinson (2009) as

“the recognition and exploitation of entrepreneurial opportunity that leads to new international

market entry” (p.1). As with domestic opportunity identification, international opportunity

identification can take place through active search, fortuitous discovery or creativity and

imagination (Karra et al., 2008). However Karra et al. (2008) argue that international

opportunity identification is more complex and requires the addition of international knowledge

and cultural sensitivity. Muzychenko and Liesch (2015) concur, noting that the liabilities of

foreignness and outsidership make international opportunity identification difficult.

Furthermore, they argue that the skills required to overcome these and to identify and exploit

international opportunities are largely aligned with entrepreneurial behaviours (Muzychenko &

Liesch, 2015).

Institutional bridging refers to the ability of internationalising firms to close the gap between

local and international markets and overcome differences between business environments (Karra

et al., 2008). This is largely dependent, in turn, on the knowledge acquired by (or available to)

the firm and relating to the target countries (Cavusgil & Knight, 2009). This perspective is

commensurate with the emphasis placed on knowledge and networks by scholars such as

Sharma and Blomstermo (2003), who apply a network oriented view of business to explain the

existence and behaviour of born-global firms. Based on their analysis, Karra et al. (2008) outline

three facets of institutional bridging: knowledge about potential customers and their buying

behaviour, knowledge of the cultural norms and nuances as they pertain to commercial

transactions and an understanding of the legal and regulatory environments in the target country

(p. 448).

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The third capability of born-global entrepreneurs, as identified by Karra et al. (2008), is a

preference for cross cultural collaboration, which the authors define as “the capacity to develop

complex cross-cultural social relationships in order to build international ties with partners

across different parts of the supply chain” (p. 449). This in turn requires awareness and

reduction of psychic distance on the individual level to assist managers in embracing the

cultures of target countries (Sousa & Bradley, 2006). Karra et al. (2008) distinguish two

components of successful cross-cultural collaboration: “the ability to identify and select

competent partners” (p. 449) and “the capacity to interpret and assimilate knowledge and

information from across the network” (p. 450). These and other skills required to overcome the

business challenges associated with psychic, cultural and physical distance are discussed in

greater detail in the section entitled “Geographic, Psychic, and Cultural Distance”, which

follows.

2.2.3 Born-Global: Innovation Orientation

In addition to the skills and capabilities outlined above, Knight and Cavusgil (2004) argue that

innovation is an especially important attribute of born-global firms as it assists these

organisations in overcoming their resource disadvantage. Furthermore they state that an

innovative culture is common amongst born-global firms as their internationalisation is itself an

act of innovation (Knight & Cavusgil, 2004, p.126). Adopting a resource based view of the

firm, Knight and Cavusgil (2004) argue that an innovative culture allows for the development of

knowledge and organisational capabilities that can become sources of comparative advantage in

the relevant absence of tangible assets and capital. In their study of emerging economy firms,

Yiu, Lau, and Bruton (2007) similarly identify innovation as a factor which relates positively

with international venturing across the majority of 274 companies studied.

Oviatt and McDougall (1994) on the other hand, frequently frame innovation as an enabling

external condition. They note that the increasing availability of technological innovations and

the number of business people with international exposure have enabled the relatively early

internationalisation of new ventures in recent decades. Like Knight and Cavusgil (2004), Oviatt

and McDougall (1999) originally defined international entrepreneurship as essentially

innovative: “new and innovative activities that have the goal of value creation and growth in

business organisations across national borders” (p. 903). More recently, they added proactivity

and risk-seeking behaviour to their definition (McDougall & Oviatt, 2000).

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Baronchelli and Cassia (2014) have focused on the ability of born-global firms to bring

innovations to the market in the form of new products and services. This ability, in turn, is the

result of a number of factors including the Born-global firm’s relatively nimble nature as well as

the exposure to innovative ideas through contact with international networks (Baronchelli &

Cassia, 2014). This is in line with Utterback and Abernathy (1975) who attribute the ability of

innovative new firms to out-maneuver larger, older competitors to these new firms’ relative

agility and fluid approach to operations. Knight and Cavusgil (2004) assert that it is this

resulting innovative ability, in addition to a strong proclivity to pursue international markets,

that ultimately lead to internationalisation at an earlier point in the born-global firm’s

development. Zijdemans and Tanev (2014) point out however that there are differing points of

view within the current literature regarding the causal relationship between innovativeness and

early internationalisation. They note that while some authors such as Knight and Cavusgil

(2004) and Baronchelli and Cassia (2014) describe innovation as the independent variable, there

are others such as Hessels and Stel (cited in Zijdemans & Tanev, 2014) who attribute the

gaining of innovative capabilities to the skills acquired as a result of internationalisation.

These differing areas of emphasis and relational descriptions do not appear to be mutually

exclusive but rather suggest a multifaceted relationship between born-global firms and

technology as enabler, condition and differentiator. In line with the findings of Zijdemans and

Tanev (2014), existing literature points to a strong and positive relationship between innovation

and early internationalisation. Taken together, these perspectives challenge theoretic orthodoxy

such as the innovation model proposed by Bilkey and Tesar (1997), Czinkota (1982) and others.

Like the Uppsala model discussed later in this report, the innovation model describes

internationalisation as a slow, piecemeal process with management gradually acquiring the

knowledge and skills required to make innovation possible (Knight et al., 2004). In contrast, in

the case of the born-global firm, innovation is broadly understood to be an agile and

unstructured process that encompasses an element of risk-taking (Zijdemans & Tanev, 2014).

2.2.4 Born-Global: Performance

Much existing theory regarding the characteristics and nature of born-globals centres around the

factors that drive their early internationalisation. A smaller number of studies have attempted to

operationalise their performance over time and understand the factors that influence this

(Trudgen & Freeman, 2014). Some such studies adopt a purely resource-based perspective,

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often with an emphasis on intangible resources including knowledge (e.g. Knight & Cavusgil,

2004). Others seek to understand the born-global based on a pure knowledge-based view or

from an organisational learning or network perspective (Gerschewski et al., 2015). Freeman and

Cavusgil (2007) adopt a combined approach, employing both the network perspective and

resource based view, which they see as complimentary, to examine born-globals and their

performance. Gerschewski et al. (2015) similarly prefer this integration of theoretical

frameworks, noting that the resulting understanding of firm behaviours and performance is more

holistic and complete. The resulting paradigm emphasises both the relationships and knowledge-

building that exists outside the boundaries of the firm and the firm’s internal capabilities and

resources (Gerschewski et al., 2015).

In terms of defining success with reference to internationalisation, Kuivalainen, Sundqvist and

Servais (2007) delineate three measures based on existing literature: time-based, scale-based and

market-scope. Trudgen and Freeman's (2014) study provides a good example of the former,

which considers performance based in large part on the speed at which internationalisation took

place. This investigation is useful in that it takes into consideration three distinct phases of born-

global development: early start up, international entry and growth / consolidation (Trudgen &

Freeman, 2014). Scale measures, on the other hand, relate to the size of international operations

achieved – often as a percentage of total turnover. Finally, Knight et al. (2004) consider

performance of born-global firms in light of market-scope. Their approach is particularly

valuable when examining firms with limited resources or where psychic distance is a factor

which requires mitigation (Kuivalainen et al., 2007). In the study conducted by Gerschewski et

al. (2015), a broader set of business performance indicators are used including financial,

operational and perceived success.

Additionally, Gerschewski et al. (2015) consider a broad range of potential antecedents to born-

global success, some of which (including innovativeness, proactivity, product quality and

competitor orientation) were shown to have a positive impact on performance. Knight et al.'s

(2004) study, on the other hand, focuses exclusively on marketing antecedents, linking four of

these back to international performance defined in terms of market scope (adapted from Knight

et al., 2004):

• Foreign customer focus

• Marketing competence

• Product quality

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• Differentiation strategy

2.3 Internationalisation

2.3.1 Opportunity Recognition

Internationalisation can itself be perceived as an opportunistic act with international expansion

potentially benefiting the SME in a number of ways (Chetty & Campbell-Hunt, 2003). In

addition to the opening up of foreign revenue streams, possible advantages of

internationalisation include the achievement of economies of scale and the accessing of new

investment opportunities, technologies and skills (Eberhard & Craig, 2013). Despite involving

difficult trade-offs, Muzychenko and Liesch (2015) define opportunity identification as

“entrepreneurship in action” (p.385) and for born-globals, it is a right of passage (Ellis, 2011).

In a study of 665 entrepreneurial exchange ventures Ellis (2011) found that 87% of foreign

opportunities were discovered rather than sought (p.121) but that these discoveries resulted from

the presence of social connections and networks. Ellis (2011) further found that luck was not a

contributing factor to the identification of foreign opportunities.

Muzychenko and Liesch, (2015) claim that international opportunity identification is

behavioural in nature and offer a behavioural model of international opportunity identification

that includes “a desire to build a world class enterprise” and “a passion for cross-cultural

encounters” (p.7). Ellis (2011) agrees, proposing that it is a subjective process that is

determined, to a large extent, by ties with others with access to and knowledge of foreign

markets. Ellis' (2011) found that close to 40% of foreign opportunities resulted from social ties,

concluding that “social ties with known others provide access to distant and valuable

opportunities” (p.121). The role of organisational and personal networks have both been

emphasised (Eberhard & Craig, 2013).

A network perspective may also be helpful in shedding light on the way in which initial

opportunities are unearthed and exploited (Gerschewski et al., 2015). For instance, Johanson and

Mattsson (1988) suggest that networks are an important source of initial ideas, motivation and

support for international venturing. Eberhard and Craig (2013) make extensive reference to

network theory as an explanatory paradigm applicable to opportunity “exploration” (as well as

“exploitation”) amongst SMEs. The network model of internationalisation “suggests that a

firm’s intention to venture abroad is triggered and facilitated by the contacts in its existing

networks” (Eberhard & Craig, 2013, p. 387). Like Muzychenko and Liesch (2015) however,

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they see the exploration as taking place primarily at the individual level. Similarly, Ellis (2011)

sees opportunity recognition as a subjective process that relies heavily on the individual

entrepreneur’s social ties (p. 99). In an earlier paper, Ellis (2000) discusses three mechanisms

through which these social ties can aid in opportunity recognition. These include bringing

opportunities to light, evaluating new network or exchange partners and providing access to the

knowledge required to underpin further innovation (Eberhard & Craig, 2013, p. 388).

In the revision of their Uppsala Internationalisation model, Johanson and Vahlne (2009)

explicitly take into account this increasingly relational perspective on global business

opportunity recognition. The clearest manifestation of this shift is their replacement of the

‘liability of foreignness’ concept with ‘liability of outsidership’, indicating that they now view

networks as a more important unit of analysis than the national or cultural boundaries they often

cut across (Johanson & Vahlne, 2009). This takes as one of its core premises the network model

of internationalisation, proposed by Johanson and Mattsson (1988), in which internationalisation

requires networks which extend into target/host markets.

2.3.2 International Market Entry

The range of market entry modes is broad and encompasses varying forms of export,

acquisition, licensing and the setting up of foreign subsidiaries - with the choice of an

appropriate entry mode determining the control, required resources and risk involved in foreign

expansion (Laufs & Schwens, 2014).

To date, the vast majority of literature on the topic of foreign market entry choice has focused

on large multinational corporations (MNCs) (Brouthers et al., 1996). However there is a

growing body of scholarly enquiry which explores various aspects of the foreign market entry

mode decision from the perspective of entrepreneurial ventures and small and medium sized

businesses in general (e.g. Cheng, 2008; Nakos & Brouthers, 2002; Shrader et al., 2000).

Erramilli and D’Souza (1993) suggest that the nature of the entry mode decision differs for

relatively small enterprises as they typically have lower cash and resource reserves. It is for this

reason that Shrader et al. (2000) ask how “firms already experiencing the risks of relatively

small size and newness also successfully manage the additional strategic risks of entering

foreign markets so early in their existence?” (pp.1227-1228). They must either select low

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involvement entry modes (such as licensing and exporting) initially or alternatively rely on

innovative business models and investment structures (Nakos & Brouthers, 2002).

Cheng and Yu (2008) note SMEs’ and entrepreneurial ventures’ heightened sensitivity to

external influences as placing additional pressure on their decision-making in this respect. While

Lu and Beamish (2001) indicate that entry mode decisions have a significant impact on SME

performance and longevity. This makes the choice of an appropriate market entry mode

particularly important.

A diverse range of theoretical frameworks are employed by various authors to contextualise this

decision process for the SME and include network theory and resource-based views among

others (Laufs & Schwens, 2014). Brouthers et al. (1996) favour Dunnings Eclectic (OLI) theory

as a paradigm in which to consider the internationalisation of SMEs. OLI posits that firms take a

wide set of internal and external considerations into account with regard to the net total risk and

return posed and compare market entry mode options accordingly (Nakos & Brouthers, 2002).

Laufs and Schwens (2014) also cite OLI as a dominant theory. They attribute this to the fact that

the OLI model assumes a more comprehensive set of firm considerations (including ownership

structure, location and internationalisation). In addition, Nakos and Brouthers (2002) find that

the OLI framework is suited to SME internationalisation studies and claim that it is the only

theory in the field that is capable of providing descriptive and predictive value.

Brouthers et al. (1996) suggest that, when viewed through the lens of OLI theory, the

considerations faced by SMEs are not dissimilar to those MNCs must take into account when

making entry mode decisions. Shrader et al. (2000) however hypothesise that smaller firms with

no prior foreign experience must trade various individual risks off against each other to

essentially reduce exposure to the total risks associated with internationalisation. Their empirical

findings show that such tradeoffs are frequently employed to mitigate risk, with factors

including foreign commitment type (foreign entry mode) (Shrader et al., 2000).

While some theorists consider host markets as homogeneous and treat them equally, others

explore the implications of real world differences between market environments (Laufs &

Schwens, 2014). By way of example, Lévesque and Shepherd (2004) address the impact of the

economic development state of host markets (in particular, the difference between emerging and

developed markets) on the choice of entry strategy adopted by entrepreneurs. Their model

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implies that it is more beneficial to mimic a competitor’s entry strategy when entering an

emerging economy than it is when entering a developed equivalent (Lévesque & Shepherd,

2004).

Irrespective of market, the entry decision may often need to be made more than once with

regard to a particular market as firms often reenter certain markets. In addition, the nature of a

firm’s involvement in a particular market may change over time as the organisation continues to

learn, grow and internationalise further (Johanson & Vahlne, 1977).

2.3.3 Internationalisation Stages

In terms of process, two closely related scholarly approaches dominate internationalisation

literature – what Andersen (1993) labels the “innovation-related models” and the Uppsala model

(Madsen & Servais, 1997). In both cases, the typical internationalisation process is described as

occurring in a slow and phased manner (Khojastehpour & Johns, 2014).

The Uppsala model was originally proposed by Johanson and Vahlne (1977) and unfolds in a

series of four related and sequential stages, starting with exporting and ending with overseas

production (the latter made possible by foreign direct investment). In addition, pre-defined

change mechanisms are predicted to occur between each stage, as knowledge and experience are

acquired and firms’ capacities to overcome psychic and geographic distance are improved

(Johanson & Vahlne, 1977). Innovation models, on the other hand, consider the

internationalisation process as a series of innovative actions, which require the adaptation of the

business at each phase of the process (Madsen & Servais, 1997). Like the Uppsala model, they

assume the global expansion of the internationalising firm to be incremental and gradual –

typically due to initial lack of knowledge, risk aversion or other related factors (Madsen &

Servais, 1997).

Additionally, there have been attempts to build more contemporary general stage-based process

theories based on different variables (such as the network model of internationalisation proposed

by Johanson and Mattsson (1988) and discussed briefly above. Along with these other

traditional approaches however, the Innovation and Uppsala models in particular have come

under scrutiny in recent years, as authors question their validity in rapidly globalising and less

predictable market environments (Knight et al., 2004). Andersen (1993), for example, argues

that the Uppsala model relies on generalisations that do not fit a broad variety of contemporary

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cases. As Oviatt and McDougall (1997) point out, in the period since the development of these

models, markets have changed - becoming more integrated, offering cheaper communication

and transport and digital knowledge access (p.88).

It is the rising prominence and proliferation of born-global firms, however, that has posed the

most significant challenge to traditional stage-based theories of internationalisation (Knight et

al., 2004). The rapid internationalisation of these firms appears to be in stark contrast to the risk

averse and gradual process predicted by these models. As a result, Madsen and Servais (1997)

state that born-global cases are considered by many authors as being in “strong opposition” to

the traditional stage based models (p. 561). Oviatt and McDougall (1997) add that

“internationalisation process theories appear to be more undermined than undergirded by recent

research” (p.86). In recent commentary on (and revisions of) their Uppsala model, Johanson and

Vahlne (1999, 2009) attempt to explain the existence of these born-global firms in terms of their

networks (and hence access to the international penetration and associated learnings achieved by

associated firms). Oviatt and McDougall (1997) suggest instead that it is the unique resources

and entrepreneurial capabilities of international new ventures that drive rapid

internationalisation and are often necessary for survival as they seek out efficiencies in their

respective industries. Certainly, the stage-based process models fall short in accounting for

variables such as these.

One alternative model, which does take these factors into account is offered by Weerawardena,

Mort, Liesch, and Knight (2007) and was developed specifically to address the

internationalisation process of born-global firms. Their model is based on these firms’ dynamic

capabilities, which are built by entrepreneurial founders and allow for the development of

innovative products with global appeal (Weerawardena et al., 2007). Weerawardena et al.

(2007) propose that these capabilities include the development of and reliance on

complimentary networks, market-focused learning (and unlearning) and marketing skills as well

as unique and knowledge-intensive products.

Oviatt and McDougall (1997) note however that the increasing prominence of International New

Ventures is not the only challenge to existing internationalisation process theory. Evidence of

more widespread general acceleration of the internationalisation process (OECD, 1997) and

reduction in time to first-export also point to a changing global market context (Oviatt &

McDougall, 1997). As these born-global ventures proliferate, consumers will likely see further

increase in the variety and choice of products available to them (Yeniyurt, Townsend, & Talay,

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2007). O’Dwyer, Gilmore and Carson (2009) therefore argue that as competition and brand

choice continue to grow, all firms, including international new ventures, will need to innovate in

terms of the way in which their products and services are marketed to an international consumer

audience.

2.3.4 Marketing and the Internationalising Firm

In practice, international marketing is a complicated and multifaceted process that extends from

promotional activities (designed to directly increase sales) and brand-building to public image,

employee reputation and foreign shareholder perceptions (Paliwoda & Thomas, 1998).

Marketing for first-time foreign market entrants often involves building product and corporate

brand awareness from a zero-base, beginning with awareness of the brand’s existence and

developing comprehension, conviction and finally action (Paliwoda & Thomas, 1998). This can

be a time consuming and resource intensive process. Knight and Cavusgil (2004) argue however

that these commitments can be significantly reduced in the case of innovative born-global firms,

which are able to learn and adapt more quickly to foreign markets. Born-global firms may also

be more adept at utilising non-traditional digital channels (social media in particular) to drive

awareness of their products and services globally before they are available in foreign markets

(Hallbäck & Gabrielsson, 2013). To this end, Paliwoda and Thomas (1998) propose the

consideration if non-advertising communications alternatives including public relations and

activations, as traditional advertising can represent a prohibitive cost for the internationalising

firm.

The innovative approach to marketing employed by many SMEs is therefore well suited to the

requirements and constraints of marketing abroad. O’Dwyer et al. (2009) observe that SME

marketing is, in practice driven by innovation and rarely bares resemblance to textbook

approaches. Relatedly, Stokes (2000) proposes that, for SMEs, the classical four Ps do not apply

and are replaced with four I’s (as summarised by O’Dwyer et al. (2009):

• Information: Informal information gathering through authentic customer interactions

• Identification: Recognising customer needs and marketing opportunities

• Innovation: Developing and implementing fresh channel and promotional ideas

• Interaction: Bringing their product and experience to customers with personal contact

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There is therefore broad agreement in the literature that marketing in a foreign context entails

additional challenges that distinguish it from marketing practices in the domestic market and

that innovative marketing approaches are required to overcome these challenges. This is

particularly true in the case of born-globals, which are typically more constrained in terms of

resources than their multinational corporate counterparts (O’Dwyer et al., 2009). Other factors

contributing to the complexity of marketing in foreign contexts are differences in culture and

consumer values, which are discussed in more detail in the section that follows. As Yeniyurt et

al. (2007) point out, cultural distance can have a significantly negative effect on the success of

internationalising brands.

2.4 Geographic, Psychic and Cultural Distance

As discussed earlier in this literature review, international new ventures often face costs and

trade-offs that must be taken into account to determine the preferred location(s) for international

expansion (Shrader et al., 2000). Much internationalisation theory therefore, takes as an

assumption the so-called ‘liability of foreignness’ concept, which cumulatively includes

differences between the home and host markets in terms of geography, culture, politics and

economics (Zaheer, 1995).

2.4.1 Geographic Distance

Geographic distance may be the most apparent of these barriers to trade, with distance to market

and international trade volumes long characterised by an inverse relationship (Ellis, 2011). In

addition to the uncertainty involved with transacting at long distance, transport costs are also

cited as a contributing factor (Ellis, 2007). However many theorists argue that these barriers are

in decline. Indeed, this perceived reduction in physical obstructions to global exchange has been

frequently linked to the rise of international new ventures in much of the literature on the topic

(Knight & Cavusgil, 2004). Madsen and Servais (1997) state that advances in technology as

well the increase in reliability and decrease in cost of international transport and freightage have

all contributed to emergence of born-globals. In particular, Knight and Cavusgil (2004) identify

the widespread adoption of the internet and electronic communications as having reduced the

effects of geographic distance and, in turn, having made the internationalisation process more

cost effective.

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The conclusion that transport related barriers to trade have been diminishing over time has led

some commentators (e.g. Cairncross, 2001) to predict the “death of distance”. However, Ellis

(2007) believes that such claims are overstated, pointing to econometric data that suggests an

approximately commensurate decline in trade per percentage increase in trade distance (p.574).

Although the extent to which it has diminished may be debated, what is clear is that geographic

distance remains a barrier to trade (Ellis, 2007). However, the nature and extent of this barrier is

largely determined by the mode of entry employed. Import-export relationships for example

have the highest cost in this regard due to the expense of physically transporting goods from one

country to another (Wilkinson & Nguyen, 2003). As discussed below however, the effects of

psychic and cultural distances are more complex and nuanced and are harder to measure directly

(Ellis, 2007).

2.4.2 Psychic and Cultural Distance

Ellis (2007, p.576) states that “business scholars have generally measured distance in terms of

culture rather than kilometers”. Cultural distance is a term used to define the degree of

dissimilarity between cultural environments in host and target markets (Wilkinson & Nguyen,

2003). Psychic distance on the other hand refers to the total sum of factors that might prevent or

otherwise interrupt the movement of information from the firm to the market and vice versa

(Johanson & Wiedersheim-Paul, 1975). These factors can include cultural differences but also

incorporate language, the legislative environment, lifestyles, business norms and values and

institutional context (Kuivalainen et al., 2007). Sousa and Bradley (2006) explicitly address the

differences between psychic and cultural distance, noting that cultural distance talks to actual

and objectively measurable differences between cultures and is assessed at the cultural level.

Psychic distance, on the other hand, centres around perception of difference, is subjective and

should be applied with the individual as the unit of analysis (Sousa & Bradley, 2006). So while

differing values influence both psychic and cultural distance, they do so at different levels with

the former being affected by individual values and the latter by social and cultural norms (Sousa

& Bradley, 2006). Despite these differences however, the majority of authors use the terms

interchangeably (e.g. Kuivalainen et al., 2007, Ellis, 2007, Wilkinson & Nguyen, 2003). For the

purposes of this paper, they will be considered equivalent. The central challenge of psychic

distance is that, the further away a foreign culture is, the more difficult it becomes to identify

and make sense of signals from the host market, the more likely it is that misunderstandings will

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occur and the more difficult personal interactions become (Sousa & Bradley, 2006).

In addition to the transport costs associated with overcoming geographic distance then, cultural

distance requires investment in learning (Ellis, 2007). Organisations and the individuals within

them need to acquire an understanding of the cultural contexts in which they are doing business

as well as learn to adapt and accept other cultures, a skill of its own accord (Madsen & Servais,

1997). Madsen and Servais (1997) argue that, in the case of born Firms, the international

experience of the founders can go a long way towards mitigating the challenges posed by

psychic distance. As Schwartz (1992) notes, certain values lend themselves to greater openness

and acceptance of differing values and cultures. The founders of born-global companies

typically see markets as open and do not perceive national and cultural borders as

insurmountable obstacles (Madsen & Servais, 1997). Knight and Cavusgil (2004) agree, finding

that a global perspective is a defining characteristic of born-global leaders. Nevertheless,

Erramilli (1991) asserts that, all other things being equal, born-globals will still favour markets

that are more culturally similar. The corresponding concern of whether new markets will accept

these foreign products and brands is dealt with in the section, which follows.

2.4.3 Product Acceptance of Foreign Brands

Takada and Jain (1991) state the successful introduction of products developed in different

cultural and market environments can rely on a wide variety of factors, not all of which are

under the control of the firm. Of these factors, Dunning (1997) notes that cultural context

remains most critical. Onkvisit and Shaw (2009) draw on this concept to propose the idea of

“national character”, suggesting that individuals in certain countries can exhibit similar

personality traits and may respond differently to brand qualities such as ‘fun-loving’ or

‘innovative’. Yeniyurt and Townsend (2003) cite evidence that, despite popular assumption,

differences between national cultural values are stable (not declining) over time and still have a

strong bearing on consumer tastes and preferences. Matanda and Ewing (2012) concur, noting

that “a more globalised culture does not imply that consumers share the same tastes or values”

(p.6). On the one hand, cultural and psychic distance (as discussed above) can influence the

degree to which consumers identify with and develop affinity for foreign products. Typically

consumers will display greater potential appetite for brands which are positioned in a way that

reflect similar cultural values (Craig, Greene, & Douglas, 2005). In addition however, Yeniyurt

and Townsend (2003) find that certain cultural values can predispose some countries to be more

or less accepting of all foreign brands.

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By way of explanation, Hofstede, (2001) argues that social institutions are still largely based on

the cultural values that are prevalent in the surrounding society. These value systems operate at

the societal and individual level, can be differentiated by country and economy and ultimately

influence the behaviour of firms and individuals (Hofstede, 2001). In his original framework,

Hofstede (1980) proposed four cultural dimensions that included ‘individualism-collectivism’,

‘masculinity-femininity’, ‘uncertainty avoidance’ and what has been termed ‘power distance’.

Yeniyurt and Townsend (2003) build on the cultural dimensions proposed by Hofstede to assess

the relationship between cultural difference and new product acceptance, demonstrating that

certain of Hofstede’s proposed dimensions impact the acceptance of new foreign products. In

particular, they find that individualism positively effects acceptance while uncertainty avoidance

and power distance respectively increase resistance (Yeniyurt & Townsend, 2003).

Steenkamp, Hofstede and Wedel (1999) adopt a similar view of culture in informing product

adoption and diffusion but emphasise the role of consumer innovativeness in particular.

Consumer innovativeness is defined by Rogers (1983) as the speed and readiness with which

individuals within a society would typically adopt a new innovation. Supporting the connection

between consumer innovativeness and foreign product adoption is the relationship between

consumer innovativeness and independence, impulsivity, risk-taking and flexibility (and a lack

of conservatism) amongst other factors (Steenkamp et al., 1999). Yeniyurt, Townsend and Talay

(2007) agree noting that, in general, consumer innovativeness can be defined at the national

level and can be shown to impact new product acceptance. For example, individualist cultures

such as that of the United States and Northern European countries may be more open to trying

foreign brands and products than more conservative cultures that exist in Asia and South

America (Hofstede, 2001). Yeniyurt and Townsend (2003) therefore argue that brands should

adapt their approach to branding and marketing in countries where cultural barriers may exist to

acceptance of foreign brands but can adopt a standardised approach in more open societies. This

is echoed in the findings of Matanda and Ewing (2012) who conclude that balancing global

brand strategy with regional flexibility that results in superior performance.

On a more country-specific level, one further influencing factor relating to foreign brand

acceptance is country of origin associations. Onkvisit and Shaw (2009) argue that consumers

categorise countries along generalised lines, which can lead to spontaneously activated negative

or positive stereotyping. Many empirical studies have shown that consumers in foreign countries

can attach these stereotypes to products based on their origin, even when these associations do

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not apply (Onkvisit & Shaw, 2009). This can lead to unfavourable bias for brands from certain

parts of the world. For example, there are a number of studies that show that consumers in

developed countries typically view brands from other developed countries more favourably than

those from emerging economies (Lavie & Fiegenbaum, 2000).

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2.5 Conclusion

The proliferation of communications technology (the internet in particular) and faster diffusion

of knowledge are among the factors that have enabled more international new ventures to

succeed than ever before. Yet their failure rate remains high. This is due to the many additional

challenges that these firms must face, over and above those encountered by established MNCs.

These include resource restrictions and lack of internationalisation experience. Overcoming

these obstacles requires strategic thinking and an innovative approach, as BOS Brands’ success

demonstrates. The purpose of this case will be to increase students’ appreciation of the

complexities and challenges faced by international new ventures, while inspiring them to

appreciate these firms’ potential.

The rise of international entrepreneurship and the contemporary phenomenon of the born-global

firm have positively impacted the variety and choice of brands, products and services available

to consumers around the world. They have also called into question many traditional theories

and assumptions regarding internationalisation. The literature outlined in this review shines a

light on this new phenomenon of international entrepreneurship and shows some of the ways in

which born-global firms are set apart from their MNC counterparts. Theories and findings

regarding their capabilities and the factors informing their success have also been discussed

above in detail. Particularly prominent in the literature are born-globals’ innate agility, reliance

on innovation, their relational approach to network building and their employment of less

traditional marketing methods. Critical examination of the literature reveals that certain classical

internationalisation theories and frameworks (such as the Uppsala Internationalisation Model

and the four Ps of marketing) do not necessarily apply to the born-global case. The table below

elaborates on the key linkages between the literature and theory that do apply and the objectives

of this teaching case:

Table 2.1 Linkages between Literature, Teaching Objectives and Questions

TEACHING

OBJECTIVE

LITERATURE TEACHING QUESTIONS

Factors informing the

early internationalisation

of ‘born-global’ SMEs

- Knight & Cavusgil, 2004

- Karra et al., 2008

1. Why did BOS Brands want to internationalise?

2. What factors made this possible so early on?

3. What factors enable the early internationalisation

of smaller entrepreneurial firms in general?

Choice of potential target

countries and entry modes

- Nakos & Brouthers, 2002

- Oviatt & McDougall, 1997

- Laufs & Schwens, 2014

1. What informed the selection of the Netherlands /

Belgium as BOS’ first international entry targets?

2. What options were available in terms of entry

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mode, which was selected and why?

3. What might inform future target country / entry

mode decisions? (what choices would you

make?)

Born-global and SME

Marketing in foreign

cultural contexts (incl.

cultural distance)

- Hallbäck & Gabrielsson, 2013 - O’Dwyer et al., 2009

- Ellis, 2007

- Ellis, 2011

1. In what ways do BOS’ current and potential

future

international markets differ from South Africa?

2. What marketing methods and tactics are most

appropriate for BOS in these markets and why?

Differences between

internationalisation

process and challenges of

‘born-global’ SMEs and

established MNCs

- Weerawardena et al. 2007

- Knight, Madsen & Servais,

2004

1. What are the primary present and future obstacles

to

BOS’ ongoing internationalisation?

2. What current strategic options are available to

BOS?

3. If you were Dave, what would your next steps

be?

3. How would the above differ if BOS were a

MNC?

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3. Methodology This research paper takes the form of a teaching case, the intention of which is to simulate a real

life business scenario in the classroom context (Ellet, 2007). Vega (2013) notes that a teaching

case should be designed with a view to sharpening the analytical and reasoning skills of

students. It should also assist in developing the students’ ability to navigate, articulate and

address business issues, which are not always immediately clear (Corey, 1996).

Yin (2003) identifies six different case study types, which include single- and multiple-case

versions each of three primary case orientations: “explorative”, “descriptive” and “explanatory”

(p. 5). These are described briefly in the table below (Yin, 2003).

Table 3.1 Case Study Type Matrix

Single-Case Study Multiple-Case Study

Explorative Assists in defining the parameters

or hypothesis for future studies

based on a single business case

Assists in defining the

parameters or hypothesis for

future studies based on two or

more similar or different

business cases

Descriptive Describes one particular business-

related scenario within and in

relation to its context

Describes two or more particular

business-related phenomenon

within and in relation to its

context

Explanatory Presents new information

regarding a causal relationship

with respect to one specific set of

business circumstances

Presents new information

regarding a causal relationship

with respect to more than one set

of business circumstances

As this BOS Brands research takes the form of a teaching case, it is descriptively orientated

(Ellet, 2007). In addition, this particular case focuses on the internationalisation of a single firm,

BOS Brands, and so is a single-case study.

As discussed in the introduction to this proposal, this case narrative is designed to stimulate

insights, thought and debate around SME internationalisation and related marketing challenges.

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3.1 Case Study Content

This case has been prepared in the Harvard style. The result presents multiple overlapping

scenarios that test a broad ambit of subject knowledge (Corey, 1998). Of this style, Heath (1998,

pp. 81-92) identifies four structural components which all subsequent research will ultimately

need to inform:

1. A flowing and immersive narrative

2. An intriguing story line

3. A chronology of interrelated dilemmas and events

4. An expository structure that allows but does not guarantee the discovery of critical

information

Farhoomand (2004) outlines a typical and simple three-part case structure. The opening

introduces the context and protagonist and answers the core questions of what, who, why, when

and where; while the body tells the broader story, introduces dilemmas and alternatives and

builds tension (Farhoomand, 2004). The conclusion synthesises the case and reiterates

challenges (Farhoomand, 2004).

Corey, (1996) states that teaching cases should provide sufficient data and information for

students to support conclusions and recommendations. Ellet (2007) further suggests that a well-

written case should include “complicating properties” (p. 13) that assist in simulating the

complexity of real world business scenarios. These can include irrelevant information, unstated

facts (which can be inferred by students) and a non-linear structure (Ellet, 2007). Corey (1998)

however disagrees, noting that, while some writers believe such additional hurdles offer

pedagogical value, in that they assist the student in learning about real world complexity, the

additional time taken to sift through this information ultimately impedes learning. The final

BOS Brands teaching case includes layers of complexity and multiple overlapping narrative

components as is typical of the Harvard style (Heath, 1998) but avoid an overabundance of

attempts to intentionally divert the student’s attention from the key issues (Corey, 1998).

3.2 Case Subject Selection

The identification of a suitable case lead is dependent on a number of factors including

topicality and company cooperation (Corey, 1998). BOS Brands is well cited in the business

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press. Furthermore, as a Cape Town based venture with a relatively approachable and non-

hierarchical structure and with a top management tier that is heavily populated by MBA

graduates, BOS appeared to offer the prospect of convenience and cooperation potential. An

initial approach confirmed this, with the CEO clearly expressing his willingness to participate.

In addition, BOS Brands was selected based on its relevance in light of the teaching objectives

identified. These objectives are as follows:

1. Consider the various factors informing the decision of ‘born-global’ SMEs to

internationalise at or close to inception.

2. Understand the decision-making process of the internationalising SME in terms of

evaluating potential target countries and entry modes.

3. Grasp the complexities of marketing in a foreign cultural and business context (psychic

and physical distance).

4. Appreciate the ways in which related internationalisation challenges might be different in

the entrepreneurial (as opposed to traditional) case.

3.3 Research Design

The ultimate function of a teaching case such as this (BOS Brands) is to facilitate learning by

simulating a real-world set of interrelated business challenges as they related to a specific

scenario and/or point in time (Ellet, 2007). As a result, the research must support the case’s

descriptive function. This in turn requires field research that records a current or recent business

scenario and related set of circumstances from a variety of angles and perspectives, providing a

deep and nuanced depiction of the business situation (Heath, 1998). Gathering data from a

variety of sources within and related to the organisation has assisted in achieving this by

providing a rich platform of information. Built on this foundation, the BOS Brands is

sufficiently complex to stimulate debate and, ultimately, learning (Vega, 2013).

In terms of data gathering, Corey (1998) suggests a multi-phased approach that includes two

sets of research, beginning with an initial field visit to define key issues and identify suitable

data sources and interviewees. The second research component consists of gathering secondary

data and conducting the interviews required (Corey, 1998). The diagram below depicts the

research process proposed by Corey (1998) with primary research components highlighted in

green. This process was followed in the preparation of the written BOS Brands case.

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Teaching Case Research Process

Figure 3.1 Teaching Case Research Process (Source: Adapted from Woodside, 2010, p.35)

First Field Visit

• Define key issues• Identify interviewees and data sources

• Discuss nature of agreement and case release procedures• Identify key liaison person within the target company

Issue Definition

• Based on initial field visit, focus and articulate the key issues• Target specific action problem or problems that management must resolve

• Consider broader strategy and policy issues• Define problem scope based on availability of disseminatable information

Data Source Identification

• Identify interviewees at various organisational levels• Additional data should be considered to give a more complete picture of the current situation

(conflicting data can provide substance for healthy debate)

Administration Due Diligence

• Case release procedures should be defined and agreed upon• Confidentiatilty should be guaranteed on all information and data not included in the final case

• Time requirements and liaision agreement should be stipulated in a memorandum of agreement

Interviewing and Data Collection

• This will likely be the primary data gathering method• The appropriate approach should be determined beforehand (ie structured vs. nondirective

interviewing)

• It is important to record and observe without judging or being obtrusive

Draft Preparation

• The draft should be prepared along case study best practice lines• The writing style should be clear and to-the-point (brief sentences and clear presentation of the

core managment "action" issue up front)

• Additional research findings and data presented in the content and appendices (graphs, charts and tables) where required

Teaching Note

• Following approval of the draft by the host company, the teaching note can be prepared• This will typically include teaching objectives and suggestions and board plans as required

• This remains a living component of the case and, along with appendices, can be updated following further research

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3.4 Data Sources and Collection (Yin, 1994) identifies six sources of evidence that can be used to build a case study. These

include interviews with individuals inside and outside the business (e.g. management,

distributors, customers etc.) as well as business documentation, archival records, physical

artifacts, observation of participants and direct situational observation (Yin, 1994). As this

teaching case is descriptive in nature, data gathered was qualitative with semi-structured

interviews forming the majority of the data collection process (Ellet, 2007). However, Corey

(1998) adds that the use of multiple sources (including interviews across various components of

the ogranisation, financial data and media and press coverage) is advisable in order to provide a

robust and multi-faceted context for a well-written teaching case. These interviews were

therefore supplemented with secondary sources including factual business data (provided by the

management team) and third party opinions of the business as expressed in recent editorial

pieces sourced from reputed business titles.

It can be argued that field research (and interviews in particular) constitute a very important

component of data gathering for many teaching cases as they “bring a slice of reality into the

classroom” (Heath, 1998, p. 63). Seidman (2006) also acknowledges this function of interviews,

while noting that their value is not predictive but rather descriptive, shedding light on the

perspectives and experiences of interviewees. In the case of BOS Brands, the following key

members of the BOS Brands management team were interviewed:

1. Dave Evans (CEO)

2. Grant Rushmere (Chief Brand Officer)

3. William Battersby (National Sales Director)

4. Alison Collier (International Business Development Director)

5. Marie van Niekerk (Marketing Director)

This represents the full population of executive level marketing-related decision makers (five).

One additional written response was provided from an external source responsible, in part, for

managing the BOS brand relationship at Woolworths Foods in South Africa:

1. Marisa Munroe (Trading Head, Snacking & Gifting and Wine & Beverages)

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In keeping with the recommendation offered by Yin (1994), these interactions took place in the

form of un-structured or semi-structured in-depth interviews. Rather than relying on formal

questionnaires to direct the interview process, conversation-guides were used to ensure that key

themes were covered without unduly interrupting or influencing the content unearthed during

the interview (Corey, 1998).

3.5 Data Analysis

Once data was collected from the three source types identified above, the findings were then be

synthesised and analysed to provide the basis for the case narrative (Yin, 1994). Woodside

(2010) suggests utilising the resulting diversity of data to triangulate information and increase

the level of both accuracy and complexity of the resulting case.

Data Analysis Triangulation

Figure 3.2 Data Analysis Triangulation (Source: adapted from

Woodside, 2010, p.35)

The model that Woodside (2010) provides

depicts seven domains of case study

research data, with categories 1 to 3

including information from one of the

three separate sources respectively while

categories 4, 5, 6 and 7 include

information from two or three sources.

Seeking information in the latter domains

assisted in ensuring a more accurate and

complete understanding of the situation

being analysed (Woodside, 2010).

The accuracy of the resulting narrative and data is important in terms of replicating, to the

greatest extent possible, the conditions surrounding the actual business situation of BOS Iced

Tea’s internationalisation. However, it is important to note that certain components of both

(narrative and data) were adjusted due to their strategic sensitivity to the business at this point in

time. As the resulting product is a teaching case rather than a pure research case, this is

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acceptable (Yin, 2009). In addition, certain information was somewhat manipulated/modified in

order to ensure that learning objectives are met (Yin, 2009).

3.6 Teaching Note

Farhoomand (2004) claims that, while lessons should be implicit and unstated in the case itself,

these should be described carefully in the teaching note along with supporting information and

guides. Corey (1998) defines the teaching note as “a contribution to education” (p.8) and

stipulates that it should clarify the key issues and questions raised by the case and suggest

solutions and alternatives in light of related theory.

Lapierre and Cardinal (2003) note that the exact contents of the teaching note should be tailored

to the teaching objectives and make the case for creativity in order to meet the pedagogical

requirements of contemporary classrooms. They suggest the inclusion of notes relating to the

nature of the case and its teaching objectives, in-class discussion notes and questions and

accompanying texts, concepts and theories (Lapierre & Cardinal, 2003). Farhoomand (2004) is

similarly non-prescriptive and suggests, amongst other elements: additional readings, teaching

themes, lecture plans and a case synopsis.

In light of the nature of the BOS Brands case as outlined earlier in this proposal, the following

components are included in the teaching notes based on the recommendations made by Lapierre

and Cardinal (2003) and Farhoomand (2004):

• Teaching Case Synopsis

• Teaching objectives (as outlined in the Introduction to this proposal)

• Key questions and proposed solutions / alternatives

• In-class discussion guide

• Additional didactic elements (group assignment)

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4. Case Study

from: Rick Greene <richard.greene@ .com>

to: Dave <[email protected]>

date: Wed, November 22, 2015 at 10:13 PM

subject: Listing Opportunity

“Hi Dave - Anne and I finally had the chance to meet yesterday afternoon, crossing

paths at O’Hare for all of 45 minutes. We are excited by the prospect of getting BOS on

our shelves in time for summer 2016, and I think we could push for a nationwide rollout.

Your product is fresh, and it’s doing well in Europe, which is a good indicator for our

developed market. Simon M and his category team would need to head across to South

Africa and to your bottling partners in Europe with one of our planners, take a look at

your operations and conduct a capacity audit and - of course - we still need to run

projections. But we expect to be able to move volumes somewhere around 4 million

units in the first year, based on a 5-year exclusivity agreement (which is standard for all

our new foreign listings). Last time we spoke, you stated that you were hesitant to take

your eye off the ball in SA and Europe, but I would suggest coming across to discuss. I

think we have the market and reach to build a compelling case for BOS’ entry into the

US. I can also set up some meetings with contract bottlers and a few of our packaging

guys stateside. Let’s talk. Regards, Rick”

4.1 Introduction

Resting on the marble counter in the Slow Lounge, in the International Departures Terminal of

Johannesburg’s OR Tambo Airport, Dave’s inbox stares back at him. As always, it offers fewer

answers than questions. BOS Brand’s youthful CEO is no stranger to tough decisions, but he’s

never grown accustomed to turning down game-changers like this. He had first met with Rick

by chance, at a low-key year-end function hosted by the Swiss company that had helped develop

the flavours for BOS’ new natural energy drink. The US isn’t on BOS’ radar just yet, but this is

a major opportunity with one of the world’s most powerful retailers. It’s also in the planet’s

largest ice-tea market – consuming close to 7 billion liters1 of ice tea a year and expanding at

close to 5% a year (compound annual growth rate in value).2

1

RTD Tea in the US: http://www.euromonitor.com/rtd-tea-in-the-us/report (Euromonitor, 2015) 2

RTD Tea in the US: http://www.euromonitor.com/rtd-tea-in-the-us/report (Euromonitor, 2015)

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Since joining the founding team of South Africa’s fastest growing soft drink company in

February 2011, Dave has watched BOS’ share of its home ice tea market grow from under 1%

to close to 15%. With this growth has come renewed global interest in their unique Rooibos-

based product lines, which now include energy and sports drinks. Perhaps he would need to get

used to the fear of missing out, but he also couldn’t help wondering if now was the wrong time

to be conservative. Does it make sense to stick to the internationalisation path BOS has been

following and continue with their metered, brand-first approach? Or is it time to chart a new

more aggressive internationalization path, in light of the magnitude of the leads they were

starting to receive?

At just US$ 1 billion3, Benelux (where BOS’ internationalisation journey had begun) is a

relative drop in the ocean of global markets totaling US$ 70 billion4. Yet the networks and

relationships his team have built there alone have taken a huge amount of effort, time and

attention. With more in the pipeline in Europe, they would be stretched thin as it is. Then again,

perhaps the next market entry would be easier and quicker. They had more experience on their

side now and stronger brand recognition abroad. But would they have the knowledge and

financial backing to truly succeed? Or would BOS just get swallowed up in a market as massive

and far afield as the States. Would their trademark and irreverent guerilla marketing techniques

work in a context so different from home? As he glanced up at the departures screen, the

questions continued to flow. He would need to talk all this through with the rest of the team

soon.

4.2 Background

4.2.1 The Ice Tea Market

Dave saw massive potential in the ice tea market, which continued to steal market share from

more sugary carbonated drinks in Europe, the US and further abroad. Industry intelligence from

respected FMCG market research firm Canadean indicated that “the refreshing taste and natural,

healthy image of iced tea drinks (with naturally high antioxidant content) would continue to

drive growth and place the category in a good position to take advantage of the slowing

carbonates market”. RTD (ready to drink) tea is forecast to grow 8% per year and contribute to

3

RTD Tea in the Netherlands: http://www.euromonitor.com/rtd-tea-in-the-netherlands/report (Euromonitor, 2015) 4

Source: http://www.bdlive.co.za/business/retail/2013/09/23/bos-plans-to-take-its-ice-tea-to-rest-of-africa (Business Day live, 2013)

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20% of global growth in the soft drink market in the five years to 20185 and statistics cited in

the most recent forecasts cited by BOS’ marketing director, Marié, point in the same direction:

• Ice Tea represents close to 9% of the global soft drinks market by value and volume and

is one of the fastest growing categories.

• Ice tea has grown twice as fast as the market over the past five years and is expected to

grow by 45% over the next five years

• RTD tea’s fast growth is driven by a strong and long-lasting consumer trend towards

healthier options that also offer great taste.

4.2.2 The BOS Team

Dave first encountered BOS as a customer, stocking the 275ml cans across his chain of artisanal

bakeries. Shortly after being introduced to other founders, however, he decided to invest in the

business directly, coming on board as CEO in 2011. His interest was fuelled in part by the

market opportunity and by his belief in the product and brand. But he had also formed a strong

bond with BOS’ people. Grant Rushmere, Richard Bowsher and Dave worked together closely

from very early on. As Chief Brand Officer, Grant led the development of BOS’ all-important

brand and was, in many ways, the visionary behind BOS’ unique positioning. Grant was

outgoing, and adventurous and was a well know personality around Cape Town and beyond.

Richard was a successful Silicon Valley entrepreneur who brought a wealth of entrepreneurial

experience (and access to his organic rooibos farm) to the table. They were joined by BOS’

energised Marketing Director, Marié van Niekerk, who has subsequently launched the brand in

Western Europe with great success and just one permanent staff member. Marie was well-

connected in the art, design, music and natural sports circles and shared Grant’s deep passion

and understanding for the BOS brand. The team was subsequently joined by Allison Collier,

BOS’ to-the-point International Business Development Director, who is also an active decision-

maker in the brand’s internationalization endeavours. Back home, William Battersby, the

pragmatic Managing Director of BOS’ Southern African operations, keeps the brand on its

growth trajectory and mirrors Dave’s sharp business acumen and appreciation for out-the-box

thinking.

5

Source: http://canadeanreportstore.industryreportstore.com/soft-drinks/iced-rtd-tea-drinks/global-iced-rtd-tea-drinks-report-2013.html

(Canadean, 2013)

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Although they spent much of their time apart and travelling – together the team were a force to

be reckoned with. Their ability to build strong relationships and networks in South Africa and

further afield was a major contributing factor to BOS’ success. The Head of Trading for the

Beverages Category at Woolworths (an upmarket South African retail brand) recently recalled a

casual conversation that the BOS team had struck up with a Woolworths Director at Cape

Town’s Design Indaba6 four short years ago. This friendly chat ultimately led to BOS’ listing in

most of the prestigious retailer’s 149 stores. Dave knew that any successful evolution of BOS’s

internationalization strategy would require the strategic input of these key team members as well

as BOS’ investors, which included Sir Alex Ferguson and South African venture capital firm,

Invenfin7.

Figure 4.1 BOS' Founding Team includes Dave Evans, Grant Rushmere, Richard Bowsher, Marié van Niekerk

4.3 The BOS Brand

4.3.1 Positioning: Healthy and Fun

6

Design Indaba is an annual global design conference that takes place in Cape Town in February. In 2011, BOS was a finalist for the coveted

MBOISA (Most Beautiful Object In South Africa) Award. 7

BOS’ is privately and closely held company with majority shareholder, South African early stage venture capital firm holding the largest

number of shares. Dave, Richard, Marie, Alison, William and Grant also hold significant stock. The balance is held by trusts and private individuals including Sir Alex Ferguson, former Manchester United manager.

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BOS’ tight-knit team and entrepreneurial spirit are evident in the brand’s personable and

pioneering approach, the way its products are packaged and marketed and the brand as a whole.

Dave sits back for a moment to consider the brand’s essence - an unexpected combination of

health and fun. The brand and product had been born out of two basic insights. Firstly, the

health food and organic products markets in 2010 were niche, somber and generally took

themselves too seriously. As Grant put it, they were characterised by the “Birkenstock

brigade”8. Secondly, the shallow commercialism that typified the mass market consumer of the

1990s and 2000’s was giving way to a deeper level of sophistication and appreciation for

intrinsics.

BOS’ vision from the beginning was to bring consumers a healthier beverage alternative that is

also lighthearted and suitable for the mass market. The organic Rooibos9 is farmed exclusively

at Klipopmekaar (Richard’s farm in the picturesque Cederberg) and is high in natural anti-

oxidants. The formulations are lower in sugar than other competing products such as ice teas

and soft drinks. BOS’ growing product line is also made with all natural fruit flavours and is

preservative and colourant free. Although, instead of appealing to its natural credentials, they

intentionally hide them on the back of the can (and on the brand’s website and social media

presence). So while they are easy for customers to discover, BOS’ packaging remains clean,

iconic and fun. It also gives the brand a casual feel. Grant always likened the brand to the kind

of person who cares about integrity, health and the environment but doesn’t announce it to

everyone she meets. BOS is more laid back, and so the brand’s marketing focuses on the brand’s

fun factor and tongue-in-cheek humour instead.

Figure 4.2 BOS' Current Ice Tea Range in Standard 275ml Tall Format Cans

8

“Birkenstock is a German brand of cork and leather orthopedic sandal, popularly perceived as the quintessential footwear choice of more

ardent and devout natural- or eco- consumers. 9

Rooibos tea is made from the fynbos plant of the same name, which is endemic to a small mountainous region of the Western Cape province.

It is very rich in anti-oxidants, electrolytes, anti-inflammatory properties, and essential minerals and contains no caffeine or preservative.

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The result is an approachable brand with good looks and plenty of soul. Multifaceted, it offers

many different attributes for consumers to engage with as they get to know the brand and

product. Grant’s opening to the company’s original investment deck touched on just a few of

these. In it, he states: “BOS offers a compelling and interesting proposition of style, celebrated

premium design, great taste and health. Each of these factors are underpinned by compelling

product intrinsics (organic Rooibos, no caffeine, no colourants, no preservatives, low in

sugar10). All packed together in an authentic and lighthearted brand that is fun to engage with –

global but with African roots.”

4.3.2 A Brand-Led Business

A brief announcement comes over the lounge PA system: the scheduled 11.59pm KLM

departure has been pushed out by 30 minutes due to a delay in the incoming flight. Just an hour

behind Johannesburg, Amsterdam was experiencing winter snow storms - a far cry from the

Johannesburg heatwave. Dave orders a vodka-BOS (they’ve recently started supplying the

Lounges in Johannesburg and Cape Town) and settles into an armchair with a view of the

departures status screen and the tarmac beyond. He reads over the budget slide for his

presentation at their upcoming Klipopmekaar strategy retreat in December. Perhaps

unsurprisingly, the very first bullet point covers brand-building spend in their new markets:

• Explore cost-effective ways to build brand equity in new European markets –

Additional 1.2 million Euro plan to ensure that BOS’ attributes are properly established

and understood among primary audiences in France and Spain in the next three years.

Dave knows the most effective brands are based on a combination of share-of-shelf and share-

of-mind (the power to influence consumer perceptions on the ground). Regarding the former,

Alison and her team have invested heavily in BOS’ distribution partnerships and channels,

carefully monitoring, supporting and working with distributors who understand the brand and

market and work with the right retailers.

As BOS achieves a foothold in critical distribution and retail channels, there is work to be done

to ensure the gains made in brand awareness and perception keep pace. This is especially

10

BOS lemon ice tea contains 6.8g of carbohydrates (predominantly sugar) per 100ml compared to Lipton’s 8.2g and Arizona’s 9g. Coca Cola

contains 10.6g (source: BOS Brand Introduction, BOS, 2013)

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important in developed markets such as Europe, where there can be upwards of 60 RTD tea

brands to contend with. For BOS, their commitment to building a brand-oriented business plays

out in some critical decisions, financial and otherwise. For one thing, this means investing time

and money to ensure that first encounters with the brand take place in the right contexts. The

brand’s three marketing platforms are natural sports (like surfing and cycling)11, art and design,

and niche music experiences.

It has also meant a commitment to always launch the brand into the HORECA (hotel, restaurant

and café) trade well in advance of hitting supermarket shelves. By utilising carefully selected

outlets to reach the right crowd first, BOS builds positive associations with the brand in a high-

touch and brand-appropriate setting. These environments allow BOS to be introduced to

consumers in a personable and knowledgeable way rather than anonymously with just a price

tag to do the talking. Marié is certainly right when she says “BOS’ brand personality is its

strongest asset”, but it is challenging to convey BOS’ multi-faceted brand to somebody

encountering the product for the first time on the shelf of a local supermarket.

4.4 Internationalisation

4.4.1 Born to be Global

The fact that BOS, a South African FMCG startup, is present in five European countries and

already moving significant volumes abroad has little to do with luck. BOS’ business model and

brand were designed for internationalisation. This puts BOS in a growing club of “Born Global”

firms – businesses that are created with the intention of internationalising within three years of

commencing operations. In BOS’ case, this was based on the conflation of three factors:

• Firstly, the premium soft drink market in South Africa is limited and, although ice tea’s

share is increasing, current consumption remains at around 1L per person per year12

(compared to an average of 6L in Europe and 18L in the USA)13. South Africa could not

provide the scale required to meet BOS’ revenue target of US$ 100 million by 2020.

11

Natural sports (or “free” sports) are defined by the BOS team as outdoors, high energy sports which are generally free to participate in and

involve a high degree of interaction with natural elements 12

RTD Tea in South Africa: http://www.euromonitor.com/rtd-tea-in-south-africa/report (Euromonitor, 2015) 13

RTD Tea in the US: http://www.euromonitor.com/rtd-tea-in-the-us/report (Euromonitor, 2015)

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• Secondly, the personalities and experience of BOS’ founders and their broader team as

well as their ambitious mindsets and global exposure (cumulatively working in Africa,

Asia, Europe, North and South America and Australia) resulted in hunger for global

success and the network and knowledge to recognise and develop opportunities abroad.

• Finally, not to be discounted, the appeal of their Rooibos-based product and fun, healthy

brand is aligned with global trends and tested positively with consumers in key markets.

4.4.2 Target Region/Country

One key question for the BOS team was where they should begin, in terms of target region. On

the cards initially was expansion northwards into the rest of Africa (ROA) as well as options

further afield in the USA, Europe, Japan or China – all selected on the basis of the volume and

margin opportunities these regions could offer. Although the ROA is broadly characterised by

fast-growing economies and a burgeoning consumer class, the team had decided against this, as

the ice tea market (and related product knowledge) there remains limited and cultural and legal

barriers can make business difficult in many countries.

Similarly, the ice tea consumption is relatively low in China and the team’s decision in that

market was to wait for larger players to invest the billions required to establish the category

there first before introducing the BOS brand. Other markets were not deemed appropriate for the

brand’s early stage expansion, due to the significant cultural and language barriers and the

team’s lack of networks and relationships in that part of the world. As a result, Western Europe

and the USA became the two primary contenders for initial internationalisation.

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Figure 4.3 BOS' Global Presence - 2015

Western Europe was eventually selected for four reasons:

1. It was possible to launch the brand in smaller countries first and so contain the risk of

both failure and success; it was easier to tackle Europe on a piecemeal basis as the

region’s markets are more compartmentalised.

2. The cultural and language similarity between the Netherlands and Belgium, in particular,

provided fertile ground to begin the internationalisation process in an environment with

low communications and cultural barriers and growth opportunities.

3. The team was more connected in Europe than they were in the USA, based on BOS’

existing network of partners including suppliers (including packaging and natural

flavourings), investors and other business contacts.

4. It would be easier to do business with Europe due to proximity, making supply chain

extensions and travel less complicated (many cities in Europe are accessible via direct

flight from Cape Town or Johannesburg).

4.4.3 Entry Mode

Another critical decision for Dave’s team had to do with entry mode. Once tea syrups have been

formulated and shipped, the manufacturing process typical of soft drinks like iced tea (just add

water) is relatively straightforward. The result is a high degree of operational flexibility

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regarding supply chain and business models. BOS faced (and still faces) a variety of entry mode

options as it enters new markets as long as the formula is protected, quality standards are

maintained and the brand is built in a consistent way. They can export the packaged product (at

least to begin with) and sell it through distributors abroad. This option offers the least risk and

highest flexibility but the lowest degree of control concerning their all-important brand.

Alternatively, it was possible to raise more capital and set up foreign subsidiaries in each

country/region. Investing in their own distribution and marketing infrastructure and teams would

have given the business more control, but at a significant cost and a higher level of risk. Once

the brand was entrenched and demand was established, they could even licence their formula

and brand to third party manufacturers and marketers.

In the end, BOS opted to internationalise by employing a hybrid entry mode approach,

manufacturing different packaging formats in various locations (wherever this proved most

profitable) and selling the product to wholly owned subsidiaries and distribution joint ventures

in different countries and territories. These entities handle their own P&Ls and oversee the

distribution and marketing to a varying extent depending on BOS role in each case.

4.5 BOS in Europe

4.5.1 Internationalisation Stages and Timeline

Figure 4.4 BOS' Internationalisation in Europe 2010 – 2016

Having made their initial strategic decisions in respect of the target region and entry mode, it

was time for action. BOS launched into Europe in 2013 and is now present in six countries on

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the continent. Dave considers the timeline to date. After South Africa and neighbouring

countries, the internationalisation journey began with the establishment of the brand in

HORECA trade in Belgium and shortly after that, in the Netherlands. As BOS became better

known and recognised in these two launch markets, demand in nearby countries began to grow.

Based on the new hybrid distributor-partnership model that was developing, BOS was then

launched into key cities in Sweden and Switzerland. After about 18 months, distribution in the

Netherlands and Belgium was opened up to include retail outlets. In the Netherlands, this point

came by invitation from Albert Heijn (AH)14 – one of the Netherlands’ largest supermarket

chains with 878 stores located across the country. Due to high levels of awareness and demand

from the public as a result of Marié’s grass-routes marketing efforts in the Dutch art, design and

music scenes, the BOS team felt the brand was known and understood enough to launch into

AH.

Looking at the timeline, it was apparent to Dave that BOS’ internationalisation was gaining

momentum – an exciting but daunting prospect. Even though their recipe for foreign market

entry was becoming increasingly efficient, they faced new challenges in Spain and France. For

one thing, the sheer size of both required a more compartmentalised approach and a nuanced

understanding of the various city profiles and cultures (with their limited staff on the ground,

they had to rely heavily on their distribution partners). As he took his last sip of BOS, he

wondered if it was time to evolve their distribution and marketing model or if their current

structure and hands-on brand-centric approach could withstand the acceleration.

4.5.2 Competitive Environment

14

Like Woolworths in South Africa, Albert Heijn is a full service (not discount) supermarket that offers a premium customer experience and

higher quality products. AH’s market share in the Netherlands is currently 30%).

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In particular, Dave thought of the

complexities of the competitive

environments they faced in Europe.

There were two major incumbents in

the ice tea market there, Lipton and

Nestea. There was also a number of

other more niche, local competitors

to contend with, such as Estathé in

Italy and Pfanner in Austria. And of

course, there were all the indirect

competitors: soft drinks, energy

drinks, sports drinks and mineral

waters. On a simple grid, Marié had

mapped BOS’ core positioning

relative to well-established

competing offerings in the EU in terms of its two core attributes: natural and fun. BOS occupied

a definite gap in the market and, to compete effectively, they needed to protect this space. Grant

had summed it up best: “BOS hits the sweet spot, filling the gap in the beverage market,

offering consumers a strong emotional brand and a natural, healthy product”. Not only do

consumers face a vast array of ice tea and natural soft options in these markets, but competitors

are better established and more aggressive than they are in South Africa. Specifically, Lipton

(owned by Unilever) and Nestea, are both very active. As BOS works to build their brand, they

continue to encounter fierce and often direct competitive responses.

Entering their home markets (Nestle is headquartered in Vevey, Switzerland) was especially

daunting. In fact, this was another key reason Alison had favoured the HORECA-first approach,

“flying under the radar” initially while building awareness and demand. Not one to shy away

from a challenge, Dave had wanted to take the bigger market players on more directly (and

potentially benefit from the David and Goliath PR play-off) but Alison’s caution was well

advised. Thus far, with support from their distribution partners and legal partners, BOS had

managed to weather the backlash but Dave was well aware that there would be more to come.

Figure 4.5 BOS Competitive Positioning Matrix (source: BOS, 2013)

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Already he had heard that Lipton was developing an ice Rooibos for the South African market15,

and he had a feeling this was just a trial market for a more ambitious roll-out.

4.5.3 Distribution and Sales

In this environment, the only way to win in the growing ice tea market is to keep a level head

and stay focused on the things that matter most – obvious as they often are. For Dave that meant

balancing time and money spent on driving availability (more push) and awareness (more pull).

Marié and her team worked hard within tight budgets to seed the product within the right circles

and win over the hearts and minds of the target audiences. The other component of the mix was

ensuring the right distribution and sales channels were being accessed and utilised. In addition

to focusing on HORECA trade first (a rule that Alison had applied across the board to date)

picking the right partners had proved crucial to BOS’ success in Europe to date.

In BOS’ home market, the team had actively sought to connect directly, first with HORECA

outlets and later with major supermarket chains such as Woolworths. Although third parties

often handled logistics, retail relationships themselves were driven and managed by Will, Alison

and the South African team. This required significant resources, but it was relatively

straightforward and had served BOS well as these retailers had supported the local start-up

largely as a result of the personal relationships they had built. The European markets

represented a more complex environment, however, as the team was less familiar with the key

retailers and individual decision makers there. Based on their lower commitment entry model,

BOS did not have the manpower on the ground in Europe to pursue and build the required

relationships from scratch, especially not in the diversified HORECA trade. As a result, they

had opted to bring distribution partners on board. Dave recalled that the best way to select the

right partners and arrive at a mutually beneficial service level agreement was not always

apparent.

As a result, since first introducing their products in the European markets, BOS had

experimented with different distribution models and relationships. The business in Belgium was

structured differently from its Dutch counterpart. (This was both as a consequence of the BOS

team’s supplier relationships and due, in part, to a strategic requirement to test different

distribution arrangements). In the case of the former, local distribution and marketing services

15

Lipton Red Tea launched in South Africa in 2012, 18 months after BOS (Unlike BOS, Lipton “Red Tea” is a rooibos flavoured product, not a

rooibos based product).

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company, Jet Import16 handles distribution and marketing with more autonomy - as a turnkey

solution to the BOS business in Belgium. In the Netherlands, the chosen distribution partner

fulfills more of a strategic logistical function with marketing headed by Marié (who Dave will

be meeting with in person after his ten-hour flight). As the two models roll out, Alison works to

optimize both with more changes made to the Belgian model (in which Marié’s Amsterdam

team began taking on a more active role in guiding and supporting marketing efforts). This was

done to reinforce the brand positioning and ensure that the right audiences were engaged. One

important point of commonality between the two approaches was the culture and degree of

brand synergy with the partner. Once again BOS applied its brand-first approach to select

partners that had the same energetic can-do approach and that all-important sense of humour.

4.6 Building an Effective Challenger Brand

4.6.1 High-Touch Networks

The display monitors above turn green – Dave’s flight will be boarding shortly. As he packs his

laptop into his leather backpack, his mobile phone rings. It’s Marié calling from Amsterdam,

where it’s the same time: 12.15 AM. The Venice Biennale has just wrapped – a six-month

international art exhibition that attracts a global A-list of hip creatives and over 300 000

members of the public, all of whom descend on Venice to immerse themselves in fine art,

theatre, music and architecture. This year, BOS was everywhere – the soft drink of choice at the

event. Marié is excited by the buzz and PR potential. Her enthusiasm is infectious, even at this

time of night. With the amount of exposure BOS has had with influencers visiting from other

large cities across Europe, she wants to put together a strategy to increase the brand’s presence

in the HORECA trade in key design cities and focus the next two months on their art and design

territory. Key contacts from BOS’ distribution partners in Spain and France were both at the

wrap-party and seemed to be onboard. She knew they would be meeting shortly but wanted

Dave to give it some thought – specifically for Paris, Barcelona and Madrid. Dave knows that

she will also want to discuss investing more in the HORECA trade in the Netherlands to support

the brand’s entry into retail through AH. The idea that customers and potential influencers may

encounter the product for the first time on a supermarket shelf has concerned Marié for some

time.

16

Jet Import is a well respected importing, distribution and marketing partner that services multiple brands in Belgium, including BOS and Red

Bull. Belgium is one of the few remaining countries in which Red Bull relies on a third party for these services.

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Like so much of BOS’ good fortune to date, featuring at the Biennale was a function of the

network of close and authentic relationships Dave and his team had built. The mere fact that

senior directors from their distribution partners in Spain and France had both joined Marié for

the final party in Venice was testament to this. Of course, BOS represented plenty of potential

revenue for them but Dave also believed that there was a degree of genuine affinity for the

business. Just as Will had noted back in Cape Town, people wanted BOS to succeed. Marisa at

Woolworths certainly concurred. It sounded un-business like in some respects but, in Dave’s

mind, that sense of good will was one of the greatest rewards that came with the past five years’

hard work. And it was the result of time and energy invested by BOS into the people around the

business – suppliers, distributors and beyond. BOS’ presence at the Biennale, alongside Grolsch

and a select number of boutique champagnes and spirits, was a case in point – a result of

Marié’s relationship building in the local art scene.

Indeed, it could be traced back to BOS’ appearance at the opening of a small store-in-store by

Moooi (a well respected commercial Dutch design collective) in South Africa two years prior.

Marié had received a call from the shop’s owner, who she had delivered samples of BOS’ new

berry flavoured ice tea when it launched in 2012. He asked her if she’d be interested in

sponsoring some BOS for the launch event and Marié didn’t hesitate. Moooi’s team took a few

cans back to the Netherlands and the rest, as they say, is history. Dave is proud of the brand’s

achievements and the inroads it has made in the design and art community and around its other

two platforms of natural sport and music. He can’t help wondering to what extent and when

BOS’ growth might necessitate them moving beyond these niche early adopter markets and into

a more mass-market space. Would BOS’ cool cache collapse if it moved too quickly into the

commercial space? Or would they be missing a critical step in their natural business evolution if

they didn’t? Perhaps more importantly, could they retain their high-touch approach to business

while accessing and appealing to millions of consumers across multiple time zones?

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4.6.2 A Fresh Approach to Marketing and Brand Building

BOS’ high-touch approach is not limited to the team’s business-to-business relations but is also

extended to everyday consumers. Aside from emphasising the HORECA trade over faceless

supermarket aisles, BOS also makes an effort to connect directly with its five target market

audiences across the business’ broader marketing and communications mix. The strategy is

different for each of the audience types, which are segmented along psychographic and age-

related lines. For example, a ‘Design Conscious Global Citizen’ might typically first encounter

BOS at design conferences, fashion shows and art exhibitions many times before cementing her

bond with the brand on social media. A younger ‘Self-Expressive Explorers’, on the other hand,

may first encounter the brand on social media and is only later be given an opportunity to

sample BOS at an outdoor music festival or similar event. No matter the market, all interactions

with BOS tend to relate to the one of its three platforms: natural sports, music and design/art.

Figure 4.6 BOS' Target Audience Segments (source: BOS, 2013)

Around these platforms the marketing mix is heavily skewed to experiences such as sampling

and activations, often connected to social media. A case in point: ‘BEV’, a BOS vending

machine that delivers an ice tea together with a public acknowledgement to anyone tweeting

#bostweet4t on site17. BOS’ cycling giraffes have also become well known for their generous

hand-outs of BOS ice tea on the street of Cape Town and, more recently, Amsterdam, Antwerp

17

View video content related to BEV and #bostweet4t: https://www.youtube.com/watch?v=mzUXa6JThVQ

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and beyond18. In addition to presence at music festivals, cycle races and other fun and healthy

events, BOS get’s plenty of exposure from stunts like these, which Marié always referred to

collectively as “marketing moments of joy”.

All of these activations, which together comprise the largest component of BOS’ overall

marketing budget, involve an element of sampling – putting cans in hands, so to speak. BOS has

also been quick to employ digital channels in fresh and innovative ways. BOS runner19 is a

Super Mario type game developed for iPhones and Google Play, which rewards outstanding

players with spot prizes such as delivery of a year’s worth of BOS ice tea. BOS’ Design-a-Can

site20 is another digital platform that has generated activity and attention by allowing creative

consumers to design their own can designs with the opportunity to see their designs rolled out

on 100 000 units. Overall, BOS has initiated in the region of 200 different marketing initiatives,

campaigns and activations in addition to ongoing public relations efforts - all within five short

years and all overseen by Marié and her small team.

Figure 4.7 BOS famous cycling giraffes on the streets of Cape Town (source: BOS, 2012)

18

View video content related to BOS’ cycling giraffes: https://www.youtube.com/watch?v=hLpIyRpP9wU 19

Download the BOS Runner game app for iPhone and Google Play: http://bosicetea.com/bosrunner/ 20

View public BOS can design submissions: http://bosdesigner.com/can-3d-8

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Marié likens marketing a Born Global firm such as BOS to gardening. Without the budget of a

big multinational such as Unilever, you can’t afford the biggest trees (the World Cup adverts)

but you plant hundreds of seedlings. As Marié has discovered, if you care for all of them, many

of them will grow and develop as the brand matures. The challenge for Marié is that it’s difficult

to say ahead of time, which of her initiatives will ultimately bear fruit. In total, BOS diversified

approach to marketing has brought with it a number of benefits:

1. Value: It achieves reach and builds awareness over time without massive “above-the-

line” spend on TV commercials and billboards.

2. Affinity: It provides an opportunity to build deeper connections with consumers and

enrich their day rather than interrupt them.

3. Depth: It promotes a multifaceted or “layered” brand experience that allows for constant

discovery of different brand elements. For example, BOS’ commitment to planting and

permanently maintaining a tree in an impoverished area for every 2000 cans they sell 21.

4. Flexibility: It allows for a responsive and agile brand-building allowing the team to take

advantage of prospects wherever they arise – many of which have burgeoned into bigger

opportunities over time (like the Venice Biennale).

Dave agrees, their current approach has brought the BOS brand significant awareness and

affinity in South Africa, the Netherlands and Belgium at cost-effective spend. But he is aware of

the downsides too – especially as BOS enters bigger and more diverse markets. One concern is

the potential lack of focus that can result. Marié and her team are finding their attention

increasingly stretched between different countries and marketing territories. Add to this a

marketing mix with too many moving parts and the result could be inefficient in the long term.

Secondly, and linked to this, Dave is not sure the current approach will scale well as BOS’

growth accelerates into the future. In addition, as the business achieves economies of scale,

Dave wonders if ATL (“above the line”) band-building approaches will become relatively more

affordable. He also wonders if, as the brand moves along the adoption curve and away from

early adopters, whether the same high-touch approach will be necessary. The team will need to

21

This contribution is only communicated in video content on the BOS website and is not included in public campaigns or on packaging:

http://www.bosicetea.com/#section-sustainability

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dig deep, creatively speaking, over the next two years to develop the brand and offering in fresh

new ways that are appropriate for a mass market while still retaining the brand’s all-important

personality.

4.6.3 An Emphasis on Creativity and Innovation

On the upside, innovation is part of BOS’ modus operandi. The team’s constant quest to keep

the brand relevant and cool in the minds of consumers involves an ongoing role for out-the-box

thinking, including not just marketing but NPD (new product development) too. In the past year

alone, the BOS team has launched a sparkling ice tea variant, a popular Rooibos and guarana

energy drink and BOS’ new 500ml BOS Sports drink format. Certainly as Alison was quick to

point out, the speed and agility at which the BOS team can move innovations through their

pipeline puts bigger players like Nestea to shame22.

In many instances, the team had to

innovate to survive or to eliminate

inefficiencies that larger corporate entities

could throw money at instead of creativity.

In other cases, innovation is fueled by the

team’s genuine enthusiasm to push

boundaries as well as respond to customers

on the ground. Because of their proximity

to the end consumer (especially in

HORECA contexts), the BOS team has a

great sense of “what will fly”. The most

recent addition to the BOS product line

was BOS Sport, a range of isotonic,

organic Rooibos-based sports drinks that

deliver an extended/sustainable energy profile 23. The range also boasts a lower glycemic index

and none of the synthetic flavourings or colourants that have come to define the rest of the

category. This innovation was born out of BOS’ interactions with sportswomen and men, born

out of the natural (or “free”) sports marketing platform and the relatively wholesome credentials

22

BOS Sport took just four months to develop from concept to final product 23

In late 2015, BOS Sport launched its own website: http://www.bossport.co.za/

Figure 4.8 BOS Sport Drinks launched in January 2014

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of their ice teas, which are proving popular with an increasingly health-conscious sporting

profile.

Dave knows that BOS’ track record of successful innovation in marketing and NPD will become

increasingly important moving forward. Crucially, it will assist in maintaining interest in the

brand and growing BOS’ share-of-shelf across categories. He also believes that innovation has a

greater role to play in allowing the business to scale. He has been reading about the four I’s of

digital marketing: Identification, Information, Interaction and Innovation and feels that this

approach could contribute to BOS’ broader marketing and business development efforts. As

Dave heads towards doors of the lift that will take him to his departure gate, he reminds Marié

that he will be joining her in Amsterdam shortly. Before he dials off, though he promises to give

some thought on the flight over to how they could build awareness in the areas around those AH

supermarkets located in areas where BOS has no lower awareness levels. For Dave, somewhere

between low-contact supermarket aisles and high-touch publicity stunts lies the answer.

4.7 Ongoing Internationalisation Challenges

4.7.1 Psychic/Cultural Distance

Another question Dave has raised before with his team is the extent to which BOS’ innovative

and creative approach will appeal across different markets and cultures. Grant had always

maintained that the brand was founded on values with inherent universal appeal and that BOS’

fun and healthy credentials resonate globally. Dave agrees, but in recent conversations with

Marié, they had also discussed the extent to which the brand may need to be adjusted for

different markets. The Netherlands and Belgium were selected as BOS’ first entry markets in

Europe, in part due to Europe’s geographic proximity. This reduced transport-related

operational costs as well as the degree of travel and communication complexity, especially

relative to Asia and the USA. Another important type of distance that Dave’s team took into

account was cultural (or “psychic”) distance. The Benelux region, in particular, offered certain

cultural and language similarities to certain parts of South Africa and there was agreement that

this would ease the business’ initial transition into international markets24. An appreciation for

lighthearted/quirky humour was certainly one example (BOS’ “designer irreverence” had been

well received to date).

24

Afrikaans, one of South Africa’s 11 official languages draws heavily on its Dutch ancestry and bears close resemblance to both Dutch and

Flemish.

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However, even there, Marié finds that the appropriateness of BOS’ three platforms differed by

cultural context. In the Netherlands, for example, there is a strong emphasis on design and art,

with most of the brand ambassadors and influencers moving in related circles. The design scene

there is very open, expressive and doesn’t take itself too seriously, which results in a

comfortable fit for the brand. In Belgium on the other hand, BOS engages with more consumers

through their music platforms; here the brand was often seeded through outdoor sporting and

music events. This was in part due to the brand’s relationship with Jet Import, but Dave felt that

there were also certain cultural nuances that set the markets apart. As BOS pushes forward into

new markets that are less culturally similar, there is certainly more work to be done to ensure

that cultural distance is taken into account and mitigated where possible. As BOS entered each

market in Europe, they learnt more about how to internationalise effectively, where to take

cultural nuance into consideration and where to stick to the way they had built the brand at

home. Much of this learning came through networks and contacts in those markets but much of

it was also based on a clear understanding of BOS consumers and influencers on the ground.

4.7.2 Country of Origin Role

Relatedly, there was the matter of BOS’ South African origin. There was agreement among the

team that “South African” or “African” should not be one of BOS’ primary attributes. Rather,

subtle African references25 hinted at BOS’ African roots. However, the brand was ultimately

created to be a “global brand with African roots”. There were many other brand attributes the

BOS team wanted consumers to recall before ‘South African’. On the other hand, however,

Rooibos’ natural benefits were increasingly recognised abroad and BOS’ Rooibos base was a

significant source of differentiation and appeal in the European markets. Grant had often noted

that Rooibos was the ultimate source of BOS authenticity. As 100% of the world’s global

Rooibos supply is grown within a 100km radius of Klipopmekaar farm in South Africa’s

picturesque Cederberg mountains, this sense of provenance was still important.

Although no formal market research on the subject had been conducted, Marié believed – based

on her interactions with customers - that the majority of European consumers did not know that

BOS came from South Africa. In fact, many brand fans were under the impression that BOS was

a local European product. Most who read the back of the pack viewed BOS’ SA heritage and

25

The bright blocked colours of the pack designs, the BOS of Rooibos (an Afrikaans word) and the lion were all selected as being emblematic

of South Africa during the initial brand design phase.

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backstory favourably, but Marié wondered if this would be the case elsewhere. The Netherlands,

Belgium, Switzerland and Sweden were relatively small countries with highly educated and

well-traveled populations. Would other consumers who were less familiar with South Africa’s

countryside, culture and national tea understand or appreciate the fact that BOS was South

African? Would they know what Rooibos is? Would it be better to tweak the brand to either

downplay or up-play these provenance components? Certainly research conducted recently

suggested that many consumers can and do form negative associations around products from

emerging market contexts like South Africa, based on assumptions about their quality and

safety. In addition, some countries were more patriotic in the purchasing habits and were

naturally less likely to buy foreign products. When he studied and worked abroad as a

Management Consultant Dave had observed that consumers are not equally adventurous and

open-minded the world over. The extent to which other countries in Europe and further afield

would appreciate BOS’ African roots or its quirky and colourful South African sense of humour

remains to be seen.

4.7.3 Legislative and Legal Hurdles

Another set of complications, although anticipated, were legislative. Not only did BOS have to

comply with onerous EU product and packaging standards but they also had to change their

label design for these markets. Furthermore, listing in AH had been a coup and had not gone

unnoticed by Nestle and Unilever. Within six months (and based on some energetic lobbying

behind the scenes, Dave suspected), Brussels passed new legislation that forced BOS to change

its product name too. These new regulations specified that only products made with Ceylon

based tea leaves (Camellia Sinensis) could be called ice tea. Initially, the team had been

flummoxed. In true BOS-style, a workshop was called over Skype one Sunday afternoon, and

the matter was resolved within four minutes – a record even for BOS.

Marié had long felt that Rooibos’ credentials should be up-weighted on BOS’ packaging

without sacrificing its iconic simplicity. She had been tracking Google searches and entries

around the Rooibos name globally and had watched their key ingredient and differentiator rise

to fame over the past three years based on anti-oxidant and anti-inflammatory properties.

Henceforth it would be BOS Ice Rooibos. The team approved the change unanimously.

Nevertheless, running different naming conventions and label formats is creating complications.

Phrases for SEO (search engine optimisation) now need to be built around two different product

names and global social media profiles must alternate between the ‘tea’ and ‘Rooibos’.

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Operationally, there was also now a risk of running too many products labeled for one market

and not enough for another, which could lead to stock management headaches down the line. It

is seldom that a month goes by without a legal letter arriving that requires some form of

expensive response26 – Dave recognises that this is largely a tactic to wear the BOS team down

but the expense (financial and in terms of focus and effort) is very real.

4.8 Conclusion

4.8.1 Opportunities Near and Far

The BOS team and investors are truly fortunate, the business’ and brand’s growth have far

exceeded expectations. Their challenge today - to choose between so many good opportunities -

is a great challenge to have. As a Johannesburg thunderstorm moves in outside, he runs through

the options one last time. They could stick in the Western European countries (where BOS has

been present for a few years) and put all the team’s efforts into becoming the third biggest ice

tea brand there. Alternatively, they could expand more aggressively into the rest of Europe and

invest greater energy into growing the brand in France and Spain. They could seek additional

investment and take advantage of the US opportunity that appeared to be developing. Or they

could invest this same capital into accelerating their internationalisation in Europe – perhaps in

Germany first and the United Kingdom – a popular exit point for Canada and the USA. They

could even leverage their brand exposure and distribution relationships to build the brand

elsewhere on the African continent. Each of these options came with a unique set of potential

upsides and downsides. Dave knows that, if the team chooses to go ahead with a US deal, they

will encounter many of the challenges they had experienced when entering Western Europe

(cultural distance and myriad legal and competitive hurdles among them). They will need to

weigh the risks up against the rewards and decide just how thinly they could spread themselves

to grow at the maximum possible pace, while still protecting the many facets of their business

and brand that have worked so well to date. Dave and his team seem to have many decisions to

make and, as is often the case these days, so little time to make them.

He settles into his seat bound for Amsterdam, with some time to think through the more

immediate challenges around bolstering brand awareness for BOS in the Netherlands. He finds

himself agreeing with Marié; no consumer should encounter their brand for the first time in the

26

Most legal issues that are raised involve trademark and other intellectual property matters or marketing claims.

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aisle of a supermarket. In the Netherlands, a country of under 17 million people, this challenge

was far from insurmountable, especially given the traction Marié and her very limited team had

already managed to achieve there. Ultimately, however, this is a small component of a bigger set

of questions, which BOS needs to answer (and ultimately innovate around) to continue growing

the business. How will BOS best scale its high-touch and personable brand for the world’s mega

ice tea markets? What are the key strategies they will need to put in place to ensure that they

leverage and remain true to the brand? And how can they achieve this within an efficient

timeframe to ensure that they don’t miss out on too many opportunities along the way? To that

end, before he switches his phone to flight mode, Dave takes a few minutes to send a reply to

Rick’s invitation. He’s not certain it’s the right call to make but then, as with many junctures

along BOS’ internationalisation journey, he realises that more time spent thinking probably

won’t bring greater clarity than he already has.

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4.9 Discussion Questions and Assignment

4.9.1 Questions for General Discussion (for preparation before session 1)

1. Discuss BOS’ internationalisation strategy. How effective have the team’s decisions and

actions been in terms of the various components of BOS’ internationalisation to date?

2. In what way does BOS’ internationalisation process and the options available to the BOS

team differ from those that a large multinational corporation might face, based on your

experience/knowledge?

3. What are the options currently available to the BOS team in their ongoing internationalisation

and what are some of the advantages and disadvantages associated with each?

4. If you were Dave, what would your next steps be and why?

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4.9.2 Group Assignment (for preparation before session 2)

Your team constitutes a niche and very well-respected consulting firm that advises Born Global

businesses on their internationalisation strategies and programmes. Dave is a good personal

friend of yours and you are keen to get more involved in BOS’ business as you see considerable

potential. Your firm assists in providing direction and formalising strategies across various

functions within client businesses (Born Global strategies often develop organically and are

highly emergent). In particular, you specialise in advising brand-centric businesses on creating

brand equity by growing the business and brand together. Based on your team response to

question 4 above, you have been asked to put together a brief, no-nonsense presentation to

Dave, Marie and Alison outlining and justifying your recommendations regarding BOS’ further

internationalisation. Dave’s request has come in the form of a brief (as always) email:

________________________________________

from: Dave <[email protected]>

to: You <[email protected]>

date: Thurs, November 23, 2015 at 9.12 AM

subject: Your valued input

“Hi guys,

As per our earlier conversation (I outlined our current situation and the opportunity in the US),

I’d like to relook at our internationalisation strategy. Before proceeding with detailed analysis

though, I’d really appreciate your initial thoughts on the subject and a rough skeleton of a three-

year internationalisation plan, to help guide our decision-making moving forward.

As discussed, I’ve set aside a very brief 10-minute slot with 5 minutes thereafter for Q&A,

which we will cram into our strategy retreat at Klipopmekaar in December. I know it’s tight but,

based on that, I think we’ll get a good idea of whether to pursue this further. Please keep the

deck to 10 slides or under, but ensure the thinking behind it is rock-solid and that you guys

have considered all the angles and options. It shouldn’t take longer than 4-5 hours to prep.

Looking forward to it and thanks again.

Dave.”

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4.10 Case Exhibits

4.10.1 Exhibit 1. The Global Ice Tea Market (source: Bos, 2015)

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4.10.2 Exhibit 2. Ice Tea Market and Competitors – South Africa (source: Bos, 2015)

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4.10.3 Exhibit 3. Marketing and Activations 2015 – Netherlands (source: Bos, 2015)

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4.10.4 Exhibit 4. On-Premise / HORECA Merchandising Examples (source: Bos, 2013)

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4.10.5 Exhibit 5. Sales Contribution and Growth by Region (source: Bos, 2015)

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5. Teaching Note

Available for Lecturers only.

6. Conclusion

The BOS Brands teaching case centres around the ongoing internationalisation strategy and

experience of a South African FMCG venture in the early years of realising its global expansion

ambitions. The case builds on the key issues faced by young CEO Dave Evans as he attempts to

evaluate a new opportunity to list with a large US retailer and closely follows his consideration

of the options at hand. Key amongst these is weighing up faster brand and revenue growth

against the more metered and brand-oriented approach that the BOS team has adopted to date.

The case was specifically developed to achieve a dual purpose, as outlined in the introduction to

this paper. The primary purpose, as noted, is “to provide students with a practical understanding

and appreciation of international entrepreneurship and the complexities of the

internationalisation process and related strategic choices, as they apply to a medium sized

entrepreneurial venture”. The case achieves this by exploring multiple facets of BOS’

internationalisation strategy in general and in application to the current dilemma Dave faces

with the US retailer. These are explored from a marketing, distribution and broader business

growth perspective. The case also introduces real-world complexity by including parallel

dilemmas of a similar nature. One example is the challenge Marié faces in the Netherlands as

she attempts to build brand recognition and understanding in areas where BOS can already be

found on the shelves of local Albert Heijns supermarkets.

The case’s secondary purpose is “to inspire business students to see the potential that lies within

strategically-driven emerging market ventures, especially those that have demonstrated the

vision and will to succeed in global consumer markets”. The case achieves this by putting the

student in the shoes of Dave and his young and dynamic team and bringing to life some sense of

the pace, challenges and exhilaration that constitutes the BOS team’s daily experience. BOS is a

business that, by all measures, is growing rapidly and has a bright future ahead of it. It is a

business which students would likely want to succeed (and possibly be a part of) and a brand

whose healthy and fun attributes have been built for global appeal. As such, it is living proof

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that emerging markets such as South Africa have much to offer the world (beyond raw minerals

and resources).

In addition to shedding an emerging market light on international entrepreneurship literature and

bringing together a broad range of applicable theory, this case offers students a practical

example of their application to a real world and inspiring case.

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