Thesis Proposal Effects of Non-Traditional Banking Activities on Revenue Diversification of Universal and Commercial Banks in the Philippines from 2007 2012 Essay Example

Thesis Proposal: Effects of Non-Traditional Banking Activities on Revenue Diversification of Universal and Commercial Banks in the Philippines from 2007 2012 Paper Thesis Proposal: Effects of Non-Traditional Banking Activities on Revenue Diversification of Universal and Commercial Banks in the Philippines from 2007 2012 By mikashee 1. INTRODUCTION 1. 1 . Background of the Study: The Banking Industry in the Philippines is one of the (recorded) contributors to GDP under the Service Sector. Despite being one of the least contributing industries in the Philippines, its purpose is highly relevant in different markets. Aside being a category under the Service Sector for GDP reporting, the Banking Sector is the largest medium for Financial Intermediation in the Philippines. Over the years, banks has been one of the common financial intermediaries that provides lending and deposit services for people whore short in funds and people who have no place to use their excess money on. In order to become more profitable and increase the level of competition, Financial Liberalization was introduced in the banking industry wherein some banking regulations have been lifted so that banks could offer other banking services other than the traditional Loans and Deposits. After the financial liberalization came into the market, banks, particularly Universal nd Commercial banks, have found new sources of income other than the traditional interest income. Examples of these activities, as given by researchandmarkets. com(2012), are Portfolio Management, Derivatives trading, Mobile/lnternet Banking, and the like. We will write a custom essay sample on Thesis Proposal: Effects of Non-Traditional Banking Activities on Revenue Diversification of Universal and Commercial Banks in the Philippines from 2007 2012 specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Thesis Proposal: Effects of Non-Traditional Banking Activities on Revenue Diversification of Universal and Commercial Banks in the Philippines from 2007 2012 specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Thesis Proposal: Effects of Non-Traditional Banking Activities on Revenue Diversification of Universal and Commercial Banks in the Philippines from 2007 2012 specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Non-lnterest Income, or fee-based income, came from non-traditional activities/services provided by banks wherein these activities differ per bank in order to establish some sort of competitive advantage against their competition. 1. 1 . 1. Banking Activities Engaged by Banks in RP Among the different classification of banks in the Philippines, it is Universal and Commercial banks services that are being availed of by most Filipinos since these banks cover Page 1 the basic banking services that are not limited to a certain market only. Aside from the Traditional Deposit-Loan activities that earn the usual Interest Income, banks have also engaged in investment and trading activities in order to gain more profit that maintain the reserves in case a decrease in interest rate occurs due to the changes in macroeconomic factors that also happen to be relatively correlated with the Interest Rates. 1. 1. 2. Revenue Diversification: Reducing Risk for Bank Capital? risk such as credit risk, and interest risk. This is used in managing asset portfolios in order to minimize losses or even offset it with profitable assets. In Banking, after the introduction of Financial Liberalization, wherein deregulation of banks have been granted, amount of competition among banks have grown until it reached the point that these banks had to differentiate the products and services they offer other than the traditional Loans and Deposits. This is where Non-Traditional Banking Activities come in. Non-Traditional Banking Activities are activities or services offered by banks at a given fee, therefore generating Non-lnterest Income. And now that banks have a simultaneous generation of Interest and Non-lnterest Income, Revenue Diversification is done. 1. 2. Problem Statement What are the effects of Non-Traditional Banking Activities on Revenue Diversification of Universal and Commercial Banks in the Philippines from 2008-2012? Page 2 1. 3. Objectives a. ) To identify the different banking products and services offered in the Philippines that are classified as Non-Traditional Banking Activities b. ) To determine whether Non-Traditional Banking Activities have positive or negative effect/s on Revenue Diversification of Banks c. To be able to recommend on which banks services will be able to take advantage of the use of Non-Traditional Banking Activities/Non-lnterest Income. 1. 4. Hypothesis HO: Non-Traditional Banking Activities (such as fee-based services and trading services) dont have any significant effect on banks revenue diversification which, in theory, should reduce risk of insolvency. HI : Non-Traditional Banking Activities (such as fee-based services and trading services) have a significant effect on banks revenue diversification which, in theory, should reduce risk of insolvency. . 5. Assumptions of the Study This study will assume that revenue diversification is the diversification of noninterest income. According to historical data of interest rates in the Philippines by tradingeconomics. com, it appears that interest rates are relatively stable. With the help of the data presented by tradingeconomics. com, this study will now assume that interest income is stable. As for data to be collected, this study shall assume that the financial statements reported to the SEC and Osiris database are true and not adjusted in bad faith. With regards to the Page 3 sample, it will be assumed that the top ten universal and commercial banks Philippines. 1. 6. Significance of the Study This study is a follow-up on the study made by Nguyen (2010) as wherein Dr. Nguyen recommended an intra-country application of their study, of which the country would be the Philippines. This study will also determine whether Non-Traditional Banking Activities have a significant contribution on the revenue diversification of Universal and Commercial banks in the Philippines. At the end of this study, results gathered by the researcher will be used for recommendation on whether banks in the Philippines should focus on Non-Traditional Banking Activities or the Traditional Interest Income-earning Activities. The results of this study will be useful for Bank Managers, and Bank Regulators. Bank Managers This study is relevant for Bank Managers because the results of this study will determine whether or not Bank Managers would encourage their staff to exert more efforts in showcasing bank products and services other than deposits and loans. Marketing strategies per branch or the bank in general can help bring in more clients that will either avail trading services or engage in trusts with the bank. Or it can also tell Bank Managers to help their branches refocus on the traditional deposits and oans, depending on whether this study will generate a positive or negative outcome. Page 4 Bank Regulators Bank regulators will benefit from this study because they can either increase or decrease the level of deregulation of banks as well as the capital requirements of banks depending on the results of this study. . 7. Scope and Limitations The study will focus on the top 10 publicly listed Universal and Commercial Banks in the Philippines from 2008-2012 as listed by philpad. com (2012) because of the services these banks offer as well as the availability of data to the public. The esearcher will take the gathered data as it is recorded, and will disregard the effects of the Global Financial Crisis in the list of factors influenc ing the revenue diversification of banks as well as the utilization of non-traditional banking activities. . Review of Related Literature Banks have evolved over the centuries, and for the past decades, banks in the Philippines have Joined in the bandwagon when it comes to modernization of banking. Some of these developments include the use of ATMs, internet and mobile banking, and express deposits. These are additional services offered by the banks for convenient banking experience for their clients. For decades, banks have expanded from simple deposit-loan transaction, they have engaged into other profit-generating activities that not only generate income for their firms, but also provide further use the terms Traditional Banking Activities (TBAs) to refer to the banks usual Deposit-Loan transactions that earn Interest Income (and incur Interest Expense) and Non- Page 5 Traditional Banking Activities (NTBAs) to refer to other banking activities that are not DepositLoan transactions that earn Non-lnterest Income (and incur Other Expenses). Like most countries (if not all), the banks in the Philippines have classified and reported their income using two (2) main categories: Net Interest Income and Other Income (or Non-lnterest Income), which were also recognized by prior studies. 2. 1. Banks Banks are the most common and accessible among financial intermediaries. These institutions serve as a bridge connecting people who wish to save their excess money and people who need to spend money for different reasons. And for centuries, banks offer their main services of keeping deposits and lending out loans. Being a financial ntermediary, their access and ability to distribute money is highly regulated by the government, specifically the Central Bank. Over the years, banks have developed and expanded its services from the standard Deposit and Loans to Brokerage and Trading. However, these services are only available to specific banks depending on the services they offer, as well as their target client market. Classifications of these banks are as follows: Universal Banks Commercial Banks Savings Banks Rural Banks Cooperative Banks Page 6 most common ones are universal and commercial because they have the most pdated set of services that are most accommodating to the needs and wants of his/ her client. 2. 2. Classifications of Banks According to Section 3 and other sections of the General Banking Law of 2000 there are four (6) main types of banks in the Philippines (Circular No. 271 dated 8 January 2001): Thrift banks, Commercial banks, Universal banks, Rural banks, Cooperative banks and Islamic banks. Thrift banks, defined by the BSP, are savings and mortgage banks, private development banks, and stock savings and loans associations organized under existing laws. (Thrift Banks Act of 1995, Sec. 3a). Commercial Banks, on the other hand, are banks that offer a full range of financial services, including checking, savings, lending, and most other services (Kapoor et al, 2013). these possess the powers of Thrift bank but in addition to that, Commercial Banks may issue letters of credit, accept negotiable instruments, and negotiate evidences of debt and promissory notes. Universal banks, according to Saunders and Cornett (2008), offer not Just investment banking services, but also commercial lending, foreign exchanges and custody and cash management services. of which covers most of the banking services available for clients. Rural banks are, as defined by the Philippines National Statistical Coordination Board (NSCB), are banks sponsored or assisted by the government, which are privately managed, that lend money to farmers and merchants in order to fund their livelihood in the rural areas such as purchasing agricultural equipment. Cooperative Banks are banks owned and accommodated by the same group of people, usually of the same community or profession, and serves as the financing institution providing loans, accepting deposits and other financial services for the said page 7 group of people (icba. coop, n. d. ). Lastly, Islamic banks, as described by the Institute of Islamic Banking and Insurance, are banks that apply the principles of Shariah (Islamic rulings) through the development of Islamic economics. = (Islamic- banking. com, n. d. ). Therefore, these banks practice the strict rules and principles of Islam, presumably based on the teachings of the Quran. As for the Philippines, banksphilippines. com (2012) as of 2012, there are 705 banks in the Philippines, thirty-seven (37) of which are Universal and Commercial Banks. The rest would include Thrift Banks, Rural banks, Cooperative Banks, Islamic banks and Quasi-Banking institutions. According to a forum from philpad. com (2012), the top players, as well as the top ten in the banking industry as categorized by assets are the following: 1. BDO 2. Metrobank 4. Landbank 5. RCBC 6. Development Bank of the Philippines 7. Philippine National Bank 8. Chinabank 9. Unionbank 10. Security Bank (source: philpad. com) Page 8 2. 3. Deposits and Loans: Traditional Banking Activities For decades, banks have relied heavily on the traditional net interest income earned due to the constraints brought by banking regulations. There might have been the existence of Nonlnterest Income, but it was minimal because banks would try to void violations of the said regulations. Banks have operated as financial intermediaries in terms of keeping deposits of savers and giving out loans to spenders and borrowers. Similar to other companies, banks earn from their operations. A summary of this basic operation of Traditional Banking Activity is given by economicshelp. com (2013), wherein Banks would take clients deposits and use these deposits to give out loans to other clients in different terms. In this process, banks would pay interest to its depositors and collect interest from its borrowers. The net of the interest would then become the main income of the bank. Now, this so- called interest is based on the interest rates offered by bank, in compliance with the Central Banks reserve requirements, which fluctuates based on the economic condition of the country. And as these banks develop over time, they have come up with the idea of interest, an amount charged to borrowers and paid to lenders. However, since loans and deposits dont have an exact off-setting rate, the difference between the interest from loans and the interest of deposits is the so-called Net Interest Income earned by banks (Investopedia, 2013). Interest rates are influenced by external factors in the economy. It is through the Monetary Policies dictated by the Central Bank that interest rates are adjusted depending on the Money Supply in circulation. If there is too much money in circulation, Contractionary Monetary Policy is implemented, raising Interest Rates in order to attract depositors while Expansionary Monetary Policy is implemented when Money Supply is low, in order to Page 9 discourage clients from depositing their money in banks. Using the Philippine Benchmark Interest Rate graph from 2002-2012 reported by tradingeconomics. com, interest rates are relatively stable over time but had dramatic decreases when it hanges. Back in 2002, the Philippines had interest rates ranging from 6. 5% to 7. 5% Global Financial Crisis. These effects have greatly influenced the Banking Industry especially their income generation from interest. 2. 4. Non-Traditional Banking Activities Banks, like most companies, are also expense-incurring firms with the need to generate income in order to cover for these expenses. Employees salaries, Equipment (ATM) maintenance, Delivery Costs, Security Expenses, and Transaction Costs are Just some of the many expenses that banks incur in order to provide convenience and good service to their clients. However, given the low interest rates in the economy, interest income alone seems to be insufficient to cover for these expenses, and Inflation rates havent been placed in the equation yet. Another source of income for banks is what we call Non-Traditional Banking Activities, activities and transactions that are not directly concerned with charging Loans or paying interest to depositors. Stiroh (2002) classified Non-lnterest Income into four (4) main categories based on the activities engaged by banks. 2. 4. 1. Deposit Loan: Traditional One of the most common activities operated by banks is mediating the lending- orrowing process of money between savers and spenders. However, in order to attract savers to open page 10 deposit accounts in their branches or safes, banks offer interest income for depositors, relative to how much and how long the money will be deposited in their account. These terms are relatively important because the terms will be the determining factor in matching peoples deposits with borrowers loans, depending on the capacity of the borrower to pay on time. In the Philippines, only a few people are able to deposit their money in their accounts because of either lack of nformation or the threat of loss from banks in case of robbery and the like. But surprisingly, according to a recent study, 80% (or 8 out of 10) Filipino households dont have bank accounts. 2. 4. 2. Non-Traditional Banking Activities in the Philippines 2. 4. 2. 1. Trading Aside from the lending operations performed by banks, banks have also covered the financial market such as the Foreign Exchange (FX) market, Stock market, and the Derivatives market. Trading Income, as described by Stiroh (2002), is income derived changes. Banks added trading financial instruments as part of their products and ervices since banks have the expertise when it comes to managing risk, computing possible profits in holding to certain assets, and the like. Trading in the financial markets is highly volatile, which is why Banks engage in trading here because of the concept high risk, high return. Now, given the wellcomputed chances of earning a relatively high profit in the financial market, banks are given the possibility of gaining enough funds to cover risks of the possible changes in interest rates as well as additional funds that can be used for investment and payment of expenses. In Banks Page 1 1 such as Bank of the Philippines Islands (BPI), existing clients need not open a new account to trade; rather, these clients can already use their existing accounts to trade. 2. 4. 2. 2. Other Services: ATMs, Fiduciary, etc. Technological innovations continue to improve banking in the Philippines, all for the convenience of banking for clients. The relatively older examples of these innovations is the use of Automated Telling Machines (ATMs), the purpose of which is to provide an easy-access to money wherever the client may be, as long as there is the presence of ATMs in the area. Now, these ATMs are considered a long-term investment made by banks. In order to maintain this equipment, as well as the printing of receipts, fees are to be charged against the clients. While banks would usually not charge the clients for using the banks ATMs, the most common fees charged are the instances wherein the client would withdraw their money from another banks ATM because not finding an ATM of ones bank is inevitable. Services charge-, commission-, and bank fee-generating activities are also part of a banks set of activities because the clerical work and other menial work performed by bank employees are part of the anks non-interest expense that are being incurred regularly, therefore it must also be compensated as part of the banks regular operations. In the Philippines, there are approximately 12,700 ATMs in all over the country with around 10,900 coming from universal and commercial banks. Fiduciary businesses are also being accommodated by banks under the trust department in the Philippines. In the Philippines, only a few banks are being authorized by the Bangko Sentral ng Pilipinas (BSP). These activities would include managing investments and estimating risk for prospect investments. page 12 2. 5. Non-lnterest Income: Is it a Factor for Bank Stability? isk, and both sides have a common relation of the two factors but opposite sides of the given relationship: Revenue Diversification. If Finance, in general, views Diversification as a good thing (given the context of Asset Portfolio Diversification), there are others who view otherwise when it comes to Bank Revenue Diversification. When it comes to determining the effect of Non-lnterest Income on the Banks overall risk, two groups of studies that discuss whether or not Non-lnte rest Income provide diversification benefits especially when it came to Risk Reduction. In a study conducted by the group of Nguyen (201 1), Non-lnterest Income contributes to the Revenue Diversification of banks, therefore minimizing the risks of not earning income to be used for either investment to equipment or help preserve their clients deposits therefore preventing the banks from declaring bankruptcy due to the available funding banks will obtain after earning/gaining profit from Non- Traditional Banking Activities. The findings of Nguyen are being supported by Smith (2003). However, in the study, it is said that Non-lnterest Income is not a stand-alone ource of income, rather, Non-lnterest Income and Interest income work simultaneously (Smith, 2003); therefore NIIs and Interest Income are not complementary as their correlation becomes closer and closer. In search of diversification benefits from Non-lnterest Income, Stiroh (2002) was able to prove that instead of reducing risk, NIIs actually add up to the riskiness in terms of Bank Stability because the nature of NIIs, specifically Trading Income, is highly volatile and is dependent on the demand and supply of the underlying assets involved in trade. This theory is page 13 also supported by the studies of Bailey-Tapper (2010). Non-lnterest Income is volatile because its demand is also fluctuating based on the demands of the clients also dependent on the economic standing of the country, therefore, despite the chances of getting high returns, it does not help in maintaining stability of the banks income. Lets say, a banks performs its Traditional Banking activities of Loans and Deposits, it is sure to earn Interest Income for every client it serves and it is constant throughout the year. But add the generation of Non-lnterest Income, Total Income generated per period has become volatile since the generation of Nonlnterest Income is variable epending on its clients. And with volatility comes risk making the Banks Income unstable, which then defeats the purpose of Revenue Diversification. However, a common misconception was clarified in the work of De Young and Rice (2004). While most studies would claim that non-interest income strictly come from nontraditional banking activities, De Young and Rice (2004) would claim that non-interest income is also generated from traditional banking activities such as deposits wherein checking fees, safe-keeping fees and cash management fees are also charged to the clients. But other than that, De Young and Rice (2004) support the claim of Stiroh (2002) that non-interest income activities are less stable than interest income. On the other hand, Smith (2003) thinks otherwise. Their study shows that the mix of relatively high (or positive) and Stabilize bank profits via Revenue Diversification. With the contribution of Non-lnterest Income, Total Interest Income is not affected by the economic fluctuations of interest rates, therefore being more capable of generating new capital for the bank. Page 14 Given the arguments of the literatures above, the study will then test which concept s applicable in the Philippine setting and therefore determine which banking activities will be more profitable for the Universal and Commercial Banks in the page 15 2. . Literature Map Page 16 2. 7. Research Gap This study will follow the recommendations made by the group of Nguyen (2010) regarding the intra-country application of their paper by measuring the correlation of the use of Revenue Diversification with Bank Stability, Profitability, and Bank Market Power. This study will further discuss and identify whether it is Interest Income from Traditional Banking Activities o r Non-lnterest Income from Non-Traditional Income Activities. 3. FRAMEWORKS 3. 1 . Theoretical Framework In this study, banks will be illustrated in a market set-up using the point of view of the bank (excluding the concept of competition), which will consist of environment, stakeholders, strategies used, and measurement of success of the said strategies. For the market environment, Random Walk theory will be used in order to explain the volatility and uncertainty of the market. As for the stakeholders such as the banks investors and depositors, Modern Portfolio Theory shall be used in order to describe the preferences of the banks stakeholders when it came to choosing which nstitutions theyd place their money on. In order to satisfy the stakeholders and to give assurance, the strategy of Diversification, specifically Revenue Diversification between interest and non-interest income, will used in order to theoretically reduce the risk of insolvency of banks. To measure the risk and return of these banks, the financial ratios on ROE and Profitability as well as solving for variance and standard deviation of income will be used. And finally, in order to measure for risks taken by the banks, with regards to total income, Sharpe Ratio will be used. page 17

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Link Natural (Pvt) International Audit EXECUTIVE SUMMARY Link Natural (Pvt) Ltds decision to advance their business to France was apart of the economical and socio-cultural analysis carried out to identify the market potential for the product (Link Samahan) to be sustainable in the French herbal market. The company is already conducting their businesses in many locations around the world, and France was a further step taken to expand their global presence. The following report is the market audit conducted in order to identify some of the key factors that should be taken into consideration when expanding a business across borders. A brief description of the product Link Samahan is presented initially in the report followed by an analysis of the product acceptance as well as possibilities of product resistance by the French consumers. 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The comparison includes the prices, product features, packaging differences along with the promotional methods and distribution channels utilized by Link Samahan and the other competitors. Moreover, the report extends to discuss the market size indicating the trend of the industry sales and the expected sales for Link Samahan in the coming year. Finally, the agencies that will benefit the company and the important government regulations that should be followed by the company are discussed at the latter part of the market audit. INTRODUCTION Link Natural Products (Pvt) Ltd. is a leading business entity in Sri Lanka that provides herbal, Ayurvedic pharmaceuticals as well as safe and effective herbal healthcare products. Some of the main products of Link Natural include, Link Kesha hair oil, Link Sudantha toothpaste, Gotukola Tea and Spa/Aroma products. As a result of extensive research carried out for years, Link Natural introduced Link Samahan, a 100% natural herbal product to the market for curing common colds and similar ailments. Currently Link Natural is exporting their products to countries such as Malaysia, USA, UK, Germany, Thailand, India etc. (Company Profile, 2009) France being a European Union country owns the largest land among the EU countries. As an expansion in the maturity level of the product (Link Samahan), Link Natural has decided to distribute the product to three different locations situated in France. According to (Bell, 1997), French people consider herbal beverages to be healthy and they are most commonly used in every day life in the French culture. The demand for herbal products in the European market has risen over the years and this can be considered as a great opportunity for Link Natural to expand their business to France. In order to identify the target market and their potential it is vital to carry out a detailed market analysis with regard to the product. Thus the main focus of the following report will be to evaluate a market plan and audit for the purpose of marketing Link Samahan in the French herbal beverages market. The market audit will comprise of a detailed description on the target market, geographical distribution, diffusion of innovation of the consumers as well as advertising, pricing and promotions in terms of the herbal beverages market in France. THE PRODUCT: LINK SAMAHAN Link Samahan is an authentic herbal product made in Sri Lanka and it is made of 14 natural plants which are generally used in Peyave formulations. As stated in (Product Data Sheet, n.d.), in ancient Sri Lanka Peyave was considered to be one of the most popular cures for viral fevers and influenza, and it consists of a mixture of herbs in boiling water. 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The rate of adoption may differ from person to person even within the same culture. According to (Solomon, 2004, pg.567) a study of 11 European countries found that consumers in individualistic cultures are more innovative than consumers in collective cultures. Therefore to identify the acceptance rate of Link Samahan in France a few important factors will be analyzed apart from the consumer behavioural changes among the target market. These factors are as follows: Relative advantage It is important that the consumers believe that the product is important and more beneficial for them than the alternative brands in the market, as the new product adaption rate is directly proportional to the relative advantage of the new product. The main characteristic of Link Samahan is that it is an herbal drink, which can be prepared instantly by just dissolving in hot water. Furthermore it has the relative advantage of being a complete natural product that can not only be used to prevent colds and similar ailments, but also can be used as a hot beverage. Therefore, it can be said that Link Samahan has a 2-in-1 relative advantage compared to other herbal beverages. Compatibility According to (Solomon, 2004, pg.570), the innovation should be compatible with the lifestyle of the consumers. No matter how convenient the product is, sometimes the consumers may not accept the product due to ethical or cultural issues. But as mentioned before according to (Bell, 1997), the French have a popular demand for herbal beverages, and have over a 70% of herbal products in large grocery stores and hypermarkets. This is one of the core reasons that Link Natural has decided to distribute Link Samahan to France. It can be stated that Link Samahan is strongly compatible with the French market and will potentially have a high usage rate. Complexity Link Samahan is a moisture-proof, triple laminated sachet with a net weight of 4 gram per packet and contains a soluble powder that can be instantly made, which makes it very low in complexity. For the convenience of the French people the directions and other details will be indicated in French, as well as English as opposed to the Sinhala, Tamil and English product details used in Sri Lanka. Therefore the product will be easier to understand and use over the other competitor brands available in the market. Trialability Link Samahan is considered to be a fast moving consumer good (FMCG). Therefore with regard to trialability, promotions will be carried out at the initial stage at the supermarkets and retail stores for the consumers to taste the product through free samples. Since consumers have the ability to try out the product and evaluate it through the free samples, Link Samahan has a very high trialability factor. Observability An innovation should be high in observability for an adopter to be aware of its existence. Having promotions as mentioned above can be of use to a certain extent (i.e. taste) but the exact outcome of Link Samahan cannot be observed immediately after the consumption. MAJOR PROBLEMS RESISTANCES TO THE ACCEPTANCE OF LINK SAMAHAN, BASED ON THE PROCEEDING EVALUATION Any company when entering to a new market or introducing a new product is faced with a potential risk of failure no matter how favourable the circumstances are. Therefore it is essential to analyze the consumer acceptance for the product in order to survive in the market. Based on the proceeding evaluation, Link Samahan has a high potential of the consumers acceptance as there are high levels of relative advantage, compatibility, trialability and it is also low in complexity. THE MARKET MARKETS IN WHICH LINK SAMAHAN WILL BE SOLD Through the sociocultural and an economical analysis conducted previously, it was identified that there is a favourable market for Link Samahan to be introduced in France. According to (Bell,1997), approximately 2500 metric tons are sold annually in the herbal beverages market in which 60% is in sachet format, 36% in instant products and about 2% in bulk. One of the main reasons to penetrate the French market is their acceptance of herbal beverages. It is most commonly used in many households and is enjoyed by most French people. Thus there is a demand for herbal products, and in addition to this, Link Samahan can also be used as a cheap effective way to cure common colds as oppose to using Saunas which is also highly popular in France. Link Samahan is an FMCG which can be afforded by anyone ranging from lower-middle level to upper level income earners. France has an estimated population of 64,057,792 as mentioned in, (France Demography, n.d) Geographical regions France is a Western European country which borders countries such as Belgium, Spain and Italy in the Europe region. 77% of the total population has been urbanized as of 2008 and 65% of the total population falls in the 15-64 years age category, (Central Intelligence Agency, n.d.) (Refer Appendix 2). The population is one of the main factors that have to be taken into consideration in deciding the main geographical regions for Link Samahan to be distributed and marketed to. According to research carried out by (Butler, 2009), the main cities in France with the highest populations are Paris (11,293,200 people), Marseille (1,532,400 people), Lyon (1,665,700 people), Toulouse (975,000 people), Nice (943,000 people) and Nantes (718,700 people). Furthermore, France is generally known to be a cold city and it is a country with typical seasonal changes through out the year. Also, according to (Central Intelligence Agency, n.d.), France is faced with floods, midwinter windstorms etc. at certain times of the year. Hence, the probability of people being faced with the common cold is high in terms of climate changes. The company has selected Paris, Marseilles and Nice to distribute and market Link Samahan due to the above mentioned reasons. Another primary reason for selecting Marseilles and Nice is the easy access due to being situated in the coast of France bordering the Mediterranean sea. Hence geographically there is easy access to these cities and the products can be shipped conveniently from Sri Lanka. Forms of transportation available in these regions Paris There are many forms of transportation used in Paris. It consists of four airports, Roissy-Charles de Gaulle and Orly being the main two commercial airports and, Le Bourget, and Beauvais Tille being two smaller airports for budget airlines and private jets, (Paris Airports, n.d.) Gare de Lyon train station in Paris provides rail services to the south and east of where Marseilles and Nice are situates. Therefore, Link Samahan can easily be transported to and fro from Paris to the other 2 selected locations, (Gare de Lyon, n.d). Apart from this the Metropolitan underground train network and the two tramlines are also commonly used for transportation in the city of Paris. The bus network in Paris covers the Ile-de-France region and also it extends in the central Paris. However, traffic has to be taken into consideration when travelling by bus as Paris a busy city, (How to use Parisian transport networks, 2003). Marseille Marseille has one airport. Similar to Paris it consists of a bus network and two metro lines which are commonly used among passengers. It is convenient to travel using the Metro Line over the bus network due to the heavy traffic situation in the city. The main train station in Marseille is called Gare Saint Charles and it connects to Paris, which takes approximately 3 hours, (Marseille Transport, 2007). The Marseille Port, being the largest port in France, plays a major role in transporting of Link Samahan from Sri Lanka to France, as the company will be using Vieux Port in Marseilles as the main port to distribute the products to Marseille and Paris and Nice respectively, (Marseille Cruise Port, 2009). From Marseilles, Link Samahan will be transported via train from Gare Saint Charles Station to Paris. Nice The main concern of the company is transporting the product from Marseille to Nice. Therefore the Link Natural (Pvt) Ltd. will be using the railway system for the means of transporting the product to Nice. Communication available in these regions The most common methods in communicating in Paris are through telephone, Internet, and television. Some of the main telecommunication companies situated in Paris are Coriolis Tà ©là ©com, France Telecom, Orange (France Telecom), Bouygues Tà ©là ©com and SFR in which most provide the consumers with telephone as well as internet broadband facilities. (France Telecommunication Companies, 2009) According to (Internet World Stats, 2008) the main dominator of all telecommunication methods such mobile, fixed, Internet and broadband in France is France Telecom. Similar to Paris, Nice and Marseille also use Internet, Telephone and television as main methods of communication. 58.1 % of the population uses the Internet in France (Internet World Stats, 2008). Therefore, Link Natural can use Internet advertising to promote Link Samahan in France for wider reach of the target market. According to (Television Viewing by Country, n.d.), the average viewing rate of television in France is 23 hours per person per week, which indicates that accessibility for television is high among the consumers and therefore television media can be used as an effective means of communicating the product to the customers. Consumer buying habits Consumers buying habits may vary according to the type of products purchased by them. For instance, people may compare and contrast when purchasing a shopping good with the alternative products available in the market. Since Link Samahan is a consumer good, which needs little effort of the consumer in purchasing the product the consumers in the intended target market are not expected spend a lot of time in deciding on purchasing the product. However, since the herbal beverages market is considerably large in France it is vital to pay attention to the leading competitors brands purchased most frequently by the consumers. Product use patterns The herbal beverages market in the Europe has grown over the years due to health concerns of most consumers. People are more careful with their health as a result of their busy scheduled lifestyles. The French generally tend to consume herbal infusions daily in the night after dinner time. Therefore the usage of herbal beverages in France is regular and consistent in the current market. Product feature preferences Most people look for convenience when purchasing products and are more health conscious considering the health issues that they are exposed in the society as previously mentioned. Link Samahan is marketed as a two in one product, which is an herbal cure of colds, as well as a normal hot beverage to the consumers. Therefore the taste of the product is given special consideration so that the consumers will show a favourable response towards the product. It also an instant drink which can be prepared easily. Shopping habits According to the research carried out it was identified that the average consumer purchases herbal beverages approximately once in every three weeks. With the rise in health concerns among the people and herbal beverages being conveniently available in the local retail and supermarket outlets customers are bound to purchase them on a regular basis. Distribution of the product Most of the herbal beverage products are available all over France. They are mainly distributed in local grocery stores, retail outlets and many international supermarket and hypermarket chains located in the country. According to (Shopping in France, n.d.) some of the main supermarket chains are Champion, Carrefour, Auchan, Casino, Leclerc and Intermarchà ©. Advertising and Promotion Advertising media usually used to reach the target market The usual methods of advertising FMCG products are through television, radio, and newspaper/magazine advertisements, as they are targeted towards a mass market of all levels of income earners. Having the fourth highest television-viewing rate in the world, 99% of the households in France have access to televisions especially in the urban areas. According to (Press Reference France, n.d.), there are 584 television networks currently operating in France and marketers of FMCGs frequently use television advertisements. Another popular method of advertising is through Radio networks, as most people have access to radios. Considering the busy lifestyles of the people most companies have adopted this method as people in urban as well as rural areas are known to listen to the radio even when doing other work. Other methods used include newspapers and magazines. French are said to have a high literacy rate of 99% and newspapers and magazines are commonly used around the country. Apart from these methods, Internet is also widely used for advertising consumer products as most people purchase goods online, especially the younger generation. Sales promotions customarily used For most FMCG products, most commonly used sales promotions methods are buy one get one free promotions, in store promotions and free sampling promotions held at retail stores and supermarkets. Pricing Strategy Initially Link Natural will be using the price penetration strategy at a set price of â‚ ¬10.50 intending to attract more customers and capture a larger market share. However, the price maybe varied accordingly in the future depending on the purchasing trend of the consumers and discounts will be given during different seasons. COMPARISON CONTRAST OF LINK SAMAHAN WITH THE COMPETITORS PRODUCTS Link Samahan Brand Name: The name Link Samahan is a family brand name, which is derived from the company name Link Natural. This gives Samahan a special recognition for the consumers, as Link Natural is a well-reputed company in many countries in the EU. Features: Link Samahan is made using 14 natural Ayurvedic herbs, which were chosen through a comprehensive study done by Ayurvedic scientists for years. The main feature of the product is that it is a beverage, which can be made instantly by dissolving in hot water. The basic flavors of Samahan are Lime and Lemon, and will extend to include Mint and Linden (which is a common taste preference of the French people). Package: The 100g pack consists of 25 moisture-proof, triple laminated sachets with a net weight of 4 grams per packet. The details on the sachet will be indicated in both French and English for the convenience of the consumers. The sachet will be yellow and green in color to give a natural look and the colors will be differed accordingly when new flavors are introduced. The competitors products Link Samahan is mainly marketed as a medicine for curing common colds as well as a regular herbal beverage. Therefore there is no direct competitor for the product although there is a large market for herbal beverages in France. There are many herbal tea products available in the French market. The market leader is Lipton with more that 46% of the herbal sachet tea market. The Lipton Company brands Elephant and Saveurs du Soir, dominate the French herbal beverage market by providing various types of herbal tea flavors. The bulk herbal tea market is dominated by La Tisanerie brand, which is also a popular brand available in France. However, they also sell sachet packages in a variety of flavors. Apart from these competitors, Solinests Ricola brand of instant herbal infusions dominates 90% of its product area while 10% of the market represents other Store brands, (Bell, 1997) (Refer Appendix 3) Lipton Brand name: Lipton Elephant Brand Lipton Saveurs Du Soir Features: Both brands mentioned above are herbal teas and have different types of flavors ranging from mint to a wide range of fruit flavors. The price ranges from  £6.00 to  £7.00. Package: Each pack contains 25 sachets and is presented in their own unique color depending on each flavor. Foods International Brand name: La Tisanià ¨re Features: La Tisanià ¨re is also an herbal tea with various flavors such as Les Fruisanes range, which has a variety of fruit flavors, Trà ©sors de Nature range, which has a variety of flavors combining flowers and herbs and the Wellness range. (What about La Tisanià ¨re, n.d) Package: Different flavors are presented in different colors and packed in 25 sachet boxes. Ricola Brand name: Ricola Features: Ricola herbal tea is a popular hot beverage especially during the winter season and is commonly used as a remedy for colds and coughs, (Instant Teas, n.d.) Similar to other competitors, Ricola also offers a wide variety of flavors in their herbal tea range. Package: Ricola teas are generally packed in a plastic container ranging from 200g onwards and in presented in different colors according to the flavors. Comparison All competitors of Link Samahan fall under the herbal tea category. Therefore there is a relative advantage for Samahan as it will be marketed as an herbal beverage as well as a medical concoction used for common colds and similar ailments. Most competitor brands seem similar in appearance which makes it hard for the consumers to distinguish between them at a glance. However, Link Samahan will be presented in its own unique packaging so that it will be visible among rest of the products. The most significant difference between Link Samahan and other competitors is that the price of Link Samahan will be slightly higher due to the fact that it is more of a remedy to cure colds as well as a regular herbal beverage. The competitors price The following is a list of prices of the competitors available in the herbal beverages market. There is no significant difference between the prices of each brand. Competitors promotion and advertising methods The primary method of advertising used by Lipton is through newspaper advertisements. Lipton range consists of a wide range of brands. Thus, they advertise each brand separately rather than as a whole. Since most people have access to reading newspapers daily, they believe that it is the best way to capture the target market. La Tisanià ¨re on the other hand is mainly advertised through radio advertisements along with the Twininngs and Ovaltine, which are the other hot beverage products of their mother company Foods International. Ricolas main focus is on health magazines as they stress on health benefits of consuming Ricola herbal tea such as a cure for coughs and colds. However, Ricola products are also advertised through radio advertisements as well as newspapers through feature articles etc. Other main promotion methods used by these competitors are discounted prizes, special draws and competitions, sponsoring various events and coupon systems. Competitors distribution channels Lipton: Hypermarkets and supermarket chains Foods International: Supermarket chains and retail stores Ricola: Hypermarkets, supermarkets and retails stores MARKET SIZE Estimated industry sales for the planning year According to the research carried out in France, a rise in the industry sales is expected in 2010/2011 due to the regular consumption of herbal products among the consumers. The income level of the consumers may not affect them since herbal beverages are considered as an FMCG. Estimated sales for Link Samahan for the planning year The graph indicates the forecasted sales for Link Samahan for the year 2010 per city. According to the figures shown, approximately about 45,350 packets per city will to be sold and roughly about 3250 packets will be sold per month in average in the year 2010. Furthermore, Link Samahan is expected to detain the market share rapidly in the French market according to the number of estimated sales. All these details are further discussed in the preliminary marketing plan. GOVERNMENT PARTICIPATION IN THE MARKET PLACE Agencies that can help Link Natural The herbal beverages industry especially herbal tea industry is a rapidly growing market in France. Apart from being sold mainly in hypermarkets and supermarkets, herbal beverages are commonly used in health care centers, hospitals, holiday spas as well as hotels around the country. The usage of herbal beverages can be highly encouraged among the consumers through most of these agencies which will benefit the sellers in the trade. For instance, Link Samahan can be made available in popular health spas and hotels such as George V-Buddha Bar Spa, Ban Thai Spa, Bleu comme Bleu and Spa Anne Fontaine in Paris, (Spas Whats New,n.d.), and SPA de lhotel Boscolo Exedra Doctor, sauna le cercle Nice Saint Maurice and Nyrvana Madeleine Nice, in Nice (Saunas and Spas in Nice, 2009). It will also enable brand recognition through making the products available in recognized organizations to grab the attention of the target market. Regulations that must be followed It is vital that all companies follow the rules and regulations of the country to avoid complications. France belongs to the European Union and according to (Gauthier, 2005, pg.7), the European Commission has decided to draft a legislation on herbal medicinal products, dietetic foods, nutritional and functional claims, and fortified foods. Also according to (Gauthier, 2005, pg.7), the French Research Center on Nutrition and Food has a recommended allowance of a percentage of ingredients in the products to be consumed daily, and if the product doesnt meet those requirements, a special authorization from the French Public Superior Council for Hygiene (CSHPF) should be obtained by the manufacturer to market the product. Also according to French regulations it is important that all information such as product definition, list of ingredients, shelf life, weight and volume etc. are labeled in French on the packaging of the product. (Gauthier, 2005, pg.7) Apart from these, according to (France Trade Regulations and Standards, n.d.), quality and ecological labels, bar code price labeling, and usage instructions should also be mentioned. In general it is important that the product does not portray any offensive material that is not accepted socially, religiously, ethically etc. in France as it will not be accepted under the government regulations. MARKETING PLAN EXECUTIVE SUMMARY The following preliminary marketing plan was prepared by Link Natural (Pvt) Ltd to present a comprehensible idea on their business expansion of Link Samahan to France after conducting an ample research on the feasibility of the product in the French market. The main objective of this report is to guarantee that the product will be successful in the French market when competing among the alternatives available. The report portrays a detailed description mainly on the intended target market focusing on geographical, sociological, demographical etc. aspects, which are relevant to B2B and B2C markets. It gives an insight to the expected sales and the profit expectations for the year 2010. Furthermore, it explains the penetration strategies used by the company to gain market share of the consumers of herbal beverages in the market. It is imperative to analyze the product adaptation and modification by using factors such as core components, packaging, and support services etc. to grasp a clear interpretation of the product, which is described with sufficient details in the analysis. The report also focuses on to one of the major components in the marketing the mix, the promotions of the product carried out in France. The overall promotion objectives are explained followed by advertising, sales promotions, personal selling and other promotional tools used by the company to promote Link Samahan among the French consumers. Moreover, it explains the distribution components from origin to destination, which includes port selection, mode selection, packing, important documentations, insurance claims etc. as well as channel of distribution and more importantly the price determination of the product. Finally the terms of sales and method payment used by the company are explained followed by the budget and the financial statement of the entire business plan. Therefore as mentioned above, the crucial factors are highlighted in this report to ensure the success of Link Samahans establishment in the French market. THE MARKETING PLAN MARKET OBJECTIVES Target Market France has been ranked the 19th most populated country in the world, with a population estimate of 64,057,792, as stated in (France Demography, n.d.). It is therefore impractical to target the entire population of the country. The company has taken into consideration factors such as demography and geography when selecting the target market for Link Samahan. Demographically, the variables that were taken into consideration when selecting the target market were age, sex and income status. 65% of Frances population falls within the age group 15-64 years (Central Intelligence Agency, n.d.). Both males and females having a lower-middle to upper level income will be targeted since Link Samahan is an FMCG and is generally affordable to all the income groups mentioned above. Geographically, Paris, Marseilles and Nice are 3 of the most populated and metropolitan cities in France. Collectively in these 3 cities, the total population amounts to approximately 14.6 million (France People, 2006). Therefore, the primary business-to-consumer (B2C) target market for Link Samahan in France is: males females, from lower-middle to upper level income groups, between the ages of 15-64 who are primarily residing in the cities of Paris, Marseilles or Nice. There will also be a business-to-business (B2B) target market which would consist of the most visited retail stores, supermarket chains, hypermarkets and health holiday spas in the sele Link Natural (Pvt) International Audit Link Natural (Pvt) International Audit EXECUTIVE SUMMARY Link Natural (Pvt) Ltds decision to advance their business to France was apart of the economical and socio-cultural analysis carried out to identify the market potential for the product (Link Samahan) to be sustainable in the French herbal market. The company is already conducting their businesses in many locations around the world, and France was a further step taken to expand their global presence. The following report is the market audit conducted in order to identify some of the key factors that should be taken into consideration when expanding a business across borders. A brief description of the product Link Samahan is presented initially in the report followed by an analysis of the product acceptance as well as possibilities of product resistance by the French consumers. This was identified through considering factors such as trialability, complexity, relative advantage, observability and compatibility of the product in the French herbal beverage market. The report further analyses the market in which the product will be sold and the geographical regions in France that were chosen for the initial business operations, namely Paris, Nice and Marseille. The basic transportation systems and modes in the selected areas are also discussed followed by the main communication methods used by them. Furthermore the report provides a description on consumer buying habits, distribution of the products, pricing strategies and the advertising and media usually used to reach the target market. A comparison and contrast between Link Samahan and its competitors in the French market is also carried out in the report. The comparison includes the prices, product features, packaging differences along with the promotional methods and distribution channels utilized by Link Samahan and the other competitors. Moreover, the report extends to discuss the market size indicating the trend of the industry sales and the expected sales for Link Samahan in the coming year. Finally, the agencies that will benefit the company and the important government regulations that should be followed by the company are discussed at the latter part of the market audit. INTRODUCTION Link Natural Products (Pvt) Ltd. is a leading business entity in Sri Lanka that provides herbal, Ayurvedic pharmaceuticals as well as safe and effective herbal healthcare products. Some of the main products of Link Natural include, Link Kesha hair oil, Link Sudantha toothpaste, Gotukola Tea and Spa/Aroma products. As a result of extensive research carried out for years, Link Natural introduced Link Samahan, a 100% natural herbal product to the market for curing common colds and similar ailments. Currently Link Natural is exporting their products to countries such as Malaysia, USA, UK, Germany, Thailand, India etc. (Company Profile, 2009) France being a European Union country owns the largest land among the EU countries. As an expansion in the maturity level of the product (Link Samahan), Link Natural has decided to distribute the product to three different locations situated in France. According to (Bell, 1997), French people consider herbal beverages to be healthy and they are most commonly used in every day life in the French culture. The demand for herbal products in the European market has risen over the years and this can be considered as a great opportunity for Link Natural to expand their business to France. In order to identify the target market and their potential it is vital to carry out a detailed market analysis with regard to the product. Thus the main focus of the following report will be to evaluate a market plan and audit for the purpose of marketing Link Samahan in the French herbal beverages market. The market audit will comprise of a detailed description on the target market, geographical distribution, diffusion of innovation of the consumers as well as advertising, pricing and promotions in terms of the herbal beverages market in France. THE PRODUCT: LINK SAMAHAN Link Samahan is an authentic herbal product made in Sri Lanka and it is made of 14 natural plants which are generally used in Peyave formulations. As stated in (Product Data Sheet, n.d.), in ancient Sri Lanka Peyave was considered to be one of the most popular cures for viral fevers and influenza, and it consists of a mixture of herbs in boiling water. This instant herbal beverage is used for common colds as other similar ailments such as sneezing, itching eyes, running noses etc. Currently Link Samahan plays the leading role in the Sri Lankan herbal products market for colds and other related ailments, and Link Samahan is being distributed to 32 destinations in eight different countries around the world, (About Samahan, 2009). (Refer Appendix 1). Link Samahan will be expanding into the herbal beverage market in France for the first time. An innovation is any product or a service that consumers perceive to be new, as stated by (Solomon, 2004, pg.567). Therefore, the following section will focus on how the proposed target market will perceive Link Samahan and their levels of acceptance and resistance will be determined. LINK SAMAHAN AS AN INNOVATION (As perceived by the intended target market) Diffusion of innovation refers to the process whereby a new product, service, or idea spreads through a population, (Solomon, 2004, pg.567). The rate of adoption may differ from person to person even within the same culture. According to (Solomon, 2004, pg.567) a study of 11 European countries found that consumers in individualistic cultures are more innovative than consumers in collective cultures. Therefore to identify the acceptance rate of Link Samahan in France a few important factors will be analyzed apart from the consumer behavioural changes among the target market. These factors are as follows: Relative advantage It is important that the consumers believe that the product is important and more beneficial for them than the alternative brands in the market, as the new product adaption rate is directly proportional to the relative advantage of the new product. The main characteristic of Link Samahan is that it is an herbal drink, which can be prepared instantly by just dissolving in hot water. Furthermore it has the relative advantage of being a complete natural product that can not only be used to prevent colds and similar ailments, but also can be used as a hot beverage. Therefore, it can be said that Link Samahan has a 2-in-1 relative advantage compared to other herbal beverages. Compatibility According to (Solomon, 2004, pg.570), the innovation should be compatible with the lifestyle of the consumers. No matter how convenient the product is, sometimes the consumers may not accept the product due to ethical or cultural issues. But as mentioned before according to (Bell, 1997), the French have a popular demand for herbal beverages, and have over a 70% of herbal products in large grocery stores and hypermarkets. This is one of the core reasons that Link Natural has decided to distribute Link Samahan to France. It can be stated that Link Samahan is strongly compatible with the French market and will potentially have a high usage rate. Complexity Link Samahan is a moisture-proof, triple laminated sachet with a net weight of 4 gram per packet and contains a soluble powder that can be instantly made, which makes it very low in complexity. For the convenience of the French people the directions and other details will be indicated in French, as well as English as opposed to the Sinhala, Tamil and English product details used in Sri Lanka. Therefore the product will be easier to understand and use over the other competitor brands available in the market. Trialability Link Samahan is considered to be a fast moving consumer good (FMCG). Therefore with regard to trialability, promotions will be carried out at the initial stage at the supermarkets and retail stores for the consumers to taste the product through free samples. Since consumers have the ability to try out the product and evaluate it through the free samples, Link Samahan has a very high trialability factor. Observability An innovation should be high in observability for an adopter to be aware of its existence. Having promotions as mentioned above can be of use to a certain extent (i.e. taste) but the exact outcome of Link Samahan cannot be observed immediately after the consumption. MAJOR PROBLEMS RESISTANCES TO THE ACCEPTANCE OF LINK SAMAHAN, BASED ON THE PROCEEDING EVALUATION Any company when entering to a new market or introducing a new product is faced with a potential risk of failure no matter how favourable the circumstances are. Therefore it is essential to analyze the consumer acceptance for the product in order to survive in the market. Based on the proceeding evaluation, Link Samahan has a high potential of the consumers acceptance as there are high levels of relative advantage, compatibility, trialability and it is also low in complexity. THE MARKET MARKETS IN WHICH LINK SAMAHAN WILL BE SOLD Through the sociocultural and an economical analysis conducted previously, it was identified that there is a favourable market for Link Samahan to be introduced in France. According to (Bell,1997), approximately 2500 metric tons are sold annually in the herbal beverages market in which 60% is in sachet format, 36% in instant products and about 2% in bulk. One of the main reasons to penetrate the French market is their acceptance of herbal beverages. It is most commonly used in many households and is enjoyed by most French people. Thus there is a demand for herbal products, and in addition to this, Link Samahan can also be used as a cheap effective way to cure common colds as oppose to using Saunas which is also highly popular in France. Link Samahan is an FMCG which can be afforded by anyone ranging from lower-middle level to upper level income earners. France has an estimated population of 64,057,792 as mentioned in, (France Demography, n.d) Geographical regions France is a Western European country which borders countries such as Belgium, Spain and Italy in the Europe region. 77% of the total population has been urbanized as of 2008 and 65% of the total population falls in the 15-64 years age category, (Central Intelligence Agency, n.d.) (Refer Appendix 2). The population is one of the main factors that have to be taken into consideration in deciding the main geographical regions for Link Samahan to be distributed and marketed to. According to research carried out by (Butler, 2009), the main cities in France with the highest populations are Paris (11,293,200 people), Marseille (1,532,400 people), Lyon (1,665,700 people), Toulouse (975,000 people), Nice (943,000 people) and Nantes (718,700 people). Furthermore, France is generally known to be a cold city and it is a country with typical seasonal changes through out the year. Also, according to (Central Intelligence Agency, n.d.), France is faced with floods, midwinter windstorms etc. at certain times of the year. Hence, the probability of people being faced with the common cold is high in terms of climate changes. The company has selected Paris, Marseilles and Nice to distribute and market Link Samahan due to the above mentioned reasons. Another primary reason for selecting Marseilles and Nice is the easy access due to being situated in the coast of France bordering the Mediterranean sea. Hence geographically there is easy access to these cities and the products can be shipped conveniently from Sri Lanka. Forms of transportation available in these regions Paris There are many forms of transportation used in Paris. It consists of four airports, Roissy-Charles de Gaulle and Orly being the main two commercial airports and, Le Bourget, and Beauvais Tille being two smaller airports for budget airlines and private jets, (Paris Airports, n.d.) Gare de Lyon train station in Paris provides rail services to the south and east of where Marseilles and Nice are situates. Therefore, Link Samahan can easily be transported to and fro from Paris to the other 2 selected locations, (Gare de Lyon, n.d). Apart from this the Metropolitan underground train network and the two tramlines are also commonly used for transportation in the city of Paris. The bus network in Paris covers the Ile-de-France region and also it extends in the central Paris. However, traffic has to be taken into consideration when travelling by bus as Paris a busy city, (How to use Parisian transport networks, 2003). Marseille Marseille has one airport. Similar to Paris it consists of a bus network and two metro lines which are commonly used among passengers. It is convenient to travel using the Metro Line over the bus network due to the heavy traffic situation in the city. The main train station in Marseille is called Gare Saint Charles and it connects to Paris, which takes approximately 3 hours, (Marseille Transport, 2007). The Marseille Port, being the largest port in France, plays a major role in transporting of Link Samahan from Sri Lanka to France, as the company will be using Vieux Port in Marseilles as the main port to distribute the products to Marseille and Paris and Nice respectively, (Marseille Cruise Port, 2009). From Marseilles, Link Samahan will be transported via train from Gare Saint Charles Station to Paris. Nice The main concern of the company is transporting the product from Marseille to Nice. Therefore the Link Natural (Pvt) Ltd. will be using the railway system for the means of transporting the product to Nice. Communication available in these regions The most common methods in communicating in Paris are through telephone, Internet, and television. Some of the main telecommunication companies situated in Paris are Coriolis Tà ©là ©com, France Telecom, Orange (France Telecom), Bouygues Tà ©là ©com and SFR in which most provide the consumers with telephone as well as internet broadband facilities. (France Telecommunication Companies, 2009) According to (Internet World Stats, 2008) the main dominator of all telecommunication methods such mobile, fixed, Internet and broadband in France is France Telecom. Similar to Paris, Nice and Marseille also use Internet, Telephone and television as main methods of communication. 58.1 % of the population uses the Internet in France (Internet World Stats, 2008). Therefore, Link Natural can use Internet advertising to promote Link Samahan in France for wider reach of the target market. According to (Television Viewing by Country, n.d.), the average viewing rate of television in France is 23 hours per person per week, which indicates that accessibility for television is high among the consumers and therefore television media can be used as an effective means of communicating the product to the customers. Consumer buying habits Consumers buying habits may vary according to the type of products purchased by them. For instance, people may compare and contrast when purchasing a shopping good with the alternative products available in the market. Since Link Samahan is a consumer good, which needs little effort of the consumer in purchasing the product the consumers in the intended target market are not expected spend a lot of time in deciding on purchasing the product. However, since the herbal beverages market is considerably large in France it is vital to pay attention to the leading competitors brands purchased most frequently by the consumers. Product use patterns The herbal beverages market in the Europe has grown over the years due to health concerns of most consumers. People are more careful with their health as a result of their busy scheduled lifestyles. The French generally tend to consume herbal infusions daily in the night after dinner time. Therefore the usage of herbal beverages in France is regular and consistent in the current market. Product feature preferences Most people look for convenience when purchasing products and are more health conscious considering the health issues that they are exposed in the society as previously mentioned. Link Samahan is marketed as a two in one product, which is an herbal cure of colds, as well as a normal hot beverage to the consumers. Therefore the taste of the product is given special consideration so that the consumers will show a favourable response towards the product. It also an instant drink which can be prepared easily. Shopping habits According to the research carried out it was identified that the average consumer purchases herbal beverages approximately once in every three weeks. With the rise in health concerns among the people and herbal beverages being conveniently available in the local retail and supermarket outlets customers are bound to purchase them on a regular basis. Distribution of the product Most of the herbal beverage products are available all over France. They are mainly distributed in local grocery stores, retail outlets and many international supermarket and hypermarket chains located in the country. According to (Shopping in France, n.d.) some of the main supermarket chains are Champion, Carrefour, Auchan, Casino, Leclerc and Intermarchà ©. Advertising and Promotion Advertising media usually used to reach the target market The usual methods of advertising FMCG products are through television, radio, and newspaper/magazine advertisements, as they are targeted towards a mass market of all levels of income earners. Having the fourth highest television-viewing rate in the world, 99% of the households in France have access to televisions especially in the urban areas. According to (Press Reference France, n.d.), there are 584 television networks currently operating in France and marketers of FMCGs frequently use television advertisements. Another popular method of advertising is through Radio networks, as most people have access to radios. Considering the busy lifestyles of the people most companies have adopted this method as people in urban as well as rural areas are known to listen to the radio even when doing other work. Other methods used include newspapers and magazines. French are said to have a high literacy rate of 99% and newspapers and magazines are commonly used around the country. Apart from these methods, Internet is also widely used for advertising consumer products as most people purchase goods online, especially the younger generation. Sales promotions customarily used For most FMCG products, most commonly used sales promotions methods are buy one get one free promotions, in store promotions and free sampling promotions held at retail stores and supermarkets. Pricing Strategy Initially Link Natural will be using the price penetration strategy at a set price of â‚ ¬10.50 intending to attract more customers and capture a larger market share. However, the price maybe varied accordingly in the future depending on the purchasing trend of the consumers and discounts will be given during different seasons. COMPARISON CONTRAST OF LINK SAMAHAN WITH THE COMPETITORS PRODUCTS Link Samahan Brand Name: The name Link Samahan is a family brand name, which is derived from the company name Link Natural. This gives Samahan a special recognition for the consumers, as Link Natural is a well-reputed company in many countries in the EU. Features: Link Samahan is made using 14 natural Ayurvedic herbs, which were chosen through a comprehensive study done by Ayurvedic scientists for years. The main feature of the product is that it is a beverage, which can be made instantly by dissolving in hot water. The basic flavors of Samahan are Lime and Lemon, and will extend to include Mint and Linden (which is a common taste preference of the French people). Package: The 100g pack consists of 25 moisture-proof, triple laminated sachets with a net weight of 4 grams per packet. The details on the sachet will be indicated in both French and English for the convenience of the consumers. The sachet will be yellow and green in color to give a natural look and the colors will be differed accordingly when new flavors are introduced. The competitors products Link Samahan is mainly marketed as a medicine for curing common colds as well as a regular herbal beverage. Therefore there is no direct competitor for the product although there is a large market for herbal beverages in France. There are many herbal tea products available in the French market. The market leader is Lipton with more that 46% of the herbal sachet tea market. The Lipton Company brands Elephant and Saveurs du Soir, dominate the French herbal beverage market by providing various types of herbal tea flavors. The bulk herbal tea market is dominated by La Tisanerie brand, which is also a popular brand available in France. However, they also sell sachet packages in a variety of flavors. Apart from these competitors, Solinests Ricola brand of instant herbal infusions dominates 90% of its product area while 10% of the market represents other Store brands, (Bell, 1997) (Refer Appendix 3) Lipton Brand name: Lipton Elephant Brand Lipton Saveurs Du Soir Features: Both brands mentioned above are herbal teas and have different types of flavors ranging from mint to a wide range of fruit flavors. The price ranges from  £6.00 to  £7.00. Package: Each pack contains 25 sachets and is presented in their own unique color depending on each flavor. Foods International Brand name: La Tisanià ¨re Features: La Tisanià ¨re is also an herbal tea with various flavors such as Les Fruisanes range, which has a variety of fruit flavors, Trà ©sors de Nature range, which has a variety of flavors combining flowers and herbs and the Wellness range. (What about La Tisanià ¨re, n.d) Package: Different flavors are presented in different colors and packed in 25 sachet boxes. Ricola Brand name: Ricola Features: Ricola herbal tea is a popular hot beverage especially during the winter season and is commonly used as a remedy for colds and coughs, (Instant Teas, n.d.) Similar to other competitors, Ricola also offers a wide variety of flavors in their herbal tea range. Package: Ricola teas are generally packed in a plastic container ranging from 200g onwards and in presented in different colors according to the flavors. Comparison All competitors of Link Samahan fall under the herbal tea category. Therefore there is a relative advantage for Samahan as it will be marketed as an herbal beverage as well as a medical concoction used for common colds and similar ailments. Most competitor brands seem similar in appearance which makes it hard for the consumers to distinguish between them at a glance. However, Link Samahan will be presented in its own unique packaging so that it will be visible among rest of the products. The most significant difference between Link Samahan and other competitors is that the price of Link Samahan will be slightly higher due to the fact that it is more of a remedy to cure colds as well as a regular herbal beverage. The competitors price The following is a list of prices of the competitors available in the herbal beverages market. There is no significant difference between the prices of each brand. Competitors promotion and advertising methods The primary method of advertising used by Lipton is through newspaper advertisements. Lipton range consists of a wide range of brands. Thus, they advertise each brand separately rather than as a whole. Since most people have access to reading newspapers daily, they believe that it is the best way to capture the target market. La Tisanià ¨re on the other hand is mainly advertised through radio advertisements along with the Twininngs and Ovaltine, which are the other hot beverage products of their mother company Foods International. Ricolas main focus is on health magazines as they stress on health benefits of consuming Ricola herbal tea such as a cure for coughs and colds. However, Ricola products are also advertised through radio advertisements as well as newspapers through feature articles etc. Other main promotion methods used by these competitors are discounted prizes, special draws and competitions, sponsoring various events and coupon systems. Competitors distribution channels Lipton: Hypermarkets and supermarket chains Foods International: Supermarket chains and retail stores Ricola: Hypermarkets, supermarkets and retails stores MARKET SIZE Estimated industry sales for the planning year According to the research carried out in France, a rise in the industry sales is expected in 2010/2011 due to the regular consumption of herbal products among the consumers. The income level of the consumers may not affect them since herbal beverages are considered as an FMCG. Estimated sales for Link Samahan for the planning year The graph indicates the forecasted sales for Link Samahan for the year 2010 per city. According to the figures shown, approximately about 45,350 packets per city will to be sold and roughly about 3250 packets will be sold per month in average in the year 2010. Furthermore, Link Samahan is expected to detain the market share rapidly in the French market according to the number of estimated sales. All these details are further discussed in the preliminary marketing plan. GOVERNMENT PARTICIPATION IN THE MARKET PLACE Agencies that can help Link Natural The herbal beverages industry especially herbal tea industry is a rapidly growing market in France. Apart from being sold mainly in hypermarkets and supermarkets, herbal beverages are commonly used in health care centers, hospitals, holiday spas as well as hotels around the country. The usage of herbal beverages can be highly encouraged among the consumers through most of these agencies which will benefit the sellers in the trade. For instance, Link Samahan can be made available in popular health spas and hotels such as George V-Buddha Bar Spa, Ban Thai Spa, Bleu comme Bleu and Spa Anne Fontaine in Paris, (Spas Whats New,n.d.), and SPA de lhotel Boscolo Exedra Doctor, sauna le cercle Nice Saint Maurice and Nyrvana Madeleine Nice, in Nice (Saunas and Spas in Nice, 2009). It will also enable brand recognition through making the products available in recognized organizations to grab the attention of the target market. Regulations that must be followed It is vital that all companies follow the rules and regulations of the country to avoid complications. France belongs to the European Union and according to (Gauthier, 2005, pg.7), the European Commission has decided to draft a legislation on herbal medicinal products, dietetic foods, nutritional and functional claims, and fortified foods. Also according to (Gauthier, 2005, pg.7), the French Research Center on Nutrition and Food has a recommended allowance of a percentage of ingredients in the products to be consumed daily, and if the product doesnt meet those requirements, a special authorization from the French Public Superior Council for Hygiene (CSHPF) should be obtained by the manufacturer to market the product. Also according to French regulations it is important that all information such as product definition, list of ingredients, shelf life, weight and volume etc. are labeled in French on the packaging of the product. (Gauthier, 2005, pg.7) Apart from these, according to (France Trade Regulations and Standards, n.d.), quality and ecological labels, bar code price labeling, and usage instructions should also be mentioned. In general it is important that the product does not portray any offensive material that is not accepted socially, religiously, ethically etc. in France as it will not be accepted under the government regulations. MARKETING PLAN EXECUTIVE SUMMARY The following preliminary marketing plan was prepared by Link Natural (Pvt) Ltd to present a comprehensible idea on their business expansion of Link Samahan to France after conducting an ample research on the feasibility of the product in the French market. The main objective of this report is to guarantee that the product will be successful in the French market when competing among the alternatives available. The report portrays a detailed description mainly on the intended target market focusing on geographical, sociological, demographical etc. aspects, which are relevant to B2B and B2C markets. It gives an insight to the expected sales and the profit expectations for the year 2010. Furthermore, it explains the penetration strategies used by the company to gain market share of the consumers of herbal beverages in the market. It is imperative to analyze the product adaptation and modification by using factors such as core components, packaging, and support services etc. to grasp a clear interpretation of the product, which is described with sufficient details in the analysis. The report also focuses on to one of the major components in the marketing the mix, the promotions of the product carried out in France. The overall promotion objectives are explained followed by advertising, sales promotions, personal selling and other promotional tools used by the company to promote Link Samahan among the French consumers. Moreover, it explains the distribution components from origin to destination, which includes port selection, mode selection, packing, important documentations, insurance claims etc. as well as channel of distribution and more importantly the price determination of the product. Finally the terms of sales and method payment used by the company are explained followed by the budget and the financial statement of the entire business plan. Therefore as mentioned above, the crucial factors are highlighted in this report to ensure the success of Link Samahans establishment in the French market. THE MARKETING PLAN MARKET OBJECTIVES Target Market France has been ranked the 19th most populated country in the world, with a population estimate of 64,057,792, as stated in (France Demography, n.d.). It is therefore impractical to target the entire population of the country. The company has taken into consideration factors such as demography and geography when selecting the target market for Link Samahan. Demographically, the variables that were taken into consideration when selecting the target market were age, sex and income status. 65% of Frances population falls within the age group 15-64 years (Central Intelligence Agency, n.d.). Both males and females having a lower-middle to upper level income will be targeted since Link Samahan is an FMCG and is generally affordable to all the income groups mentioned above. Geographically, Paris, Marseilles and Nice are 3 of the most populated and metropolitan cities in France. Collectively in these 3 cities, the total population amounts to approximately 14.6 million (France People, 2006). Therefore, the primary business-to-consumer (B2C) target market for Link Samahan in France is: males females, from lower-middle to upper level income groups, between the ages of 15-64 who are primarily residing in the cities of Paris, Marseilles or Nice. There will also be a business-to-business (B2B) target market which would consist of the most visited retail stores, supermarket chains, hypermarkets and health holiday spas in the sele

Reasons for the Defeat of Napoleon in Russia in the Campaign of 1812

This essay will examine the factors that led to Napoleon and his enormous army retreating from Russia and eventually losing a great majority of soldiers as well as their notoriety of being â€Å"invincible† after invading Russia in 1812. It will also consider the effects that that particular war had on the downfall of Napoleon’s empire in the subsequent years. The Campaign of 1812 was to be Napoleon’s crowning achievement. His Grand Armee of over 600,000 men from all corners of his empire was the largest he had ever assembled. The Emperor of France was notorious to his enemies. His armies were said to be invincible and his tactics in battle were second to none. This was at least how he was perceived at the time. On the 23rd of June, 1812 he invaded Russia with the hopes of ultimately dominating Europe. Napoleon did not anticipate, however, the harsh Russian weather that they had to face coupled with the scorched-earth policy that the Russians employed. He also overlooked the resolve of Tsar Alexander in that the Russian Tsar would not surrender to Napoleon under any circumstances. Napoleon was also fighting a losing battle within himself. His age was beginning to get the better of him and his unwavering confidence in himself blinded him from making correct decisions. The campaign of 1812 was a disaster for Napoleon. Worse than the loss of over 500,000 men in Russia was the realization of France’s enemies that Napoleon was no longer the ‘Invincible’ conqueror that he was. Napoleon’s Russian campaign failed due to the culmination of these various factors, but above all, it was Napoleons faulty judgment and unwavering confidence in himself that led to his demise. Furthermore, this great defeat exposed Napoleon’s weakness to his enemies and as a result his reign as emperor came to an end. The weather was a worthy opponent to Napoleon and his Grand Armee during his campaign in Russia. However, casualties could have been prevented if Napoleon prepared properly for this grand campaign. Russia experiences extremely cold winters that arrive rapidly. It also gets very hot in the summer months. At the start of Napoleon’s campaign his army experienced very hot weather. As the campaign entered July the heat became unbearable. Napoleon and many of his men were struck with diseases. [1] Napoleon was losing soldiers to exhaustion, sickness and desertion at a rate of 5,000 per day. It is reported that after two months, without even fighting a battle Napoleon had lost 150,000 soldiers. [2] General Clausewitz wrote, â€Å"The bad water and the air-borne insects caused dysentery, typhus, and diarrhea. â€Å"[3] However, if Napoleon had planned to bring more doctors and medicine with him then many thousands of lives would have been saved. I believe this is Napoleon’s first in a series of mistakes that stems from faulty planning. Napoleon’s army suffered even worse during their retreat from Moscow. The soldiers were shattered by the bitter cold of the harsh Russian winter. Again, Napoleon had not planned properly for this. In fact, he had not even planned that he would be in Russia during the winter, another fatal mistake. Napoleon proclaimed before the campaign began that he expected it to last 20 days. [4] And according to another source he prepared 40 days worth of food for his army. [5] Either way this gross miscalculation by Napoleon in the preparation stages of his campaign. It is evident that Napoleon did not thoroughly plan for the Russian campaign, nor did he make the correct calculations that would ensure a decisive victory. I think that this is due to his slowly deteriorating heath as well as Napoleon’s overconfidence and irrational belief that he could not be defeated. It seemed as though Napoleon failed to display his true genius in 1812 that had won him countless battles in the past. He displayed much caution, which was uncharacteristic of his once vigorous and dominating demeanour. It is still unclear whether this was due to his illness at the start of the campaign or a more deeply-seated issue in Napoleon’s age and irrational beliefs. This is what Napoleon said on the subject of his own health: â€Å"Health is indispensable in war†; and, a few years later :†There is but one season for war; I shall be fit for it six years longer, and then I shall myself be obliged to stop. † He had passed the limit set by himself when the highest efficiency could be expected. [6] â€Å"Napoleon was 42 years of age in 1812 and clearly his best years as a youthful and energetic leader were behind him. As he entered into this midlife crisis he became more restless and he wanted to fully control Europe before he grew too old to do so. Napoleon also maintained this sense of destiny, he found it incredible that others even tried to oppose his strength. â€Å"Russia is now being led to her fate, let her destiny be fulfilled! â€Å"[7] This quote is evidence to the claim that Napoleon allowed his ego to get the better of his judgement. In Napoleon’s mind, it was god’s will for him to crush Russia and seize control of Europe. It was impossible for him to lose this campaign against Russia, especially with the greatest army the world had ever seen at his disposal. With such a tremendous force Napoleon overlooked the finer details of the campaign that were essential to assuring its success. Another factor that greatly contributed to the failure of Napoleon’s 1812 campaign was the tactics that the Russians employed to deter his Grand Armee. The Russians would retreat deeper inland as soon as they saw the Grand Armee approaching, which worked to exhaust their enemy. The Russians had no choice but to retreat when they saw Napoleon’s massive approaching army. As a result of this, the Grand Armee suffered. [8] It is unclear whether the Russians retreated as they were aware that facing the enormous invading force was suicidal or they did it on purpose in order to intentionally tire out the enemy. Either way, the retreat worked wonders against Napoleon’s Army. A French General said this: â€Å"We (the French cavalry) deploy, and boldly advance to the attack, and already reach their line; but they disappear like a dream and we see only the bare pines and birch trees. An hour later, when we have begun to feed our horses, the dark line of Cossacks again appears on the horizon, and we are again threatened with an onslaught. We repeat the same manoeuvre, and, as before, our operations are not attended with success. Thus one of the best and bravest cavalry forces the world has ever seen was tired out and disorganised by those whom it considered unworthy foes, but who were the real saviours of their country. â€Å"[9] As the Russians retreated, they gained in strength, and exhausted the resources of country on the path that was to be trailed by the invaders. This has come to be known as the ‘scorched earth policy. ’ This strategy was designed to deplete the enemy’s resources so that they may only survive on the provisions that they brought along with them. The Russians burned their own countryside as they fell back. Napoleon did not anticipate the use of this tactic. It was greatly effective in depleting the numbers of the Grand Armee by starving the enemy. The Russians were determined to defend their country from almost certain defeat. They fought knowing that their entire country was relying on them to keep it from falling into Napoleon’s hands. This incentive and confidence in battle that the Russians had was also not anticipated by the French Emperor. He expected the Russians to roll over and be crushed as he had done in previous campaigns. Also to his horror he found that the discipline in his own ranks was slowly fading†¦ As previously stated, Napoleon had amassed his army from all corners of his empire. Among the French there were Germans, Italians, Poles, Spaniards, Portuguese, Swiss and Croatians. Even though the numbers of this army were staggering, their cohesion as a unit was compromised due to the simple fact that they were all from different countries. This mixture of languages and cultures, although very large and well organized, made efficiency and discipline an issue for Napoleon. Also, only the French troops were the ones who were well equipped and well trained, they were inspired to fight under their beloved Emperor. The same cannot be said of the rest of the troops. [10] The foreigners were fighting because they had no choice, they were allies to Napoleon but they shared no special bond with him, nor were they particularly motivated to be fighting in his name and in the name of France. This was another key factor that played a large role in the dismantling of the army during Napoleon’s retreat form Moscow. Napoleon also failed to realize that the Tsar Alexander would not surrender as easily as he thought. Napoleon thought that after a handful of decisive victories the Tsar would agree peace terms and Napoleon would have his way. He also mistakenly thought that if he were to occupy the Russian capital of Moscow then the country would be at his mercy. â€Å"A Single blow delivered at the heart of the Russian Empire, at Moscow the holy, will instantly put this whole blind, apathetic mass at my mercy. [11] Napoleon, despite having extensive relations with Tsar Alexander had underestimated his character. The Tsar’s resolve was strong and unwavering in his decision to not accept terms of peace with Napoleon. He did not even respond to Napoleon, even though the French Emperor now occupied the capital city. [12] It is important to note that as the Grand Arme e entered into Moscow it was in flames, set ablaze by the Russians themselves in accordance with their scorched earth policy. This denied Napoleon’s men the provisions and plunder that they so desired and had been promised. The occupants had fled to the countryside and the city was left deserted and up in flames. Napoleon had again been bested by the Russians. His army was now 1/5th of what it was. Two of my sources hold very different views when it comes to the morale of Napoleon’s men at this time. One maintains that the officers maintained their confidence in Napoleon while the troops, although not happy with the fact that they had no provisions â€Å"retained their thoughtlessness† and were still content under the Emperor’s guidance. [13] The other source depicts more of a sense of disillusionment within the ranks. The fires by which the place was devastated reacted on the discipline of the troops. The men abandoned themselves to disorder, and marauding did not cease until the Emperor took stringent measures to restore discipline. †[14] Napoleon was left with a dilemma to ponder. He could either continue the campaign and make a final push to defeat the weakened enemy with the disgruntled and famished troops that he had left or he could quickly retreat and leave Russia knowing that he had been outmanoeuvred by his enemy. Napoleon took a third option. He waited for word from Tsar Alexander. He was optimistic that the Tsar would sign a peace agreement. Napoleon was unaware of the fact that Alexander could not possibly surrender, it was his duty as Tsar to never accept terms. This led to Napoleon hesitating in Moscow for five weeks. With no word from Alexander and winter fast approaching. A decision needed to be made quickly. Napoleon gave the order to retreat and they marched out of Moscow on the 19th of October. [15] This hesitation from Napoleon would soon come back to bite them. Napoleon lingered in Moscow for far too long. His stay should not have exceeded two weeks and he should have retreated in September. By hesitating so long he brought about the horrors that would face him and what was left of his army in the following weeks. Three weeks after Napoleon and his army exited Moscow the winter emerged. As they marched westward the cold gradually increased until it became almost unbearable. As the temperature dropped to -20 degrees the retreating soldiers began dropping like flies from starvation, disease and the bitter cold. Discipline declined. The famished soldiers no longer did what they were told. They had no honour left to do battle, instead the main goal of every soldier was to stay alive. Men fought over food supplies and clothes. Some abandoned the unit in search of provisions elsewhere. The army was no longer a fighting force. [16] This, however was not the retreating army’s only problem. The Cossacks attacked the army from all flanks, they were vicious and relentless to Napoleon’s army, and they showed no mercy to anyone who fell behind the main unit. 17] Napoleon’s army was slowly fading away, little by little each day. Napoleon even wore a vial of poison around his neck in the event of him being captured. Less than 90,000 soldiers escaped Russia even after Napoleon had abandoned what was left of his army when he heard of a coup developing in Paris. The campaign in Russian was colossal failure. With what looked like a sure victory for Napoleon at the start of the campaign ended in shambles. Napoleon was outwitted and undone by the tactics of the Russians. Something Napoleon did not consider possible. Napoleon’s failure to understand that the Russians would fight with such desperation to defend their motherland was a costly mistake. Napoleon greatly underestimated his enemy, as well as the amount of necessary provisions to feed such a massive force as the Grand Armee. Everything seemed to conspire against Napoleon in the Russian campaign and in some respects he was hopelessly unlucky. His belief in himself and his army was so great, his ‘star’ so bright that he became blinded. He failed to think through the battle plan thoroughly enough and the result was a great failure. This failure did not go unnoticed by the rest of Europe. After it became obvious that Napoleon had lost with such a large army at his disposal Britain, Russia, Prussia and Sweden decided to strike Napoleon when he appeared weakest. His reputation as an invincible conqueror took a massive hit. The rest of Europe realized that it was possible to defeat Napoleon. Napoloen was able to rally another army to defend his empire from the forces that were now conspiring against him but it was too late, the initial damage had been done through the Russian campaign and Napoleon’s empire would never again ascend to what it once was prior to the campaign of 1812.