Strategic Marketing Plan for the Penfold Bin 8 Wine in China - Case Study Example

Penfold Bin 8 Wine in China Name Penfold Bin 8 Wine in China Course: Institution: Date Table of Contents Table of Contents 2 1.0 Introduction And Company Background 3 2.0 Marketing Mix in China 3 2.1 Price 3 2.2 Place 3 2.3 Product 4 2.4 Promotion 4 3.0 Promotional Approaches and Risks 4 4.0 Distribution Channels and Risks 5 5.0 Price Positioning and Marketing Messages 6 6.0 Conclusion and Recommendations 7 References 9 1.0 Introduction And Company Background This marketing report offers strategic marketing plan for the Penfold Bin 8 wine in China. The Penfold Company is an established wine brewing company in Australia. The Company was established in 1844 and has ever since expanded its scope and influence in the global market, both in Australia and beyond. Among its many company products, is its Bin 8 wine (“Penfold Company”, 2016). Due to the rising and increasing global market competition in the Australian market, there is need to expand and increase the brand product in China. This marketing plan illustrates the process through which the proposed wine products, Bin 8, are expected to be marketed. This includes the proposed marketing mix, promotional approaches, distribution channels, price positioning, and the associated risks respectively. 2.0 Marketing Mix in China In the development of a strategic plan and process through which a product is to be availed and marketed into a new market, it is imperative to develop the right marketing mix. As Richter (2012, p.103) described it, a marketing mix comprises of the four main marketing elements that determine how a new product is introduced and pushed through a new market. The four main elements are the price, place, product, and promotion respectively. This marketing plan evaluates the key marketing elements in the market. 2.1 Price The first aspect of the marketing mix process is the price element. In this case, a product price is a cost that the customers incur while purchasing the product in the market. In the determination of an organisational product pricing strategies, two issues and aspects come to the fore. First, the overall product production cost should be evaluated. This is the total cost of all the activities and processes involved in developing a new product. The second consideration aspect is the desired profitability margin in the market. Based on these two approaches, the proposed Bin 8 wine product will use the penetration pricing approach. 2.2 Place The second aspect is placed. In this case, place includes the physical location at which the proposed organisational outlets will be located. Based on the nature of the wine industry, the organisation will have its main locations in established retail and wholesale outlets across Beijing city. 2.3 Product In terms of the product aspects, the company will offer slow brewed high-quality wine. The key distinguishing characteristic of the proposed wine products in China is the exclusive use of the Australian olives. In this case, all the products used will be Australian, a market renowned for its quality vineyards and olive products. 2.4 Promotion The final element in a marketing mix is the promotional element. This includes the process through which the organisational and brand products communicate and reach out to the market base. In this context, the proposed brand product will use advertisements on the mass media and social events sponsorship promotional tools respectively. 3.0 Promotional Approaches and Risks As already illustrated above, promotional strategies are the communicational approaches applied by an organisation to reach out to the customer market. In the evaluation of key successful promotional strategies, McLeish (2011, p.79) noted that a successful promotional strategy is one that incorporated the existing organisational capabilities and the market characteristics. This marketing plan proposes the use of mass media advertising and social events sponsoring as the main promotional aspects. On one hand, an evaluation of the strategy and organisational capabilities indicates a match. In this case, the Penfold Company enjoys economies and scale and thus has a high capital base and financial stability. Consequently, the venture has sufficient funds for supporting events sponsoring and mass communication strategies that are capital intensive. This means that the adoption of the strategies will not strain the company operations in China. Similarly, the organisation has a positive brand reputation in Australia for using the two market promotional strategies. Thus, this implies that the use of the strategies in China will be a mere extension of the Australian market, indicating the presence of the required skills and expertise in the venture respectively. On the other hand, the use of the proposed social events sponsoring aligns with the Chinese market characteristics. This can be explained through the Hofstede cultural dimensions model analysis on collectiveness. The model illustrated that China has a high collective society, which means the society favours social events. Consequently, sponsoring such events will expose the venture brand to an increased high potential customer base, as well as increase its overall market reputation. Moreover, the Bin 8 wine product is a luxury product, which is likely to be consumed in such luxurious social events and festivals. This means that the applied promotional strategy supports the brand potential for increasing sales while aligning itself with the market characteristics respectively. Although the proposed promotional strategy is viable, it faces a number of market risks in China. The first such risk of emerging as a social entity. In this case, through participating in social events, the brand may project the wrong brand image. In this case, it might be viewed as a social entity that is oriented towards social support and development. Consequently, this could emerge as contradictory to its pricing strategy that is likely to be high as a means of compensating for the incurred expense in the market. Through such a misunderstanding, there is he risk that the customers would form the wrong impression of the company, and thus, feel dissatisfied when its products are charged relatively high prices to cover for the advertising expenses. 4.0 Distribution Channels and Risks The selection of organisational distribution channels depends on a number of factors. The key factors include the availability of resources as well as the market served scope respectively. In the development of distribution channels, organisations have two main alternative approaches, namely the direct and the indirect distribution channels. Moreover, ventures have the alternative for applying the two distribution channels as a mixed approach (Paul and Kapoor, 2008, p.253). In the case of the Penfold Company marketing its Bin 8 wine, the venture will use the mixed distribution channels. This means that the organisation will apply both the direct and the indirect distribution channel approaches respectively. On one hand, the organisation will have retail outlets in Beijing. In this case, the retail outlets will serve as a strategic position through which the venture can interact directly with the Chinese customers. Through the retail outlets, the organisation will deliver and sell its Bin 8 wine product to the Chinese end users. Although this approach is viable and sufficient in ensuring the development of customer relationships and loyalty, it is expensive and hard to roll out in the start-up years. Consequently, the venture will also apply the indirect distribution system. Under the indirect distribution system, the organisation will use supermarkets to deliver its products across the Beijing City. The fact that the city is large enough implies that using the indirect distribution channels will enable the venture to reach out to a relatively larger customer base with reduced expenses and operational costs in the long run period. The use of this approach will enable the venture to increase its desired profitability margins in the market without raising the overall product prices. The main risk facing the use of indirect channels in the market is failures by the supply chain partners. In this case, the organisational operations will be hedged on the efficiency and goodwill of the supply chain partners. Thus, this exposes the organisation to the risk of non-market performance in the event that the established market partners bleach their distribution contracts (Kapoor and Kansal, 2003, p.33). Moreover, the fact that the distributors will not be exclusive to its Bin 8 Wine means that they carry the competition products. Consequently, there is a possibility that the competition products will be preferred over its least known wine product in the Chinese market. Consequently, this exposes the brand to the risk of market failure and lack of expected penetration. 5.0 Price Positioning and Marketing Messages The element of organisational pricing is a sensitive marketing strategy. In this case, as already noted, a number of factors need to e considered. On one hand, the market purchasing power and competition should be considered. On one hand, the market purchasing power is determined through an evaluation of the average market earnings and the key targeted consumer segment. In the case of the Chinese market, Chen and Hamori (2014, p.23) noted rising earnings in the market. This is as a result of the rising Chinese economic growth over the last two decades. In terms of the targeted consumer base, the organisation targets the integrated Chinese society as well as global expatriates in the Chinese market. Over the last decade, the rise of China as a global and regional trading and production hub has increased the number of multinational expatriates in the market. In this case, an overview of the entire segmented market illustrates average and high-income earnings. Finally, an evaluation of market competition illustrates a growing rather than a mature competition base. Therefore, the competition is not a major factor in setting up the desired prices as none is fully established in the Chinese wine industry. This is because the wine industry is on a continuous growth trend as the Chinese wine drinking culture changes respectively. An additional evaluation of the company existing structures illustrates that the venture is a profit oriented organisation. Based on the above analysis, the venture will apply the penetration pricing approach as illustrated. Under the penetration pricing approach, the venture will start off with a low pricing cost for its product. This will ensure that it has a lower price than the competition. This will create a potential for a higher demand creating the intended product familiarity in the Chinese wine industry. Once the required familiarity and brand reputation is attained, the product pricing will rise steadily to create a sustainable profit margin in the market. In the development of the main organisational marketing messages, this review illustrates that the messages will be developed under three main aspects namely: 1. Product quality based on its raw materials origin from Australia 2. The price affordability of the product offered at a relatively affordable price 3. Availability of the products through local and regularly visited supermarket outlets Although the adoption of this approach is viable, there is the risk of customer fall out with price rise. In this context, the customers could be excited about the products low prices and thus increase its demand. However, as the prices increase, this drive and motivation may decline to force the customers to shift to alternative wine brand with relatively lower prices. This means that the venture pricing strategy exposes it to the risk of a false start where initial stages may indicate success, but the success cannot be sustained in the long run period. 6.0 Conclusion and Recommendations In summary, this marketing analysis report offers a summary of the proposed Penfold Company Bin 8 Wine expansion into the Chinese market. In this case, the marketing report starts off with a Marketing mix analysis. The marketing mix indicates the use of a penetration pricing strategy, mass media and social events sponsoring promotional strategy, and the use of retail outlets as its main place element. In a critical analysis of the promotional strategies, the analysis indicates that the proposed strategies fit into the organisational capabilities and market conditions, making it a potential success in the market. Moreover, a distribution channel analysis indicates the need for a mixed channel analysis. However, risks of supply chain partners’ failures, the risk of customer apathy with price rise, and the potential for customers misunderstanding of the promotional strategy are the underlying risks for the venture. Based on the above critical analysis, the review offers the following strategic recommendations for future market success. Create a clear marking message that illustrates that although supporting social events, the venture is a for-profit organisation with an aim of making market profits. This will ensure that the customers do not in any way misunderstand the organisational promotional strategy as its core business in the market Use sustainable prices-although endeavouring to reduce the market prices for the initial launch, the venture management should ensure that the selected price is not below a sustainable level. This ensures that the company potential future price rise is minimal and thus does not lead to customers’ apathy. References Paul, J., & Kapoor, R. 2008, International marketing: Text and cases, Tata McGraw-Hill, New Delhi Kapoor, S. K., & Kansal, P. 2003, Basics of distribution management: A logistical approach, Prentice-Hall of India, New Delhi Chen, G., & Hamori, S. 2014, Rural Labor Migration, Discrimination, and the New Dual Labor Market in China. (Rural labour migration, discrimination, and the new dual labour market in China.), Imprint Springer, Berlin, Heidelberg McLeish, B. 2011, Successful marketing strategies for nonprofit organisations: Winning in the age of the elusive donor, Wiley, Hoboken, N.J Richter, T. 2012, International marketing mix management: Theoretical framework, contingency factors and empirical findings from world markets, Logos, Berlin Penfold Company, 2016, About Us. [Online] Available at: < https://www.penfolds.com/heritage-and-winemaking/history-timeline> [Accessed: 4th April 2016] Read More