Industry Competition in China and Australia - Assignment Example

Name Professor Course Date Case Study Analysis 1. Apply Porters model of industry competition in China and Australia. What are the key implications for Lion Nathan’s marketing strategies in both of these countries? Lion Nathan Company is an international brewing company operating in three countries. These are China, New Zealand, and Australia. This company has 10 breweries in these three countries and has over 50 brands of its products. The beer from this company is also exported to 50 different countries around the globe. The company engages in a series of expansion strategies to enable it achieve its set objectives for every financial year. Some of these strategies have greatly seen it through a number of success and fitting well in the market competition that is ever competitive. The company as also employed knowledgeable persons like Kevin Roberts to manage its production services. These persons are well equipped and capable of delivering the very best in this industry. The same trend has also witnessed employment of various personalities who are highly experienced and knowledgeable in the management of these drinks. Most of these people were taken from prominent companies like the coca cola companies (Jain et al 108). Thereafter, they were placed on this company as directors and heads of productions. Through their knowledge and skills, they come up with ideas that significantly change the business. This company operates in three countries and thus calling for implementation of various strategies to enable them stay on top of the competition in the market. This discussion will analyze the company’s operational strategies in both China and Australia using the Porters model of industry competition, a concept that is used widely worldwide in analyzing and predicting company’s outcome. Here is a brief history of the Lion Nathan Company (Proctor 150). China has one of the largest and most impressive markets in the world, despite this fact, Lion Nathan Company has not been doing well thus presenting the need to perform well and improve its market share. With many companies competing in the same niche, Lion Nathan Company has faced a tough competition that can easily lead to their exit from the market. China has also very difficult market conditions that make business operations rather difficult and prices are under so much pressure. This company has thus felt a great jeopardy in its operations thus making it very difficult to succeed in this sector. By 1998, the Chinese market had over 600 breweries posing a great threat to this company’s operations thus making the completion very stiff. In accordance to porter model of market competition, there are certain key factors that are put into consideration to sufficiently analyze the company’s operational strategies in the Chinese country (Dess 13). This concept considers five market forces thus, making the analysis simple and easy. According to the porter’s model, five forces may define the nature of market competition in any market. This may include the following; threat of entry of new firms into the competition, threat of introduction of substitute products and services, increase or decrease in bargaining power of suppliers in the market, Increase or decrease in bargaining power of the buyers in the market and, the rivalry that exists among the existing competitors in the prevailing market. These five forces largely define the nature of competition in the market and can lead to exit and entrance of more firms into the market. Due to the high number of companies investing along this line, there are many market rivalries and each is striving to maintain its market share or get more reasonable share. Companies like Tsingtao upon realizing the great market competition that was resulting from the rivalry; they put in place several measures to curb this. Chinas largest domestic brewer, Tsingtao is one of the greatest competitors of Lion Nathan Company in China. By 1998, this company was producing 3 percent of the total figure of Chinese drink consumed. With the entrance of new firms in the market, this trend changed and the company began to intensify its competition (Dess 120). As a result, it increased the production capacity of its beers; in addition, the company increased its sales and distribution network hence making it hardening the race for the other local market competitors. In addition, at that time, Tsingtao produced the best domestic brand that was sold locally and many people purchased. This resulted into them grasping the largest market share; consequently, it earned them competitive advantage over its competitors, both upcoming and those onboard. Through this stiff completion, many foreign firms withdrew from the market in response to the large number of local brewers in the country. Another factor that greatly undermined the market performance of beer in the Chinese market is the seasonality of beer consumption. In China, most people consume beer during warm summer days hence making the business boom only for a few months. With many brands in the market, and the various prevailing market conditions, companies are thus, left to strive and produce unique quality brand that can compete favorably in the market. With all these competitive factors in the market, Lion Nathan Company had to lay down a strategy that would work effectively for them. One such was market entry strategy. This entry strategy had to ensure that the company enjoys large economies of scale; they meet the government regulation regarding the entry of new firms in the market, brand loyalty i.e. introducing a new brand that is unique and would draw many people towards liking their goods. In addition, other factors that they had to put into consideration were the method of distribution as well as the establishment of strong capital base. This strategy is very effective and can yield perfect results if applied accordingly. To make the strategy effective, the company took over Taihushui brewery, an existing beer firm in China. They then improved its services to capture a large market pie. Another implication of the strategy was the one intended to face the existing market competition. Since the market had many competitors, Lion Nathan Company had to find a good strategy to beat the other giants in the market. They thus established their products in one of the best performing states, delta, and then took over an existing company (Oliver 1770). In the process, they introduced the best products in the market hence attracting attention of many consumers. This strategy enabled them to fight the forces of demand for goods from other producers hence giving them the best chance to compete effectively in the market. The company then embarked on an expansion strategy to increase the volumes of services offered. For this reason, they built an excellent brewery at Suzhou. Therefore, to limit the bargaining power of buyers in the market, this company has featured mainly in selling its products in restaurants and large shopping centers where bargaining for the best price is not easy (Dess 130). This makes them rule in pricing and gives them the power to determine the best pricing for the products in the market. The buyers therefore have very little influence in establishing the cost of various brands in the market. Unlike the Chinese market, Australian market was rather easy to manipulate. When Alan Bond Company faced a financial crisis, Lion Nathan Company took over the brewing operations and had 37.5% of the total Australian market share. Within three years of acquisition, the company’s share increased to 46% hence giving them a proper grip for the market. This made them one of the key players in the industry hence making them to control the market largely. The market penetration strategy has thus improved the position of the company in these two countries making them giants from the start. The Lion Nathan company in Australia uses the regional strategy advantage to compete well and become the market leaders. The regional strategy ensures that they open branches in many regions and produce brands that their competitors cannot imitate in the market. Similarly, they have established various distribution means that helps them reach many customers. The implication herein is therefore that the porter’s model has been successfully applied and the company is prevailing in both the markets (Gurau and Ranchhod 130). The Lion Nathan company Australian market is performing well and among the top most brewery companies in the country. Introduction of substitute products is another aspect that greatly shapes the nature of competition in the market. These are known to change the customers taste and preferences offering them close choice in case their desired products are costly. The Lion Nathan Company implemented this strategy and as a result, they produced a variety of drinks brand that customers were likely to enjoy (Eric 47). This was based on the various age groups in the Chinese culture. One thing that is also evident here is that the tastes and preferences of various age groups in China are very different. The youths below 30 years of age have very controversial ideas to old men 40 years. 2. Examine the current marketing strategy of Lion Nathan in China. What changes has the company made in recent times and why do you think that it has made them? The current marketing strategy in China involves having large market shares and competing well against other companies in the market. The company is also introducing new brands in the market to attract many customers. Consequently, the company is fast expanding and is opening branches in many countries to enable them attain considerable sales for their products. Furthermore, the company is engaging in training of its staff to ensure improved level of services so as o attract more customers. Comparing the initial strategy with the current one, some differences are evident and the current strategy has new aspects introduced. This is made to introduce new and unique products that customers will like. For instance, the company has introduced many brands in the market hence using that to make more revenues (Jain et al 152). In addition, the company has engaged in training of its members before assigning them or posting them to work in any station. This ensures that only qualified and knowledgeable persons are employed hence increasing and the consistency of their brew quality. The company is also setting up more branches in potentially productive regions to ensure they increase their market share. Mostly, the market share increases with the number of consumers, the company therefore opens many branches to attract more customers. As the company strives to increase its long list of customers, it also seeks customer loyalty (Jain et al 102). Through provision of high quality brands of beer, this company seeks to create a group of loyal customers who will always be interested in buying their goods. This is a very important strategy as it seeks to create a team of persons who are loyal to only their products. 3. What are the key differences in marketing strategy between Australia and China? The prevailing market conditions in both China and Australia are different hence resulting into difference in strategies put in place for the market operations. Chinese market is large and comprises of many brands as compared to the Australian market that is still small. There are thus many competitors in the Chinese market than on the Australian one (Enander and Tischendorf 88). This high level of competition makes companies compete very strongly for the market share. On the other hand, the Australian market is not so large and the market conditions are very favorable for competing. The market is greatly controlled by government regulations as well as buyers and sellers who may change the operating strategies from time to time. One of the major differences in strategies used is the entrance strategy. In the context of the Chinese country, due to the strict competition in the market, they had to take over an existing company then improve on their services. This move enabled them to get an already established company with good public reputation thus; their only duty was to ensure diversity in brands and quality. In the process of improving their services, they develop unique brands that will draw many customers to their side. On the Australian side, the entrance was timely and opportunistic (Warner 200). They simply gained an easy market entry after Allan Bond Company faced a dire financial crisis. Another difference that is quiet evident is the number of firms operating in the market. The Australian government limits the amount of firms operating in this line hence controlling the number of firms entering the competition; the Chinese market however is a free market and companies can enter and exit at their own wishes (Jain et al 89). As a result, competition is highly stiff in the Chinese market. Market size is also another great difference. Chinese country has the largest number of people hence making it one of the best and most competitive markets in the world. Australian market on the other end is not as big as the China market. The marketing strategy in China involves production of diverse brands that are used to lure people of various ages to buy the drinks. Australia however has not witnessed largely the implementation of this strategy since the competition is not very stiff. As a result, the numbers of branches operating in China are more than those in Australia. Conclusion The use of Porters five force model enables the Lion Nathan Company to monitor its progress and change the mechanisms and principles of operation accordingly. It is therefore the company’s prerogative to follow the information revolution and monitor the trends by leveraging the consumer insight hence delivering the high quality products and services. The advancement on technological aspects also leads to the quality provision of services; this is an aspect, which should be embraced by any company in order to meet the global requirements (Warner 210). The implementation strategies should be formulated in a way that it links with the company’s objectives; this ensures that the realistic goals are achieved. The business strategies should be flexible enough to allow for adjustments in lieu of the unbecoming trends. Works Cited Dess, Gregory G.. Strategic management: text and cases. 6th ed. New York: McGraw-Hill/Irwin, 2012. Print. Enander, Marion and Tischendorf, Silke. Wilkhahn Asia Pacific - A strategy and performance evaluation of an international commercial furniture company. New York: GRIN Verlag, 2003. Eric, Shaw. Marketing strategy: from the origin of the concept to the develoment of a conceptual framework. Journal of historical research in marketing, 4.1 (2012): 30 – 55. Gurau, Calin and Ranchhod, Ashok. Marketing Strategies: A Contemporary Approach. New York: Financial Times Prentice Hall, 2007. J, Jain, Haley H, and Wickham K. Case Study Analysis -Lion Nathan China. NY publications, 2012. Print. Oliver, Constantin. The CR-Marketing Strategy. Ovidius University Annals, Economic Sciences Series. 1.1 (2011: 1769 – 1772. Proctor, Tony. Strategic Marketing: An Introduction. New York: Routledge, 2002. Warner, Malcolm. China's Managerial Revolution. New Jersey: Psychology Press, 1999. Read More