Marketing Strategy of Lion Nathan China Business Company - Case Study Example

Marketing Strategy Introduction Marketing can be defined as the process of conveying the message or communicating about the value of your product or service to customers as well as the potential customers for the purpose of selling that product or service (Kotler, Philip & Keller 2012). According to Kotler, Philip & Keller L. K. (2012), this process helps in earning more customers for your business. From an organizational point of view, marketing includes all the processes involving communicating the value of the product or service to customers as well as managing the customer relationships in a way that will benefit the organization together with the shareholders. Marketing also involves selection of target markets, analysis, and segmentation, understanding the customer behaviours and providing the best service to the customers. Kotler, Philip & Keller (2012) further argue that, marketing can be approached from the customer focus-relationship marketing, from the organization or institution focus- business or industrial marketing, from the society focus- social marketing or internet or e-marketing (Kotler, Philip & Keller 2012). Marketing strategy is the process that allows an organization to concentrate its resources on optimal opportunities with the goal of increasing sales and obtaining a competitive advantage. This includes all the activities in the field of marketing. For example, they deal with the initial location of the company or business, selection as well as evaluation of those strategies that are market oriented that are going to contribute to the goals of the company (Kotler, Philip & Keller 2012). The lion Nathan china is among the various firms in the beer industry in China who compete in marketing various brands of locally produced beer. The beer market is doing well due to economic growth that has continued to thrive in the country. This is coupled with fairly weak competition from other beverage sub sectors and high consumer spending. Porter’s model of industrial competition Porter’s model explains the competitive environment in which a company operates. It consists of five forces, which are intra-industry competition, bargaining power for suppliers, bargaining power of customers, substitutes and threats brought about new entrants (Porter, 1979). According to Porter (1979), the major reason behind a firm developing its business strategies is in order to obtain competitive advantage over its competitor. The business will do this through responding to the five primary forces: rivalry among existing firms within an industry, the threat of substitute products/services, the bargaining power of suppliers, the bargaining power of buyers and the threat of new entrants. The Lion Nathan China business company should assess these five competitive forces in its beer industry and then try to develop the market at those points where the forces are weak (Porter 1979). Porter (1979) further argues that the company does this by for example by choosing powerful buyers and sells to them the product that is not vulnerable to substitutes. This enables it to be least vulnerable to competitive forces as it enjoys its competitive advantage. It can also achieve competitive advantage by altering the competitive forces for example through establishing barriers to prevent new entry from coming into the industry through cultivating capital-intensive resources that new firms cannot easily duplicate (Porter, 1980). The business company can also increase bargaining power over their customers and suppliers by increasing its customers' switching costs and decreasing their own costs for switching suppliers (Fleisher & Bensoussan, 2003). The five competitive forces model provides a solid base for developing the business strategies that generate strategic opportunities (Porter 1979). According to Porter, (1979), analysing these forces helps in illuminating the industry’s fundamental attractiveness, exposes the underlying drivers of average industry profitability, and provides insight into how profitability will evolve in the business’s future. The five competitive forces still determine profitability even if suppliers, channels, substitutes, or competitors change (Porter 1979, p. 66).” Fig 1: Porter’s competition model Source: Author Application and implications of marketing strategies in China and Australia Application of the Porter’s model generally involves several steps. The first step involves the collection of information that identifies the characteristics of these forces while at the same time assess the impact on the industry in both China and Australia (Ayala & Lai, 1996). The sources of identification include the rivalry between the competitors, substitute products, potential entry and the bargaining power of both suppliers and customers (Fleisher & Bensoussan, 2003). Second is to identify the ability of the company to compete successfully given the strengths of the forces (Fleisher & Bensoussan, 2003). According to Lion Nathan China company strategy, there is low bargaining power of customers in that most of the customers go to the restaurant to drink beer not because of its quality, type or price but because it is foreign an also get time to be with their friends (Kukutai, Cooper, & Gilbertson, 1992). On the other hand, the traders have a lot of power over the customers as they can dictate to them the type of the beer that they buy (Kukutai, Cooper, & Gilbertson, 1992). According to Kukutai, Cooper, & Gilbertson (1992), there is also a lot of competition due to the many suppliers of the product. This also contributes to increased power for the traders over the suppliers of the product. The current marketing strategy for Lion Nathan China In order to move the business forward, the company is currently integrating various marketing strategies (Mcnabb, 1998). Among them are: communicating with other brewers, talking about competition in a profitable way, looking for alliances with other brewers who do not have competition port folios, licensing other brands as well as introducing them in other branches. Other strategies according to Mcnabb (1998) include leveraging with other suppliers, raising standards such as quality of the product, services, and packaging and labelling, acquire other breweries and brands. The current strategy of the Lions Nathan China is to be the leading brewer of the whole of china (Mcnabb, 1998). The core values, which are passion, integrity and realism, are emphasized in order to help the company in achieving its core vision (Mcnabb, 1998). Mcnabb (1998) further explains that the marketing strategy of Lions Nathan china is driven by: being the leader in the market segment of mainstream beer, coming up with other brands to widen its market, increasing its geographical market by targeting other regions and lead in industry consolidation. Key differences between marketing strategy in China and Australia China’s beer industry is the largest in the world by production volume. Records show that there was an increase of 4.9% from 2009 to 2010 (Kukutai, Cooper & Gilbertson, 1992). According to Kukutai, Cooper & Gilbertson (1992), volumes of beer production depend on economic growth, weather conditions and natural disasters. The strong economic growth in particular highly contributes to the growth of the industry. Other factors are rapid urbanization and increased disposable income, change of lifestyles and consumption patterns where recently they have preferred beer to traditional spirits (Kukutai, Cooper & Gilbertson, 1992). The beer industry in Australia has achieved greatly within a short time with wine dominating the industry (Ayala & Lai, 1996). The increased success is attributed to both internal and external factors. Internal drivers include market & market orientation and strategic planning while the external drivers are factors such as legislation and industrial infrastructure. The major difference between the two countries as far as the beer industry is concerned is the type or rather the brand of the beer being sold. For example, wine is popular in Australia while beer is traded in China. Conclusion The Porter’s five competitive forces model identifies strategies, which are likely to bring a competitive advantage in the brewing industry (Porter, 1979). Porter, (1979) further states that through understanding these forces, the management can apply these forces to meet the unique challenges of the industry. The model will therefore assist in coming up with a framework that will analyse and develop successful strategies to address marketing strategies in Lion Nathan. Integration will provide the business with benefits such as cross-promotion, shared information, purchasing leverage and distribution economies (Porter, 1979). An analysis of the industry shows that it can be an attractive industry to enter if planned, executed and managed appropriately. References Ayala, J. & Lai, R. (1996). China’s consumer market: A huge opportunity to fail? Mckinsey, Quarterly, 3, pp 56-71 Fleisher, C., & Bensoussan, B. (2003). Strategic and Competitive Analysis: Methods and Techniques for Analyzing Business Competition. New Jersey: Pearson Education. Kotler, Philip & Keller, L. K. (2012). Marketing Management 14e. Pearson Education Limited 2012 Kukutai, A., Cooper, A. & Gilbertson, D (1992). Lion Nathan ltd. Innovation and management in New Zealand: A case book, Dunmore Press, Wellington, p 167. Mcnabb, D. (1998). World’s brewers bleed in China’s beer wars, The Dominion 2 (21) Porter, M. (1979). “How Competitive Forces Shape Strategy,” Harvard Business Review, March-April 1979. Porter, M. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: The Free Press. Read More