Dimensionalizing International Market Entry Mode Choice - Term Paper Example

Running Header: International Marketing Plan Student’s Name Lecturer Course Title Date Introduction International marketing involves selling of the company’s products in foreign countries. Unlike domestic marketing, international marketing is highly complex due to variation in cultural, political, social, and economic environments. This paper focuses on developing international market plan for Accolade Wines as it enters into the Chinese market. Accolade Wines is the leading Australian wine company and the fifth biggest wine firm in the globe. It was established in 1853 and it provides an impressive award winning profile of international and Australian wine (Accolade Wines, 2016). The company wishes to sell some of its products, particularly red wine in the Chinese market. This paper provides the best strategy to employ to be successful in the Chinese market. The paper conducts market screening, analysis of foreign environment which will include the analysis of social or cultural, economic, political, geographical, technological, and competitive environment in the selected market. The paper also discusses marketing objective and strategy, recommended marketing mix, international performance and operations management, and finally a conclusion. Market Screening Chinese market is selected in this case since it has experienced very drastic wine consumption growth in the past years. China currently accounts for about 60 per cent of the wine market value in Asia-Pacific (MarketLine, 2014, p.11). The wine market in China is anticipated to continue growing through a predicted period of 2013 to 2018, upholding growth by double digit. Based on 2013 statistics, the wine market in China recorded a total income of 27448.2 million dollars, which accounted for 23.1% compound annual growth rate (CAGR) between 2009 and 2013. The volume of the market is anticipated to grow by the end of 2018 to 3913 million litres, accounting for 16.5% CAGR for the period starting from 2013 to 2018. The market performance is anticipated to decelerate by the end of 2018 (BMI, 2015, p. 17). However, by that time, the anticipated market value will have grown to 61816.5 million dollar. This means companies that managed to make an early entry will have established their market and defined their market share before this equilibrium point (MarketLine, 2014, p.7). Accolade Wines anticipate that it will have managed to gather enough shares to sustain it in the market and to withstand direct competition from other local and international wine companies by that time. Foreign Environment Analysis Social and Cultural Environment Understanding Chinese local culture and its influence on business activities is very essential for business performance in China. According to Rahman (2014, p. 15), Chinese people highly treasure harmony aspect of Confucianism and strictly use it as their social guide. Thus, people have to maintain moderation and self-discipline so as to maintain peace. Foreigners should therefore avoid raising their voice, maintain temper, and confrontation when discussing business with Chinese. Face (Mianzi) is a sensitive business relationships part and it is a very essential Chinese business and cultural aspect, since it is associated with respect and reputation of an individual. Thus, foreigners should avoid embarrassing Chinese by making them lose their face (Rahman, 2014, p.15). Chinese businesspersons normally prefer to create a strong association and create personal links prior to closing a business deal. Thus, foreign investors will be anticipated to invest energy and time into developing good associations with suppliers, partners, and customers. This includes attending their social event, asking and expecting personal or social questions such as family related questions. They should also avoid going straight to the point prior to creating trust. Hierarchy is very essential in china. People are respected and valued based on their title and seniority and thus, it is important for foreign business partners to understand that and observe that (Narayanamurti, 2015, p.58). The shopping behaviour of Chinese consumer has changed with the change of the country’s economic situation. Although the older generation has maintained the old habits of spending, the middle aged wave between new and traditional trends, while younger generations tends to be more westernized, paying more attention to taste and quality (Qui, 2011, p.19). It has also been noted that Chinese people are carrying their youth shopping habits to adulthood. Spending habit is also influenced by individual earning where more get to luxurious products as their income increases. Whisky and wine have broken traditional preference of alcohol in China, as wealth consumers frequently exhibit their status by taking high-end wine, young generations alternatively finds strong traditional spirit, while consumers with lower income consider local beer (Qui, 2011, p.20). The purchase of wine also varies greatly based on individuals, and occasions. Educated people are highly probable to purchase expensive wine. In addition, individual purchasing wine for gifts can normally purchase expensive wine, as long as it is well packaged (Xu & Zeng, 2014, p. 427) Economic Environment China has been experiencing economic transformation for the last three decades. It still continues with this transformation with growth in GDP averaging 10% per year over the past decade. China is currently the fourth biggest economy in the globe with regard to US-Dollar GDP value and the second biggest economy with regard to purchasing-power correspondence (Zhang, 2015, p. 408). This scale of growth is having ramifications on both demand-side and supply-side. The economic growth is creating dramatic impact on the spending patterns and incomes of consumers, especially those living in urban area. Items and food for daily consumption accounts for about 40 per cent of Chinese urban consumer overall living spending. These consumers have also demonstrated considerable increase in spending power, which has resulted to consumption of extensive range of products that were never considered in the past. Urban Chinese currently thirst for ice-cream, frozen foods, fresh milk, ready-to-eat snacks, carbonated drinks, wines and yogurt among others (Uncles, Wang & Kwok, 2010, p.922). Political or Legal Environment Alcohol use has gone through a number of government regulation periods in China. According to Pingali (2011, p.25), from 1100 BC to 1400 AD laws over production of wine were repealed and enacted 41 times. The PRC government in 1990s and late 1980s took measures to enhance healthier and responsible drinking habits in the country. They also encouraged use of fruits rather than grains for alcohol production. The government also increased imported spirits tax in the late 1990s and refused to extend foreign and domestic spirits manufacturing license in the country. However, the entry of World Trade Organization in China in 2001 resulted to the reduction of foreign alcohol import duties. This has resulted to increase in alcohol export to the country. Geographical Environment China is the third biggest nation in the globe having a population of more than 1.3billion individuals (Rahman, 2014, p.15). China is a very diverse nation with considerable regional variations. The country is sectioned into 34 provinces, with four municipalities. The Chinese market is extensively fragmented with every province holding its own dialect, taste ad culture. Eastern China is the most populated and prosperous area with the major business hubs in the country. However, other regions are also growing at a considerable rate. This market variation demands that a company may carefully study the population and select the best market entry point based on the targeted customers (Sovereign Group, 2015, p.12). Technological Environment Like all other countries, China has highly embraced change of technology in both business and social aspects. Advanced IT technology has highly been used in various business operations. The technology is being used in marketing where modern social media marketing is being considered over traditional forms of marketing. IT technology can also be used to gather information regarding consumers’ behaviours and preference in various products. Competitive Environment The market of alcoholic beverage in China is dominated by main firms that include Beijing Yanjing Beer Group Corp., SABMiller plc, Molson Coors Brewing Co., Tsingtao Brewery Co., and Anheuser-Busch InBev SA/NV. According to Pingali (2011, p.26), based on the 2009 MDA data, these five top firms collectively controlled a market volume of 57 per cent. The five companies are also the top players in the FABs, cider, and beer category, proposing that this group drives the general sector of alcoholic beverages. The five top domestic wine firms in China are Yantai Weilong Grape Wine Co. Ltd., Yantai Changyu Group Co. Ltd., Dynasty Fine Wines Group Ltd., Tonghua Grape Wine Co. Ltd., and China Great Wall Wine Co. Ltd. The five wine companies dominate 62% of the wine market in China (Pingali, 2011,p. 27). The Accolade Wines will also experience competition from international companies. According to Xu et al. (2014, p. 266), China wine import market is dominated by France. China also imports wine from USA, Italy, and Australia. Marketing Objectives and Strategies Mode of Entry There are various techniques a company can use to enter into a foreign market. They include use of joint venture, franchising, strategic alliances, co-production, wholly owned operations, and exporting among others. The choice is based on the cost, cultural distance, and governmental regulations among other factors. In this chase, exporting will be the best choice to enter into the Chinese Market. Chinese consumers highly appreciate foreign wine and thus, it is easy to convince them to try a new product made in a known international wine company. In addition, exportation is considerably cheaper since the company will only incur supply chain cost. It will also enjoy subsidised tariffs. The company can make an alliance with retail distributors of goods to sell their product and at the same time establish its franchise to enhance marketing and product tasting (Driscoll & Paliwoda, 1997, p.62). Targeted Segment The company will target the urban population focusing more on educated, wealthy and middle class consumers. It will focus more on young and middle aged individuals who highly belief on westernization and tasting of new products in the market (Williamson, Robichaud & Francis, 2012, p.258). It will consider providing diverse products that fit all occasions including dinners, parties, and gifts, ranging from low, average, and high prices. This will help the company to increase its general sales in the country. Targeting majority of consumers will increase its ability to earn more market share and win customers loyalty. Positioning The company will first introduce its product in major cities in the Eastern part of China. This is because the eastern part is highly populated, highly urbanized, with highly educated and westernized population. It contains the most vibrant population containing young and middle aged people who are among the highly targeted customers of the company. It also contains the three major business hubs in the country and thus, it will be the best part to launch the company products before distributing them to other parts of the country (Sovereign Group, 2015, p.12). Recommended Marketing Mix Pricing Strategies Price sensitivity in the wine industry in the country varies greatly based on consumers. The educated, rich and those purchasing the product for gifts hardly consider their prices. Thus, high pricing strategy can be employed for this group of customers (Balasescu, 2014, p.20). However, the middle class will always go for cheaper products. Thus, the company will have to vary its prices based on the kind of consumers it is targeting with each product. In addition, it is important to note that a new product loses its prestige in the market once a similar highly profiled product is introduced in the same market. In this case, the company has to reduce its prices to support continuous growth of the product in the market (n.a., 2000, p.134). Product Strategies Packaging and branding is very important in the Chinese market. Having a considerable part of the population that is still traditional based, the foreign products should always consider integrating Chinese culture into their branding. For instance, the company has to show its foreign logo since westernization is considered as a source of prestige, and also use Chinese words to attract traditional customers. In this case the company may consider using a phrase like “wine treasure” in Chinese as part of their branding (n.a., 2000, p. 132). The main agenda is to show the population that the company developed this product purposely for them and thus, Chinese words should be used in marketing slogans used in branding. The branding must also be attractive and appealing particularly for wine focusing on those purchasing gifts (Jin et al., 2015, p. 881). Quality must also be highly maintained since the new Chinese generation pays close attention not to prices but the quality of the product (Wang & Song, 2011, p. 28). Promotion Strategies Chinese wine consumers give a high priority to the product taste and quality. In this regard, providing sample for tasting will act as a key to market entry. This should be done until the company is convinced that the interested consumers know their products (n.a., 2000, p.132). Relational marketing which focuses on maintain, developing, and establishing fruitful relational exchanges is highly recommendable. Chinese value relations and harmony and thus, they can easily be attracted to the company’s product by earning their friendship and trust. Thus, relationship marketing should be highly fostered in this case. This can result to major benefits such as winning customers loyalty and referrals (Wang & Song, 2011, p. 12). Other marketing strategies to enhance the product penetration in the market include discounting and media advertisement as a way of creating awareness and attracting more customers. Distribution Strategies The best distribution technique in this case is by use of franchises and selling products in retail stores. Franchising will enhance the marketing process especially through sample testing. It will also ensure that consumers get what they want without sampling so many other products. Retailing on the other hand will give those with habit of testing new products as they see them a chance to try the company’s product. At least two to three franchises will be found in all major cities in the eastern part of China, while the rest are distributed through retail stores. This will increase the product accessibility to all who are interested. Managing the International Performance and Operations The international performance and operations will be enhanced by ensuring that the franchises are well managed and controlled. Franchisors will be required to follow the company’s demands and regulation, and abiding to the set code of conduct. In addition, they will be required to observe cultural marketing requirements such as fostering good relation with consumers. The company will consider working with Chinese people since their labour cost is minimal compared to Australian workers. In addition, the Chinese people clearly understand their culture and dialects and thus, it will be easy to win consumers trust and confidence in the new products, particularly in marketing. The company will also consider maintaining high product quality to be able to maintain its customers and to win many more, particularly when the wine consumption growth reduces in the country. Conclusion Based on the analysis, China provides a big and ready market for wine products based on the recent increase in wine consumption in the country. Moreover, the exports tariffs in the country are highly favourable. The change of consumer behaviour and focus on westernization provides the company a great chance to acquire a higher market share in the country. Thus, the company should consider exporting some of its products in China, particularly in the Eastern parts of China where people are more urbanized, westernized, educated, and sophisticated. Nevertheless, the company must take consideration of Chinese culture to be able to easily enter and grow in this market. Product quality must be highly observed to retain its customers and to attract more. 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