Wahaha International Strategic Analysis - Essay Example

International Marketing Introduction Since the 1980s, the worlds purchased beverage consumption has increased rapidly. The global beverage industryhas entered a high-speed-intensive industry, and geographical differences in consumption are more pronounced (Carl McDamel, Jr.& Roger Gates, 2000). After the reform and opening up of this consumer market, almost all of the worlds beverage giants are in a fight for the throne of China. At present, Chinas largest soft drinks market share of the carbonated soft drinks market has been occupied by the two companies of Pepsi and Coca-Cola. How one competes with international brand giants already established in the market and open up the domestic living space to local companies is the problem Chinas beverage industry must currently face. Wahaha Company was established 10 years ago. From the initial development of a school-run factory to Chinas national backbone of the beverage industry, Wahaha has become one of the few beverage producers in the country to meet the challenge of leading international brand companies. Although Wahaha Company built factories producing the world’s top five beverages and foodstuffs of Danone Group, and exports products to the United States, Canada, Italy and other countries, Wahaha has always maintained a target focus on the domestic market rather than to develop the international market. This article will analyze the international beverage industry market and explore the internationalization road of Wahaha Company in building a strategic vision for the Chinese beverage industry to develop their international market. 2 Situational Analysis 2.1 Wahaha international strategic analysis Corporate-level international business development strategy is based on the internal and external environmental analysis to determine intention to enter new countries and regions. The international strategies of the corporate management level will need to determine the specific elements of how they wish to enter the chosen market (Michael E. Potter, 1997). Corporate business-level generic strategies are divided into three types: overall cost leadership strategy, differentiation strategy and focus strategy. The overall cost leadership strategy can be analyzed using Porters competitive advantage matrix to represent a common strategy (Appendix 1). It relates to market entry and market expansion strategy research. As the Wahaha Group is still a relatively young company with limited experience in international business, it should choose a waterfall model to enter the market in the early stage of internationalization, expressed in Appendix 2. For the present, Wahaha’s entry into the U.S. market has a certain trade foundation and marketing relationship, and the U.S. market demand is large with high degree of opening. Opening the U.S. market is thus more feasible than other markets on the international scale. Integrating Wahahas low-cost strategic advantage, the international strategic initial goals and the market entry mode, it is believed that the company can choose specialization and cost leadership strategy with great success. The next challenge is to determine which specific products should be used by Wahaha to conquer the U.S. market. 2.2 The international market conditions and SWOT analysis of Wahaha products Since the present study is currently only taking into account the U.S. market, comprehensively measuring the national, regional factors, product factors and business factors and market conditions (Michael Czinkota, Itkka Konkainen, 2004), this article argues for the idea that the company should provide differentiated products to consumers in the United States. The new tea drinks that have been introduced in the product line would be a better choice than carbonated soft drinks. The following SWOT analysis will be used against Wahaha tea drinks in the U.S. market for marketing strategic options analysis. 2.2.1 Strengths and opportunities 1) product factors - tea industry and its development trend Tea, coffee and cocoa are called the worlds three major non-alcoholic beverages. Research shows tea is rich in amino acids, vitamins and trace elements for health benefits, providing health care for active retirement, medical treatment recovery from fatigue and health and beauty benefits. The step-down anti-cancer properties of tea are incomparably superior to that of other beverages. Cocoa will be fattening and may even lead to certain childhood diseases as there are measurable side effects of caffeine on the human body. The U.S. coffee consumption in 1957 was only 65 percent and today remains relatively stable. On the contrary, tea consumption increased significantly in recent years: In 1960, the U.S. per capita annual consumption of tea was 0.31 kilograms of tea, and now the amount of per capita annual consumption of tea has increased to about 1 kg. In addition, the U.S. tea industry has long organized a number of scientific research and advocacy activities on "Tea and Health". As the concept that tea can prevent and cure ailments becomes increasingly accepted by more North Americans, the price of tea will become much higher because of the increased demand. Consumer trends indicate the changes in the United States’ population age structure are having an effect on consumption and lifestyle choices. Peoples consumption patterns regarding the structure of tea has also changed as people are advocating a more rapid and convenient way of obtaining tea. This indicates that the development of the tea room is enormous. 2) business factors - Wahahas market competitiveness In the production of tea drinks in China, each company has its main brand. Entering the 21st century, Master Kong, Unity and Wahaha have always occupied the top three positions, but Master Kongs market share has declined slightly, while Wahaha showed an upward trend year by year. This shows that the Wahaha tea beverage products companies have strong market competitiveness, and good prospects for the development into new markets. Its international markets have better technology, experience, support and practical development capabilities (Appendix 3). However, Appendix 4 demonstrates that Wahaha has a long way to enter the United States market and claim its share; however, it does have the potential. 3) relevant industries factors - the passive situation of tea changing tea export In recent years, Chinas tea production efficiency continued to decline, mainly because of the following factors: accession to WTO, foreign enterprises take advantage of strong capital strength and management strengths for all-round competition with Chinas tea enterprises, squeeze domestic enterprises market share. developed countries have to improve "green barriers" which impede Chinas tea exports. the technological level of Chinas tea industry is low, operating on a small scale and having a lack of well-known products. From the foregoing factors, Chinas tea export market is not ideal and the situation is ripe for someone to develop a strong Chinese brand in the tea industry, to build an international tea export marketing system in order to change the passive situation and to enhance the value of Chinas tea industry. 2.2.2 Threats and weaknesses 1) the domestic market is unstable, and foreign threats are large. Large market research firm AC Nielsen conducted a survey which showed that in recent years, the pace of development of Chinese tea drinks market is over 300 percent. Tea drinks have become the third largest drinks sold, second only to carbonated beverages. Huge market potential has attracted the attention of several beverage giants to form a situation in which multi-party capitals are crowding together. In the funded enterprises, in addition to Robust, Huiyuan, Jianlibao, the Hangzhou Wahaha Group has the strongest momentum. Tea products with Japanese cultural backgrounds have the fiercest momentum. In addition to the "Suntory" which has been entrenched in the Shanghai market for many years, the Japanese beer brand "Unicorn" and "Asahi" also entered the Chinese tea beverage market. 2) the overall technological level of Chinas tea is not high. Chinas tea production equipment is primarily limited to conventional beverage equipment, and there is a big gap compared with the advanced countries. There is an especially large gap in tea extract, sterilization and aseptic filling equipment. In process technology, to solve tea turbidity, sedimentation and maintenance of key technologies such as flavor and quality has not completely crossed the border. Compared to Japan and other tea beverage processing technology countries with higher levels, there is not a small gap. 3 International Marketing objectives In the United States: sales of 221 million U.S. dollars; gross profit of 57 million U.S. dollars; gross profit margin was 28%; net profit of 600 million U.S. dollars; market share of 6.3%. 4 Marketing Strategies Marketing is targeted at the consumer of market commodities. In the international marketing activities, because of the difference in the political, economic, geographic and climatic environment for consumers, national characteristics, history and culture of different origins and religious beliefs, income levels, spending habits, consumer characteristics, buying behavior and other elements of market consumption are different. This therefore constitutes a unique consumer demand (Andrew Kupfer, 1988). In order to meet various needs, we must take the appropriate marketing mix, implementing the appropriate marketing strategy (Michael E. Potter, 1997). 4.1 Elements of international marketing strategy of tea drinks Implementation of international marketing strategies needs to strengthen attention to the key points that will sell the brand. The following focuses on Wahaha and the whole tea drinks to analyze the elements of analysis for international marketing strategy for achieving the true globalization of Chinas beverage industry. 4.1.1 Health quality People’s awareness of health is growing and tea as a natural health drink has a high reputation. It is precisely because of teas health benefits that have brought about the development of this market space, so it is important to ensure the health of tea and good quality is top priority. 4.1.2 Contained in tea culture Any goods are the conquest of human intelligence to material form, with the dual spiritual and material endowment. How to tap the spiritual content of the product itself and realize the commercialization of their spiritual values is the secret of corporate marketing. Coca-Cola has developed their brand over more than a century. One element of its success lies in the establishment of "youth, vitality, enjoy, Oh, make smooth" brand positioning, the American spirit, emotional and lifestyle Roujin brand. Therefore, Coca-Cola has not only a beverage brand, it also represents the essence of all thinking Americans. China has a long history of tea culture in the material quality on the well-transformation in the cultural heritage on the infinite sublimation. If the tea companies rely on the modern image of youthful vigor to attract young peoples attention, a lack of thinking, soul, tea culture and other deep-seated conception, will make products lack the core brand qualities. 4.1.3 Integrated Chinese and Western The tea consumption patterns in the United States are different – in the United States, more than 80 percent of tea consumption is the ultimate way to make iced tea. In other words, whether it is brewing tea in boiling water, juice or cold water soluble instant tea liquid, add lemon, sweetener, alcohol, with or without condiments, drink when you have spent the majority of ice (stained), or pre - placed in the refrigerator to cool it down for iced tea. Iced tea conforms to Western society, especially the young fast-paced lifestyle, and as sports drink is also highly respected. As can be seen from the best-selling iced tea, the U.S. consumer market is very different from the present state of Chinas enterprises, so Chinese enterprises should carry out further research on the U.S. consumer market demand characteristics of tea to launch the product easily accepted by the Americans. In addition, Chinese enterprises can also combine Chinese and Western food culture and customs, characteristics, development characteristics of both the multinational tea drinks, non-follow up the implementation of the creative product strategy. For example, a new type of bio-health food – Chinese coffee tea, successfully developed in Zibo Biotechnology Development Co., Ltd. 4.1.4 Standard production Developing standards for the tea beverage is a solid basis to ensure tea beverage production for sustained and healthy development. Chinas tea industry standards for tea drinks definition, classification, technology, test planning, marking, transportation storage, etc. have done detailed provisions, tea beverage enterprises should strictly be in accordance with industry standards for production. Especially on the international market of tea drink enterprises, usually products comply with international standards ifas their entry into the countrys market access conditions, standardized production will undoubtedly raise the overall level of the industry overall, promote fair competition and winning a good reputation are a great help. 4.2 Specific strategy steps (1) Discount retailer Wahaha in the next year will continue to implement strategies in this years quantity discounts. (2) Sales staff training The training of salespeople is from December 1 until the beginning of new marketing activities to be carried out so far. (3) 800 times to open a 24-hour toll-free hotline December 1, 2009 onwards the company will set up 800 times a 24-hour toll-free hotline and customers to discuss the issue of Wahaha tea drinks. (4) Retail store strategy The activities of the retail store will be the implementation arrangements including the following strategies: In the Wahaha tea drinks soon shipped to retailers prior to, or more precisely on December 1, 2009, Wahaha Company will notify the retailer. Retailers who purchased 10 boxes of Wahaha tea drinks will receive a free product poster. Wahaha Company will also distribute prepared and printed product brochures for sales staff in retail stores and to send to potential customers. (5) Shows campaign This activity will be in each retail organization. These promotional activities include advertisements repeatedly broadcast to consumers to use Wahaha tea drinks and their new products. (6) Apply to advertising If the retailer cooperative advertising funds to invest, then they will get to purchase 2 percent of the amount of benefits. But it is conditional, and only when they will be introducing advertising content focused on the aspects of Wahaha tea drinks. Cooperative advertising funds accounted for half the advertising costs. (7) Program to stimulate sales Wahaha tea drinks for those who purchase the value of 5 million U.S. dollars, and paid the retailer, Wahaha companies to provide them twice a year, continuing a week incentive activities. Its specific contents include: In stimulating activities during the period, retailers will donate a view to cooperative advertising funds raided by 50 percent. In this way, retailers will receive an additional amount in order to stimulate the base period to purchase 5 percent of the cooperative advertising allowances. Retailers to purchase the amount of incentive period will be an additional 5 percent for discounting 5 Implementation & Control 5.1 Sales channels The fierce market competition played against Wahaha brand has numerous reasons for defeat, not because Wahaha is more powerful, but it is precisely because Wahaha is already located at urban and rural areas across the country without a strong sales network in order to match. It can be said to provide consumers with convenience as the key to winning the Wahaha brand competition. Wahaha sales network construction in the United States may be as follows: 1) firms to implement a win-win between the aggregators body system Wahaha may select more than 1,000 dealers with advanced concepts, strong economic strength, higher loyalty in all states in the United States, for a composition of sale system that cover almost every town in the United States, to create a strong distribution network. 2) build a stable and orderly sharing network Wahaha on the basis of the aggregators body second groups of providers through the establishment of special marketing network, and gradually weave to a closed state of the marketing system spiders web, not only can enhance the rapid penetration of Wahaha products, but also can improve the dealers on the market control, so as to achieve rational layout, depth distribution, to enhance delivery capacity and enhance service awareness. 3) to create the brand with distributors Wahaha sales target this year in the United States is 1 billion and is expected to have only 1,000 sales staff throughout the United States. Wahaha is dependent on the aggregators body of policy, is the size of tens of thousands of distributors and Wahahas determination and action to create the brand. Wahaha based on the Joint Sales bodies and special two networks can introduce sales territories of accountability. Distributor change from passive to active, actively cooperate with the companies jointly made the brands long-term strategic planning, has greatly enhanced the companys loyalty and identification with the product, but also consciously strengthen the sense of responsibility, improved management capacity and market development capabilities. Because Wahahas policy made them aware of: the market is everyones, the brand is shared by companies and interests are in common. 5.2 Main implementation Wahaha has two issues for requiring clarification. First, it must establish a defensive market position having retailers and customers. Second, it must raise prices in order to restore to their original levels of profitability. This years marketing plan will establish a stronger market position as the center of defense. The customer is, primarily by significantly improving product introduction to meet their needs; for retailers, when to carry out a unique marketing campaign focused on how to meet their needs. Next year, Wahahas market position should be changed, making it the foundation to raise prices. Wahaha companies should implement the key actions, its strategy is as follows: 1) increase visibility to consumers and Wahaha product support: The introduction of easy to understand "product introduction book" For the cooperative advertising program provides some advertising materials, whose central elements is to emphasize the quality of Wahaha is excellent. 2) Wahaha products retailers seek support: Continue to implement the plan of discount to retailers Provides in-store display to help the Wahaha products Retailers to develop a publicity campaign, emphasizing the benefits of Wahaha. This year, sales of Wahaha sales of 5 million to organize a retail incentive programs. References Andrew Kupfer, 1988, How to Be a Global Manager, Fortune, March 14, pp.52-58. Carl McDamel, Jr.& Roger Gates, 2000, Contemporary Marketing Research, 4th Edition, China Machine Press Michael Czinkota, Itkka Konkainen, 2004, International Marketing (6th Edition) Publishing House of Electronics Industry Michael E. Potter, 1997, Competitive Strategy, Simon & Schuster Wahaha Company News, 2005, Tea Expo in Hangzhou, Wahaha Longjing tea drink ready to go. Retrieved July 18, 2005 from ‘Wahaha’ Company Profile, 2004, China Business Review (CBR). Sept-Oct, pp. 59-62 ‘Wahaha claims top spot’, 2004, Beijing Review, Business, Retrieved July 12, 2005 from Warren J. Keegan and Mark C, 1997, Green, Principles of Global Marketing,Upper Saddle River, NJ: Prentice Hall, pp.294-98 Warren J. Keegan, Global Marketing Management, 4th ed. (Upper Saddle River, NJ: Prentice hall, 1989), pp. 387-81. Appendix Appendix 1 Porters competitive advantage matrix Appendix 2 Waterfall model to enter the market Appendix 3 Market share of tea drinks in 2002-2004 Brand 2001 2002 2003 2004 MASTER KONG 11.1 15.4 11.8 10.8 Unity 4.0 6.5 6.7 6.7 Wahaha 3.4 4.4 5.9 6.1 Suntory 1.8 1.5 1.4 1.4 Oddsey 0.7 0.7 0.7 0.7 Wang Lao Ji 0.4 0.4 0.6 0.6 Huiyuan 1.6 1.0 0.7 0.5 Tea King - - 0.1 0.5 Unicorn 0.4 0.4 0.4 0.4 Nestea Ice Rush - 0.4 0.3 0.3 Sky and Earth 0.4 0.3 0.2 0.2 Asahi - 0.1 0.1 0.1 Coca Cola 0.1 0.0 0.0 0.0 Sunrise 2.7 1.1 - - Others 73.3 67.5 70.9 71.6 Total 100.0 100.0 100.0 100.0 Appendix 4 Top ten selling soft drinks in the United States in 2006 Source: http://money.cnn.com/2007/03/08/news/companies/softdrinks_sales/index.htm Read More