Undoubtedly, strategic planning and management have a significant contribution to business success. Planning entails setting of company’s goals and objectives as well as the determination of resources needed to achieve the set objectives. Starting a new venture in a competitive market requires prior preparations and adoption of effective strategies that will help the business to survive. This essay will summarize the basic planning for a new alcohol beverage venture that targets the global market.
Reasons for selecting for selecting China as the target country for the new venture
China has a large market for alcoholic beverages. According to statistics, more than 50% of men and over 15% of women consume alcohol (Wei at al., 1994). Additionally, alcohol consumption is not prohibited, and the government does not restrict alcohol consumption to particular gender or age group. The level of political stability is high enabling businesses to operate with minimal political risk. Favorable economic conditions prevail in China, and financial markets are very strong. Besides, businesses have access to loans at low interests enabling them to operate at low financial risk.
Determination of marketing mix
Marketing mix entails a combination of factors that make products more appealing to consumers. The market for alcohol beverage is highly competitive. As such setting of favorable prices makes the product more attractive to customers. Moreover, customers are attracted to low price even if the product is unfamiliar. Promotion enhances the marketing through activities such as advertising and offers. Products should be in the market any time they are required. Customers grow their confidence with the firm’s products when there is consistency in supply. Thus, the best marketing mix for a new company in a competitive market a combination of price and place. Offering favorable price for the product will promote the demand. Additionally, ensuring regular product supply will help to increase customers’ confidence in the new brand. Market indicators entail tools that traders use to determine the trend of their business. Hang Seng Index and the Shanghai SE Composite Index are most appropriate for the determination of the strength of the product’s market and the capacity of business to raise more capital (The e-book, 2011). Moreover, these indicators are breath and long-term market indicators.
Financial Overview
Activities of the firm depend on its financial capability. Preparation of a budget helps the managers in determining the financial constraints facing the venture. All estimated costs of the new undertaking fall under six main categories.
Sources of financing
Businesses usually obtained capital through internal and international borrowing. Financial institutions in China offer loans at affordable interest rates (Triami, 2016). Thus, internal sources of finance include borrowing from local banks such as commercial banks. International financing entails obtaining financial support from international financial agencies and development banks.
The primary objective of business organizations is to maximize profits and minimizing operations risk. Making quality decisions is essential for businesses. Therefore, most of the business operations should be centralized. Top executives are involved in major decision making which increases the efficiency and quality of decisions resulting in high profits and low-risk exposure.
Appropriate exit strategies
Setting exit strategies entail defining the procedure for closing the business or leaving the market. Exit strategies are essential for determining the ultimate position of the business in relation to profit. One of the most appropriate exit strategies is divestiture of assets which entails selling some of the company assets (Gillespie and Hennessey, 2015). The revenue generated from this sale can be used to pay debts, invest in other business or to facilitate business operations. The second best alternative route to exit market is diversification. This strategy helps in averting risk of failure and ensures continuity of business even if one brand of product loses market (Cagape, 2010). Shutting down operations due to short-term loss is not advisable since it results in loss of fixed capital. The major contingencies that new businesses struggle to overcome include the reduced capacity of business to stand stiff market competition and barriers that incumbent firms impose to prevent new entry.
Recommendations about the feasibility of the new venture
Considering the market situation, production of new alcohol brand is a profitable business in China. The large market and conducive business environment enhance the establishment of new ventures. Additionally, accessibility to capital is easy due to the availability of low interests loans and international financing. Thus, the financial risk of operating business is low. Proceeding with business is the best option despite challenges such as cutthroat market competition. There exist high prospects of business success due to growing market. The high tendency for population growth creates an opportunity for a large customer base. Shutting down operations due to competition and other unfavorable market conditions will result in loss of fixed capital whereas perseverance will lead to long-run profitability.
Conclusion
Strategic planning is indeed the central pillar of business organizations. The success of business ventures hinges on the efficiency of management strategies. Despite numerous advantages associated with trading in alcoholic beverages in China, there are possibilities of business failure due to inefficiencies of management strategies. Determination of best marketing mix as well as exit strategies is essential for business success. Additionally, preparation of budget helps in the estimation of expected expenditures and assessment of potential sources of finance.
References
Cagape, E. W. (2010, January 16). Google’s china exit strategy. Retrieved April 24, 2016, from http://www.seo-hongkong.com/blog/google-china-exit-strategy-2773.html
Gillespie, K., & Hennessey, D. H. (2015). Global marketing. United Kingdom: Routledge.
The e-book of technical market indicators 2.0 complex technical analysis made simple how to build a rational decision making framework (systematic trading model) based on different kinds of technical market indicators. (2011). Retrieved from http://www.swing-trade-stocks.com/support-files/indicators.pdf
Triami Media BV. (2016). PBC base interest rate - Chinese central bank's interest rate. Retrieved from http://www.global-rates.com/interest-rates/central- banks/central-bank-china/pbc-interest-rate.aspx
Wei, H., Derson, Y., Shuiyuan, X., Lingjiang, L., & Yalin, Z. (1999). Alcohol consumption and alcohol-related problems: Chinese experience from six area samples, 1994. Addiction, 94(10), 1467–1476.
