Term Paper
Marketing Warner Edwards Gins in China
Introduction
Globalisation has caused many companies around the world to move from their country of operation to other jurisdictions to set up various businesses. This approach is through foreign direct investment which includes the use of various techniques to ensure that a corporate entity establishes a business in a foreign jurisdiction with the view of making profits and attaining other long-term goals. The international business environment has numerous issues and challenges and this creates the need for the utilisation of a unique system of strategic management in order to thrive and survive in a foreign market.
Warner Edwards is a classic gin and spirit manufacturer in England. They use an up-to-date technological system to refine spirits and sell them throughout the UK and around the world. As the markets in China thrives, Warner Edwards (WE) has the potential to enter the Chinese markets and set up a business unit that can bring profits to the company and increase the wealth of shareholders.
This paper is a market consultancy report for Warner Edwards in their bid to enter the Chinese markets and attain optimal results in that market. This paper will utilise elements of research and analysis to provide a report on a market entry strategy for WE into China. The following objectives will be covered in this report:
A critical review of the export potential of WE’s gins;
An evaluation of the potential of the Chinese markets in relation to the offering of WE;
A recommendation of the marketing mix that WE can employ to survive and grow in the Chinese market.
These three parts of the report will critically analyse and review data and statistics from various sources in order to identify trends and patterns. The procedure will be used to deduce the internal elements of WE, analyse the potential for spirits in the Chinese markets and present a set of recommendations for the actual expansion into China.
Internal Analysis
In order to identify the best means through which a company will expand to a foreign market, it is necessary to evaluate and assess the internal suitability of a company. This is done by critically evaluating the core competencies, abilities and processes used by the company in question. It is based on this analysis that a company can conveniently plan and move into a foreign country in a manner that will ensure optimal results and success.
The most popular tool used in conducting this evaluation is the SWOT analysis which matches the strength, weaknesses, opportunities and threats of a particular company. This is done by evaluating the core competencies of a company and examining its major limitations in order to deduce the opportunities and threats for expansion into other foreign markets.
Fundamentally, WE is a small private distillery outside London that was set up by best friends with the support of business angels. The founders both grew up on family farms and have similar backgrounds. They met in an agricultural college in 1997 and have built a strong friendship which has lasted to this day. There is a personal touch to the kind of distillery they carry out and this involves the direct and personal supervision of every single bottle of gin that is produced from start to finish.
Warner Edwards is located in a village called Harrington, Northamptonshire. The environment for the production of its gins and spirits is natural and involves the use of water from the farm’s natural spring and home-grown ingredients from the farm. The reputation of WE is strong and it includes the company’s ability to produce smooth and aromatic gin. Every bottle is handmade and this includes supervision from the distilling to the bottling stage. The production includes the use of a wax seal and a label finishing which gives WE a bespoke and hand-craft view from the outside.
The spirits produced at WE are classic and they are produced with some of the most modern and respected technologies. This includes some of the best machines that were acquired in the past few years with the ability to give WE a lot of advantage over competitors. This is something that enables them to also flexibly change and include various items into the spirits to make them suited for consumers.
There are four quality brands that gives WE the ability to specialise and provide more services to the consumers. The brands include Harrington Dry Gin, Harrington Elderflower Gin, Harrington Sloe Gin and Harrington Rhubarb Gin. These are popular brands that help them to cater for different clients’ needs and also go further to meet specific demands on the markets.
In spite of these benefits, Warner Edwards has a number of weaknesses. Fundamentally, they are known for producing just 10,000 bottles of spirits each year. This is just a small amount of gin which focuses on a small market. Thus, in seeking to enter a market like China, there is an inherent challenge of how to get to 1.5 billion consumers. Thus, there will be the need for a major expansion in the production base in order to meet up with the challenge of entering a market as huge as China.
Secondly, WE is a family-owned entity which is limited to English shareholders. Their capital base is limited because the company was formed by just family members and business angels. Thus, the expansion into a major market like China seems to be a huge task that could be so daunting and challenging.
Furthermore, WE has a limited capital base. In China, a company will have to expand its tentacles and compete with major giants from all over the world. This is a mass production market and with the status of WE, this will be quite difficult and challenging.
Chinese Market Analysis
In order to address the possibility of entering and succeeding in China, there is the need to analyse the cultural framework and the business environment within which a business operates. Cultural analysis is meant to examine the fundamental paradigms within which people think and define what is right and wrong. On the other hand, the business environment analysis involves the evaluation of the political, economic, social and technological factor relevant to the market.
In order to understand the Chinese market, it is important to use the Hofstede Scale to evaluate and analyse the Chinese market in relation to the UK markets. This can help to formulate ideas on how to market the products and formulate an appropriate marketing mix. The Hofstede Scale places every country and society into five core dimensions.
Figure 1: Hofstede Scale: China & UK
Figure 1 above shows that the Power Distance in China is huge, subordinates expect to be distant from their bosses and this is a sign of an authoritative society. Chinese society is collectivised and this is seen by the fact that individualism is very low. Long-term orientation is high in China and the level of indulgence is very low. This should provide views on how to present gin and spirits to Chinese consumers.
China is a Communist country and is ruled by a one-party system led by the Communist Party and its elites. It is the most populous country in the world with 1.38 billion people. Until recently, China’s activities were heavily regulated and everything British or American was considered a luxury. However, with the modernisation of the country and China’s accession to the World Trade Organization (WTO) opened up a new chapter where an upper class and wealthy middle class emerged that developed a taste for western products like American gin . China’s foreign gin and spirit consumption doubled from the 2006 levels was in 2014 as per projections.
In spite of the encouraging improvements, there was a major crackdown on corruption by the new Chinese government that caused the demand for imported products to fall significantly in China. Although many products were affected, cheap spirits remained in vogue throughout China and sales did not fall significantly.
After Brexit, Britain is moving towards a process of improving its trade relations with foreign countries around the globe including China. Thus, Britain has an upper hand since China and the European Union have had a number of tensions in recent times. As such, Brexit allows for Britain to get better and more favourable deals for British businesses in China.
The background of a country can provide the basis for the formulation of a PEST analysis which is a strategic tool for scanning the environment. This is presented in Table 2 below.
Marketing Mix and Recommendations
There are some important pointers from the PEST analysis and the Cultural analysis that provides a lot of information and guidance about the way Warner Edwards spirits can be presented to the Chinese consumers. This include important indicators and pointers that have been identified.
First of all, the current Chinese administration is expected to stay in power for another 7 years. They seek to reduce the levels of luxury and require Chinese workers to do more for the Communist party and its activities. Thus, it is important for Warner Edwards to present its brand in a cheap form that the ordinary Chinese citizen can afford. This is because things are not going to change any time soon.
Secondly, there is an abundance of labour in China. As such, it is possible to mass-produce at a high rate. The high population is sure to guarantee a high level of demand which will compensate for the lower profit margins. And if the brand becomes a household brand, there is the potential for expansion.
Thirdly, a long-term orientation and desire to support the brand in a way that promotes family matters and social structures of China is likely to help. This is because the Chinese society is low-indulgence and as such, there must be a focus on things that are collectively acceptable and also, on the long-term prospects of consumers and their products. Thus, WE must consider selling in events that relate to generally accepted processes and procedures.
Finally, there is the need to emphasis on the British source and origins of the products. This will help to make them more acceptable in order to gain a higher market share. This is because Britain is seeking to enter the Chinese markets in a strong way. This is after the conflict and frictions between China and Europe and America in recent times. Therefore, the presentation of WE as a British brand is likely to be benefit from a higher level of goodwill amongst Chinese consumers. These consumers are more willing and able to do things in the context of a British-oriented package rather than a foreign and strange packaging and offering.
In order to effectively make the best of the circumstances at hand, it is necessary to formulate a market positioning. This is done by the use of the 7Ps which involves the presentation of specific plans for a particular target market. Warner Edwards can thrive and gain the best results in China’s markets by applying the following recommendations:
Product: They have to get factory-produced versions of the Warner Edward gins in China. It will not be appropriate to export directly from the United Kingdom. This is because the cost of production will be too high and the transportation will also be expensive. Thus, it will be more appropriate to come up with a local system of production whereby the focus will be on providing mass-produced version of the four brands that are sold in the UK. However, the ingredients must be as close to the UK products as possible but it has to be labelled with something with the Union Jack and the British identity.
Place: The WE gins that would be sold in China will have to be produced in factories near the major cities in eastern China. This way, there could be factories near the major cities of Beijing, Shanghai and Guangzhou. These factories will be connected to various production and distribution outlets that would lead to urban centres. The sales will be done through ordinary Chinese shops where WE gins will be offered alongside other brands in order to gain results. There should be a multichannel approach to selling WE gins in China.
Price: The pricing strategy should be one that would allow WE to gain a low profit margin, but target the over 1 billion consumers in China. Thus, the WE gin should be sold at a low-cost with the idea of gaining market penetration. With time, various classics could be introduced to the market as hand-made versions directly imported from the UK. However, for now, a local version of WE should be sold at a low-cost for a low profit margin.
Promotion: Warner Edwards must expose its brand through the sponsorship of events. This way, they can expose their brand and get people in China to build an affinity with the brand. They should also consider signage in the shops they will sell their gins. This way, people can build a connection to the brands. Since television commercials are highly regulated in China, it might be more appropriate to use person-to-person advertising techniques as well as social media marketing to create a revolutionary measure of marketing and promotion.
People: The employees of WE must wear WE clothes and they should be seen as cultural ambassadors of the UK. This way, there will be the institution of a British identity in the workplace and everyone will appear to have some connection to the UK.
Process: This process will include the presentation of volumes of produced WE gins form the factor to shops and other channels in the major cities of China. This will be offered to clients like other drinks.
Physical Environment: WE could have a special section where they will display their own unique products and present them in shops. This way, they will be unique and distinct and consumers can easily identify their sections of shops and purchase their gins.
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