International Marketing of Vintage Wines - Essay Example

?Running Head: International Marketing International Marketing [Institute’s International Marketing Introduction Vintage Wines is one of the most well known and emerging brands of Indian wine market which have been able to capture a significant portion of the Indian wine market. The company manufacturers one of the finest quality wines but it is operating on a smaller scale in India. Due to the increasing pressures of competition from existing and new players in the Indian market and other macro environmental factors, Vintage Wines has found it difficult to retain its market share lately. The company has considered domestic expansion since India is home to more than 1 billion people making it the most populous country in the world but the same would not be a sustainable and long-term solution since the competitors are most likely to follow the company. Vintages Wines has the potential to expand in the international market, which would benefit the firm in many ways. First, it would allow the company the company to widen its customer base, which would in turn lead to greater revenues and profits. Second, conducting businesses in a foreign country and home country at the same time would make Vintage Wines absorbent to regional shocks (Kotler, Keller, Brady, Goodman, & Hansen, pp. 384-386, 2009). Third, it would allow the firm to apply the already known tips and tricks in the foreign market and in turn learn new experiences from the foreign market, which could be used to maximize revenue in the domestic market (Cant, Strydom & Jooste, pp. 104-105, 2009). After considering various aspects of business such as economy, purchasing power of customers, customer perception about wine, culture, growth of business, government legislation and others, United States was chosen as the market to enter. This paper is an attempt to explore the various aspects of expansion of Vintage Wines into the US market. The same would be done by looking at the possible market entry markets, best-fit marketing mix, importance of logistics and organizational controls. Discussion Market Entry Method According to the literature available related to international market entry methods, “exporting, licensing/franchising, joint ventures/strategic alliances, and full ownership/direct entry” (Armstrong, Harker, Kotler, & Brennan, pp. 52-58, 2009). are the four broadly defined market entry methods. Furthermore, the factors, which influence the market entry methods, are the speed of entry, level of involvement and control, level of risk, investment, and market costs and level of return (Armstrong, Harker, Kotler, & Brennan, pp. 52-58, 2009). Each of the market entry method has its own pros and cons and none of them is the best for every firm and every situation. Each firm would look into its resources, market, situation, and other variables to find out the “best fit” (Czinkota & Ronkainen, pp. 74-78, 2007). Considering the case of Vintage Wines and its entry into the United States, it appears that the option Joint ventures and strategic alliance would be the best option for Vintage Wines to enter into the United States market. This option lies between the two extremes of exporting and full acquisition (Cateora, Cateora, Gilly, Gilly & Graham, pp. 320-325, 2010). The former option minimizes the risk and investment costs but at the same time, it gives minimal control, returns, and is not a long-term option. Moreover, the later option has the potential of high and long-term returns with more control and involvement in the business but at the same time it increases the risk, time required for entry, investment, and market costs (Cant, Strydom & Jooste, pp. 104-105, 2009). Nevertheless, the option of forming as joint ownership or strategic alliance with an already existing wine manufacturing company in the United States lies in between of the extremes and is a moderate option. Joint ownership or partnership would allow the Vintage Wines to enter in the US market with moderate investment and factors such as speed on entry, level of risk, control, involvement, and returns would remain at an acceptable level (Onkvisit & Shaw, pp. 529-523, 2008). Second, another reason why Joint ownership is the best option for Vintage Wines because the company lacks the financial, intellectual, managerial and other physical resources to set up a new business on its own or acquire an existing business and run it (Lamb & McDaniel, pp. 194-195, 2008; Muhlbacher, Leihs & Dahringer, pp. 60-62, 2006). Third, this would allow Vintage Wines to acquire the support an existing local firm to conduct its business. The ally or partner would not only familiarize Vintage Wines with the dynamic, ups and downs and tips and tricks of the US wine market but would also vintage Wines to use its existing supply and distribution channels (Dubois, Jolibert & Muhlbacher, pp. 510-513, 2007). The company may also be able to take benefit of the existing partnerships between the US firm and its suppliers and distributors. Fourth, by working with an already establish company, both the partners would be able to reap the advantages of economies of scale which may lead to significant cost benefits (Cant, Strydom & Jooste, pp. 104-105, 2009). Fifth, from a strategic perspective, merger of two companies with each other, Vintage wines and its US counterpart would result in the formation of a bigger and more powerful entity. Porter Five Forces tells us that the threat of rivalry amongst the existing competitors is one of the biggest profit-eroding forces in most of the industries (Cateora, Cateora, Gilly, Gilly & Graham, pp. 320-325, 2010). The same is also true for the US wine industry. However, important here to note is that rivalry is fuelled when companies are of the same size but when there is great deal of disproportionality between their resources and sizes, they are less likely to engage in competitive rivalry (Bradley, pp. 631-634, 2005). Quite understandably, this merger would give birth to a bigger firm, which would be a positive step towards decreasing the rivalry in the industry. Furthermore, with this decrease in rivalry, the biggest beneficiaries would the companies themselves since this would allow them to earn higher profit margins (Kotler, Keller, Brady, Goodman, & Hansen, pp. 384-386, 2009). Sixth, from a long perspective, Vintage Wines will not always have to work in that joint partnership but with the passage of time, as it gather the financial and knowledge resources of establishing a business on its own. A few years down the road, it may start its own business to reap the maximum benefits (Armstrong et al., pp. 52-58, 2009). Seventh, quite understandably, if Vintage Wines decides to follow the method of full acquisition then there is all the possibility that the company would face problems in understanding the business and market culture of United States of America. Without any doubts, India is not away from United States in terms of distance but also there cultures have sharp differences (Onkvisit & Shaw, pp. 529-523, 2008). The business history and corporate world is full of examples where companies, both big and small have done some terrible mistakes by failing to understand the culture of country where they decided to conduct business. Therefore, presence a partner who is aware of the local culture and its dynamics would save Vintage Wines a lot of trouble (Czinkota & Ronkainen, pp. 74-78, 2007). Marketing Mix Quite understandably, the core of marketing is the marketing mix that is made up of four Ps of product, price, place, and promotion. Together these four Ps make up an important part of the overall marketing picture. Vintage Wine has its certain marketing mix, which it offers for its Indian customers. Without any doubts, that marketing mix is best suited for the needs, wants and dynamics of the Indian market and may not be successful in the US market as well. Therefore, it would be important to make certain important adaptations to the marketing mix for the US consumers (Kotler, Keller, Brady, Goodman, & Hansen, pp. 384-386, 2009). Product Important here to note is that the product which Vintage Wines would be offering to its US market is a nondurable product, which would be consumed quickly with repeated purchases. Furthermore, in terms of consumer goods classification, the product appears to be a shopping good. More specifically, it would be a heterogeneous shopping good, which means that all products of other competitor would differ greatly from each other in terms of quality, taste and other features, which would be more important than price (Mullins & Walker, pp. 603-609, 2009). Nevertheless, the Indian market and consumers are more price sensitive than American consumers are. Indian consumers are more likely to distinguish and base their purchases on the prices of the product but a considerable number of the American consumers search for more and more information about the features, taste, brand, manufacturing, origin, and ingredients of the wine (Dubois, Jolibert & Muhlbacher, pp. 510-513, 2007). Price is an important criterion but it does not rank at the top of the list in the American market. As mentioned earlier, a huge segment of American consumers would be willing be pay a higher price for a differentiated product. Therefore, Vintage Wine’s product strategy has to be based on differentiation (Cateora, Cateora, Gilly, Gilly & Graham, pp. 320-325, 2010). Its product design, product quality, product features, and product branding have to different from that of the other competitors (Mullins & Walker, pp. 603-609, 2009). Despite the fact that there is a lot of potential in the American market and values of consumerism and luxury fuel growth and high revenues for the producers and sellers, it is important to note that the competition is fiercer in the American wine industry than in the Indian wine industry (Pickton & Masterson, pp. 88-89, 2010). Indian wine industry is infant and still learning but American wine industry has well established and players that are known at international levels (Marshall, Johnston & Johnston, pp. 344-345, 2009). Therefore, Vintage Wine’s product cannot be “some product” but it has to “the product” with unique form, features, performance quality, conformance quality, and style (Armstrong, Harker, Kotler, & Brennan, pp. 52-58, 2009; Pride & Ferrell, pp. 458-461, 2007) Price Price is an important part of the overall marketing mix, not only for the marketers but also for the entire company since it generates all the revenue (Pickton & Masterson, pp. 88-89, 2010). Considering the economy and purchasing power of American people, it appears that a standardized price strategy in Indian and American market may backfire (Marshall, Johnston & Johnston, pp. 344-345, 2009). Vintage Wine’s prime objective behind price setting in India was gain maximum market share; however, the same will not be the objective in the US market. That explains why Vintage Wines was using penetration pricing in India but it should use premium-pricing method in US with targeting a certain return on investment (Gillespie, Jeannet & Hennessey, pp. 438-442, 2010). Premium pricing will not only help the firm to acquire a certain return on investment but it would also send the message of quality and class to the customers and to the competitors (Cant, Strydom & Jooste, pp. 104-105, 2009). Promotion Promotion becomes an even more crucial element of marketing mix for a new entrant in market. Marketing communication mix includes advertising, sales promotion, events and experiences, public relations, direct marketing and personal selling. For India, Vintage Wines was heavily relying on small-scale advertising and sales promotion (Doole & Lowe, pp. 349-351, 2008). However, using the same promotional mix may cause problems for the company in United States. The customers in United States have need for more information and reaching them with traditional means is not possible (Lancaster & Massingham, pp. 320-325, 2010). Therefore, Vintage Wines will have to use all the elements of marketing communications mix to reach its targeted customers. It will have to advertise it self with the help of print and TV ads, brochures, booklets, posters, billboards, display signs and others (Pickton & Masterson, pp. 88-89, 2010). Under the umbrella of sales promotion, Vintage Wines will have to ensure the use of sampling, coupons, premiums, gifts, rebates, demonstrations, and others to catch the attention of customers (Loudon, Stevens & Wrenn, pp. 248-249, 2004). For public relations, the company may decide to donate money to charity, print magazines, and annual reports, and take up some space at the local media (Peter & Donnelly, pp. 519-523, 2010). Personal selling may force the company to hire staff who would give away the samples of the product along with sales presentations. Furthermore, direct marketing could be done with the help of setting up websites, emails, and others (Lamb & McDaniel, pp. 194-195, 2008). Place As mentioned earlier, that the paper would discuss the importance of logistics in the market entry of Vintage Wines in United States. The same is being done with merging the discussion about the last element of marketing mix that is place (distribution) with logistics since both share great similarities (Muhlbacher, Leihs & Dahringer, pp. 60-62, 2006). Most firms do not sell their products directly to the end consumers but those products go through a “marketing channel,” which helps in distribution, transportation, storage and others (Dubois, Jolibert & Muhlbacher, pp. 510-513, 2007). The same is also true for the business of Vintage Wines, which would sell their product to the retailers, wholesalers, brokers, agents and distributors before it could reach to the end consumer of the product (Brady, pp. 370-371, 2010). Therefore, it would be imperative for the company to realize the importance of their disruption channels in United States because Vintage Wines wants its product to be viewed premium product and for that, it would have to be in close contact and partnerships with their distributors (Mullins & Walker, pp. 603-609, 2009). The reason behind the same is that the company is most likely to use a pull strategy for its products rather than a pull strategy (the one that was being used in the Indian market). In India, the company was competing on price, therefore, the idea was to fill out the shelves of shops with the product, and the customers would buy the product based on the price (Kotler, Keller, Brady, Goodman, & Hansen, pp. 384-386, 2009). However, in United States, the customers are more likely to come up with many questions, suggestions, feedback, and queries that would have to be addressed. Therefore, the company will have to remain in close contact with the channel members to get that feedback, suggestions, and questions. Furthermore, since the company wants to follow a pull strategy in America, timely support of the channel members would be crucial (Cant, Strydom & Jooste, pp. 104-105, 2009; Peter & Donnelly, pp. 519-523, 2010). Organizational Controls Quite understandably, entering a new market is not a simple and straightforward activity but instead, it is a painful and effort taking exercise which requires great deal of commitment and control. Following could be the possible ways in which the company could control and monitor its entry in the US market (Kotler, Keller, Brady, Goodman, & Hansen, pp. 384-386, 2009). First, financials of the company give an excellent view of the overall performance of the company. Vintage Wines should plan on closely monitoring the expenses, sales, revenues, profits and other financials for the company and any sudden decrease in these may come with a solid explanation and so that planning could be done at the same time for covering up the gaps (Lancaster & Massingham, pp. 320-325, 2010; Muhlbacher, Leihs & Dahringer, pp. 60-62, 2006). Second, the company will conduct extensive marketing research quarterly for the first year and then semi annually for the next two years in order to find out the opinions of customers about the quality, price, and performance, conformance of the product, their expectations, packaging, and views about competitor product, new product ideas, and others (Cateora & Graham, pp. 264-267, 2002). This would allow the company to explore and understand the dynamics of consumer behavior, which would help in making certain important decisions (Cateora, Cateora, Gilly, Gilly & Graham, pp. 320-325, 2010). For example, after a few months, if the company wants to either increase the price to earn more revenue or decrease the price to appeal to the lower end of the market as well, research would help the company to explore that whether or not the move would be beneficial for the company (Pride & Ferrell, pp. 458-461, 2007). More importantly, this would allow the company to benchmark and monitor progress of the company in terms of non-financial and intangible elements of customer satisfaction, customer loyalty and others (Armstrong, Harker, Kotler, & Brennan, pp. 52-58, 2009). Third, internally, the company would force its Human resource department to come up efficient and effective appraisals systems, which could indicate the progress and performance from the side of the human resources. If the employees of the company are motivated, satisfied and are performing well then there is all the evidence to believe that the company has a bunch of satisfied customers as well (Lascu, pp. 103-105, 2008). References Armstrong, G., Harker, M., Kotler, P., & Brennan, R. 2009. Marketing: An Introduction. Financial Times Prentice Hall. Bradley, F. 2005. International marketing strategy. Financial Times/Prentice Hall. Brady, D. L. 2010. Essentials of International Marketing. M.E. Sharpe. Cant, M. C., Strydom, J. W., & Jooste, C. J 2009. Marketing Management. Juta and Company Ltd. Cateora, Philip R., & Graham, John L. 2002. International marketing. Irwin McGraw-Hill. Cateora, Philip, Cateora, Philip R., Gilly, Mary, Gilly, Mary C., & Graham, John. 2010. International Marketing. McGraw-Hill Companies, Inc. Czinkota, Michael R., & Ronkainen, Ilkka A. 2007. International marketing. Cengage Learning. Doole, I., & Lowe, R. 2008. 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