Jameson Irish Whiskey Global Expansion - Case Study Example

Jameson Irish Whiskey Global Expansion Introduction Jameson Irish Whiskey is one of the premier brands of whisky of Ireland. The company has been successful at creating a strong brand image for itself and meets consumer need satisfactorily. Jameson Irish Whiskey manufactures a number of high ended whiskies. In the recent times the company has also launched a less expensive category of whiskies, to target the more price conscious consumers. However the market for Jameson Irish Whiskey in the nation of Ireland is seen to reach its saturation point. Growth of the firm is seen to have become stagnant in the last few years. As a result Jameson Irish Whiskey is now considering diversifying its operations and entering foreign markets. Moreover in the present day globalised economy, most firms find it essential to expand globally and diversify risks (Zahra, Ireland and Hitt, 2000). Accordingly Jameson Irish Whiskey has considered expanding into the nations of Sweden and India through direct export to distributors. The current paper vividly analyses the markets of Sweden and India in order to determine the different types of benefits the firm is likely to incur through such a business strategy. Market Environment in Sweden PESTEL Analysis Sweden’s political factors favour the growth of globalized organization as it is one of the strong democratic powers globally. The nation has adequate political stability which attracts many foreign business entities. The government of the nation remains liberal towards developing and enhancing foreign tie ups and thereby increasing the inflow of foreign investments into the nation. The government of the nation also believes that increasing the number of foreign players is likely to boost the economy, provide greater job opportunities, and enhance export opportunities. In order to enhance the manner in which the firm acquires a large amount of assets The economy of the nation is adequately well developed, with a GDP of approximately $ 543 billion in the year 2012. Sweden concentrates very highly in developing its tourism sector (Chen and Mujtaba, 2007). The tourism sector is one of the largest contributors towards the GDP of the nation, amongst others. The economy also concentrates upon increasing exports level by producing commodities which are demanded in the foreign markets as well. Capital investments of the nations are synonymous with growth. Jameson Irish Whiskey therefore can expect steady growth and profitability if it enters the market of New Zealand. More than 85% of the population of Sweden lives in urban areas. Majority segment of the population of the nation are European followed by Asians. Foreign resident in the nation of Sweden is quite high. Since the nation has an adequately well developed economy, it attracts a number of foreigners. The society is seen to remain flexible towards accepting foreign institutions, making it simpler for a number of multinational organizations to set up their base in the nation. Socially Jameson Irish Whiskey has lesser concerns in exporting its products to the nation. Most alcoholic beverage companies operating in the nation are seen to operate successfully. Jameson Irish Whiskey requires remaining less bothered regarding the technological environment of New Zealand. The company would mainly export its products to New Zealand, rather than manufacturing therein (Luo and Tung, 2007). Jameson Irish Whiskey must consider analyzing the legal environment prevailing in Sweden as the alcoholic industry of the nation is governed by strict policies. The government of Sweden is seen to control and monitor the trade practices, mergers and the competition policies which exist in beverage industry. Different policies regarding pricing and taxes must be well studied. In the recent times the nation has made their foreign investment regulations stiff, so as to protect the interests of indigenous firms and to prevent exploitation of resources (Deng, 2009). Strategy for operation Majority of the foreign firms which operate in the alcoholic industry of the Sweden are seen to from the US. There are a number of distributors operating in the nation for international alcohol brands. Since the target market for Jameson Irish Whiskey in Sweden is relatively large, the company is expected to be successful at earning high revenue. Drinking alcohol is a common aspect of the lifestyle of most people of this nation. As a result alcohol consumption in the nation is high. Moreover whisky brands operating in Sweden, both international and domestic are not very large as compared to the number of players who distribute vodka and beer. As a result Jameson Irish Whiskey is expected to face less competition. Jameson Irish Whiskey being a renowned brand in Europe is expected to be easily accepted in the market of Sweden. The company plans to enter the market of Sweden through distributors. Distributors will be provided with adequate freedom in terms of pricing, promotion of product and choosing retailers. Direct export is seen to be most suitable as exports to Sweden are liberal. Also since Sweden and Ireland are in the Euro-zone, exports are likely to be liberalized to a large extend. Distribution activities are expected to be carried out on the basis of the demand conditions. Since the general demand for alcoholic beverages in the nation is adequately high it is expected that Jameson Irish Whiskey would require exporting products to the nation in bulk. Hence production capacities must be enhanced adequately. While expanding into Sweden, Jameson Irish Whiskey must also develop measures so that market conditions must be analyzed timely. This would facilitate taking strategic decisions regarding establishing subsidiary units in the targeted nations. Jameson Irish Whiskey must ensure that the supply chain established by the distributors facilities meeting the demands of the market (Contractor, Kundu and Hsu, 2003). Market Environment in India PESTEL Analysis India is one of the most important destinations in Asia in terms of business expansion. Since the last decade the nation has displayed constant growth in economic terms. Business environment in the nation is highly influenced by government policies and interest. The government of the nation is seen to frequently intervene into business activities. Political disputes often hinder business growth. As a result international organizations are required to carefully analyze the political environment existing in the nation before they enter the same. Political authorities in general are liberal towards foreign firms. In the last decade, the growth of multinational companies in India has been tremendous. This is mainly due to favourable government policies. Jameson Irish Whiskey is therefore expected to obtain adequate government support in respect of growing their business into the nation. The economy of India is still in the growing stage. It has remained adequately stable since the last decade and has undergone tremendous growth due to increase in the number of foreign players. A significant cause for the growth of the economy of India is the increase number of operations in the financial markets of the nation. Indigenous prediction capacity of the nations has also enhanced due to developed economic conditions. The participation of the international organizations in the economy of the nation has increased since the year 1991, when the industrial reform policies had been announced. Jameson Irish Whiskey therefore can expect favourable economic conditions for operating in the economy of India. The people of India give much importance to their tradition values and cultures. Consumption of alcohol as per the culture of the nation is considered to be inappropriate. As a result frequent indulgence in alcohol consumption is avoided by most individuals. However, revenue from alcohol sale is adequately high, owing to the massive population levels. Additionally since majority of the consumers of the nation belong to the low and average income group, they prefer to purchase less expensive forms of alcoholic beverages such as beer. Foreign branded whisky therefore cannot be afforded by many consumers. Also since Jameson Irish Whiskey is expected to be priced highly, it is likely to be served only in high end restaurant chains, wine shops and through online sources. Since Jameson Irish Whiskey would mainly export their products to the nation instead of producing whisky therein, technology factors are less important for the company. There exists a strict legal environment in the nation in respect of trading in alcohol. A number of rules and regulation have been established by the government authorities for regulating and controlling alcohol consumption in the nation. Jameson Irish Whiskey would therefore be required to closely monitor the existing rules and policies. The Indian liquor industry is seen to be governed with rules which are different in each state. Hence the tax regulations and other distribution related aspects of Jameson Irish Whiskey in India will vary highly from state to state. Jameson Irish Whiskey will require taking permissions and obtaining licenses for their operations in each state (Crick and Jones, 2000). Strategy for operation Jameson Irish Whiskey is considering entering India through distributors. The international alcoholic beverage manufactures, who sell their product in India were seen to enter through joint ventures or through take over’s. Majority of these firms have wide international operations and earn very high revenues. Hence it’s feasible to invest in different global operations. Jameson Irish Whiskey relatively has a smaller business size and would be the first time the company is considering entering a developing nation. Hence the risks would be quite high. It would be therefore wise for the company to enter with a strategic policy which is less expensive. Distributors are therefore the most feasible option for Jameson Irish Whiskey. In establishing business through distributors, Jameson Irish Whiskey relies on the market capabilities of a different firm to attain success (Steenkamp and Ter Hofstede, 2002). This is also considered to be the most economical option for Jameson Irish Whiskey. Jameson Irish Whiskey requires establishing contracts with Indian distributors so that all the products which are exported are kept account for. The company must ensure that distributors do not indulge in illegal practices such as arbitration. The state government in each of the nation in India controls the liquor trade practices prevalent in the region. Hence Jameson Irish Whiskey must consider selecting those distributors mainly who have strong and healthy relations with the government. Another important aspect Jameson Irish Whiskey must consider while entering the market of India is in respect of price. Majority consumers of liquor in the nation prefer to consume less expensive products. Jameson Irish Whiskey is essentially a premium prices whisky. Hence the target consumer group for the company is essentially the high income group. Jameson Irish Whisky must therefore select Jameson Irish Whisky on the basis of those who cater to consumers who can afford expensive and branded foreign whisky. Another significant challenge faced by Jameson Irish Whisky in the Indian market is the restrictions imposed in advertising or promoting alcohol consumptions. Alcohol promoting advertisements are banned in the nation. This is a major disadvantage and therefore the company must solely rely upon the effectiveness of distributors to sell the products. Once Jameson Irish Whisky is able to establish itself firmly in the market of India, it may consider developing joint ventures with existing Indian beverage companies or other foreign entities operating successfully in the nation. Taxation and value added taxes are seen to be the most important concern for majority firms which operate in the market of India. The government of the nation relies primarily on tax revenue. Tax rates are therefore frequently checked and altered by government authorities. This creates much difficulty for firms to establish a suitable and stable pricing policy. However the existence of strong demands and generally favourable market conditions makes India a strategically important choice for Jameson Irish Whisky. India being a developing nation provides numerous opportunities for international firms and therefore Jameson Irish Whisky is expected to reap significant benefits from expanding into the nation (Hill, 2008). Entry mode The best form of market entry for Jameson Irish Whiskey is through distribution after direct export. Jameson Irish Whiskey must consider having close relations with distributors by allowing them adequate freedom to choose a price of their own. While entering the market through distributors, Jameson Irish Whiskey can benefit from the customer base which the company already has and therefore market penetration would be easier. Jameson Irish Whiskey must however indulge in careful selection of the distributors. The important factors to be considered in this respect are size of the organization, storage and other physical facilities, contract prices charges, cost of operations, experience, and knowledge base of the firms. Jameson Irish Whiskey would essentially allow the distributing firms to choose consumers and retailers themselves. This would not only reduce the burdens upon Jameson Irish Whiskey to find customers, but also facilitate it to take advantage of the familiarity which distributors have in the market of Sweden and India (Gabrielsson and Pelkonen, 2008). Considering the current operations and organizational structure of Jameson Irish Whiskey, it would be more profitable for the company to export rather than to set up their own manufacturing units in the nations of Sweden and India. Direct exports are also likely to induce less risk as cost of capital investments is most likely to be low. Most international organizations follow the strategy of entering a foreign nation through a distributor and then after gaining enough market knowledge, they may consider tot set up their own subsidiary firms and try to establish a strong market. This is also a very cost effective technique. If Jameson Irish Whiskey enters the market of Sweden and India through direct subsidiary, the firm might not be able to establish itself in a proper manner. The company might end up losing a lot of time in understanding the market conditions. Initial marketing and production strategies might also be a fail to meet market needs. However while entering the market of India and Sweden through a distributor, since thee capital investments is less, risks of losing profits is low. Also such a strategy is likely to provide Jameson Irish Whiskey with adequate time to understand the market conditions existing in both the nations and accordingly develop strategies for future operations. If the firm is successful at procuring a strong market position, they might consider setting up distilleries in the nations considered for business expansion. The alcoholic beverage industry of both India and Sweden are relatively small. This necessitates the firm to have close relations with the distributors and suppliers with whom Jameson Irish Whiskey considers to conduct business with. Jameson Irish Whiskey also cannot consider the option of licensing. This is due to the fact that Jameson Irish Whiskey mainly sells Irish whisky. The product is protected through geographical indications. As a result if the product if produced in Sweden or India, it is likely to lose its value. Additionally Jameson Irish Whiskey may also consider assisting or partnering its distributors in India for promotion activities. In Sweden most of the distributors are adequately strong in terms of market activities and efficiency. As a result much assistance or support does not require to be provided. However, since the Indian alcoholic beverage distributors lack efficiency, especially when it comes to distribution of international alcohol, it becomes essential that Jameson Irish Whiskey provides some assistance. Analysis of both the markets shows that, Jameson Irish Whiskey is expected to be able to distribute their products highly efficiently in both the nations. Pricing policies of the company in both nations would be highly different considering the nature of consumers. The disparity in income distribution in Sweden is low. Additionally, a large segment of the population belongs to the high income category. As result it is expected that the products would be sold at premium prices. However in India, since income disparity is high, consumers belonging to the high income group are low. Jameson Irish Whiskey would therefore only be served by high end hotels and restaurants, airports and urban liquor shops. Hence the sales of the products of the company is likely to be high in Sweden rather than in India. Once the company is successful at developing a firm position for themselves in the alcohol industry of both nations, it would be easier for them to company to consider establishing distilleries. SWOT Analysis One of the primary strengths in Jameson Irish Whiskeys’ strategy to enter the market of Sweden is that there exists a considerably high demand in the nation for high quality alcohol. Jameson Irish Whiskey also has a number of whisky variants whose implications upon the health are not adverse. Jameson Irish Whiskeys manufactures products which are medium priced. This is considers to be an important advantage for entering the market of India. The existing foreign brands of whisky in the nation only provide high end products with fewer less expensive options. However Jameson Irish Whiskey will be able to provide a stiff competition to existing market players by providing a stiff competition. A major weakness for Jameson Irish Whiskey in the market of Sweden is the existence of a number of strong alcohol manufacturing firms. It would require Jameson Irish Whiskey to strongly place its products in the market so as to achieve profits. In case of India a major point of weakness is the nation’s frequently altering economic conditions and the lack of target consumers. Sweden possess as an important opportunity for the growth of the business of Jameson Irish Whiskey. Since it is well developed nation, the company is less likely to face financial difficulties. It would also be easier for Jameson Irish Whiskey to find suitable distributors in the market of Sweden as compared with India. However the rising population and the steady growth of the economy of the nation pose as an important opportunity for investments and market entry. The recent economic crisis has induced increased saving behaviour upon consumers and reduces spending upon high end luxury items. Branded alcoholic beverage firms in the Sweden are therefore seen to lose many consumers. However this trend is likely to be improved in the coming years, unless there is another major financial crisis. Also the existing beverage companies of Sweden, both national and international are seen to become increasingly aware of the rising competition and develop innovative strategies of growth. In case of the Indian market, the primary threat is in respect of the small target market segment and the rapidly fluctuating income distribution levels (Ekeledo and Sivakumar, 2004). Conclusion From the analysis conducted in respect of the alcohol markets of Sweden and India, Jameson Irish Whiskey is more likely to perform well in the nation of Sweden. The demand for high quality alcohol and the existence of a larger number of consumers belonging to the high income group is likely to provide Jameson Irish Whiskey with huge market opportunities. However alongside of entering the market of Sweden through distributors, the company must closely watch its trends of growth, market demand conditions, and strategies adopted by competitors. Accordingly the firm must consider enlarging their market presence by adopting policies such as joint venture or mergers. Jameson Irish Whiskey may also consider developing its own distilleries in Sweden with the passage of time. However in case of India, Jameson Irish Whiskey expects a slow growth. Reference list Chen, L. Y. and Mujtaba, B., 2007. The choice of entry mode strategies and decisions for international market expansion. Journal of American Academy of Business, 10(2), pp. 322-337. Contractor, F. J., Kundu, S. K. and Hsu, C. C., 2003. A three-stage theory of international expansion: The link between multinationality and performance in the service sector. Journal of international business studies, 34(1), pp. 5-18. Crick, D. and Jones, M. V., 2000. Small high-technology firms and international high-technology markets. Journal of international marketing, 8(2), pp. 63-85. Deng, P., 2009. Why do Chinese firms tend to acquire strategic assets in international expansion? Journal of World Business, 44(1), pp. 74-84. Ekeledo, I. and Sivakumar, K., 2004. International market entry mode strategies of manufacturing firms and service firms: A resource-based perspective. International marketing review, 21(1), pp. 68-101. Gabrielsson, M. and Pelkonen, T., 2008. Born internationals: Market expansion and business operation mode strategies in the digital media field. Journal of International Entrepreneurship, 6(2), pp. 49-71. Hill, C., 2008. International business: Competing in the global market place.Strategic Direction, 24(9), pp. 45-89. Luo, Y. and Tung, R. L., 2007. International expansion of emerging market enterprises: A springboard perspective. Journal of international business studies, 38(4), pp. 481-498. Steenkamp, J. B. E. and Ter Hofstede, F., 2002. International market segmentation: issues and perspectives. International Journal of Research in Marketing, 19(3), pp. 185-213. Zahra, S. A., Ireland, R. D. and Hitt, M. A., 2000. International expansion by new venture firms: International diversity, mode of market entry, technological learning, and performance. Academy of Management journal, 43(5), pp. 925-950. Read More