Wine Industry in Hong Kong - Case Study Example

Market Segmentation Name: Institution: Date: Executive Summary This report is a marketing plan for the proposed Penfold Company investment in the Hong Kong wine industry. The report evaluates the Company internal resources through a SWOT analysis and establishes that the corporation has the capability to venture into this market. Further, a porter’s five forces analysis establishes that the market is bound to remain competitive and thus a need to establish strategic approaches in the market. In its analysis, the report establishes that the market has high market consumers as among the new entrants. Thus, this study recommends that the organisation should target the new entrants’ market segment. An evaluation of the forecasted organisational market share positions the organisation at an estimated 5.6%. A marketing mix analysis on the organisational venture establishes that social media promotion, direct distribution channels as well as development of unique market products are among the key organisational success factors. Further, the marketing mix recommends increased customer services as well as the adoption of a low pricing strategy. In addition, the report recommends an implementation span of five years to allow for the development of appropriate infrastructure. Finally, in order to evaluate the strategy and venture success, the report recommends the application of both the benchmarking and forecasted and actual benefits analysis tools. 1.0 Introduction The Hong Kong wine industry is an attractive venture for multinational wine organisations. The market is currently classified as a major wine consumption market in the Asian region. As such, Penfold Company, a multinational wine company in the Australian market, seeks to venture into this market. In order to develop an appropriate marketing plan, it is imperative to conduct and evaluate the organisational internal analysis. This is conducted through a strength, weakness, opportunities and weakness (SWOT) analysis as illustrated under appendix 1. A strength analysis on the company is established on its focus on the production of the red wine brand since the end of world war 11. This business model is in congruence with the Hong Kong consumer demand trends (Penfold, 2010). The economy, as established under the market segmentation section, is driven by an increased demand for the red wine products. Consequently, this offers the organisation a market strategic advantage with the potential for increased demand and revenues. However, the presence of other established competitors in the Hong Kong market serving the red wine brands serves as the organisational weakness. Moreover, the presence of increasing earning levels in the market presents the organisation with a growth potential as the Hong Kong consumer purchasing power increases. Finally, a threats analysis establishes that increased Hong Kong market regulations for foreign direct investments poses an operational challenge through increased production costs in the long run (“HKTDC Research”, 2014). In addition, a porter’s five forces model analysis on the wine market by the Agriculture and Agrifood Institute (2014) established that the market faces the risk of increased competition and new entrants. Moreover, increased competition will increases the buyers bargaining powers a combination of which is expected to reduce organisational profit margins. Therefore, the above analysis necessitates the need to develop strategic marketing plans in the wine manufacturing and distribution industry. Thus, this report offers a market plan for the expansion of Penfold Company products expansion on the Hong Kong wine market. 8.0 Implementation Plan and Evaluation Tools 8.1 Implementation Plan As discussed the introduction and distribution of the Penfold product in the Hong Kong, it is imperative to develop a strategic implementation plan. The strategic management process comprises of various stages among them strategy implementation and evaluation. Under the implementation phase, it is of importance to focus on the cost implication of the implementation of a strategy, implementation timeline as well as forecasted implementation challenges. Kohtamäki, Kraus, Mäkelä and Rönkkö (2012) conducted a study to evaluate the role of strategy implementation planning. The study sought to evaluate the implications of such a process in the overall strategy implementation success. The study established that organizations that successfully applied this phase, developed appropriate strategy implementation strategies and reduced failure instances in the market. Consequently, the study recommended the application of these processes in respective organizational marketing plans. Based on this analysis, this report develops an implementation analysis on the Penfold product marketing strategy. As evidenced above, the product seeks to venture into the market through increased direct distribution strategies. The implementation of this approach, as evidenced under the marketing mix analysis, requires the input of a combination of a range of strategic factors in the market. Such factors include the development of appropriate infrastructure. A review of wine distribution by the American Association of wine economists (2012) described distribution as the process and activities involved in supplying and availing products to their final consumers. The development of a distribution framework is an expensive organizational venture requiring increased organizational Capital commitment. In order to facilitate and develop an appropriate and efficient distribution channel, the organization will be required to invest in logistics and warehousing. On one hand, logistics will incorporate transportation of the products to the final consumers. Therefore, the organization should invest in securing and purchasing enough distribution motor vehicles. Alternatively, upon the advice of the finance department, the organization can outsource transportation services in the short run in order to reduce on the existing high investments costs. However, in the long run, in above five years of operation, the organization should develop a capacity to enhance its in house logistics systems. Such a system though with high investment costs will increase its overall profitability due to reduced distribution costs (Tyson & Schell, 2008). In addition, the organization needs to store its products near the consumers in order to hedge against stock outs. The cost of reduced stocks in the market is an increased challenge that would reduce on the overall cost implications in the market. Therefore, the organization should develop a storage system for its products. However, this report argues that the development of a privately owned warehouse would be an expensive venture. Therefore, it recommends that the organization should lease out storage facilities in the market. Through leasing, the organization will benefit on two fronts. On one hand, it will significantly reduce on the overall investment costs. On the other hand, it will acquire control of the facilities enabling establishment of appropriate conditions for the products storage (Lis, Lis & Grabara, 2009). Through the adoption of this approach, the organization will achieve increase market presence and reduce on the overall cost implications. Finally, in the implementation process, the organization seeks to develop a framework for social media advertising, In order to develop this framework; the organization should invest in technological infrastructure as well as the recruitment and training of the employees’ workforce to handle the developed IT infrastructure as well as manage the social media platform. Based on this implementation analysis, it is apparent that investing in the Hong Kong market is an expensive venture that requires capital investments and capital. Therefore, this report recommends that the roll out project should be implemented on a three years period. 8.2 Implementation Evaluation Upon implementing the proposed strategy in the Hong Kong market, it is imperative for the organization to develop an evaluation approach through which the strategy success will be evaluated. Dauda, Akingbade and Akinlabi (2010) conducted a study to evaluate the merits of strategy evaluation approaches. The study evaluated organizational strategy evaluation implications. Consequently, the study established that organizations adopting the strategy evaluation tools resulted to increased strategy success rates. Strategy evaluation enables the development and application of the continuous improvement process. Developed strategically analysis enables the application of corrective measures to facilitate increased implementation efficiency. It is imperative to establish the development trend of Penfold product in the Hong Kong market. In order to evaluate this market venture, this report recommends the adoption of the benchmarking and cost forecast analysis methods. Singhal, Stueland and Underman (2011) in a review of forecasted implications of US healthcare plan changes on employees, argued on the advantages of the application of the actual and forecasted analysis in the market. Upon the development of a marketing strategy, the marketing team bases its rationale on a set of forecasted deliverables and outcomes. However, strategy implementation faces challenges and barriers that at times reduce or increase the actual benefits against the forecasted ones. Upon the establishment that the actual strategy benefits fall way below the forecasted benefits, the organization should develop corrective measures to align the organization strategy with the market needs. Such changes would be a change in the implementation schedule as well as variances in funds and resource allocation. The adoption of this approach enables the establishment of a continuous improvement process. On the other hand, the report recommends the application of the benchmarking approach. As, Jones (1999) argued, benchmarking enables organizations position their market performance against best players in the industry. As such, the organization should evaluate its performance in penetrating the market against other market competitors. Such an approach would enhance increased strategy performance through the implementation of a continuous improvement process. This report acknowledges that the implementation of this strategy will face a number of challenges including high implementation costs as well as its requirement to change the business model. Therefore, this report recommends the phase approach in the strategy application to allow for availability of organizational working capital for other organizational functions. Finally, this report concludes that Hong Kong market investment through the proposed marketing plan is a viable venture that will enhance increased organizational performance and success. As such, it is forecasted that expansion onto the Hong Kong market will enable the organization expand its consumer base by an average 10 % as well as increase its profitability margins with an excess of 4% upon the full implementation of the expansion strategy within five years of operation. This is evidenced under appendices two and three References HKTDC Research, (2014). Wine Industry in Hong Kong. Retrieved from < http://hong-kong-economy-research.hktdc.com/business-news/vp-article/en/1/1X07WNW7.htm > Penfold, S. (2010). Condensed capitalism: Campbell soup and the pursuit of cheap production in the twentieth century. Labour, (65), 212-214 Agriculture and Agrifood, (2014). Consumer Trends Wine, Beer and Spirits in Hong Kong. Retrieved from < http://www.ats-sea.agr.gc.ca/asi/5821-eng.htm > Kohtamäki, M., Kraus, S., Mäkelä, M., & Rönkkö, M. (2012). The role of personnel commitment to strategy implementation and organisational learning within the relationship between strategic planning and company performance. International Journal of Entrepreneurial Behaviour & Research, 18(2), 159-178 American Association of wine economists, (2012). Port Wine Distribution Strategies Buyer/Seller Cooperation. Author. Retrieved from < http://www.wine-economics.org/workingpapers/AAWE_WP116.pdf > Tyson, E., & Schell, J. (2008). Small business for dummies. Hoboken, NJ: Wiley Publishers Lis, T., Lis, M., & Grabara, J. (2009). Systems Of Supply And Distribution In Logisitc Management In Commerce Enterprises. Annales Universitatis Apulensis : Series Oeconomica, 11(2), 881-889. Dauda, Y. A., Akingbade, W. A., & Akinlabi, H. B. (2010). Strategic management practice and corporate performance of selected small business enterprises in Lagos metropolis. International Journal of Business and Management, 5(11), 97-105. Singhal,S., Stueland, J., & Underman, D., (2011). How US health care reform will affect employee benefits. Mc Kinsey & Company. Retrieved from < http://www.mckinsey.com/insights/health_systems_and_services/how_us_health_care_reform_will_affect_employee_benefits> Jones, R. (1999). The role of benchmarking within the cultural reform journey of an award-winning Australian local authority. Benchmarking, 6(4), 338-349 Appendices Appendix 1: SWOT Analysis Internal External Strengths Weaknesses Opportunities Threats Increased Demand for red wine Presence of established competitors in the market High consumer purchasing power Market regulations for foreign direct investments Appendix 2: Balance Sheet Balance Sheet of Penfold Company As At 31st December 2010 Particulars Debit (DR) Amount in U.S.D Credit (CR) Amount in U.S.D Fixed Assets Land and building Machinery Current Assets Stock Debtors Cash Current Liabilities Creditors Bank Overdraft Short term loans Long Term Liabilities Long term bank loan CAPITAL 100,000 80,000 50,000 40,000 20,000 530,000 10,000 5,000 5,000 800,000 Total 820,000 820,000 Appendix 3: Profit and Loss Account Profit and Loss Account of Penfold Company for the year ending 31st December, 2010 Particulars Amount in U.S Dollars Sales of Goods 400,000 Cost of Sales -225,000 Gross Profits 275,000 Overheads -75,000 Net Profit 200,000 Drawings -75,000 Returned Earnings 125,000 Read More