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An Australian wine manufacturer (or brewing company) is thinking of partnering or selling overseas ( China ). what would they need to do? (Focus on China only). Essay Example

  • Category:
    Marketing
  • Document type:
    Essay
  • Level:
    Undergraduate
  • Page:
    4
  • Words:
    2609

Environmental Market Factors in Export Business

Export Report Plan

International Environment factors that would Impact the Export of Wine to China

Hypothetical Company: The Victoria Breweries Company Ltd, Australia

Order No: 378046

Subject: Marketing

Table of Contents

Cover page …………………………………………………………………………………. 1

Contents………………………………………………………………………………………2

  1. Abstract …………………………………………………………………………………..3

  2. Introduction……………………………………………………………………………….3

  3. Identification of International Environment factors in export business plan…………….3

  4. Evaluation of the strength and Weaknesses of the firm in the selected environment……3

    1. Economic-Infrastructural environment……………………………………………3

    2. Political environment………………………………………………………………5

    3. Legal environment…………………………………………………………………6

    4. Social environment…………………………………………………………………7

    5. Technological influence……………………………………………………………7

  5. Conclusion…………………………………………………………………………………7

Bibliography……………………………………………………………………………………8

Appendix……………………………………………………………………………………….9

Picture of one of the Planned market Destination

An Australian wine manufacturer (or brewing company) is thinking of partnering or selling overseas ( China ). what would they need to do? (Focus on China only).

1.0 Abstract

This is an export report plan dealing with the international environment factors that impact export of wine to china by the Victoria breweries company, Ltd. This abstract gives a road map of the report and its intended purpose. The report is divided into an introduction which introduces its main wine products, body, in which the international environmental factors are identified, evaluated as the swot analysis of a hypothetical firm by giving the strength and weaknesses of the Company. There is a conclusion- summarizing the main findings of the report and the references page acknowledging the source of this information with the appendix. Importantly the report shows that these factors form the basis of an export wine business to china and should be considered before engaging in a wine export. This is because they determine where the firm has strength and weaknesses in exporting wine to China.

2.0 Introduction

Export trade is the selling of goods and services outside a country (Australia). Marketing simply imports the creation of demand for goods and services of a particular organisation or firm. In this case, it is the creation of demand for Australian wine in China. To achieve this objective, the company should make a study of Chinese wine market to determine the risks involved and ability to maximize profits. This could be done by identifying the environmental factors that impacts the export of wine to China and forms the thesis of this report. These factors influences or affects the operation, survival and development of the wine business such as political-legal, social, technological and economic factors of export trade. However, the company has chosen China as the export destination for their wine products and that market best fits their vision and mission for export in light of these elements. In some companies, the approach to market selection for wine export is based upon impromptu decisions instead of a formalised approach to deal with the reliable export in the targeted Chinese markets. In this current case, the export plan is based upon a hypothetical Victoria breweries company Ltd located in the state of Victoria. The company deals in selling Riesling, Sauvignon or Trainer wine, Chardonnay, Seheurebe and Gewürztraminer wine beverages. Therefore, the report identifies the international environment factors that impacts this export and evaluates strength and weaknesses of this company in exporting wine to the Chinese Market Environment.

3.0 Identification of International Environment Factors for this Firm

These factors are; Economic- infrastructural factors, Political, Legal, Social, and Technological.

4.0 Evaluation of strength and weaknesses of the Hypothetical Firm (Swot Analysis)

4.1 Economic-infrastructural environment

(1997). The competition can further be determined by other big companies exporting wine to China. In this vein, our competitiors helps us to determine the level of competive intensity. China has a big population which stragically gives the company a better competive adavantage (DeBurca S, 2004). Under this factor, the firm should determine the size of the market that will consume the wine products. In selecting the market, the firm should consider the population size. Besides, the quality of the products exported should be compared with the existing similar products in the market within China and wine imported into china from Italy, USA and Germany. Therefore, the market size will help the firm determine the height of competition as well as the trade barriers like the export duties. Where the market is small, it would affect the company’s sales. This view is also a characteristic of earlier published work by Johnson Woods and Robertson, (2000,), the size of the market is often uesd as determining factor when selecting a foreign market.According to

2011), China’s economy favours market for alcoholic beverages due to large population. However, the biggest weakness is that the company is a small entrant and will face huge competition from the bigger companies selling and exporting wine in China from Canada, Italy, USA and Germany. In the bigining, Victoria breweries would pattern with one of these big companies as they gain market in the Long run. Ian Katz, Furthermore, the compaany should consider the economic growth of China. This can be seen by identifying the cyclic market changes to ascertain whether wine export business will grow within that market. This is done by assessing the current and future demands of your product together with the unutilised exisiting market (Johnson, 1997). DeBurca (2004) also concludes that market growth can be identified by loking at income elasticity measures, the demand patterns, market proxy, market indexes and product life changes. In the instant plan for Victoria Breweries Ltd, despite the fact that there has been economic depresion across the world that made the economic growth of China to drop from 10% in 2010 to 8.7% in 2011 (

The trade barriers is yet another economic factor to consider categorised as enry, exit and market constraints according to Graham, (2002). Most times, these barriers affect business environment such as the trade tarrifs during entry. Exit barriers relate to profit repartriation after achieving economies of scale. In most countries like China, enacted economic rules of trade provides that a certain profits from the proceeds should be re invested into the country to promote economic growth. This could be a barrier if Victoria Breweries company wanted to exit the market and could not take home all the profits. Besides, Walt Rowstow, (1971, P.10) suggested that in determining the economic strength of a country, consider the availability of labour (both skilled and unskilled), technical operations, education level, Inflation, Gross domestic product and income per capita level. These will help you to know the extent of market constraints together with the nexus between economic growth and the most highly consumed products in that selected export market. Victoria Breweries Company would have a better economic strength due to the abundance of both skilled and unskilled labour. The company’s challenge would be setting a side capital that would cater for these labour costs because it does not have enough money to employ a large human resource that could logistically compete with these large companies.

Meanwhile, earlier research by Hollensen (1998), indicates that the economic growth of a country can further be identified by the levels of industrialisation. That is; least industrialised, new emerging industrialised nations and highly indusrialised states. This level of industrialisation determines the level of economic growth and competition based on the economic indicators as illustrated in the table below.

Level of development

Market indicators and categorisation

Least industrialised states

  • undeveloped,developing

  • Low GDP and income per capita

  • Poor infrastructure

  • Limitted manufacturing base

New emerging industrial herbs

  • Just entering into the world of industrial expansion.

  • Steady GDP and Income percapita

  • Good infrastructures.

Highly industrialised market centres

  • Highly developed and industrialised

  • Very good Infrastructure

  • Steady GDP and income per capita growth

In the current situation of Victoria Breweries Ltd, China has emerged as a highly industrialised state with a steady economic growth. Even though the world is still hit by the economic crisis, there are indicators that China’s economy is picking up and investing in such market centre, will yield positive results in the long run. This is a strength upon which the company could rely on to export wine to china.

4.2 Political enviroment

Cateora P, (2000), conludes that in export business, its importatnt to examine the political stability of a country where you intend to operate your business. If the state is vulnerable to instability and external aggression like terrorism, your business would be at a stake. Therefore knowing the political enviroment of the selected market is the first thing an exporter should do to avoid surprises. Besides, even your business should be accepted within the political environment of the selected market (Cavusgil, 1985). It should not be a business that threatens the political stability and sovereignty of that state. Furthermore, the stability of a selected market helps the exporter to anlyse the country’s attidute towards foreign importers. It is also vital to determine the country’s political sovereignity and influence in global business (Keegan, 2001). Accordingly, determining political risks is based upon the country’s level of identification in the international political enviroment in terms of sovereignity, finance, exporiation, and operations (Kabrin S, 1979) as illustrated in the table below levels of political risks.

Political Risk

Examples

Political instability

Sucessful and unsuccessful revolutions, foreign military interventions

Exploration

Dependance of a country and extent of contractual obligations, Un democratic.

Trade barriers, level of profit repartriation, unreliable exhange rates,weak currency.

Operation

Import restriction rules, other domestic regulations,export duties and other forms of taxes

This helps in determining the magnitude of security for your business. In the current export plans for Victoria Breweries Ltd, the strength and level of Security in China is perfectly favourable. Despite the fact that there has been world threat by terrorist, China has steadily enjoyed peace. Therefore, the company can export without fear of security risks. However, the firm should be prepared for trade barriers like meeting the quality standards for the wine imported into China. The other weakness is adjustment to a new political environment. Victoria company has operated her business is the Australian Capitalistic environment. China is to a large extent a Marxist or socialist state. The company is not well conversant with this political environment which justifies partnering with a local company like the China Red wine first as they gain reputation and understanding of the Marxist environment.

4.3 Legal Environment

In selecting market, you should identify the rules or regulations that will govern the contractual agreements of your business with the selected country. For example, the common law system, civil law codes, Islamic law, the Marxist / socialist- of Russia, China, and Eastern Europe. Therefore, identifying the legal system of the selected market will help the exporter in knowing the legal ramifications to the business in case of breach of a contract or any illegal transaction. In the instance case, the uses the Marxist legal framework which is different from the common law system used in Australia. The company therefore should be aware of the legal technicalities of Marxism in order to have a better legal advantage. This is a weakness that needs using local firms to advise you legally on the various legal rules and their application especially the domestic trade rules that governs import of goods into china..

4.4 The social Environment

. In the instant case, China has a very sophisticated Community with diverse cultures. Most of them prefer their traditional wine such as “Fen jiu, zhute quing jiu, wujia pi Jiu, grape wine, Mao Tai jiu, san Hoa jiu and Dag u jiu” among others (Stephen Reiss, 2009). Breaking this cycle is very difficult. However, through branding and packaging by partnering with the local companies, it’s possible that Victoria wine Breweries would penetrate this market like other companies did. Jeannet, (2004). By doing so, you will be able to determine the level of business aggravation and the methodology employed to promote marketing and communication within the selected country. You will be able to know the most consumed product and language of communication used in that global market as observed by as observed by Barkema H, et al (1996) The social environment depends on people’s behaviour towards your products in the selected markets. Certain cultures respond to certain products differently. In carrying out this research, know the subtle differences in taste and preferences within the people of that selected market

4.5 Technological Influence

. China is one of the countries with a good technological advancement which would facilitate export and marketing of wine into the country. (Cateora P, 2000)This relates to the level of internet technology and other forms communications that would facilitate communication and marketing. The internet is today the biggest method of communication and Marketing used in the world

5.0 Conclusion

In conclusion, the environmental factors that impact export business include economic influences, political, legal, social and technological factors. Each of them is a big determinant in the selection of Chinese market and work closely to promote wine export business. The strength Victoria Breweries Ltd lies in the political stability in china, investment opportunities, big population and market size, and steady economic growth. However, the weakness of the company lies in the fact that it is a new firm, small in size and would face stiff competition from the already established wine export companies, adjusting to the economic and political Marxist philosophies and breaking the sophisticated rich culture. Therefore, what the company should do is to invest in the local skilled and unskilled labour, use attractive and vibrant local Chinese employees to carry out sales promotions in colleges, television, magazines and using internet. Above all, these weaknesses can be dealt with through partnership with local firms.

Bibliography H

Barkema H, Bell. J,H,J and pennings, J M, 1996,. Foreign entry, Cultural barriers and Learnings. Strategic manaegement Journal 17 , PP.151-166.

Cateora P, R. and Ghauri, P , N, 2000,. International marketing: European edition. Maidenhead: McGraw Hill Publishing Company.

Cateora P, R, and Graham J.L, 2002,. International Marketing, 11th edition. New York: McGraw Hill Companies.

, pp. 27-33.26(6)Business horison, Cavusgil S. T 1985, November -December). Guidelines for export Market Research.

DeBurca S, Fletcher and Brown L , 2004,. International Marketing-an SME perspective. London: Printice Hall.

Hollensen, S, 1998,. Global Marketing:A Market Respective Approach. Hertfodshire: Prentice hall.

Ian Katz, January, 13 2011, China’s Economic Growth to Slow to 8.7% in 2011 From 10%, World Bank,

Available at: http://www.bloomberg.com/news/2011-01-13/china-economy-may-grow-8-7-this-year-slowing-from-10-world-bank-says.html

[Accessed April, 18, 2011]

Jeannet, J. P and Hennessy, H.D, 2004,. Global Marketing Strategies. 6th redition. Houston: Houghton Mifflin Company.

Johnson, J, K, 1997,. Global Marketing strategies. Bouston: Houghton Miffin Company.

Kabrin S, J, 1979,. Political risks: Review and Considerations. Journal of International Business Studies, 10(1) , PP. 67-80.

Keegan, W. J and Schlegelmilch, B, B, 2001,. Global marketing management: A European perspective. Harlow: Pearson education Ltd.

Rowstow, W. W, 1971,. The stages of economic growth, 2nd ediition. London: Cambridge university Press.

Stephen Reiss, 2009,. Wine Education: The Chinese Wine Markets and Industrial analysis

Available at: http://www.wineeducation.com/chinadet.html

[Accessed April, 18, 2011]

Wood. V, R and Robertson K.J, 2000,. Evaluating markets. International Marketing Review, 17(1) , PP. 34-55.

Appendix

International Environmental Factors

Strength

Weaknesses

Economic

Big marker size, steady economic growth, strong GDP and Income per capita, free market economy and the good infrastructure.

Small firm and would suffer strong completion from other companies from Canada, Italy, Germany and Australia itself

Political

Enjoys stable political climate, favourable trade rules and free from external aggression

Marxist or socialist system of government is a challenge to the company, which is used to capitalism.

Adheres to international rules of trade and commerce. Use of local Chinese firms in interpreting domestic Marxist Rules.

Marxist or socialist rules pose a challenge to the common law principles.

Use the local labour to break the sophisticated cultures and communities to break the cycle of communication and behavior change towards the wine product

Too sophisticated society with a variety of cultures that love their traditional wine. Very much inclined to herbal wine

Technological

Advanced technology facilitated by High speed internet which favours e- commerce and marketing.

The firm has not placed in place mechanisms to tract internet fraud and hackers.