Growing brands in emerging markets. Essay Example

  • Category:
    Marketing
  • Document type:
    Assignment
  • Level:
    Masters
  • Page:
    3
  • Words:
    2069

INTRODUCTION

Henschke is counted as one of the flourishing luxury product brands in emerging markets. Its product branding has made it dominate in Australian market for quite a long time, with “Hill of Grace” wine being the exceptional and highly ranked in the country. Henschke brands have often been associated with the core competences of creativity, exclusivity, craftsmanship, precision, high quality, innovation and premium pricing. These product attributes give the consumers the satisfaction of not only owning expensive items but the extra-added psychological benefits like esteem, prestige and a sense of a high status that reminds them and others that they belong to an exclusive group of only a select few, who can afford these pricey items.

GROWING BRANDS IN EMERGING MARKETS

The growing Chinese luxury brands are believed to be where its products and services at consumers on the top-end of the wealth spectrum are directed. These self-selected elite are more or less price insensitive and choose to spend their time and money on objects that are plainly opulence rather than necessities. For these reasons, luxury and prestige brands have for centuries commanded an unwavering and often illogical customer loyalty. The winery industry is among the fast developing industries in the world. Their competitive edge of “Hill of Grace” wine is prompted by the increased demand of super premium brands, where every brand establishment is doing all it can, to dominate the market and win a maximum number of clients and consumers (Ferrell & Hartline, 2008). In light of the above information, managements of Henschke need to
perfect its portfolio strategies of “Hill of Grace” wine to remain relevant in the market.

While developing a brand a market research is done to identify the needs and the likely benefits associated with it in relation to pricing and . This is because the objective is solely aimed at generating profit. As such, Henschke should therefore embrace simplicity, clarity and conciseness in their brands. It is through the provision of solutions that the firm is assured to ride on the wings of success, mainly because of its importance. Once the opportunities are spotted a calculated move is taken to determine this crave while at the same time valuing evaluating it to find its significant value. The goal should therefore focus on satisfying the need of Henschke.

PORTFOLIO STRATEGIES

There are a number of ways that Henschke can adopt to advance its portfolio growth strategies for its luxury prestige brands on the Chinese market. The strategies that may be employed in exploring this market with Henschke products could be market timing, buy and hold, pricing strategy, diversification and market segmentation.

Diversification

Henschke can employ diversification strategy in the market. By coming up with diverse sizes of Henschke in the market, will help in boosting the sales. China’s middle class, which is more sophisticated and westernized, has higher income to support their international and sophisticated life style. They are willing to pay a premium for convenience and high quality goods. China’s younger generation is more inclined to spend on luxury items than their elders do; likely, diverse group of younger and middle aged people are the new emergence of luxury consumption in China, as such Henschke should target such group.

Pricing strategy and penetration in new market

Pricing definitely provides the direction for the financial modeling of the business and it is another key factor for the marketing mix which is a major tool of the companies to position themselves in the market. In case of the Henschke marketing mix, pricing should be the tool which computes the revenue constituent from the other factors of the four P’s of marketing, which are otherwise the cost centers for the companies (Ferrell & Hartline, 2008). Penetration policy can be used by Henschke in Australia
to enhance sales in Chinese market for its super premium brands. However, according to Ferrell and Hartline (2008), penetration pricing strategies may not be able to provide the companies with only the economies of scale and get better market shares as there is the risk where the competitors might imitate the strategy of penetration pricing.

Development of Advertisement and Price Promotion

With a changing marketing environment, it is becoming necessary for Henschke to make the use of articulate means to engage customers and to attract them towards themselves. It might be believed that some of the customers are tired of being marketed to and hence need a change- this change has to come from the producers themselves by analyzing the marketing environment (Ferrell & Hartline, 2008). However, with such intense competition going on in the Chinese markets for premium brands, Henschke should position itself strategically while entering the market so as to come at par with their competitors and matching their points of parity far create some type of point of differentiation.

Some of the key drivers of portfolio strategies include:

Exchange Culture: China is a relationship based country; hence, it is an important factor in the consumption of Henschke brand in China. Further, it is consider as an important tradition in every area of life and it exists among family members, social connection, business contacts, social institutions, and dealing with political authorities; it accounts for more than 20% of luxury and premium consumption in China. Additionally, research has proved that there is very strong relationship between acquisitiveness and consumers attitude towards luxury brands (Gil et al. 2012, cited in Chen & Kim 2013).

Increase in Household Disposable Income: Disposable income in china has grown consistently over the years; thus, individuals often have a voracious appetite for luxury goods like Henschke brand and are the biggest spenders on luxury goods. Further, Yeoman & McMahon-Beattie (2006) confirmed that increased disposable income in China doubled the living standards and further growth is expected; consequently, it has increased the spending on luxury and premium items.

Young Consumers: In general luxury consumers in China are younger as compared to their counterparts. Langlolis&Barberio (2013) suggested that China’s younger generation is more inclined to spend on luxury brands than their elders do; likely, diverse group of younger and middle aged people are the new emergence of luxury consumption in China.

The fast growing affluent and middle class drives luxury sales: China’s middle class, which is more sophisticated and westernized, has higher income to support their international and sophisticated life style. They are willing to pay a premium for convenience and high quality goods. Further, Langlolis&Barberio (2013) mentioned that emerging middle class in China has continued saving heavily and they can pay Henschke premium prices and spend increasing amount of money. It may be the major driving force in the consumption of the luxury items in China.

CHINESE ENVIRONMENT MARKET ANALYSIS

China’s wine market has exploded in recent years, spurring major competition among winemakers who have flooded the market and are now looking to differentiate themselves. Sales of wine reached 257 billion Yuan, roughly $41 billion, in 2012, up 20% from a year earlier Henschke need to carry out environmental analysis, to take into consideration various factors in coming up with new products, renovating and re-inventing existing products and expanding into new potential markets. For this to happen in a systemic and more organized form they have to use various theory models and concepts to formulate and organize them well during pricing (Armstrong, 2002).

This is where the PESTEL and SWOT analysis comes in. The elements of an environmental scan include both internal analysis and external analysis which culminate in a SWOT analysis of the organization. In most of the situations organizations take environmental scans to only involve the external analysis. But for it to be comprehensive and conclusive enough it has to involve both internal and external analysis. The internal analysis includes an analysis of the internal structures of the company, its policies and operations, employees and abilities while External analysis includes concepts such as the macroeconomic environment of the area in which the company operates. This includes the government, legislation policies, technology, socio-cultural trends, and shareholders. In relation to Chinese super premium brand market, Henschke can make the analysis; PESTEL framework covers the macro-environment.

Political: looking at how governments have opened up an open door for new entrants at the premium brands in the market. For instance, the Chinese central government has also pushed for mergers and acquisitions in the winery industry, a move that is likely to support the emergence of joint ventures between leading national companies and Henschke from Australia. The government is also very committed to building infrastructure like roads, as a way to increase literacy levels to stimulate economic growth. In terms of business support the Government is controlling the lending rates of banks to help both local and foreign investor’s access funds for business growth and expansion.

Economic: Chinese government has resolved to implement several tax adjustments and subsidies for example premium brand purchases to encourage competitive prices hence also to boost economic growth. Interest rates have also been lowered as a matter of government policy to spur borrowing and lending, economic growth has been on the rise throughout, inflation has been contained and exchange rates against the USD have been steady.

Social: Changes in the social structures are favorable for Henschke businesses in the market, for example availability of cheaper labor and large urban market. Stress and unemployment make people desperate for jobs thus providing cheaper and efficient labor force. There has also been the rising domestic demand for small cars that is attributed to rising incomes and a growing middle class.

Technological: the domestic innovation and design capabilities in Chinese winery industry are key challenges to its international pricing competitiveness. This has forced Chinese government to encourage strategic partnerships with foreign players, aiming to facilitate technology transfer and improve domestic design and engineering capabilities.

Environment: most industries have gradually launched environmental friendly policies for example consumption standards for new wines. Plan to develop environmentally friendly strategy to winery industry.

Legal: The provision of friendly investment policies in terms of registering business and investing have been reviewed and this process is now much simpler and faster compared to previous years. There have been various reforms from the government seeking to regulate various sectors to avoid monopoly synergies.

Conclusion

The entrepreneurs from Australia have benefited from well propounded global marketing techniques in majority of emerging markets especially in China. In the current world, the revolution of the global marketing structure is likely to be bigger in emerging markets; hence entrepreneurs will need the assimilation of different cultural and political traditions. In this case, the highly populated areas like Asians seek to play even a greater role. The increased competition and fulfillment of customer value in winery industry is a great challenge to wine firms around the world. Henschke in Australia being a key player in the industry has taken over much competition in different regions. This has forced management to devise a way of improving their services and broadening their market niche.

References

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Armstrong, & Gary, A. (2005). Marketing: An Introduction, 7/e (New Edition). South Asia:

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