The sac’s Model is a strategic look at the factors needed for success. T was developed by Chicken Omaha. The sac’s model points out that a strategist should focus on three key factors for success. Len the construction of a business strategy,three main players must be taken into account: The Corporation: A medium sized company but efficiency is not one of its strengths. Let has quite a high cost structure. This is not a major problem though,as it sells its premium bottled beers at premium prices,”off-trade” via supermarkets and “on trade” through fashionable,up-market city centre bars.
The products comprise of Hostellers European style lager beer,San Bernard. Camelot. British style dark bitter beer,Ark Royal. British style dark bitter beer Pot of Gold. Loris style dark stout beer This essay is an example of a student’s work Disclaimer This essay has been submitted to us by a student in order to help you with your studies. This is not an example of the work written by our professional essay writers. The Customer: China is undoubtedly the largest consumer market in the world.
A land that promises huge potential and broad prospects,many companies have succumbed to the seduction of the Chinese marketplace and have set foot in the country. Due to the here geographical size of the Chinese territory and the differing rates of growth,the level of economic and social development in various regions varies significantly. The Competitors: In China Competition to serve consumer needs is intense; multinational companies are battling one another and also taking on increasingly sophisticated Chinese players. En of the bigger issues facing multinational companies in China is their ability to serve the mass market cost-effectively-”an important advantage of the local competitors. Bud light beer has been enjoying the lead market share. Various leading layers includes CAB Brewing Company Inc. ; China Food and Beverage Company; China Resources Enterprises,Ltd. (CREE) ; Adagio/Guinness; Ordering; Group Model AS De ICY, Foment IconГ¶mice Mexicans AS De C.V., Fijian Yanking Haiku Brewing (Group) Inc. ; Heinlein NV; Interbred (Ellen); Shrink Brewery Company Ltd; Alcohol Change Beer Co. Ltd. ; Lion Nathan; Planner Barrier Gumbo & Company KEG; San Miguel Corporation; Shapiro Breweries Ltd. ; Scottish & Newcastle; Shanghai Shenanigans; Country Ltd; Toasting Brewery Company Ltd; and Gabrielle PL San Miguel is one of the top three selling brands of beer in Asia and the largest selling Chinese Beer Market Competitor Analysis By Jag-Kong world’s second largest brewer owns 47 breweries in 13 provinces in China and sells Snow brand beer nationwide. Len 2004,Gabrielle purchased three unprofitable breweries in China from Australia’s Lion Nathan for $71 million.
Scrabbles has been producing beer in China since 1991 . Len 2003 it purchased Dali beer,the largest brewer Yuan,and took over Gumming Hash Brewery. Heinlein also has a stake in a large Chinese beer producer. Market Opportunities & Threats in China: The Chinese market offers great business opportunities due to its rapid economic Roth and huge market; however,it has its fair share of challenges,ranging from inadequate market data,inappropriate entry strategy,lack of access to sales channels,difficulty in finding the right partners and cultural differences etc.
Companies have to consider the gap between the developed and less developed markets,where a uniform marketing strategy is not feasible,considering the large scale of the Chinese market. The beer market in China is not national- it is an aggregation of local markets with each region having specific tastes,preferences and spending pattern. As a result of the localized nature of the beer market,small regional breweries dominate these fragmented markets. These regional local brands have a nationwide market share of less than 2%.
The Chinese beer market is still a fragmented market with the top four breweries in China controlling only 45% of the total market share. China Resources Snow Breweries is the top brewery in China,with an estimated nationwide market share of 15% in 2006,followed by Toasting at 13%,Yanking at 10% and Ellen at 7%. Beer Market scenario in China: The Chinese beer market has grown at an astounding pace in recent years,spurred n by the massive levels of foreign investment in the market,along with the rise in the average levels of consumer spending in China,in view of the economic reform policies of the government.
China has now overtaken the US to become the largest national beer market in the world. In 1994 only four foreign beer companies had invested in China. In 1999,there were more than 60. The Chinese operation remains unprofitable. Year Million Liters Annual Growth (%) 2007 3203583 10. 04 2008 33459. 42 4. 44 2009 34 904. 69 4. 32 36,371. 42 4. 20 2011 37. 860. 59 4. 09 Source: http://www. Psycholinguistics’s. Mom/content/rowboat mm. PDF But new research by the McKinney Global Institute (MGM’) highlights the emergence of a far larger,more complex segment-”the urban middle class,who’s spending power,will soon redefine the Chinese market.
The lure of China’s urban-affluent segment is easy to understand. These consumers earn more than 100,000 remind (about $12,500) a year and command 500 billion remind-”nearly 10 percent of urban disposable income-”despite accounting for Just 1 percent of the total population. Although China is the world’s largest consumer of beer in terms of volume,it is still under-penetrated cause its per capita consumption is still the lowest when compared to the US and European countries. This offers tremendous growth opportunities for the large breweries operating in China.
China total population trends and growth China is the world’s most densely populated country and makes up of one-fifth of the world’s population. Let has a total population of 1321 million as at 31 Deck 2007 with 51. 50% Males and 48. 50% of Females. Her population is nearly five times more than United States even though both have about the same geographic area. China’s rate of population growth has slowed significantly. The country’s population of 1. 3 billion in the early asses is projected to grow by another 100 million by 2050. T is forecasted that India with its higher fertility levels will take over China to become the most populous country by 2035. This essay is an example of a student’s work Understand the risk of entering China market China is a good opportunity for companies to embark on if they want to expand their business in Asia and the world around. However,Seems (small and medium enterprises) like Eire Valley Breweries Pl,may be worried that they do not have the required or enough resources to enter into China market. However,it is not Just about having the capital but applying the correct approach when doing business in China.
A number of foreign companies do not have a good network in China and thus they are unable to find relevant or reliable business partners in China market and meet a lot bureaucratic problems as they are unfamiliar with the laws of China. Cultural Aspects of Chinese Consumers: The Chinese consumers have a very strong national pride and they like to be associated with their nationality and country. Hence,the Chinese consumers are very supportive of their local products. Hence,foreign investors sometimes have a hard mime trying to market their products to the Chinese consumers because their products may seem too unfamiliar and foreign.
Foreign companies need to familiarize themselves with the China market laws and culture before entering it. Law at China: foreign companies are familiar with the Chinese culture,they will be able to understand the Chinese laws better. Eliminating with the locals would also allow a deeper understanding of the Chinese culture. Let is advocate to undertake a local company as a partner to help them with the registration process and negotiation with the Chinese. Geographical Segmentation: China is a complex market, varying widely from region to region. Ended,the country can be described as a collection of regional markets,with very few companies able to operate on a truly national level. The brewing industry has been one of those quickest to modernize in China,and can be seen as a yardstick upon which other industries in China will model themselves. Let may be good to follow a region-centric approach to cater the market Demographic Profile: China market is a complicated field by which only those who are familiar with the Chinese culture would be able to move around in the market. China is a multi- religious country.
Buddhism,Taoism,LULAS,Catholicism and Protestantism,with the first three being more wide spread. Many may not realize that China is a country whereby the Chinese are deal with business according to their social and cultural values. The Chinese have been passing down a set of values since history and the Chinese companies have been carrying out their business and trade according to those values and beliefs. Thus it takes more than Just being able to speak the language. To survive in the China market,one must have good relationships in the market. The
Chinese uses the term,”guan xi” to refer to any kind of relationships; personally or bureaucratically. Chinese companies tend to want to work with people whom they are familiar with as they would be able to develop a trust between them. Distribution of Population income wise: Population (million) Gross National Income (Billion) Low Income 2512 10. 20 Middle Income 2667 49. 22 High Income 955 Source: US census Bureau,World Bank group,McKinney analysis Marketing Mix: Product: China is largest beer market. Beer is most popular alcoholic beer in China. The consumption range between 500 ml to 750 ml.
Offered in cans and Bottles. Beer is often served warm. Beer consumption is still low on a per capita basis: about 18 liters a year,compared to 84 liters in the United States and 75 liters in western Europe. Since taste vary from region to region It is suggested to go with localized taste tastes,volume,bottle shapes,colors,packaging should be according to local preferences Price: The beer is generally pretty cheap,especially the local brands. A large bottle of beer can cost as little as 25 cents. Locally-made foreign brands such as Past Blue Label,Scrabbles and San Miguel are also fairly cheap.
Bottom line pricing is always preferable to penetrate the market. Cost-plus pricing assures that all costs,both fixed and variable,are covered and the desired profit percentage is attained Promotion: Advertising osmosis predominantly play vital role in fixing brand locus. This can be achieved through focusing the promotion strategy on one premium brand. We should ensure that most promotional activities are executed as per marketing plan by distributors. Distribution (place): Beer distribution in China from producers to distributors is via a set of distributors and wholesalers.
Beer producers vary in terms of ownership structure and size. Distributors are usually licensed by the beer producer. Distributors purchase beers from producers or other distributors and sell them to a number of wholesalers. Distributors can also act as wholesalers in order to directly sell products to retailers. Each distributor normally carries a single brand,though the distributor can carry many other non-competing beverages at the same time. Wholesalers procure products from multiple beer and other beverage distributors. The vast market makes foreign players to suffer from effective reach. N this case a local player who has net work of distribution will enhance the availability before aggressive promotion nation wide. N china Joint venture beer producers are Heinlein,Budweiser,Sandhog Yeoman and Sandhog Soaking. Long haul trucking is most often used that contributes to high transportation cost. However,it is faster and more reliable. But only those beer firms are likely to succeed which can strengthen their distribution network and sustain low profitability. Len the long term,increased scale could be the driving force behind increased market profitability.
A piggy back model will help in Distributor- retailer model of channel in getting quick access to market. Len china large retail formats like Supermarkets and hypermarkets and grocery torts do dispense the beer. Hence multi-channel mechanism would be preferable. Marketing Planning: Once the size of the market has been determined,the next step is to define the target market. The target market narrows down the total market by concentrating on segmentation factors that will determine the total addressable market the total number of users within the sphere of the business’s influence.
The segmentation factors can be geographic,customer attributes,or product-oriented. Beer brands should have sufficient support and restrictions forces over market management issues. While some beer producers do have formal product control within their organizations,they will have little control in aspects like products,prices,placements and promotions once the product is released to the market. Entry Strategy: It is always good to enter in to the Chinese market through a Joint venture. For many years,the Eire Valley Breweries Pl,a I-J company focused its marketing effort on premium-priced products.
China’s market for consumer goods is growing quickly,stimulated by a strong economy that is putting more disposable income into emphasizing on aspects such as advertising,product development and the arks,companies must also allocate more resources into channeling and distributing the products,such that the products are readily accessible to the consumer groups. While the distribution system is relatively efficient in the major cities where there is a high concentration of chain stores and departmental stores,the smaller cities generally have a poorly managed distribution chain.
While intensive advertising is one way to persuade potential consumers in major cities,a greater focus has to be placed on “push” marketing,to build up brand presence and product knowledge in the other cities. Conclusion: It is suggested an overall approach for marketing planning,returning the focus to product values,and devising several mechanisms for pricing,channeling,resources management and data management. Chinese Beer Industry MEGAWATT by Cynthia hung on 27 September 20125361 Comments (O) Please log in to add your comment.
Report abuse Transcript of Chinese Beer Industry Chinese Beer Industry and the demise of Foreign competitors Cynthia Hung Stella Chem.. Risky Change Question 1: Describe the characteristics of China’s beer industry Characteristics I. Rapid Growth Rate 2000-2004, growth rate of 8. 1% p. A 1999, Top 4 brewers = 9% market 002, Top 10 brewers = 40% market 2004, 325 market competitors Four major competitors in the industry: Toasting Breweries Yanking Beer Group South African Breweries (SAAB) ABA Ellen Characteristics Characteristics Characteristics Characteristics Characteristics II.
Dominance of National Players Strategic Alliances: Toasting & Enhances Busch South African Brewery & China Resource Breweries Regional and local players are losing the consolidation battle : Jungian Brewery, Guano 2009, market share drop 47% to 33% Ill. Patriotism to Local Beer Brand IV. Segmentation Attributed to: protective local policies geographical proximity underdeveloped infrastructure preference for local beer V. Uneven Wealth Distribution ‘V.
High Tax on Imported 316% value consumption Imported beer are subject to import duty exercise duty value added tax Question 2: What are the opportunities and challenges facing foreign companies operating in this industry in China? Question 1: Describe the characteristics of China’s beer industry Question 2: Question 3: What strategies did SAAB adopt in China to outperform other foreign brewers? Question 4: Do you think Saab’s strategies will give them sustainable competitive advantages in China? Why?
What are the lessons for other foreign companies operating in the same industry and also in other industries in China? Overview Challenges Foreign Firms face, Fragmented Industry Fierce Competition Nationwide Presence Cost Advantages Strategies Foreign Investment Enterprises have implemented strategies such as, Join-ventures with Chinese partners Investing equity in big Chinese breweries Acquisition of local breweries Current Beer Trends Premium Beer Trends Premium beer Constitutes 5% of Chinese beer market Projected to constitute 25% in 10 years time Are priced up to 50% more than regular beers
CRY Snow – prominent beer brand Snow Non-premium Beer Market Share Beer Trends Premium Beer Local brew sells for less than ARM per bottle. Foreign premium beer is popular among younger, educated, image conscious Chinese. But Beer is about national pride. Question 3: What strategies did SAAB adopt in China to Outperform other foreign brewers? Guiana Synonymous with networking; process of exchanging favors A major source of competitive advantage Example: SAAB – CRAB Joint Venture Saab’s utilization of Cry’s Guiana network Company Specific Advantages Saab’s success can be also attributed to Company history Company culture
Company experience (overseas) SAAB vs… Other FEES Other FEES faced barriers such as local protectionist policies distribution issues & licenses local knowledge & experience weather, geography, advertising Question 4: China? Why? What are the lessons for other foreign companies operating in the same industry and also in other industries in China? SAAB vs…
Late FIE entrants Late FIE entrant strategies mimicked aspects of SAAB entering strategic alliances investing in local brands building Greenfield sites Late FIE entrants ALSO introduced promotion of international brands as well as local brands woo tier marketing campaign Saab’s Strategic Response In response to the two tier system SAAB merged with Miller Brewing Company, a prominent global beer brand compliments SAAB, a producer of low end brand To Sustain its competitive advantage cultivation and deepening of existing Guiana networks have positive long term impacts Conclusion “Chinese have a very strong sense of home place… -Lie Guiro, chairman of Toasting Consumer has a preference for their local brew over foreign brews. Consumers are divided into 3 tiers: Economy, standard, premium Local beer- US$O. 85/L Foreign beer- priced 400-500% higher
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