Australian wine company called Penfolds entering into market of UK with its Penfolds Grange wine.
This section involves the development of the international marketing plan. complete the comprehensive international marketing plan. You are expected to develop a detailed market entry plan that will involve making decisions on issues such as:
- mode of entry;
- segmentation, targeting, positioning; and
- strategic options for the 4Ps, including the extent of standardisation vs. adaptation needed.
This section must include:
- Mode of Entry
- Locations: city, region, etc.
- Exclusive marketing or joint venture, etc. for marketing of the product/
- Segmentation, Target, Positioning(STP should be consistent with and driven by overall competitive strategy)
- Segmentation options and final basis and analysis for segmentation
- Target group selected, size, sales potential
- Positioning options and final analysis and basis for positioning
- Marketing Mix (4 P’s should be integrated among themselves and consistent with STP)
- Product (degree of standardization/customization, why appropriate, what needs products meets, what their advantages would be over local and global competitors’ products/services, etc.)
- Promotion (what media, other promotional efforts, what kind of reach expected, how promotion would be culturally appropriate or tailored, degree of standardization, etc.)
- Pricing (what pricing strategy used (financial analyses not required)
- Place or Distribution (what channels to be used, what channels available, expected ease or difficulty of channel access, measures used to overcome difficulties, direct distribution or using partners or agents, sales force management, etc.)
Overview of Penfolds and its product
This document depicts international marketing plan and strategy for an Australian wine producing company named Penfold targeting the market of United Kingdom. The aim of this document is to analyse political and legal, economic, social, cultural and ethical as well as environmental factors of UK as well as to display strength, weakness, opportunity and threat for the product in the market. This document also aims to explain mode of entry for the wine company, segmentation of the market and targeted consumers along with positioning of the product. The document will also include strategic option focusing on product, Promotion, Pricing and Place of distribution. The document has two section with first section explaining the country and product opportunity brief while second section explaining marketing strategy and plan for the company. The limitation for this report was the research which is based on secondary sources without conducting and primary research. It is assumed that the information obtained from those secondary sources are accurate and reliable.
Winery is Australia’s one of the major agro-based industry. According to pre-budget submission report from Australian Grape and Wine Industry (2019), winery contributes $40.2 billion annually for the australian economy. Among 2500 wineries, Penfold is considered as the leading wine production company with number one ranking from Ranker (2019) a popular online ranking website. According to Penfolds (2019) official website, penfolds was founded by Christopher Rawson penfold in 1844 in Adelaide. Since then, the compnay has progressed over the time with making varieties of wine and has successfully rooted itself in australian domestic market. Now, the company wants to go beyond the borders and target the overseas market. From penfolds wide range of wines, they want to take Penfolds Grange wine in the UK’s wine market. Penfolds Grange is made from high amount of Shiraz grapes and small quantity of Cabernet Sauvignon.
According to BBC (2017), United Kingdom is a state comprised of three countries England, Wales and Scotland with population of 62.8 million. Its capital is in London. UK being one of the major business hub, Australia has invested around $333.1 billion in 2017. Aiming to broaden the market of penfolds wine, the company aimed to target UK market. But to make various marketing strategies, it is very important to understand the overall environment of the targeted market so PESTLE analysis is carried out.
UK has constitutional monarchy which runs with the influence of a parliamentary system. UK has been favourable place for foreign direct investment with numerous international companies investing here. According to BBC (2019), UK is due to leave European union on 31st October 2019 known as Brexit. This event date has been changed many times creating uncertain environment for policies that might impact various businesses and trade relationship.
PESTLE analysis of UK market
Since, UK is on the state of Brexit, there are high chances of changes and modification in laws. Currently, UK applies rules set by EU as well as enforce their own laws. According to Australian Department of Industry (2019), Australia and UK have signed mutual recognition agreement which makes Australian products able to test and certify the UK standard before they depart the country reducing cost and time of duplicate testing and re-certification. As mentioned by Gov.UK (2019), people aged 16 or 17 can drink wine accompanied by an adult but can’t buy any along. Other law for alcohol consumptions are similar in UK as in Australia. Currently, UK implements EU importCommon custom Tariff (CCT) also called import duties. Here is a picture of Tarrif rate which would no longer apply on UK after Brexit.
UK is known for its strong economy with an employment rate of 75.9%. Due to the impact of Brexit issue, the inflation rate in UK has increased and reached 2.4% on September (Jackson, Strauss, Bernard, Pearson, & Romei, 2019). Revenue from wine in 2019 amounts to US$370,167m and is expected to increase by 3.8% (Veseth, 2019).
UK has total population of 67.53 million among which 53,409,606 are adult (Population, 2019). According to WSTA (2019), 81% of UK adult consume alcohol drink including wine. The majority population of UK follows Christanity which has tradition of having drinks during festivals and celebration. According to Consumer (2019), wine consumer in UK are highly influenced with ethical aspect of wine company. Most of the consumer prefer the wine that is obtained through fair trade and organic and some prefer vegan wines.
People in UK are exposed with advance technologies as the country is very developed in case of technology and innovations. As discussed in the article Higgins, McGarry, & Wolf (2014), the role of mobile applications and QR code has a significant impact in consumer in having wine details and selecting the desired wine. Some small companies have used the medium of social media to sell wine bottles directly to customer’s home as explained by Moore (2015). Significantly UK’s online wine market was successful to gain $1.86 million approx of sales in 2018 (Mileham, 2019). Mileham (2019) also argues that regulations against online sale of wine is relatively light as compared to UK and other nations.
According to Amienyo, Cameilleri, & Azapagic (2014), environmental impact of wine consumption in UK are estimated to have contribute around 0.4% of total greenhouse emission of UK and 559,000 tonnes of packaging waste per year. Transportation of wine in bulk, increment in recycling and light weighting of glass bottles are some of the measures that helps in reducing negative impact of winery on the environment as suggested by Amienyo, Cameilleri, & Azapagic (2014).
Modes of entry into UK market
A marketing plan is a business document that outlines the strategy and tactics that will be used by the firm. In most cases, the plan is short term and can be used within one year depending on the strategy chosen. The success of the firm rests on the right marketing plan that is used to identify the target customers, how the customers will be reached and strategies for retaining them within the business (Furrer, 2016). This means that the marketing plan is supposed to be a road map for success and thus is supposed to have an outline of the target plan, pricing strategy, distribution plan and the entry strategy that will be used to penetrate the new market.
To enter the new market, the company will use several strategies to make it easy to enter and penetrate the market. One way is the use of the franchising system which will be achieved through the manufactured-sponsored wholesaler’s franchise system. This system is the best since it uses wholesalers and distributors to spread the products in the new market. The reliance on the franchise system ensures that Penfolds wine spread its products within a wider market by using the existing distribution networks in the country (Hill, 2015). This means that the company can license its franchise to other companies who will only be charged with the distribution of the new product in the UK market. Lymbersky (2018) adds that the strength of franchising is the operation beyond the supplier-dealer relationship that ensures the distributor only deals with one product that they have been contracted to distribute. Penfolds also benefits from this model by avoiding the manufacture, storage and distribution costs in the new country since they are passed on to the franchise.
Joint ventures can also be a good opportunity for penetrating the UK market through Penfolds working with existing companies in the UK. For example, the joint venture agreements can include entering agreements with these companies to ensure that it retains the bottling rights. The role of this strategy is to develop a scale of efficiencies for Penfolds through the integration of products with other companies (Channon & Sammut-Bonnici, 2015). This means that some of the rights like bottling rights can be joint ventured with other firms in the UK which have already established themselves in the UK thus making it easy for the firm to enter the UK market. Joint ventures can also be useful in expanding the product portfolio through developing a product that relates to what the other firm offers.
Market segmentation, targeting, and positioning
From the joint venture and franchising, Penfolds will have to enter the UK through regions that are controlled by the firms that it will be working with. When franchising rights and entering joint ventures, caution has to be made on the distribution of regions to allow easy integration between the different companies that will be interested to work with Penfolds. Thus the entry will be through regions that are controlled by these firms as a way of equal distribution of rights to these firms. The regional distribution will also allow the slow spread of the wine into the UK market through the region by region.
Market segmentation is the grouping of customers into subgroups defined by shared values and characteristics. In most cases, the characteristics that customers have are defined by demographic and psychographic characteristics within the population. The role of segmentation is to identify high yielding customer segments that the organization needs to concentrate on (Pride, et al., 2018). The UK is a diversely demographic country with the majority both the young and the old aged 65 years and above engaged in the consumption of different alcoholic drinks (Drinkaware, 2019). The common type of drink in the UK is the binge drink which is consumed by most people. The young people are social drinkers since the drink in groups while mostly going out while the older population are regular drinkers due to the savings that they have accumulated. This means that to enter the market well Penfolds will have to develop different product ranges that will meet the needs of these two populations. The consumers can be segmented according to age and income to ensure that the company develops a product for each of the population segments. For example, the grange wine costs $350 which is fit for the upper segment that can be easily afforded and thus there is a need to develop another wine product that probably costs half or less the amount of the grange so that the younger non-working generation can afford. Further, in the UK, both men and women are drinkers meaning that the firm has to develop products that are fit for the male and female market profiles. This positioning will be achieved through a new taste of wine that the company will bring. The positioning statement of Penfolds will be “Penfolds blends wine with 50 years ageing with an excellent taste to give you a new taste that has never existed in the UK”.
Strategic options for product, promotion, pricing, and distribution
Target marketing builds on the segmentation information developed for Penfolds. The target market is defined by the identified segments that the organization seeks to invest in. the basis for choosing the market for the firm is to focus on the key customer segments that the company will invest in. As seen in the market segments, the UK market has the older and the younger generation who consume alcohol. This will also be extended to include gender profiling so that the firm designs market advertising trends that seek to lure both male and female customers. In this case, the nature of the products developed needs to be defined by their price range and the attached quality that will define the people that it is targeted to. For example, the Penfolds Grange ranges from $350, then it means that it will have to target the middle class and upper-class segment within the society. This means that the target market is demographically segmented in a way that defines the consumer profiles that exist in the UK.
From the target segments that have been identified, Penfolds needs to position its products in a way that reflects the needs of the segments in the population. Annamma & Li (2012) suggest that the role of positioning is to develop product attributes and design how it is communicated to the mind of customers. In the UK, Penfolds has to position its brand in a way that will enable it to compete with other existing wine-producing companies. As seen in the SWOT analysis, the new entrance of Penfolds in the UK could be a weakness in itself but if the company positions itself well, then it means that marketing can be used to penetrate the UK market. Aggressive marketing strategies have to be put in place by Penfolds so that the firm can position its product in the UK market. In positioning the product to fit the UK market, Penfolds needs to focus on product development, pricing, and promotion areas which will be used in communicating the brand to the UK market.
The marketing mix is a combination of factors that a firm uses to control and influence the target customers to purchase the products it offers (Rafiq, 2016). Since positioning entails ensuring that the firm products are positioned in a way that creates a competitive advantage, then the role of the marketing mix is to define the four P’s of product, promotion, price and place about Penfold’s target UK market.
The product represents what the firm offers to the consumer based on its brand. This means that the way the product will be distributed in the UK will determine the level of customer interaction. This will be based on the use of the best packaging strategy which will reflect the nature of the brand (Wedel & Kamakura, 2010). For example, the company will have to use different packaging for a range of products that it will offer to reflect the demographic needs of the target market like male and female customers. Since the customer profiles and needs differ, then Penfolds will have to develop different product ranges to satisfy each of the customer segments. For example, the design of the wine product will determine the price and thus the target consumer profile. This means that there should be luxury products, middle-class products and even those that are designed to meet the wine needs of male and female customer profiles. For Penfolds to reach out to a wider customer population, a wide product mix offers the best way to reach out and satisfy a larger customer segment. The product packaging will be ecofriendly through the use of wooden storage barrels and crates while the wine itself will be distributed in paper bottles which are cheap and ecofriendly.
Promotion exists in the form of advertising or the public relations that the company develops with its customers by offering appropriate product-related information. Novak (2011) suggests that the role of promotion is to offer customers appropriate and valued information that makes it easy for them to make purchase decisions. When the company uses appropriate, competitive and aggressive promotional strategies to its target customers it increases customer knowledge thus increasing their purchasing decision. In this case, Penfolds will use traditional marketing advertising platforms and online tools to reach out to the target consumers. Traditional advertising platforms will include newspapers and television which will allow the company to share the product information. Penfolds will also utilize social media platforms to reach out further to the young and youthful customers who rely more on social media for communication as compared to the older population. The success of the promotion will also be based on the promotion method chosen by the firm and how the product information will be designed and communicated to the customer segments.
Price is the willingness of the customers to pay for the product which is defined by many factors. In a liberal market economy, customers go for products that reflect the best opportunity and the one that offers maximum utilities (Nagle, Hogan, & Zale, 2016). To survive in the UK market, Penfolds has to use a competitive pricing strategy on its products to increase the competitive advantage that it will develop over other products. The fact that the UK has other wine-producing companies that have established their market share means that Penfolds has to use the right pricing model (Roheim, Asche, & Santos, 2011). In this type of market, Penfolds will use the penetration pricing model that entails setting low prices that allow the company to penetrate the market, especially when launching the first products in the UK market (Dibb, Simkin, Pride, & Ferrell, 2013). This will also be paired with promotional pricing where the company uses discounts on particular products that the company has. This type of pricing mechanism will be short-lived since it will only work for a specific period that will be designed based on market trends.
The place is the distribution channels that are used to ensure that they reach out to the intended customers. Penfolds will use a distribution chain that relies on distributors, wholesalers, and retailers (Andjelkovic & Barac, 2017). Distributors will be regionally places and are part of the joint venture or the franchise system that the company will use to enter the UK market. From the distributors, the products will be taken to the wholesalers who will then sell to retailers and later customers. The distribution network that will be used by Penfolds will rely solely on the distribution channel that will be used to ensure that products reach to the targeted customers.
In conclusion, to enter the UK market, Penfolds requires develop a marketing plan that will allow penetration. This will achieved through segmentation, targeting and positioning of the wine products to meet the needs of the UK market. This means that the company will have to adequately develop products that reflect the consumer segments of the target market, have a price range based on the different abilities of the consumer segments, proper promotion to increase customer information on the products and adequate distribution processes to ensure that the products reach the intended customers.
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