Market Entry Strategy For Treasury Wine Estates’ Product Grange Shiraz In The UK Wine Market

Apply relevant theories, models and frameworks to assess international business opportunities.

Undertake an applied and practical research project in International Business and make recommendations for strategic decision-making

You then need to develop a market entry strategy for the firm.

• Firstly, you should consider the industry environment for your product/service – please see extra hints in the Assignment 2 helpful hints document.

Find data , market share,total revenue in the market and industry in terms of competitors-some details on other competitors ,who are our competitors?their market share,,size, what they do,are they large from revenue perspective,what they do, are they profitable etc competitors analysis of 3 to 4 companies or competitors who are likely to effect your company relevance to your firm-Industry and market analysis

Then you should consider the market for this product/service (hint have a look at the marketing resources in this unit).

Then you may consider the strengths, weaknesses and opportunities and threats, of the company/this product/service entering this market.-identify what is the strategic objective that you want to get out of the market -is it market share?is is to reduce cost? Is it efficiency? Setting objective like why you are there or wahy you want to be there-and what is the strategy you want to achieve for that market

Then you need to consider the choice of ‘international strategy’ in the market, and justify why you are recommending this ‘international strategy’.  Transational,global,international ,multi domestic or localization? Which one is perfect one?

• Then you need to pick the type of entry mode you are going to use, and justify why you pick this entry mode, using Dunning’s eclectic theory.-what are the different type of entry modes that we can use in international business? Franchising,licencing,mergers and aquisition,greenfield,FDI,exporting,joint venture?which one? Why we choose this than other mode?which type of entry mode?you need to justify it and explain what are advantages and disadvantages?why is it a good entry mode for your business? USE DUNNING’S ECLECTIC THEORY TO EXPLAIN/DECIDE  WHY WE MIGHT CHOOSE A PARTICULAR ENTRY MODE IN A PARTICULAR MARKET
• You then need to choose the organisation design and control you will use.-create the design of your company over business that you are doing in foreign environment-product divisional structre , area structure, matrix organization
• You then need to specify the international marketing strategies that you might use.-4 p’s look at to the extend to that do we change around the 4 P’s according to the market place that we are in?do we chage the prpduct/pricing/distribution/place around in a different market place ?do we change permission? Reasons for why we will change all of these things in diferent market-(standardise pricing or whatever/customization/communication or distribution channels strategy)
• You then need to specify the international human resource management options.
• And then make and overall recommendation how the firm might deal with the above issues over the next five years.how  you might deal with the issues over next 5 years-so you need to make forecast of what a firm and product might do over the years-wheather a smaller entry in the market and as we go along we might increase that entry or we might make international strategy etc or whatever  briefly-how company looks and how the intenational

Strategy or entry mode may change ?

1)So what makes a good quality assignment (same as Assignment 1)?

a.It’s based on good quality research.

b.You have good quality sources of information (business information sources such as industry reports, EIU, Datamonitor etc, business databases such as Proquest, Business Source Premier, academic journal articles, textbooks, please don’t use Wikipedia or dubious references, or no name references from strange websites).

c.How well you use these resources support to your arguments.

d.Your information is realistic, relevant, and would be useful for a company/person conducting international business.

e.The information is specific to the product/service chosen.

f.You have adequately referenced, and you have used the Harvard referencing system to acknowledge your sources of information (both in-text and as a reference list at the end).

h.It should be in a report format. Your report should be typed, double spaced, 12-point font, and has headings (further information on report format is provided below).

You will submit your work in the group dropbox on Cloud Deakin.

You must keep a backup copy of every assignment you submit, until the marked assignment has been returned to you.  In the unlikely event that one of your assignments is misplaced, you will need to submit your backup copy.

International management of business mainly focuses on the strategic planning for operating in an international market which provides an in-depth analysis of the organisational capabilities. International management of business provides specialised functions required for the finance, human resource and marketing in the foreign market (Hitt et al. 2016). In the previous assessment, the external environment of the UK has been explained along with business trading and financial conditions. In the assessment, market entry strategy of Treasury Wine Estates’ product Grange Shiraz, famous bottled wine in the UK market is described. In the first part, market analysis and industry analysis is conducted focusing on the competitors in the UK. In the following part, market entry strategy and international strategy of doing business in the UK is described. In the final section, appropriate market entry mode along with organisational structure and human resource requirement is provided.

The UK wine industry is now going through the phrase of the glorious period and the English wine industry is now worth of £130 million. According to the published report of WSTA (Wine and Spirit Trade Association), the UK had more than 504 vineyards and almost 134 wineries in all over the Wales and England. The UK has a total 2,000 hectares vineyard that can collectively produce a wine of 5.06 million bottles (Nibusinessinfo.co.uk 2018). Most of the wine producing vineyards are situated near South West, East Anglia and South East parts of the UK. Among all the wine, the UK market mostly sells sparkling wine (66%), 24% of white wine and 10% of rose wine (Wsta.co.uk 2018). In the UK, the government has cut down the duty by 2% on wine providing relief for a growing wine industry in the UK.

Industry is growing

The UK wine industry is growing as it has been successful to increase the sale of wine by 16% from £113 million turnovers to £131 within just two years (2014-16) (Wsta.co.uk 2018). The UK wine industry had also observed a considerable jump of £55 million in just five years (2009-14). In the UK Customs statistics and HM Revenue showed that 65 new wine producers got the licence of doing business in the UK throughout 2015-16 (Nibusinessinfo.co.uk 2018).

Size of the wine industry

The UK wine market is the 6^th largest wine market in the world. Wine and spirit industry in the UK created £50 billion economic activity in which £10.3 billion sales have come from the wine (Delmas and Grant 2018). The wine industry in the UK employs more than 554,000 people all across the UK in wineries and through the supply chain. In the UK, almost 60% of adults drink wine and it is almost equivalent to 31 million customers in the UK. WSTA (2018) report stated that wine in the UK is now the preferred drink for 57% of people who like to have wine over other alcoholic drink.  The wine industry in the UK generated £ 10.9 billion through the sale and paid £6 billion in duty and VAT paid by the customers. The wine industry in the UK is worth £6.6 billion to shops and supermarkets and £4.3 billion to bars, pubs and restaurant (Morrison and Rabellotti 2017).

Competitors Analysis

Wine market can be segmented in the UK by three different divisions. First one is demographic segment; where the wine sellers can target the customers based on the age and economic condition of the customers. Age group of the wine customers is mainly between 24 and 45. Wine is mainly purchased by the customers who belong to the higher income group.

The second one is the behavioural segment; where the wine sellers can target everyday loyal and engaged newcomers. Everyday loyal customer group like wine and prefer to entertain at home (Gilinsky et al. 2016). For these types of customers, wine is part of the regular routine and wine is formal for them. Engaged newcomers are mainly millennial and for them, wine is part of socialising.  

The third one is the psychographic segment; where the wine-sellers like to sell the wine to the customer's group like image seekers, enthusiasts and overwhelmed. Overwhelmed group of customers like to drink wine and they do not know which one to buy and many of the customers purchase the wine through label design (Anderson and Nelgen 2015). Image seekers type of customers like to drink wine for maintaining the status symbol and they like to be first to try the new wine and they are open to innovative packaging. Enthusiasts' people like to think of themselves as knowledgeable about wine. These types of customers are cosmopolitan centres and they are influenced by ratings and scores.

Grange Shiraz is made from Shiraz Grape and it has a small percentage of Cabernet Sauvignon. The wine manufacturer, Treasury Wine Estates (TWE) can target the customers aged between 24 and 45 in all over the UK. This age group is large in numbers and these people are mostly professionals and family persons. The target customers of Treasury Wine Estates' Grange Shiraz would be both male and female. Therefore, the primary target market of Grange Shiraz would be the customers aged between 24 and 45, both males and females. The UK market is ever-changing, vibrant and competitive. The UK economy encourages customers to drink wine to the adults more frequently.

The secondary target market of Grange Shiraz would be the bars, pubs and restaurant in which the firm can sell their large quantity of the wine bottles. Most popular drink in the UK at restaurants and home is red wine. Therefore, TWE needs to try to enter the UK market targeting restaurants, bars and pubs across the UK.

Table 1: Porter’s five forces of the wine industry in the UK

(Source: Self-developed)

In the UK, domestic wineries produce wine and many of the foreign wine companies sell their wine in the UK industry. Competitors of Grange Shiraz will be both international wine brands and the domestic wine brands of the UK (Gain.fas.usda.gov 2018). In addition, a general characteristic of domestic wine brands is that they have their own vineyard; therefore, the cost of the wine will be lower than the foreign wine. Foreign wine brands are very popular in the UK and many foreign wine companies do their bottling in the UK (Kelley et al. 2016). Wine brands in the UK are large ones and they spend many pounds just to promote their wine. In the UK, many of the online platforms are there to sell the wine through the internet.

Market Entry Strategy for Treasury Wine Estates’ Grange Shiraz

Table 2: Competitors' analysis of the wine industry in the UK

(Source: Self-developed)

Table 3: SWOT analysis

(Source: Self-developed)

TWE has it headquarter in Melbourne and it is in the global winemaking and distribution business. Apart from wine, it produces a different spirit and alcohols. Wineries of TWE are situated in Penfolds and Lindeman.  TWE’s Grange Shiraz does a good performance in the new market. Grange Shiraz has the good return on capital expenditure. On the other side, TWE has been facing a lack of demand in the market and suppliers' relationship is not good. Grange Shiraz may have the opportunity of employees' capability and regulation policies in the foreign market (Tweglobal.com 2018). However, changing consumer behaviour and the newly implemented spirit laws may create an issue for the organisation.

TWE can take the global strategy as the organisation sacrifices the responsiveness to the local requirement of the market. In the wine industry; the company can hardly make any local changes of the taste of the wine. In order to increase the efficiency of the market; the company does not change the taste and service of Grange Shiraz. The global strategy is completely opposite of multi-domestic strategy. Grange Shiraz would not change the taste and quantity of the wine bottles as they are planning to sell the wine bottles exactly accurate like in Australia. The global strategy provides economies of scale to the company by offering essentially the product in each market (Johnson and Purkis 2015).

TWE will have its own supply chain distribution so that it can deliver the products on time. Treasury Wine Estates’ Grange Shiraz will be sold in across the UK in three different places, supermarkets, wine shops and in restaurant and bars. TWE can gain efficiency by creating a global brand by the unique taste whenever possible. Global strategy will be effective for Grange Shiraz as the customers do not hear about this new product yet. However, the customers are used to with Shiraz grapes wine from other brands and this new brand will enter the new market with ease.

Eclectic paradigm has a three-tiered framework which helps to follow in understanding the advantage to pursue FDI (Dunning 2015). Dunning's Eclectic paradigm is completely depended on the assumption that the companies avoid the transaction in the open market when the companies carry internal transaction lower costs. Competitive advantage is about assessing the benefit of doing business in the certain country. The business applies to the availability and the organisation can understand the costs of resources in the functioning of the country. The second factor is about ownership advantage which has the proprietary information. Before doing the business; the organisation needs to have the copyright, patent rights and trademark (Dunning 2015). The third factor is about internalisation advantage as it can have the cost-effective for the company.

 TWE will take the advantage of own production rather than producing a partnership arrangement. As stated by Li et al. (2017), internalisation theory focuses on imperfection in the product market and it only occurs when the companies perceive the benefits to cross the costs. Internalisation may lead to risks the business as the company does not have enough idea of the foreign market. Grange Shiraz will take the strategy of moderate international activity at the first step. Treasury Wine Estates will take the strategy of direct exporting to enter the UK. Direct exporting leads to investing more capital abroad. Direct exporting leads to be responsible for the organisation's logistics of shipment and for collecting of the payment. TWE is a large and global organisation and it is capable of making a potential profit without intermediaries. The process of direct exporting would be as follow:

• Treasury Wine Estates fill order forms from the foreign buyers who like to have the products
• Seeking out for producing extra bottled wine
• Exporting directly through own shipment and logistic channel
• Taking permission from Department of Commerce, trade offices, freight forwards and international banks

International Strategy for Doing Business in the UK

In the UK, direct exporting outside the EU countries is known as ‘third countries exporting’ and the company must have the appropriate license to export. TWE’s Grange Shiraz will make the export declaration to customs through the UK’s National Export System. TWE makes sure than import taxes, VAT and duties of the destination country must be paid in necessary. In the UK, the Commission issues Notices and Directives on general matters so that the company must be responsible, authorities and competent designated for reinforcement and liaison purpose (Tyler et al. 2017). The UK government is responsible for enforcing the wine regulation in the UK in case of importing, bottling, UK production and wholesale distribution.

In Australia, the business follows a hierarchical structure where the Board of Directors are at the top and the Board of Directors command the subordinates for their activities. Hierarchical structure of the business provides the clear chain of command and clear path of advancement for advancing and departing of the superior. Hierarchical structure also provides specialised groups in different departments.

In the UK, Treasury Wine Estates will new to export and it will treat exporting differently from the home country of Australia. The organisation is going to use different personnel and different organisational structure. TWE is going to make the different team for direct exporting of Grange Shiraz which is likely to lead increase sales. The organisation will do market research to locate the foreign representatives and buyers. The marketers will also do contracting and evaluating of foreign representatives.

TWE is going to market its product Grange Shiraz, bottled wine in the UK. Therefore, the organisation is going to recruit new staffs to market the products to wine shops, supermarkets and restaurants and bars. TWE is going to use direct exporting so that the organisation will need a proper channel of distribution. TWE will need to recruit new staffs, sales representatives, agents, distributors and general staffs working on logistics and shipment. Sales representatives will work on a commission basis to gather the customers. The organisation will also have the agents who will not have the legal authority to obligate the firm. TWE will also recruit the distributors who will purchase the merchandise with substantial exporters from the exporters. From the distributors, the wine bottles will reach foreign retailers and direct exporting will eliminate the extra expenses. Treasury Wine Estates will take the strategy of Polycentric approach in which the company takes the strategy of limiting the recruitment to the nationals of the host country. Therefore, TWE will recruit the employees from the UK and it will reduce the cost of foreign operations. The primary objective of the polycentric operation is to hand over the distributorship responsibility to the people who know the UK very well. TWE will recruit the staffs through the interview and the staffs would be given induction and on-the-job training to improve the performance. Fringe benefits would be given so that the staffs perform well.

Product: TWE is going to offer Grange Shiraz to the UK market. Grange Shiraz is prepared through Shiraz grapes and it uses a small percentage of Cabernet Sauvignon.

Organizational Structure and Human Resource Requirements

Price: In the UK market, TWE will use competitive pricing strategy so that the customers can purchase the wine. In a competitive pricing strategy, the firm needs to provide the price like other competitors in the market. TWE wants to avoid the price competition which can damage the company. In the UK market, already Shiraz wine is available; competitive pricing will help the company to get noticed by the customers.

Place: The warehouse of TWE will be located near London. Grange Shiraz will be distributed through Port of Felixstowe. The direct exporting will be started from the port and it will be delivered by the staffs of Treasury Wine Estate. The complete supply chain and distribution will be maintained by headquartering.

Promotions: TWE will do the promotions in three different ways.

First, the customers will watch the promotions of Grange Shiraz on the social networking sites, Facebook, Instagram and Twitter pages. The organisation is going to start the SEO and PPC promotions through online.

Second, TWE will also start the print media promotions of Grange Shiraz wine in magazines and newspapers.

Thirdly, TWE will also do the discount pricing strategy to attract the large numbers of the customers. In the restaurant and bars; the firm is planning to put the discount posters in front of the customers. These posters will attract the customers to purchase the discounted wine.

TWE sets the target to achieve a 3% market share in the UK by the end of 2023. Treasury Wine Industry is also trying to reach almost all parts of the UK through distribution. Grange Shiraz would be available online also via third-party apps and websites. The UK wine industry is competitive; however, promotions and growth of the wine industry in the UK make the picture brighter for Grange Shiraz. Most of the supermarkets like Tesco, Morrisons, Aldi and Lidl would be targeted to sell the bottled wine. 3% market share and a loyal customer base can be achieved through competitive pricing and extensive promotions. Promotions would be done conducting events in the supermarkets and putting posters on restaurants and pubs. Small football clubs can be used for sponsorships so that the people would get to know about Grange Shiraz.

Conclusions 

It can be concluded that the wine industry in the UK is growing and Treasury Wine Estates' Grange Shiraz has enough potential to reach the customers. Grange Shiraz would be targeted the customers aged between 24 and 45 as these customers drink maximum portion of wine. Restaurants, bars and supermarkets would be targeted to sell maximum wine. Treasury Wine Estates has a global presence which would be helpful for the organisation to take the global strategy. In addition, the direct export strategy will reduce the expense of market entry and it would make the organisation capable to reach the customers. Treasury Wine Estates would do promotions to meet the business objective.  

Reference List 

Anderson, K. and Nelgen, S., 2015. Global wine markets, 1961 to 2009: a statistical compendium (p. 468). University of Adelaide Press.

Bruwer, J., Burrows, N., Chaumont, S., Li, E. and Saliba, A., 2017, Consumer involvement and associated behaviour in the UK high-end retail off-trade wine market. The International Review of Retail, Distribution and Consumer Research, 24(2), pp.145-165.

Delmas, M.A. and Grant, L.E., 2018. Eco-labelling strategies and price-premium: the wine industry puzzle. Business & Society, 53(1), pp.6-44.

Dunning, J.H., 2015. Reappraising the eclectic paradigm in an age of alliance capitalism. In The Eclectic Paradigm (pp. 111-142). Palgrave Macmillan, London.

Gain Fas. 2018. UK wine industry. Available at: https://gain.fas.usda.gov/Recent%20GAIN%20Publications/UK%20Wine%20Market%20Report%202016_London_United%20Kingdom_2-19-2016.pdf [Accessed 18^th Sept 2018]

Galinsky, A., Newton, S.K. and Vega, R.F., 2016. Sustainability in the global wine industry: concepts and cases. Agriculture and agricultural science procedia, 8, pp.37-49.

Hitt, M.A., Li, D. and Xu, K., 2016. International strategy: From local to global and beyond. Journal of World Business, 51(1), pp.58-73.

Johnston, M.W. and Purkis, S.J., 2015. A coordinated and sustained international strategy is required to turn the tide on the Atlantic lionfish invasion. Marine Ecology Progress Series, 533, pp.219-235.

Kelley, K., Hyde, J. and Bruwer, J., 2016. Usage rate segmentation: enriching the UK wine market profile. International Journal of Wine Research, 7, pp.49-61.

Li, C., Brodbeck, F.C., Shenkar, O., Ponzi, L.J. and Fisch, J.H., 2017. Embracing the foreign: Cultural attractiveness and international strategy. Strategic Management Journal, 38(4), pp.950-971.

Morrison, A. and Rabellotti, R., 2017. Gradual catch up and enduring leadership in the global wine industry. Research Policy, 46(2), pp.417-430.

New Food Magazine. 2018. The UK wine industry. Available at: https://www.newfoodmagazine.com/article/46928/46928/ [Accessed 18^th Sept 2018]

Nibusiness Info. 2018. The UK wine industry. Available at: https://www.nibusinessinfo.co.uk/content/uk-wine-industry-overview [Accessed 18th Sept 2018]

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Treasury Wine Estates. 2018. Australian Wine. Available at: https://www.tweglobal.com/ [Accessed 19th Sept 2018]

Tyler, B., Cerrato, D., Beukel, K., Minciullo, M., Lahneman, B., Spielmann, N. and Cruse, A.D., 2017. Attitudes toward Sustainability, Environmental Practices, and Firm Performance in the Wine Industry: A Multi-Country Study. In European Academy of Management Conference (pp. 1-27).European Academy of Management.

WSTA. 2018. The Spirit and Wine Industry UK. Available at: https://www.wsta.co.uk/publications-useful-documents/146-2017-market-overview/ [Accessed 19^th Sept 2018]