Tito Vodka Market Expansion: Strategies For Entering The Kenyan Market

Marketing Environment (Kenya)

Discuss about the Tito Vodka Market Expansion.

Tito’s handmade vodka was first produced for commercial purposes in 1997, when Fifth generation Inc. was formed by Burt Beveridge. In that year, only 1000 cases of the drink were produced and sold. Ten years later, the company managed to sell 160000 cases of the vodka. The company is based in Texas where it was first established and continues to carry out all of its production processes in the same place.

Due to the significant changes in the market and the rise of many other companies producing similar products, the company has found it imperative to change the way that it reaches out to its consumers. Strategies that may have brought positive results in the past may not be as effective in this century for several reasons. First of all, the dynamic of the market has changed a lot. The kind of consumers that were targeted in the past may not be the same as today since their interest may have changed or they now have a variety of products to choose from other competing companies. As a result, Tito’s Vodka has been able to identify two new targeted marketing environments (Dawson 2014).

This term often refers to the existing factors that are likely to affect the way that a company performs in the market. These factors can be micro or macro (Armstrong et al 2012). Micro factors refer to those factors that come from inside the company. The strategies that the company has put in place, its processes, staff and many other internal factors often have the ability to affect the way that the company will relate with its consumers and target markets, which will eventually reflect on the direct performance of the company.

Macro factors are those factors that come from outside of the company. Since they are not found within the company, the said organization does not have any control over them as it does on the micro factors (Levens 2011). However, these factors are just as important as they to have a lot to do with the way that the company will reflect the outside world, its audiences and consumers, and competitors. Since the company does not have a hold on these macro factors, the best that it can do is find ways of coping with the existing factors in a way that will end up being beneficial. For the case of this paper, one micro factor and one micro factor were selected to understand the chances of Tito’s Vodka performing better in the market.

Micro Factors

As has been elaborated, these are factors that come from within the company and can affect the way that the company performs. One of the markets that Tito’s Vodka should consider venturing into is the Kenya region (Martin & Schouten 2011). For this to take place, the company has to put in mind the fact that Kenya is a diverse culture. The key ethnic group in Kenya can be highlighted as:

With this in mind, staff diversity is likely to help a lot on ensuring the smooth entrance of the company to the United Arab Emirates.

This has a lot to do with the kind of people that will be employed at the company and the advantages or disadvantages that will come with this change (Kotler, 2011). However, with the changing times, the company has found it imperative to venture into newer and more diversified markets. That means that some of the strategies it may have out in place in the past may seem obsolete in this century.

The company prioritizes workforce diversity to ensure it remains competitive in the market. Several reasons support the fact that this strategy is likely to work. For starters, the company needs to ensure that the kinds of products that it provides in the market can serve people from all walks of life (Perreault, et al 2013). It would thus not be enough to assume that the present products would serve the purpose. That means that their preferences are also likely to be very different from those of others. Having a workforce that is diversified would help in enhancing the diversity of the company. It is easy to argue that research and focus groups would be just as effective in getting to know about the preference of other people, but it not really sufficient (Drori & Honig 2013). Tito's vodka may consider widening the variety of its products in order to suit various markets. For example, not all alcohol drinkers like vodka. There are several other types of alcoholic drinks that are available in the market. So, this company may consider manufacturing these other varieties in order to gain more credibility in the market.

Having people of diverse cultures at the company will help the company to understand better how to deal with different people. Employing locals would also be beneficial because it will help the company to adjust faster in the new locations by getting much assistance from the diversified employee base.

Staff Diversity

Diversity at the company also increases creativity. Creativity is quite important in marketing since it ensures that the right kind of material is used to create the right kinds of strategies that will have a positive impact on the company (Wang, et al 2012). A person that has lived his entire life in a certain culture is more likely to understand the needs and operations of his people than someone that has studied marketing for ten years. He will know the right kind of language, where the product can meet the needs of the public and where this audience can be found.

Take the example of the African state or any other developing countries around the world. If Tito’s Vodka is to bring its products to this place, having people who understand this region well within its workforce is likely to have a lot of benefits (Murray et al. 2011). Certain languages are likely to appeal to an American audience but will likely be seen as offensive to a resident of Kenya. As much as this may seem trivial, on a large scale, it has the potential of reflective very negatively on the company, thus making it unable to penetrate this target market.

The greatest implication for entering the new market of Kenya is the threat of competition from companies that have already established their base in the region. Several companies were founded in this country and had continued to strive here for several years. The company would thus need to put in extra effort to convince people to abandon the products they have been using and try the new ones bought in by Tito’s Vodka (Timsit et al 2015).

A good example of this would be Aberdares Beverage Limited. The company is located in Kismu and it has a good hold in the domestic market. In fact, it is one of the largest distributors of alcohol an alcohol products in Kenya. Since Aberdares Beverage Limited has been in the market for more than ten years, the locals in Kenya are more likely to use its products compared to their chances of taking up a new alcoholic beverage. Entering new markets is especially difficult for Tito’s vodka since it deals with consumables, which are the most sensitive products to sell. An additional advantage that Aberdares Beverage Limited has over Tito’s vodka is the fact that it is an internationally recognized brand. It therefore does not have a problem with marketing and making its name known to its consumers.

Marketing/Business Implications

These are strategies that the company can put in place to enquire a smooth transition into the mew market. For the case of Tito’s Vodka in Kenya, franchising would be the best choice. Franchising refers to a system where one company pays royalties and fees to another company, usually more established for the former to use the identity of the latter company to sell its products (Jeanne & Ranciere 2011). Using the name of a company that is more established in this region is likely to give Tito’s Vodka better airtime with the audience that they look forward to attracting in Kenya. One advantage of franchising is that it helps in cutting costs. The Company would not have to use as much money for setup and marketing purposes as compared to when it decided to venture into the market independently.

Another entry mode that is likely to work for the company is a joint venture (Khanna & Palepu 2013). This is a process where two companies come together for the purpose of enhancing their profitability. The difference however between a joint venture and franchising is that each of these companies can maintain its name and identity. This strategy while worthwhile may not be as beneficial as franchising in this case since the company would still need to carry around its name, which is still new to the audience in the target market.

A new company venturing into the UK market may not be one of the hardest things that Tito’s Vodka will ever have to face. This is due to the fact that there are various similarities between culture of USA and culture of UK. The country is stable in several ways, both economically and environmentally (Albornoz et al 2012). That means that a lot of factors would need to be put into consideration before the company takes the leap into this market. One of the important factors to think about is whether the people in the country will be able to identify with the products of this company.

However, in recent times, the events like Brexit has some impacts on the UK economy. The purchasing power of UK citizens may not be the same as it was couple of years before. Having this is mind; the company will be well aware that some of its products are likely to do poorly in this region since the people are not able to afford them. Tito’s Vodka sells alcohol, which is essentially a luxury product, which may not suit all of the UK market. First of all, the company will need to split the market into two segments; for both economically stable and unstable, since there would be people that live below the poverty line index. (Johanson & Mattson 2015). Assuming that the rest of the population would be able to afford Tito’s Vodka products, it means that the kind of marketing strategies that will be put forth will be different from those of the other people. Additionally, the company would have to significantly consider the pricing of its products if it looks forward to making any profits. High pricing will discourage the potential sellers, even if they are seen to be living above the poverty line.

Recommended Market Entry Modes

Another market that should be considered by the company is the tourists. According to a  report that was given by World Bank, tourism in the region has been able to increase in the past year has increased by around twenty percent (Ahmed & Zlate 2014). Considerations should be made regarding the origin of these tourists. It would be even better if these tourists are coming from countries where Tito’s Vodka has already established itself. For example, the company would get a push in the market if American tourists are visiting UK. Adjusting to new life and new products are common challenges that people face in new countries. Foreigners find many reliefs when they come upon products that they are familiar with since they use them back at home.

The good thing for the company is that UK business environment shares similarity with US business environment. It is correct that the country is currently undergoing much political unrest with violence having reported in some areas after the general elections were conducted. When such violence occurs, it is characterized by destruction of property, and unfortunately, most of the time it is the foreigners that are targeted most (Zeschky et al. 2011). That means that Tito’s Vodka would have to take the issue of security quite seriously while entering this market. Security for this case means that of its products and members of staff.

At this point, diversity of the workforce would be quite essential. Whenever a company sets up in a region, they are scrutinized by the locals and governments to ensure that even if their intention is to make profits, the country too can benefit (Bingham & Eisenhard 2011). Therefore, if the company sets up and employs UK locals, there are a few problems that may be evaded. The hostility from the locals is likely to reduce since they know that the company is providing a source of income for them. Additionally, the locals can understand the environment much better that foreigners and thus can warn the company of any impending dangers and the best way that they can be countered.

Lack of sufficient labor is another risk that the company may run into should it enter the UK market. One of the reasons that have been given for a large number of people living below the poverty line is that fact that they do not have access to quality and sufficient education. That means that no matter how willing the company may be to employ locals; they may not be able to accomplish the tasks that will be assigned to them. This may force the company to have to take in members of staff that do not come from the area, and in the process, reducing its chances of expansion since it will be absent in the diversity department.

Countries are prone to natural catastrophes such as earthquakes. These earthquakes are often quite great and in some cases, cause damages that are irreparable and sometimes leading to death. The company may thus lack the labor force that would be willing to be flag bearers in UK for fear of safety. Since for a while the company may not make that much profit since the products will be new, a natural calamity taking place in the country is likely to set the company may steps back in dealing with the losses (Johanson & Vahlne 2011).

The company can directly enter to UK market. However, there is no need to take unnecessary risks and the franchise model of operations appears to be the best option.  Corporate social responsibility is a mode that would work to the advantage of the company (Ramamurti, 2012). This could take place for a year or so before the company decides to start selling its products to the UK market. Corporate social responsibilities are those activities that companies venture into that while are not for making profits, help to improve the environment and the lives of people around. There are still several people in UK that have not recovered for the post-election violence (Brexit case). Tito’s Vodka can, for example, help in resettling these people by helping them get access to proper living conditions and healthcare for those that are not able to afford.

This can also be used as a marketing tool. For example, while resettling them, Tito’s Vodka can ensure that the event is widely publicized. They would also consider giving out branded personal effects like t-shirts and caps which will help in marketing of the product even before the company comes to UK. They may find that they have a large following among people who work with refugees since they often come from various parts of the world, and sometimes find that the countries they have been assigned are short of entertainment such as alcoholic drinks.

Conclusion

Tito’s Vodka is a company that manufactures and sells vodka to Americans. The company, having been in existence for more than ten years may consider taking up new markets. In this paper, the chances of its survival in the Kenya and UK have been considered. The UK market, though a bit hostile, may still provide a chance for the company to prosper since there is likelihood that it will find the right kind of audience for its products. The Kenya market may however pose more challenges for Tito’s vodka. This is especially due to the unrest that is in the country. For the company to survive in any of these markets, it may have to consider entry modes such as franchising and corporate social responsibility.

It is recommended that the company should use UK as an expansion country. The above analysis presents that UK is a better option that Kenya due to number of options. On a scale of 10, the scores of Kenya and UK for different parameters can be discussed as:

The above table shows that UK is better placed that Kenya. Therefore, Titos Vodka should enter UK market. It is also recommended that the company should use the franchise model of expansion. The management of Titos may not have much idea to handle the business in the foreign markets. The franchise business model would enable the company to gain knowledge from local partners.

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