SPRITZER Strategic International Marketing Plan for Exporting Bottled Water in China
Prepared By Rezaul Huda MBA Programme University of Southern Queensland Australia 2009
Dr. Eric Ng Managing Director SPRITZER Bhd No 54 Jalan Premai 43300 Perak Malaysia
12th May 2009 Mr. Rezaul Huda Senior Research Executive R&D Department SPRITZER Bhd Dear Mr Eric: Enclosed you will find strategic marketing plan entitled "SPRITZER Strategic International Marketing Plan for Exporting Bottled Water in China". The report contain 2 part, in the part A of the report examine the background analysis and external environmental analysis for primary selective foreign market using PEST framework, we have found that China is the most attractive foreign market to export bottled water. The findings also align with the stakeholder’s expectation of SPRITZER Bhd. In the 2nd part of the report contain the competitive analysis of the china market and the international market entry strategy for SPRITZER bottled water. The purpose of this report is to illuminate the most attractive foreign market to extend SPRITZER global market share. However, our primary selective foreign market was Thailand, India, Iran, United Arab Emirate and China. Using PESTEL framework we have identify the most attractive foreign market for our bottled water is China. This research based on the secondary data. Due to limited accessibility, we are unable to clarify 2009 China Statistical Data. Sincerely Yours
SPRITZER is one of the most integrated and largest bottled water producers in South-East Asia. The SPRITZER mineral water is the first company in Asia to have obtained the prestigious certification by NSF International, which recognized worldwide as the premier third party certifier in its specialties. SPRITZER would like to extend their global market share considering the global bottled water market grew by 7% in 2007 to reach a value of 60.9 billion (USD) and the market forecast in 2011 to have a value of 86.4 billion, an increase of 41.8% since 2007 (Bottled Water-Global Industry Guide, 2008). This report contains two major parts. Part A contains the situation analysis of SPRITZER and the environmental analysis of China bottled water industry. Part B contains the international market entry strategy and recommended international marketing mix for SPRITZER. China bottled water industry is more attractive than other industry such as IT, Services and other. To analyze the external factors for bottled water industry SPRITZER use the PESTEL framework. China has a stabile political situation with the one-party system. The system is opening up and there is no opposition trying to destabilize the country. The government’s policy on the economy is favourable for the business life. China has made a market economy and there is a strong political will to make China an important player in the world economy. In China, the Law of the People's Republic of China on Protection of the Rights and Interests of the Consumers of 1994 enumerates consumer rights and the obligations of business dealers (Consumer International report 07). After analysing, the external environment based on secondary data the report developed the international marketing strategy and international marketing mix. Moreover, the finding is that the China is the most attractive foreign market to export SPRITZER bottled water.
Table of Contents
Background and Situational Analysis of SPRITZER bottled water Environmental Analysis of China Bottled Water Industry
1. Introduction: Bottled water market has been growing past few years. This is a matter of personal taste and preference for bottled water over municipal tap water. Because of these days, the people are health concern and to avoid the water deceases the bottled water has been increasing. Only in China consumer of the bottled water, with sales expected to surpass 15 billion litres by 2008, exceeding a value of $4.9 billion (Asia and Middle East Bottled Water Association report 2008). SPRITZER is one of the largest bottled water providers in Southeast Asia. Entering in to the China bottled water industry would help SPRITZER to expand its global market share. The purpose of this report is to examine all possible international marketing aspect to export bottled water in China market. Limitation of this report is that some sophisticated data not available such as the China Statistical Year book 2008.
2. Background Analysis 2.1 Company Overview: Spritzer is one of the most integrated and largest bottled water producers in South-East Asia. Spritzer comprises five subsidiaries which are involved in the manufacturing and distribution of natural mineral water, sparkling natural mineral water, distilled drinking water, carbonated fruit flavored water, carbonated fruit flavour isotonic water, teas, toothbrushes, performs and packaging bottles (Chuan Sin Sdn Bhd corporate report 2008). The Spritzer mineral water is the first company in Asia to have obtained the prestigious certification by NSF International, which recognized worldwide as the premier third party certifier in its specialties (Health & Environmental). The NSF certification is well recognizing by FDA, WHO, FAO and Health Canada as having demonstrated high GMP in the processing of bottled water (1996). 2.1.1 Reasons of Internationalization SPRITZER would like to extend their global market share considering the global bottled water market grew by 7% in 2007 to reach a value of 60.9 billion and the market forecast in 2011 to have a value of 86.4 billion, an increase of 41.8% since 2007 (Bottled Water-Global Industry Guide, 2008). Consumers spend a collective $100 billion every year on bottled water and worldwide bottled water consumption surged to 41 billion gallons in 2007, up 57 percent since 1999 (Beverage Marketing Corporation, appendix 1).
2.2 Product Overview: SPRITZER production lines fully automated and equipped with the “state-of-art” bottling technology. The plant managed by highly qualified professionals such as food technologists, chemists, microbiologists and engineers. SPRITZER bottled water contains no microorganisms, minerals or chemicals (Figure 1 shows the production process). It is so pure that it helps bring out the best and natural flavor of beverages that meets or exceeds FDA, EPA, USP, ASTM and other industry standards. Figure 1 SPRITZER Production Process
2.3 Product Key Features: SPRITZER has competitive product key features comparing other competitive. SPRITZER offers the customized bottled water that is new in this subcontinent. This feature gives a new direction in the bottled water industry. The other major keys catachrestic are safety packaging, different size and different flavor.
2.3.1 Customized Bottled water: SPRITZER bottled water products with innovative label designs and packaging programs to corporations and non-profits throughout Malaysia. Spritzers use the state-of-the-art equipment to insure the purest water possible through a stringent five-stage process. The weatherproof labels are printed using the flexographic printing method and are made with vibrant inks and can be ordered with up to 7 spot colors or 4-color process. Whether a company event, trade show, high school reunion, or a sporting event, Spritzer will use clients art or create a unique label design. Figure 2 shows Spritzer regular and customized labeling. Figure 2 SPRITZER Customize Bottled Water
2.3.2 Packaging & Size: Spritzer has the best packaging hands down. The standard shape of this water bottle is narrow enough for small hands, has a flat base that does not tip over, and does not take up unnecessary space. Spritzer also has different shaped bottles depending on the size of the bottle, which identified for different uses. For example, the Spritzer pop bottle that looks fun that marketed towards kids. The label on Spritzer has the unmistakable green color in the background and the large logo on the front. The green background makes the thought that this water is “natural”. However, the caps vary with the different size bottle. The green cap looks
“cleaner” and is soft on the hands, making it very attractive. It could even be a fashion statement.
2.3.3 Different flavor: Spritzer offer different flavor drinking water considering different age group of the end user. At the present market, they have 6 different bottled water and they are Spritzer Natural Drinking Water, Spritzer Love Mineral Water, Spritzer Sparkling, Spritzer POP, Spritzer Tinge and Spritzer GO. Please refer to the appendix 2 to clarify each different flavor of Spritzer bottled water. 2.4 Overview of China Bottled Market: China is the world's third-largest consumer of bottled water, with sales expected to surpass 15 billion litres by 2008, exceeding a value of $4.9 billion (Asia and Middle East Bottled Water Association report 2008). According to China Statistical Yearbook, 2008 China's use of water is highly inefficient and consumes 7-15 times more water to produce one unit of gross domestic product (GDP) than developed economies. Because of China's robust and unchecked economic growth, country faces severe water pollution and, consequently, shortages of safe drinking water. About 700 million Chinese drink water contaminated with human and animal waste, and/or chemicals such as fluorine, arsenic, sodium sulphate and bitter salt. The Chinese government reports that water from 53% of mainstream rivers, 50% of lakes and 35% of ground water is not fit for human consumption due to pollution (Health and Safety Regulatory Summit Beijing, 07 Appendix 3). 2.4.1 Facts of Bottled Water Industry of China: China is now the third-largest consumer of bottled water in the world, behind only the United States and Mexico. From 1998 to 2003, total Chinese consumption of bottled water more than doubled from about 3.8 billion litres to more than 9.2 billion litres (See appendix 1). According to EuroMonitor, sales of bottled water by volume expected to surpass 15 billion litres by 2008. The value of all bottled water sales expected to rise from $3.7 billion in 2003 to more than $4.9 billion by 2008 (See table 1).
Table 1 Growth Rate of Bottled Water in China
Other major facts in China bottled market consider as follow;
China's bottled water import market grew to $15.6 million in 2008, up from $4.4 million 2006, and consisted mostly of unsweetened mineral water (52%), and sweetened waters - including aerated and minerals waters (46%). According to the World Trade Atlas China imported $17.6 million of bottled water in 2007, mostly from France, Italy, U.S., and Hong Kong (See Table 2).
Table 2 Import Rate of Bottled Water in China
Between 1999 and 2004, the compound annual growth rate (CAGR) for bottled water consumption in China was 20.9%, the second-highest rate in the world was India 25% rate (Beverage Marketing Corporation Repot). According to the “Asia and Middle East Bottled Water Association”, the market for bottled water will continue to experience strong CAGR of 13.5% through 2008. Production cost is one of the major facts while strong growth in bottled water and the market are very competitive. A bottle of Spritzer costs approximately $0.20 in
Malaysia. The average cost of a domestic brand bottle of water in China is about $0.25 (Asia and Middle East Bottled Water Association). 2.5 Comparisons China and Other Bottled Market 2.5.1 Consumer Consumption: There is significant opportunity for growth in bottled water consumption in China comparing other Asian country. On a per-capita basis, the Chinese population consumed only 7 L of bottled water in 2003. Comparatively, each Thailand consumed 4 L of bottled water while those in the United States consumed 82L; the Indian consumed 5 L of bottled water in 2003. Sales of bottled water expected to increase by 90% between 2003 and 2008, due to the combined impact of lower prices and concerns over polluted water. Figure 3 shows the statistical comparison between China, Thailand and India by Asia and Middle East Bottled water Association. Figure 3 Bottled Water Consumption Index
2.5.2 Structure of the Operating Environment Globally the water industry has been estimating as a $400 billion market with signs of longterm growth ahead, especially China continuing to drive the market as they focus on
improving many of the region’s water issues such as shortages and contamination from pollution associated with accelerated economic growth. China government plans to spend $125 billion on water treatment and recycling over the next five years opening its door to foreign investment and participation in their water market. Comparing China the Thailand government does not give so much opportunity for foreign investor for their bottled water industry. However, Thailand political situation not stable for foreign investment. Considering this issue the China market is much more attractive then Thailand. Figure 4 shows the statistical country risk and Table 3 shows the quick fact of China bottled industry and other primary selective country, this comparison based on the secondary research. Figure 4 FDI Risk Index
Table 3 Quick Fact for Bottled Water Industry In India, Thailand, Iran, UAE and China United Fact India Thailand Iran Arab China Emirate Political Stability √ √ √ Government Regulation foreign √ √ √ investment Geographic location √ √ √ √ Demographic √ √ √ Harbour facility √ √ Harbour Efficiently √
Substance of local Market Legal system Market entry consideration Key Player Labor cost
√ √ High High Low
√ √ Low Low Low
√ High Low High
√ √ Low High High
√ √ High High Low
Table 3, demonstrate that the china market are much more attractive than other southeast and middle-east country. 3. Environmental analysis China bottled water industry is more attractive than other industry. Considering bottled water consumption the China is the third largest country in the world. The external environment always has a vital influence on almost every industry. However, to exporting the bottled water in China Spritzer also concern about external environment. To analyze the external factors for bottled water industry Spritzer use the PESTEL framework and to identify strategic challenge of external environment, Spritzer been using the “Porter” five forces.
3.1 PESTEL Framework: In analyzing the macro-environment, it is important to identify the factors that might in turn affect a number of vital variables that are likely to influence the organization’s supply and demand levels and its costs (Kotter and Schlesinger, 1991; Johnson and Scholes, 1993). “The radical and ongoing changes occurring in society create an uncertain environment and have an impact on the function of the whole organization” (Tsiakkiros, 2002). A number of checklists have been developing as ways of classification the huge number of possible issues that might affect on industry (Table 4). The PEST analysis is one of them that are merely a framework that categorizes environmental influences as political, economic, social and technological forces. Sometimes two additional factors, environmental and legal, will be added to make a PESTEL analysis. Another version of PESTEL analysis is called “LoNGPESTEL” which illustrated below;
Table 4: Quick list of PESTEL Analysis Fact Local POLITICAL Provision of services by local council
National China government policy on subsidies
Global World trade agreements e.g.
further expansion of ECONOMIC SOCIAL Local income Local population growth China interest rates Demographic change (e.g. ageing population) China wide technology the ASIAN Overseas economic growth Migration flows International TECHNOLOGICAL Improvements in local technologies technological breakthroughs e.g. internet Global climate change International agreements on human rights or environmental policy
Local waste issues Local licences/planning permission
China civil law
3.1.1 Political factor: The political situation has a huge influence upon the regulation of the economy, and the spending power of consumers and companies. Consequently, areas such as political stability and trading agreements are considered. Through the last decades, China has evolved from being a totalitarian communistic regime with a centrally governed economical system to a more open market economy with wider economic and social freedom for its citizens. The Communist Party of China (CPC) still has an absolute power monopoly and an actual liberalization of the political area is not taking place. The Chinese administration has also shown signs of more openness and transparency and the judicial system and legislation is starting to build a constitutional state founded on the rule of law. It has been decide to implement the right to private property in the constitution. Consequently, private initiative has become more important in the Chinese society. Due to rapid economic development and inequality, corruption has become a big and growing problem. China is number 72 of 179 countries on Transparency Internationals Corruption Perception Index, and is given 3.5 points on a scale from 0-10, where 0 represents the most
corrupt country (Transparency International Report 07). The government is trying to solve it by issuing severe punishments for committing the crime. China has a stabile political situation with the one-party system. The system is opening up and there is no opposition trying to destabilize the country. The government’s policy on the economy is favourable for the business life. China has made a market economy and there is a strong political will to make China an important player in the world economy. The membership of World Trade Organization (WTO) in 2001 had huge consequences, opening China’s economy to the world, and making the country a very active player in foreign trade.
3.1.2 Legal Factor: In China, foreign firms investing must be aware of China’s general lack of codified laws and the regional diversity of “legal systems” and practices. An anti-monopoly law will become effective in August 2008. This law stipulates that foreign mergers and acquisitions of Chinese companies should go through national security checks. Moreover, a special anti-monopoly commission will be set up to deal with anti-monopoly issues (“Beverage deals 'no threat' to economic safety” CHINA DAILY). These anti-monopoly laws exclusively concerns foreign investments and non-local businesses. In China, the Law of the People's Republic of China on Protection of the Rights and Interests of the Consumers of 1994 enumerates consumer rights and the obligations of business dealers (Consumer International report 07). To protect consumers there are government agencies involved in food and Drink safety, including work on new laws and regulations. The SAIC (State Administration of Industry and Commerce) for instance, regulates and inspects “market circulation” which means the entire process of food/drink from the producer to the consumer. Piracy of intellectual property is everywhere in China and it has been a major source of contention between China and foreign investors. However, its protection has been one of the priorities of the Chinese government since it bond to the WTO in 2001. In the past years China has taken great strides to develop the intellectual property rights but there is still a lack of local enforcement. In consequence, companies doing business in China have to prevent themselves from having their intellectual property stolen. The best way of preventing this is to
have a limited number of employees with access to confidential information and to visit trade fairs to make sure that some other local company does not copy products.
Figure 5 PEST Analysis for China Bottled Water Industry
3.1.3 Socio-cultural Factor: Socio-cultural factors are a combination of cultural aspects, such as traditions and values, and social aspects, such as population growth rate and age distribution. Socio-cultural values are unique in each country. Typically, Chinese socio-culture is hard to understand for foreigners. China has the biggest population in the world with 1.3 billion people, which is about 22% of the world’s total. The population density is strongest in the coastal regions while the hinterland and western parts are more sparsely populated. From being a relatively poor country, China is becoming one of the world largest luxury goods markets. People are
purchasing well-known brands instead of the fake brands (National Bureau of Statistics of China). Through the last two decades the political and economical changes has made a significant influence on the society and consequently changed the Chinese lifestyle. For much of the population, the life quality and living standards have improved dramatically leading to an increase in consumption. For doing business in China, there are some business cultures that a company has to aware. Guanxi is a term used everywhere in everyday China, but in the business world it refers to a kind of network between individuals. It appears between people having common motives and interests. It could understand as an act of friendship but from a western perspective, it might border on bribery. It involves gifts or services given or conducted for the other part. Thus money is not directly involved in the matter rather it is concealed as a dinner offer or the like ("A just legal system" International Herald Tribune)
Target Market Competitive Analysis Target Market Entry Strategy Recommended Marketing Mix
4. Target Market and Competitive Analysis: China bottled water industry is more attractive than other industry. Considering bottled water consumption the China is the third largest country in the world. In this part of the report has been analyze the SPRITZER global competitors, internal capability and targeted market (china) segmentation. 4.1 Global Player in Bottled Water Industry: In the emerging bottled water market, the bottled water is not only as a product it also trend of prestige. Companies are very much concern on packaging, designed to appeal to a superpremium audience. Table 5 shows the list of the international and local bottled water brand in China market. Table 5: List of Global and Local Bottled Water Competitors Global Companies • • • • • • Evian Dasani Coca Cola CanadianSprings Aquafina Nestlé Pure Life
China Local Companies Wahaha (娃哈哈) www.wahaha.com.cn YES Mineral Water http://www.yeswater.com.tw • 5100 Tibet Spring-- Tibet Glacier Mineral Water http://www.5100.net/English/
To analyze the competitors this report uses the competitor analysis framework (Porter, 1980). According to the Porter competitors framework SPRITZER need to focus on analyzing competitor’s objectives, assumptions, strategy and capabilities. Competitor’s analysis framework also helps to identify where organizations operating within the similar industry can obtain on-going knowledge of competitor, information used for benchmarking purposes and respond to counter attack with defensive actions to compete further. However, to contrast of this approach, the pitfall of competitor analysis is to arrive at a situation where there is a great deal of data but very little information. Moreover, it also lack of possible side-benefits for shorter-term operational activity, such as being able to brief the sales force or marketers on the benefits of the company's product offerings compared to those of competitors (Hussey & Jenster, 1999). Figure 6 shows the competitors objective, assumption, strategy and capabilities.
Figure 6: Competitors Analysis Component
Sources: Author’s illustration via concept adapted from Porter (1980) In the Malaysian bottled water industry, SPRITZER controls 30 percent of market share (Malaysian Daily Express 2007) comparing other bottled water brand that operating in Malaysian market. According to the porter framework shows that the major competitors like Nestlé, Aquafina and local Chinese company Wahaha and YES mineral water has significant market cover in China. Most of the major competitors driving force in the market are their objective and their assumption. As Nestléis one of the major competitor in the China market the objective of the Nestléis is “To take care that water discharged into the environment is clean (Nestléis management report 2007)” which makes to increase their market share. However, the strategy they have been taken is to utilize the knowledgeable management to provide the services to the customized segmented market.
4.2 SPRITZER Internal Capability: To evaluate the SPRITZER internal capability this report uses the SWOT analysis. Gerry Johnson state that “SWOT analysis helps the firm to summaries the key issue from the business environment and the strategic capability of the organization that are most likely to impact on strategic development” considering this statement it would be successful business decision to exporting bottled water using their internal and external capability. The SPRITZER internal capability has designed based on the situational, environment, market and competitor analysis. Table 6 illustrated the SWOT of SPRITZER comparing other competitors to entering the China market. The focus is to ensure that the SPRITZER furtherance by capitalizing the strengths on bottled water thus helps to build the brand image across border. Table 6: Contrast of Competitor SWOT Analysis
Company Name Strength SPRITZER
1. 30% Malaysian Market share 2. Five subsidiaries including 3. 1st Asian company obtaining NSF International certificate 4. Customize bottled water
Contrast of Competitor SWOT Analysis Opportunity
1.Rising Global bottled water demand 2. China Malaysia political relation
1. Growing china local company 2. Low regulation in Copyrighting in China 3. Financial sound competitors
1. No experience in overseas investment 2. High cost
1. Positioned as too scientific so consumer are not understandable 2. Bad image in France market
1. Low regulation in Copyrighting in China 2. Growing southeast companies
1. Advanced developed and research team
1. Global brand image 2. High internal growth 3. low cost operators
Wahaha (娃哈哈) 1. Backward R&D
2. only one subsidiaries
1. High Cost
1. Overseas investment in china bottled water market 2. Low regulation in Copyrighting in China 1. Low cost
1. China is the 3rd largest bottled water consumer 2. Reachable outlet
1. China local brand 2. Better understanding about the custom 3. Low cost 1. Number one 17
1. Growing health
2. Very specific market segment
competitors 2. Low regulation in Copyrighting in China
and safety concern 2. Global bottled water demand
prestigious brand 2. High global market share 3. Long experience in bottled water industry
Sources: Author’s illustration via concept adapted from J Shhepherd Simon Fraser University
4.3 Market Segmentation: The purpose of the market segmenting helps SPRITZER exporting plan to determine the most likely market in China. Proper segmentation helps to retain highest return from the marketing expenditures. According to Johnson & Scholes (2005), “market segmentation is a group of customers who have similar needs that are different from customer needs in the other part of the market”. Bottled water market has been segmented in 2 different market (consumer market and industrial/ organizational market) based on the consumer. However, this 2 market has been clarify based on 3 different factors. Figure 7 illustrate the segmentation of bottled water market in China. Figure 7: China Bottled Water Market Segmentation
Sources: Author’s illustration via concept adapted from Johnson & Scholes (2005)
4.3.1 Consumer Market: China is the world's third-largest consumer of bottled water, with sales expected to surpass 15 billion litres by 2008, exceeding a value of $4.9 billion (Asia and Middle East Bottled Water Association report 2008). According to China Statistical Yearbook, 2007 China's use of water is highly inefficient and consumes 7-15 times more water to produce one unit of gross domestic product (GDP) than developed economies. Because of China's robust and unchecked economic growth, country faces severe water pollution and, consequently, shortages of safe drinking water. About 700 million Chinese drink water contaminated with human and animal waste, and/or chemicals such as fluorine, arsenic, sodium sulphate and bitter salt. The Chinese government reports that water from 53% of mainstream rivers, 50% of lakes and 35% of ground water is not fit for human consumption due to pollution (Health and Safety Regulatory Summit Beijing, 07 Appendix 3). Considering high market growth, demographic segmented market is the best as a targeted market. However, china market also has the good potential in industrial sector to provide bottled water due to most of the foreign company moving to China and the service industry growing faster than before. Therefore, for further business extension in the China market would be the corporate clients. 5. Market Entry Strategy: According to Johnson & Scholes (2005), “the international environment has to be critically appraised prior concluding an international market entry decision”. The rationale behind this statement is to ensure uncontrollable forces external environment such as politic, economic, social and technologies are properly evaluated. However, Muhlbacher & Leihs state that “As the company become more involved in marketing and production in another country, the risk and control of the organization increase”. 5.1 Market Entry Mood: Market entry classified according to whether they require indirect or direct involvement on the part of the firm, and whether they involve marketing activities only or marketing and production both. Figure 8 shows the different mood of entry in the market.
Figure 8: Market Entry Modes
Sources: Author’s illustration via concept adapted from Muhlbacher & Leihs (2006) 5.2 Comparison Market Entry Strategy: There are different type of strategy allow company to enter in to new market. Major 2 type of strategy is indirect market entry strategy and direct market entry strategy. Advantage and disadvantage of possible China market entry strategy for SPRITZER has been describe below. Table 7: Advantage & Disadvantages of possible indirect entry strategy for SPRITZER Market Entry Strategy 1. Casual Exporting Advantage • Low cost • Avoiding international taxation • Low HR involvement Disadvantage • High transaction cost. E.g. Malaysian port to shanghai port • Low control about copywriting • Time consuming
• Less market control • Low profit • Negative brand image 2. Export trading companies • Trusted body • Own control • Risk free product to the market • High companies market entry • Trading company handling different product line • Avoided to product title • Low brand image • Low market share • Low control about copywriting 3. Licensing • Possible to marketing and production • Registered brand name • Small capital resources • Low capital risk • Licensed company could be major competitors later • Chinese government regulation • Licensed company has more control over the product • Different management style
Table 8: Advantage & Disadvantages of possible direct entry strategy for SPRITZER Market Entry Strategy 1.Wholesale and Retail purchasing Advantage • Low cost • Avoiding international taxation • Wholesaler carry fewer product line Disadvantage • Different management style • Low market share • Chinese government regulation
• Double taxation 2.Joint Venture • Trusted body • Own control • Risk free product to the market • Marketing and production • Adopt existing market share • Access to Technology & Resources • Brand image • Possible market growth • Low or no risk opportunities and massive leverage • Haring of resources and the leveraging of underutilized resources • High profits • Fill in internal weaknesses E.g. lack understand regarding Chinese custom • Gain a new skill or area of competence • Low labour cost 5.3 Joint Venture: Joint venture is one of the best market entry strategies for the bottled water market that’s allows the company to increase the capital involvement, the level of risk and control over foreign market also increase. Joint venture usually formed between one of the host companies and the foreign company (Muhlbacher & Leihs 2006). Adopting joint venture market entry
• High investment • Chinese government regulation • Highest 49 present share • Difficulties to get host partner
strategy helps SPRITZER to enjoy the existing market share in the China bottled water market. Moreover, it also helps to monitor the trademark piracy because of the low enforcement regarding trademark in China is very low. Wahaha (娃哈哈) is one of the fastest growing bottled water in China (China Daily Express 2007). To makes partnership between the Wahaha (娃哈哈) and SPRITZER helps to share the management knowledge that helps both of them to gain higher bottled water market share. However, it also helps to make the combination of the SPRITZER advanced bottled water production process (Ref. figure 1) and low cost labor that helps both of the company to be effective and efficient in the market.
6. Recommendation: In this part of this report to analyze the most recommended international marketing mix strategy for the SPRITZER to export bottled water in China. The marketing mix is one of the most effective strategy development processes for every company. Marketing mix helps the management to maximize the market share with the help of effective 4 elements of marketing mix. Kotlet state that there are numerous marketing tools considered when the firm pursue its objective. “The 4P strategies are catalyst in the formulation of the positioning strategy for desired market target penetration (Craven & Piercy, 2006)”. When one firm launch a new product to the new market they could use the standardized marketing mix strategy or customized marketing mix strategy for selective market. Considering China bottled water market SPRITZER should go for the customized international marketing mix strategy. China is one of the most competitive bottled water markets. However, the custom is much more different then Malaysia. Considering this 2 most significant issue SPRITZER should enter the market with customized international marketing strategy. Figure 9 shows the customized international marketing strategy for SPRITZER. Figure 9: SPITZER International Marketing Mix Framework
Sources: Author’s illustration via concept adapted from Craven & Piercy (2006) 6.1 International Product Strategy: International product strategy defines the core competence of the SPRITZER bottled water. Unique SPRITZER product feature is that offers the customized bottled water that is new in this subcontinent. This feature gives a new direction in the bottled water industry. The other major keys catachrestic are safety packaging, different size and different flavor. 6.1.1 Customized Leveling: SPRITZER bottled water products with innovative label designs and packaging programs to corporations and non-profits throughout Malaysia. SPRITZERS use the state-of-the-art equipment to insure the purest water possible through a stringent five-stage process. The weatherproof labels are printed using the flexographic printing method and are made with vibrant inks and can be ordered with up to 7 spot colors or 4-color process. China is one of the growing economy, lots of foreign investor open their business as a matter of fact SPRITZER
could introduce this customized bottled water to this corporate market. However, during Chinese new-year SPRITZER also could change the labeling and write “Gong Xi Faa Chai” (Chinese traditional new-year greeting) that’s helps to attract the consumer. Moreover a company event, trade show, high school reunion, or a sporting event, Spritzer will use clients art or create a unique label design. Figure 10 shows Spritzer regular and customized labeling. Figure 10: SPRITZER Customize Labeling
Sources: Author illustration 6.1.2 Flavor: Spritzer offer different flavor drinking water considering different age group of the end user. At the present market, they have 6 different bottled water and they are Spritzer Natural Drinking Water, Spritzer Love Mineral Water, Spritzer Sparkling, Spritzer POP, Spritzer Tinge and Spritzer GO. Please refer to the appendix 2 to clarify each different flavor of Spritzer bottled water. 6.2 International Price Strategy: Product prices differ from one country to another, mainly due to the cost associated such as tariffs imposed by the country the product sold (Harvard Business School Publishing 2006).
Thus, a product could be cheaper or more expensive depending on where it sold. As it has mentioned early before the bottled water market is very competitive. There are lots of foreign and local company operating already, considering that to enter in to the market the price would be cheaper then comparing the competitors. However, the price depends on the production and other relative cost. Table 9 shows the competitors price for standard 100ml bottled. Table 9: Competitors pricing 500ml Bottled water Competitors Name 1. Nestlé 2. Evian 3. Wahaha (娃哈哈) 4. YES Mineral Water Standard 500ml Bottled price In RMB 4.00 10.00(Apx) 2.50 2.00 Converted RMB to RM 2.05 5.00 1.20 1.00
Sources: Euro Monitor International "Soft Drinks in China" April 2006 ** Price subjected to change In Malaysia PRITZER 500ml bottled water cost is 1.50rm which indicate that is cheaper than other foreign bottled water brand. As the labour cost in China is lower than Malaysia so it’s pretty much clear that SPRITZER could able to launch the bottled water in China in a very competitive price which would be a strategic decision. 6.3 International Distribution Strategy: The place when products sold known as marketing or distribution channels (Smith, 2003). China is one of the biggest country in the world. As a matter of fact its not possible for SPRITZER to cover the entire market. Considering the demographic and geographic location Xian province and Beijing would be the best location to set up 1st distribution channel. Figure 11 illustrate the possible distribution channel for SPRITZER in Beijing and Xian province. Figure 11: Distribution Channel
Source: Author Illustrate 6.4 International Promotional Strategy: According to Stone (2001) communication is known as a vital conduit especially in view of product promotions to draw the attention of new or existing customers. Due the market complexity, the other component of market segmentation are equally important to enable the differentiated promotion activities to target the difference type of market segments available (Wright, 1999). Considering the Chinese custom SPRITZER would engage in some selective promotional activities. The recommended promotional activities are listed below
1. Sponsoring some curriculum activities such as SPRITZER could sponsor the annual program of “Leshan Teacher’s College”. This is the one of the leading school in SPRITZER targeted market. Sponsoring annual program will helps to build the awareness, which is very important as new product. 2. Providing coupon system helps to increase the initial seals. According to the Chinese custom they like to receive the hongbao, bonus or lucky draw. However, the promotional activities would be like “Drink SPRITZER win 100rmb, check you SPRITZER cap you might won 100rmb”. This promotional campaign helps to boost initial sales. 3. Provide the flayer providing the water safety for the human life, in addition could manage a talk show regarding women fitness in the present day. However, the promotional campaign depends on the competitors what they are doing in the market.
7. Conclusions: Bottled water industry is one of the vital sectors for doing business due to European and American marketer. In 2008, the sales volumes of the bottled water in China were over 25 million tons, increased by 20% compared with 2007. The market scales were more than 30 billion Yuan (4.3 billion USD). After analyzing the external environment and international marketing strategy based on SPRITZER internal capability shows that China bottled water market much more attractive than Thailand, India or Middle East and SPRITZER capable enough to enter in to that market. International marketing mix helps SPRITZER to enter to the China bottled industry successfully. However, the international financial crisis had few influences on Chinese bottled water market but it still rising which is different from other industry.
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Appendix: A. Global market growth of bottled water
B. Different Flavor of Spritzer Bottled water: Spritzer Love Mineral Water: For a splash of fun to drinking water, Spritzer launches 4 New 'Love' bottles, intended for the teens and kids. It comes with a heart shape engraved unto the bottle, hence its name 'Love' bottle. Each bottle is available in 4 choices of colours; Cool Blue, Sweet Pink, Zesty Green and Happy Yellow. A limited launch edition of 'Love' bottles will sold with upgraded Sport Caps. Its 'thumb up' cap feature allows one to open the cap with just a flick, which designed with enhanced tamper proof features, and allows optimum flow of water. Most important of all, the new feature is child-safe. Spritzer Sparkling The sheer goodness of natural mineral water, lightly carbonated, that invades the senses. Sparkling Spritzer enhances the taste of fruit punches or any liquor. This product simply savour for its clear, sparkling goodness. Sparkling Spritzer has no sugar, no colorings and no preservatives. Spritzer POP Spritzer POP is a new-age refreshment for the new generation – POP that contains lightly carbonated pop drink with a difference. Natural fruit flavours - Apple, Orange, Lemon, Berries and Lychee. Absolutely no artificial colouring or flavourings. Spritzer Tinge Tinge is available in 2 natural flavors mineral water either with a tangy tinge of lemon or fruit fusion, non-carbonated or colored. However, unlike the most flavored drinks in the market. Spritzer GO Spritzer GO is the goodness of natural mineral water, fruit flavored, lightly carbonated with natural thirst and body quencher. A thoroughly enjoyable way to help replenish lost energy, body fluids, salts and electrolytes fast.
C. China Pollution Index 2008
D. Statistical Yearbook