Globalisation(jameson)

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Globalisation(jameson)

  1. 1. JAMESON WHISKEYAssignment SummaryJameson whisky is the successful Irish whiskey brand that had succeeded in globalmarkets. Even in the recession times across Europe Jameson is the only brand that hasincrease in its sales. We succeeded to launch our product successfully in differentmarkets globally by successfully positioning our brand. Now the company has decided tolaunch Jameson whiskey in Chinese market and this report gives a detailed insight intothe factors that are needed to be considered by the company in launching its brand inChina.Why China?China is the highly populated country in the world. It constitutes 22% of the world’spopulation. It is the developing country contesting with US in regards to power andmarkets. China has a lot of younger population aged between 25-40 (Data monitor 2010).We can see a huge change in the cultural patterns of drinking in younger generation whencompared to the older generation. The aspects of drinking are highly regarded in Chinesehistory. The corporate culture has increased in China because of its growth in markets all1|Page
  2. 2. around the world. During the past decade several social and economic changes haveboosted the sales of alcoholic beverages in China. China’s fast paced economic growthand high incomes have led to urbanization and lots of people are willing to spend on highend alcoholic beverages. The Chinese governments are also encouraging foreigncompanies by reducing import taxes and VAT on foreign products.The younger generation is open to changes and this is a very favorable aspect for us tolaunch our product.MARKET DESCRIPTIONAs we mentioned earlier China is the highly populated country in the world, as a result itoffers a huge market for launch of our Jameson whiskey. According to a survey on liquorconsumption in China the spirits consumption in China grew by stunning 52% between2005-2009(BBC 2009). As this an encouraging aspect for us regarding launching ourproduct there is a prediction that the spirit consumption rate going to increase by2014(The globe 2010). The international spirits category is relatively low when comparedto the domestic industry, but there is a lot of scope for the global brands to prosper inChina. Alcohol production in China dates back to 12th century and now there are about100000 alcohol manufactories in China in which 1/3rd is occupied by the spiritscompanies. Foreign spirits make up 10% of the markets (business insights 2010). Thisoffers us a huge market to target. There is an expanding elite consumer segment in Chinahas boosted sales of foreign spirits. There is a huge market for us to create an impact andchange the drinking habits of the Chinese people.The east and north east regions dominate overall alcohol consumption rates inChina.Growth opportunities continue to increase for the global brands because of itsyounger generation. Foreign spirits are limited to premium end in the spirit industry dueto restricted distribution channel and fierce domestic competition.2|Page
  3. 3. COMPETITIONWe are going to face a lot of competition by the domestic brands. Locally produced spiritcalled “baijiu” holds the top position in China. It is the most popular and best sellingliquor in terms of volume in the world. Baijiu is the few remaining Chinese spiritscompanies in which the foreign capital has very low hand. It is the most consumed spiritin China.Foreign competition is dominated by the Scottish group and Chivas brothers owned byPernodRicard and the Diageo Group. Other foreign spirits in Chinese markets include theJapanese spirits and Russian vodka. A good understanding of the consumer is importantfor the success of foreign brands in China. Foreign brands are perceived as luxury inChina. So it is going to be a task to compete with the domestic brands which are availableat very low prices in China. We may also face competition from counterfeit brands.These are so prevalent in country that some alcoholic beverages manufacturers are forcedto take special measures to preserve their brand image.DISTRIBUTIONRetail sales dominate the spirits markets in China mainly in independent food stores,specialist retailers and supermarkets. Low cost super markets such as Wal-MartandCarrefour are providing mostly one stop distribution channels even for the high endbrands (emagazine2009). Specialist retailers act as a gateway mainly between traditionalold buyers and foreign spirits. Spirits are mostly sold via retail outlets than any othermeans. Foreign spirits are mainly considered as high end and luxury item which are givenas gifts on Chinese holidays. As China lack national spirit chains the supermarkets andretail outlets play an important role in distribution. In addition to this local retailers andnight clubs mostly depend on local specialist retailers to supply their needs at discountedprices.3|Page
  4. 4. MARKETINGForeign spirits consumption is mainly regarded as luxury or high end in China. To marketour brand in China we need create awareness of spirits among Chinese people. Most ofthe people in China do not relate the foreign brands as compared to the local brands. Sothe marketing of our brand must be done in such a way that the people can relate to ourbrand.Chivas sales in 2006 have been increased by 50% in China all thanks to the “this isthe Chivas life” campaign by the Chivasgroup (Datamonitor 2010). This ad campaignbecame successful and the people started to change their drinking habits. An ad campaignhas to be designed in a way that the local people can relate to our brand.There are certain restrictions in China regarding advertising of spirits. No more than 2ads are permitted per brand in an hour in the prime time (word press 2009). Howeverthese are not adversely effecting the promotion of foreign brands. The high end spiritmarket is extremely brand sensitive. We have to build our brand awareness among thepeople of china from ground zero. We have to seek strong relationships with the localsupermarkets and specialist retailers as they are the main supply chain of spirits in China.LAWS IN CHINA ON SPIRITSChinese governments provide a favorable environment for the foreign spirit companies inchina. Recent evidence is that of the Scottish whiskey for which the Chinese governmenthas agreed to recognize the brand. By this it prevents the fake companies to come in themarkets.The Chinese government is also encouraging companies by reducing the consumptiontaxes and importing taxes which is a good sign for our company to launch our brand inchina. It appears to be a good sign for the competitiveness of the foreign brands.4|Page
  5. 5. COUNTRY RISKSThere is a need to look into Counterfeits in alcohol industry in China. It is not onlyrestricted to alcohol industry. But there were many legal issues concerned with alcoholindustry regarding counterfeits. Recently there was a legal issue regarding counterfeitingof Chivas group brands. The governments are supporting the foreign brands andenforcing strict laws to counter the counterfeits.Chinas political situation was stable and the people lived and worked in peace andcontentment, which created necessary social conditions for attracting foreign investment.So these conditions favors to our company.The initially established market economy system and the gradually perfected laws andrules created favorable legal environment for our company. The economic rate ofincrease during 1998-2001 was about 7.5%, which was still the highest in the world. Theeconomic rate of increase of 2002 is 8% and is expected to be about 8% in the years tocome. Meanwhile, the macro-economic environment was fairly stable. The governmenthas, in recent years, energetically taken positive financial policies to stabilize exchangerate and reduce deposit interest rate so as to promote the development of economy.Chinas economic development level was also improved with a high speed; the per capitaGDP was nearly US$1,000. The Gross Domestic Product in 1997 was RMB7, 446.3billion Yuan, RMB7, 939.6 billion Yuan in 1998, RMB8.205.4 billion Yuan 1999,RMB8.940.4 billion Yuan 2000, RMB9, 593.3 billion Yuan in 2001 and RMB10.2398trillion Yuan in 2002 and become the sixth largest economic entity of the world.GDP and Population of six Asian countries GDP in key sectors (%)Countries Population GDP GDP/capita Agriculture Industry Services (Million) ($ Billion) ($)China 1281.00 1237.10 7.262 13.80 52.90 33.30Japan 127.10 3978.80 3.745 1.30 24.70 74.10India 1043.30 515.00 3.319 23.60 28.40 48.00Korea 47.60 476.70 925.1 3.20 40.00 56.305|Page
  6. 6. Indonesia 211.70 172.90 827.4 14.60 45.00 40.60Thailand 61.60 126.40 524.8 9.00 44.30 46.70(Chatterjee&Nankervis 2007, p.4)Consumer prices in the worlds second largest economy rose 6.2% from a year earlier,down from 6.5% in July.Food prices have been the main reason for the rising costs in thecountry.Separately, the Bureau said Chinas industrial output had risen 13.5% in Augustyear-on-year, slightly down on growth in July (BBC 2011).After the global financial crisis in October 2008, the Yuan has largely fluctuated between6.82 and 6.89 to the U.S. dollar. Lian points out that China, the world’s third largesteconomy and one of the fastest growing, is important to a global recovery.Blaming the RMB rate for the huge U.S. trade deficit is unjustified because the Chinesecurrency has gained more than 21 percent against the U.S. dollar(Lian2011).So with high GDP, good inflation rate are very helpfuland suit for our company’s futurein China.In China, Transparency International study that measures the perceptions of internationalbusinesspeople on global corruption, China scored 3.4 on a scale of 0-10, where zero is"highly corrupt" and 10 is "highly clean" surveyed in 2005. So China is not very cleannorhighly corrupted country. So with this low corruption rate as compared to other Asiancountries, our company will face problem in China but very few.Corruption perception index for five Asian countriesCountries Score World rank Surveys usedSingapore 9.3 5 13Japan 6.9 24 15Malaysia 5.0 39 156|Page
  7. 7. China 3.4 71 16Thailand 3.6 64 14(Chatterjee& Nankervis 2007, p.7).The amount of labor force with improved diathesis was sufficient. The cost advantagecaused by abundant cheap labor forces provided tremendous opportunities for foreigninvestors. On the other hand, China also possessed related number of skilled labor forcesthat have accepted favorable training and education, and can meet the requirements offoreign investment on high-tech industries. So there is an advantage to get the labor atvery low price.The area of Chinas land is more than 9.6 million square km, and is only next to that ofRussia and Canada. China is characterized by both the continental monsoon climate andcomplicated and diversified climate. Also China stretches from the south to the northequator belt, sub-torrid zone, warm temperate zone, temperate zone and cold temperatezone. These are the favorable conditions to our company. We’ll get the land to open anew branch there even at low price so that we can control the middle and eastern Asiaand can save the transport charges from Ireland to the Asia. The climate conditions favorsto people of China to drink alcohol throughout the year which favors us as well withrespect to production.In recent years, Chinas infrastructure has been greatly improved, and the infrastructureconstructions like transport, telecommunication, water, electricity and gas supply, etc.have been basically matured, and the capacity and quality of energy, raw material andcomponent supply were also obviously elevated, providing a favorable externalproduction management conditions for foreign investment. With these facilities we neednot to worry about selling our whiskey to different regions of China(2004).CONCLUSIONFrom the above stated report we conclude that there are very favorable and encouragingconditions for us to launch our brand in china. A huge proportion of young generation,people willing to spend on high end products, the economic growth and the change intastes of people are going to be a huge boost up for us launching our brand in China. The7|Page
  8. 8. global markets will continue to be highly competitive. China is a huge emerging marketin recent times and by having a right marketing strategy and good ad campaign we cantaste the success of our brand in china.REFERENCESAccess Asia Limited., 2006. Alcoholic drinks in China a market analysis, ShanghaiChina: Access Asia Limited.ALCOHOL USE IN CHINA. Available at: http://alcalc.oxfordjournals.org/content/38/6/537.full [Accessed October 10, 2011a].BBC News - Chinese boost for Scotch whisky industry. Available at: http://www.bbc.co.uk/news/uk-scotland-11706777 [Accessed October 10, 2011b].Bronte Capital: Looming excess capacity in getting you smashed and Chinese statistics. Available at: http://brontecapital.blogspot.com/2010/12/looming-excess-capacity- in-getting-you.html [Accessed October 10, 2011c].China food & drink report : including 5-year industry forecasts by BMI. (eJournal / eMagazine, 2005) [WorldCat.org]. Available at: http://www.worldcat.org/title/china-food-drink-report-including-5-year-industry- forecasts-by-bmi/oclc/608318702&referer=brief_results [Accessed October 11, 2011d].Chinese Alcohol, Chinese Spirits. Available at: http://www.chinadaily.com.cn/life/2010- 10/27/content_11692216_4.htm [Accessed October 10, 2011e].Chinese Alcohol, Chinese Spirits - China culture. Available at: http://kaleidoscope.cultural-china.com/en/132Kaleidoscope5907.html [Accessed October 11, 2011f].Court case: Spirited fight against liquor counterfeits | Business | chinadaily.com.cn. Available at: http://www.chinadaily.com.cn/cndy/2011- 06/29/content_12797594.htm [Accessed October 11, 2011g].Cultural aspects of drinking patterns and alcohol controls in China. Available at:8|Page
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