Strongbow Internationalization

Coursework title: Internationalization of Strongbow Module Name: Global Market and Entry StrategiesModule No: M12BSSTutor: Dr. Da TengStudents Id Number: 6003238

Table of contents:i. IntroductionCompany Analysis The company Products Industry Target market profile Competitors SWOT Analysisii. The Target Market Country Selection Demography Infrastructure PESTLE Analysis Tariffs & Regulationsiii. Internationalization Process Distribution Strategy Pricing Strategy Porters 5 forces Competitors Segmentation, Targeting & Positioning Promotion Strategies Marketing Strategies Marketing Cost Assumptionsiv. Export Operations Mode of payment Export Import strategy Documents required for operationsv. Recommendations & Conclusionsvi. References

Introduction:International Trading is an exchange of goods, capitals, & services between several nations and states, without much difficulty. International trade has a major contribution to its economy. Additionally it is also main cause of income for an emerging country.International trade is growing rapidly nowadays with the support of the modern technologies, advanced transportations, outsourcing of manufacturing & services, rapid progress, & advanced manufacturing techniques.Expanding business internationally can be a great opportunity to grow the organization & reach to the potential consumers that may not else discover the brand, service or a product.This report examines the overall aspects of internationalizing of a product to a foreign market where the product is currently not present. Essentially, for this report the product I have chosen to internationalize is Strongbow Cider. Which is a product of a Dutch brewer Heineken. However the product is manufactured in United Kingdom.

The Company

Company Analysis: Heineken has many brands under its name. Strongbow is one amongst them. Strongbow ciders was launched by HP Bulmers in England in the year 1962. Strongbow is manufactured by HP Bulmers located in Herefordshire in England. HP Bulmer is a subsidiary of Heineken international. Strongbow is the largest selling cider in Australia & second largest selling cider in US.(theheinekencompany2015)

Strongbow belongs to the division of Heineken International. Because Heineken does not disclose the financial statements for each company, we have analyzed the Financial Statement for the Heineken group.

Year Sales (millions) Profits (millions)

201419,2571,758

201319,2031,585

201218,3831,661

Products: Strongbow brand offers a wide variety of products in its portfolio. The products ranges from different flavors, Pricing & packaging. Strongbow manufactures cider that are produced from a mixture of bitter sweet cider & culinary apples. It is available at 5% ABV as a draught product and at 4.8% ABV as a packaged product. Some of the product offerings from Strongbow are Strongbow original cider, Strongbow gold cider, Strong bow dark fruit, Strongbow pear, & Strongbow citrus edge. Strongbow ciders are available in pubs, bars restaurants and even supermarkets.(Strongbow2015) Industry: Cider is one amongst the best performers among the alcohol markets. Cider is widespread in UK, mainly inSouth West England, & is commonly available. UK has the maximum per capita consumption, and is also the largest cider-manufacturing brands in the world. Cider is similarly widespread in EU Countries & Australia. However cider industry in the Asian markets is totally untapped.(euromonitor)

Despite the economic downturn Cider has achieved steady growth. In the span of 5 years the sales of cider has increased drastically at 32%. In the year 2007 the sales of cider was 1.8 billion and as the time went by it increased drastically to 2.7 billion in the year 2012. According to the mintel reports the sales of cider has reached around 3.7 pounds in the year 2014.(mintelreports)

Target Market Profile: strongbow is targeting people with Excessive life style with an annual income of $2000.The age group we are targeting is from 18-65 years of old. As cider is a low ABV drink and is made from apples it can be consumed by both men and women. The consumer buying criteria for Strongbow cider depends on taste, country of origin, service, quality & recommendations.

Competitors: The strong competitor to Strongbow is Somersby Cider that belongs to the Danish brewing companyCarlsberg group. It is one of the top cider brand in the world. It is financially strong and has strong backing of parent company. Somersby cider has a capture of over 46 countries throughout the world.(euromonitor)

SWOT Analysis:

StrengthsWeakness

-Brand already well established in western countries such as UK & US. Brand positioning strategies can be replicated.

-Has experience in entering new markets such as Australia.-Strong backing of the parent company

-Developing a taste in a new market takes time and is a formidable task

-Creating awareness about cider in a new market is a huge task

OpportunitiesThreats

-Asian and South American markets are still untapped-Low alcohol content drinks with a sweeter taste do appeal women

-Its hard to make a transition of consumer from their loyal brand-Negative image associated with drinking

The Target Market: Country Selection: Basically I have chosen 5 Asian countries such as Thailand, China, South Korea, India & Indonesia as the target markets. The reason for choosing Asian countries is because of their emerging economies, untapped markets for cider, high level of alcohol consumptions & existing operations of Heineken in those countries. Out of the 5 best target market countries the two best potential markets suggested by the GMMSO4 are India & South Korea.

Although both the market potentials are similar India has favored high in market & company sales potential because of its high level of alcohol consumption. Ultimately India is a market with high potential in overall GDP growth, population, rising alcohol trends &high population of younger generations.(GMMSO4)

Demography: India is the second most populated nation in the world with more than 1.26 billion people living in it. India has more than 50% of its population under the age of 25 & more than 65% of the population under the age of 35.(indexmundi)PopulationAge(0-18)Age(18-65)Age(over 65)Target Customers Age(18-65 )

1,210,193,42239.7%55%5.3%55%

Infrastructure: With more than 300 million internet users, India has the second most internet users in the world. There are 13 major ports & about 200 minor and intermediate ports in India. India has one of the biggest road networks in the world, totaling to around 3.3 million kilometers at current. There are 329 international & domestic airports in India. However Currently, India faces a heavy $1 trillion price tag for infrastructure expenditure.(mckinsey2015)

PESTLE Analysis:

Political Analysis

Current StrengthsCurrent challenges

Tough democratic setup Overseas policy Violence Absence of comprehensive deal with Pakistan Charges of corruption

Future prospectsFuture risks

Tough and steady government Improved relations with its smaller instant neighbors Better responsibility of the government Increasing demand for new states Societal & communal tensions

Source:marketline

Economic Analysis


Second biggest work force in the world Persistent inflation Excessive local progress and broadening monetary differences


Pro-growth guidelines of the fresh government Reduced infrastructure Extremely leveraged corporate segment postures a threat to finance sector

Source:marketline

Social Analysis


Increasing ratio of young people. Employment assurance schemes Healthcare remains main worry Express growth Less HDI rank


Growing life expectancy & dropping infant mortality Governments authority challenged

Source:marketline

Technological Analysis


Solid data base Robust English language skills and cost advantage Gross spending on R&D remains less than 1% of GDP The talent pool needs additional occupational training


Significant competitive advantage in biotechnology research Low amount of high technology exports

Source:marketline

Legal Analysis


Broad legal agenda for business entities Implementation of VAT Obstacles to trade & investment Weak execution of intellectual property laws Judicial postponements


Improvements in corporate governance Tax reforms Inefficient implementation of regulations Lack of a single financial market regulator

Source:marketline

Environmental Analysis


Biodiversity Comprehensive environmental policy framework Depleted water resources Dependence on fossil fuels for energy requirements


Public private partnership & ecotourism

Distortionary policies Enforcement deterrents

Source:marketline

Tariff & Regulations: The Indian tax rate is 30% for the domestic companies and 40% for the international companies. The tax rate in India varies from the state and the type of products. The average VAT in India ranges from 12.5% to 15%. Some categories are charged for less VAT ranging from 4-5%. These include medicines, drugs, cotton, and chemical fertilizers. (marketline2015)

Internationalization Process:

Distribution Strategy: Our chosen distribution strategy for Strongbow cider is to Joint venture with Indias top alcohol brewer UB(united breweries). Heineken and UB group signed a shareholder agreement in 2009. The reason for choosing this strategy is to take advantage of existing operations with UB group. UB is the official distributor of Heineken products in India and Heineken also holds a stake of 42.1% in UB group. UB group has contacts with reputed hotel chains such as Taj hotel group, Oberoi, JW Marriot, ITC Hotels, Sheraton and Radisson. UB group also has strong distribution network to bars pubs & liquor shops. The additional benefit of choosing Joint venture with UB group as our entry mode is that we can utilize the same distribution channels as presently carried out by Heineken products. Most of the distributors have been loyal UB group partners for multiple decades.(euromonitorpassport) Pricing Strategy: According to our marketing objectives & aims the finest pricing approach for this product is Penetration pricing. Our aim is to launch the product at a low price than its subsidiary products in order to gain market share and build customer loyalty. Once we capture a significant market share we can rise the price later. However the selling price of the product will be lower in India if compared to the home country.

Porters five forces:

Threat of new entrants: Since the untapped markets are ripe, there are chances of other cider brands entering those markets.

Threat of substitute:Very heavy because of the established markets of other alcoholic beverages such as beer and wine. Determinants of supplier power: Not a significant concern because Heineken has existing alliance with leading liquor companies around the world. The Heineken products are sold via their distribution networks at present.

Determinants of competitive rivalry:Once Strongbow enters the new market there may be competition by the existing international cider brands such as magners, Aspall & Stella Artois.

Bargaining power of the buyer: Significant because of the significantly established market of the product substitutes and the chosen pricing strategy for Strongbow Cider.

Competitors: Since India is totally untapped market there are no competitors for strongbow cider in India. However its International competitor Somersby Cider might compete with strongbow in future. Somersby Cider has a strong backing of parent company and is financially strong and available in large number of markets. There is an indirect competitor for strongbow cider in India that is Bacardi breezer. Although breezer is not a cider but it is a fruit drink with less ABV (Alcohol by volume) which is similar to the cider. Bacardi has a wide market share & strong distribution strategies in India.

Segmentation, Targeting & Positioning:

Segmentation: 6 metro cities in India for the first phase launch and expand to other cities in the expansionary phase.

Targeting: The target customers for strongbow cider are from the age 18-65 both men and women. Most importantly people who consume alcoholic drinks regularly while socializing or while celebrating with family and friends and also who would want to try new alcoholic beverages.

Positioning: pursue symbolic positioning in the form of self-image enhancement. Belongingness and social meaningfulness. Appropriate pricing and promotion strategies to position strongbow cider in consumers mind, and to reposition the product based on consumer feedback after the launch phase if required.

Promotion strategies: As many people in India are totally aware of Strongbow as well as Cider in general we should promote the product using creative promotion and marketing strategies such as organizing Cider tasting events during the launch phase where people can come and taste the cider for free and also organizing road shows in metro cities surrounding the colleges, pubs & reputed restaurants.

Marketing strategies: marketing is the lifeblood of any business. In order to promote the strongbow cider the best marketing strategies for entering into Indian market are sponsoring a cricket team in Indian Premier League which itself is owned by the chairman of UB group, display the Banners, Billboards & signages, Distribution of vouchers in colleges and at point of sales, Email id harvesting, & Social media marketing.

Marketing Cost Assumptions: Below are the marketing cost assumptions for a strongbow cider entering into Indian market. As we can see in the below table the marketing cost are high during the launch of the product. However once the product grows and captures a significant market share the advertising costs will be reduced. Action/ToolWho/When2015201620172018

Frequent advertising using print media & fashion magazinesIntensely for 3 months & consistently over 4 years 15151515

Advertising contracts for jingle creations.During the launch of the product1000

Sponsorship in sporting eventsOwned by UB group for the first four years4.04.04.44.8

Billboards & hoardings near areas with heavy pub cultureDuring the launch for 2 weeks5000

Banners, signages, & video advertisements in bars pubs and reputed hotels. 6 months0.60.60.60.6

Promotional offers & cider tasting eventsDuring the launch for 1 month0.5000

Fliers and catalogue distributions.6 months0.500.500.500.50

Roadshows 4 times for first month1.2000

Website creation & maintenance0.0250.0250.0250.025

Total27.920.220.621.0

(Figures in INR millions)

Export Operations

Exporting is a process of manufacturing products & services in one nation & marketing and distributing it to the other nations throughout the world. It is the traditional and most efficient form of operating business internationally. Basically exporting requires for key players to coordinate that is importer, exporter, government & transportation provider. In order to expand its market potential a company must enter into a global trade. By entering into a global trade a company can expand its sales and increase brand recall globally. Firms entering into the international market for the first time chose export strategy as it is reliable and flexible when compared to other strategies. A business can enter into a international market for a less risk & expenses. Moreover exporting is adapted by the small business organizations.Our idea is to joint venture with the UB group in order to carry on the manufacturing operations in India. At present Heineken carries out the same process, the Heineken beers in India are manufactured by UB group. The reason for carrying out the manufacturing operations in India is low because of the low manufacturing cost. However UB group should Import raw materials such as the Apple cider vinegar from the Heineken in order to develop the quality & taste of cider. There are certain procedures to be carried out during the export import process. Heineken sets up new breweries in the overseas markets, through the assistance from local government and monetary institutions. Heineken company has set up various breweries in different countries in order to achieve location benefits (production capicity,qualified wage rates, R&D services, market potential). Heineken also purchases over the local surviving breweries overseas , thus by growing contacts to new markets, skilled & trained work force,latest technology & product supply systems.

Mode of payments: The payment mode chosen for our entry strategy is Letter of credit. LOC is often used in international transactions in order to manage the payments efficiently and safely. Due to the environment of international dealings including factors such as different laws, distance & trouble of knowing each other personally letter of credit plays a very prominent role in international trades. Below is the step by step process to carry out LOC

Initially, the importer & exporter enter into an agreement to conduct a business. Here the exporter desires a letter of credit to guarantee payment. Then the importer applies for a letter of credit in his bank for a courtesy of the exporter. Importers bank then favors the credit risk of the importer, subjects & passes the credit to its correspondent bank (directing or sanctioning). The correspondent financial institution is typically situated in the same geographical location as the exporter. Exporters bank validates the credit & passes it to the original credit to the exporter. Exporter then transports the goods, validates & prepares the documented necessities to provision the LOC. Documented necessities may differ significantly provisional on the apparent risk involved in dealing with a specific organization. The exporter then forwards the necessary documents to his bank in intimating them to process the payment done by the importer. The institution then inspects the papers for obedience with the terms & conditions of the LOC. Once the bank found out the documents to be correct then it will claim the amount by: Depositing the account of the issuing bank. To wait till the bank forwards, once in receipt of the documents. Compensate on alternative bank as essential in the credit. Exporters bank will forward the documents to the importers bank. Importers bank will inspect the forms for obedience. If they are correct, the importers bank will deduct the buyer's account. The importers bank now forwards the documents to the importer. Export Import Strategy:

Free CarrierWho pays

Export packingExporter

Marketing & labelingExporter

Export clearance(license, EEI/AES)Importer

Freight forwarder documentation feesImporter

Inland freight to main carrierExporter

Origin terminal chargesImporter

Vessel loading chargesImporter

Ocean freight / Air freightImporter

Nominate export forwarderImporter

Marine insuranceImporter

Unload main carrier chargesImporter

Destination terminal chargesImporter

Nominate on-carrierImporter

Security informationImporter

RequirementsImporter

Customs broker clearance feeImporter

Duty, customs fee & taxesImporter

Delivery to buyer destinationImporter

Delivering carrier unloadingImporter

Documents required for operations: These are the documents commonly used while exporting the goods. commercial invoice export-packing list Insurance policy Letter of credit Declaration of value bill of lading An route bill specific to the transporter GR/SDF form prescribed by Reserve Bank of India in duplicate A certificate of origin An export licence An Export insurance Incoterms

Recommendations & Conclusions:With the rising tough competitors in the cider industry strongbow has to endure the capitals in order to form its brand image in the international markets. Additionally It has to participate in R&D to discover new local & indigenous goods to set up to the potential marketplaces, such as Asia and North America. By taking along its greater quality & exclusive taste of cider the customers throughout the world, Strongbow will last to appear as the topmost international brands in the cider industry.

We recommend Heineken to Enter the Indian Market as trading partner with UB so that the existing marketing & positioning strategies can be replicated. Strongbow should take early a mover advantage and obtain significant market share in Indian cider market by creating awareness about Strongbow cider brand and cider as an alcoholic beverage drink and also use appropriate positioning & promotional activities to pull audiences from traditional alcoholic beverages.However there are also number of risks associated with entering into Indian market such as High tax rate on alcohol, Laws and regulations in various Indian states & Restrictions on T.V advertising. If the strongbow captures a substantial market share it may also affect the existing Heineken products. The strongbow cider might turn out to be a tough competitor to its own Heineken products.

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Strongbow Internationalization

Documents

strongbow brand

strongbow ciders

strongbow gold cider

strongbow original cider

strongbow pear

strongbow citrus edge

product offerings

draught product