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Xs Energy Drink in China Analysis

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Xs Energy Drink in China Analysis

Introduction

It is evident that global events result in intense rivalry between firms and affect almost all modern businesses and organizations; such rivalry is actually attributed to the increasing challenges as a result of the ever-changing external and internal business environments. For instance; the economic and political linkages involving the migration of people, money as well as products across state boundaries together with ideas and values have increased the pace of change, ambiguity, uncertainty, and unpredictability. Therefore for any contemporary firm to remain focused, competitive, and international in scope it needs to embark on market strategies that will foster good results in terms of exploring new markets.

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Intense competition has become the norm of all firms and therefore each firm wishing to remain competitive as well as international in scope must formulate workable marketing plans that are long-term in nature. Such workable marketing plans should be formulated in a manner that considers the available resources, strengths, weaknesses, opportunities and threats of that particular company. For these strategies to be efficiently and effectively carried out, prior marketing research should be conducted to avoid unnecessary failures in the future.

Company/product/market selected

The company in question is a US company that deals with manufacturing and selling of a wide variety of energy drink products such as Vita Max Power and other Horlicks drinks. The company in question is among the energy drinks producing companies that have utilized the concept of globalization because of the saturated European market for energy drink products. It is therefore considered a pioneer in selling it energy drinks products abroad not only to China but to other European countries like Germany. The company has a well built organization structure with competent employees that boost international marketing.

The energy drinks including Vita Max Power produced by the company are rated to be among the best energy drinks products in the world and reports suggests that it can do well in the foreign markets. The product in question that is the Vita Max Power energy drink not only meets the international standards but it is also accredited with good taste unlike other drinks which tastes bitter. Medical scientist views VITA-MAX drink as an every day compound super-food nutrient recipe that has necessary antioxidants, vitamins, minerals, whole-meal additives, calcium and B-complex as well as dietary fiber with sweet taste that is fit for human consumption.

The country selected by the company to market Vita Max Power energy drink is China, which is among the most growing economies in the world and allows for free exchange of medium of payment. Therefore The Company will not face exchange rate difficulties during its business transactions in China. Research indicates that China consumption of energy drinks have dropped significantly over the past few years unlike other European countries like Australia and Germany and France where the consumption of these products is reported to be high.

Good economy, stable exchange rates, flexible import duties, better trade tariffs and more importantly, the virgin market of energy drinks in China propel the Company to go international. Through the concept of globalization, China enjoys the benefits associated with economic policies put in place by the developed countries. Therefore the company in question will not experience many difficulties in form of trade barriers while introducing the product in China since less economic legislation regulations are encountered. However, cultural issue in china is the most probable hurdle that the Company will face since China is known to be among the conservative countries in the world.

Situational PESTLE Analysis

Situational analysis is very crucial to any business that opts to go international and the company should utilize such analysis in its effort to expand its market share in China. This analysis simply involves understanding the organizational business environment and therefore the company should pay crucial attention to the following factors:

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Political Factors

Political factors are the issues that the company has to deal with such as the political interferences that may be practiced by the Chinese government. According to research political systems of nations affect the conduct of businesses, for example some countries practice collectivism while others practice capitalism political systems. Unlike in the past nowadays the Chinese government practices capitalism in that it allows factors of production to be privately owned and the government performs only limited duties that the private sector cannot perform unlike in collectivism and communism that stresses collective goals. So the company has fewer restrictions and hence we can conclude that it will enjoy good external political environment in China.

Economic Factors

Economical factors are factors that mainly deal with financial forces in the economic environment. Such factors include foreign exchange rates, currencies and global monetary systems like the use of Euro currency, inflation, counter trade, balance of payments, monetary policies, and fiscal policies among others. After carrying out careful analysis of these factors the company does not face a lot of these challenges but only the company is likely to be subjected to few of them like inflation and the balance of payments which is now common because of the economic meltdown all over the world.

Social Factors

Social factors are other factors that the company has to consider before going international. Forces within the society such as religion, family, social structure and education may impact positively or negatively the way the company will market its Vita Max Power energy drink in China. Research indicates that social factors affect our attitude, opinions and interests on the way we view products from certain companies and Chinese people will not be exceptional from such factors.

Technological Factors

Technological factors are another key factor to be put in consideration by the company before expanding to China. Advanced technologies are now being experienced by many companies as a result of the concept of globalization. Globalization has taken centre stage and now the use of e-commerce or internet marketing has been increasingly utilized by many firms. The company in question should not be left behind and the management should consider the utilizations of such techniques in maximizing the benefits brought about by globalization. For instance, Vita Max Power brand in china can be enhanced by carrying out marketing online activities since it reaches lo large market share.

Legal Factors

Legal factors are another factor that must be analyzed before going to china by the company. The way the company operates in terms of operating rules of law for example how it will cope the legal rules in China is more important because it will avoid conflicts and thus will enhance the success of the company. The biggest advantage of the company is that it is engaged in legal business practice of marketing energy drink products in form of Vita Max Power energy drink which is permitted by the Chinese laws.

Implications of situational analysis

Since the energy drink industry is faced with stiff competition, the company needs to be aware of the ever changing external and internal business environments. The company has the duty to analyze political, legal, social, legal, and technological factors that may affect the overall company’s performance not only in China but in its all strategic business units across the world.

SWOT analysis

This will involve in-depth analysis of the strengths, weaknesses, opportunities, and threats that the company in question will be experiencing as a result of competition from other companies already in Chinese market.

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Strengths and weaknesses

Strength can be defined as a particular skill or distinctive competence that a company can do relatively better than other companies especially its competitors and which the companies have and contributes to the achievements of the stated goals or objectives.

The company in question has a strong brand name which helps the organization to have a competitive advantage over the other energy drink producing companies who seek to go international. The company is also accredited with the best marketing network that have made the company to do well globally. The company has the best distribution networks in the industry which has been a strength that has significantly helped the company to dominate the market for a long time. The other strength associated with the company is it has the ability to identify the market segments and hence the competitive position of the company.

A weakness can be defined as any aspect of the company which may hinder the company from attaining its objectives or goals. Usually, it covers the firm’s assets, resources, and capabilities. The company’s rules, procedures, and policies are said to be weak as in some markets they have started to perform poorly. Research shows that the employees of the organization especially the marketing department has failed in coming up with viable strategies that will enhance productivity.

Opportunities and threats

An opportunity can be defined as any event, development, or a feature of the external environment which creates circumstances that are advantageous to the business in relation to set of goals to be attained. It is considered to be an attractive endeavor for a company’s functions which if fully utilized will lead to increase in productivity and thus rise in profitability level as a result of international marketing.

The most evident opportunity for the company is the use of e-commerce which is brought about by globalization. The company has to utilize the use of internet in exploring the market in China. There have been significant improvements by the company in terms of accessing market share and has been attributed to the use of internet marketing. Because of the strength of strong and well built financial base the company has the opportunity of producing new energy products in the market for example new Vita Max Power brands without straining its budget. Such energy drinks should be unique and of high quality as compared to that of other firms in the industry in order to gain significant market share. The company has an opportunity of undertaking vigorous marketing campaigns and promotional activities when selling such products and therefore it may be viable to produce new energy drinks such as Vita Max Power products for long-term purposes.

A threat can be referred to as an environmental development or event which will present problems or challenges likely to hinder the achievement of organizational objectives. The company in question is not the only company seeking to expand and therefore it is facing intense competition from other companies who seek to expand there market share too, thus it may experience a drop in the market share in future and thus a reduction of its profits.

Another threat faced by the company is that of poor management in some other subsidiaries. Reports suggest that the staff of the company in other branches of the company may have been recruited on discriminative basis and therefore they have been incompetent in fulfilling their tasks. This should not happen in this case of entering the Chinese market. In fact it should give the local Chinese people an opportunity to work for the company in order to increase the confidence of Chinese people on the Vita Max Power drink.

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Marketing Strategy

A marketing strategy is a plan of action that the company will have to utilize in order to counter the competition from its rivals and in the process attains a significant market share in the market arena. Since the company in question is a big multinational firm in the world it has in the past chosen to compete across entire market in energy drink industry. However, this strategy has not gone on well with the company in that in some places it has lost ground in terms of market share. Therefore, the best marketing strategy for the company to use in Chinese energy drinking market is to compete in particular segments only that will perform better more than its competitors. To achieve this, market segmentation should be carried out by the company prior to marketing activities. Market segmentation involves identifying those target markets that the company will do well. It is only through this strategy that the company can ensure its survival in the energy drink industry in China. This is because through market segmentation the company will only specialize in few and potential target markets that will yield good returns and also it will require little resources to compete in the segments than competing across the entire market. Further, the management of the company should ensure that the target market selected provides an opportunity of accessing the market information required in order to save time and financial resources.

Identification of portfolio plan for the company will be an important strategy too for the company in that the management will be able to identify those subsidiaries in China that will not be performing as expected in the Chinese market. Such a strategy will involve classifying the branches of the company in to four groups as follows. The first group is that of a star which symbolizes a branch that does well and is said to have large market share in a growing market. The strategy adopted is that of building the business unit. The other group is question mark or problem child, which is a branch of the company characterized by declining market share in expanding industry. The strategy is that of harvest or divest to other markets. The third group is of cash cow which is characterized by low market share but in a growing industry. Cash cow normally sustains other branches because its cash flows are constant. The strategy associated with cash cow is harvest. The fourth group is that of the dog whereby the business unit in question has low market share in a declining industry. Such a business require a lot of financial resources and time thus losses are experienced. The strategy for such strategy is to divest to other branches or business units in order to avoid losses.

Marketing strategies

These are ways in which firms and companies seek to market there products in globally and usually depends on the quality of the company’s products and the nature of competition that rival firms employ in trying to expand there market share and to maintain there growth. There are various methods of entry to different markets and the company in question has to select the effective one depending on cost, risk and the degree of control which can be exercised over them in terms of security. However, the following are some of the best modes of entry that the company can utilize while entering the Chinese energy drinks market:

Indirect Exporting

Under indirect exporting the company in question that will be the exporter of energy drink to China will access the Chinese market free from risks of doing it directly. It involves the use of independent organizations within the exporter’s domestic markets. It can be done through various ways; for example; a domestic based export merchants, who take the title of the Vita Max Power energy drink and sells them in the Chinese market; domestic based export agents who sell and market the Vita Max Power energy drink on behalf of the company and co-operative organizations who act on behalf of the company in question. Although this approach might be cumbersome to undertake because of high cost of getting links with agents, if it succeeds the company will get access to new and ready market for Vita Max power drink.

Joint Ventures

Joint venture partnership can be defined as a partnership created by one or more companies with a view to carry out a business together. They contribute equally to the business and agree to share any profits in a certain percent in the course of the business. Generally joint ventures are common where government conditions demand so in order to ensure control, nationalism and reduced re-patriation of profits which is common in China. It will be an ideal situation for the company since it will require fewer resources to enter in to the Chinese energy drink market. However, it has potential problems and includes sharing of profits, employment issues, market coverage and decision making due to different long-term interest in partners.

Franchising

Franchising involves one partner called franchisor licensing trademarks and established methods of entry to a party called a franchisee in swap for a recurring compensation. A good example that illustrates this method is that of the company selling its Vita Max Power energy drinks together with the rights to use its trademark and name to other independent energy drinks producers in china. This is very appropriate for the company since it will be easy to start the business in China and there will be room for rapid expansion thus attracting customers.

Marketing mix

Product

The company in question deals with a variety of energy drinks products ranging from Vita Max Power and other Horlicks drinks. The brands of the company are said to be unique as compared to of that of its competitors. The energy drinks products especially the Vita Max Power energy drink is considered to be of high quality as compared to that of its competitors.

Price

Price is an important tool in competition and thus firms use it as a mechanism to outdo themselves in the energy drinks industry. According to research, reports suggest that the company is said to be overall low cost producer of energy drinks products in the world. The energy drink products of the company are cheap and affordable to its customers. Research indicates that the company is becoming a market leader because of the cheap prices associated with the products. The company should therefore employ such pricing strategy in China and thus Vita Max Power energy drink will experience a significant increase in terms of market share.

Place

Distribution channels determine the sales of any company and the company in question should utilize the best distributional channels that will result to increase in profit levels of the company. This will enable the company to have a competitive edge over its competitors and thus will lead to increase in market share, profitability, and growth rate.

Promotion

The company should engage itself in modern promotional activities of Vita Max Power energy drink in China and significant results will be achieved because consumers will respond well in terms of consuming the energy drink. The company should engage itself in vigorous advertising campaigns through media and bill boards and thus will attract a large number of customers to drink the Vita Max Power drink.

Implementation and control

Because the company has diversified, online marketing will be efficient method to use. Online marketing also referred to as E-commerce is based on the technology of internet and the usage of personal computers. Through internet, branches of the same company can develop networks, through which they could keep up to date with business progress and could improve service provision to customers. E-marketing is relatively a new advancement in the field of marketing and there are many business and customers who have switched from traditional to online marketing. The reason being quite obvious, the convenience and flexibility it provides cannot be ignored. Flexibility of time, place and human resources are also involved. As internet globalizes this world and in the same rate online marketing is becoming global. This implies that the company should utilize such technology when entering into Chinese energy drink market.

Constant evaluation should be carried out to ensure that the company’s marketing activities are a success in China. The managers should monitor how the Vita Max Power energy drink is performing in new markets of the company as compared to that of its competitors thus it will be able to formulate marketing strategies that can be a success to the firm.

The company further should plan for the activities to be carried in advance (budgeting) and ensure that sufficient funds and capital are provided to enhance the success of the programs to be undertaken in China. The strategies that have been formulated should be implemented effectively in order to counter the moves of its competitors in Chinese market. The use of pre-testing techniques while introducing the Vita Max power drink to new markets in China should be utilized in order to give the management the insight of how the drink will perform in the market. The methods of entry adopted by the company should be implemented too in the best way possible.

Conclusion

China which is the main target market for the company is faced with decline in consumption of energy drink products. This scenario is attributed to change in behaviour of the citizens of China and their attitudes towards energy drink products. There is also evidence that the Vita Max Power energy drink, an energy drink brand that the company intends to export it to China may not perform better unless the company engages itself in vigorous advertising and other promotional tools especially marketing mix strategies that will give the competitive advantage over the other rival companies that are in the same industry.

Research indicates that there are many things a company does but it should always concentrates on what it can produce best. The internal analysis facilitates the formulation of strategic plan which requires a clear understanding of the internal strengths acquired over time and any weakness that adversely impact on performance. Distinctive competencies are things that give a firm an advantage over similar businesses. Research also indicates that no matter how attractive an opportunity may be the business must have the competencies to capitalize on it. An opportunity without the competence to capture it is no really an opportunity to the business. The company in question has got its strengths weaknesses, opportunities and threats as discussed in this paper. It should also be noted that globalization has influenced decision making and the conduct of policies in energy drink industry.

Recommendation

We can therefore deduce that there is greater need to understand organizational behaviour in order to achieve the organizational effectiveness in the company and much attention should be directed to people, structure, technology and the environment of the company. Organizational effectiveness can only be achieved if the management is able to incorporate good leadership, effective motivational structures, a well defined organizational structure, forming group dynamics and setting up good structures for communicating in the workplace. The company in question should also be flexible in the sense that it should be ready to cope with change without affecting its productivity especially when it intends to go international.

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