Positioning and Opportunity Assessment Report with main focus on Germany, China, USA, New Zealand

The establishment of an English Tea Company

Term Paper, 2010

40 Pages, Grade: 1,3


Table of contents

Part 1 Opportunity Assessment

1.0 Glossary
1.1 List of Figures
1.2 Executive Summary

2.0 Introduction
2.1 Macro environment of international market
2.2 PESTLE Framework
2.3 Key Facts New Zealand
2.4 Key Facts China
2.5 Key Facts USA
2.6 Key Facts Germany

3.0 Market Segmentation by Industries
3.1 New Zealand
3.2 China
3.3 USA
3.4 Germany

4.0 Geographical Variables - Businesses Portfolio Matrix
4.1 Competitor Analysis

5.0 Recommendation

Part 2 Market Entry Strategy

6.0 Market Entry Strategies
6.1 Indirect Exporting
6.2 Direct Exporting
6.3 Direct Investment
6.4 Cooperate Strategies
6.4.1 Joint Ventures
6.4.2 Strategic Alliances
6.5 Marketing Plan

7.0 Market Entry Strategy for Bettys

Part 3 Implementation of Bettys Marketing Mix

8.0 Company Analysis - SWOT
8.1 Marketing Mix
8.1.1 Product
8.1.2 Price
8.1.3 Place
8.1.4 Promotion
8.2 Stimulus Response Model
8.3 Bettys in Germany
8.4 Conclusion
8.5 Bibliography
8.6 Appendices

1. Glossary

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1.1 List of Figures

3.4.1 Global Hot Drinks

4. Business Portfolio Matrix

4.1 Competitor Identification (Porter)

4.2 Level of Need

6. Market Entry Strategies

8. SWOT Analysis

8.1 Product (Packaging)

8.1.2 Product Life Cycle

8.2.2 Break Even Analysis

8.1.4 Marketing Promotion

8.2.1 Stimulus Response Model

PESTLE New Zealand



PESTLE Germany

Hot Drinks Germany

Hot Drinks China

Hot Drinks USA

Hot Drinks USA

1.2 Executive Summary

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Bettys and Taylors of Harrogate Limited (Bettys) appointed the consultant to provide guidance in developing an oversea positioning strategy by mainly investigating four markets: New Zealand, China, USA and Germany. In order to find the most appropriate market for Bettys, he decided to apply the PESTLE-framework, which will help to plan for future events concerning the macro- economic environment in which Bettys operates. The key findings for every country are summarised in this report. (A detailed analysis has been attached in the appendices). After having thoroughly skimmed the four markets Germany has been acknowledged as a potential market, nevertheless it was necessary to further analyse all of the markets in order to come to an appropriate decision. The markets were segmented by looking at a special industry. The hot drink segmentation for each market gives a clear overview of the level of demand for tea and coffee. Europe contributes almost 44 % of the hot drinks in the global marketplace. Germany accounts for 24.3 % of the European's hot drink market value and therefore these results strengthen his initial bias of choosing Germany as a potential oversea market. Since there is a high consumer percentage of hot drinks in Germany the threat of substitute products is not considerably disturbing. In order to provide a clear overview of the results, the Business Portfolio Matrix was chosen to demonstrate the findings on the markets and thereby to point out which markets are considered to be primary, secondary or tertiary. As an additional tool the competitor analysis from Porter's five forces model was applied which is divided into direct, indirect, incipient and potential competitors for Bettys. The different levels of demand for each market were also summarised in a table. Again, the results show that Germany has a relatively low market entry risk because there are only few direct competitors. As a last analysis tool the 12 C framework was applied for the chosen country.

According to his findings the consultant advises Bettys to enter the German market and provides an overview of the four existing market entry strategies by stressing the advantages and disadvantages of each strategy. The “Strategic Alliance-strategy” is considered to be the appropriate market entry strategy. In order to implement Bettys marketing mix the consultant analysed the company's strengths, weaknesses, opportunities and threats (SWOT) and designed the possible new marketing mix for the new market. This report is structured as a marketing plan.

2. Introduction

2.1 Macro environment of international market

For the majority of British people a cup of tea is an essential part of their culture and every day life. Why not enjoying it in a nice atmosphere at Bettys, a traditional Anglo Swiss family business, located in the heart of North Yorkshire, England. Bettys is a successful family business committed to provide their customers with high qualified products, such as handmade cakes, mouth-watering chocolates, exclusive coffees and fine teas, often sourced locally. Since 1919 the company has been working in two long-established family businesses namely those of tea coffee and cake. Since 1960 Bettys has been cooperating with Taylors of Harrogate, which is specialised in trading with tea and coffee. In 2007 Bettys and Taylors received 2 prestigious awards which esteemed their work in terms of sustainable development and fairly trade with their suppliers.

2.2 PESTLE-framework

In order to analyse the macro environmental influences which have a considerable impact on Bettys it is economically reasonable to look at the PESTLE framework. This framework is a useful tool to understand the environment in which an organisation operates. Environmental influences never influence an organisation to the same extent, for some organisations any changes in the surrounding environment will pose a threat but for others those changes might be favourable. “ Also, it will affect some organisations favourably whilst posing a threat to others ” (Johnson,G., Scholes,K.,2002, p.102). The PESTLE- framework categorises the influences of the environment into six types: political, economic, social, technological, legal and environmental. The impact of those environmental factors might change constantly, therefore it is essential to look at their future trends.

Political and legal environmental changes are significant to an organisation which wants to set up a business oversees. Some political parties might have free trade policies and encourage organisations to set up their business in different countries and export their goods and services but others simply do not. Bettys cannot avoid being affected by the economic environment, therefore it is important to take a look on the different exchange and interest rates. Consumers' tastes concerning tea types might also change due to the implementation of new flavours in the global market. Other drinks and beverages might be a direct competition for tea and might replace it. Bettys should be able to anticipate those future trends in order to further compete with international competitors hence these sociocultural changes are extremely important to be considered when investigating in potential markets. Another driving force when moving towards a global marketplace is the impact of technological advances. Bettys has to be aware of several technological advances within the new market which they could apply to their own products. The legal aspects are very crucial in terms of creating a successful businesses environment. They ensure that every company is operating in a legal way which reflect the statutory framework within a country.

2.3 Key Findings New Zealand

According to a WTO report on trade, New Zealand has remained among the most open economies in the world. Thanks to its long democratic tradition New Zealand has a high degree of political stability. However, due to its position it is physically isolated from other core markets. 2009 the GDP contracted by 1 % (GDP per capita $ 27,900) which is mainly caused by fluctuations in exchange rates and high interest rates, which affect investments in the export and domestic sector. The current inflation rate is 2.7%, the unemployment rate is 5.98%. Since Bettys would have to bring their own technologies to NZ, the cost of import would be high due to long means of transports. NZ has similar traditional habits as the UK with an increasing sector of tea consumption nevertheless, the costs of import and export are high.

2.4 Key findings China

China is the largest country in East Asia with over 1.3 billion habitants. Apart of that, it is the fastest growing economy in the world. China is one of the largest receiver of FDI and its average GDP growth of 10.3 % during 2003-2008. In terms of research expenditure it is among the most consistent in the world with one of the highest numbers of R&D institutes in the world. One of the major problems is the non transparent marketplace and the high level of corruption. China's inflation rate is currently at 5.66% and the percentage of the interest rates is at 5.31%, which means that the borrowing costs for Bettys would be high. According to the findings of the PESTLE analysis, the consultant advices Bettys not to enter the Chinese market.

2.5 Key findings USA

As a self sufficient country, the USA have a well developed economy and are leaders in industries such as motor, aerospace, telecommunications and IT. Apart of being one of the leading powers in the world with strong political and economical influence, the country has to face illegal immigration as well as high threats of terrorism. The USA have got the most expensive healthcare systems which not everybody can afford. The current unemployment rate is 4.8%. Since the Americans use to drink a lot of coffee, it might be an opportunity for Bettys to enter the US market, however the risk of long term establishment is relatively high due to the difference in culture. The US population prefers “coffee to go” rather than to sit down and take time for a coffee.

2.6 Key findings Germany

Germany is a federal republic with fair and transparent elections and one of the most competitive economies in the world. Stable laws ensure the protection of liberties, property rights and equality before the law. In terms of technologies Germany investigates in biotechnology furthermore it has a sophisticated technological infrastructure. Residents are entitled to monetary and material assistance (Harz IV). Germany's healthcare system has the reputation of being one of the best in the world. As a European country Germany can benefit from the “Schengener Abkommen”, which is a treaty that facilitates import and export within the European Union. The country imports most of its energy sources, including almost all of its oil. In the 1970s and 1980s it worked to reduce its dependence on imported oil by developing nuclear power and encouraging energy efficiency.

Germany has one of the world's most developed transportation and communication infrastructures.

The cultural differences between Germany and the UK do not differ much, hence it might be a favourable opportunity for Bettys to establish their premises in Germany. (for further information please refer to the appendices).

3. Marketing segmentation by industries (Hot drinks)

“ In most markets there is a wide diversity of customer's needs, so the concept of market segmentation can be useful in identifying similarities and differences between groups of customers or users ” (Johnson,G.,& Scholes,K.,2002, p.127). Segmentation enables Bettys to avoid wasting their efforts on people who have no need for their products and therefore unlikely to become customers.

3.1 New Zealand:

The tea and coffee value in New Zealand's market is only 4.1%. New Zealand's soft drinks account for 40.3% of the total market volume.

3.2 China:

Tea has become a vital part of the Chinese culture since tea had been discovered thousands years ago in China. Tea is the most lucrative market with an overall value of 96.8%. China generates 51.3% of the Asia-Pacific hot drinks market's value

3.3 USA:

Hot drinks in the USA account for 14.9% of the global market's value. With 69.9% of the total market revenue coffee is the most lucrative market in the USA.

3.4 Germany:

Germany accounts for 24.3% of the European hot drinks market's value with coffee being the most lucrative market with overall value of 58.4%.

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4. Geographical variables

For classifying the four potential markets, the consultant chose the Businesses Portfolio Matrix, which is a useful analysis tool in order to evaluating the level of attractiveness of the markets. Countries are divided into three different categories; Primary, Secondary and Tertiary markets.

Primary markets

- best opportunity for long term strategic development

Secondary markets

- good opportunities but economic and environmental risks

Tertiary markets

- high risk
- minimal allocation of resources
- short term objectives

(Dole, I., and Lowe, R., 2005, p. 67)

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Fig. 4

The two graphics illustrate Betty's potential, incipient and indirect competitors, as well as the level of need for hot drinks in those markets.

Identification of Competitors

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Fig. 4.1 (source: own analysis adapted from Datamonitor)

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Fig. 4.2 (source: own analysis adapted from Datamonitor)

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5. Recommendation

The consultant decided that Germany would be the most suitable market for Bettys. The level of need concerning tea and coffee is moderate but the CAGR of 2.9 % is supposed to accelerate. The key distribution channel consists of supermarkets (almost 70.9%) which implements that Bettys could find a niche market by establishing Tea Rooms in Germany. Furthermore, the threat to enter the German market is moderate, there is no risk of subsidiary products concerning the high proportion of the population consuming hot drinks. Since Bettys is a small family business the consultant calls the attention on the fact that by growing too fast there is a risk of loosing quality. Hence, China, as one of the largest country in East Asia with over 1.3 billion people, would not be the appropriate market for Bettys. Furthermore the culture in Germany is not much differing from the one in the UK concerning having a cup of tea or coffee in the afternoon and especially on Sundays. The means of transports are not too long since Bettys would stay in Europe, which is a further advantage. Bettys' mission is to stay small and they emphasis the desire to stay closer to their customers rather than growing too fast.

6. Market Entry Strategies

Once the consultant has chosen the most appropriate foreign market for Bettys, it is now essential to establish the entry mode in order to optimise their operations. Entering a new market is always a critical and fundamental decision due to the advantages and disadvantages of each entry strategy, which will have an influence on the organisation's performance. “ Furthermore, the choice of entry method will involve the firm in a long-term commitment from which it might find it hard to extricate itself without some cost. ” (Chee,H., Harris, R.,1998, p. 292). According to Chee and Harris (1998, p. 291)

“(...) it is not a practical strategy to enter all markets with one single entry method; many large companies adopt multiple entry strategies (...)”.

Altogether there are 4 different types of market entry strategies:

1. Indirect Exporting
2. Direct Exporting
3. Direct Investment
4. Cooperation Strategies


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(Doole, I., and Lowe, R., 2008, p.233)


Excerpt out of 40 pages


Positioning and Opportunity Assessment Report with main focus on Germany, China, USA, New Zealand
The establishment of an English Tea Company
Leeds Metropolitan University
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ISBN (Book)
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positioning, opportunity, assessment, report, germany, china, zealand, english, company
Quote paper
Letizia Zisa (Author), 2010, Positioning and Opportunity Assessment Report with main focus on Germany, China, USA, New Zealand, Munich, GRIN Verlag, https://www.grin.com/document/171404


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