Gerolsteiner Brunnen & Co. is the best-selling mineral water company in the German market. Gerolsteiner sells its products in all over the world including Japan, USA, UK and France. The company started its operations in 1888 and now it is supplying the best mineral water products to its customers in terms of taste and quality. The products of Gerolsteiner are manufactured in order to meet the customers’ needs and fulfill the promises in terms of qulaity (Gerolsteiner, 2017). Now, the company is seeking for the business expansion in China market. This report provides marketing strategies in order to enter in the new market. This report takes screening process to select the potential entry market. In preliminary market, the report uses PESTEL analysis to analyze the characteristics of entry market. By the market segmentation, report focuses on the target consumption group and provides effective marketing and advertising strategy to establish the brand image and achieve sales success (Peñaloza, Toulouse & Visconti, 2013).
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Strength |
· Strong brand image in the global market, · Gerolsteiner mineral water enjoys a long history of more than 120 years · High quality standard, · Effective marketing strategies, · Increasing popularity, and · Good reputation in German market |
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Weakness |
· Threat of reusable bottles, · Pressure of government for the production, and · Unable to fulfill the demand of customers |
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Opportunities |
· Effective utilization of distribution chain, · Expansive international market are opportunities for mineral water, · Expansion in new global market like China, and · Increased population of China |
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Threats |
Entry of new companies, and Availability of big players in global market |
Before deciding to enter in the potential market, it is important to consider various characteristics of that market. The company plans to expand the market in the developing countries or emerging economies. Since the brand has already established brand awareness and images in Europe, North American Continent, Australia, it should increase its brand awareness in Asia and Latin America. From the perspective of overall economy strength, Asia has China, the second economic power in the world, India and Korea, three of the six BRICKS countries which boosts of the world economic engine. On the other hand, the population in Asia is as large as more than 4 billion, accounting for nearly 61% of the world population. China has only 65% of renewable water resources to maintain one-fifth of the population of the globe. The World Health Organization (WHO) has stated that although China has positioned sixth in terms of total quantity of fresh water accessible across the world but the amount of fresh water available per capita in China is only a quarter of universal average. Customers in China are taking the water pollution very seriously. In this way, there will be more market potential in Asia especially in China.
Research reveals that there is a significant development in the industry of bottled water. In 2013, China became the largest bottled water market in all over the world. The market is constantly increasing and experiencing the growth from 19 billion to 37 billion liters of bottled water in the year from 2010 to 2015 in China. According to a report of The Economist, it is predictable that total annual utilization of water will reach 49 million tons by 2020 (The Economist, 2010). The retail sales value of bottled water in China market is estimated below:
Figure 1: Retail sale value in China
Political
The political condition of China is stable. China is the dominant country in the region. The country is emerging as a super power in the world. Country has second biggest economy along with most densely population and topping the GDP list. Chinese government and ruling parties have established strong law system and put more efforts on rule of laws i.e. anti-corruption, laws for financial and illegal activities. The efforts of Chinese government make a healthy political environment for the foreign investment. So, company should put focus on Chinese market (Huang, 2015).
Economic
In terms of GDP growth, China still maintains a high growth rate as compared to other countries. China is the second largest economy in the world and has steady economic growth as high 6% to 7% increase rate. The economic fundamentals of China are good and the domestic needs are increasing drastically in the country. Along with this, employment rate is increasing and the average income growth rate overruns the economic growth rate. Due to China, a world economy engine, the economy of Asia is increasing (Guan, 2015).
Social
People in China tend to live healthy lifestyle and tend to consume more and focus on quality product. The economic aspects will impact on the consumption trend and lifestyle of people living in the country. Middle class population in the country tends to have more per capita disposable money. This will potentially provide good opportunities for the company to enter in China.
Technological
From the technological perspective, China provides more innovative products and designs as compared to other countries. China is powerful in software programs and state-of-the-art manufacture projects. High-speed railway station in China is the top innovative program in railway building field. China is better in the technological support as compared to other countries (Douglas & Craig, 2011).
Environmental
China has more than 60% of world population, larger than any country in the world. High level of population poses a great pressure to the environment and demand for water and other daily necessities. So, Gerolsteiner will have more opportunities in China. In China, tap water is not drinkable without boiling. So, Gerolsteiner will likely to seek more opportunities in China
Legal
In China, there is a complete and better judicial system to secure the rights of foreign investment. The government of the country has approved to strengthen the legal system and rule of laws. Along with this, there are many processes including legal and judicial judgment. So, the legal system of China is appropriate for Gerolsteiner.
Based on the above market analysis of China, it is observed that China is the most promising country for the expansion of Gerolsteiner. There are various and commonly used modes of entry in the international market which can be adopted by the company. Direct exporting, licensing, joint venture and foreign direct investment are the least preferred options. Joint venture cannot work in this case as finding right partner in the global market is not an easy task. Along with this, the company has never entered into any kind of joint venture in past. Considering all the factors and research, the best suited mode of entry for Gerolsteiner would be intermediary mode as this will provide franchising and licensing rights to the company in China. Company can form the business with the most powerful enterprise in China which has good reputation and customer awareness as well as customer loyalty (Cavusgil, 2012).
In the China market, Gerolsteiner will target the customers by segmenting the market. The market will be segmented into two parts i.e. consumer market and business market (Bruning, Hu & Hao, 2009).
The company will segment the consumer market based on the family size and social classes existing in the China market. Based on the income level, consumer will buy the bottled water on the monthly, weekly or daily basis. In order to target the customers, a mini pack of 250ml will be introduced for the use of daily basis. Based on the research or market, 20% of Chinese people buy at least 250ml of bottled drinking water in a day. Most of the joint families are shifting towards the single family size so; the target customers for Gerolsteiner would be individual, single and joint family. Along with this, the packaging size would be based on the demand of the consumption. The average customer will buy the bottled drinking water based on their requirement. Their requirements will depend upon their income level. The average selling patterns reveal that 1 liter to 5 liter containers are basically sold in all over China so, main target of Gerolsteiner will be those customers (Peck et al, 2013).
In the business market, company will target five star hotels and restaurant of the country. Company will convince the hotel and restaurant to use it’s the mineral water. Company will let the team know that the bottled water is good for health. Company will provide mineral and natural water which is suitable for the customers as compared to other existing water in the market (Bickhoff, Hollensen & Opresnik, 2014). Company will provide the bottled water to the hotel and restaurants on the corporate prices. The company will also provide them regular service of bottled water based on their choice. If the restaurants will use good bottled water then the customers would definitely visit to the company for more bottled water (Fifield, 2012).
There are some large companies in the market who are presently covering the industry of bottled mineral water in China. For Gerolsteiner, this would be the first bottle drinking water launched in the China market. Few of the companies are at the strong place as the market leader and most of them are using the marketing strategies to achieve competitive position in the market. There are various big companies dominating the market because of huge investment and promotional activities. Gerolsteiner is seeking for the business expansion in the China market so; it will adopt the market following strategy at the initial stage. But the objective of the company is to become market leader in this industry (Brumfitt, 2001). In recent years, there are various foreign brands such as Acqua Panna, Evian and VOSS that have already entered to scramble for the mineral water. All of them are the world top mineral brands and have good sales performance in China. Company will position the mineral water product as the high end product for the customers of China. At the initial period, the position of the company will not be strong. In order to achieve competitive position in the market, company will create a threat for the existing companies. In order to dominate the market, it is important gain major market share in the bottled water industry. Company will try to lead the niche market for the brand position, good will, and for high demand of bottled drinking water (Gilligan & Hird, 2012).
Company Gerolsteiner has objective to enter in the China market with its products bottled mineral water and enhance the brand awareness and sales. This product will be helpful in meeting the requirements of the customers of getting clean water. The objective is specific as the product is able to provide clean and quality mineral water to the customers.
It is observed that the mineral water is basically used by the people who are health conscious. The customers also want to stay fit and healthy. So this objective is measurable based on the sales of bottled water.
Improving the customers’ experience is achievable for the company by the digital media strategies. It is possible for the company to satisfy the customers with the requirement of mineral water. The objective of customer satisfaction can be attained by the consumer communication procedure (Pavlou & Stewart, 2015).
The objectives of the company are the goals are realistic because company has to deal in the highly competitive market. The success of these objectives depends upon the efficient marketing and communication tactics used by the Company Gerolsteiner.
This is the final factor of good objective. For achieving these stated objectives, company would set time for 1 to 3 years. Time makes the objective genuine and solid. Within the set time, company would educate the employees for attaining the set goals and objectives.
The main product of the company Gerolsteiner is mineral water including the name Gerolsteiner sparkling, Gerolsteiner Naturell and Gerolsteiner Mineral water. Company will launch at least one localized water product. So R&D department of the company will make adjustment to its microelement content in the water to satisfy the taste of Chinese customers. Localized products will not only suit Chinese people but also shows the respect for Chinese culture and identity.
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Features · Consumer friendly designs, · Logo of Gerolsteiner is present on the bottle, · Ergonomically designed |
Benefits · Consumers’ lifestyles implications, · Fitness or health lifestyle connections, · Sustainability, eco-friendly, fair-trade connections, · Cheaper product in the long run |
In Germany, Gerolsteiner has a high market share but in China market, company has to deal with the high competitive pressure and changed preferences of the customers. In such situations, company Gerolsteiner needs to adopt penetration pricing strategy in order to achieve high market share. It is observed that the demand of the products is highly flexible in the China market as the new customers will be attracted due to the low prices. Along with this, the strategy will also be helpful in promoting the re-use ob bottled water packaging. In the China market, penetration strategy will be most appropriate. By the penetration strategy, company will try to create standardization for consumption of mineral water (Boone & Kurtz, 2013).
Figure 2: Market Penetration
(Source: Boone & Kurtz, 2013)
Gerolsteiner will provide license and franchising rights to COFCO group which is the most powerful State owned enterprise in China. The enterpriuse has lots of experience in food, beverage and agriculture products (Chakravarthy & Coughlan, 2011). Distribution of Gerolsteiner would be by the online medium as in the first year, company will develop its online sales portal along with enlisting itself on various online platforms. Further, Gerolsteiner will expand its business by opening physical shops in all over the China (Baker, 2003).
Social media like FaceBook, WhatsApp, Instagram and Twitter is becoming very popular for the promotional activities. Gerolsteiner will establish the relationships for various promotional activities on the social media platforms. Along with this, company will contact with big shopping malls to enhance the brand awareness. Those shopping malls will be New Mart, Wal-Mart and Fu-Mart in China (Chikandiwa, Contogiannis & Jembere, 2013). The marketing tools such as advertisement on the television, newspaper and internet i.e. FaceBook, WhatsApp, Instagram and Twitter can be use to promote the products in the market (Armstrong & Cunningham, 2012).
Conclusion
Based on the above discussion, it is observed that Company Gerolsteiner is seeking for the business expansion in China market. By adopting above discussed strategies, company would be able to attract more customers in the market as it is clear that there is high growth of bottled water market in China. So, Gerolsteiner need to enter in the market by the direct investment method as it will be profitable for the company in future.
References
Armstrong, G., & Cunningham, M. H., (2012), Principles of marketing, Australia: Pearson publication
Baker,M.J., (2003), The Marketing Book (5th), Burlington: Linacre house, Jordon hill
Bickhoff, N., Hollensen, S., & Opresnik, M., (2014), The Quintessence of Marketing: Strategic and Operative Marketing Planning—Segmenting, Targeting, Positioning. pp. 47-11
Boone, L., & Kurtz, D. (2013), Contemporary marketing, USA: Cengage Learning
Brumfitt, K., (2001), The Competitive Business Environment, UK: Nelson Thornes Ltd
Bruning, E. R., Hu, M. Y., & Hao, W., (2009), Cross-national segmentation: European Journal of Marketing, 43 (11/12), 1498-1522
Cavusgil, S. T., (2012), International Business: The New Realities, Australia: Pearson Education
Chakravarthy, B., & Coughlan, S., (2011), Emerging market strategy: innovating both products and delivery systems, 40(1), 27-32.
Chikandiwa, S. T., Contogiannis, E., & Jembere, E., (2013), European Business Review :The adoption of social media marketing in South African banks, 25(4), 365-381
Daxue Consulting, (2017), Market research: Mineral water market in China, accessed on 4th January 2017 from https://daxueconsulting.com/mineral-water-market-in-china/
Douglas, S.P. & Craig, S.C., (2011), The role of context in assessing international marketing opportunities. International Marketing Review, 28 (2), 150-162
Fifield, P., (2012), Marketing strategy (2nd edition), Berlin: Reed educational & publishing Pvt Ltd
Gerolsteiner, (2017), What drives us, accessed on 4th January 2017 from https://www.gerolsteiner.de/en/about-us/gerolsteiner-brunnen/
Gilligan, C., & Hird, M. (2012), International Marketing Strategy and Management (Vol. 17)
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