Wine in China: the wild west of the Far East
The principle of this case is to illustrate why producers of Napa valley wine are finding challenging and tempting in entering the Chinese wine market, which is overgrowing. In the 2000s, china came from being the leading importer of wine globally, ranked at almost 51 to suddenly becoming fifth. Even though the consumers in china have got more interest in wine that is coming from foreign countries and income which is significantly discretionary, cultural barriers, regulatory, and logistically is creating a block to the wineries of Napa valley from accessing the market quickly to achieve the economic achievement (Przyswa, pg, 7).
The Frederick family’s vineyards, who are fictional in the running up the wine company of Napa valley, have got much interest in expanding the wine distribution in China. To be successful, the company must first determine whether the geographical expansion is viable economically and then decide on the strategy of going to market to be put in a position for the firm to succeed. The company is making a decision based on the four potential methods: utilization of traditional distribution channels and import, apply online sales through leverage, create a partnership with providers of logistics, and create Chinese investment. The vineyards family of Frederick’s family is grappling with deciding to have imperfect information. The landscape of marketing is also changing every time due to corruption measures by president Jinping’s. The measurements made an effect on luxury goods more than wine and spirits. Before 2013, more than 70 percent of imported luxury wine took place in China; they were being distributed as gifts used in the deals and relationships cementing.
The four primary options that Frederick’s family vineyard had put in place would make them successful in selling wine in China. The four basic plans include;
- Utilization of traditional distribution channels and import
The most effective approach that the family could use was finding partners in Chinese distribution and import since it successfully entered China’s market. This importation and distribution approach was adversely different from the distribution network in the United States. It would make them have no differentiation, which is forced between retailers, distributors, and importers. The Frederick family could participate in this to sell their wines in china as wit would be led to many businesses having a similar name and different capabilities. The approach in using these two dynamics of importation and distribution would create a vast field for Frederick as the distributors that were wider and large than the U.S distributors who were their main competitors.
- Leverage in online sales
This would help the Frederick family sell wine as internet penetration had significantly increased in china. People who could access the internet had increased as this made the E-commerce proliferate, including the selling of wine. Therefore, for the Frederick family to succeed in this, they had to partner with other e-commerce companies that were most trusted and well informed, which would cause them to penetrate the Chinese market.
- Partner with a logistics provider
Since the Frederick family would find it difficult to sell their wine in the Chinese market, which was being brought by regulatory obstacles, the most successful way to penetrate the call was to partner with the logistics providers who would directly deliver the Chinese wines market. The providers would forgo retail channels, distribution, and existing import. Frederick Company would place the order through the logistics providers. They would handle all the regulatory, tracking, and shipping hurdles acting as all-around processing manager, distributor, and importer. This strategy would make the Frederick family sell their wine into the Chinese market without the struggle. They will not undergo the regulatory obstacles faced when trying to penetrate the market.
- Creation of Chinese investment
Frederick’s family could sell their wine by creating Chinese investment, whereby they would build their brand by investing in the infrastructure of wine in China. This would make them have a strong ground presence in china by understanding the regulatory environment whereby they would have full control of the distribution and branding.
Barriers that were faced by the Frederick family
Some of the challenges that the Frederick family could face during the implementation of these approaches include using logistics to pose some risks whereby they would find it difficult to control and make sure that they adhere to the set regulations. Many Chinese consumers also depend a lot on foreign wine. They were much drawn into the French wine, which would pose a significant challenge to Frederick’s wine made locally. Chinese drinking culture also made it difficult for Frederick to sell as these traditions meant that Chinese consumers had little chance of tasting, savoring, or appreciating the wine produced locally. Fredrick company would distinguish its wine from the foreign wines being imported in china by adding little flavor whereby the consumers would be drawn away from the red wine, which they believed was the best (Muhammud et al. pg 9). They would also make the wines per the consumers’ desires and what they loved about drinking wine and their culture and beliefs. They would make wine with substances that would boost their health when one drink was the impression by most consumers.
The least risky go-to-market strategy was to partner with the logistics providers. Even though this strategy was not limited to the uncertain environment for the luxury goods in the current government crackdown on corruption, they directly linked to the consumers. They could forgo the retail channels, distribution, and existing import. All these would make them avoid the government’s regulatory obstacles in controlling corruption, and excess consumption hindered many businesses from penetrating the Chinese market. The economic wine value globally has increased over the years due to the emergence of new markets and new producers. The global wine distribution has also shifted as the production and consumption majorly inform it of wine. Wine has become a more valuable commodity in international trade. Its global market value has continued to increase due to the entry of new countries in the market both as producers and consumers, leading to a high market share.
Works cited
Muhammad, Andrew, and Amanda M. Leister. “The rise of foreign wine demand in China.” Wine & Viticulture Journal 29.6 (2014): 58. http://www.ers.usda.gov/amber-waves/2014-januaryfebruary/the-rise-of-foreign-wine-demand-in-china.aspx#.V7Xv-z4rIy4
Przyswa, Eric. “Counterfeiting in the wines and spirits market.” Key issues and presentation of anti-counterfeiting technologies (2014). http://www.ft.com/intl/cms/s/0/f7b193e4-8915-11e3-bb5f-00144feab7de.html#axzz4AXonMdah