Executive Summary

Chinas demand for Western wine has rapidly increased. This has created
a market opportunity for high end, quality wine companies from Australia to
export their products to China. The product that will be focused on is
Glandore Wine from the Hunter Valley. The report will focus on exporting
this product into the Chinese market.
There should be a strong focus on building brand reputation and
maintaining long-term business relationships. There are multiple entry
types into foreign markets yet Chinese regulations limit the mode of entry.
The recommended mode of entry for Glandore wines is a Joint Venture.
The decision between product standardisation and customisation is an
important aspect of strategic decision-making. It is recommended that
Glandore does not customise their core product of wine, however it is
recommended that other product attributes are customised to appeal to the
Chinese market. When promoting Glandore wine in the Chinese market
there should be use of advertising, public relations, sales promotion and
personal selling.
Table of Contents
Executive Summary ... 2
1. Introduction ... 4
2.
2.1 Market Entry4
2.2 Recommendations 5
3.
3.1 Product Standardisation and Customisation ....7
3.2 Recommendations..7
4. Promotion in China
4.1 Push Strategies.. 8

4.2 Pull Strategies. 9

5. Conclusion.10
6. Reference List11
1. Introduction
Middle-class affluence in China is beginning to fuel changes in
consumption, which creates market opportunities for higher end products.
Exporting wine to China that is of higher quality is rapidly increasing. Some
wine companies have increased their presence in the market by supplying
a service of cellar doors in China, creating a positive, high-end brand
image. According to Fletcher & Brown (2008) China had the second highest
market potential globally. There is increasing competition but a lot of this is
counterfeit products that are not highly valued by consumers.
The product that will be focused on is Glandore Wine from the Hunter
Valley. The report will focus on exporting this product into the Chinese
market.
The higher end wine market in China tends to be focused in coastal, main
and second-tier cities. When exporting wine to China there are duties and
taxes, labelling regulations and other country-specific export requirements
to consider.
Wine has shown the strongest growth of all alcholic beverages over the last
ten years in China (Webley, 2010). Per capita consumption is still only 0.5
litres per annum, but the size of the market is immense and growing at 7%
per annum. The import tariff rate for wine less than 2 litres is now down to
14%.
There are multiple entry types available to entry China. There are also
standardization and customisation considerations to be made. The
marketing of the wine is also a crucial factor that must be focused upon to
ensure success in the Chinese market.
2.1 Market Entry

The company needs to establish effective relationships with a balance of

Guanxi (business relationships in China) and wine culture.
There are multiple types of entry into international markets, which are
constantly changing, depending on the nature and type of the company,
product and market. According to Fletcher & Crawford (2010) the level of
involvement in an international market is determined by the Government.
The choice of entry mode is influenced by the exporters interntaional
experience, culture, industry, location, and resource commitment factors
(Wei, Liu & Liu, 2005).
Entry modes include Indirect and Direct exporting. Indirect modes of entry
refer to the manufacturing of good or services in the home country and
transferring the responsibility of exporting to another agency (Albaum,
Strandskov & Duerr, 1998). It involves use of agencies in the domestic or
foreign market, export merchants, and piggy-backers. A turnkey project
involves a contractor organising a foreign project and then handing over
ownership at the completion of the contract (Fletcher & Crawford, 2010).
Direct exporting relates to the firm itself contacting buyers overseas and
either selling direct to end users or arranges agents and distrubutors in the
foreign market to sell their products (Fletcher & Crawford, 2010). Entry
modes include Joint Ventures, Wholly Owned Subsidiaries, Licensing,
Franchising, and relationship entry of strategic alliances. A licensing
agreement is where a licensor grants the rights to an intangible asset to
another entity for a specified time period, in return for royalty fees. This
allows avoidance of entry barriers. Franchising is similar to licensing, with
the addition of insisting that the franchisee abides by rules in carrying out
business in a certain manner. This allows the company to avoid high costs
and risks, and has the benefit of local expertise and market knowledge.
Wholly Owed Subsidiaries (WOS) are expensive and require high
commitment and involvement in the market. According to Fletcher &
Crawford (2010) a WOS is 100% owned by another company, called the
parent company. They have the benefit of maintaining a high level of
control over core competencies. WOS entry can be carried out through an
acquisition or Greenfield project. Acquisitions are quick and have lower risk,
yet Greenfield projects allow the firm to establish the subsidiary exactly to

their preferences and needs. According to Wei et al (2005) the more

experience China has in attracting Foreign Direct Investment, the more
likely China will be to allow and encourage the entry of WOSs. Joint
Ventures are of greater use when there is high cultural difference between
the domestic and international nation (Wei et al, 2005). The propensity to
enter through Joint Venture increases when small capital commitment is
desired and there is large cultural distance between nations.
2.2 Recommendations for Market Entry
Joint Ventures (JV) are of greater use when there is high cultural difference
between the domestic and international nation (Wei et al, 2005). The
propensity to enter through Joint Venture increases when small capital
commitment is desired and there is large cultural distance between nations.
The use of JVs can reduce the effect of import issues such as permits,
tariffs and customs. Azari Vineyards & Winery stated that carriers were
unwilling
to accept shipments due to these documentation difficulties (Gurney &
Atkin, 2013).
Factors that need to be assessed when deciding upon an entry mode
include the size and financial resources of the firm, their existing foreign
market involvement and knowledge, competition, and tariff and non-tariff
barriers. The product is crucial in the decision as it may have a competitive
advantage and need patents and other forms of protection. Timing affects
the entry mode as the company needs to assess if it wants to be first mover
or a follower (Fletcher & Crawford, 2010). According to Wine Australia
(2013) exports of cheap wine decreased by 3% while exports of higher end
achieved a double-digit growth percentage suggesting any high-end
importer that now enters is a follower.
Agencies such as Export Australian Wine to China supply access to
importers and connect them to Australian wine exporters. They provide
professional export services and assist with bottling, standard approval,
shipping, customs, registering and sales. They have expertise in the
Chinese market and provide information and assistance for Australian
exporters. The entry timing is currently correct for companies who wish to

export quality wine to China as there is market demand and opportunity. To

avoid the issue of counterfeiting it is important to have a high presence in
the market and give consumers the opportunity to sample the wine. To
initially enter the market, Glandore wines would be recommended to use
agencies established in the market with expertise in the wine category and
use this cooperative association to their benefit. Piggybacking may also be
recommended, as this use of an experienced exporter in the foreign market
may be highly beneficial to the success of exporting the wine to China.
The Chinese government has local policies restricting entry levels into the
market, which often dictates the mode of entry that is allowed. For this
company the mode of entry that is recommended is a Joint Venture with a
wine distributor. A JV with a Chinese business partner makes entry more
feasible due to strict regulations and the political environment. A Joint
Venture is the establishment of a firm that is jointly owned by two or more
otherwise independent firms (Fletcher & Crawford, 2010). This has benefits
of distribution networks, low costs, skills access, tax relief, and
neighbouring markets (Albaum et al, 1998). This allows for higher presence
in the market, ability to exert more control and not simply sending wine to
China without any involvement from the company in terms of marketing.
JVs enhance confidence and trust due to increase in host country
experience (Wei et al, 2005). This entry mode is recommended because
the firm can benefit from a local partner's knowledge of the foreign
country's competitive conditions, culture, language, political systems and
business systems. Location of the partner is crucial, therefore a business
partner with high access to the target market is recommended. Thus a wine
distributor located in capital or main cities near to the cost is recommended,
such as Shanghai.
The disadvantages are manageable and thus the JV entry mode is still
recommended. The firm risks giving control of its technology to its partner
and they may not have control over all business aspects and decisions.
Shared ownership can lead to conflicts and battles for control if goals and
objectives differ or change over time (Fletcher & Crawford, 2005).
Glandore Wines have a low level of experience with the Chinese culture
and a JV can lower this perceived risk in the transition economy and culture
of China (Trpczyski & Wrona, 2012). Australia has a vast cultural

distance with regard to China. Trpczyski & Wrona (2012) suggest the
higher the cultural proximity to transition economies, the lower the level of
perceived risk. A JV can narrow the cultural gap between Glandores and
Chinese consumers. The JV allows the company to have direct
participation in the local markets and gain understanding.
3.1 Product Standardisation and Customisation
When marketing internationally, the decision of customisation or
standradisation is influenced by government regulations, cultural
preferences, competitors, linguistics, the nature of the product, and so on.
Standardisation relates to marketing one common version of the product to
all markets on a worldwide basis (Fletcher & Crawford, 2010). Levitt (1983)
supports standradisation, arguing that firms should treat the world as a
global market.
Product customisation refers to making appropriate changes in a product to
match requirements of consumers in a specific market (Fletcher &
Crawford, 2010. It is essentially tailoring products to consumer needs and
preferences. Consumer products require higher levels of adaptation than
industry products and services.
Reasons for customisation include variations in taste and consumption
patterns, and for products to suit the purchasing power and disposable
income level of the foreign market. Also, Government regulations, legal
requirements and industry standards affect the decision. Albaum et al,
(1998) suggest higher cultural similarity requires less adaptation. Products
may need to be adapted to ensure efficiency in regard to transport, storage,
sales distribution, and access to support systems.
The approach to branding may need to be customised if the brand name or
logo will not be well received in the international market due to cultural
differences. Translating brands can be difficult between English and
Mandarin. Packaging and labeling languages often require customisation.
3.2 Recommendations for Standardisation and Customisation
Customisation is not always based on national boundaries, but rather
geographical, sociodemographic and political boundaries within countries.

This is known as niche marketing (Fletcher & Crawford, 2010). According to

Wei et al (2005) foreign investors should view Chinese regions as separate
markets. Total standardisation or adaptation of the marketing mix is unlikely
to happen in any one company (Jun Hou, 2001). Consequently, neither
complete standardization. The strategy often depends on the level of power
the company has in the foreign market. There is high level of competition in
the Chinese wine market and Glandore wines need to offer a competitive
advantage through a balance of customisation and standardisation. It is
recommended that the core product of Glandore wines is not adapted
because the target niche in China is similar to the domestic country. In the
Asian region it is thought that the more differentiated the products the more
likely the occurrance of high market potential due to cultural differences
and consumer taste preference (Trpczyski & Wrona, 2012). This has
been successful for companies producing cheap wine suit the target
market, such as Yellow Tail wines. The market that has preference for
quality, authentic wine suggests Glandore should not adapt their core
product and rather only adapt on the basis of packaging and language, and
possibly branding. Differentiated products are not always demanded when
the focus is on high-income segments of the market (Trpczyski & Wrona,
2012). This justifies the recommendation of not customizing the wine to suit
the Chinese market.
The accompanying service of cellar doors should be kept standardised to
maintain the high-end consumption culture that is desired by the foreign
targeted market. It is recommended that packaging, symbolism and
labeling are adapted to maximise appeal. This ensures that there will be no
negative connotations with the brand or use of certain colours that are not
received positively. In Asia the quality of a product is judged by how
elaborate the packaging is, therefore this aspect should be adapted.
Wine may be affected when transported or stored for a long period of time
in humid weather. The bottles and crates need to be modified to withstand
transport and climatic conditions. This ensures that the product arrives at
the optimum standard and quality is maintained by each link in the
distribution chain (Atkin & Gurney, 2013). To ensure authenticity and reduce
counterfiteing the bottles should be adapted to show their quality and
authenticity (Gurney & Atkin, 2013). Correct labeling in Chinese must be
affixed to bottles.

4. Promotion in China
Chinese consumers are still relatively new to wine, and generating sales
requires education and promotion. Success can be simply attributed to
brand recognition and distribution channels.
4.1 Push Strategies
Push strategies are aimed at distributors, and create demand for products
or services through sales promotion and personal selling (Fletcher &
Crawford, 2010). The use of personal selling and sales promotion are
recommended for Glandore. Personal selling relates to managing
relationships and a selling strategy focusing upon relationship building. In
regard to China the focus needs to be on long-term relationships and an
understanding of the cultural and business norms. Trade missions are
recommended as Williams & Brothers (2000) showed that they are
effective in attracting FDI. Outward trade missions would be effective and
involve visiting overseas markets. Trade missions give access to
distributors and potential business partners, and are sponsored by either
the Australian Government or Chamber of Commerce. Sales promotions
are used in international marketing as a networking tool, to gain access to
distribution chanels and to increase brand and product awareness when
introducing a product to a new market (Fletcher & Crawford, 2010). The
China 2nd Tier Cities Road Show, organised by the Austrade, was
designed to link Australian wineries with importers, distributors, traders and
corporate buyers, as well as hotel and restaurant owners. And in 2012
Austrade collaborated with Wine Australia to host an Australian Wine
School seminar for importers and consumers. Albaum et al, (1998) suggest
the use of appealing package design and maintaining a reputation for
reliability, value and style in the Chinese market. Catalogue and/or
brochure marketing is also recommended as this give the Chinese
distributors the chance to learn about Glandores offerings.
4.2 Pull Strategies
Pull strategies are directly targeted toward overseas consumers and end
users (Fletcher & Crawford, 2010). They involve the use of advertising,
public relations, promotions, offers and discounts, and building demand.

Publicity and Public Relations (PR) is recommended to promote Glandore

wine in China. News releases in the foreign Chinese market are highly
beneficial through press conferences or announcements that use industry
expert endorsement to gain credibility. PR activities are recommended as
they are effective to demonstrate the authenticity of the product to the
Chinese market. These can be done through the web, magazines and
newspapers to build brand image. Sponsorship of events and sport is
questionable as it can raise issues of corporate social irresponsibility and
bring negative connotations to the brand. Associations with high-end sport
is recommended as wine has positive lifestyle connotations in China. It is
seen as a sign of civilisation, a global product and good for health.
Associating wine tastings and the brand with golf is one promotional way of
doing this.
In regard to advertising, the use of multimedia is effective in China. Website
advertising is recommended, because the internet is a main source of
information and there are high levels of technology and digital media
usage. The Chinese seek information from specialised websites therefore it
is crucial to have a strong web presence. Broadcasting stories of the winery
history and using pictures are effective in point-of-sale displays. Interactive
marketing should also be used to enhance brand image and awareness.
The country of origin should be promoted as this contributes to the
authenticity of the wine, and builds brand and product knowledge. The
Chinese market evaluates products on their prestige and origin. Interactive
marketing is recommended in the Chinese wine market through use of text
messages, the internet, and DVDs (Fletcher & Crawford, 2010). A great
deal of the market relies upon what they see on TV ads and online, to
determine if the wine from a quality brand. Therefore it is recommended
that the company uses broadcasting media and the internet to pull in
consumers. Use of communication media to make the Chinese society
more aware of Western tastes. The marketing efforts should be directed
toward developing a want in the market.
In China, word-of-mouth promotion is important and having the product
visible in restaurants and bars is crucial to success and creating brand
awareness. A strategy should be adopted that promote to a key market
(one city at a time) or key channel (popular bars in a certain city) with
industry leaders pushing the product. It is crucial to build a prestigious, high

quality brand in the Chinese wine market. This can be accomplished

through wine tasting, advertising, promotion, PR and the use of cellar
doors. The company must invest in marketing and educate consumers and
make them aware of the brand and product. Showcasing and advertising
the wine and brand, creates consumer demand and can convince
distributors to stock and showcase the products.
5. Conclusion
It is recommended that the wine company enters a JV to maintain control
and reach potential, without entering a high unmanageable level of risk.
The factors that affect standardisation and customisation are political,
economic, cultural, physical condition, technology, product life cycle,
competitive factor, organisational factor, the nature of the product, and the
target and positioning strategy. Glandore wine should not be customised;
the company should adopt a strategy of standardization. However other
factors in the marketing mix should be customised.
The use of advertising and promotion must be politically and culturally
acceptable, of relevant content and media vehicle, and must be targeted at
the market segment. When promoting Glandore wine in the Chinese
market there should be use of advertising, public relations, sales promotion
and personal selling. China is a good market because the high Australian
dollar is not as problematic as it is in the European and American markets.
When entering the Chinese market, Gladores needs to be aware that it
takes time to build relationships and trust with Chinese partners.
The increase in Chinas demand for Western wine has brought many new
competitors to the market. Glandores needs to create a wine culture in
China and reinforce a message of excellence and reputation. They need to
maintain their boutique integrity to avoid undesirable brand image.
Glandores can create brand image through physical presence, wine
education and maintaining authenticity.