Coursework title: Internationalization of Strongbow

Module Name: Global Market and Entry Strategies

Module No: M12BSS
Tutor: Dr. Da Teng
Students Id Number: 6003238

Table of contents:
i. Introduction
Company Analysis
The company
Products
Industry
Target market profile Competitors
SWOT Analysis
ii. The Target Market
Country Selection
Demography
Infrastructure
PESTLE Analysis
Tariffs & Regulations
iii. Internationalization Process
Distribution Strategy
Pricing Strategy
Porters 5 forces
Competitors
Segmentation, Targeting & Positioning
Promotion Strategies
Marketing Strategies
Marketing Cost Assumptions
iv. Export Operations
Mode of payment
Export Import strategy
Documents required for operations
v. Recommendations & Conclusions
vi. References

Introduction:
International Trading is an exchange of goods, capitals, & services between several
nations and states, without much difficulty. International trade has a major contribution
to its economy. Additionally it is also main cause of income for an emerging country.
International trade is growing rapidly nowadays with the support of the modern
technologies, advanced transportations, outsourcing of manufacturing & services, rapid
progress, & advanced manufacturing techniques.

Expanding business internationally can be a great opportunity to grow the organization

& reach to the potential consumers that may not else discover the brand, service or a
product.
This report examines the overall aspects of internationalizing of a product to a foreign
market where the product is currently not present. Essentially, for this report the product
I have chosen to internationalize is Strongbow Cider. Which is a product of a Dutch
brewer Heineken. However the product is manufactured in United Kingdom.

The Company

Company Analysis: Heineken has many brands under its name. Strongbow is
one amongst them. Strongbow ciders was launched by HP Bulmers in England in
the year 1962.

Strongbow is manufactured by HP Bulmers located in

Herefordshire in England. HP Bulmer is a subsidiary of Heineken international.

Strongbow is the largest selling cider in Australia & second largest selling cider in
US.(theheinekencompany2015)
Strongbow belongs to the division of Heineken International. Because Heineken
does not disclose the financial statements for each company, we have analyzed
the Financial Statement for the Heineken group.
Year
2014

Sales (millions)
19,257

Profits (millions)
1,758

2013
2012

19,203
18,383

1,585
1,661

Products

: Strongbow brand offers a wide variety of products in its portfolio. The products
ranges from different flavors, Pricing & packaging. Strongbow manufactures cider
that are produced from a mixture of bitter sweet cider & culinary apples. It is
available at 5% ABV as a draught product and at 4.8% ABV as a packaged
product. Some of the product offerings from Strongbow are Strongbow original
cider, Strongbow gold cider, Strong bow dark fruit, Strongbow pear, & Strongbow
citrus edge. Strongbow ciders are available in pubs, bars restaurants and even

supermarkets.(Strongbow2015)
Industry: Cider is one amongst the best performers among the alcohol markets .
Cider is widespread in UK, mainly in South West England, & is commonly
available. UK has the maximum per capita consumption, and is also the largest
cider-manufacturing brands in the world. Cider is similarly widespread in EU
Countries & Australia. However cider industry in the Asian markets is totally
untapped.(euromonitor)
Despite the economic downturn Cider has achieved steady growth. In the span of
5 years the sales of cider has increased drastically at 32%. In the year 2007 the
sales of cider was 1.8 billion and as the time went by it increased drastically to
2.7 billion in the year 2012. According to the mintel reports the sales of cider
has reached around 3.7 pounds in the year 2014.(mintelreports)

Target Market Profile: strongbow is targeting people with Excessive life style
with an annual income of $2000.The age group we are targeting is from 18-65
years of old. As cider is a low ABV drink and is made from apples it can be
consumed by both men and women. The consumer buying criteria for Strongbow
cider depends on taste, country of origin, service, quality & recommendations.

Competitors: The strong competitor to Strongbow is Somersby Cider that

belongs to the Danish brewing company Carlsberg group. It is one of the top
cider brand in the world. It is financially strong and has strong backing of parent
company. Somersby cider has a capture of over 46 countries throughout the
world.(euromonitor)

SWOT Analysis:

Strengths

Weakness

-Brand already well established in western -Developing a taste in a new market takes
countries such as UK & US. Brand positioning time and is a formidable task
strategies can be replicated.
-Creating awareness about cider in a new
-Has experience in entering new markets such market is a huge task
as Australia.
-Strong backing of the parent company
Opportunities

Threats

-Asian and South American markets are still

untapped
-Low alcohol content drinks with a sweeter
taste do appeal women

-Its hard to make a transition of consumer

from their loyal brand
-Negative image associated with drinking

The Target Market:

Country Selection: Basically I have chosen 5 Asian countries such as Thailand,

China, South Korea, India & Indonesia as the target markets. The reason for
choosing Asian countries is because of their emerging economies, untapped
markets for cider, high level of alcohol consumptions & existing operations of
Heineken in those countries. Out of the 5 best target market countries the two
best potential markets suggested by the GMMSO4 are India & South Korea.

Although both the market potentials are similar India has favored high in market &
company sales potential because of its high level of alcohol consumption. Ultimately
India is a market with high potential in overall GDP growth, population, rising alcohol
trends &high population of younger generations.(GMMSO4)

Demography: India is the second most populated nation in the world with more
than 1.26 billion people living in it. India has more than 50% of its population
under the age of 25 & more than 65% of the population under the age of 35.
(indexmundi)

Population

Age

Age

Age

(0-18)

(18-65)

(over 65)

Target
Customers
Age
(18-65 )

1,210,193,422

39.7%

55%

5.3%

55%

Infrastructure: With more than 300 million internet users, India has the second
most internet users in the world. There are 13 major ports & about 200 minor
and intermediate ports in India. India has one of the biggest road networks in
the world, totaling to around 3.3 million kilometers at current. There are 329
international & domestic airports in India. However Currently, India faces a heavy
$1 trillion price tag for infrastructure expenditure.(mckinsey2015)

PESTLE Analysis:

Political Analysis
Current Strengths
Tough democratic setup
Overseas policy
Future prospects
Tough and steady government
Improved relations with its smaller
instant neighbors
Better responsibility of the
government
Source:marketline

Current challenges
Violence
Absence of comprehensive deal
with Pakistan
Charges of corruption
Future risks
Increasing demand for new states
Societal & communal tensions

Economic Analysis
Current Strengths
Second biggest work force in the
world
Future prospects
Pro-growth guidelines of the fresh
government

Current challenges
Persistent inflation
Excessive local progress and
broadening monetary differences
Future risks
Reduced infrastructure
Extremely leveraged corporate
segment postures a threat to
finance sector

Source:marketline
Social Analysis
Current Strengths
Increasing ratio of young people.
Employment assurance schemes
Future prospects
Growing life expectancy & dropping
infant mortality
Source:marketline

Technological Analysis
Current Strengths
Solid data base
Robust English language skills and
cost advantage
Future prospects
Significant competitive advantage
in biotechnology research
Source:marketline
Legal Analysis
Current Strengths
Broad legal agenda for business
entities

Current challenges
Healthcare remains main worry
Express growth
Less HDI rank
Future risks
Governments authority challenged

Current challenges
Gross spending on R&D remains
less than 1% of GDP
The talent pool needs additional
occupational training
Future risks
Low amount of high technology
exports

Current challenges
Obstacles to trade & investment
Weak execution of intellectual

Implementation of VAT

Future prospects
Improvements in corporate
governance
Tax reforms

property laws
Judicial postponements
Future risks
Inefficient implementation of
regulations
Lack of a single financial market
regulator

Source:marketline
Environmental Analysis
Current Strengths
Biodiversity
Comprehensive environmental
policy framework
Future prospects
Public private partnership &
ecotourism

Current challenges
Depleted water resources
Dependence on fossil fuels for
energy requirements
Future risks
Distortionary policies
Enforcement deterrents

Source:marketline

Tariff & Regulations: The Indian tax rate is 30% for the domestic companies
and 40% for the international companies. The tax rate in India varies from the
state and the type of products. The average VAT in India ranges from 12.5% to
15%. Some categories are charged for less VAT ranging from 4-5%. These
include medicines, drugs, cotton, and chemical fertilizers. (marketline2015)

Internationalization Process:

Distribution Strategy: Our chosen distribution strategy for Strongbow cider is to

Joint venture with Indias top alcohol brewer UB(united breweries). Heineken and
UB group signed a shareholder agreement in 2009. The reason for choosing this
strategy is to take advantage of existing operations with UB group. UB is the
official distributor of Heineken products in India and Heineken also holds a stake
of 42.1% in UB group. UB group has contacts with reputed hotel chains such as
Taj hotel group, Oberoi, JW Marriot, ITC Hotels, Sheraton and Radisson. UB
group also has strong distribution network to bars pubs & liquor shops. The

additional benefit of choosing Joint venture with UB group as our entry mode is
that we can utilize the same distribution channels as presently carried out by
Heineken products. Most of the distributors have been loyal UB group partners
for multiple decades.(euromonitorpassport)

Pricing Strategy:

According to our marketing objectives & aims the finest

pricing approach for this product is Penetration pricing. Our aim is to launch the
product at a low price than its subsidiary products in order to gain market share
and build customer loyalty. Once we capture a significant market share we can
rise the price later. However the selling price of the product will be lower in India
if compared to the home country.

Porters five forces:

Threat of new entrants:

Since the untapped markets are ripe, there are chances of other cider brands
entering those markets.

Threat of substitute:
Very heavy because of the established markets of other alcoholic beverages
such as beer and wine.

Determinants of supplier power:

Not a significant concern because Heineken has existing alliance with leading
liquor companies around the world. The Heineken products are sold via their
distribution networks at present.

Determinants of competitive rivalry:

Once Strongbow enters the new market there may be competition by the existing
international cider brands such as magners, Aspall & Stella Artois.

Bargaining power of the buyer:

Significant because of the significantly established market of the product
substitutes and the chosen pricing strategy for Strongbow Cider.

Competitors: Since India is totally untapped market there are no competitors for
strongbow cider in India. However its International competitor Somersby Cider
might compete with strongbow in future. Somersby Cider has a strong backing of
parent company and is financially strong and available in large number of
markets. There is an indirect competitor for strongbow cider in India that is
Bacardi breezer. Although breezer is not a cider but it is a fruit drink with less
ABV (Alcohol by volume) which is similar to the cider. Bacardi has a wide market
share & strong distribution strategies in India.

Segmentation, Targeting & Positioning:

Segmentation: 6 metro cities in India for the first phase launch and expand to
other cities in the expansionary phase.
Targeting: The target customers for strongbow cider are from the age 18-65 both
men and women. Most importantly people who consume alcoholic drinks
regularly while socializing or while celebrating with family and friends and also
who would want to try new alcoholic beverages.
Positioning: pursue symbolic positioning in the form of self-image enhancement.
Belongingness and social meaningfulness. Appropriate pricing and promotion
strategies to position strongbow cider in consumers mind, and to reposition the
product based on consumer feedback after the launch phase if required.

Promotion strategies: As many people in India are totally aware of Strongbow

as well as Cider in general we should promote the product using creative
promotion and marketing strategies such as organizing Cider tasting events
during the launch phase where people can come and taste the cider for free and
also organizing road shows in metro cities surrounding the colleges, pubs &
reputed restaurants.

Marketing strategies: marketing is the lifeblood of any business. In order to

promote the strongbow cider the best marketing strategies for entering into

Indian market are sponsoring a cricket team in Indian Premier League which
itself is owned by the chairman of UB group, display the Banners, Billboards &
signages, Distribution of vouchers in colleges and at point of sales, Email id
harvesting, & Social media marketing.

Marketing Cost Assumptions: Below are the marketing cost assumptions for a
strongbow cider entering into Indian market. As we can see in the below table the
marketing cost are high during the launch of the product. However once the
product grows and captures a significant market share the advertising costs will
be reduced.

Action/Tool

Who/When

Frequent advertising using print media

& fashion magazines
Advertising contracts for jingle
creations.
Sponsorship in sporting events

Intensely for 3 months &

consistently over 4 years
During the launch of the
product
Owned by UB group for the
first four years
During the launch for 2
weeks
6 months

Billboards & hoardings near areas with

heavy pub culture
Banners, signages, & video
advertisements in bars pubs and
reputed hotels.
Promotional offers & cider tasting
events
Fliers and catalogue distributions.
Roadshows
Website creation & maintenance

Total

During the launch for 1

month
6 months
4 times for first month

2015
15

2016
15

2017
15

2018
15

4.0

4.0

4.4

4.8

0.6

0.6

0.6

0.6

0.5

0.50
1.2
0.025

0.50
0
0.025

0.50
0
0.025

0.50
0
0.025

27.9

20.2
20.6
( Figures in INR millions)

21.0

Export Operations
Exporting is a process of manufacturing products & services in one nation & marketing
and distributing it to the other nations throughout the world. It is the traditional and most
efficient form of operating business internationally. Basically exporting requires for key
players to coordinate that is importer, exporter, government & transportation provider.
In order to expand its market potential a company must enter into a global trade. By
entering into a global trade a company can expand its sales and increase brand recall
globally. Firms entering into the international market for the first time chose export
strategy as it is reliable and flexible when compared to other strategies. A business can
enter into a international market for a less risk & expenses. Moreover exporting is
adapted by the small business organizations.
Our idea is to joint venture with the UB group in order to carry on the manufacturing
operations in India. At present Heineken carries out the same process, the Heineken
beers in India are manufactured by UB group. The reason for carrying out the
manufacturing operations in India is low because of the low manufacturing cost.
However UB group should Import raw materials such as the Apple cider vinegar from
the Heineken in order to develop the quality & taste of cider. There are certain
procedures to be carried out during the export import process .
Heineken sets up new breweries in the overseas markets, through the assistance from
local government and monetary institutions. Heineken company has set up various
breweries in different countries in order to achieve location benefits (production
capicity,qualified wage rates, R&D services, market potential). Heineken also purchases
over the local surviving breweries overseas , thus by growing contacts to new markets,
skilled & trained work force,latest technology & product supply systems.

 Mode of payments: The payment mode chosen for our entry strategy is Letter of
credit. LOC is often used in international transactions in order to manage the
payments efficiently and safely. Due to the environment of international dealings
including factors such as different laws, distance & trouble of knowing each other
personally letter of credit plays a very prominent role in international trades.
Below is the step by step process to carry out LOC

Initially, the importer & exporter enter into an agreement to conduct a business.
Here the exporter desires a letter of credit to guarantee payment.

Then the importer applies for a letter of credit in his bank for a courtesy of the
exporter.

Importers bank then favors the credit risk of the importer, subjects & passes the
credit to its correspondent bank (directing or sanctioning). The correspondent

financial institution is typically situated in the same geographical location as the

exporter.

Exporters bank validates the credit & passes it to the original credit to the
exporter.

Exporter then transports the goods, validates & prepares the documented
necessities to provision the LOC. Documented necessities may differ significantly
provisional on the apparent risk involved in dealing with a specific organization.

The exporter then forwards the necessary documents to his bank in intimating
them to process the payment done by the importer.

The institution then inspects the papers for obedience with the terms & conditions
of the LOC.

Once the bank found out the documents to be correct then it will claim the
amount by:
o Depositing the account of the issuing bank.
o To wait till the bank forwards, once in receipt of the documents.
o Compensate on alternative bank as essential in the credit.

Exporters bank will forward the documents to the importers bank.

Importers bank will inspect the forms for obedience. If they are correct, the
importers bank will deduct the buyer's account.

The importers bank now forwards the documents to the importer.

Export Import Strategy:

Free Carrier

Who pays

Export packing

Exporter

Marketing & labeling

Exporter

Export clearance(license, EEI/AES)

Importer

Freight forwarder documentation fees

Importer

Inland freight to main carrier

Exporter

Origin terminal charges

Importer

Vessel loading charges

Importer

Ocean freight / Air freight

Importer

Nominate export forwarder

Importer

Marine insurance
Importer

Unload main carrier charges

Importer

Destination terminal charges

Importer

Nominate on-carrier
Importer

Security information
Importer

Requirements
Importer

Customs broker clearance fee

Importer

Duty, customs fee & taxes

Importer

Delivery to buyer destination

Importer

Delivering carrier unloading

Importer

Documents required for operations: These are the documents commonly used
while exporting the goods.

commercial invoice

export-packing list

Insurance policy

Letter of credit

Declaration of value

bill of lading

An route bill specific to the transporter

GR/SDF form prescribed by Reserve Bank of India in duplicate

A certificate of origin

An export licence

An Export insurance

Incoterms

Recommendations & Conclusions:

With the rising tough competitors in the cider industry strongbow has to endure
the capitals in order to form its brand image in the international markets.
Additionally It has to participate in R&D to discover new local & indigenous goods
to set up to the potential marketplaces, such as Asia and North America. By
taking along its greater quality & exclusive taste of cider the customers
throughout the world, Strongbow will last to appear as the topmost international
brands in the cider industry.

We recommend Heineken to Enter the Indian Market as trading partner with UB

so that the existing marketing & positioning strategies can be replicated.
Strongbow should take early a mover advantage and obtain significant market
share in Indian cider market by creating awareness about Strongbow cider brand
and cider as an alcoholic beverage drink and also use appropriate positioning &
promotional activities to pull audiences from traditional alcoholic beverages.

However there are also number of risks associated with entering into Indian
market such as High tax rate on alcohol, Laws and regulations in various Indian
states & Restrictions on T.V advertising. If the strongbow captures a substantial
market share it may also affect the existing Heineken products. The strongbow
cider might turn out to be a tough competitor to its own Heineken products.

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