Expanding Jacob's Creek Wine into China: Market Analysis and Entry Strategy

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International Business management
By (Name)
Course
Instructor’s Name
Institutional Affiliation
The City and State
The Date

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Introduction
China was chosen as a potential country for expansion of Jacob’s Creek
international wine market after a thorough analysis and understanding of the
Chinese market. It was also chosen due to the potential customers and the
ever growing market for imported wines. Further,this paper emphasizes
Jacob Creek Wine in order to gain a deeper understanding of its overall sale,
market share and trend of the wine industry. Also, social factors like culture
in addition to income, are also critically important while analyzing factors
which influence a given product in the market. Therefore, knowing the
cultural aspects and the economic status of the target market is very crucial
while analysis the success of the product in different markets.
Jacob Creek Wine.
Jacob Creek, an Australian wine Brand, was released by the Orlando
wines in the year of 1976 (Wine-searcher 2017). It’s among the largest wine
organizations operating in the Southern part of Australia. Its major aim as a
company is to offer contemporary standard wine together with maximum
verity while carrying out their services (Jacob's Creek 2018). The Company
deals in more than one brand of wines and some of these include; Sauvignon
Blanc and Shiraz.

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In order to increase profits of the company, there is need for extension of
company’s services into China. A choice of China was made because China
has a favorable economic, technological, and political environment that
could raise revenue for the company (Santander Trade Portal2018).

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Reasons why China was chosen
China has a strong economic climate. It has a very favorable climate
for foreign investment that could possibly favor the establishment of
international companies. Referring to UNCTAD 2018 World report on
Investment (United Nations 2018), this country was graded the second
biggest country with largest Foreign Direct Index close to the United States
of America. China’s FDI (Foreign Direct Index) grew steadily from $133 billion
in 2016 to $136 billion in 2017 (United Nations 2018.). The major reasons for
these developments was because of trade liberalization in china, friendship
with neighboring countries, as well as rapid population growth(Brian 2015).
The foreign exchange rates in china are very favorable, the current
currency exchange rate was given to be 6.87 Chinese Yuan being equivalent
to 1 United States dollar(Santander Trade Portal2018). China also has a very
high population which givesit a large market base for the products produced
and sold (Brian 2015). The large population would also be useful in providing
cheap labor in the company. This country has over 1.68 billion people
making it the country with the highest population in the whole world (Brian
2015).
There is also a low corporate tax within china. This rate has always
been constant at 25% thus favoring the growth of companies. The country
also has low restriction policies to immigrants and foreigners thus making it

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a politically stable country as compared to other potential countries for
Jacob’s Creek expansion.
A graph illustrating the corporate tax rate within china, source
(Santander Trade Portal2018)
China has a very favorable economic policy. One of the components of
this policy is the good economic relation between China and neighboring
countries for example Australia. The also has a strong GDP (Gross Domestic
Product) growth rate, the GDP for its economy increased by 6.8% in 2018
though there was a higher expectation for this rate (World Bank Group
2018). The country's per capita income is also recorded to increase to
7329.09 US dollars in 2017, this means there is an increase in family income
within China (Santander Trade Portal2018). Politically china is operating
under a single party. This happened after the birth of a communist state,
therefore there will be peace for foreign Investment.

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The Wine and Beverage industry in China.
Thiswine industry in China industry has grown dramatically since 1980
economic reforms. This has made China one of the Top ten distributors of
wine in the global market in tie with France (Julie 2016). The Chinese wine
market for quite a long time has been overshadowed by a very well distilled
spirit known as "Baiju" and "huangjiu" occasionally referred to as "yellow
wine"(Wang 2017). China has over years has been operating with over 90
alcoholic beverage brands which have won a number of awards
internationally and domestically (Julie 2016). Because of the many brands
within china, there is an expectation of a stiff competition between Jacob’s
Creek products and products produced within China.
Besides globalization and trade liberalization as some of main factors
for increasing sales of Jacob’sCreek wine company in China, the country has
the biggest population of people within the whole world (Centre 2014). The
current population statistics in china show 1.68 billion people within the
country, therefore there is a possibility for creating market for the Brand.
One of the other brands that is internationally recognized within China is
"Yantai Changyu group company Limited". It is ranked as China's leading
wine in the wine industry occupying 25% of the wine market share(Centre
2014). The other top selling brands are "China Great wall Wine Co. Ltd" and
“Tonghua Grape wine co. ltd". The Wine industry in China is characterized