Strategic Marketing for CAFEPOD Coffee Co. in China Market

This report discusses the strategic marketing approach for CAFEPOD Coffee Co. to establish its new product, Almond Milk Coffee, in China market. It includes PESTLE analysis, market entry options, STP model, and Porter's generic strategies. The report recommends exporting as the market entry option.

Strategic Marketing

EXECUTIVE SUMMARY
Strategic marketing helps the prior analyse of firm in marketplace by taking in
considering various aspects like external factors, marketing options and strategies to be adopted
while achieving aims and objectives. The aim of the report is to establish the organisation
internationally specifically in China market with a new product. This report also highlights the
barriers that organisation faces while penetrating into international markets and enforcement of
strategic approach on foreign grounds.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................1
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Pestle analysis.........................................................................................................................3
Market entry options:.............................................................................................................5
STP Model:.............................................................................................................................7
Porter's generic Strategies:.....................................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11
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INTRODUCTION
Strategic marketing can be understood as the analysis of marketplace by using the
marketing concepts to attain the goals of organisation by appropriately adopting and developing
strategies as per needs while sustaining in competitive environment of market (Bhattacharya,
2017). This report is about Coffee business set up in 2011 at London called CAFEPOD Coffee
Co. that is launching its new Almond milk coffee to China market especially for those who are
allergic to dairy products. This report is giving a detailed analysis of planning to launch this
product in China using PESTLE which help to understand macro factors while STP model to
address serving and communicating products to customers by examining their need and generic
strategies are eloborated to gain success. Along with all these the market entry options to enter
China are also elaborated and recommended.
MAIN BODY
Pestle analysis
This is a framework that is used to analyse the impact of external factors on the chosen
firm while expanding its operations to new market of China with its new product almond milk
coffee.
Political factors: The china government in recent years has invested millions of bucks on
infrastructure development means it facilitate foreign firms to expand there is one of the very
clear opportunity for COFFEEPOD emerge out of political aspect (Chen and et. al., 2019). But
still instability in the local markets of China as there is continuous integration and disintegration
at local level that will be an opportunity if strategies adopted at a time when it integrates as there
will be support from them like from established distribution or supply chains or threat if they
became disintegrate because it hamper the performance of firm. The strict laws and procedures
to obtain trade permission by China with the motive to preserve the cultural and language
identity at global level is imposing a serious threat to working styles and conditions for
international firms. The only solution to eliminate above barrier and threats is that the company
need to understand the culture and language needs and give them preference along with a mould
of strategic approach adopted according to their local market conditions can yield fruitful results.
Economic factors: The most critical factor that act as an opportunity for international
firms like COFFEEPOD is the developing nature of economy of China which salivate to attract
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the more foreign trade to country so that it can contribute to its development as it helps to
increase in employment opportunity and direct foreign investment into nation. The most severe
economic threat is the increasing cost of labour as a result of globalisation a lot of in-home
opportunities are created and more people are shifted to skilled workers due to increased
educational opportunities. The only solution is to analyse the trends of hike in salary of workers
and bound them with firms with more wages then present time for an intended period of time.
The thing here that must be considered is that the government policies must also be considered in
the analysis done above implicitly (Etemadi and et. al., 2018).
Social Factors: The social environment of most of cities including its middle class is
inclined to the coffee trend which is a prime opportunity that has large scope for chosen firm and
this scope is also extended to crafted coffee which is the essence of chosen firm is also a great
opportunity. Further, a lot of people are health conscious which means the new product meet
their healthy diet routine as it uses fresh almond milk instead of dairy milk which contain
preservatives. The only threat from social factor is the rise of local support to small coffee house
trends in China which is strong enough to knock down the medium business like chosen firm.
The promotion especially on social media with online sales is the only solution to this problem at
present that can help to boost sales (Gorshkova and et. al., 2018).
Technological factors: The technology has opportunity in every segment of any business
like in production unit the effective technology can be used to roast coffee beans on large scale
with quality assurance, the supplier chains can be controlled and monitored end to end. The
distribution can be facilitated by online sales that give hike to profit. When technology is wide
spread it is also available to home country as well so they can also use the same to develop firms
and impose severe competition to chosen firm which means technology is a double edged sword
for businesses at international level. The only solution to this is to continuously refine the
technology and gain trust of customers in the initial stage of expansion in host nation (Johnson
and et. al., 2018).
Environmental factors: These are all factors like climate and rules regarding
environmental safety and climate change (Mechri and et. al., 2017). The current trend to opt for
sustainable practice in manufacturing, distribution and has a lot of opportunities like use of green
energy which make a distinct image of firm in marketplace and attract more customers. The
sustainable packaging also come under this which is easy way to gain profit with less investment.
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The threat also come from not following environment rules by ground levels employees as they
may take them lightly. The only solution is to provide environmental awareness among workers
and foster the value of environment in them.
Legal factors: These are all the factors which include any type of regulations imposed by
international authority or local or state authorities (Queirós and et. al.,2018). The chosen firm has
a serious threat from food standard imposed by Chinese government if they don't follow them
properly but it still has no problem with non-vegetarian or alcohol as many of other Asian
country. Coffee is subjected to caffeine laws as they contain a large amount of caffeine so their
bulk transportation and storage require permission. The only solution to this problem is the
regular update about laws and seeking permission prior to deadlines for manufacturing or dealing
transportation in small batches like monthly export or import instead of yearly supply.
So, above threats and opportunities will enable us to understand that why there is a need
to understand the macro factors when expanding globally. It is recommended that the
technological advancement, environmental laws and social trends can be seen as an opportunity
can help firm to grasp control over Chinese market whereas the strict legal laws regarding trade
and labour cost must be addressed appropriately so that if they cannot be converted into
opportunities but least their influence on profit can be controlled (Singh and et. al., 2017).
Market entry options:
Exporting
Definition: It is defined as the sales of products or service which ever the company is
offering on foreign grounds which are produced in the country of origin of company (Elkington,
2018). They are bought by company from foreign sources in the home country and at same place
is either processed to final goods or the products which are used in foreign nation to sale by
making minor changes and the later is in case of food products which are partially ready to sale.
Legal formalities to export: The very first step is to obtain a Importer- Exporter Code
and assure legal conformation under the different international and national trade laws. The next
to obtain a licence by meeting all the documentation requirement and clearing formalities. Lastly
to do it by getting in touch with sales grounds and determine a import duty rate.
Pros and Cons: It helps to market expansion both demographically and geographically and
helps to larger economics of scale but there is chances to loss of control on host country and
most severe of all of these is the international system of obtaining a license.
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Franchising
Definition: Its a form business deal between a organisation usually called a franchisor
and an individual or a group of individuals called franchisee that enable the later party to run
product or service using a franchisor's business system on the settled terms and conditions. The
permission to use of brand logo or trademark is also inculcated in the agreement(Fila and et. al.,
2020).
Legal formalities to Franchising: At first the franchisor need to use a letter of intent to
franchise and if they agree then need to fill an plication form. The other mandatory details are
then finalised like site location and business name registration and in clearance from regional
government and finally a mayor's permit is issued which ease the real execution of process.
There are three laws for international franchising which the firms are needed to follow specific
franchise law, general commercial laws and code of conduct.
Pros and Cons: Low supply costs with quality assurance and legal benefits to support
firm financially but with the restriction from franchisor and loss to considerable share of profit.
Joint venture
Definition: A business system in which two firms share their resources for achieving a
pre-set goal that can be a project or any other business activity and here each of the sharer is
responsible for profit or loss(Fila and et. al., 2020).
Legal formalities to Joint venture: To obtain a JV the firms or partners need to obtain
three main category of documents that is letter of intent, documents of definitive agreement and
other agreements technological transfer, labour laws and many more.
Pros and Cons: It gives firms the opportunity to gain capacity and expand
geographically at a cost to loss of flexibility and complicated decision making.
Recommendation: Out of the three discussed above exporting is recommended to CAFEPOD
Coffee reason being the ease to adopt this and the various advantages associated with this. The
new product is use almonds, coffee and sugar and the machinery which is easily exported via the
various well established distribution channels prevailing in the markets of China a all the these
material are easily package-able and have more shelve life. There is only one time of paper work
for the intended period of time with no agreement from others as in case of joint venture and
franchise which also involve sharing of profit. All the previous distribution channels for the
supply of goods in host country is used and the company will also remain in contact with the
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country of origin as there is requirement to regular dealing from that side. The strategic planning
and any new innovation can be done at the comfort of home country and then directly
implementing to the host nation.
STP Model:
The STP model is a concept which refers to three activities such as segmentation,
targeting and positioning. The organisation segment the market and determine attractive
segments in order to target prior creating appropriate positioning strategies and assigning
resources to prioritise activities of marketing. In context to the selected firm, STP model is
mentioned below:
Segmentation: Segmentation assists in defining and understanding of target audience. It
divides the target audience to into different consumer groups on the basis of distinct entities such
as demographic segmentation, behavioural segmentation, geographical segmentation and
psychological segmentation(Musto, Gardella, and Møller, 2020). In demographic segmentation,
the organisation could segment audience on the basis of age, gender, income and so on. The firm
would divide on the basis of income of people such income of middle class groups could afford.
Along with this, the firm is penetrating into Chinese market (Tran, 2017). The company is
launching Almond Milk Coffee which includes almond milk instead of milk. This new type of
coffee is launched in for those individuals who are lactose intolerance and the firm would
segment their audience based on lifestyle.
Targeting: Targeting is breaking large audience into small segments for focusing a
certain entity within that audience(Velosa and Nascimento, 2017). This defines a segment of
consumers on basis of unique traits and concentrate only on serving them. The firm would focus
on that segment which is more attractive. CAFEPOD Coffee would selected audience on the
basis of lifestyle and income of individuals. The firm would target these both segments by doing
effective marketing of the new launch such as they could use social media, print media and
broadcast media for creating awareness. The firm could also use email marketing for targeting
groups which have income of average range
Positioning: It is the final stage of STP marketing process. Positioning maps the elements
which are present in segmenting and targeting and describes the location where the offering
would stays in relation to consumers. It is vital for noticing the the competitive advantage in the
market. There are three types of positioning such as functional, symbolic and experiential which
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influence a brand and competitive advantage. In functional position, by launching new type of
coffee, the firm is able to focus on value proposition aspects which aim to fulfil the coffee
requirements of Chinese people. Along with this, the organisation has aim to offer Almond Milk
Coffee in which the main ingredient is almond milk which is a replacement of milk. Experiential
positioning helps the firm in creating emotional connection with the customer by offering
Almond Milk Coffee as some people of China are lactose intolerance and they are not able to
consume dairy product.
Porter's generic Strategies:
Strategies are very essential as any failure to adopt an effective strategy lead ruin the
performance of firm and eventually loss of profit (Fadhilah, 2017). The porters generic
strategies help to evaluate various strategies that can have the potential for the chosen firm to
boost their performance and recommending one of them to adopt by firm while expanding to
China market. The appropriate strategical approach is key factor to determine the success of firm
and directing its operations in line with the goals and objectives of firm.
Cost leadership: It is a strategy in which as suggested by its name the cost is a parameter which
is reduced to attract more sales and to do so the efficient use of large scale production by
lowering production cost (Pellicelli, 2017). It also involve the optimal use of resources to their
full potential like technology, financial resources and raw materials etc. As the cost is low which
means to boost margin there is critical need to bulk production otherwise the input will be more
than output and firm condition will become unstable. It works well when the firms are in their
mature phase and possess the tendency to invest a huge amount at once.
Differentiation Leadership: This strategy enables the firm to distinguish its product from market
by enhancing its features, variants or any way that made it to stand out of others. It give a chance
to customer to go for a change as any change in products give a unique perception about the new
product offered by firm and also more profit. The department of innovation need to be very
active while making changes as it must consider the needs and demand of customers precisely so
that the designs they come up with can gain popularity in market. It not only benefit to retain old
buyers but also attract new people and can work in the same way or mature and new entrants.
Cost focus: It can be understood as the firm seeking for cost advantage in target markets in the
particular industry(Sariola and et. al.,2019). If a firm select an specific segment of a market it
help to mould strategy accordingly while aiming at more profit. The whole success of firm
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depend on the segmentation selection and serving that segment as per needs of customers of that
segment which is necessary as any mismatch can lead to loss of effort, resources and more
importantly the estimated profit. This can also work effectively to pre-existing firms as well as
new one but old ones have more chances to growth while adopting this strategy as they are more
aware of markets and there needs.
Differentiation Focus: This is a competitive strategy that focus on specific segment while
implementing differentiation strategy upon them. Here the differentiated product instead of
aiming to large segment is targeted to sale on specific buyers that help to save time and effort on
unnecessary segments. This works best for firms which have strong command over market and
also there resources are available to support them while implementing this strategy. New entrants
have equal chances of failure and success when come to look forward while implementing this
strategy.
Recommendation : From the above discussed strategies cost focus can be adopted as the firm is
new to China market low cost to such large segment can disrupt the whole functioning but
targeting a specific segment like heath conscious and another one who are allergic or avoid dairy
products can be easy target of this new product and above this maintaining a low cost will be
very influential. Its a best strategy for Coffepod to give a start.
CONCLUSION
Overall, it can be concluded from the report that strategic marketing require a lot of at
time of planing and a lot of focus while implementing. Its not mere the understanding of
marketing concepts but also sublimation of these concepts with the main goal and objectives of
firm. It also require the analysis of competitive environment in order to be successful. The seven
macro factors discussed in pestle model determine the impact of these on chosen firm and also
solution to get rid of the threats arising out this suggested which can be used by firm
productively. To actually execute operations in intended market which is China three market
entry methods are elaborated namely Franchise, joint ventures and export out of which export is
recommended for firm undertaken. The new product that is almond milk coffee is supposed to
segmented and targeted as per China market using STP Model that help to look forward for
strategic planning accordingly. Porters generic strategies are discussed in the last paragraph to
understand the various types of strategies and cost leadership is suggested out of which so that
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the firm can extract maximum profit along with gaining there trust. All over all models helps to
understand situation of market corresponding to product type and host nation situation.
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