Southern Peninsula Wines: International Market Opportunities in China

This report provides a detailed analysis of the international market opportunities for Southern Peninsula Wines in China. It begins with an overview of the political, corruption, and financial stability factors affecting the Chinese market. The report then examines legal and regulatory requirements, trade barriers, and the risks associated with international business cycles. It explores key market trends in the wine industry, highlighting the rising demand for Australian wine, particularly red wine, and the growing importance of wine as a status symbol. The report assesses various modes of entry into the Chinese market, considering joint ventures and exporting as viable options. It evaluates the costs, benefits, risks, potential competitors, and probable return on investment associated with different market entry strategies, particularly focusing on the use of distributors. The report concludes with recommendations for Southern Peninsula Wines, emphasizing the need for significant marketing investment, understanding the Chinese culture, and developing promotional strategies tailored to specific regions. The report provides insights into the competitive landscape, the importance of distributor relationships, and the potential for long-term market development in China.

Running head: SOUTHERN PENINSULA WINES 1
INTERNATIONAL MARKET OPPORTUNITIES REPORT: SOUTHERN PENINSULA
WINES
Name
Student ID
Institutional Affiliation

SOUTHERN PENINSULA WINES 2
Political, Corruption Risk, and Financial Stability Factors for China
China has in the last couple of years undergone some major economic slowdown and
volatility in the financial market. Most of the aspects have been brought about by the growth in
public investment, extreme export dependency, and a structural problem which is deep-rooted,
which has resulted to the inefficiency of the government in terms of policies and regulations. The
aspects have led to increased debts at different levels which have posed risks in the country’s
long-term expansion.
China’s centralized power is based on the Communist Party of China. Since 2012,
president Xi Jinping has ruled the country and has dealt with various issues which have
drastically stagnated the country’s performance. At its financial front, the country is at a
moderation risk in regards to the largely state-owned financial institution. China has witnessed a
slow momentum in the partial liberalization, which has slowed down the economy’s long-term
sustainability pace. Corruption in the country is another notifying factor which is present in a
large government segment and sectors of businesses. In public and private sectors, corruption
offers a legal framework which is comprehensive in order to criminalize various practices which
are corrupt including money laundering and gifts, facilitation payments, and passive and active
bribery.
Legal and Regulatory Requirements and Trade Barriers for China
The overall regulatory outline for China remains complex and arbitrary, with licensing
requirements which are complete possibly costing three times more than the average level of
annual income. The government has set wine production standards which the exporters
crosschecked and confirmed in lieu to have increased wine production quality. The imported

SOUTHERN PENINSULA WINES 3
wine has been levied a total tax of 14% including a consumption tax of 10 percent and a VAT of
17 percent (Morrison, 2008).
Risk Associated with International Business Cycles
In terms of conditions of the economy that may impact the markets of China which
Southern Peninsula Wines considers a potential market, it has been found out that Beijing’s
economic growth has decreased due to restrictions from heavy and manufacturing industries. The
business cycle is in the midst of a transition from a manufacturing-based low-cost economy to an
economy which is highly focused on goods and value-added services.
Marketing Opportunities
Key Market Trends in Wine Industry
Recent market trends indicate that the demand for fine wine from Australia has risen in
China. The Export Report has indicated that the Australian wine export to China’s mainland has
by June 2016 increased by 50 percent to $419 million in just two months (Anderson & Wittwer,
2013).

SOUTHERN PENINSULA WINES 4
(Anderson & Wittwer, 2013)
Figure 1: Top Five Destinations’ Exported Bottled Alcohol for MAT June 2016
Red wine has remained to be the most popular, forming the sales’ seventy-four percent while
sparkling wine holds the highest price per unit.
(Anderson & Wittwer, 2013)
Figure 2: Premium Wine exported to Chinese Mainland on the basis of Price Segment
The purchasing patterns and preferences of consumers indicate that globally, China is
among the top five nations which consume wine. The increasing middle-class consumer income
has resulted in the development of more sophisticated tastes for wine. Moreover, wine
consumption has currently been considered as a symbol of status for China’s emerging middle
class.
Modes of Entry to China
Southern Peninsula Wines must choose the best market entry mode due to the firm’s
connectivity with future developments. In situations of profitable and large markets, developing

SOUTHERN PENINSULA WINES 5
a sales subsidiary is the better option for controlling and monitoring market programs. The most
appropriate entry mode for China market would be consideration of joint ventures and exporting.
The viability of Marketing Opportunities
The likely fit of chosen opportunities for market entry with Southern Peninsula wines
capabilities and goals is very effective due to strong believes by the firm that its strategic and
objective goals develop a lifestyle that is comfortable for many families. The Strategic goals and
capabilities are promoted and implemented in future generations showing that long-term market
development is the main aim of the company and exporting develops the long-term opportunity.
Furthermore, the company’s main vision is creating premium quality wine, which supplies
boutique wines at reasonable and affordable prices for the achievement of long-term set goals,
targets and creating long-lasting customers relationship.
Marketing opportunities of Southern Peninsula’s current business and customer base
would be very optimistic because it will experience an expansion of customer base to the
international market. Furthermore, the expansion will generate more revenues for the company
hence these marketing opportunities will be beneficial for the business once the company
penetrates in international markets.
Assessment of Costs, Benefits, Risks, Potential Competitors and Probable Return on
Investment
The distributor’s agent consideration will be profitable for Southern Peninsula Wines in
the foreign market because the distributor will have in depth-knowledge about customers as well
as a specialized market knowledge. The transactions required to be handled by an agent or the

SOUTHERN PENINSULA WINES 6
distributor will be less. Furthermore, agent of distributor market opportunity will be considered
as highly cost-effective as distributor margin and commissions will not be baring fixed costs but
variable costs. However, through the distributors of agent opportunity, there will be a risk of
declining profit margins and difficulties in the management of effective customer services due to
agent involvement in creating customers relationships.
China has high growth of middle class and disposable income hence wealth is evenly
distributed across the entire country. However, the nature of the Chinese market having high
wages and industries being well regulated makes it less competitive manufacturing market.
Furthermore, the appointment of distributors from China is a key success for the company but
the risk of losing technology is high. Additionally, the China market also has local competitions
with have developed strong customer loyalty as compared to Southern Peninsula Wines.
Recommendations
Southern Peninsula Wines need to finance marketing and distributors significantly as the
leading wine distributor’s in China came from foreign organizations that are equipped with the
knowledge and experience of the Chinese market. Therefore, Southern Peninsula Wines should
ensure there is enough marketing capabilities and enough capital resources before it starts the
process of approaching the distributors.
Southern Peninsula Wines should also need to come up with promotional strategies on
specific regions having high consumptions of the product as large-scale marketing in Chinese
market need huge costs. Additional, the firm should consider understanding the culture of
Chinese as the market has a huge cultural gap between China and Australia.

SOUTHERN PENINSULA WINES 7
References
Anderson, K., & Wittwer, G. (2013). Modeling global wine markets to 2018: Exchange rates,
taste changes, and China's import growth. Journal of Wine Economics, 8(2), 131-158.
Morrison, W. M. (2008). China-US trade issues.