Nerada Tea's China Market Entry Strategy: A Case Study

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MRKT20057
A CASE STUDY OF NERADA TEA AND CHINA
MARKET

TABLE OF CONTENTS
▰ INTRODUCTION
▰ MARKET SELECTION
▰ ENTRY STRATEGY
▰ COMPETITIVE STRATEGY
▰ MARKETING MIX-PRODUCT STRATEGY
▰ MARKETING MIX-PRICING STRATEGY
▰ MARKETING MIX-PROMOTION STRATEGY
▰ MARKETING MIX-DISTRIBUTION STRATEGY
▰ CONCLUDING RECOMMENDATIONS
▰ CONCLUSION
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INTRODUCTION
▰ Every company desires for the business growth and expansion
for ensuring sustainability.
▰ Market selection requires numerous considerations to be
focused on.
▰ Nerada Tea, an Australian establishment, works on the mission
to manufacture the most sustainable, freshest as well as finest
tea in Australia (Neradatea, 2019).
▰ It offers loose leaf, black tea and green tea and other tea
varieties.
▰ This Australian tea brand has selected China for the business
growth and expansion.3

MARKET SELECTION
▰ China tea industry:
• The largest tea exporter of the world that
indicates the vast market size of tea
industry.
• Generated $1.5 billion worth tea export
market in 2018.
• Enjoying enormous growth rate regularly
from 2009.
▰ In China, tea places a special position among
the essentials of life along with vinegar, rice,
and fuel and so on which people consume on
daily basis (Rubini, et. al., 2013).
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MARKET SELECTION
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▰ Industry is highly competitive due to the existence of
more than 50,000 companies.
▰ Economical environment:
• High export business
• Enormous GDP growth
• Skilled labor in abundance
• Potential growth of urban population (Brada, et. al.,
2015)
▰ Technological environment
• Rapid technological adoption
• Adoption of new distribution and purchasing
mechanism

ENTRY STRATEGY
▰ For Nerada Tea, direct exporting would be the most suitable market
entry strategy for China market.
▰ Direct exporting involves:
▰ Exporting goods to foreign customers directly
▰ May or may not involve middlemen
▰ Exporter becomes responsible for foreign distribution, invoicing,
market research and shipment logistics (Fuchs & Köstner, 2016)
▰ Benefits of direct exporting:
▰ High profits -> elimination of middlemen
▰ Greater control
▰ Direct customer feedback
▰ Better patent, trademark or copyright protection
▰ Better understanding of customers6

COMPETITIVE
STRATEGY
▰ Differentiation competitive strategy should be adopted by Nerada
Tea in China market.
▰ In this strategy, Nerada Tea needs to provide products and
services being unique and different from other competitor
products and services.
▰ Using differentiation strategy of gaining competitive advantage,
the tea brand may widen its target market (Lee & Lee, 2019).
▰ Benefits of differentiation competitive strategy:
▰ Possibility of better pricing
▰ Develops barriers for new companies
▰ Increase in customer loyalty
▰ Reduced threat from substitution7

MARKETING MIX
PRODUCT STRATEGY
▰ The products of Nerada Tea are international products within
potential of extension from domestic to international market.
▰ Nerada Tea should follow the market leader product strategy in
which:
▰ Products are developed with innovation
▰ Differentiated from the competitors (Gang, et. al., 2018)
▰ Key elements of Nerada Tea:
▰ Core benefit: Beverage
▰ Basic Product: Nerada Tea
▰ Expected product: Manufacturing, expiry and “how to make”
information
▰ Augmented product: Quick product delivery, packaging and
customization (Kim, et. al., 2019)
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MARKETING MIX
PRICING STRATEGY
▰ Entering a new market is a challenging task especially where
competition is highly prevailed.
▰ In case of Nevada Tea, the penetration strategy would be the
most suitable strategy (Jobber & Shipley, 2012).
▰ In penetration strategy:
▰ Product prices are lower in introduction phase
▰ For a limited period to gain significant market share
▰ Benefits of penetration pricing strategy:
▰ Provides competitive advantage
▰ Developed brand loyalty (Du & Chen, 2017)
▰ Lowers switching costs for customers from competitor
firms
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MARKETING MIX
PROMOTION STRATEGY
▰ Nerada Tea should integrate pull strategies for the promotion of
products in China market.
▰ In pull strategies, following promotional tools are recommended to
follow:
▰ Advertising: Television and print media
▰ Public relations: Health events sponsorships
▰ Social media (Beldona, et. al., 2012)
▰ Benefits of pull strategies:
▰ Competitive advantage with sustainability
▰ More brand value creation
▰ Customer loyalty
▰ Direct interaction with customers (Chapman, 2017)10

MARKETING MIX
DISTRIBUTION
STRATEGY ▰ In direct exporting, the products are directly sold to
customers or individuals acting as intermediaries within
that target market.
▰ These intermediary customers may be wholesalers,
retailers, importers or the customers themselves (Yaşar,
2015).
▰ Therefore, Nerada Tea should implement selective
distribution in which multiple partners and channels are
carefully selected.
▰ Using selective distribution, Nerada Tea gain the following:
▰ Customer satisfaction
▰ Optimum coverage of market
▰ Greater control and lesser cost (Giannino, 2013)11

CONCLUDING
RECOMMENDATIONS
▰ Entering a new market is a complex process which needs
concentration of certain considerations.
▰ Nerada Tea should consider the following key components for
successful entry in China market:
▰ In China, digitalization dominates consumer behavior (Manrai,
2019)
▰ Dominance of local platforms for communication
▰ Consumers preference is leaned to brands
▰ Great emphasis on return on investment due to vast size of
China market
▰ Use of quality market research (Zhao, et. al., 2014)
▰ Positive reputation and high brand visibility
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