Penfolds Winery: Analysis of Market Entry Options in China

This report analyzes Penfolds Winery's international marketing plan for entering the Chinese market. It begins with a summary of a previous assessment and then examines the screening of market selection using a five-stage analysis, including domestic regulations, initial entry assessment, competiti...Read More

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Contents
Introduction......................................................................................................................................2
Summary of Assessment 1...............................................................................................................2
Screening of Market Selection.........................................................................................................2
Five Stage Analysis.....................................................................................................................2
Reason for Choosing....................................................................................................................4
Objectives....................................................................................................................................4
Market Entry Options for Penfolds Wine........................................................................................5
Options.........................................................................................................................................5
STP for Penfolds Wineries..............................................................................................................7
Marketing Mix.............................................................................................................................8
Recommendations for preferred strategy for Country.....................................................................9
Conclusion.......................................................................................................................................9
References......................................................................................................................................10

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Introduction
The focus of this report is to inform the reader with the details about the business
Penfolds Wineries, Australia. The below mentioned paper highlight the details about the market
expansion and entry strategies in the country China. The company is successfully working its
business activities in the environment of Australia, the business aspires to grow in the market of
China so as to increase the sales and attract the more people as well. The company already has
captured the market of Australia so the expansion of business in China will help the business to
develop its sales in diverse market. More details about the report are discussed below:
Summary of Assessment 1
The report one of the assessment highlight the analysis of opportunities and challenges
that the business Penfolds Winery will face with the option of entering the marketplace of China.
The market analysis of the country states that there are a large number of individuals present in
the country who consume alcohol on a regular basis that can increase the sales of the company in
the new market. The country has large number of population that acts as favourable condition for
the company as more than 60% of people are urban that have a positive purchasing behaviour in
the environment (Zeng, & Szolnoki, 2017). Talking about the market barriers for the company in
China, it should be noted that the people in the country does not believe in purchasing products
from international markets, nor they purchase goods from the international brand because their
believe in growth of business industry of their nation. Secondly, it should be noted that the
people of the country are less inclined towards expensive brands in the environment. Penfolds
Wineries is one of the most oldest winery present in the country Australia so the brand is quiet
expensive and gives premium quality products to the people in the market. This factor can reduce
the competence of company in Chinese market (Sun, & Wong, 2015).
Screening of Market Selection
Five Stage Analysis
Stages Description Evaluation

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Stage 1 Domestic regulation and
management preference
As the country is major
exporter of wine in the
worldwide market. So, there
are several regulations
imposed on the transactions of
companies
Stage 2 Initial entry assessment Under this step of screening,
the business analyse the
favourable ways with the help
of which they can successfully
enter in the market. This step
explains the initial way in
which the business should
enter so as to attain the interest
of maximum consumers in the
market.
Stage 3 Competitive environment The company should then
judge the rivalry prevalent in
the marketplace. It is
important to analyse the
degree of competition before
entering in the market as
monopolistic or oligopoly type
of environment can make it
difficult for the organization to
survive.
Stage 4 Market responsiveness This stage elaborates the
response of the market on the
functions and activities of the
business. This stage will
elaborate that whether the

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customers are liking the
products and services of the
company or they need to
change it.
Stage 5 Internal trade-off analysis The business need to mix up
with other organizations in
order to maintain
competitiveness in the
environment. So they should
sacrifice their resources with
an objective to attain the
goodwill another domestic
organization (Deresky, 2017).
Reason for Choosing
The country is favourable for the organization Penfolds Wineries to initiate their business
and attain competitiveness as well. The biggest reason for selection of this country is that there is
presence of diversity and large number of target segment in the Chinese market. Huge number of
Chinese people drinks alcohol and are fond of drinking on several occasions. Secondly, China is
one of the biggest importers of wine in the international market, so entering in this market will
help the organization to save themselves from several taxes and duties serve products to the
customers on time (Cardoza, Fornes, Li, Xu, & Xu, 2015).
Objectives
The mission statement of the organization Pefolds Wineries in Chinese market is to serve
adequate products and services to customers in the market. The organization aim to let people
taste the essence of pure and healthy wines from the end of oldest wine making company of
Australia. Further, the financial objective of the company attain 20% profitability from the
activities in the first year. The company should focus on attaining the market share of the
Chinese wine market by 15%. Thus, the SMART objective of the organization Penfolds

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Wineries is to attain 20% profitability and capture 15% target market of China in its initial year
of entrance (Noe, Hollenbeck, Gerhart, & Wright, 2017).
Market Entry Options for Penfolds Wine
Options
Greenfield Investment: it refers to the type of foreign direct investment where the
business start all the activities in the international market from the beginning. The company
construct new facilities, infrastructure, manufacturing plant etc. on the new location on their
own. In this process, the business itself find a new location and forms their business unit in
diverse environment. The business does not export the goods to the prospective country instead
they setup their own plant in the international market so as to serve the customers present in the
market. The advantage of this type of process is that it provides high degree of control to the
organization on business operations. The management can mould the quality of product and
services in the international market based on the demand (Johnson, 2016).
Whereas in case of exporting, it would be get difficult for the organization to analyse the
reaction of the customers on the brand and implement the change management activities
accordingly. Economies of scale and economies of scope can be easily achieved using this type
development strategy. The company also gets to bypass the trade restrictions using this type
market entry strategy as now the business is settled in the market so they do not need to export or
import goods. Resulting in which, the level of restriction reduces (Gaur, Ma, & Ding, 2018).
Further, talking about the disadvantages of this type of market entry strategy, it should be
noted that this process requires high degree of investment in the environment. As the business
needs to settle in the diverse environment from the scratch, so they require high investment for
the same. Failure to implement sales can risk a huge amount of investment for the business.
There is presence of high fixed cost in the country as well as the business cannot take back
money after settling in the Chinese market. Also, it should be noted that after the infrastructure is
maintained, it is important for the organization to manage it as well that require high fixed cost in
diverse market. However, it should be noted that favourableness of the company to enter in the

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market of China using this type of strategies is more than its disadvantages (Craig, & Douglas,
2015).
Joint Venture: joint venture refers to the arrangement of two companies to come together and
form a new entity so as to attain mutual relationship from each other. This type of process is
usually conducted to share the resources, power or goodwill in the environment. The company
Penfolds Wineries can enter in the market of China using this type of strategy by joining hands
with another organization of similar or different industry that is a domestic company in China. In
this way, the business would be able to attain the goodwill of the domestic organization and the
business would not face difficulty in identifying the target customers from the initial and attract
them as the goodwill will attract them to initiate sales for the organization (Doole, & Lowe,
2008).
The level of risk is also shared using this type of market entry strategy. Talking about
disadvantages of this type of process, it should be noted that the company will lose effective
decision making power through this type of market entry strategy as now the both the
organizations will share the power. If the objectives of both the parties is not aligned then the
activities will not provide effectiveness to both the organization. Difference in goals can lead to
profitability to one organization and loss to other due to which the other partner can cancel the
venture (Bocken, De Pauw, Bakker, & van der Grinten, 2016).
Licensing: it refers to the transmission of IPR to implement market entry strategy in the
environment. It involves the business (licensor) to grant permission to another corporation to use
the intellectual property for a definite period of time. Under this process, the business Penfolds
Wineries will share IPR of their organization with another domestic organization of China so that
they can produce and sell products under their brand name. The intellectual property includes
patent manufacturing process, copyrights, trademark and technical assistance. Under this type of
market entry strategy, the licensor attain fee and periodic royalty for sharing their IPR with
another organization (Doyle, 2015).
This process will help the organization to increase its sales by supply goods to the
customers present in the local market without facing extra cost or additional efforts. However,
the disadvantage of this type of process is that it makes hard for the association to attain

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maximum benefits from the target market. The terms of licensing, process is for a limited period
of time. The license can be used by the other organization to become a better company as well.
Lastly, the biggest disadvantage of this process is that it limits the profitability of the
organization till royalty and fee only (Suzuki, S., & Okamuro, 2017).
Thus, after analysing all the above mentioned options, it should be noted that the
company Penfolds Wineries should make use of greenfield investment strategy to enter in the
market of China. With the help of this type of strategy, the organization will get to capture the
complete market without sharing profits and objectives with other organization in the business
environment. This strategy will help the organization to attain effective goodwill in the external
market of China (Tulung, 2017).
STP for Penfolds Wineries
Segmentation: The Company should target people on the basis of their age, income and
behaviour in the environment. On the basis of age, the company should target middle age people
from 30 to 55. Nowadays, young generation have also started consuming alcohol but the majorly
consume beer or vodka and wine is still the preference of middle age group. Further, on the basis
of income level, the company should target middle to higher income segment present in the
market of China. As the business serve high quality branded products in the environment, thus
they should target middle to high income level people who can afford the product in the market
(Isada, & Isada, 2018). Thirdly, on the basis of behaviour, the company should target people who
have a behaviour of consuming wines while they are dining or at occasion. These are people who
can never celebrate without opening a bottle of wine. Thus, according to segmentation it should
be noted that the organization should target these people in the environment (Zhang, Qian, Li, &
Qian, 2019).
Targeting: on the basis of above mentioned segmentation activities presented above, the
company should target people who prefer ordering wine over beer and are middle age people.
These are the people prefer relaxing with a glass of wine in their hand. The company should also
target pubs, bars and bar café so that they can also serve their brand to the customers in the
environment (Guillotin, & Mangematin, 2015).

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Positioning: below mentioned is the positioned map for the company Penfolds Wineries
Marketing Mix
Product: the company should provide old wineries to the people like they serve to the people of
Australia. The organization should focus on bringing the rich taste of wine of Australia in the
Chinese market (Penfolds, 2019).
Price: The Company should keep the pricing strategy of the brand in such that it gives an idea to
the customers that the brand is premium and at the same time, it should be economical for people
as well. Considering the middle and high income segment, the company should keep medium to
high range price of the products.
Place: China local market should be the main focus of the organization. The company should
target all the states of China so as to increase the sales of the company (Thompson, Strickland, &
Gamble, 2015).
30-55
years
Regular
Drinker
Occasional
Drinker
16-29
years

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Promotion: The Company should make use of both offline as well as online marketing strategies
in the external business marketplace so as to increase the interest of the customer. The company
should attract local online influencers and offline wine shops to supply their products in the
environment (Bach, 2017).
Recommendations for preferred strategy for Country
It should be recommended to the company Penfolds Wineries that they should make use
of differentiation business strategy in the market of China so as to grow and increase its
profitability. With the use of this type of strategy company the company would be able to attract
the adequate type of people in China. Many companies serve wines in the environment,
differentiation strategy will help the organization to serve wines to the customers that are
different from other competitors in the environment (Sheth, Sinha, & Shah, 2016). This type of
strategy will help the customers to identify that their wineries are different from the other wines
served by the competitors in the environment. Thus, the organization should make use of product
differentiation strategy in the Chinese environment.
Conclusion
So, by analysing the above mentioned statements in the business environment, it should
be concluded that the above mentioned paper highlighted details about the business expansion
strategies of the company Penfolds Wineries. The company is focusing to enlarge the business
functions in the market China, so the business should make of greenfield investment strategy to
enter in the international market. Further, the company should target middle age people who
prefer wine on regular basis in the environment. The business should also contact several pubs
and bar cafes so as to insist them to serve their wines in the environment. Thus, in this way, the
company should initiate sales and profitability in the market of China.

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References
Bach, C. (2017). Demystifying McCarthy’s 4 P’s Of The Marketing Mix; To Be Or Not To Be.
Industrial Marketing Management, 26(1), 1.
Bocken, N. M., De Pauw, I., Bakker, C., & van der Grinten, B. (2016). Product design and
business model strategies for a circular economy. Journal of Industrial and Production
Engineering, 33(5), 308-320.
Cardoza, G., Fornes, G., Li, P., Xu, N., & Xu, S. (2015). China goes global: public policies'
influence on small-and medium-sized enterprises' international expansion. Asia Pacific
Business Review, 21(2), 188-210.
Craig, C., & Douglas, S. (2015). International Marketing Research. Chichester: John wiley &
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Deresky, H. (2017). International management: Managing across borders and cultures. Pearson
Education India.
Doole, L., & Lowe, R. (2008). International marketing strategy: analysis, development and
implementation. Cengage Learning EMEA.
Doyle, G. (2015). Brands in international and multi-platform expansion strategies: Economic and
management issues. In Handbook of media branding (pp. 53-64). Springer, Cham.
Gaur, A. S., Ma, X., & Ding, Z. (2018). Home country supportiveness/unfavorableness and
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Isada, F., & Isada, Y. (2018). Relationship between Competitive Advantage and Success or
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Journal of Business and Management, 2(6), 23-27.

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Johnson, G. (2016). Exploring strategy: text and cases. Pearson Education.
Noe, R. A., Hollenbeck, J. R., Gerhart, B., & Wright, P. M. (2017). Human resource
management: Gaining a competitive advantage. New York, NY: McGraw-Hill
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https://www.penfolds.com/en-cn/about-penfolds/heritage/our-history
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