Nayuki Holdings Ltd Entry into the US market through Joint Venture with Imperial Tea Court

Foreign Market Entry Analysis:

Nayuki teahouses were established in 2015. Currently, the teahouses are among the best in mainland China for freshly made tea drinks. According to CIC, Nayuki, with a market share of 18.9 percent in 2020, became the second largest among China’s premium modern teahouse brands in terms of total retail consumption values. The premium teahouse has extensive teahouse networks in China, with 489 Nayuki teahouses covering 66 cities across mainland China and one Nayuki teahouse in each of Hong Kong SAR and Japan. Nayuki’s premium quality allows it to charge a higher price, and it is extremely popular among China’s young customers.

Nayuki should form a joint venture with Imperial Tea Courts in order to gain access to the American market. A joint venture is a low-risk market entry method that allows companies to leverage the strengths and diversity of their partners while entering strategic markets (Shen, Puig & Paul, 2017). In contrast to the 11 percent industry average in the United States, joint ventures produce a 17 percent return on investment (Nayuki, 2020).In a survey of 253 companies, Nippa and Reuer, (2019), discovered that joint ventures boosted growth, with 80 percent of participants claiming that joint ventures met and exceeded their expectations.

Located in San Francisco, California, Imperial Tea Court specializes in selling eastern (Taiwanese, Indian, Chinese, and Japanese) tea brands to the Asian population in the United States as well as other customer demographics. The fact that Imperial Tea Court retails premium traditional Chinese tea, just like Nayuki, is one of the reasons why this joint venture will be a success. This is a factor that will blend well with Nayuki’s product portfolio.

Joint Venture entry method is the best for Nayuki for the following reasons. Through the joint venture,  Nayuki will be able to learn from Imperial Tea Court the critical distribution channels,  supply chain networks and the customer characteristics to survive in the USA ( )) .  Also, joint venture is a risk mitigation mechanization as the losses will be borne by both parties. The management principles for a joint venture are very clear. To begin, both participants must align their strategies, elect or appoint leadership for the venture, and establish rules to govern the venture (Killing, 2017). This joint venture should be formed on a 50/50 basis.

Imperial Tea Court already caters to a comparable customer niche when it comes to Nayuki’s premium tea. This will enable both businesses to expand beyond San Francisco’s Chinatown to other places in the United States. The joint venture’s possible hazards include Imperial Tea Court’s lack of commitment, as it will be a direct competitor of Nayuki’s tea. Additionally, the United States market is crowded with teahouses serving the Asian community; consequently, to survive beyond the joint venture, Nayuki must develop a portfolio that caters to the demands of the non-Asian (Chinese) population in the United States.