Chapter-1 Theoretical aspects of the International Marketing Strategy

1.1 Analysis of Marketing Environment

1.1.1 Micro-environment

Micro environment refers to the general environment, that can affect the working of all business enterprises. COSMIC, i.e. Competitors, Organization itself, Suppliers, Market, Intermediaries and Customers.

Competitors

Competitors refer to other companies that offer products that the customer might prefer. The increasing level of technology and internationalization has made consumer analysis an essential aspect of any company venturing into an industry (Hatzijordanou et al., 2019). The company analyzes using Porter’s Five Model. Companies use the model to identify five forces in the company’s microenvironment that assist in increasing the competition in a market (Adelakun, 2020). The competitors help the company gauge its product’s potential.

Organization

The organization’s analysis involves understanding what the company can offer the market its ventures. The company’s strategy, together with its resources, its values, and what business it carries out in the country ultimately determine the organization’s success in foreign markets. The organization analysis helps it decide what entry strategy it will use (Paul, 2019). Organizational analysis helps it determine whether it is capable of venturing into the market and whether it can make profits.

Suppliers

Suppliers provide the materials for the company’s production or sale. Supplier analysis refers to understanding how much bargaining power they have in the market (Anastasiu et al., 2020). It is essential to analyze the suppliers in any market. The suppliers determine whether the company can gain the resources to ensure maximum productivity in a particular market. Comparing what different suppliers provide is a crucial aspect of the analysis.

Market

The market analysis involves considering various factors that drive the business, such as the demand and supply forces. The market analysis helps the company develop strategies for improving performance, such as market orientation. Market orientation is the capability of a company to increase performance and the type of behaviours the companies need to increase this performance (Udriyah et al., 2019). The most common aspect of the market is whether there are instances of the country performing at a high level.

Intermediaries

Intermediaries refer to the group that acts as a bridge between the company and its customers. Intermediaries help the company to understand the needs of the consumers through the information from the intermediaries (Brujil, 2018). Intermediaries represent the company in the foreign market, making their entry easier and helping bridge the gap between the company and the country’s consumers.

Customers

Customer analysis involves understanding their needs and understanding the demand factor of the market. Customers form the cornerstone of any market, and understanding their needs is crucial in ensuring they overcome various aspects of the market. In the modern technology world, it is easier to understand the needs of consumers through artificial intelligence (Puntoni et al., 2021). Companies need to have the ability to provide the products the customers demand to be successful in a foreign market.

1.1.2 Macro-Environment

Macro environment refers to how the macroeconomic conditions of a company or department affect its performance. Macroeconomics studies the total output, expenditure, and price level of an economy, not a single industry and market.

GDP- The Gross Domestic Product (GDP) is a tool used to measure the economy of an area. Higher GDP means better commerce opportunities (Pantelimon et al 2020). Higher GDP will also lead to a more attractive business destination.

Fiscal policy- The fiscal policy helps the country to measure the form of lasting constraints through the fiscal performance indicators (Eyraud et al. 2018). A reliable fiscal policy that does not impose on new companies makes the country attractive.

Monetary policy- The monetary policy of the company is a combination of measures that regulate the supply, value, and cost of supply in a market (Gnahe & Huang, 2020). A positive policy helps the company to make the decision of investing in the country.

Inflation – the inflation in a country refers to how the rise in the increase of prices leading to decreased economic growth (Kruskovic, 2020). Higher inflation rates lead to higher risks of investment leading to companies not investing.

Employment rates- The employment rates determine how many of the population have jobs. The higher the employment rates, the higher the economic growth and by extension, the ease of doing business for companies in the country.

Consumer spending- Consumer spending is how much the customers use when purchasing new products. In areas where the consumer spending is high, companies get encouragement to conduct business.

1.2 Segmentation on the Foreign Market

Segmentation refers to the division of the market into different groups and subsets to enable the business to get to the consumers more effectively (Kalam, 2020). In the foreign market, segmentation involves dividing the aspects of the new country to understand the demographics they need.

Geographic segmentation refers to the dividing the market into different smaller geographical units (Akhande & Khatka, 2018). The geographical regions could either be local, regional, national, or international.

Demographic segmentation is dividing the product’s market into different groups based on either their age, gender, income, ethnic background, or marital status to understand what people from the different segments want (Akhande & Khatka, 2018).

Psychographics segmentation covers the concept of consumers’ psychological beliefs and values (Akhande & Khatka, 2018). The psychology includes the attitudes, activities they perform, their personality and values. The values of the consumers push the company to decide on investment and the type of product to bring to the market.

Behavioral segmentation involves understanding the customers behavior and dividing the market according to these behaviors (Akhande & Khatka, 2018). The segmentation allows the company to focus its resources on specific segments that have more benefits and higher usage rates.

1.3 Foreign Market Entry Strategies in International Marketing

Increased opportunities have led to more companies entering into foreign markets to improve their customer base and revenue through strategies such as internationalization. Internationalization means finding potential and opportunities in foreign markets, which means more companies understand the need for going global (Hofer & Baba, 2017). Companies can also use the multinationalization strategy to ensure they enter markets. Multinationalization uses foreign direct investment as a means of making the company a Multinational Enterprise (MNE) (Vanninen et al., 2022). The strategy plays a vital role in understanding whether the company will be successful.

1.4 International Marketing Strategies of Operation on Foreign Market

Entry is the first aspect of a company’s life in the international market. The next step is to operate in the country. There are various strategies to use when entering the market.

Joint Venture – This entails the coming together of two international entities to access a market and control the management aspect of the business (Akhande & Khatka, 2018).

Strategic Alliance- This concept allows the company to form a strategic alliance with another independent company with the aim of achieving its objectives (He et al. 2020).

Indirect Exporting – The concept involves exporting done through an intermediary who has better connections and relationships with the base country (Zhang et al. 2020).

Direct Exporting – The exporting of products using the direct relationship and connection between the exporting country and the importing country (Zhang et al. 2020).

Foreign Direct Investment – The investment to an international country by a multinational corporation including establishing operations in the country (Jiang et al. 2022).

1.5 Marketing-Mix in Foreign Markets

1.5.1 Product policy

The product policy refers to how much the company involves the company’s stakeholders in decisions about the product (Warrink, 2018). The product policy dictates how the customers in the market will be satisfied, with the wrong policy potentially leading to dissatisfied customers (Do & Vu, 2020). The rules and regulations of a foreign market determine whether the company’s product policy can affect how customers select the organization (Ravangard et al., 2020). Therefore, product policy is an essential aspect that companies need to consider before venturing into foreign markets.

1.5.2 Pricing policy

The pricing policy is what the company values its products at in the market. Various market forces such as demand, supply, government regulations, and competitors’ prices are vital for any price policy (Thabit & Raewf, 2018). The aspects of price policy in a foreign market involve analyzing the various factors to ensure the company sets the right price. Price is essential for ensuring the organization and consumers get a fair value for the product.

1.5.3 Distribution

Channels 

Distribution channels refer to the chain that the product goes through before arriving at the hands of the consumers. The distribution channels involve various factors such as the storage and export facilities at the ports of the foreign countries. Ensuring the distribution channels are cost-efficient and cover all the aspects of the marketing mix is essential for the company’s growth in the foreign market (Lahtinen et al., 2020). Distribution channels require the involvement of the governments in international markets to make them viable.

1.5.4 Promotion

Promotion refers to the communication and information of customers about the product (Lim, 2021). Markets that require to gain new customers play a crucial role in ensuring they attract new customers and ensuring the users of the product do not have an issue with what they are offering. In the digital world, promotion is more accessible and can reach a larger market faster, enhancing their opportunities (Katsikeas et al., 2019). Promotion helps the company to advertise its promise to its consumers.

1.5.5 Personal

The personal aspects indicate the company’s values and how they treat their employees. A company’s relationship with its employees and customers relies on them to treat its stakeholders fairly when venturing into the foreign market (Warrink, 2018). The company needs to communicate what it offers by providing its ideals such as culture and values to maintain its competitive advantage in the market. A company’s values and ideals must align with the consumers’ ideals in a foreign country if it intends to maintain the advantage.

1.5.6 Process

The process refers to the activities of ensuring the consumers get the product, and the aspects involved such as the behaviour of the people delivering these services (Do & Vu, 2020). Customers become satisfied when people have a different idea of what the company provides through using different strategies (Lahtinen et al., 2020). The process aspect is essential as it helps the consumers feel closer to the company since they will feel valued by a process involving their input.

1.5.7 Physical evidence 

Physical evidence is what the consumers can see physically about your organization. Physical evidence is basically what the company operates on, such as the buildings displaying their name, the branding, or employees. It is vital to create a customer-friendly environment where they can feel like part of the company (Warrink, 2018). The physical evidence of the company helps to create loyalty from international customers as they feel like they are a part of the company.

 

 

Chapter 2

2.1 Introduction and Current Situation of  HEYTEA

2.1.1 Competition

HEYTEA faces significant competition from domestic corporations and foreign institutions as well. One of the major companies posing the threat of competition is Starbucks. Starbucks invested significantly in China, increasing its outlets in record time. With less than 700 stores in the country, companies like Starbucks with more than 5000 stores and unique products (Daxue Consulting, 2021). One of the domestic companies like Kweichow Moutai also provides competition.

2.1.2 Organization

HEYTEA has 649 stores in China and approximately 20 outlets operating in other countries (HEYTEA, 2022). The company markets most of its products through TikTok since it is the country’s most used social media platform. There have also been programs that encourage younger generations to purchase more cheese tea, renewing the traditional tea culture.

2.1.3 Suppliers

The company sources its products from domestic products, just as it does for its foreign market. Currently, the company shares minimum information from the industry due to its trademark. The company’s strategy is similar to KFC in anonymous ingredients. The company outsources from local stores and farmers that manufacture its material at their stores.

2.1.4 Market

 According to (Townson, 2019), more than 15 million Chinese people consume beverages daily. Most of these people consume coffee before their day starts, purchasing from chain stores.  HEYTEA has rebuilt the tea culture, adding approximately two to three million consumers.  HEYTEA aims to add more loyal consumers, an aspect aided by the sensory naming approach that it took to increase its popularity.

2.1.5 Intermediaries and Customers

  HEYTEA has grown to popularity and success because of its unique marketing strategy towards the younger generations. Most of its customers are Generation Z (Tao, 2018). Most of these customers reported a liking to the products because the company made each drink name speak for its flavor. When a customer visits the stores, they have to wait for two to six hours before taking a sip of tea. However, consumers have shown a willingness to wait for this high-quality tea. The customers take pictures at the restaurants and post them on their social media platforms during this period.

2.3 Existing Marketing Strategy Analysis for  HEYTEA

2.3.1 Partnership

HEYTEA has a strong understanding of crossover collaboration with a wide range of businesses in several sectors to develop co-branded goods. Overall,  HEYTEA’s co-branding has infiltrated a wide range of living situations, and the audiences of these companies are also extremely consistent with  HEYTEA. The first benefit of co-branding is the ability to create a scarcity atmosphere: Because co-branded items are often offered in limited numbers, utilizing “hunger marketing” to create a scenario in which demand exceeds supply might enhance customers’ desire to purchase (Townson, 2019). The benefit of hunger marketing is that it brings greater topicality and a huge number of sales, but it does not result in a period of low sales following the event, as sales promotions do.

2.3.2 Social Media Marketing

HEYTEA also has an effective social media marketing strategy. Some well-known food bloggers shared their thoughts and views about consuming and tasting  HEYTEA products on social media. Bloggers would snap pictures in the shop, write about themselves, and demonstrate their enthusiasm for  HEYTEA’s goods as well as their different interests and aesthetics (Zhang, 2021). The company  HEYTEA is growing more famous by selling items in publicity and recommendation. Food bloggers do extensive assessments by buying several sorts of beverages and recommending the beverages they like. This technique distinguishes  HEYTEA as a distinct and eye-catching online celebrity brand, resulting in an increased number of people wanting to purchase its product.

2.4 Analysis of the Advantages and Disadvantages of  HEYTEA on the European Market

2.4.1 Advantages

One of the main strategies used by the company is social media marketing. Social media marketing has been a game-changer for numerous companies globally, giving people a better platform to communicate with their target audience. The company has been successful because of social media marketing, with Chinese Gen Z using social media indirectly to market  HEYTEA’s brand (Xu & Filiera, 2021). In Europe, the company will use a similar approach, which will be effective for the company. This strategy is advantageous because it has already worked in China and companies like Sing2apore. The use of social media will prove economical for the company since it will incur fewer costs and have positive impacts on attacking the youth in Europe.

HEYTEA will also combine its resources with other companies in Europe to sell its products; as highlighted,  HEYTEA markets its products by merging or creating partnerships with companies in their target regions. This strategy will benefit the company because it reduces the risks that the company could have incurred (Xu & Filiera, 2021). Furthermore, partnering with a company familiarized with the market will help the brand penetrate the target market before eventually venturing independently. This approach will also mean that  HEYTEA will not have to start from scratch in creating its consumer base. Partnering with restaurants and other organizations means that their partner’s customers will buy  HEYTEA’s products before they establish them as their own. Both of these approaches, partnership, and social media marketing, benefit the company in entering the European market, especially due to its competitiveness.

2.4.2 Disadvantages

One of the disadvantages of their marketing strategy is that the company will only attract a specific group, which minimizes the number of people it will attract. Unlike China, most European countries’ populations are older generations due to their low birth rate. As such, Generation X and Baby Boomers comprise a significant part of the population, more than Generation Z. As such, the use of social media to market products in Europe could prove to be ineffective and could slow the company’s entry into Europe. The company could have turned to mainstream media or other forms of marketing in Europe to attract all generations in the region.

Secondly, using partnerships, the company’s approach in the European market could derail operations and minimize profits. As it stands, the company has found immense success because of its ability to perform effectively at low prices (Xu & Filiera, 2021). Merging or forming partnerships with European countries will mean that the company either pays for services or receives less income from their sales. From one perspective, the company could sell its ideologies to Chinese in European countries and target them to start operations independently. A comparison between sole proprietorship in Europe and partnership shows that the former could incur significant risks but bring immense benefits for the company. However, the latter means that the company will have to share profits, which could diminish its growth and development.

Another disadvantage of these strategies used by the company is that they will lead to reinvestment due to its failure. If the company uses these strategies in Europe, the strategy could fail significantly, requiring the company to reinvest, spending more money and resources. Social media marketing and partnerships could lead to failure for  HEYTEA, which will require the company to either abandon the project or invest more money.