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Country Market Analysis: China Kristin Cookson Catherine Graham Lauren Nickel Jen Parsons Eddie Wehmer.

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Presentation on theme: "Country Market Analysis: China Kristin Cookson Catherine Graham Lauren Nickel Jen Parsons Eddie Wehmer."— Presentation transcript:

1 Country Market Analysis: China Kristin Cookson Catherine Graham Lauren Nickel Jen Parsons Eddie Wehmer

2 China’s Tea Market  Ready-to-drink tea market in China  Expected to have the most sales volume of any country from 2005-2007  Expected to remain second highest country in overall sales of ready-to-drink teas through 2007  Economy growing at 10% over last 18 years

3 Price  Setting the Price cont.  Competitors in China price products relatively lower than in the U.S.  Coca-Cola in China: $.23 per unit  Master Kong and Uni-President are two main competitors  Packaged ready-to-drink teas tend to be more expensive than freshly made teas  Many consumers are financially unable to purchase such products

4 Price  Setting the Price  Distribution of wealth  Small middle class that continues to grow  Large lower and upper classes  Avg. Income per capita  City dwellers: $1,023  Rural areas: $316  People in the to top 10% income bracket account for 30.4% of total consumption  This leads to the Chinese being more price sensitive than Americans; Chinese tend to choose less expensive products  Clearly better product quality may sway them to pay more

5 Price  Setting the Price cont.  Distribution  Need for many intermediaries  Each tier adds significant markup ranging from 5-17%  Would need to price products higher in order to make up for the high cost  Some companies achieve lower prices by surpassing intermediaries and selling directly to retailers

6 Product  Taste  Culture  Tea is usually served without sugar, milk or lemon  Popular flavors include green tea, black tea, and oolong tea  Diet & Nutrition  Diet depends on region  May need many different flavors depending on what regions tea is sold in  Packaging  Size  Due to limited shelf space in the popular small retailers/mom and pop stores, packaging must be reasonably small

7 Product  Packaging cont.  Label Design  Language  Mandarin is national language  Taught in all schools  Many different dialects spoken, depending on geographical region; many use same basic set of characters  While they may not be able to understand other verbal dialects, are able to communicate in writing  Little or no English is spoken or read  90.9% literacy rate  Would allow for writing on labeling

8 Place  Production  If choose to import:  More costly and complicated for companies to import products due to many restrictions by:  People’s bank of China (PBOC)  State Administration for Exchange control (SAEC)  Ministry of Foreign Trade and Economic Cooperation (MOFTEC)  Would not be able to import from West due to mountainous terrain  Company would have less control over their capital

9 Place  Production cont.  Many foreign companies locate in large cities to avoid extensive distribution system  Inventory levels are based on allocation rather than market demands  Transportation  Varying terrain would make distribution throughout country difficult  Big cities located on coast; allows for water transportation  Highways  28.8% paved  1.49% paved expressways

10 Place  Retail  Mostly small retailers  Chinese prefer close contact with vendors; large focus on relationships  Market Entry  Difficult for foreign companies to enter marketplace  Political and legal restrictions give them little/no rights to import or manage distribution networks  Foreign suppliers must form joint ventures with local companies  Due to large economic growth, it is becoming easier for foreign companies to succeed  Foreign trade increased from $20.6 to $325 billion in past 10 years; growth expected to continue

11 Place  Location  Urban populations are growing rapidly  Shanghai: 13 million  Beijing: 12.2 million

12 Promotion  Advertising  Advertising media breakdown  44.7% TV  35.2% print  3.4% radio  16.7% other  Media Exposure  TV: 84% of population watches TV  Avg. 184 minutes/day  209 government-run stations  3000 local stations  Satellite is increasing range and availability of TV  Internet: 79.5 million people have access

13 Promotion  Advertising cont.  Scheduling  Advertising spots must be bought 2 to 10 months in advance  Restrictions:  Comparative advertising  Superlatives  Must “safeguard the dignity and interests of the State”  Censorship standards vary throughout China

14 Promotion  Sales Promotion  After-sale benefits and services will sway consumers to purchase products  Trade shows available, but costs are high and only local audiences are reached  Event Sponsorships  Sporting events are popular channels for promoting products  Beijing will be hosting the summer 2008 Olympic games

15 Promotion  Public Relations/Publicity  Due to government regulated television stations, PR is highly monitored  Several organizations play an active role in controlling print or television content  Personal Selling  Enticing consumers to come in to the store to make purchases are popular methods of personal selling in larger cities  Consumers feel most comfortable purchasing from people they are acquainted with in order to build and maintain close personal relationships  Personal relationships are highly valued by the Chinese

16 Final Questions?


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