1.0 Executive summary
This assignment was commissioned to select a local Malaysian company in any industry which is operating in a host country. The company that was selected is Oldtown white Coffee which is operating in China. By using the Deeplist analysis, porter 5 forces and Hofstede cultural, this theoretical frameworks allows to analyze the business environment in China. The marketing strategies that Oldtown used in China was measured by using the 4p’s, segmentation and consumer behaviour and degree of adaptation. Recommendation was given on the ways that Oldtown could improve in terms of their marketing strategies in China.
Beginning with the history of Oldtown white Coffee, it started in the year 1999. Oldtown aim is to deliver high quality of white coffee to the Malaysian household as well as the food service industry. Blend 3 in 1 instant coffee is formulated by Mr. Goh Ching Mun the co-founders and Mr. Tan Say Yap the executive directors. The growth of the Oldtown were helped by the co-founders with the provision of Mr. Lee Siew Heng who is holding the position of Managing director of the company. The role that he was responsible was implementing the company vision, development and strategy. Oldtown currently exports beverages to 17 markets globally. In this assignment, I had choose China as my host country. I will be doing research on analyzing the global marketing strategies that Oldtown adopted in China.
Instability in the economic and trade policy challenges China, where it is the second world’s largest economy as well fastest growing economies globally. When international companies enters into China, they must study the economic stability and prepare to face numerous risk because of the changes in monetary policies, the trade policies, fiscal policies and etc.
Yuan was more like a floating currency in 2017 which was unstable between 6 to 7 Yuan against 1 USD. Therefore, changes in the Yuan could give an impact to the profitability of the international businesses. Not only that the labor cost in China as also increased gradually the past five years plus the minimum wage level as also increased by the government. This will actually give an impact to the cost of operating in China which will affects local as well international companies who is operating in China.
As stated above, the average wages has increases in past years which leads to customer spending power increases. People in China looks for status of symbol by owning latest smartphones, designer clothing as well luxury cars in demonstrating their success. Increased in consumer spending is a great opportunity for domestic and also foreign companies.
The development of the internet environment as well the promotion in China has brought a huge opportunities into the e-commerce. Numerous e-commerce platforms has increased sharply lately this is because consumers in china prefers online shopping rather then going to shopping malls to get the products or services.
Due to the differences in culture, Oldtown follows different standard technique marketing strategies in Malaysia but in China, it has adapted to the global localization which uses the polycentric orientation influenced by the local culture and also market conditions in gaining Chinese consumers confidence and trust. The product development is geared up to adapt to the products attributes in suiting up the local market conditions (Chee and Harris, 1998). For example, Oldtown has changed the product packaging in China with slightly modification in terms in language which is written in local language.
Oldtown also had adapted to the degree of standardization, in which the firm could enhance their customer’s preferences by standardization (Johny K. Johansson, 2009). For an instance, they offer Nasi Lemak Special, Wonton Soup, Toast and also Kaya and Peanut Toast in Malaysia and also China. Moreover, the interior design of the outlets in China is same as in Malaysia, wherever each dining table fits 4-6 people where consumers could have their meals with their family and friends (Appendix 2). This shows that Oldtown has localised their products in adapting to the local preferences with the standardization.
For product strategy, Oldtown in China has adapted to a certain level of degree in which China is recognised as a tea traditional country, so they have come up with a white milk tea product which will attract more consumers because consumers in China, individuals prefers tea more then coffee and it is expect to increases more in the coming years (Statista, 2018). Moreover, Oldtown had launched the mocha flavour in China in 2017 in aiming to target the young consumers and individuals that do not drinks coffee (minime insights, 2018). This is because the changes of the lifestyle of young consumers in China would actually upsurge their demand for coffees.
Moreover, in place strategy Oldtown have been present since 2014 in China’s leading platforms and reported to been doing very well on the key supermarket chains and also online retailers, for instance, jd.com and t-mall. (Oldtown Annual Report, 2017.) They are also presently supported well at almost 100 online major platforms in China. A website which uses the native language might increase the consumers’ confidence in purchasing their products. This will boost up the branding relationship between the user and also the brand (Smith ; Zook, 2011.)
In terms of pricing strategy, Oldtown uses polycentric pricing for their products. Naturally, the prices might differ significantly between the countries in the polycentric pricing which creates risks of the gray trade (Johansson, 2009). For an instance, Due to the differences in culture and demand among the customers, the price is set in order to suit the local conditions (Oldtown annual report, 2017). Oldtown also uses online pricing strategy occurs in a situation where certain wholesalers or retailers who purchases products from The Oldtown White Coffee in a large quantity and able get trade and also quantity discount.
For promotional strategy, Oldtown used “word of mouth” marketing strategy in promoting their product in China. They recently had a contest where customers could win prizes such as free two tickets to Malaysia and free one year Oldtown white coffee. In order to win those prizes, they have to take pictures and upload it on any social media and tag a friend and include hashtag of #ILOVEOLDTOWN and set the post as public.
4.0 Conclusion and recommendation
After analysing the macro environment, micro environment, and the culture differences, there are few gaps that Oldtown is facing in China. In order to close the gaps, there are few recommendations that should be taken into consideration.
Firstly is social media. Oldtown could start to have a Wechat account as it is the number one social media platform at China with almost 768 million users daily. WeChat could be an important tool in bring up the Oldtown brand also products. WeChat performs as a good CRM tool because it allows a conversation which is personal between the brand and followers. Oldtown could deliver to the users the unique feeling which they could sole focus on the brand which will be a successful strategy in engaging with the users. Oldtown also could sell their products through Wechat store which will be very convenient as consumers in china prefers online shopping rather then purchasing at physical stores. Moreover, Wechat has different types of payment methods such as QR code payment, quick pay and in-app pay. Oldtown could exploit this opportunities in choosing one of the suitable types of payment for their products. The users just have to link up their payment to their bank cards and can start to enjoy the offers and benefits as well. Thus, this are the benefits that Oldtown could get with the Wechat application.
The second recommendation that should be taken in consideration is that, Oldtown should expand their business by operating at Shanghai and Beijing. This is because Shanghai and Beijing are the top two cities with high population as well high income level in China. Opening a physical store in those both cities, would actually bring in more revenue. Affluent consumers in the range of 23 to 28 in Shanghai who started to work and also accumulating additional disposable income has increased their spending power (CBNData, 2017). Since millennials and working adults who had a long day of class or work will seek a good place to have their meals to relax their mind. In that Oldtown could open their stores at shopping malls, street roads and corporate headquarter in Shanghai and Beijing.
Thirdly, Oldtown could use the joint venture strategy entering into China marketing other then the franchise entry mode. By using the joint venture strategy, Oldtown could boundary its risk and exposure into the political uncertainty (Keegan ; Green, 2011). This strategy could assist Oldtown in getting the knowledge of the host country in terms of the cultures, political and economy systems, the competitive conditions and business system from the local partners. This will help Oldtown to exploit their opportunity without any external barriers. Moreover, the cost and risks in opening business are shared in joint venture in which it will help in plummeting the unnecessary costs. Not only that, Oldtown is able to learn about the environment through the joint venture strategy. Join venture will allow their partners in achieving synergy with the combine of strength in different value chain (Keegan ; Green, 2011). This will really help Oldtown in improving the company image as well reputation.