INTERNATIONAL MARKETING PLAN FOR STROH AUSTRIA

AN ANALYSIS OF THE CHINESE SPIRITS INDUSTRY AND THE

OPPORTUNITIES FOR STROH AUSTRIA WITHIN IT

Prepared by:

Martin Witthoeft

Module Title: International Marketing Module Leader: Dr Jonathan Wilson

Module Code: BC315010S

Academic Year: 2008/9 Semester: One

Level: 3

Submitted: 17 December 2008

i

Table of Contents

1. STROH on Course of Expansion ......................................................................................... 1

1.1. STROH in Austria ............................................................................................................. 1

1.2. STROH - Past and Present ................................................................................................ 1

1.3. China - Land of Opportunity ............................................................................................ 2

2. STROH AUSTRIA in the Chinese Spirits Market ................................................................. 2

2.1. PESTEL Analysis of the Chinese Spirits Market ............................................................... 2

2.2. SWOT Analysis of STROH AUSTRIA .................................................................................. 4

2.3. Competitive Analysis of the Chinese Spirits Market ....................................................... 5

2.4. Target Market for STROH AUSTRIA ................................................................................. 6

3. Marketing Objectives for STROH AUSTRIA in China ......................................................... 7

3.1. Short-term Objectives for STROH AUSTRIA in China (0-12 months) .............................. 7

3.2. Medium-term Objectives for STROH AUSTRIA in China (1-3 years) ............................... 8

3.3. Long-term Objectives for STROH AUSTRIA in China (3+ years) ...................................... 8

4. Marketing Strategy for STROH AUSTRIA in China ............................................................. 9

4.1. Ansoff Matrix Analysis for STROH AUSTRIA .................................................................... 9

4.2. Market Entry Strategy Analysis for STROH AUSTRIA .................................................... 10

4.3. Standardisation vs. Adaptation Analysis for STROH AUSTRIA ...................................... 11

4.4. Market Segmentation Analysis of the Chinese Spirits Market ..................................... 12

4.5. Targeting Strategy for STROH AUSTRIA ........................................................................ 13

4.6. Positioning Strategy for STROH AUSTRIA ...................................................................... 14

5. Marketing Plan for STROH AUSTRIA in China ................................................................. 14

5.1. Marketing Activities for STROH AUSTRIA in China ........................................................ 14

5.2. Marketing Budget for STROH AUSTRIA in China ........................................................... 15

5.3. Justification of Marketing Budget for STROH AUSTRIA in China .................................. 15

5.4. Schedule of Marketing Activities for STROH AUSTRIA in China .................................... 17

6. Future Outlook for STROH AUSTRIA in China ................................................................. 18

7. List of References ............................................................................................................. 19

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List of Tables

Table 1: PESTEL Analysis of the Chinese Spirits Market ............................................................. 3

Table 2: SWOT Analysis of STROH AUSTRIA ............................................................................... 5

Table 3: Competitive Analysis of the Chinese Spirits Market .................................................... 6

Table 4: Ansoff Matrix Analysis for STROH AUSTRIA ................................................................. 9

Table 5: Comparison of Market Entry Methods for STROH AUSTRIA ...................................... 11

Table 6: Standardisation vs. Adaptation Analysis for STROH AUSTRIA ................................... 12

Table 7: Segmentation Matrix of the Chinese Spirits Market .................................................. 13

Table 8: Targeting Strategy for STROH AUSTRIA ...................................................................... 13

Table 9: Brand Positioning Statement for STROH AUSTRIA in China ....................................... 14

Table 10: Marketing Activities for STROH AUSTRIA in China ................................................... 14

Table 11: Justification of Marketing Budget for STROH AUSTRIA in China .............................. 16

Table 12: Schedule of Marketing Activities for STROH AUSTRIA in China ............................... 17

1

To: Board of Directors, STROH AUSTRIA

From: Martin Witthoeft

Date: 17 December 2008

RE: International Marketing Plan for STROH AUSTRIA

1.

As you are aware, STROH is Austria’s largest spirits manufacturer and market leader in

Austria (STROH, 2005). Michael Jackson & Co. have analysed several prospect markets

around the globe and have come up with a proposal for STROH’s future growth: Market

expansion to China.

STROH on Course of Expansion

1.1. STROH in Austria

The company’s main seller, STROH’s 80 (160 per cent proof) spiced rum is known by over 75

per cent of the Austrian population according to a 2001 IMAS brand awareness survey

(STROH, 2005).

The slogan “STROH – THE SPIRIT OF AUSTRIA” is popular in ski huts across the Alps and

associated with Après ski parties. The current promotion is about drinking STROH`s 80 pure

named the “Ultimate challenge” (STROH, 2008).

1.2. STROH - Past and Present

STROH’s history began in 1832 when Austria-Hungary had no access to colonies in tropical

regions and Sebastian Stroh therefore introduced a domestic spiced rum substituting sugar-

cane with special herbs (STROH, 2005).

2

In 2007, STROH AUSTRIA GmbH had sales of € 9.8 million and a yearly production capacity of

6.2 million bottles. Exporting 65 per cent of their production makes them one of Austria’s

export success stories. The company currently employs 33 people (Strasser, 2008).

1.3. China - Land of Opportunity

China is the sixth largest economy in the world with a GDP of $ 3,241 billion in 2007 and an

annual growth rate of 9.8 per cent in 2008. The growth of real disposable income at an

annual rate of 11.5 per cent is resulting in a rapidly emerging middle class (Economist, 2008).

This middle class has an increasing need for leisure and winter sports resorts are being

established in the northern Chinese provinces. Although still in their infancy, Chinese resorts

are destined to attract the new Chinese middle class due to the prestigious image of skiing

and the historical reluctance of Chinese to leave their country (Runckel, 2005).

STROH is the first foreign company to embark on developing the Chinese Après ski culture

giving it a first-mover advantage (Economist, 2008).

2. STROH AUSTRIA in the Chinese Spirits Market

2.1. PESTEL Analysis of the Chinese Spirits Market

Outlined in Table 1 below is a PESTEL analysis to understand the forces of change in the

Chinese spirits industry.

3

PESTEL Analysis of the Chinese Spirits Market

I. Political II. Economic

• OPEN MARKET: 2001 opening of Chinese spirits market due to WTO membership.1

• MODERNISATION: Chinese government encourages the move towards western provinces.1

• COUNTERFEITING: Empty foreign spirits bottles filled with a cheaper spirit & fake labels or bottles are sold to inexperienced Chinese spirit consumers.2

• ECONOMIC GROWTH: GDP growth expected to drop from 11.9% in 2007 to 8.2% in 2012. Domestic demand is to remain strong in the next five years as consumption will rise due to overall wage growth.1

• TAXATION: Tariff for foreign spirits 10% & rate for hard liquor 20%. Combined with 17% VAT equals overall tax of around 50% of product's value.3

• MARKET SIZE: Chinese spirits sales expected to grow 13% to 14% annually.3

III. Social

IV. Technological

• DEMOGRAPHICS: China’s population growth rate in 2008 is 0.629% with an average life expectancy of 73.18 years. Age distribution is characterized by a small youth group due to China’s one child policy since 1979.4

• SEASONALITY: Consumption of spirits high during Chinese holidays & average consumption is higher during winter months.5

• HEALTH AWARENESS: Chinese are advised to cut down on liquor by government.5

• DISTRIBUTION: Chain supermarkets & specialist retailers dominate retail channels providing basis of distributing to local restaurants, bars & nightclubs.2

• INTERNET: So-called “Great Firewall of China” controls websites available on the internet according to policies of the Chinese government.6

• MEDIA: Brand communication in China uses symbols & targets local and national affiliation of Chinese population.7

V. Environmental

VI. Legal • CONSUMPTION: China needs three times as

much energy per unit of GDP as US & nine times as much as Japan.8

• RECYCLING: Chinese government wants to introduce recycling programs through its plan of “National Economy and Social Progress”.9

• CONTROLS: China has become sensitive to the issue of pollution due to international pressure → lately stricter controls of firms.10

• CLASSIFICATION: 2007 lifting of restrictions on above 60% alcohol content in spirits.2

• LABELING: 2006 abolition of pre-approval process of labels upon entry into China, translation into Chinese still mandatory.2

• STANDARDS: Standard retail sizes of bottled liquor in China are 350 ml & 750 ml.2

Table 1: PESTEL Analysis of the Chinese Spirits Market

Sources: 1 Economist, 2008 6 Taylor, 2006 2 Leu, 2007 7 Fuchs, 2004 3 Maheshwari, 2008 8 Nair, 2006 4 CIA World Factbook, 2008 9 China Daily, 2004 5 Zhang, 2004 10 Shipeng & Graham-Harrison, 2008

4

PESTEL Summary: Educate the Market

New entrants to the Chinese spirits market need to focus on educating consumers,

bartenders and bar managers not only about their brand but also about its general spirit

category and its application in mixed drinks (Leu, 2007).

The spirits market is extremely brand sensitive and even new entrants with well-known

global brands might have to start building brand awareness from ground zero in China (Leu,

2007).

2.2. SWOT Analysis of STROH AUSTRIA

Shown in Table 2 below is a SWOT analysis to assess STROH’s overall strategic situation in

the Chinese spirits market.

SWOT (1/2): Chinese Spirits Market Environment

Opportunities Threats

• Steady year-to-year market growth

• Promoting foreign spirits as healthier than local spirits

• Educating the market about spirits outside of traditional spirits

• Luxury & high social status are associated with foreign spirits

• Availability of foreign spirits limited to supermarkets & retailers in major cities

• Foreign spirits are given as gifts, e.g. for Chinese festivals

• Expansion into the western & northern part of China => First-mover advantage

• Economic slowdown might affect spirits market negatively

• Poor infrastructure & distribution channels

• Consumption tax might be raised if domestic brands are threatened by foreign competition

• Perception that all spirits are equally unhealthy

• Counterfeiting by refilling empty foreign bottles & reusing labels

• High prices of foreign spirits are too expensive for average Chinese consumer

• Lack of knowledge about non-traditional spirits

5

SWOT (2/2): Internal Perspective of STROH AUSTRIA

Strengths Weaknesses

• STROH is successfully marketed in more than 30 countries worldwide

• STROH holds 3rd position of the dark rum segment in worldwide duty free business

• STROH has over 80% market share in Austria’s dark rum market

• STROH has steady growth in both home market & internationally

• STROH has experience in successfully entering foreign markets, e.g. strong in South Africa

• STROH was awarded a gold medal at the 1900 World Exhibition in Paris

• STROH brand has cult appeal & an international community of devoted followers

• STROH will have high start-up costs due to lack of experience in Chinese spirits market

• STROH’s trial-and-error strategy is prone to create difficulties entering the market

• STROH has a limited marketing budget due to being a medium-sized company

• STROH will have trouble to find capable staff in China

• STROH has to rely strongly on its Chinese distribution partner

• STROH will have difficulty in sourcing a capable partner for PR activities

• STROH needs a good pricing strategy for the extremely price sensitive market

Table 2: SWOT Analysis of STROH AUSTRIA

Source: Adapted from STROH, 2005 & Leu, 2007

SWOT Summary: Bank on History

Matching STROH’s internal strengths with the Chinese spirits market environment helps to

reveal the opportunities that STROH can exploit, i.e. STROH’s long history and local

background (Stroh, 2005).

STROH can minimize the impact of its internal weaknesses in perspective to the threats in

the Chinese spirits market by networking with experienced partners in China, i.e. the

“Austrian Business Circle” or the “Austrian Chamber of Commerce Hong Kong” (WKO

Austrian Trade, 2008).

2.3. Competitive Analysis of the Chinese Spirits Market

Outlined in Table 3 below is a competitive analysis to identify the main players in the

Chinese spirits market.

6

Competitive Analysis of the Chinese Spirits Market

Sector

% Share

• Domestic Spirits Bajiu

• Foreign spirits Pernod Ricard Group Moët Hennessy Diageo Other

90 %

4.2% 1.7% 4.1%

Table 3: Competitive Analysis of the Chinese Spirits Market

Source: Adapted from Leu, 2007

Competitive Analysis Summary: Domestic Spirit most popular

The most popular spirit in China is the local Baijiu, a “white liquor” with a market share of 90

per cent. Consumed mostly in the rural parts of China with its estimated 700 million

inhabitants, it is considered the national drink and comparable to Russian vodka in both

taste and potency (Osnos, 2007).

Foreign spirits compete for the remaining 10 per cent of the spirits market which is

dominated by the Pernod Ricard Group with a 42 per cent market share and Moët Hennessy

Diageo Group with a 17 per cent share (Leu, 2007).

In the segment above 60 per cent alcohol content (>120 per cent proof) there are currently

no direct competitors in China. Since the ban on drinks containing more than 60 per cent

alcohol was lifted in 2007, no other foreign brand has entered the Chinese spirits market

within that sector yet (Leu, 2007).

2.4. Target Market for STROH AUSTRIA

The focus is on entering a single region since according to Leu (2007) “moving into a

province in China is like moving into a country in Europe”.

As the point of entry we have identified China’s largest ski area Yabuli Ski Resort, hosting

both the 2008 National Winter Games and the World Winter University Games in early 2009.

The resort is located about 200 km southeast of Harbin, the capital of the north-western

7

province of Heilongjiang which was formerly known as Manchuria. Yabuli has 170 day

average snow coverage and boasts of 15 skiing courses adding up to 30 km of slopes with

best natural conditions (Runckel, 2005).

Several five-star hotels are to be opened in 2008/09 bringing the resort towards Western

standards. Yearly tourist arrivals at Yabuli accounted for about 110,000 in 2000 and are

projected to grow to approximately 500,000 by 2010 (Runckel, 2005).

According to reports of visitors to Yabuli, Après ski culture is almost non-existent and hotel

operators are eager to expand their range of activities away from the slopes (Tiger, 2005).

3. Marketing Objectives for STROH AUSTRIA in China

3.1. Short-term Objectives for STROH AUSTRIA in China (0-12 months)

• PROMOTION: Increase brand awareness to 50 per cent of STROH in the selected winter

sports resort by May 2009.

This objective will be achieved through a promotional campaign introducing Austrian-

style Après ski culture to a high-class Chinese skiing resort. Local designers will adapt

the STROH label to the Chinese language and event managers will set up an authentic

STROH branded Austrian ski hut in Yabuli. STROH will also be a co-sponsor of the

2009 World Winter University Games.

By the end of the winter sport season brand awareness will be measured by

conducting a survey in selected universities in China.

• PROFIT: Selling of a minimum of 10.000 9-liter cartons of STROH by December 2009.

This objective will be achieved through special promotional offers directed at visitors

to Yabuli ski resort. Tasters at the STROH ski hut as part of the famous “STROH’s 80

challenge” will be accompanied with promotions at local hotels offering a special

room rate that includes a promotional bottle of STROH’s 80 in a gift package. The

8

package also includes a list of preferred STROH suppliers around the country and a

booklet illustrating the use of STROH in combination with other drinks like green tea.

3.2. Medium-term Objectives for STROH AUSTRIA in China (1-3 years)

• GROWTH: Expanding number of STROH sales points to 100 by 2011.

This objective will be achieved through opening STROH ski huts in China’s No. 2

Jingyuetan Ski Resort and No.3 Beidahu Ski Resort (Runckel, 2005). Special attention

will be given to create close ties with both the major hotel chains and the major

developers of these regions. For this purpose we suggest the establishment of a Sino-

Austrian representative office in Yabuli to oversee the marketing activities in the

three resorts.

• MARKET SHARE: Become market leader in the above 60 per cent alcohol content spirit

market in China by December 2012.

This objective will be achieved through educating the Chinese winter sport fans

about Après ski culture and linking their experience to the brand of STROH. Hereby

the first-mover advantage is crucial since other domestic and foreign brands are

likely to set up copies of the STROH ski huts hereby adding credibility to the original.

The emerging middle class, which is considering skiing as a status symbol, and a lack

of competition in its segment of the market provides a promising outlook for STROH.

3.3. Long-term Objectives for STROH AUSTRIA in China (3+ years)

• BRAND LOYALTY: Make STROH the preferred high-volume spirit brand of the 20-35 year

old middle class in China by February 2014.

This objective will be achieved by distributing STROH promotional gear like T-shirts,

glasses and jackets with the image of STROH’s marketing symbol “STROHminator”

(Stroh, 2005) across the Top 3 winter sport resorts in China. In addition a multilingual

website will be set up with daily draws to win weekends at one of the STROH ski huts

as well as an online shop where both STROH’s 80 and STROH merchandise can be

purchased at preferred rates. Sponsoring of competitions and local activities in the

9

geographical areas around the STROH ski huts will ensure the necessary media

coverage boosted by the employment of a national PR agency.

• PROFITABILITY: Achieve a 10 per cent return on capital employed by December 2015.

This objective will be achieved by stringent supervision of costs from the market

entry onwards by keeping a rigorous and prudent approach. Early investments into

property and costs for setting up of the website and distribution channels will be

compensated by projected sales resulting in a breakeven point in less than 5 years.

4. Marketing Strategy for STROH AUSTRIA in China

4.1. Ansoff Matrix Analysis for STROH AUSTRIA

Shown in Table 4 below is an Ansoff matrix analysis to achieve a better understanding of the

risks of different options for STROH`s growth.

Product

Existing New

Mar

ket

Exis

ting

Market Penetration Product Development

• Advertising/ promotions for STROH’s 80

• Introduce Austrian Après ski culture with STROH branding

• STROH & Tea mixers for rural Chinese market

• STROH & Cola in cans targeting urban youth

New

Market development Diversification

• Rebranding of STROH as a “healthy” spirit

• Emphasizing other uses of STROH for cooking & baking

• STROH entering the franchise market for its STROH Ski huts

• STROH creating a presence in Indoor Ski parks

Table 4: Ansoff Matrix Analysis for STROH AUSTRIA

Source: Adapted from Ansoff, 1957

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Ansoff Matrix Summary: Stick to the Original

Introducing the STROH brand through promotions involves low risk since an existing product

is placed in an existing market. Higher risk operations include rebranding STROH as a

“healthy” spirit, a move into a new market with an existing product; or the creation of a new

line of STROH & Tea mixers for China, where a new product is created for an existing market.

Most risky options include opening a franchise for STROH ski huts involving the move into a

new market with a new product. Going into multiple quadrants simultaneously further

increases the level of risk (Manktelow, 2008).

4.2. Market Entry Strategy Analysis for STROH AUSTRIA

Outlined in Table 5 below is a market entry analysis to identify the best method of delivering

STROH’s goods to the market and distributing them there.

Considering the size of STROH AUSTRIA, its core competences and the characteristics of the

Chinese spirits market, three options for market entry were considered:

Comparison of Market Entry Methods for STROH AUSTRIA

Method Pros Cons

1. Direct Sales Products are produced in home market & sold to customers overseas directly.

• Distribution & pricing control

• High profit potential due to elimination of any middlemen

• Solely responsible for advertising, marketing, customer service, translation & required labelling

• Must become an expert in the market

• Potential sales volume is low due to low experience in the market

2. Agent/ Representative A company legally authorised to act on STROH’s behalf.

• Products are represented by an expert in the local market

• Has established customer contacts

• Increased sales potential

• Exclusive agreements must be granted regarding geographic regions or product lines

• Control over pricing is lost

• Profit rate is lowered due to sales commission

11

Comparison of Market Entry Methods for STROH AUSTRIA (continued)

Method Pros Cons

3. Distributor A company that specializes in distributing STROH’s products.

• Dealing with one customer who takes possession of goods

• Takes control of promotion, marketing, delivery, returns and customer relations

• Sales volume potential increases

• Relationship harder to end than with an agent or representative

• Lowest profit rate

Table 5: Comparison of Market Entry Methods for STROH AUSTRIA

Source: Adapted from NSW Department of State and Regional Development, 1998

Market Entry Strategy Summary: Employ an Agent

Since STROH AUSTRIA has no experience in the Chinese spirits market, we suggest turning to

an experienced agent for both the set-up of a Hong Kong based off-shore company and for

the distribution in China which will potentially increase sales volume potential. The agent

will provide the infrastructure and networks to quickly enter the market, but marketing will

remain solely in STROH’s hands.

4.3. Standardisation vs. Adaptation Analysis for STROH AUSTRIA

Shown in Table 6 below is a comparison of standardisation and adaptation to find out to

what extent STROH’s products and marketing campaign need to be changed in order to

match Chinese cultural characteristics.

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Standardisation vs. Adaptation Analysis for STROH AUSTRIA

Standardisation

Adaptation

Using a communication policy in China which is identical to the one in the Austrian market.

Altering different parts of the marketing campaign to the characteristics of China.

• EDUCATION: Introduce Après Ski culture and STROH rum mixed with tea, the famous Austrian “Jagertea (hunter’s tea)”.

• COST MINIMIZATION: Besides translation no need to adapt other marketing instruments.

• COUNTRY OF ORIGIN: Minimize changes & emphasize “Made in Austria” brand.

• GEOGRAPHICAL REGIONS: Similarity between Chinese and Austrian mountains, therefore the same marketing tools can be used.

• AWARENESS: Chinese are not used to alcoholic beverages exceeding 60% alcohol content.

• LABELING: There is the need to change the product name into the Chinese language, possibly giving it a completely new meaning.

• DIMENSIONS: Since 350 ml or 750ml are the standard sizes for spirits in China, there is a need to adjust the size of the original 1-liter STROH bottle.

Table 6: Standardisation vs. Adaptation Analysis for STROH AUSTRIA

Source: Adapted from STROH, 2005 & Leu, 2007

Standardisation vs. Adaptation Summary: Focus on Standardisation

STROH should use adaptation only where absolutely necessary and focus on standardizing its

campaign around the “Made in Austria” brand image using its slogan STROH – THE SPIRIT OF

AUSTRIA (STROH, 2005).

Possible threats due to the NIH (Not Invented Here) syndrome, where customers are

rejecting a product because it does not originate from their home country can be ruled out

due to the Chinese affinity to Western products (China Sourcing, 2007).

4.4. Market Segmentation Analysis of the Chinese Spirits Market

Outlined in Table 7 below is a market segmentation analysis to divide the Chinese spirits

market into key product categories.

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Segmentation Matrix of the Chinese Spirits Market

High Proof >120% (STROH)

>80% Baijiu Whiskey, Rum,

Vodka Cognac, Scotch

Low Proof >40% Liquors, Cream

>1% Beer Wine Champagne

Lower Class Middle Class Higher Class

Table 7: Segmentation Matrix of the Chinese Spirits Market

Source: Adapted from Cohen, 1986

Market Segmentation Summary: No direct Competitors

There is currently no other high-proof alcoholic beverage in China giving STROH a first-mover

advantage in this niche market. In the future Absinthe, recently un-banned in the US, is likely

to enter the market of over 120 per cent proof spirits as well (Clarke, 2007).

4.5. Targeting Strategy for STROH AUSTRIA

Shown in Table 8 below is the targeting strategy for STROH in China focusing with its main

product on a niche market in a clearly defined location to create maximum exposure on the

target audience.

Targeting Strategy for STROH AUSTRIA

Target

Area

• A single segment The above 120% proof premium spirit range

• In a single market Chinese spirits market in the province of Heilongjiang

• With a single product STROH’s 80 spiced rum

Table 8: Targeting Strategy for STROH AUSTRIA

Source: Author

Proof Grade

Social Standing

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4.6. Positioning Strategy for STROH AUSTRIA

Outlined in Table 9 below is the brand positioning statement for STROH in China.

Brand Positioning Statement for STROH AUSTRIA in China

For winter sport fans, STROH is the beverage that delivers true Après ski feeling because only STROH has the SPIRIT OF AUSTRIA.

Table 9: Brand Positioning Statement for STROH AUSTRIA in China

Source: Adapted from STROH, 2005

STROH wants to be defined by the Chinese target market in relation to its competitors as

being the first to introduce the Après ski culture to China. Another important aspect is its

function as brand ambassador for the country of Austria (STROH, 2005).

5. Marketing Plan for STROH AUSTRIA in China

5.1. Marketing Activities for STROH AUSTRIA in China

Shown in Table 10 below is a summary of STROH’s planned marketing activities in China.

Marketing Activities for STROH AUSTRIA in China

On site Web based

• Preparing multilingual STROH marketing materials for Chinese needs

• Renting a STROH ski hut in Yabuli Ski Resort

• Co-sponsoring of 2009 World Winter University Games

• Sourcing of capable staff

• Developing a STROH online web shop for China

• Creating one umbrella multilingual STROH website with interactive elements

• Interactive PR including daily STROH blogs

• Webcasts from the STROH ski huts

Table 10: Marketing Activities for STROH AUSTRIA in China

Source: Adapted from Leu, 2007

15

5.2. Marketing Budget for STROH AUSTRIA in China

Marketing budgets worldwide are being cut on a large scale due to the current economic

crisis. However, those companies with the highest marketing spending will “come out on

top” according to Moray MacLennan, chairman at M&C Saatchi (SMEweb, 2008).

Considering the above statement and following the suggestion of Celia Rocks, partner at

INSIGHTS for Marketing, that in order to market successfully in the long-term “10 per cent of

gross revenue should be allotted for marketing”; STROH’s annual global marketing budget

will therefore be set to € 1 million in 2009 (IPFrontline, 2005).

STROH’s entry in the Chinese spirits market will take up 20 per cent of the available

marketing budget due to the start up costs in the first year.

5.3. Justification of Marketing Budget for STROH AUSTRIA in China

Outlined in Table 11 below is the justification for the allocation of the € 200,000 marketing

budget for STROH’s market entry in China in 2009.

1. Personnel (€ 110,000)

STROH Project Director (€ 70,000)

STROH Event Team (€ 30,000)

Chinese Event Team (€10,000)

• 1 member of current event management department in Austria

• Full-time position

• Will be overseeing STROH’s development in China

• € 70,000 annual salary

• 3 members of current event management department in Austria

• Temporary support for project director

• Will be training Chinese staff

• 3x € 10,000 bonus for three months project

• 15 local event managers to be recruited

• Full-time positions

• Will be organizing the STROH events

• 15x € 2,000 annual salary

16

2. Capital Equipment (€ 28,800)

STROH Ski Hut (€ 27,000)

STROH Promotional Gear (€ 1,800)

• € 20,000 annual rent for STROH ski hut in Yabuli Ski Resort

• € 5,000 for interior furnishing of STROH ski hut

• € 2,000 for Après ski sound system

• € 1000 for STROH snow mobile

• € 500 for STROH giveaways

• € 300 for STROH staff uniforms

3. Consultant Services (€ 19,000)

Agent (€ 15,000)

Translator (€ 4,000)

PR Agency (€ 10,000)

• € 15,000 for set up of off-shore company & distribution channels

• € 4,000 for translation of label, marketing materials, website & web shop

• € 10,000 for annual retainer contract with national PR agency

TOTAL: € 157,800 Table 11: Justification of Marketing Budget for STROH AUSTRIA in China

Source: Adapted from Leu, 2007

Budget Justification Summary: 5-year Amortisation

The overall set up costs for STROH’s marketing campaign in China are estimated at € 157,800

leaving a cushion of € 42,200 for running expenses and sponsoring.

STROH is a medium-size company and therefore has only limited resources to allocate to its

marketing budget. However, as costs and salaries in China are only a fraction of those in

Europe, we have assessed that STROH’s marketing budget is more than sufficient for a

successful market entry.

STROH’s marketing expenses for China are treated as an investment and will be amortized in

less than five years according to our long-term profit calculations (Miller, 2007).

17

5.4. Schedule of Marketing Activities for STROH AUSTRIA in China

Shown in Table 12 below is a schedule for the implementation of STROH’s marketing

activities.

Schedule of Marketing Activities for STROH AUSTRIA in China

2009 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec

SEASON 2008/09

SEASON 2009/10

ON

SIT

E

Translating marketing materials

Chinese

STROH ski hut set up Yabuli Ski Resort

Jingyuetan Ski Resort

Sponsoring World Winter

University Games

WEB

BA

SED

Website Chinese Multilingual

Web shop Chinese

Blogs /webcasts Chinese

AD

MIN

Find partners Distribution PR

Sourcing staff Chinese

Representative office Yabuli Ski Resort

Table 12: Schedule of Marketing Activities for STROH AUSTRIA in China

Source: Adapted from Gantt, 1915

Marketing Activities Summary: Employ Austrian Web hosting partner

The responsibilities for on site activities will be solely with the project director in China

whereas the web based activities will be initially set up by STROH’s web hosting partner in

Austria and then maintained by members of the Chinese event team. For administrative

activities STROH will employ an agent in China.

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4. Future Outlook for STROH AUSTRIA in China

Gap in the Market

In conclusion to the proposed marketing plan outlined above we have looked at the Chinese

spirits market and identified a “gap in the market” that STROH can capitalize upon. We have

also answered the old market researcher's cliché if there is a “market in the gap”, giving

detailed background information about future trends in the Chinese spirits market (Day,

2006).

Financial Crisis

There is an apparent concern that the current financial crisis might significantly impact the

Chinese alcohol consumption. According to Stella David, chief executive officer of Bacardi-

Martini in the UK, global consumption may see some impact causing consumers from higher-

priced brands to look for slightly lower-priced brands. We regard this volatile environment

as a welcome circumstance beneficial to STROH’s market entry in China (Goel, 2008).

We are happy to present this marketing plan to the STROH board of directors in person at an

agreed time.

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5. List of References

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Nair, C., 2006. A prescription to advance China’s green ambitions. Financial Times, [internet] 11 January. Available at: http://www.ft.com/cms/s/1/8bfb563c-82d2-11da-ac1f-0000779e2340.html [Accessed 30 November 2008]. NSW Department of State and Regional Development, 1998. Market Entry Checklists, [Online] (Updated 1998). Available at: http://www.smallbiz.nsw.gov.au/smallbusiness/Exporting/Markets/Market+Entry+Checklists [Accessed 30 November 2008]. Osnos, E., 2007. When served this country's stiffest drink, it's OK to sip. Chicago Tribune, [internet] 23 September. Available at: http://www.chicagotribune.com/services/newspaper/printedition/sunday/chi-letter_osnossep23,0,4200525.story [Accessed 30 November 2008]. Runckel, C., 2005. China’s Ski Industry, [Online] (Updated 2005). Available at: http://www.business-in-asia.com/skichina.html [Accessed 30 November 2008]. Runckel, C., 2005. Skiing the Dragon’s Back - A look at Skiing in China, [Online] (Updated 2005). Available at: http://www.business-in-asia.com/skidragon.html [Accessed 30 November 2008]. SMEweb, 2008. Firms slash marketing budgets. SMEweb, [internet] 14 April. Available at: http://www.smeweb.com/sales-and-marketing/news/firms-slash-marketing-budgets.html [Accessed 30 November 2008]. Strasser, E., 2008. Heritage brand STROH back in Austrian hands. The Skills Group, [internet] 21 August. Available at: http://www.skills.at/mediacorner/stroh/index3.html [Accessed 30 November 2008]. STROH company website AUSTRIA, 2008. Recipes, [Online] (Updated 2008). Available at: http://www.stroh.at/pages2.php?ln=en&id=34 [Accessed 30 November 2008]. STROH company website UK, 2005. Facts & Figures, [Online] (Updated 2005). Available at: http://www.stroh.co.uk/stroh/facts+figures.htm [Accessed 30 November 2008]. STROH company website UK, 2005. STROH Worldwide, [Online] (Updated 2005). Available at: http://stroh.co.uk/stroh/worldwide.htm [Accessed 30 November 2008].

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