After careful consideration, we have to conclude that Introducing our product In this new market could definitely be a success. Since research shows us that our current target market is also well represented in Spain, there is enough potential for a large offset. Furthermore, it showed that Spanish youngsters crave American products, which will create a lot of leverage for us to create brand equity. When entering the market we will pursue a focus differentiation strategy.
This will allow us o market the American rolling of our product, which will appeal to our specific target market. We will market our product as a malt liquor beverage, rather than a wine. This will help us to overcome the difficulties of a wine product (old-image, perceived quality should be high, etc. ) and will allow us to offer the product as an exciting new mix drink for youngsters. The American foundation of our product will be widely used in marketing the product to develop brand awareness. This might Include slight alterations to labeling In order to make It look even more American.
The product will be marketed through several channels, which include promotional events, online advertisements, and television adds. Since no significant differences exist within our target market throughout the country, we will be using a pull strategy in launching a nationwide campaign. Our local sales representatives will use a push approach with the supermarket owners, giving them a lot of personal contact. With regards to our pricing strategy, we will initiate a low-price penetration strategy, allowing us to gain considerable market share in a short amount of time.
After gaining this market share, we have created enough brand equity to launch additional flavors, products and services (like events). Due to cost constraints, the products will be produced In Spain, which rules out a large part of our distribution channel Issues. Local managers that will be hired by Bone’s Farm will manage factories and orchards. Further analysis should show us whether or not to outsource local distribution. Info/Facts About Target Country Spain is a constitutional monarchy in the Southwest of Europe, with King Juan Carols as the head of state.
Spain went through a peaceful transition to democracy after the death of dictator Franco In 1975 and Joined the European Nylon In 1986, Moreover, it was one of the founding members of the Economic and Monetary Union (MME) in 1999. (Economist, 2009) The latter resulted in the Euro now being the national currency. Flamenco, corridor and sangria, a drink that is made from red wine combined with other spirits such as brandy or whiskey and fruits, are considered as the symbols of Spain. (Europe-cities, 2009) Spain’s terrain is largely flat to dissected plateau surrounded by rugged hills.
In the North, near the French border, he peaks of the Spanish part of the Pyroxenes dominate the terrain. Other than the mainland, Spain also controls a number of islands in the Mediterranean Sea (e. G. Pizza and Mallory) and the Atlantic Ocean (Canary Islands). Furthermore, Spain’s summers are hot in the interior and more moderate and cloudy along the coast, while winters are cold in the interior and partly cloudy and cool along the coast. (CIA World Fastback, 2009) Estimated is that Spain will have 40,525,002 inhabitants in Lully 2009. Of this population 14. % is between the ages of O and 14, 67. 4% is between the ages of 15 and 64 and 18. % is aged 65 and over. For the group ranging from O to 64 the ratio of males to females is roughly 1:1, whereas that ratio is roughly 2:3 in the age group of 65 and over. In addition, population is not expected to grow significantly in the coming years, and a growth of 0. 01% is estimated to occur in 2009. (CIA World Fastback, 2009) From 1994 through 2008 the Spanish economy grew every year. In the third quarter of 2008 this streak ended when Spain entered a recession, much like the rest of the world.
Spain’s GAP per capita is approaching to be amongst the highest in Western Europe, with $34,600 in 2008. According to figures from the year 2000, the top 10% of the population in terms of household incomes or consumption earn over 25% of the total of all household incomes, and the bottom 10% earns only approximately 2. 5%. Together with Germany it is now the most decentralized large country in the EX. after Belgium. The Spanish market is made up out of a total of 17 autonomous communities that are similar to U. S. States, each one with its own culture and varying levels of autonomy.
All these autonomous communities are lined by two hubs in Madrid and Barcelona, which is where the vast majority of gents, distributors, foreign subsidiaries and government controlled entities that control most of the Spanish economy are located and operate from. Establishing an effective subsidiary in the Madrid or Barcelona areas or appointing a competent agent or distributor is the key to success. In recent years Spain has also eased regulations and increased incentives in an effort to attract foreign firms and investments. U. S. Commercial Service, 2009) Doing Business (2009), part of the World Bank Group, has done research on 181 economies around the world. Out of these 181 economies, Doing Business ranks Spain as the number 49 country in terms f doing business for 2009, down from a ranking of 46 in the previous year. These rankings are measured according to a number of criteria. Spain scores especially low on the ‘starting a business’ and ’employing workers’ criteria, with a ranking of 14th and 16th in those areas respectively.
In terms of ‘paying taxes’ and ‘protecting investors’ Spain ranks approximately 80th and in terms of ‘dealing with construction permits’, ‘registering property, ‘getting credit’, trading across borders’ and ‘enforcing contracts’ it scores approximately 50th. Spain received its highest ranking in ‘closing a easiness’, which is probably to any company’s least concern out of all of the criteria. Culture into account in order to be successful in launching our product into this country. Culture is an integrated system of learned behavior patterns that are distinguishing characteristics of the members of a given society. Michael Kaplan, 2009) and is thus the underlying set of values that ‘guide’ people within a group to adhere to a certain pattern. Since we know that cultures differ from country to country and study after study places cultural insensitivity/ignorance as the primary cause of international ventures failures (Michael Kaplan, 2009), it is evident that we need to put great emphasis on this issue. In order to do so, we have various models that can assist us in understanding the Spanish culture, or at least the differences Ninth American culture, and allow us to develop a way to overcome any cultural differences.
First of all, we can use a model developed by Egger Hefted. In his book ‘Cultures and Organizations’ (Hefted, 1991) he defines culture as the collective programming of the mind which distinguishes the members of one group or category from another’. This definition shows that cultures differ between groups of people and overcoming these differences is clearly a necessity in order for a business to be successful. The model that Hefted has developed as a tool to overcome these differences, includes several basic dimensions that exist in every culture.
These dimensions basically entail a scale on which each country can be measured and thus provides information on the extent to which a certain factor can be found within the country. When we measure Spain on this scale, we can see that, in contrast to the U. S. , the score for ‘Uncertainty Avoidance’ is particularly high. This could create a problem for us, since the Spanish people will probably be ‘hostile’ towards a new product from another country. Furthermore, we can see that on the other dimensions, there are considerable differences between the U.
S. And Spain. We will need to develop a strategy in order to overcome this. By means of comparison, we have added the application of the Hefted model to Mexico. Especially on the ‘Uncertainty Avoidance’ scale, these countries do not differ that much. Since we know that Bone’s wine has been launched in Mexico with great success, it might be interesting to match our Implementation strategy to one adopted when entering Mexico. Second of all, we can use the cultural dimensions model developed by cultural expert Fans Trampers (1995).
Trampers’ concise definition of culture the way in which a group of people solves problems’ (Trampers, 1995) lies at the basis of his cultural dimensions model. This model is similar to the model developed by Egger Hefted, in the sense that it measures dimensions that, according to Trampers, can be found in any culture. The only practical difference between the two models is the selection of dimensions. We can read from Trampers (1995) that there are, again, considerable differences between Spain and the U.
S. When applying the model. Now, as mentioned before, these cultural differences are something that we’ll have to overcome when entering the market. The Spanish culture. For one, Spanish tend be more formal in personal relations than Americans and professional attire is recommended to be worn. This approach to doing is business is very similar to countries like Italy and France. Moreover, Spanish business representatives like to have face-to-face meetings because they expect a personal relationship with suppliers.
However, less than 30% of all local managers are fluent in English. A final point is that Spanish people tend to be very conservative n their buying habits, where known brands do well, but it should be noted that there is an increasing awareness and curiosity about the U. S. In general, especially among the younger generation. (U. S. Commercial Service, 2009) Product Description E&J Gallo Winery is the largest family-owned winery in the world today and the biggest exporter of California wines.
E&J Gallo Winery has a wide range of wines and one of this is the brand name of Bone’s Farm. Bone’s Farm is a fairly standardized, fairly popularized malt liquor; it is recognized as a cheap wine (Everyday Drinkers Infinite; 2008). However, it has more resemblance to a cider than a standard wine, since the alcohol comes from fermented apples instead of grapes. Added to the apple wine are ingredients like natural and artificial flavors and coloring additives, to give the product its special taste and color (Weakens. Com, 2009). The beverage has an average between 3 and 7. Percent of alcohol, and is therefore considered a soft beverage. Bone’s Farm offers a wide variety of fruit-flavored beverages which are the allowing: Sangria, Fiesta Strawberry, Tropical Sun, Wild Island, Snow Creek Berry, Mountain Berry, Pink Grapefruit, Kiwi Strawberry, Strawberry Hill, Watermelon, Strawberry Margarita, Strawberry Daiquiri, Wild Cherry, Green Apple, Apple Blossom, Melon Ball, Pain Accolade, Fuzzy Naval, Mango Grove, Orange Pineapple, Orange Hurricane, and Blue Hawaiian (Bone’s Farm Fan Club website, 2007).
Bone’s Farm beverages are served in 750 ml bottles and are often located in the cold box area of convenience stores across the inner cities of the United States and TTS prices are between 3 and 7 dollars (Shopping. Com, 2009). Outside of the U. S. Bone’s Farm has already been introduced in Mexico, Japan, and Canada (E&J Gallo Inner, 2009). For instance, Bone’s Farm has been introduced in Mexico 10 years ago and it has a good position in the Mexican market by being recognized as a main contender in the category of Fruity Wine.
Furthermore, Bone’s Farm is focusing primarily on women because they are used to drinking alcoholic beverages with only small percentage of alcohol in it. Therefore, Bone’s is sold like a soft beverage: refreshing, sweet and easy to drink; in other words, as “an original and unrepeatable product”. Bone’s is also mixed with other beverages like rum, tequila or vodka Restaurant De M©OIC, 2006). Product Industry Since our product categorizes itself as a wine, it is important to have a look at the wine industry in our target country.
The wine industry in Spain is the largest wine industry in the world, mainly in the area of vine cultivation and the amounts of wine produced (Wines in Spain, 2009). During the last quarter of the 20th century the Spanish wine industry transformed, nowadays it’s seen as a quality product (Wines in Spain website, 2009). This quality is sustained by strict regulations (provided by the ELI), which classify the wines in several groups. This way when the wines reach the consumer they can expect a certain quality (Wines in Spain website, 2009).
Additionally, the Vineyard and Wine act’ describes the different classes of wine according to the degree of monitoring and exigency applied to the production process. The various geographical regions each have their own trading organization that upholds the quality, promotes the exports and represents the interests of the wine trade, furthermore it functions as a forum of encounter and discussion for the wine trade (Wines in Spain website, 2009). What this information shows us is that the wine industry in Spain is not only protected, but is possibly deeply rooted in the Spanish culture.
This means that marketing our product as a wine might pose difficulties. We will elaborate on this issue in the coming sections of our paper. Out of a report from 2008 by Federation Espanola del Vine, which does market research about the wine market, several conclusions can be reached. For several years, there has been a decline in the wine consumption in Spain, whereas the export has been increasing (Federation Espanola del Vine, 2008). This decline, forever, is much more severe in the wine industry than in other alcoholic beverage industries (Federation Espanola del Vine, 2008).
The most important finding from that report is that most wine is consumed in houses with higher status and by elder people (presentation by Federation Espanola del Vine, 2004). Young people in Spain see it as a drink for their parents not themselves (Federation Espanola del Vine, 2004). Which has a tremendous effect on the marketing strategy, on which later will be elaborated. Alcoholics industry The conclusions by Federation Espanola del Vine that the wine consumption is silencing are contradicted by other market research, namely Remuneration International (2008) that says that the value and volume of the alcoholic market in general increased.
This contradiction is caused by the performance of beer and ready-to-drinks (Reds) which offset the declines of wine and spirits. The growth in the alcoholic market is mainly in the premium and super-premium segments with higher than average unit prices. The result of this is predomination in all alcoholic categories. The spirits sector has launched several products and refrained some because of the maturity of the market. Ere brand oriented and have well defined preferences regarding brand of alcoholic drinks.
Private labels are therefore small and mainly consumed by low-income consumers and young people looking for cheap options to mix. Furthermore small, regional companies dominate the Spanish alcoholic market, which are contributed by regional distribution of beer, wine and cider. The research by Remuneration International (2008) is concluded with a cautiously optimistic outlook for alcoholic drinks, mainly for beer and Reds. Because of the recession predomination will slow down and private labels will do better under the conditions at the moment.
Competitor Analysis In order to be able to successfully enter the Spanish market, a thorough analysis of the potential competitors is required. First of all, as a product that is basically a cider with some additions, our product will encounter several cider producers as direct competitors. From the websites of the two of the most well-known supermarkets in Spain (Mercado S. A. And Errors) we found four relatively cheap ciders that are widely sold and promoted. Mercado offers El Gaiters and El Gaiters Extra (Mercado website, 2009), whereas Errors offers Corrugate and Eula in the name price range (Errors website; 2009).
An extended description of these products is not of any importance at this point, but we do have to state that the products mentioned above match both the average amount of alcohol as well as the proposed price of our product. All in all, we can argue that, due to the wide variety of flavors, our product is so much more than Just a cider and the competitors Just mentioned Mould not be the direct competition. However, since the base ingredient of our product is apple wine, we are still a cider nonetheless.
Second of all, we have to look at our indirect competitors. This is a much more difficult issue, since we are competing with a wide variety of malt liquor providers. As Nee will discuss in the next section, we are planning on targeting young people. Since this target market is pretty much saturated with a wide variety of alcoholic beverages, Nee will certainly compete with producers of drinks other than cider. Sunroof might be an example of such an indirect competitor, since they offer a sweet, malt beverage to this same target group for a much higher price.
Backyard, which offers their customers the malt beverage ‘Breeze’ would be another example of such a impetigo. Both of these companies offer the same type of sweet, fashionable malt liquor as an alternative to the more traditional drinks. It is very important for us to be aware of these competitors and act on their current competitive advantages. Furthermore, as mentioned above, there are some traditional drinks that our product will have to compete with. This type of drink, including e. G.
Sangria and Tint De Verona (Wine with soda water) have been around for decades and have a wide popularity amongst youngsters. Since these and other mixed drinks, form a direct wreath to the successful establishment of our brand in this new market, it will be a Challenge to differentiate our product enough to convince a large chunk of the Target Market Analysis As our target market we have selected youngsters aged 18 to 29 years old, which is more or less the same market that is targeted in countries where Bone’s Farm is being sold now already.
Population statistics provided by the Institutor National De Statistics (2009) tell us that this group consists of roughly 7 million people: there are ?2. 3 million people aged 15-19 years old, ?2. 7 million people aged 20 to 24 years old and ?3. 5 million people aged 25 to 29 years old. Given the fact that the legal drinking age in Spain is set at 18 and that our target market is tailored towards that, Nee can obviously not count all 2. 3 million people aged 15-19 as part of our target market.
Therefore, a fair estimation would be to take 15th of the 2. 3 million that fall under that specific age group and add that to the rest, which totals up to approximately 7 million. Our main reason for choosing this specific target market comes from other statistics provided by the Institutor National De Statistics (2009) regarding the expenditures of different age groups. On average expenditure per household by expenditure groups, the age group of 16 to 29 has the highest total expenditures on alcoholic beverages, tobacco and narcotics out of all age groups.
Looking at it in detail, we find that males aged between 45 and 64 spend about 15% less on that expenditure group that 16 to 29 year-olds do, but that difference is offset by the fact that females between 16 and 29 years old spend approximately 20% more on those expenditure groups than the 45 to 64 year-old women. Moreover, if we look at the Truckee of spending we find that for the age group of 16 to 29 year-olds ranks highest for both the males as well as females, with 2. 24% and 2. 7% of total expenditures respectively. One thing to note, though, for all these statistics regarding the expenditure group of alcoholic beverages, tobacco and narcotics, is that we do not have information on how the structure of spending on those different products is Nothing that specific group. When we think about this generation, with ages varying from 18 to 29 years old, Nee are thinking of people that are probably still in school or in university or people hat are in the early stages of their working career.
When looking at the statistics for this age group we find that they clearly have lower expenditures than people from older age groups, which might indicate less disposable income (although people aged 65 and over have even lower expenditures). A point of note is that the younger generation in Spain has started to adopt non- traditional drinks and styles. A new trend, along with beer-drinking, seems to have patterns of binge drinking that was previously unheard of in Spain and more commonly associated with Britain.
The Social Issues Research Centre website, 2009) S. W. O. T. Bone’s Farm has a lot of experience in the business, especially since E&J Gallo, the largest exporter of California wines, owns it. Not only does it have experience its continental U. S. Market, but also international experience across the border and even overseas in countries like Canada, Mexico and Japan. One of the great strengths of Bone’s Farm is its wide variety of flavors that are included in its products offering.
Ninth over 20 different flavors available, Bone’s Farm offers a wider variety than any of its competitors. One of the additional strengths is that Bone’s Farm does not ask a premium price for its 750 ml bottles. Instead, prices that are being charged are between 3 and 7 dollars. Uneasiness Since Bone’s Farm has chosen to sell its product at a price range between 3 and 7 dollars it is not a product of very high quality like your typical wine might be. Moreover, comparing it to wine again, a bottle of Bone’s Farm only contains between 3 and 7. Percent alcohol, whereas a typical bottle of wine has a higher percentage than that. Another weakness is that Bone’s Farm is not yet a known brand in Spain. Opportunities Spain offers a lot of opportunities for Bone’s Farm, if it would decide to enter the Spanish market. First of all, Spain is a member of the European Union, which means that entering the Spanish market could be used as a gateway to other European markets. Furthermore, the climate in Spain is very suitable for the type of product it offers.
With over 40 million inhabitants and a GAP per capita of $34,600, the market can be called quite substantial (CIA World Fastback, 2009). By targeting the age group between 18 and 29 years old we are targeting a market with approximately 7 million people that statistically spend the most money (out of all age groups) on alcohol, tobacco and narcotics (Institutor National De Statistics, 2009) Establishing an effective subsidiary in the Madrid or Barcelona area or appointing a competent agent or distributor has been identified as the key to success (U.
S. Commercial Service, 2009), so that is definitely something to keep in mind. Moreover, the fact that Mexico and Spain have some similarities in terms of their scores on the cultural dimensions by Hefted (1991) could prove to be helpful. Since nine’s Farm has been quite successful in Mexico (Restaurant De M©OIC, 2006), his could prove to be a valuable experience to rely on for the introduction into Spain. In terms of specific attributes to the Spanish culture, there is an increasing general awareness and curiosity about the U.
S. Among the younger generation (U. S. Commercial Service, 2009), which is an opportunity that could possibly be capitalized on as well. In addition, there is an adoption of non-traditional drinks and drinking styles by the younger Spanish generation, which is also very noteworthy (Social Issues Research Centre, 2009) Finally, when looking at the industry we find that wine and spirit consumption is silencing, while the consumption of beer and Reds, technically Bone’s Farm’s obviously a great opportunity for Bone’s Farm.
Threats It goes without saying that Bone’s Farm will also face some threats when entering the Spanish market. First of all, an extremely big threat is the recession that Spain entered in the third quarter of 2008. (CIA World Fastback, 2009) It is difficult to foresee when this recession will end and it could have (and has) a great impact on business ventures in Spain. Moreover, the fact that Spain is one of the most decentralized countries in the EX. Economist, 2009) could also prove to be a difficult hurdle if things like consumer preferences differ too much from region to region.
Another area that could prove to be a big problem is the general business environment in Spain. As stated before, research has shown that Spain is ranked only 49th out of 180 countries in terms of doing business and especially in the areas of ’employing workers’ and ‘starting a business’, which could be of vital importance to Bone’s Farm. (Doing Business, 2009) In terms of culture, Spain scores particularly high on Hypotheses (1991) cultural emission of ‘uncertainty avoidance’, which means that it could be difficult to penetrate the Spanish market with new products in general.
This claim is backed up by the U. S. Commercial Service (2009), that says Spaniards are conservative in their buying behavior, and by Remuneration International (2009), that says that Spaniards are very brand oriented and have well defined preferences regarding brands of alcoholic drinks. Also, less than 30% of all local managers in Spain are fluent in English (U. S. Commercial Service, 2009), which could be a problem in face-to-face meetings, or any form of communication for that matter.
When looking at the Spanish wine and alcoholic drinks industry, we find out there are some threats as well. Wine consumption in Spain has been declining for several {ears (Federation Espanola del Vine, 2008) and wine is seen among young people as a drink for their parents and not for themselves (Federation Espanola del Vine, 2004). Even though Bone’s Farm could technically be considered different from wine, giving people the idea that Bone’s Farm is a wine could have negative consequences. Finally, there is the threat of competition.
A wide variety of alcoholic drinks are Ewing sold in Spain; not only more expensive drinks, but also drinks like ciders, for example, that compete in the same price range that offer the approximately the same amount of fluid (750 ml) and alcohol (3-7. 5%). Marketing Strategy and Tactics Product An easy way to create focus in the marketing mix is to identify the link between a product’s features and the perceived target market. In order to gain such a focus, we have a wide variety of models at our disposal.
One of these is Porter’s generic strategies, which identifies three different strategic directions for a company/product; cost leadership, differentiation and focus (De Varies en Decker, 2007). Without getting into all the details of the model, we will state here that we decided on a focus strategy. This strategy allows us to focus on a specific segment in the new market, in Inch we aim for a cost leadership advantage. Reached the same target market with success in the United States and Mexico Restaurant De M©OIC, 2006).
By marketing the product as a malt beverage the needs of young people will be fulfilled as they are looking for non-traditional drinks Social Issues Research Centre, 2009) and therefore probably score lower on Hypotheses ‘uncertainty avoidance’ (1991) scale than the rest of Spain. Additionally, as Nee can read from the previous sections, Spanish youngsters are looking for cheap options to mix (Remuneration International website, 2008) and crave anything coming from the United States (U. S. Commercial Service, 2009).
This means that marketing our product specifically as an American product and putting great emphasis on this, Nail allow us to create a lot of brand awareness in the introduction phase and brand equity in the long run. Included in this strategy is the fact that we will slightly alter he packaging/labeling of our bottles, making it look even more American. At the same time, we overcome the ‘age’- issue that states that young people see Nine as a drink for their parents more than a drink for themselves (Federation Espanola del Vine, 2004).
Since we decided to market our product as a malt beverage, Instead of a wine, we will not have to deal with the current ‘old’-image problems of Nine. The focus on young people and marketing the product as a cheap malt beverage brings another benefit as the quality of the product becomes less important than when you buy a wine. Also it differentiates itself clearly from its direct competitors, offering much more than the simple taste of cider as well as its indirect competitors, bringing a new exciting beverage to the target customers.
The product will not be adapted as the beverage already comes in many flavors. In the introduction phase, only a couple of flavors will be introduced into Spain. The selection of the flavors that are introduced is based on preferences of young Spaniards. One of the flavors that will probably not be introduced in the first batch is Sangria’. Even though this is a very traditional drink (Europe-cities, 2009), we argue to to do so.
The reason for this is that a lot of our competitive advantage stems from the ‘unique’ features and image of our product, which would be lost if we decide to go for a flavor that is already well known and commonly accepted. In later phases, other flavors will be introduced to extend the life cycle of the product. Promotion As already stated, the product will be promoted nation-wide as a malt beverage towards young people. It also will be promoted as a cheap option to mix. The awareness of the product will be raised by advertising and promotional events on university campuses and other areas where young people gather.
A promotional event could be for example free samples. The promotional activities will be the same throughout Spain because no significant cultural differences are expected within Spain, as we believe that our target market has pretty standardized characteristics throughout the country. This means that no significant effect is expected from the fact that Spain is a decentralized country. Since we focus on a large target market, we Nail use pull strategies to reach our audience.
