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Chinese market entry strategy for the Turners Ice Cream

Introduction
This report sets out to analyse the selected UK ice cream manufacturer the Turners
strategy to entry to Chinas ice cream market. It uses !"T analysis approach
analyses the companys strengths# $eaknesses# opportunities# and threats. The report
has identified a general marketing entry strategy $hich $ill help the company
de%eloping ne$ market effecti%ely. It contents the introduction of the Turners
company in &rief# the Chinese ice cream market# the !"T analysis and the
suggested marketing entry strategy.
The Turners Ice Cream in brief
The Turners Ice Cream $as founded in '()*. T$o years later# +,erona- rang of
fla%oured ice cream $as introduced. .y '(/*# the company had o%er 0* outlets along
the south coast of England# and &y '(11# there $ere 2)* Turners shops around the
UK. The company has recently launched a franchise option# and there are no$ '3
franchisees operating near key tourist centres in England# cotland# and !ales.
Turners ice cream has 4ustifia&le ac5uired a high 5uality# upmarket image# and the
company has continued to emphasise traditional %alues# traditional products# and
traditional ingredients.
6rom 2**3 to 2**/# the companys sales stood at around '.) m 7.8# trading profit
reached '.' m 7.8. The companys profile looks "K# &ut there is no dou&t that times
are getting harder. The UK ice cream market pre%iously is dominated &y three large
players !alls# 9yons# and Cad&ury ch$eppes. The competition has &een highly
stiffer all the time# and things are &ecoming e%en $orse $ith more and more glo&al
%arieties of ice cream find their $ay to the UK.
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Chinese market for ice cream
:ust a&out a decade ago# ice cream# especially high;end ones# is regarded as lu<urious
snack in China. =o$# $ith dynamic economic gro$th# and disposa&le incomes gro$th
for ordinary consumers# eating out is &ecoming increasingly afforda&le and is
increasingly popular# especially in the cities. >o$e%er# Ice cream sales in China are
highly fragmented. !ith the e<ception of key national players# such as Inner
?ongolia @ili Industrial 7roup Co 9td# !allAs BChinaC Co 9td# Inner ?ongolia
?engniu 7roup# =estlD BChinaC 9td and .right 6ood Co# the rest of the ice cream
players are mainly regional players $ith %alue shares of less than 2E in 2**0.
According to Euromonitor International B2**)C# ,olume sales of ice cream are
e<pected to record ro&ust gro$th of 3/E in the ne<t four years# to reach 3.' &illion
litres &y 2**(. This is predicted to see a continued emphasis on ne$ launches# $hilst
the strengthening of retail distri&ution $ill also dri%e %olume sales of ice cream. Trade
sources ha%e indicated that ice cream consumption is increasingly less seasonal# and
this is likely to dri%e o%erall sales of ice cream. The de%elopment of the retail market#
$ith the e<pansion of modern retail channels such as supermarketsFhypermarkets and
chained con%enience stores# is also e<pected to enhance the retail presence of ice
cream on a national le%el# thus &oosting sales.
The Turners Ice Cream SWOT analysis
Although the Turners is doing currently "K# &ut facing the intensi%e competition# the
limited UK ice market is seen more and more hard. Under this circumstance# it is
necessary to consider de%eloping ne$ market. This section analyses the company in
terms of Chinese ice cream market &y adopting !"T approach.
Strengths Weaknesses
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trong &rand name
>igh 5uality products
8roducts inno%ation
8oor operate system
Opportunities Threats
8ositi%e outlook for the Chinese snack
food market
7ro$ing natural ice cream market
Increasing demand for organic healthy
food products
9o$;end products
8roduct inno%ation
Gising ra$ material prices
Strengths
Strong brand name
The company has marketed a UK $ell kno$n &rand throughout the years. This is
perhaps the reason $hy the consumers still $illing to &uy its products e%en there has
&een no inno%ation and high price. This means that the &rand to a certain e<tent
represents a high 5uality product. This gi%es the company the chance and confidence
to de%elop ne$ products and entry to ne$ market.
High quality products
+,erona- rang of fla%oured ice cream products are kno$n as high 5uality. It is this
$hich helps the company holding its competiti%e ad%antages. This %alue $ill
undou&tedly make easy to the company de%eloping its ne$ market.
Weaknesses
Products innovation
The company is known as a traditional value keeper, with its traditional products and
traditional ingredients. It does pay attention to suiting consumers life style needs. This could
result in a situation where it will loose its segment consumer group like children.
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Poor operate system
The tightly control o%er the o%erheads has &een a ma4or $eaknesses that pre%ents the
company gro$th. The companys in%estment in research is e<tremely lo$. In 2**3
and 2**)# it spent only '#*** 7.8 on research# $hich holding a per cent as lo$ as
less *.'. ?ean$hile# its ad%ertisement costs are also seen as the lo$est among its
competitors. In addition# the companys management system is also seen as poor
e<ample.
Opportunities
Positive outlook for the Chinese snack food market
ChinaAs accession to the !T" $ill ha%e a positi%e impact on the ice cream industry
o%erall. There $ill &e more foreign imports of ad%anced technology# and traditional
machinery $ill &e replaced. The 5uality of products $ill impro%e as a result. Ur&an
consumers $ill &e e<posed to more foreign &rands and $ill &e tempted to &e more
ad%enturous in trying out these products. Impro%ements to the distri&ution
infrastructure $ill &enefit sales of ice cream products# as they &ecome more $idely
a%aila&le# e%en in remote areas. !ith the further opening up of the retail o$nership
system# more international &rand launches are e<pected through foreign;o$ned
channels.
(Removed
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Low-end products
Intense competition has led to the price campaign# and in turn has resulted in a
situation $here manufacturers ha%e to gi%e up high;end products to cater for the
demands. E%en key foreign players such as !allAs and =estlD ha%e to ad4ust their
product portfolios to cater to local preferences. 6or instance# they cut their product
prices &y more than 0*E o%er the period to compete &etter $ith domestic players.
=e$ product launches in 2**0 $ere mostly mid;priced products# thus increasing
competition in this price segment. According to official statistics# a&out 1*E of ice
cream products cost &elo$ G?.2# $hile only 0E of sales are comprised of products
costing o%er G?.3 BCA.CI# 2**3C.
Product innovation
Another outcome of the intensified competition is that foreign manufacturers are
engaging in the launching of ne$ products to increase &rand shares. The multinational
companies ha%e introduced ice cream $ith typical Chinese fla%ours to compete $ith
products from local players. =e$ launches ha%e also included higher end products# as
companies aim to offset falling margins due to the reductions in the prices of e<isting
products. The market for impulse ice cream is still the focus &ecause consumers
commonly &uy ice cream on an impulse &asis. This means that the Turners traditional
%alues must &e changed other$ise it $ill not &e a&le to tackle $ith the competition.
Rising raw material prices
!ith the price of &asic food and feed commodities on the rise# food manufacturers are
increasingly facing pressure on their margins. The Turners uses &asic ra$ materials
in large amounts. If ra$ material prices continual rise# it $ould thus lead to increased
pressure on the companys margins.
!arketing plan for the Turners
To de%elop Chinese ice cream market has ne%er &een easy as analysed a&o%e.
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>o$e%er# this does not mean there is no chance to success. .eing ha%e the good
reputation in this industry# the Turners ice cream could still $in the campaign if
follo$ing an appropriate marketing strategy. This includes a general strategy and step
&y step plans. The general strategy refers to the regenerati%e inno%ation $ith respect
to the companys traditional %alues. This calls for the ne$ strategy on product
inno%ation# distri&ution channel# sales promotion# and ne$ market de%elopment as
$ell. The entry to Chinese ice cream market# in particular# re5uires properly prepared
plan as presented &elo$.
"earning Chinese business culture
The process of glo&alisation has $itnessed the rapid gro$th of international acti%ities
BFrank 1994C. "nce a firm e<pands its operations outside the &orders of its o$n
nation;state and outside the dominance of its o$n home culture# the influence of the
host countries national cultures &ecomes reality BFatehi 1996C. Conducting &usiness
across international &oundaries re5uires interaction $ith people and their
organiHations nurtured in different cultural en%ironments BKale and Barnes, 1992C.
Therefore the need for kno$ledge and understanding of the social;cultural difference
&et$een host country and home country &ecomes of paramount importance.
6or most $estern people# China is still a mystic country o$ing to its cultural features
&eing completely different from those of $estern countries B7hauri et al# 2**'C.
Indeed# the traditional Chinese culture# in $hich Confucian philosophy is dominant# is
a high conte<t culture# $hich is opposite to $estern culture $hich is lo$ conte<t. It
also has its o$n incredi&ly comple< Chinese condition Bguo qingC# $hich al$ays
confuses $estern people B7hauri et al# 2**'C. All of these make $estern negotiators
feel difficult and confused $hen they negotiate $ith Chinese negotiators. ?any failed
negotiations are caused &y the poor understanding of Chinese culture or lacking of
a$areness of the Chinese &usiness negotiation style BKirk&ride# Tang I !est$ood#
'((1C. This is $hy more and more scholars are studying ino;!estern .usiness
=egotiation in order to &e more effecti%e in negotiations $ith Chinese.
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Choosing appropriate entry strategy
To compare $ith its counterparts# the Turners has missed an early chance to de%elop
the Chinese market. >o$e%er# it may en4oy the ad%antages o%er the follo$er strategy
in terms of initial market costs and 5uestiona&le effecti%eness. Indeed# for pioneer
entrants# some factors such as demand uncertainty# entry scale# ad%ertising intensity#
entry time of follo$ers# and the scope of the economy are all risk. =o$ for the
Turners# it is more easily to de%elop effecti%e entry strategy into the emerging market
in China. ?oreo%er# studies ha%e demonstrated that those inno%ati%e late entrants
gro$ faster than pioneers and ha%e higher market potentials and repeat sales rates.
?oreo%er# they can slo$ the pioneers gro$th and reduce its marketing spending
effecti%eness.
=onetheless# in doing so as inno%ati%e late entrants# apart from the a&o%e mentioned
general inno%ation strategy# the company needs to study ho$ to &uild its distri&ution
channel in short order and to de%elop it market share. In so doing# an effecti%e $ay is
to set up 4oint %enture through the Turners find an appropriate counterpart to merge it
and use its distri&ution channel and factories. This strategy has &een e%idenced &y
many e<amples.
Conclusion
This $ork has analysed the Turners Ice Cream 9tds case to look at its entry strategy
to Chinese ice cream market. It can &e concluded that the UK ice cream market is
highly dominated &y three large players i.e. !alls# 9yons and Cad&ury ch$eppes.
Although the Turners currently runs smoothly# it has to seek for ne$ income point if
it is fighting sur%i%al in the future. The Chinese ice cream market as an emerging
market# although it is also competiti%e# pro%ides a great potential to increase income.
The company ha%e its key strengths in de%eloping ne$ market# and it is right time to
think a&out its future. >o$e%er# the $eaknesses accompanied $ith the company could
&e risk in de%eloping ne$ market# as $ell as e<ternal en%ironment. In general# the
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Turners may make success in entry to Chinese ice cream market if follo$ing a proper
marketing strategy.
References
.enkouider# C. B2**3C. Indulgent ice cream o%errides health concerns. Euromonitor
International.
China Association of the .akery and Confectionery Industry BCA.CIC# B2**3# 2**/C#
The annual report on .akery and Confectionery Industry.
7h5uri# 8er%eH# 6angand Tony . =egotiation !ith the ChineseJ A socio;cultural analysis. :ournal
of !orld .usiness. '*(**)'/# 6all2**'# ,ol. 0/# Issue 0
7h5uri# 8er%eH# 6angand Tony . =egotiation !ith the ChineseJ A socio;cultural analysis. :ournal
of !orld .usiness. '*(**)'/# 6all2**'# ,ol. 0/# Issue 0
Kanter# ?. and Corn# G. I. B'((3C Ko Cultural Kifferences ?ake a .usiness
KifferencesL Conte<tual 6actors Affecting Cross;Cultural Gelationship uccess.
:ournal of ?anagement Ke%elopment# '0.