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Running head: FINALIZED GLOBAL MARKETING PLAN Finalized Global Marketing Plan Tara Appling-Crisp MKT/562 October 10, 2011 Lorri Cline 1 FINAL GLOBAL MARKETING PLAN 2 Executive Summary Whether red, white, rose, or sparkling, wineries across the world provide a range of varieties and prices from many regions. Most cultures also use wine in a variety of ways from religious ceremonies to special occasions to a standard beverage with a meal. California wineries provide a range of choices based on the desires of the consumer with current availability reaching only the United States. Globalization of California wines provides these same options to consumers in other countries, which requires significant research because of the popularity of European wines such as those local to France, Italy, and Spain. While personal experience from travel indicates a lack of California wines across Europe, the risk of competition from other European vineyards may indicate a need for exporting specific blends of wine into specific markets. Ireland’s recent failure in the wine industry because of climate issues creates a need for importing wine from other countries. Porter’s Five Forces Model provides five major areas for study to determine the success of failure of a venture within this chosen market including rivalry, new entrants, substitutes, buyer power, and supplier power. A strategic mode of entry also plays a significant role in the success of California wines for Ireland. According to Johansson (2009), four different modes of entry exist for a company beginning a new expansion venture for the international market in the form of exporting, licensing, strategic alliances, and foreign direct investments. Each mode varies based on the involvement required of the company. In an exporting mode, for example, a company has ecommerce options as well as overseas subsidiary options allowing minimal overseas purchases with the initial investment. FDI, on the other hand, requires full involvement from the company and a capital investment for manufacturing plants. Choosing one option or a variety of options for entry mode allows any company a successful entry into the country of choice. Strategic FINAL GLOBAL MARKETING PLAN 3 alliances and partnerships prove the best mode of entry for Ireland with production remaining in California to ensure the quality of the grapes. Understanding consumer behavior, localization, adaptation, and standardization strategies provide additional knowledge for successful product globalization. Understanding the decision-making process of any consumer provides the initial insight into the foreign customer. With further research, consumer behavior in local and foreign markets reveals similarities and differences useful in the marketing process, whereas standardization becomes country specific. Implementation of the knowledge of each aspect reveals to the consumer a company value worthy of a quality product. With California wines specific to Ireland, creating blends unique to the country and adapting the labeling to meet the regulation requirements becomes the best strategy for standardization along with adherence to the four P’s of marketing for the implementation strategy. Significant research regarding country cultures and areas to create a competitive advantage provide additional information for segmentation, positioning of the product, distribution strategies, and pricing. Additionally, the life cycle of the product holds an important factor for pricing and positioning because each phase of the life cycle requires adaptation. Flexibility in the product for target segment, pricing, and positioning creates an avenue for further success. Global advertising and management of the advertising strategy requires an integrated approach with adherence to different cultures, inclusion of marketing managers in the decisionmaking process, and appropriate promotional strategies. Employing a marketing director to supervise the department with individual managers for each product, country, or aspect of the strategy creates a unification of the marketing between countries. Creating a global presence through media and volume additionally places the California wine in front of the customer on a consistent basis. Finally, promotional tools such as sponsoring causes and special events such as FINAL GLOBAL MARKETING PLAN 4 art gallery openings, allows the customer an opportunity to taste the product without a significant initial purchase. FINAL GLOBAL MARKETING PLAN 5 Finalized Global Marketing Plan Competitive environments, global entry strategies, segmentation, pricing, distribution, promotional tools, and implementation plans all play a significant role in the introduction of California wine to the Irish market. Consumer behavior studies reveal the desire of the customer, the thought process before purchase, and feedback following use of the product. Adaptation, localization, and standardization of California wines to meet Irish standards further create brand value among the consumer. Finally, advertising strategies and promotions in the form of sponsorships and strategic product placement create a globalization and marketing strategy for successful implementation. Competitive Environment Porter’s Five Forces Model Competition in the global market involves a large group of possibilities and requires significant research prior to market entry. When entering an overseas market, competition outside the chosen country of Ireland requires consideration as well because France, Italy, and Spain produce quality wines as well as European Union trade advantages. Porter’s Five Forces Model “identifies five sources of competitive pressures on the firm in a given industry” (Johansson, 2009, p. 48). The five areas of study include rivalry, new entrants, substitutes, buyer power, and supplier power. Each area reveals the viability of Ireland as a new market for California wine and the potential of exporting a specific California wine to Ireland. Rivalry. Research of domestic and international competitors requires focus for successful product globalization. One of the easiest methods of exporting wine to Ireland or any overseas market requires a third party vendor. According to the California Wine Export Program (2011), which provides market reports for the world’s leading importers and exporters of wine, FINAL GLOBAL MARKETING PLAN 6 Ireland neither imports nor exports the product from California or any of the other major countries within the global wine industry. Although many Irish citizens believe production of wine within the country becomes impossible because of severe climate changes, others believe a version of the grape produced in France could withstand the climate (Herault, 2010). However, the competition with France as one of the world’s leading wine producers would create a high level of competition for Ireland. Therefore, importing wine from across the globe becomes the only option for many pubs, restaurants, and spirit stores throughout the country. California wineries produce the largest amount of wine within the United States creating a larger potential for success in the export business. After reviewing the online sales options of the major wineries in California, none currently ship overseas creating an environment of low competition for developing an export relationship with Ireland. Foreign competitors become the highest potential for rivalry with France a strong possibility because of geographic location and the membership within the European Union. New Entrants and Substitutes. As leading wine producing countries in the foreign market, France, Italy, and Spain create the greatest threat of new entry or substitution. However, The Irish Wine Association (2011) indicates that of the 8.7 million cases of wine sold in Ireland in 2010, only 4% were rose. Additionally, only 15% of wine sold in 2010 came from hotel and restaurant sales with only 6% in local pubs. Therefore, the specific market to pursue within Ireland becomes hotels, restaurants, and local pubs with an initial offering of California rose wines with a sampling of red and white options that differ from those currently offered. For example, if France provides merlot and chardonnay options, providing shiraz, cabernet sauvignon, or pinot grigio alternatives in addition to a zinfandel or other rose provides an extended offering of California’s unique blends. FINAL GLOBAL MARKETING PLAN 7 The IWA also indicates that Australian produced wines became the favorite of Irish citizens in 2010 with France trailing as the distant second in popularity. Although an attempt to enter the market in either of these countries would create significant substitution possibilities, global options in Ireland reduce that possibility because of the lack of local production. According to the IWA (2011), Ireland maintains the third highest excise tax on wine within the European Union. This high tax keeps the risk of import from smaller wine producing countries low because the financial risk becomes too significant for even a slow introduction of the product. Buyer Power and Supplier Power. According to Porter’s Five Forces Model, buyer power and supplier power can create a strong argument either for or against global expansion. In the case of strong buyer power, an attempt to have high prices or to increase prices creates additional competition because the consumer simply purchases another brand. In the case of supplier power, profit margins realize the effects without a distribution network (Johansson, 2009). Irish guidelines for importing wine from outside the European Union require special licensing and fees every four months dependent upon the amount of wine imported on a regular basis. Therefore, increasing prices becomes necessary to cover costs and maintain the desired profit margin. However, a distribution network within the European Union provides the opportunity for decreased fees and a competitive price per bottle of wine. Pubs, restaurants, and hotels frequently sell wine by the glass increasing the potential for additional profit percentages when dealing with these entities. Global Entry Strategy Exporting Three options exist when considering the exporting strategy as follows: FINAL GLOBAL MARKETING PLAN 8 Direct through overseas subsidiaries, Direct through e-commerce, or Indirect through trading companies (Johansson, 2009). Direct exporting provides the company more control through hiring middlemen or partnering with sales subsidiaries. With the direct exporting option, the limited knowledge of the chosen country remains an issue. However, the hiring of individual agents to oversee each aspect of direct exporting requires additional resources and funding. Johansson (2009) details six different areas required for exporting as listed above. The distribution agent holds responsibilities from finding the distributor to negotiating the contract whereas customs issues become the responsibility of the shipment agent. Another agent requires an experience with export pricing and legal issues while needing a fourth agent with currency conversion. Each of these agents must also deal with the range of documents used for each task. These forms include bills of lading in foreign and domestic needs, letters of credit, customs declarations forms, and insurance certificates in addition to the traditional forms of invoices and purchase orders. The indirect exporting option of using trading companies provides a company little control including control over the country choice. EMCs, on the other hand, allow the company to choose the country for business and become responsible for business transactions in the foreign market with limited commitment terms. If the venture becomes unsuccessful or not as successful as forecast, ending the venture becomes an easy task. However, assuming the venture becomes the success forecast in the planning stages, the company loses the ability to learn about the foreign market and the necessary laws and regulations of doing business in the country of choice. FINAL GLOBAL MARKETING PLAN Licensing An agreement between foreign and domestic companies to produce, distribute, and sell a product becomes the nature of licensing. Essentially the technology and product created by a domestic company transfers to the foreign company with an agreement for a certain percentage of the royalties. According to Johansson (2009), royalties average 5% of the gross revenues. The advantages of licensing a product allow time for significant market research and knowledge of the foreign country and an avoidance of tariffs while maintaining a profit from the product whereas the possibility of the licensee using information for competition becomes a significant disadvantage. The creation of the licensing contract becomes essential to the agreement to ensure fair dealings and limitations for both companies involved. The first effort requires ensuring necessary copyrights and patents take place. The next contractual efforts include sublicensing rights, performance requirements, auditing expectations, compensation, and provisions for termination of the contract. Two important forms of licensing and equity options exist in the form of franchising and original equipment manufacturing (OEM). Franchising, a form of licensing, creates a situation in which a domestic company allows a foreign investor or entrepreneur access to products for sale in the overseas market. The domestic company maintains control of the business dealings as the foreign company pays fees and royalties based on revenues. The domestic company provides the foreign entrepreneur marketing strategies and training. Although franchising occurs quickly and inexpensively, the domestic company receives a small percentage from sales of the product, which leaves little room for further expansion. Original equipment manufacturing (OEM), on the other hand, requires allowing a foreign company to sell a domestic idea or product under the foreign brand name. “OEM is like selling a generic brand, letting another firm put its name on the product” 9 FINAL GLOBAL MARKETING PLAN 10 (Johansson, 2009, p. 162). The domestic company maintains minimal expense with no future efforts available to market the product internationally. Strategic Alliance Finding an accomplished partner in any foreign country within various networks becomes the essence of a strategic alliance. With minimal market knowledge, a strategic alliance (SAs) in at least one of the four areas becomes essential to entry into a foreign country. SAs formulate in one of four areas including distribution, manufacturing, research and development, and joint ventures. In a distribution alliance, the domestic company locates a distributor in the foreign market allowing increased capacities of production for the foreign company and immediate access to the foreign market for the domestic company. A manufacturing alliance allows the two different companies to manufacture similar parts and products using the same manufacturer. The disadvantage to this alliance becomes two different companies attempting to control the production process with potentially different opinions and management styles. Joint ventures, viewed as equity-based alliances, involve the “transfer of capital, manpower, and technology” (Johansson, 2009, p. 166) to a foreign partner with business experience in the market. Again, a disadvantage becomes the domestic company’s lack of knowledge about the foreign market and a loss of the opportunity to gain that knowledge. When sharing information with a foreign company, a risk of antitrust exists because of minimal knowledge and an uncertainty regarding the financial benefits to the foreign partner. Approached correctly, the domestic company must obtain significant information about the foreign partner, ensure contract negotiations cover each step as necessary, and take the opportunity to visit the foreign country as a learning experience. FINAL GLOBAL MARKETING PLAN 11 Foreign Direct Investment Foreign direct investment (FDI) options create a strong advantage in low prices, customer satisfaction, and production of a quality product. Building new plants or acquiring existing plants requires an initial capital investment to maintain marketing control. Readily used in Ireland, by the end of 2009, FDI from the United States totaled $235 billion with 600 subsidiaries in place employing more than 100,000 Irish citizens (US Department of State, 2011). Although FDI appears the preferred method of entry into Ireland, outsourcing outside of the United States falls under attack because it leads to the loss of jobs for the American employees. In an already faltering economy, increasing the unemployment rate while aiding employment in another country becomes an undesirable option. Acquisitions, on the other hand, create issues of compatibility with a potentially similar product already manufactured by the company. Implementation and Standardization Strategies Consumer Behavior Successful marketers develop a strategy to meet the needs of the target group better than the competition through research revealing the buying patterns of consumers. Market research also consists of defining the problem, research design, measurements, constructing questionnaires, sampling, fieldwork, and data analysis (Johansson, 2009). One of the goals of the lengthy amount of research required becomes company value not only for one product but also future products. Additionally, understanding the decision process of the consumer allows the creation of an appealing marketing strategy. Several models exist to aid marketers and researchers in compiling information. FINAL GLOBAL MARKETING PLAN 12 Kotler and Keller’s five stage model of the buying-decision process (2007) includes research in problem recognition, information search, alternatives, the purchase decision, and consumer behavior following the purchase. The diagram below provides details of each step in the process. Problem Recognition • Consumer recognizes the need for a product • Marketing strategies invoking interest in a product relayed as a need • Active searches reveal information about various products of similar products and the features of all competing brands • Marketers use strategic positioning and branding to highlight the assets Informational of a specific product over the competition Search Alternatives Purchase Decision • Consumer weighs the options and assets of each product for an informed purchasing decision that meets the need • Marketers use pricing strategies for similar quality products and important attributes as the competition • Social networking and others opinions sought by the consumer • Situational influences such as finacial capability and any potential risks • Marketers must reduce any perceived risks and build brand value for the social networking factor • Buyer satisfaction or disappointment • Marketers use communication efforts to reduce dissatisfaction and gauge areas for improvement Postpurchase Behavior • Marketers provide methods of disposal to protect environmental risks The buyer decision-making process remains the same for local and foreign customers alike because consumers are goal-oriented (Johansson, 2009). A consumer realizes a need or desire for a particular product and seeks out the best availability when considering price, quality, and FINAL GLOBAL MARKETING PLAN 13 the opinions of peers as shown in the previous model. However, difficulties exist in the search for information directly from consumers in the form of surveys or questionnaires, personal communication, or customer feedback following a purchase. Marketers must rely on available statistics during the decision-making process. For this reason, initial expansion to a country similar to the home country in culture, behavior, and legal regulations provides a higher degree of certainty in the consumer research. For example, the European Union consists of 24 countries including Ireland. The EU provides these countries with a foreign trade agreement with the United States although the union prefers trade among the 24 countries only. Standardization Creating a standardized marketing strategy for a global product allows companies to meet the needs of customers while keeping the quality of the product and production costs low. As with any concept, various advantages and disadvantages exist creating the need for research into other options such as localization or adaptation. The result must create positive financial performance in conjunction with sustainability of the product in the global environment. Production, distribution, and marketing strategies become important areas of standardization as world markets become similar and the desires of the consumer increase. A global product, such as the rich wines of California, becomes individualized to a specific area with changes to the marketing strategy within each area. Localization, Adaptation, and Standardization. Standardization refers to a unique marketing strategy appealing to the consumers in Ireland, whereas localization and adaptation require changes to the product and changes to meet the specific legal requirements within the country. “Product adaptation involves altering the product to meet local conditions or preferences” (Kotler & Keller, 2007, p. 336). However, adaptation of California wines becomes FINAL GLOBAL MARKETING PLAN 14 unnecessary because the product holds a natural differentiation from the wines popular to Ireland that import from Australia, France, and Chile with differences in the grapes harvested in each area (Irish Wine Association, 2011). Localization, as stated by the Alcoholic Beverage Federation of Ireland (2011), requires that labeling include the number of units in European measurements on each bottle as well as a warning for pregnant women. The ABFI also requires that the company providing the product engage in consumer awareness and education campaigns. Ultimately, the mix of adaptation, localization, and standardization depends upon the global market selected. Adhering to the local policies and regulations of that country may not indicate a need for product adaptation. However, successful infiltration of the product may require localization in select areas. Standardization, on the other hand, indicates a marketing strategy identifying the unique differences of the product from others already offered and adheres to the local policies. Advantages and Disadvantages of Standardization. With any new product line or marketing venture advantages and disadvantages require research and discovering. Kotler and Keller (2006) suggest a lengthy consideration of the following areas to determine revenue possibilities: Product features, Brand name, Labeling, Packaging, Colors, Marketing strategy, Materials, and Prices. However, the standardization effort of the marketing strategy becomes significant in the success of the product. Johansson (2009) provides five important advantages of any standardization effort as follows: FINAL GLOBAL MARKETING PLAN 15 Cost reduction, Improved quality, Enhanced customer preference, Global customers, and Global segments. When directly related to California wine, improved quality becomes an advantage that need not be addressed. Production must remain in California because of the time sensitive issue between harvesting the grapes and producing the various types of wine. The cost reduction comes through the current advertising on British cable and television because millions of Irish consumers purchase cable options through Great Britain creating a combined effort for advertising the product. Worth €6.6 billion in 2010, the alcoholic beverage industry in Ireland led by 50.7% beer sales. Wine sales represented half of the remaining 49.3%. Only 10% of those sales imported from the United States with white wine constituting 49% and red wine following at 47% (Irish Wine Association, 2011). Competitive concerns lead the marketer to a conclusion of initially importing rose wines because of significant imports from Australia of red and white wines. However, the most popular imports come in the form of Shiraz, Cabernet Sauvignon, Riesling, and Chardonnay leaving a variety of other combinations available for California wines. Creating a blend unique to Ireland provides differentiation from the current popular varieties. Because the Irish consumer maintains a unique palate for wine of quality and has experience with California wines in travels to bordering countries, the global customer base has a natural creation with segmentation focused on those who frequent restaurants and pubs or stay in hotels within the country when traveling. However, according to the Irish Wine Association (2011), the majority of wine sold came from independent sprit shops. Standardization of the marketing strategy in a country with awareness of the product should aim FINAL GLOBAL MARKETING PLAN 16 to excite the Irish consumer to select California wines and create an increased sense of brand awareness. Standardization holds as many disadvantages as advantages. These disadvantages include off-target segmentation, a lack of uniqueness, issues with trade barriers, and strong competitors (Johansson, 2009). In relationship to California wine, the uniqueness presents in the form of the grape quality creating differentiation from the popular Australian wine. The quality of the grape becomes the promotional difference between the California wines and others available in Ireland from around the world. For example, the length of time purple grapes remain with the skin becomes the distinguishing factor for the type of wine created. The longer the grape stays with the skin prior to pressing, the deeper the redness of the wine. The grapes that produce white wine varieties stay with the skins for a short period and pressing occurs almost immediately after harvesting. Additionally, grapes that create red wine varieties soak in tannins for a certain amount of time dependent on the type of wine intended for production (Wine.com, 2011). Off-target segmentation and trade barrier issues also require significant market research prior to determining the best country market for the product. Because of decreased economic conditions in 2009, Irish wine sales decreased in 2009 and 2010 by 3.5% creating a questionable target market for Ireland. A growing concern regarding high excise and domestic taxes exists because Ireland holds the highest excise tax for alcoholic beverages. However, increasing domestic taxes within the country would result in consumers choosing to source products from other countries serving to further increase the excise tax (ABFI Policy Document, 2011). This creates an issue of cost when considering the import of California wines that require production in California. Furthermore, when considering the current political and religious issues in FINAL GLOBAL MARKETING PLAN 17 Northern Ireland, the United States government implemented the 1998 Belfast Agreement allowing a united Ireland. This agreement changed trade options for the entire country because of the location of one of the major harbors for distribution, Belfast Harbour in Northern Ireland (US Department of State, 2011). However, because the wine imports to Ireland primarily come from Australia and Chile, and the demand for wine continues to increase, the California wine market produces enough varieties to successfully compete. The potential of using other alcoholic beverage distributors such as those owned by Heineken or Bacardi Limited, creates the potential for additional jobs within those companies and eliminates the initial need to locate subsidiaries while learning more about the country. Globally Standardized Products. Kotler and Keller (2006) identify 10 important steps deemed “The Ten Commandments of Global Branding.” These steps listed below aid a company in starting a global branding process that eliminates many of the disadvantages and enhances the advantages such as reducing marketing costs and becoming a source of substantial growth for the company. 1. Understanding similarities and differences between local and foreign markets, 2. Elimination of shortcuts, 3. Adaptation of an existing marketing infrastructure, 4. Diverse communication, 5. Profitable partnerships, 6. Balancing standardization and customization, 7. Global and local control, 8. Ground rules for targets and positioning the product, 9. Measurement systems for strategic decisions, and 10. Design of brand elements. With significant market research, each of these elements provides a successful globalization strategy. Research of the wine industry in Ireland specifically reveals that many of the varieties of red and white wine currently offered include mixes of standard varieties. For example, the Australian red Shiraz wines include only 75% Shiraz and 25% Grenache and the popular white FINAL GLOBAL MARKETING PLAN 18 variety of Chardonnay from Australia includes a small amount of Sauvignon Blanc. The same information holds true for the wines imported from France with Chile the only country to provide Ireland with pure versions of wines. This information creates unique possibilities for adaptation of existing wine blends with the globalization of California wines into the country. Researching the various blends imported from the top two or three importers of wine also allows California wine blending in new ways unique to Ireland. Profitable partnerships with companies and distributors currently doing global business within the country opens initial avenues for success. For example, Heineken International holds several FDI’s and strategic alliances across 70 countries creating a large market for distribution and warehousing. Creating a partnership with this popular beer company for initial entrance into Ireland allows lower costs and association with a beverage that makes up 50.7% of the alcoholic beverage sales in Ireland (Heineken, 2005). Again this allows time to learn more about the country through personal experiences and make strategic changes as necessary for increased profit margins and sole control of the distribution of the product without the need for partnerships. Standardization of California Wine for Ireland. Many standardization strategies include a slight change in the product. However, as previously mentioned, the differences in the grapes produced in each region importing to Ireland holds a natural standardization of the product. Creating new blends specifically for Ireland in both red and white varieties further standardizes the product as well as providing pure forms of the wines. Packaging and marketing strategies becomes the best area for standardization for the purpose of complying with the requirements of the Alcohol Beverage Federation of Ireland and the Irish Wine Association. For example, the IWA requires that consumers be allowed to sample wine prior to a purchase FINAL GLOBAL MARKETING PLAN 19 opening up a variety of options for marketing strategy when introducing the new brand to the country. Additionally, the ABFI that governs the IWA requires that companies importing products show equal concern for preserving the employment of Irish citizens by using manufacturing and distribution companies indigenous to the area (Irish Wine Association, 2011). Another local standardization effort and requirement indicates that the unit guidelines for drinking alcoholic beverages differ for men and women, 21 units for men and 14 units for women where one unit equals 10 grams (ABFI, 2011). Although not currently in place, socially responsible issues toward the environment require potential consideration because the government officials within Ireland have begun these considerations. Successful marketing strategies around each of these standardization efforts aid in the success of the California wine products. Implementation Strategy A successful implementation plan transfers a marketing strategy into a measurable plan of action resulting in growth and an increased competitive edge (Pearce & Robinson, 2011). The four P’s of marketing include product, price, placement, and promotion with a fifth important aspect in the global environment devoted to packaging. With the top three wine imports to Ireland coming from Australia, Chile, and France respectively, the California wine products realize minimal competition because of the different qualities of the grapes and the ability to provide either pure varieties or new blends. Pricing, on the other hand, requires consideration of the current pricing in Ireland for by the bottle and by the glass situations. In 2010, table wine ranged from €7.72 to €8.62 per bottle (Irish Wine Association, 2011). With the recent reduction in excise duty, the cost per bottle increases an average of €1.97 changing the per bottle range from €9.69 to €10.59. FINAL GLOBAL MARKETING PLAN 20 Placement of the California wines requires strategic competition with the current sales in Ireland. The majority of wine sold by the bottle naturally occurs in local stores with by the glass sales occurring in hotels, restaurants, and pubs. Creative packaging the meets the previously mentioned country requirements along with features that include the beautiful landscape of the country draws the consumer to the attractiveness of the bottles. Offering wine tasting events within hotels and shops allows the consumer to taste the unique blends prior to a purchase for an informed decision. Sponsoring or cosponsoring events such as wine and food events held throughout Europe brings an array of customers throughout the European Union and allows the potential for food and wine magazines to showcase the products and the event. Global Segmentation, Positioning, Distribution, and Pricing Global Segmentation Through the process of segmentation, market division reveals groupings based on similar customer wants and expectations. Certain patterns and criteria develop naturally and require identification in the segmentation process. Peter and Olson (2008) identify specific bases used for the initial process as follows: Geographic such as country, Demographic such as age, Sociocultural such as social class Affective and cognitive such as benefits of the product, and Behavioral such as media use. However, customer preferences will differ in some way creating the need for a flexible product. Termed niche marketing by Kotler and Keller (2007), subsegments and patterns of segmentation produce increased product offerings, the potential for expansion, and increased revenues. Homogenous preferences indicate similar preferences among consumers whereas diffused preferences indicate significant differences. Finally, clustered preferences reveal distinct FINAL GLOBAL MARKETING PLAN 21 preferences suitable for flexible and profitable product options. Segment identification becomes a broad spectrum of ideas further narrowed down involving the two-step process of macro segmentation and micro segmentation. The segmentation process occurs in two distinct stages Johansson refers to as macro segmentation and micro segmentation (2009). Macro segmentation, similar to the bases identified by Peter and Olson, involve general criteria such as socioeconomic status and cultural aspects. This first phase aids the marketer in the identification of country selection in the beginning of the expansion project. Several countries will have similar characteristics creating the need for the micro segmentation stage of the process. In this stage information regarding specific groups of customers reveals patterns of use, price sensitivity issues, media use, buyer behavior, and income levels. Through this second phase the specific target customer becomes clear and the analysis reveals ways the marketer should communicate with the customer within the target segment. Marketing Components A strategic marketing mix consists of the four P's of marketing, product, price, place, and promotion as well as the four C's, consumer wants and needs, cost to satisfy, convenience to purchase, and communication. Mixing each of these into a marketing strategy builds brand equity and awareness. For example, when comparing consumer wants and needs to a product, careful analysis reveals success in building a product for the customer not for the company. Additionally, implementing the stages in the product life cycle (PLC), introduction to growth, maturity, and decline, influences the marketing mix and strategies. Analysis of the four P’s occurs in each stage of the PLC. FINAL GLOBAL MARKETING PLAN 22 Growth, Maturity, and Decline. The growth stage builds market share and brand preference by maintaining competitive pricing, reaching a larger consumer base, acceptance of the product, and quality assurance. As the popularity of California wine increases, plans to expand to other regions ensure a strong market share through the maturity stage. In the maturity stage sales begin to diminish as a company formulates ideas for maintaining market share and profits. Lower pricing, incentives, and differentiation measures ensure the products PLC continues. Because California wines maintain global recognition, the addition and creation of new varieties produces an incentive over the competition in the decline of the PLC. As sales decline, these additions provide opportunity for a new target market creating customer sustainability. Positioning Positioning in the global market offers brand awareness and allows the marketer to select the optimal place for the product, which changes with each target market thereby creating the need for an analysis of the demands within each market to establish a differential advantage. The needs within each targeted segment differ and require a link to the brand name “to increase brand loyalty," (Johansson, 2009, p. 190). Involvement in the selection of positioning strategies includes various stages of a company cycle such as market leader, the market challenger, and the market follower. Maintaining quality position allows a firm to remain a market leader. However, the position of market challenger requires a company to implement strategies that include price advantages, innovative products, and promotions (FAO Corporate Document Repository, n.d.). Extensive advertising throughout the marketing strategy allows the California wine product to gain competitive perspective and a market challenger position while paying close attention to the product space. FINAL GLOBAL MARKETING PLAN 23 Keegan's Four Positioning Strategies. According to Johansson (2009), Keegan focused on product and promotion as vital aspects of the marketing mix and developed four basic positioning strategies. The first, product-communications extension provides methods for extending an existing product to new country markets. Because of customized products for each segment, local decision-making and differences between countries disable this concept for a multidomestic market. The second strategy, product extension-communications adaptation, involves repositioning a current global product, which includes adapting to cultural, political, and socioeconomic conditions. Additionally, implementing different communication strategies serves to meet consumer wants and needs. The third strategy, product adaptationcommunications extension, includes adapting to government policies and regulations, cultural differences, and patterns of use whereas the final positioning strategy of dual adaptation involves product localization that reflects host market conditions. Accepting a Global Brand. Successfully entering the global market requires gaining the acceptance of the company and the product in the foreign market. California winemakers must analyze the cultural differences, government policies, consumer demands, and patterns of use to understand how to best enter the Irish market. Additionally, analysis of the five stages of development listed below becomes vital to ensuring success and acceptance of the product. Idea generation, Preliminary screening, Concept research, Sales forecasting, and Test marketing (Johansson, 2009). The current global popularity of California wine requires basing the sales forecast on the success of recent wine sales from various regions. As previously mentioned, Irish wine sales totaled 8.7 FINAL GLOBAL MARKETING PLAN 24 million cases in 2010 (Irish Wine Association, 2011). California wines also create potential for versatility through combinations presented as unique to the Irish market. Distribution In a global marketing strategy, achieving production efficiency for minimal costs and mass distribution becomes the goal of a company that provides a product to customers. When introducing a new product into the foreign market, creating decreased shipping times requires a modification of the distribution channels currently in place for building brand equity. Therefore, the marketer must determine how to deliver the new product to the customer through appropriate channels that meet the needs of the customer as well as keep costs down for maximum profits. Discovering these channels differs for each market and must be specific to the foreign target market while creating a competitive advantage. Competitive Advantages and Available Channels. When entering a new foreign market, creating and maintaining a competitive advantage becomes vital to the success of the company goals. Johansson (2009) indicates several issues requiring a solution such as exhaustive distribution, distribution based on the location of customers, decreased costs, distributors with knowledge of the new foreign market, and local manufacturing. A decision regarding the methods for customers to obtain the product such as retail stores, Internet orders, or wholesalers require research. Each of these areas, if strategically chosen, provide any company with a competitive advantage through lower costs and a competitive price that still creates the desired profit margin. Implementing numerous sales avenues further increases the competitive level. With a prime geographic location, Belfast Harbour in Northern Ireland provides additional competitive advantages through numerous options for warehousing, shipping channels, and FINAL GLOBAL MARKETING PLAN 25 distribution of California wines. Therefore, deciding among forming strategic alliances, foreign direct investment (FDI), full exporting, or licensing becomes an initial requirement. Optimal Channel for Irish Distribution. Although FDI becomes an appealing frontrunner, California wine production must remain in the United States because shipping grapes overseas for production affects the quality of the grape and ultimately the quality of the wine. However, creating strategic alliances with Belfast Harbour for the shipping and warehousing portion of the distribution process creates a relationship that benefits the harbor with plans for investments and improvements between 2011 and 2013 (Belfast Harbour, 2011). The sales options for retail, trade events, pub sales, and restaurant sales allow customers a variety of avenues for purchasing the product either by the bottle or glass. Pricing The close relationship between product price and positioning in addition to the effect on the marketing mix allocates price as a crucial step to strategic planning. Certain steps require consideration when determining price: Developing a marketing strategy, Making marketing mix decisions, Estimating the demand curve, Calculating costs, Understanding environmental factors, Setting price objectives, and Determining price (NetMBA.com, 2010). The stage of the product life cycle also affects pricing as the life cycle progresses from introduction through the growth, maturity, and decline of the product. An introductory price creates incentive to purchase or a low-priced penetration approach. At the beginning of the cycle the customer’s sensitivity to price becomes inconsequential because of the lack of familiarity with the product. Therefore, “charging what the market will bear” (Johansson, 2009, p. 476) FINAL GLOBAL MARKETING PLAN 26 allows a higher skimming price. As demand increases the price adjusts accordingly while maintaining competitive advantage and quality. When the product matures the price may drop as the company considers discontinuing or liquidating the product. In the stage of decline, new features allow customers to maintain interest in the product as the company maintains the ability to price at a substantial level to prevent liquidation. Global Advertising Managing Global Products Whether introducing a new product into a global market or introducing an existing product in a new country, management of the process presents quite a few challenges as follows: Different cultures and time zones, Increased need for technological communication, Effective implementation for both foreign and domestic environments, Balancing different priorities, and Leadership despite cultural and communication barriers. An integrated marketing approach creates a situation in which the home country and the foreign country become part of one global marketing strategy with adaptations to meet cultural needs. According to Johansson (2009), many companies employ a global marketing director to direct the entire process. The director position requires the ability to lead the development and implementation of a global marketing strategy, unify marketing and sales between countries, allocate resources for global brand development, recruit team members, and manage that team with leadership and motivation to reach common goals. Gruppo Campari, the parent company of Skyy Vodka, employs a marketing director based at the corporate headquarters with marketing managers in Italy, United States, and Brazil for the company spirits brands with a fourth marketing manager for the other countries combined. A fifth marketing manager for the wine labels deals with marketing and public relations (Gruppo Campari, n.d.). Bacardi Limited, on FINAL GLOBAL MARKETING PLAN 27 the other hand, employs a chief marketing officer based in Puerto Rico with a marketing manager for each of 16 different countries (Bacardi Limited, 2011). Managing an extensive marketing strategy such as Bacardi Limited and Gruppo Campari requires certain methods and techniques for success. Johansson (2009) identifies certain management systems in the form of integration mechanisms that aid in the process. The first, informal coordination, allows employees to travel to necessary countries and informally share information gathered from that visit allowing other employees to receive information about different markets. The second, coordinating committees, allows a more formal aspect of communication because managers from various countries meet on a regular basis to ensure global integration between each country. The final method, coordination of staff, begins as an informal meeting similar to the informal coordination method but eventually becomes an organized meeting for communications regarding product development, integration of local and global brands, and the coordination of a global campaign. Heineken Holdings, for example, includes five operating regions in Western Europe, Central and Eastern Europe, The Americas, Africa and the Middle East, and Asia-Pacific. The company employs marketing managers for each region who meet quarterly on a formal basis (Heineken, 2005). Managing the global product also requires people skills and an understanding of the necessary organizational structure. “If the organizational structure is the body and the chassis that hold the car together and the management systems are the engine and the gearbox, people provide the necessary lubrication that makes the pistons pump and the car run smoothly. And ‘people’ means everybody in the organization, from top management down” (Johansson, 2009, p. 589). Allowing managers responsible for a specific region or country to take part in the development and implementation process of the marketing strategy provides an opportunity to FINAL GLOBAL MARKETING PLAN 28 use knowledge gained regarding the culture and people within that country. Communication with the country managers additionally enhances the corporate culture for internationally strong financial and planning systems. According to Johansson (2009), marketing directors and country managers should communicate and make decisions that comply with company values rather than relying on the various cultures involved in the strategy. For example, Heineken International claims marketing innovation, changing needs of consumers, and community involvement in each country drive the growth strategy (Heineken, 2005). Global Presence Creating global recognition and brand equity on an international level begins and ends with coordinating campaigns, which require minor adaptations for each country, and controlling costs with advertising funds shared among several countries. Global advertising accomplishes these goals through uniform campaigns used in several countries with adaptations for language barriers and regulations. Throughout the process, decision-makers must choose how to allocate the budget shared by several countries, the best message for cross-cultural markets, and the media used in the campaign (Johansson, 2009). For example, many citizens in Ireland subscribe to British television providers that also become available in a variety of other countries including the United States such as the British Broadcasting Corporation (BBC). An integrated approach to creating a global presence requires strategy, budget organization, creative messages, and the use of media. For strategic introduction of California wines, ensuring the labels meet Irish requirements of units and necessary warnings becomes the first step. Familiarity with many independent wineries in California may not exist in Ireland. Therefore, an additional labeling tactic requires mentioning the more recognizable region in California such as Sonoma or Napa Valley while keeping label images uniform. Creating a label unique to Ireland ensures a FINAL GLOBAL MARKETING PLAN 29 recognizable label for consumers as well as advertising promotions and an eventual decrease in costs, which will initially be higher because of the new expansion efforts required. As with any marketing strategy, creating a global presence and the options for global advertising contain pros and cons that require consideration before proceeding with the strategy to allow the marketer to make adaptations as necessary. The main advantage involves the ability to keep advertising costs down through integrated advertising campaigns allowing international use of the message chosen for promotions in addition to purchasing promotions in media that reach an international audience. Johansson (2009) identifies four conditions required for successful global advertising: A recognizable image across multiple country markets, Same logo meanings, Identical or similar product features, and Similar requirements for use. Each of these conditions, or the lack of these conditions, creates disadvantages to the global advertising strategy if localization and adaptation become required elements within several countries. Costs may become difficult to contain, adaptations to logos or product images may require localization serving to further increase costs, and product features may require adaptation to meet the needs of customers. Therefore, global advertising agencies may become a viable option for the initial introduction of California wines into the Irish market. The agency itself maintains an international reputation, and locating an agency with alcoholic beverage experience in Europe or Ireland presents additional advantages. The potential advantages follow: Development of the message and creative for the campaign, Access to media worldwide media outlets, Development of the media schedule, Budgetary considerations, and Standardization as necessary (Johansson, 2009). FINAL GLOBAL MARKETING PLAN 30 The advertising agency RSCG Worldwide currently holds two offices in Ireland as Eightytwenty 4D and Young Euro RSCG. Utilization of these companies for initial entrance into the Irish market creates a successful implementation strategy for small independent companies such as the California wineries. Global Promotion Upon beginning a global advertising campaign, three areas require consideration specific to the country market including volume of advertising used within the country, the important media within the country such as television or print advertisements as well as the important global media available within the country. The volume of advertising requires consideration of the budgetary requirements, whereas the media and promotions used require significant research into the available global options. For example, many American publications such as Time, Newsweek, Cosmopolitan magazine, and People magazine have European versions published throughout Europe. Online advertising also reaches the global environment with strategic placements for each country involved. Sales promotions as well involve in-store promotional items, sponsorship of events, support of various events and causes, cross-marketing, and product placement (Johansson, 2009). In-store promotions and trade promotions such as coupons or gifts with purchase diminish the fine quality of the wine industry. Another issue with this form of promotion becomes the effect on the distributor because of the need to provide spirits stores with frequent deliveries if the wine sells rapidly because of the promotion. Alternatives become strategic placement of the product in a spirit store with promotional print ads introducing the product and smaller print ads for table tops in restaurants and pubs. These same inserts created on an even smaller scale fit inside restaurant menus and hotel room service menus. Sponsorships, on the FINAL GLOBAL MARKETING PLAN 31 other hand, create a global advertising opportunity that reaches beyond Ireland. A variety of events related to the arts, media, and sports allow opportunities for global branding and product introduction. For example, several musicals and art exhibits scheduled to premier in a variety of European countries including Ireland currently advertise the need for sponsorship. Additionally, BBC and Derry Entertainment need sponsors for an upcoming show called “Last Model Standing” (Sponsorscape, 2011). Special causes, such as any heart associations require support as nonprofit organizations. Supporting events that promote heart health fall in line with wine production because, in moderation, the antioxidants in red wine aid in the production of good cholesterol. The European Society of Cardiology promotes several initiatives requiring support such as The European Cookbook for heart healthy recipes, a perfect match for wine (European Society of Cardiology, 2011). Product placement, one of the newer aspects of promotion, involves contacting movie and television producers to include the product in films and television programs. With the range of films and programs that show a variety of pub, hotel, and restaurant scenes, this form of promotion requires pursuing assuming an affordable cost exists. The cost could become the disadvantage of the advertising placement promotion and thus requires consideration at different points in the advertising strategy. FINAL GLOBAL MARKETING PLAN 32 References ABFI Policy Document. (2007 - 2013). Retrieved from http://www.abfi.ie/Sectors/ABFI/ABFI.nsf/vPages/ABFI_Policy~abfipolicy/$file/ABFI%20Policy%20Document.pdf Bacardi Limited. (2011). Retrieved from http://www.bacardilimited.com/index.html Belfast Harbour. (2011). Retrieved from http://www.belfast-harbour.co.uk/welcome California wine export program. (2011). Retrieved from http://www.calwinexport.com/ European Society of Cardiology. (2011). Retrieved from http://www.escardio.org/Pages/index.aspx FAO Corporate Document Repository. (n.d.). A Competitive Analysis And Strategy. Retrieved from http://www.fao.org/docrep/W5973E/w5973e0a.htm Gruppo Campari. (n.d.). Retrieved on October 5, 2011 from http://www.camparigroup.com/en/index.jsp Heineken. (2005). Retrieved from http://www.heinekeninternational.com/management.aspx Herault, I. (2010, June 1). Vineyards in Ireland me arse. The Evening Herault. Retrieved from http://irishherault.wordpress.com/2010/01/06/irish-vineyards/ Irish wine association. (2011). Retrieved from http://www.abfi.ie Johansson, K.J. (2009). Global marketing: Foreign entry, local marketing, and global management (5th ed.). Retrieved from The University of Phoenix eBook Collection database Kotler, P., & Keller, K.L. (2006). Marketing management (12th ed.). Retrieved from The University of Phoenix eBook Collection database. FINAL GLOBAL MARKETING PLAN 33 Kotler, P., & Keller, K.L. (2007). A Framework for Marketing Management (3rd ed.). Retrieved from The University of Phoenix eBook Collection database. NetMBA.com (2010). Price strategy. Retrieved September 30, 2011, from http://www.netmba.com/marketing/pricing/ Pearce, J. A., II, Robinson, R. B. (2011). Strategic management: Formulation, implementation, and control (12th ed.). Boston, MA: McGraw-Hill/Irwin. Peter, J.P. and Olson, J.C. (2008). Consumer behavior and marketing strategy (8th ed.). Retrieved from The University of Phoenix eBook Collection database. Sponsorscape. (2011). Retrieved from http://www.sponsorscape.com/ U.S. Department of State. (2011). Retrieved on September 18, 2011 from http://www.state.gov Wine.com. (2011). Retrieved from http://www.wine.com/