CASE STUDY: WINE AUSTRALIA TARGETS CHINA
Taken from: Strategy, Marketing Plans and Small Organisations, 1st edition, 2016 Dr Breda Mccarthy & bookboon.com
Most observers of the Chinese consumer market have seen it evolve from a traditional culture toward a more Westernized consumer society (Wang and Lin, 2009). To Australian policy makers, China is one of the world’s most attractive markets due to its large, emerging middle class and their increased disposable income. Even though only a small fraction of China’s population of 1.3 billion is classified as middle class, the segment is still large and attractive. However, wine exports to China fell 7% in 2013 and 8.5% in the first half of 2014 (Ross, 2015).
The consumers of luxury brands are considered to be the ‘nouveau riche’, generally young, urban and fashion savvy (Gao, Norton, Zhang and To, 2009). There has been a shift toward hedonic consumption in China. Chinese consumers, especially young consumers, are inclined to seek fun, enjoyment and instant gratification (Wang and Lin, 2009). By purchasing foreign wines, and giving red wine as a gift, they can satisfy their needs for esteem. The concept of face, or mian-tzu is of central importance in China. Face stands for prestige or reputation that is achieved in life through success and personal effort (Hsien, 1944). The ‘face’ concept is relevant to conspicuous consumption (Wong and Ahuvia, 1998). Companies selling expensive cars, watches, jewelry, fashion, high-end electronics, leather goods, fine wine, skincare and so forth, have benefited from the demand for aspirational brands.
By buying designer label brands, the individual can impress others and achieve greater social status. Apple is positioned as luxury product in China and status is conferred by owning an Apple product (HSBC, 2011). When Chinese people travel to places like continental Europe and Hong Kong, they tend to be quite interested in shopping and inclined to bring home aspirational brands in order to gain face. The publishing industry also supports growth in demand for luxury brands, with high-end fashion magazines like Vogue seeking to educate the Chinese consumer. Recent research counters the assumption that Chinese consumers will pay huge sums of money for foreign gifts and imported labels.
Recent research shows a rejection of Western associations. While the super-rich target French wines, due to the country-of-origin effect (Yang and Paladino, 2015), the growing middle class are interested in value-for-money wine. They are strongly patriotic. They are highly appreciative of their local culture and norms. Supporting the Chinese community is seen as important for social status and image – which are major drivers of behaviour. The conclusion for Australian wine marketers is to distance themselves from Western associations and localise a bit more. Exporters should consider branding their products with Chinese names, rather than established Australian titles such as Penfolds or Jacob’s Creek (Paladino and Ye Yang, 2015).
Although young, affluent Chinese consumers appear to reject traditional Confucian values such as frugality, modesty and humility, they are still strongly influenced by other Confucian values of collectiveness (Wong and Ahuvia, 1998). The western value of individualism is tolerated on the condition that it has no influence on collectivist interest and does not conflict with moral standards (Li and Su, 2007). Some brands like Apple promote individualistic values and encourage consumers to express their own values and personality. The Think Different advertising campaign celebrated the renegade culture, however this is not a message designed to strike a chord with the Chinese authorities. Rebelliousness has not been emphasized in appealing to Chinese customers; instead Apple’s luxury appeal has been much more prominent in attracting followers (HSBC, 2011).
Please read the case and answer the following questions:
1. List factors from external and internal environment which influene on the formation of strategy.
2. According to the case, which factors from external and internal environment need to be studied carefully while entering Cina wine market? Why?
3. According to the case which factors changed in China in derent years, how it influenced wine market?