International Expansion Essay

Pages: 16 (4255 words)  ·  Bibliography Sources: 16  ·  File: .docx  ·  Level: College Senior  ·  Topic: Business

SAMPLE EXCERPT . . .

China has in the recent years liberalized its trade policies (Lardy,2003; Ianchovichina & Martin,2001). This means that import and exports can be conducted freely. Red Bull can exploit this friendly policy in the importation of its products into the populous Chinese market. Red Bull must also tow the line in regard to adhering to the Chinese food and beverage importation policies.

Some of these rules and regulations as stated in the policy include the following;

The company must ensure that they declare the importation of its goods to the Customs at the port of entry or any other place of entry within 14 days from the declaration of entry date.

The imported Red Bull products must be given Chinese labels as stipulated by the Chinese import policy.

The work of EastBridge Import and Export (2009) indicated that the importation of drinks and food stuff are restricted by very complicated administrative rules and provisions. The work of Fei (2012) indicated that Red Bull energy drink contains certain ingredients that are not recognized by the State Food and Drug Administration (SFDA).These ingredients/substances includes sodium citrate, carmine pigment, sodium benzoate as well as tartrazine.

Red Bull is however lucky because it has been endorsed by the China Safe Beverage Certification Center (Beijing) as a safe substance.

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The other element that Red Bull must observe is taxation. In China for instance the basic tax rate for food and beverages is 17% and 13% respectively as noted by the Customer Guideline (2012).In China, the import duty for non-alcoholic beverages is 35% plus 17% VAT. Kuomintagang (2011) noted that China is ranked 13th in the most favorable investment destinations.

TOPIC: Essay on International Expansion Is One of Assignment

Hatipoglu (2006) noted that that the Chinses market is a favorable one for foreign investors. Since the Chinese government allows foreign investors to list their companies in the local/domestic market exchange, companies such as Red Bull can take this opportunity in inciorporating the company under a local brand name and then involving the citizens in its running. Hatipoglu (2006) indicated that China has for a long time maintained its spot as the most attractive foreign direct investment (FDI) in the whole world. This can then help in promoting foreign investments such as Red Bull. Entering into the Chinses market might present certain risks to the company but the BERI rank and other indicators includes that there is a very high likelihood of corporate growth in the region.

Fine-grained screening

China is a very attractive and competitive marketplace for various business opportunies.What makes the nation best for Red Bull's international expansion strategy is the fact that it was recently crowned the second largest market for the consumer energy drinks worldwide (Marketograohy,2012).This is the first fact that makes the market suitable for a Red Bull product launch. Secondly, the Red Bull's market share in the Asian market is the largest (13% by 2005) (Euromonitor, 2005). The third factor is the fact that the Chinese have the highest buying power in the Pacific-Asian region (Romeschchandra, 2011). The fourth factor is the establishment of special economic zones by the Chinese government (Doole & Lowe, 2004).

As indicated in the macro screening as well as preliminary screening, in the Asian region, factors such as the country's market size/growth and buying power of customers are the main points that Red Bull's internalization plan should ride on. Their plan would therefore be to expand and increase their operations within the global marketplace.

Target market and segmentation strategy

SWOT Analysis

SWOT analysis is a strategic planning too that is used in the evaluation of both the internal and the external market environment in various sectors. It investigates the as strength, weakness, opportunity and threat affecting a given establishment. SWOT analysis of Red Bull Company is indicated below.

Strengths

Red Bull employs an already established distribution network n order to spread tits product into market as well as raise awareness of its brand (Selling Energy, 2002).

The company has concentrated on the building of a strong customer base through the supply as well as marketing of its products at clubs and sporting events

Red Bull usually hosts parties at nightclubs (Ingram, 2004)

Red Bull usually sponsors extreme sporting events so as to order to create a customer base as well as stimulate demand in this particular market segment (Hein, 2001)

Red Bull brand is a market leader. This means that Red Bull as a brand is an already established brand name with brand recognition and equity.

Red Bull has the largest market share in the Asian-Pacific region.

Red Bull has a strong brand image

The small size of the can is the best connotations of strength as noted by Keller (2004).

Red Bull sponsors over 500 extreme sports athletes worldwide.

Weaknesses

Red Bull has a restricted range of product offering, with all its products being brand extensions of the Red Bull energy drink (see Selling Energy, 2002 like as sugar-free and double-size can.

The general lack of effort to innovate has led the company to rely on small product base

Competing products such as iced coffee as well as hot drink presents a stiff competition to the brand.

Opportunities

The BRIC countries presents a perfect international expansion opportunity to the company

The health concerns surrounding carbonated drinks can give it an opportunity to be positioned as and a healthier alternative.

Venturing into the production of other products other than beverages

The health concerns surrounding sugared drinks can give it an opportunity to be positioned as a healthier alternative. Red Bull is sugar free..

Threats

Stiff competition from other products and companies

Associated with various death cases due to overindulgence or mixing with alcohol

PESTEL Analysis

Political

Red Bull was initially introduced to the global market as a non-alcoholic beverage. However, there is a lot of political pressure on the Chinese beverage industry. This political pressure is mostly felt on the levy of import fees and taxes. In China, the import duty for non-alcoholic beverages is 35% plus 17% VAT. This adds up to 54% tax. This deters the company from charging premium prices within the Chinese market. The drink also need to be approved before it is sold in any market. Fortunately, Red Bull has been approved for sale in China but with strict regulations for labeling and taxation.

Economic

China's economic condition will directly affect the sale of the product. Over the years, the rise in the level of disposable income among the Chinese means that more and more people can afford to buy premium drinks such as Red Bull. The global economic crisis has a direct influence on its sale since the Chinese economy is directly affected by the change sin the global economic condition.

Social

The social factor that affects Red Bull marketing strategy are the negative health concerns, global warming (since it is imported and therefore has a high carbon footprint).The longer working hours as a result of the increasing professional demands of the modern Chinese society means that people get tired and lethargic. The need for a "push up" effect can then be satisfied by drinking Red Bull.The increasing level of consumer concern on personal health and diet might also negatively impact its sales.

Technological

Improved methods of manufacturing could help in lowering the cost of Red Bull production. Technology can also be used in spurring innovation of better Red Bull products.The look for an ultimate cure for hangover for instance could be achieved by technological means.

Environmental

Red Bull just comply with the Chinese regulations of environmental safety in regard to transportation, packaging, manufacturing as well as recycling of used cans.

Legal

The company must comply with all legal requirements like the once guiding taxation, health, employment as well as environmental safety.

Strategies to be used by Red Bull in entering into a foreign Market

Selecting the kind of market to put up investment and strategies which can be employed effectively is one task that Red Bull will have to sort out first. The method of entry into a new market means an institutional planning are already in place so that a company products and services can make an entry into a new foreign market, which is vital component to the success of the companyin a new country (Hollensen, 2004). There different kind of entry mode which a company can decide to use when getting into a new market. These methods are hierarchical mode and intermediate modes. However, according to Hollensen (2004) the mode of entry into a new could be easy decided by various internal factors such as mode characteristics, transaction specific factors, products and external factors.

The internal factors to be considered during the time of entry are the size of the firm and the kind of experience it has in the international market. Product is said to be the complication and differentiation. The specification or characteristics of mode which is wanted include the control, risk and flexibility. Moreover,… [END OF PREVIEW] . . . READ MORE

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