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SPRITZER Strategic International

Marketing Plan for Exporting Bottled


Water in China

Prepared By
Rezaul Huda
MBA Programme
University of Southern Queensland
Australia 2009
Dr. Eric Ng
Managing Director
SPRITZER Bhd
No 54 Jalan Premai
43300 Perak Malaysia

12th May 2009

Mr. Rezaul Huda


Senior Research Executive
R&D Department
SPRITZER Bhd

Dear Mr Eric:

Enclosed you will find strategic marketing plan entitled "SPRITZER Strategic International
Marketing Plan for Exporting Bottled Water in China". The report contain 2 part, in the part A
of the report examine the background analysis and external environmental analysis for primary
selective foreign market using PEST framework, we have found that China is the most
attractive foreign market to export bottled water. The findings also align with the stakeholder’s
expectation of SPRITZER Bhd. In the 2nd part of the report contain the competitive analysis of
the china market and the international market entry strategy for SPRITZER bottled water.

The purpose of this report is to illuminate the most attractive foreign market to extend
SPRITZER global market share. However, our primary selective foreign market was Thailand,
India, Iran, United Arab Emirate and China. Using PESTEL framework we have identify the
most attractive foreign market for our bottled water is China.

This research based on the secondary data. Due to limited accessibility, we are unable to
clarify 2009 China Statistical Data.

Sincerely Yours

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EXECUTIVE SUMMARY

SPRITZER is one of the most integrated and largest bottled water producers in South-East
Asia. The SPRITZER mineral water is the first company in Asia to have obtained the
prestigious certification by NSF International, which recognized worldwide as the premier
third party certifier in its specialties. SPRITZER would like to extend their global market share
considering the global bottled water market grew by 7% in 2007 to reach a value of 60.9
billion (USD) and the market forecast in 2011 to have a value of 86.4 billion, an increase of
41.8% since 2007 (Bottled Water-Global Industry Guide, 2008).

This report contains two major parts. Part A contains the situation analysis of SPRITZER and
the environmental analysis of China bottled water industry. Part B contains the international
market entry strategy and recommended international marketing mix for SPRITZER.

China bottled water industry is more attractive than other industry such as IT, Services and
other. To analyze the external factors for bottled water industry SPRITZER use the PESTEL
framework. China has a stabile political situation with the one-party system. The system is
opening up and there is no opposition trying to destabilize the country. The government’s
policy on the economy is favourable for the business life. China has made a market economy
and there is a strong political will to make China an important player in the world economy. In
China, the Law of the People's Republic of China on Protection of the Rights and Interests of
the Consumers of 1994 enumerates consumer rights and the obligations of business dealers
(Consumer International report 07). After analysing, the external environment based on
secondary data the report developed the international marketing strategy and international
marketing mix. Moreover, the finding is that the China is the most attractive foreign market to
export SPRITZER bottled water.

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Table of Contents

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v
Background and Situational Analysis of SPRITZER bottled water

Environmental Analysis of China Bottled Water Industry

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1. Introduction:

Bottled water market has been growing past few years. This is a matter of personal taste and
preference for bottled water over municipal tap water. Because of these days, the people are
health concern and to avoid the water deceases the bottled water has been increasing. Only in
China consumer of the bottled water, with sales expected to surpass 15 billion litres by 2008,
exceeding a value of $4.9 billion (Asia and Middle East Bottled Water Association report
2008). SPRITZER is one of the largest bottled water providers in Southeast Asia. Entering in
to the China bottled water industry would help SPRITZER to expand its global market share.
The purpose of this report is to examine all possible international marketing aspect to export
bottled water in China market. Limitation of this report is that some sophisticated data not
available such as the China Statistical Year book 2008.

2. Background Analysis

2.1 Company Overview:


Spritzer is one of the most integrated and largest bottled water producers in South-East Asia.
Spritzer comprises five subsidiaries which are involved in the manufacturing and distribution
of natural mineral water, sparkling natural mineral water, distilled drinking water, carbonated
fruit flavored water, carbonated fruit flavour isotonic water, teas, toothbrushes, performs and
packaging bottles (Chuan Sin Sdn Bhd corporate report 2008). The Spritzer mineral water is
the first company in Asia to have obtained the prestigious certification by NSF International,
which recognized worldwide as the premier third party certifier in its specialties (Health &
Environmental). The NSF certification is well recognizing by FDA, WHO, FAO and Health
Canada as having demonstrated high GMP in the processing of bottled water (1996).

2.1.1 Reasons of Internationalization

SPRITZER would like to extend their global market share considering the global bottled
water market grew by 7% in 2007 to reach a value of 60.9 billion and the market forecast in
2011 to have a value of 86.4 billion, an increase of 41.8% since 2007 (Bottled Water-Global
Industry Guide, 2008). Consumers spend a collective $100 billion every year on bottled water
and worldwide bottled water consumption surged to 41 billion gallons in 2007, up 57 percent
since 1999 (Beverage Marketing Corporation, appendix 1).

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2.2 Product Overview:

SPRITZER production lines fully automated and equipped with the “state-of-art” bottling
technology. The plant managed by highly qualified professionals such as food technologists,
chemists, microbiologists and engineers. SPRITZER bottled water contains no
microorganisms, minerals or chemicals (Figure 1 shows the production process). It is so pure
that it helps bring out the best and natural flavor of beverages that meets or exceeds FDA,
EPA, USP, ASTM and other industry standards.

Figure 1 SPRITZER Production Process

2.3 Product Key Features:

SPRITZER has competitive product key features comparing other competitive. SPRITZER
offers the customized bottled water that is new in this subcontinent. This feature gives a new
direction in the bottled water industry. The other major keys catachrestic are safety packaging,
different size and different flavor.

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2.3.1 Customized Bottled water:

SPRITZER bottled water products with innovative label designs and packaging programs to
corporations and non-profits throughout Malaysia. Spritzers use the state-of-the-art equipment
to insure the purest water possible through a stringent five-stage process. The weatherproof
labels are printed using the flexographic printing method and are made with vibrant inks and
can be ordered with up to 7 spot colors or 4-color process. Whether a company event, trade
show, high school reunion, or a sporting event, Spritzer will use clients art or create a unique
label design. Figure 2 shows Spritzer regular and customized labeling.

Figure 2 SPRITZER Customize Bottled Water

2.3.2 Packaging & Size:

Spritzer has the best packaging hands down. The standard shape of this water bottle is narrow
enough for small hands, has a flat base that does not tip over, and does not take up
unnecessary space. Spritzer also has different shaped bottles depending on the size of the
bottle, which identified for different uses. For example, the Spritzer pop bottle that looks fun
that marketed towards kids. The label on Spritzer has the unmistakable green color in the
background and the large logo on the front. The green background makes the thought that this
water is “natural”. However, the caps vary with the different size bottle. The green cap looks

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“cleaner” and is soft on the hands, making it very attractive. It could even be a fashion
statement.

2.3.3 Different flavor:


Spritzer offer different flavor drinking water considering different age group of the end user.
At the present market, they have 6 different bottled water and they are Spritzer Natural
Drinking Water, Spritzer Love Mineral Water, Spritzer Sparkling, Spritzer POP, Spritzer
Tinge and Spritzer GO. Please refer to the appendix 2 to clarify each different flavor of
Spritzer bottled water.

2.4 Overview of China Bottled Market:


China is the world's third-largest consumer of bottled water, with sales expected to surpass 15
billion litres by 2008, exceeding a value of $4.9 billion (Asia and Middle East Bottled Water
Association report 2008). According to China Statistical Yearbook, 2008 China's use of water
is highly inefficient and consumes 7-15 times more water to produce one unit of gross
domestic product (GDP) than developed economies. Because of China's robust and unchecked
economic growth, country faces severe water pollution and, consequently, shortages of safe
drinking water. About 700 million Chinese drink water contaminated with human and animal
waste, and/or chemicals such as fluorine, arsenic, sodium sulphate and bitter salt. The Chinese
government reports that water from 53% of mainstream rivers, 50% of lakes and 35% of
ground water is not fit for human consumption due to pollution (Health and Safety Regulatory
Summit Beijing, 07 Appendix 3).

2.4.1 Facts of Bottled Water Industry of China:

China is now the third-largest consumer of bottled water in the world, behind only the United
States and Mexico. From 1998 to 2003, total Chinese consumption of bottled water more than
doubled from about 3.8 billion litres to more than 9.2 billion litres (See appendix 1). According
to EuroMonitor, sales of bottled water by volume expected to surpass 15 billion litres by 2008.
The value of all bottled water sales expected to rise from $3.7 billion in 2003 to more than
$4.9 billion by 2008 (See table 1).

Table 1 Growth Rate of Bottled Water in China

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Other major facts in China bottled market consider as follow;

 China's bottled water import market grew to $15.6 million in 2008, up from $4.4
million 2006, and consisted mostly of unsweetened mineral water (52%), and
sweetened waters - including aerated and minerals waters (46%). According to the
World Trade Atlas China imported $17.6 million of bottled water in 2007, mostly
from France, Italy, U.S., and Hong Kong (See Table 2).

Table 2 Import Rate of Bottled Water in China

 Between 1999 and 2004, the compound annual growth rate (CAGR) for bottled water
consumption in China was 20.9%, the second-highest rate in the world was India 25%
rate (Beverage Marketing Corporation Repot). According to the “Asia and Middle
East Bottled Water Association”, the market for bottled water will continue to
experience strong CAGR of 13.5% through 2008.
 Production cost is one of the major facts while strong growth in bottled water and the
market are very competitive. A bottle of Spritzer costs approximately $0.20 in

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Malaysia. The average cost of a domestic brand bottle of water in China is about $0.25
(Asia and Middle East Bottled Water Association).

2.5 Comparisons China and Other Bottled Market

2.5.1 Consumer Consumption:

There is significant opportunity for growth in bottled water consumption in China comparing
other Asian country. On a per-capita basis, the Chinese population consumed only 7 L of
bottled water in 2003. Comparatively, each Thailand consumed 4 L of bottled water while
those in the United States consumed 82L; the Indian consumed 5 L of bottled water in 2003.
Sales of bottled water expected to increase by 90% between 2003 and 2008, due to the
combined impact of lower prices and concerns over polluted water. Figure 3 shows the
statistical comparison between China, Thailand and India by Asia and Middle East Bottled
water Association.

Figure 3 Bottled Water Consumption Index

2.5.2 Structure of the Operating Environment

Globally the water industry has been estimating as a $400 billion market with signs of long-
term growth ahead, especially China continuing to drive the market as they focus on

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improving many of the region’s water issues such as shortages and contamination from
pollution associated with accelerated economic growth. China government plans to spend
$125 billion on water treatment and recycling over the next five years opening its door to
foreign investment and participation in their water market. Comparing China the Thailand
government does not give so much opportunity for foreign investor for their bottled water
industry. However, Thailand political situation not stable for foreign investment. Considering
this issue the China market is much more attractive then Thailand. Figure 4 shows the
statistical country risk and Table 3 shows the quick fact of China bottled industry and other
primary selective country, this comparison based on the secondary research.

Figure 4 FDI Risk Index

Table 3 Quick Fact for Bottled Water Industry In India, Thailand, Iran, UAE and China
United
Fact India Thailand Iran Arab China
Emirate
Political Stability √ √ √
Government Regulation foreign
√ √ √
investment
Geographic location √ √ √ √
Demographic √ √ √
Harbour facility √ √
Harbour Efficiently √

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Substance of local Market √ √ √ √ √
Legal system √ √ √ √
Market entry consideration High Low High Low High
Key Player High Low Low High High
Labor cost Low Low High High Low

Table 3, demonstrate that the china market are much more attractive than other southeast and
middle-east country.

3. Environmental analysis

China bottled water industry is more attractive than other industry. Considering bottled water
consumption the China is the third largest country in the world. The external environment
always has a vital influence on almost every industry. However, to exporting the bottled water
in China Spritzer also concern about external environment. To analyze the external factors for
bottled water industry Spritzer use the PESTEL framework and to identify strategic challenge
of external environment, Spritzer been using the “Porter” five forces.

3.1 PESTEL Framework:

In analyzing the macro-environment, it is important to identify the factors that might in turn
affect a number of vital variables that are likely to influence the organization’s supply and
demand levels and its costs (Kotter and Schlesinger, 1991; Johnson and Scholes, 1993). “The
radical and ongoing changes occurring in society create an uncertain environment and have
an impact on the function of the whole organization” (Tsiakkiros, 2002). A number of
checklists have been developing as ways of classification the huge number of possible issues
that might affect on industry (Table 4). The PEST analysis is one of them that are merely a
framework that categorizes environmental influences as political, economic, social and
technological forces. Sometimes two additional factors, environmental and legal, will be
added to make a PESTEL analysis. Another version of PESTEL analysis is called
“LoNGPESTEL” which illustrated below;

Table 4: Quick list of PESTEL Analysis


Fact Local National Global
POLITICAL China government World trade
Provision of services policy on subsidies
agreements e.g.
by local council

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further expansion of
the ASIAN
Overseas economic
ECONOMIC Local income China interest rates
growth
Demographic change
Local population
SOCIAL (e.g. ageing Migration flows
growth
population)
International

Improvements in China wide technological


TECHNOLOGICAL
local technologies technology breakthroughs e.g.
internet
Global climate
ENVIRONMENTAL Local waste issues China weather
change
International
Local agreements on human
LEGAL licences/planning China civil law
permission rights or
environmental policy

3.1.1 Political factor:

The political situation has a huge influence upon the regulation of the economy, and the
spending power of consumers and companies. Consequently, areas such as political stability
and trading agreements are considered. Through the last decades, China has evolved from
being a totalitarian communistic regime with a centrally governed economical system to a
more open market economy with wider economic and social freedom for its citizens. The
Communist Party of China (CPC) still has an absolute power monopoly and an actual
liberalization of the political area is not taking place.

The Chinese administration has also shown signs of more openness and transparency and the
judicial system and legislation is starting to build a constitutional state founded on the rule of
law. It has been decide to implement the right to private property in the constitution.
Consequently, private initiative has become more important in the Chinese society. Due to
rapid economic development and inequality, corruption has become a big and growing
problem. China is number 72 of 179 countries on Transparency Internationals Corruption
Perception Index, and is given 3.5 points on a scale from 0-10, where 0 represents the most

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corrupt country (Transparency International Report 07). The government is trying to solve it
by issuing severe punishments for committing the crime.

China has a stabile political situation with the one-party system. The system is opening up and
there is no opposition trying to destabilize the country. The government’s policy on the
economy is favourable for the business life. China has made a market economy and there is a
strong political will to make China an important player in the world economy. The
membership of World Trade Organization (WTO) in 2001 had huge consequences, opening
China’s economy to the world, and making the country a very active player in foreign trade.

3.1.2 Legal Factor:

In China, foreign firms investing must be aware of China’s general lack of codified laws and
the regional diversity of “legal systems” and practices. An anti-monopoly law will become
effective in August 2008. This law stipulates that foreign mergers and acquisitions of Chinese
companies should go through national security checks. Moreover, a special anti-monopoly
commission will be set up to deal with anti-monopoly issues (“Beverage deals 'no threat' to
economic safety” CHINA DAILY). These anti-monopoly laws exclusively concerns foreign
investments and non-local businesses.

In China, the Law of the People's Republic of China on Protection of the Rights and Interests
of the Consumers of 1994 enumerates consumer rights and the obligations of business dealers
(Consumer International report 07). To protect consumers there are government agencies
involved in food and Drink safety, including work on new laws and regulations. The SAIC
(State Administration of Industry and Commerce) for instance, regulates and inspects “market
circulation” which means the entire process of food/drink from the producer to the consumer.

Piracy of intellectual property is everywhere in China and it has been a major source of
contention between China and foreign investors. However, its protection has been one of the
priorities of the Chinese government since it bond to the WTO in 2001. In the past years
China has taken great strides to develop the intellectual property rights but there is still a lack
of local enforcement. In consequence, companies doing business in China have to prevent
themselves from having their intellectual property stolen. The best way of preventing this is to

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have a limited number of employees with access to confidential information and to visit trade
fairs to make sure that some other local company does not copy products.

Figure 5 PEST Analysis for China Bottled Water Industry

3.1.3 Socio-cultural Factor:

Socio-cultural factors are a combination of cultural aspects, such as traditions and values, and
social aspects, such as population growth rate and age distribution. Socio-cultural values are
unique in each country. Typically, Chinese socio-culture is hard to understand for foreigners.
China has the biggest population in the world with 1.3 billion people, which is about 22% of
the world’s total. The population density is strongest in the coastal regions while the
hinterland and western parts are more sparsely populated. From being a relatively poor
country, China is becoming one of the world largest luxury goods markets. People are

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purchasing well-known brands instead of the fake brands (National Bureau of Statistics of
China).

Through the last two decades the political and economical changes has made a significant
influence on the society and consequently changed the Chinese lifestyle. For much of the
population, the life quality and living standards have improved dramatically leading to an
increase in consumption.

For doing business in China, there are some business cultures that a company has to aware.
Guanxi is a term used everywhere in everyday China, but in the business world it refers to a
kind of network between individuals. It appears between people having common motives and
interests. It could understand as an act of friendship but from a western perspective, it might
border on bribery. It involves gifts or services given or conducted for the other part. Thus
money is not directly involved in the matter rather it is concealed as a dinner offer or the like
("A just legal system" International Herald Tribune)

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Target Market Competitive Analysis
Target Market Entry Strategy
Recommended Marketing Mix

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4. Target Market and Competitive Analysis:

China bottled water industry is more attractive than other industry. Considering bottled water
consumption the China is the third largest country in the world. In this part of the report has
been analyze the SPRITZER global competitors, internal capability and targeted market
(china) segmentation.

4.1 Global Player in Bottled Water Industry:


In the emerging bottled water market, the bottled water is not only as a product it also trend of
prestige. Companies are very much concern on packaging, designed to appeal to a super-
premium audience. Table 5 shows the list of the international and local bottled water brand in
China market.
Table 5: List of Global and Local Bottled Water Competitors
Global Companies China Local Companies

• Evian • Wahaha (娃哈哈) www.wahaha.com.cn


• Dasani • YES Mineral Water
• Coca Cola http://www.yeswater.com.tw
• CanadianSprings • 5100 Tibet Spring-- Tibet Glacier
• Aquafina Mineral Water
http://www.5100.net/English/
• Nestlé Pure Life

To analyze the competitors this report uses the competitor analysis framework (Porter, 1980).
According to the Porter competitors framework SPRITZER need to focus on analyzing
competitor’s objectives, assumptions, strategy and capabilities. Competitor’s analysis
framework also helps to identify where organizations operating within the similar industry can
obtain on-going knowledge of competitor, information used for benchmarking purposes and
respond to counter attack with defensive actions to compete further. However, to contrast of
this approach, the pitfall of competitor analysis is to arrive at a situation where there is a great
deal of data but very little information. Moreover, it also lack of possible side-benefits for
shorter-term operational activity, such as being able to brief the sales force or marketers on
the benefits of the company's product offerings compared to those of competitors (Hussey &
Jenster, 1999). Figure 6 shows the competitors objective, assumption, strategy and
capabilities.

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Figure 6: Competitors Analysis Component

Sources: Author’s illustration via concept adapted from Porter (1980)

In the Malaysian bottled water industry, SPRITZER controls 30 percent of market share
(Malaysian Daily Express 2007) comparing other bottled water brand that operating in
Malaysian market. According to the porter framework shows that the major competitors like
Nestlé, Aquafina and local Chinese company Wahaha and YES mineral water has significant
market cover in China. Most of the major competitors driving force in the market are their
objective and their assumption. As Nestléis one of the major competitor in the China market
the objective of the Nestléis is “To take care that water discharged into the environment is
clean (Nestléis management report 2007)” which makes to increase their market share.
However, the strategy they have been taken is to utilize the knowledgeable management to
provide the services to the customized segmented market.

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4.2 SPRITZER Internal Capability:

To evaluate the SPRITZER internal capability this report uses the SWOT analysis. Gerry
Johnson state that “SWOT analysis helps the firm to summaries the key issue from the
business environment and the strategic capability of the organization that are most likely to
impact on strategic development” considering this statement it would be successful business
decision to exporting bottled water using their internal and external capability. The
SPRITZER internal capability has designed based on the situational, environment, market and
competitor analysis. Table 6 illustrated the SWOT of SPRITZER comparing other
competitors to entering the China market. The focus is to ensure that the SPRITZER
furtherance by capitalizing the strengths on bottled water thus helps to build the brand image
across border.

Table 6: Contrast of Competitor SWOT Analysis

Company Name Contrast of Competitor SWOT Analysis

Strength Opportunity Threat Weakness

SPRITZER 1. 30% Malaysian 1.Rising Global 1. Growing china 1. No experience in


Market share bottled water local company overseas investment
2. Five subsidiaries demand 2. Low regulation in 2. High cost
Copyrighting in
including 2. China Malaysia
China
3. 1st Asian company political relation 3. Financial sound
obtaining NSF competitors
International
certificate
4. Customize bottled
water

Competitors Weakness Threat Opportunity Strength


Nestlé 1. Positioned as too 1. Low regulation in 1. Advanced 1. Global brand
scientific so Copyrighting in developed and image
consumer are not China research team 2. High internal
2. Growing
understandable growth
southeast companies
2. Bad image in 3. low cost operators
France market

Wahaha (娃哈哈) 1. Backward R&D 1. Overseas 1. China is the 3rd 1. China local brand
2. only one investment in china largest bottled water 2. Better
subsidiaries bottled water market consumer understanding about
2. Low regulation in 2. Reachable outlet the custom
Copyrighting in 3. Low cost
China
Evian 1. High Cost 1. Low cost 1. Growing health 1. Number one

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2. Very specific competitors and safety concern prestigious brand
market segment 2. Low regulation in 2. Global bottled 2. High global
Copyrighting in water demand market share
China 3. Long experience
in bottled water
industry

Sources: Author’s illustration via concept adapted from J Shhepherd Simon Fraser University

4.3 Market Segmentation:


The purpose of the market segmenting helps SPRITZER exporting plan to determine the most
likely market in China. Proper segmentation helps to retain highest return from the marketing
expenditures. According to Johnson & Scholes (2005), “market segmentation is a group of
customers who have similar needs that are different from customer needs in the other part of
the market”. Bottled water market has been segmented in 2 different market (consumer
market and industrial/ organizational market) based on the consumer. However, this 2 market
has been clarify based on 3 different factors. Figure 7 illustrate the segmentation of bottled
water market in China.

Figure 7: China Bottled Water Market Segmentation

Sources: Author’s illustration via concept adapted from Johnson & Scholes (2005)

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4.3.1 Consumer Market:
China is the world's third-largest consumer of bottled water, with sales expected to surpass 15
billion litres by 2008, exceeding a value of $4.9 billion (Asia and Middle East Bottled Water
Association report 2008). According to China Statistical Yearbook, 2007 China's use of water
is highly inefficient and consumes 7-15 times more water to produce one unit of gross
domestic product (GDP) than developed economies. Because of China's robust and unchecked
economic growth, country faces severe water pollution and, consequently, shortages of safe
drinking water. About 700 million Chinese drink water contaminated with human and animal
waste, and/or chemicals such as fluorine, arsenic, sodium sulphate and bitter salt. The Chinese
government reports that water from 53% of mainstream rivers, 50% of lakes and 35% of
ground water is not fit for human consumption due to pollution (Health and Safety Regulatory
Summit Beijing, 07 Appendix 3). Considering high market growth, demographic segmented
market is the best as a targeted market.
However, china market also has the good potential in industrial sector to provide bottled water
due to most of the foreign company moving to China and the service industry growing faster
than before. Therefore, for further business extension in the China market would be the
corporate clients.

5. Market Entry Strategy:

According to Johnson & Scholes (2005), “the international environment has to be critically
appraised prior concluding an international market entry decision”. The rationale behind this
statement is to ensure uncontrollable forces external environment such as politic, economic,
social and technologies are properly evaluated. However, Muhlbacher & Leihs state that “As
the company become more involved in marketing and production in another country, the risk
and control of the organization increase”.

5.1 Market Entry Mood:

Market entry classified according to whether they require indirect or direct involvement on
the part of the firm, and whether they involve marketing activities only or marketing and
production both. Figure 8 shows the different mood of entry in the market.

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Figure 8: Market Entry Modes

Sources: Author’s illustration via concept adapted from Muhlbacher & Leihs (2006)

5.2 Comparison Market Entry Strategy:

There are different type of strategy allow company to enter in to new market. Major 2 type of
strategy is indirect market entry strategy and direct market entry strategy. Advantage and
disadvantage of possible China market entry strategy for SPRITZER has been describe below.

Table 7: Advantage & Disadvantages of possible indirect entry strategy for SPRITZER

Market Entry Strategy Advantage Disadvantage


1. Casual Exporting • Low cost • High transaction cost. E.g.
Malaysian port to shanghai
• Avoiding international port
taxation
• Low control about
• Low HR involvement copywriting

• Time consuming

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• Less market control

• Low profit

• Negative brand image

2. Export trading companies • Trusted body • High companies market


entry
• Own control
• Trading company handling
• Risk free product to the different product line
market
• Avoided to product title

• Low brand image

• Low market share

• Low control about


copywriting

3. Licensing • Possible to marketing and • Licensed company could


production be major competitors later

• Registered brand name • Chinese government


regulation
• Small capital resources
• Licensed company has
• Low capital risk more control over the
product

• Different management
style

Table 8: Advantage & Disadvantages of possible direct entry strategy for SPRITZER

Market Entry Strategy Advantage Disadvantage


1.Wholesale and Retail • Low cost • Different management
purchasing style
• Avoiding international
taxation • Low market share

• Wholesaler carry fewer • Chinese government


product line regulation

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• Double taxation

2.Joint Venture • Trusted body • High investment

• Own control • Chinese government


regulation
• Risk free product to the
market • Highest 49 present share

• Marketing and production • Difficulties to get host


partner
• Adopt existing market
share

• Access to Technology &


Resources

• Brand image

• Possible market growth

• Low or no risk
opportunities and massive
leverage

• Haring of resources and the


leveraging of underutilized
resources

• High profits

• Fill in internal weaknesses


E.g. lack understand
regarding Chinese custom

• Gain a new skill or area of


competence

• Low labour cost

5.3 Joint Venture:

Joint venture is one of the best market entry strategies for the bottled water market that’s
allows the company to increase the capital involvement, the level of risk and control over
foreign market also increase. Joint venture usually formed between one of the host companies
and the foreign company (Muhlbacher & Leihs 2006). Adopting joint venture market entry

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strategy helps SPRITZER to enjoy the existing market share in the China bottled water
market. Moreover, it also helps to monitor the trademark piracy because of the low
enforcement regarding trademark in China is very low. Wahaha (娃哈哈) is one of the fastest
growing bottled water in China (China Daily Express 2007). To makes partnership between
the Wahaha (娃哈哈) and SPRITZER helps to share the management knowledge that helps
both of them to gain higher bottled water market share. However, it also helps to make the
combination of the SPRITZER advanced bottled water production process (Ref. figure 1) and
low cost labor that helps both of the company to be effective and efficient in the market.

6. Recommendation:

In this part of this report to analyze the most recommended international marketing mix
strategy for the SPRITZER to export bottled water in China. The marketing mix is one of the
most effective strategy development processes for every company. Marketing mix helps the
management to maximize the market share with the help of effective 4 elements of marketing
mix. Kotlet state that there are numerous marketing tools considered when the firm pursue its
objective. “The 4P strategies are catalyst in the formulation of the positioning strategy for
desired market target penetration (Craven & Piercy, 2006)”. When one firm launch a new
product to the new market they could use the standardized marketing mix strategy or
customized marketing mix strategy for selective market. Considering China bottled water
market SPRITZER should go for the customized international marketing mix strategy. China
is one of the most competitive bottled water markets. However, the custom is much more
different then Malaysia. Considering this 2 most significant issue SPRITZER should enter the
market with customized international marketing strategy. Figure 9 shows the customized
international marketing strategy for SPRITZER.

Figure 9: SPITZER International Marketing Mix Framework

23
Sources: Author’s illustration via concept adapted from Craven & Piercy (2006)

6.1 International Product Strategy:

International product strategy defines the core competence of the SPRITZER bottled water.
Unique SPRITZER product feature is that offers the customized bottled water that is new in
this subcontinent. This feature gives a new direction in the bottled water industry. The other
major keys catachrestic are safety packaging, different size and different flavor.

6.1.1 Customized Leveling:

SPRITZER bottled water products with innovative label designs and packaging programs to
corporations and non-profits throughout Malaysia. SPRITZERS use the state-of-the-art
equipment to insure the purest water possible through a stringent five-stage process. The
weatherproof labels are printed using the flexographic printing method and are made with
vibrant inks and can be ordered with up to 7 spot colors or 4-color process. China is one of the
growing economy, lots of foreign investor open their business as a matter of fact SPRITZER

24
could introduce this customized bottled water to this corporate market. However, during
Chinese new-year SPRITZER also could change the labeling and write “Gong Xi Faa Chai”
(Chinese traditional new-year greeting) that’s helps to attract the consumer. Moreover a
company event, trade show, high school reunion, or a sporting event, Spritzer will use clients
art or create a unique label design. Figure 10 shows Spritzer regular and customized labeling.

Figure 10: SPRITZER Customize Labeling

Sources: Author illustration

6.1.2 Flavor:

Spritzer offer different flavor drinking water considering different age group of the end user.
At the present market, they have 6 different bottled water and they are Spritzer Natural
Drinking Water, Spritzer Love Mineral Water, Spritzer Sparkling, Spritzer POP, Spritzer
Tinge and Spritzer GO. Please refer to the appendix 2 to clarify each different flavor of
Spritzer bottled water.

6.2 International Price Strategy:

Product prices differ from one country to another, mainly due to the cost associated such as

tariffs imposed by the country the product sold (Harvard Business School Publishing 2006).

25
Thus, a product could be cheaper or more expensive depending on where it sold. As it has

mentioned early before the bottled water market is very competitive. There are lots of foreign

and local company operating already, considering that to enter in to the market the price

would be cheaper then comparing the competitors. However, the price depends on the

production and other relative cost. Table 9 shows the competitors price for standard 100ml

bottled.

Table 9: Competitors pricing 500ml Bottled water

Standard 500ml Bottled price


Competitors Name Converted RMB to RM
In RMB
1. Nestlé 4.00 2.05

2. Evian 10.00(Apx) 5.00

3. Wahaha (娃哈哈) 2.50 1.20

4. YES Mineral Water 2.00 1.00

Sources: Euro Monitor International "Soft Drinks in China" April 2006 ** Price subjected to
change
In Malaysia PRITZER 500ml bottled water cost is 1.50rm which indicate that is cheaper than
other foreign bottled water brand. As the labour cost in China is lower than Malaysia so it’s
pretty much clear that SPRITZER could able to launch the bottled water in China in a very
competitive price which would be a strategic decision.

6.3 International Distribution Strategy:

The place when products sold known as marketing or distribution channels (Smith, 2003).
China is one of the biggest country in the world. As a matter of fact its not possible for
SPRITZER to cover the entire market. Considering the demographic and geographic location
Xian province and Beijing would be the best location to set up 1st distribution channel. Figure
11 illustrate the possible distribution channel for SPRITZER in Beijing and Xian province.

Figure 11: Distribution Channel

26
Source: Author Illustrate

6.4 International Promotional Strategy:

According to Stone (2001) communication is known as a vital conduit especially in view of


product promotions to draw the attention of new or existing customers. Due the market
complexity, the other component of market segmentation are equally important to enable the
differentiated promotion activities to target the difference type of market segments available
(Wright, 1999). Considering the Chinese custom SPRITZER would engage in some selective
promotional activities. The recommended promotional activities are listed below

27
1. Sponsoring some curriculum activities such as SPRITZER could sponsor the annual
program of “Leshan Teacher’s College”. This is the one of the leading school in
SPRITZER targeted market. Sponsoring annual program will helps to build the
awareness, which is very important as new product.

2. Providing coupon system helps to increase the initial seals. According to the Chinese
custom they like to receive the hongbao, bonus or lucky draw. However, the
promotional activities would be like “Drink SPRITZER win 100rmb, check you
SPRITZER cap you might won 100rmb”. This promotional campaign helps to boost
initial sales.

3. Provide the flayer providing the water safety for the human life, in addition could
manage a talk show regarding women fitness in the present day.

However, the promotional campaign depends on the competitors what they are doing in the
market.

7. Conclusions:

Bottled water industry is one of the vital sectors for doing business due to European and
American marketer. In 2008, the sales volumes of the bottled water in China were over 25
million tons, increased by 20% compared with 2007. The market scales were more than 30
billion Yuan (4.3 billion USD). After analyzing the external environment and international
marketing strategy based on SPRITZER internal capability shows that China bottled water
market much more attractive than Thailand, India or Middle East and SPRITZER capable
enough to enter in to that market. International marketing mix helps SPRITZER to enter to the
China bottled industry successfully. However, the international financial crisis had few
influences on Chinese bottled water market but it still rising which is different from other
industry.

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iii
Appendix:

A. Global market growth of bottled water

iv
B. Different Flavor of Spritzer Bottled water:
Spritzer Love Mineral Water:
For a splash of fun to drinking water, Spritzer launches 4 New 'Love' bottles, intended for the
teens and kids. It comes with a heart shape engraved unto the bottle, hence its name 'Love'
bottle. Each bottle is available in 4 choices of colours; Cool Blue, Sweet Pink, Zesty Green
and Happy Yellow.
A limited launch edition of 'Love' bottles will sold with upgraded Sport Caps. Its 'thumb up'
cap feature allows one to open the cap with just a flick, which designed with enhanced tamper
proof features, and allows optimum flow of water. Most important of all, the new feature is
child-safe.

Spritzer Sparkling
The sheer goodness of natural mineral water, lightly carbonated, that invades the senses.
Sparkling Spritzer enhances the taste of fruit punches or any liquor. This product simply
savour for its clear, sparkling goodness. Sparkling Spritzer has no sugar, no colorings and no
preservatives.
Spritzer POP
Spritzer POP is a new-age refreshment for the new generation – POP that contains lightly
carbonated pop drink with a difference. Natural fruit flavours - Apple, Orange, Lemon,
Berries and Lychee. Absolutely no artificial colouring or flavourings.
Spritzer Tinge
Tinge is available in 2 natural flavors mineral water either with a tangy tinge of lemon or fruit
fusion, non-carbonated or colored. However, unlike the most flavored drinks in the market.

Spritzer GO
Spritzer GO is the goodness of natural mineral water, fruit flavored, lightly carbonated with
natural thirst and body quencher. A thoroughly enjoyable way to help replenish lost energy,
body fluids, salts and electrolytes fast.

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C. China Pollution Index 2008

vi
D. Statistical Yearbook

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