Marketing Report - 94wines

8/3/2019 Marketing Report - 94wines

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VU University Amsterdam

Faculty of Economics and Business Administration

Title: Marketing plan for 94winesCourse: International MarketingAcademic Year: 2011-2012Date: 18.04.2011Group: 2.4

Student Name / ID: Aleksandr Karev (2120763)Student Name / ID: Jaroslav Urban (2163586)Student Name / ID: Nitchanan Kangwolkij (2162407)

Student Name / ID: Nita Sujaritwatanasak (2162393)Student Name / ID: Peter de Wit (2087235)


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Table of contents

...............................................................Analysis of the target market 1

............................................................................The company and products 1

................................................................Brief analysis of the export country 1

...................................................................................Basis of segmentation 2

..............................................Similarities between the local and export market 2

..............................................Differences between the local and export market 2

................................................................Business environment and strategy 3

......................................................................................SW OT analysis 4

....................................................................................................Strengths 4

................................................................................................Weaknesses 4

...............................................................................................Opportunities 4

.......................................................................................................Threats 4

......................................................................................Entry strategy 5

...............................................................................................Joint venture 5

.........................................................................................Indirect exporting 5

...............................................................................Wholly owned subsidiary 6

....................................................................................Export strategy 6

............................................................................................Standardization 6

..................................................................................................Adaptation 7

....................................In tegrated marketing communication strategy 8

.............................................................................Communication objectives 8

...............................................................................Communication message 8

..................................................................................Communication slogan 8....................................................................................Promotional Strategy 9

....................................................................................Pri cing strategy 9

........................................................................................Di stribution 10

........................................................Pr oduct life cycle considerations 11

..................................................................................Implementation 12

.......................................................................................Bibliography 13


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Analysis of the target market

The company and products

On November 10th 2009 Lucas Tieleman and Sander de Jonge in corporation withBaarsma Wine Group Holding (BWGH) launched a new company called 94wines. It

defines itself by combining a traditional wine product with innovative technology. Theresult is a great wine in a contemporary and striking bottle with a QR code. 94winesgives you a unique method to send a personal message. Every bottle is given a uniqueQR code which contain all sorts of files. Whether it is a text, photo or even a video,customer can upload files on the website and 94wines will make sure that the file isconverted into a QR code and placed on the right bottle. The code can be read byusing the camera of a mobile phone. The personal message can also be viewed byfilling in the code on 94Wines.com.

94wines differentiates itself from their competitors by selling French wine in veryunique and distinctively designed bottles. Their bottles have no traditional label,instead they use colored sleeve that is tightly attached to the whole bottle with uniquenumber on the front that not only provides a striking appearance, but also constitutesa code for taste.

Another distinctive feature 94wines offers is WineID-test. This test begins by taking ashort quiz of six questions regarding customer likes and dislikes. That, in turn,produces their personal WineID, which can then be used to guide their choices fromamong the companys series of wines. The use of numbers and colors makes winepreferences easy to remember, while personal ID profiles allow friends to see eachothers preferences for gift-giving purposes.

At the moment 94wines has 13 different types of wine in their assortment distributed

within the Netherlands and elsewhere in Europe by request only. Their primary targetis young people who concern not only about the inside content of the bottle but alsoabout external factors, such as the bottle design and product uniqueness. In theconservative and traditional whine market 94wines is the first company who targetsyoung people online with their innovative concept. In 2010 94wines sold 120,000bottles of wine (Financieel dagbland, 2010). According to fooddrank.eu theirapproximate market share in Netherlands is 0.034%.

Brief analysis of the export country

The republic of Lithuania is a country located in Northern Europe. Its moderninfrastructure, Ice-free Seaport and geographic location makes Lithuania ideal hub of a thriving import and export between Scandinavian, Baltic and West Europeanmarkets within a 500 km radius. The European Union had also recognized Lithuaniaas the largest and most diversified market in Baltic States with the lowest tax rate andmore than 50% GDP of the total market (Lithuanian Development Agency, 2007).

British analysts of the Economist Intelligence Unit (the research subdivision of TheEconomist magazine) confirm Lithuania to be a country with very low economic andpolitical risks. The country is a member of the EU and NATO and follows the Westernmodel of internal and foreign politics. The International Monetary Fund (IMF) hasranked Lithuanias performance among the best within the European Union. Lithuania

maintains an exceptional economic progress, based on macro stability and economicflexibility (NaiBaltics, 2009). Lithuania has been maintaining an average GDP growthof 7.8%.

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According to the Eurostat quoted in (the EU Statistics Agency) in 2005 Lithuanias GDPincreased by 7.5%. In 2006 Lithuania had the biggest annual GDP increase of 8.6% inthe EU and it has been forecasted that it will grow by 7.4% in 2007. The World Bankin its report Doing Business in 2006: Creating Jobs announced Lithuania to be theeasiest place to do business among the Baltic States and all new EU members. TheInternet usage and online purchase is the important factor of 94wines business, asthis is their primary sales channel (NaiBaltics, 2009).

According to (National Department of Statistics, 2011), 55% of the LithuanianInternet users have access to the Internet that leads to 1,760,000 of the totalpopulation. What is more, 40% of the Internet users constantly seek for new productsonline and 10.9% makes online purchases, which are approximately 191,840 people.Our target market is people aged 18-35 that covers 36.8% of the online purchasegroup that leads to 70,597 users

Basis of segmentation

The target group for our product is occasional wine buyers without knowledge of thesubject who also pay a lot of attention to the colors, design and shape of the product.We will focus on both male and female of all ages, especially teenage and workingpeople, who are creative, fashionable and love to have unique products. In addition,there is a relatively high consumption of alcohol among young people in Lithuaniabecause of the lifestyle and behavioral patterns common to a persons social groupand economic welfare, which encourages alcohol consumption.

It is important to note that the product may not only be sold in terms of consumption,but it can be also purchased as a present for special occasions. In Lithuania it iscommon to make a gift of alcoholic drink for various occasions including Birthday,Graduation and Funeral.

As our product will be sold through the Internet, it is essential for our target group tohave an access to the Internet and willingness to purchase online.

This target group in Lithuania is similar to the target group in the country of origin,the Netherlands.

Similarities between the local and export market

Just like the Netherlands, Lithuania has a logistic hub function in Europe. Itexpectations for economic growth and welfare are positive for the coming years. Justlike in the Netherlands, Lithuania has a very low economic and political instability risk,which makes it beneficial for foreign investment (Lithuanian Development Agency,2007).

Differences between the local and export market

The average disposable income in the Netherlands in 2009 was 20,876 Euro percapita. In Lithuania, however, in 2009 it was only 11,386 Euro per capita. The pricelevel of wine and beer is almost the same between Lithuania and Netherlands(Svennebye, 2009). A consequence of these statistic results is that the buying power

for wine in Lithuania is approximately twice as low as compare to the Netherlands.Secondly, the growth of the disposable income in Lithuania was 7.8% between 2003and 2008. As a result of the crisis, in 2009 it dropped to 4.2% (Svennebye, 2009).

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The growth of the disposable income in the Netherlands was about 4% per yearbetween 2003 and 2009. Between 2008 and 2009, however, it dropped to 2.8%.In 2010, the wine consumption in the Netherlands was approximately 21.7 litters percapita (Distrifood, 2009). In Lithuanian, however, the results were much lower, withan average wine consumption of 5.4 litters per capita for the same period of time. Thegrowth of wine consumption in Lithuania is approximately 6% per year (NationalDepartment of Statistics, 2011). In the Netherlands, the wine consumption is stablesince the beginning of 2010. From these results it can be concluded that the wineconsumption is growing steadily in Lithuania, which makes it a very attractive marketfor the export of wine.

In the Netherlands, most wine is sold in supermarkets, where price is an importantfactor. Dutch consumers have always had a reputation for being extremely priceconscious. Approximately 60% of wine sold in the Netherlands is below 3.50 Euros(Kolkman, 2011). In Lithuania, however, 93% of the wine sold varies between 4.5 6Euros, with 57% of it being purchased in supermarkets (National Department of Statistics, 2011). This is because due to the high taxes an average price for wine inLithuania is slightly higher than in Netherlands.

Finally, it is important to take a look at the Internet usage in both countries. In 2010,in the Netherlands, 90% of the population had an access to the Internet, where 55%of these people were making frequent purchases through the Internet. In contrast toNetherlands, only 55% of Lithuanians had an access to the Internet in 2010. Inaddition, only 10.9% of these people were making frequent purchases through theInternet (National Department of Statistics, 2011). The growth percentage of Internetusage in Lithuania is 8% per year. It is expected that in four years time Internetaccessibility in Lithuania will be the same as it is in the Netherlands.

Business environment and strategy

With the rise of wine popularity around the world the competition in this market getsmore intense. Lithuania is not an exception. Being part of the European Union allowsforeign companies to enter Lithuanian wine market easily. Due to the European Uniontrade policy, there is now a great variety of wine present in Lithuanian. However, ourgroup strongly believes that the unique bottle design and extra features such aspersonal message on the bottle will differentiate 94wines and help it grow its share inthis very intense market.

According to the personal experience of one of our team members from Lithuania,

most people in Lithuania purchase their wine in supermarkets and specialty shops.There are three main supermarket chains in Lithuania, which are: Rimi, Maxima andIKI. Their market shares in Lithuania are: 24%, 36% and 32% respectively. Accordingto the data presented on their official website, Rimi currently operates 46supermarkets and employing 2400 people in Lithuania. Maxima is currently the largestLithuanian capital company and the largest employer in the Baltic States. Maximacurrently accounts for 425 stores in total, of which 216 stores are located in Lithuania.IKI currently operates 185 supermarkets and stores in Lithuania and is known for itshighest quality, impeccable service, and customer satisfaction.

These three supermarket chains can be classified as our direct competitors. Since ourprimarily target market are young people, it is also important to mention here thatmany of them choose other alcoholic drinks instead of wine. Therefore, places that sellbeer and other alcoholic spirits can also be classified as our indirect competitors.

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In addition to the traditional supermarkets there are numerous wine specialty chainsin Lithuania. Vynoteka is one of the biggest and mostly known chains specializing inwine retailing. Vynoteka currently operates 16 shops throughout Lithuania.

SWOT analysis

Strengths

The bottle is designed to appeal to young generationmodern, colorful, stylishand fashionable.

The company gives opportunities to customize your bottle of wine by addingyour personal message on it.

The company offers an online purchase to customers.

The company has the WineID system, which identifies and suggests you thetype of wine you might like based on your taste and preferences in food.

There is a 94wine iPhone application, which allows you to have all of theinformation and brief description about each type of wine 94wines offers.

Weaknesses

Since the company has been operating for only one year, it has a weak brandname with no history behind.

Due to the positioning of the product as a luxury good, its price should be setabove the average price for a bottle of wine in Lithuania, which is 4.5 - 6 Euros.

Opportunities

There are opportunities to re-establish traditional wine bottles in order to attractthe interest of younger generation.

It is possible to form business alliances with other well-known retailers inLithuania.

Threats

New regulations and policies on alcoholic drinks, which might be imposed in thefuture, could affect sale performance as well as product promotion.

The increasing number of competitors entering the market with similar productscan affect sales.

Evidence suggests that only 10.9% of Lithuanians are in favor of using Internetto purchase their products.

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Entry strategy

In order for a company to establish business and operate on the global scale it has toconsider many different aspects including entry barriers and entry strategy. Thechoice of how to enter a foreign market can have a substantial impact on the results.Different entry strategies may be more applicable under various circumstances, and

the chosen strategy is a critical factor in the success of the project. Among the vastarray of different entry strategies available, we believe that there are three mainstrategies appropriate for our case, they are: joint venture, indirect exporting and thewholly owned subsidiary.

Joint venture

Joint venture is a separate business entity (e.g., corporation, limited liability company,or partnership) that allows two or more parties to collaborate in conducting specifiedbusiness activities (Gutterman, 2000).

In the present global marketplace, joint ventures have become a popular mode forentering foreign countries. Generally speaking, the objective of joint ventures is to puttogether complimentary resources of already existing firms. These types of resourcesnormally incorporate not only "ordinary" financial, technical, human resources, butalso "acquired" resources like goodwill, know-how, team spirit and other intangibleassets (Chen, 1995).

The reason why we believe joint venture is an appropriate mode of entry to Lithuanianmarket is because it will allow 94wines to access to expertise and establish connectionwith existing wine suppliers in Lithuania. In addition, by entering joint venture94wines could make use of strong and widely accepted brand of their chosen partner.This market entry strategy is known to minimize potential risks associated with

entering a foreign market. Economies of scale can also be achieved due to the sharingof knowledge and resources between organizations. Finally, joint ventures are lesscostly compared to many other entry strategies such as wholly owned subsidiaries.

On the other hand, the problems associated with joint ventures may include culturalbarriers, difficulties with corporative alignments and conflicts with partner(s).

Indirect exporting

For many companies, the easiest and lowest-cost distribution alternative when

considering international marketing for the first time is that of indirect exporting(Colin Gilligan, 2005). Indirect export occurs when the exporting manufacturer usesindependent organization(s) located in the producers country (Albaum, 2005). Theobvious advantage of this method is that little or no international expertise isrequired, since the strategy is a little more than an extension to distributing theproduct domestically.

This approach, however, would limit 94wines control not only over the marketsselected but also over the marketing strategies used and the degree of commitmentto each market.

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Wholly owned subsidiary

Wholly owned subsidiary is one in which 100% of the subsidiarys stock is owned bythe parent company (Charles Hill, 2008).

In order to establish a wholly owned subsidiary in a Lithuania, 94wines can either set

up a completely new operation or acquire an established host country organizationand use it to promote their products.

This entry strategy would allow 94wines to reduce the risk of losing their knowledge,technology, ideas and control. We believe that it is very important for 94wines toremain full control of all operations because it will allow them to market and tailortheir product the way that will work best for the Lithuanian market.

However, establishing a wholly owned subsidiary is generally the most costly methodto enter a foreign market. In this case 94wines will be responsible for all the costs andrisks associated with setting up operation in Lithuania, whereas with joint venturestrategy 94wines could share both the risk and the investment with their partner(s). Itis important to say that acquiring an established enterprise in the host country willminimize the risks of entering a foreign market. On the other hand, acquisition maybring other potential problems such as trying to merge diverse corporate cultures,which in some cases can offset the benefits of acquisition.

To sum up, we believe that the most appropriate entry strategy for 94wines to enterthe Lithuanian market is by establishing a joint venture with already existing and well-known Lithuanian organization. One of the options for 94wines is to create a jointventure with the company called Alita. This is Lithuanian brewing company based inAlytus, established in 1983. Alita is one of the largest producers of alcoholic beveragesin Lithuania. Alita produces naturally fermented sparkling grape wines, alcoholic

cocktails, ciders, vodka, brandy and concentrated fruit juice. This will allow 94wines tomake use of the widely known and accepted Alitas brand in Lithuania.

Last but not least, it is important to mention that 94wines can always begin byentering Lithuanian market through the joint venture and in case of success they canchange the strategy or buy out the rest of the shares from their partner(s).

Export strategy

When companies expand their market internationally, they have to considerstandardization and adaptation of their marketing program (Jobber, 2001). Adaptationis a strategy regarding change of the marketing program, in other words thecompanys product, price, place and distribution, for each international target market.Standardization is an international marketing strategy where the company uses thesame marketing program for all their international target markets (Tina Nordstrand,2005).

Standardization

Those in favor for standardization mean that this makes sales higher because of aconsistent product image across different international markets (Bradley, 1999). Thecosts can be reduced by having a standardized product and move the production to

low cost locations (Tina Nordstrand, 2005), (Michael Czinkota, 2009) add that thisalso can result in economies of scale and that this is a driving force for companies tomake markets more unified.

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(Michael Czinkota, 2009) say that a firm may identify target markets where productscan be marketed with little or no modification, that is, markets where standardizedproducts can be used. The benefits of standardization and sell the same productworldwide are cost savings in production and marketing. Economies of scale aretherefore one of the main forces behind making markets more unified over the world

using the standardized approach (Tina Nordstrand, 2005).

Adaptation

(Jobber, 2001) says that adaptations most likely improve the performance of businesses. Those in favor of adaptation argue that markets are not exactly alike andthat it is essential to tailor your marketing mix in order to ensure that sufficientvariety exists to satisfy buyers needs in each market. There are without a doubtdifferences in customer needs between different countries and cultures. The amountof product adaptation that is required depends both on cultural differences as well aseconomic conditions. A well-known example of product adaptation is Uniliver whocreated cheaper packages to their high quality products because they found out thatIndians desired them but could not afford them. Uniliver therefore developed apackage that only cost a few pennies instead of the regular $5.00 package.

In order to decide which strategy is the best to use, three factors are compared(Michael Czinkota, 2009).

1. Are the needs of consumers across markets similar or different?2. Could conditions surrounding the product use affect company expansion

strategy?

3. Can the target market customers afford to buy the product?

Based on our primary research, which is summarised in the analysis of the differencesand similarities between the local and export market, we can conclude that all of these three factors are very similar between both the local and the export country. Itis, however, important to note that our analysis showed that the buying power forwine in Lithuania is approximately twice as low compare to the Netherlands. Due tothe exclusive positioning of the product, its price should be set above the averageprice for a bottle of wine in Lithuania, which is 4.5 - 6 Euros.

It is important to remember that there is no right strategy for all the differentsituations. The right export strategy depends on the situation. Based on our extensiveanalysis we suggest 94wines to keep their marketing program unchanged except forthe price, which should be lowered down a little bit so that the Lithuanian customerswould be able to afford it. This will help them to benefit from both the cost reductionand economies of scale. As we already mentioned, 94wines is a relatively new brandand a small company, therefore it will be beneficial for them if they could reduce thecosts associated with entering new market. In addition, by adopting standardizationapproach 94wines will be able to improve their quality since all of the efforts will beconcentrated upon the same products. In the long run, however, nothing stops94wines to change their export strategy if it will be needed.

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Integrated marketing communication strategy

Integrated Marketing Communications (IMC) has been defined by the AmericanMarketing Association as a planning process designed to assure that all brandcontacts received by a customer or prospect for a product, service, or organization arerelevant to that person and consistent over time (interMedia Strategic Marketing

Services, 2008).The purpose of Integrated Marketing Communications (IMC) is to join together all theelements of your organization such as: advertising, customer service, sales, publicrelations, direct marketing etc. into a unified components rather than having thesedifferent departments all work independently from each other so that they can worktogether in harmony. All of these communication tools work better if they worktogether in harmony rather than in isolation.

Integrated Marketing Communications allow you to have a single brand messageacross all your marketing channels.

Among the vast array of different communication strategies we believe that the mostappropriate one for them would be to simply extend their current strategy used in theNetherlands to Lithuania. The reason for this is because both of these Europeancountries are very much alike and since their current strategy seems to work inNetherlands we can therefore assume that it should be successful in Lithuania too.

Communication objectives

Communication objectives are the goals that an organization seeks to achieve throughits promotional program in terms of communication effects such as creatingawareness, knowledge, images attitudes, preferences or purchase intensions

(Marketing MiMi.hu).

The setting of communication objectives is important for the three main reasons.First, they provide means of communication and co-ordination between groups e.g.clients and agency working on different parts of campaign. Second, these objectivesalso serve as a guide for decision-making. Third, objectives are served as abenchmark so that relative success or failure of a program can be determined.

For 94wines it is important to show their target market that the products they offercan serve as perfect gifts for those who they care about. Therefore, the objective is toshow that their products are more than just a bottle of wine, it is a perfect gift too. Aswe discussed previously, in Lithuania youth prefers beer to other alcoholic drinks.Hence, it is logical for 94wines to make an attempt to convince youth that wine is abetter choice.

Communication message

The core communication message of the marketing campaign should be that 94winesis a wine with unique and attractive bottle design that can be purchased not only asmeans of consumption but also as a gift to someone you care about.

Communication slogan

The slogan 94wines is using in the Netherlands is: sinfully delicious. We believe thatit might not be the best idea to use the same slogan in Lithuania. This is because of the relatively high percentage of christian citizens (87% according to the Lithuanian

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Department of Statistics) in Lithuania. In other words, the original slogan might notbe widely accepted in Lithuania. The appearance of the slogan is desirable to be usedin conjunction with the communication strategy. We believe that the slogan shouldreflect or even enrich the communication message. Another important factor islanguage. We reckon that it will be better to come up with Lithuanian slogan so thatevery potential customer can understand it. One possibility for the slogan is: Puikidovana j s mylimiems mon ms, which translates to: The perfect gift for yourloved ones.

Promotional Strategy

In the process of developing a promotional strategy it is crucial to make sure that thedifferent communication channels are carefully integrated and coordinated to deliver aclear, consistent and compelling message about the organization and its products.

In todays world, people are continuously bombarded with various messages. There isno time for a person to evaluate and act on all these m e ssages so w e pick and choos ebetween them. This makes the choice of promotional tools extremely important for anorganization.

There are five main promotional tolls, which are: advertising, personal selling, salespromotion, public relations and direct marketing. In case of 94wines, the mostappropriate promotional tools would be direct marketing and public relations. Thereason for this is because there are very strict regulations in terms of alcoholadvertising in Lithuania. For example, the newly amended Law foresees the completeprohibition of alcohol advertising in all media in Lithuania as of 1 January 2012(Ie mantait , 2010).

Due to the restriction of alcohol advertising 94wines will need to put more emphasis

on other promotional tools to reach their target audience. It is essential for 94wines togain brand awareness, while at the same time educate their customers about theproducts they offer.

It is important to note that advertising in shops and cafes with posters and cardboarddisplays is not currently forbidden in Lithuania. Therefore, it could be considered asan option for 94wines to quickly gain brand recognition. Although, since our productwill be sold through the Internet, it is essential for 94wines to advertise on theInternet. Our primary research has shown that the most frequently visited Internetportals in Lithuania are: www.delfi.lt, www.lrytas.lt, www.alfa.lt and www.one.lt.Therefore, we suggest 94wines to focus primarily on the above-mentioned Internetportals.

Moreover, with the help from the joint venture partner: Alita, 94wines could opensmall corner shops within well-known Lithuanian shopping malls, such as Panorama,Akropolis and Ozas; which are similar to de Bijenkorf in the Netherlands. This willallow them to educate buyers about the product and quickly gain brand awareness. Inaddition, personal interaction with customers will allow 94wines to receive customerfeedback, find out more about their preferences, thus allowing them to tailor a bettermarketing mix.

Pricing strategy

In today's very competitive marketplace a pricing strategy that insures a consistentapproach to offering your product in a way that will outsell the competition is critical.

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http://www.lrytas.lt/http://www.alfa.lt/http://www.one.lt/http://www.one.lt/http://www.one.lt/http://www.alfa.lt/http://www.alfa.lt/http://www.lrytas.lt/http://www.lrytas.lt/


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Small businesses such as 94wines can ensure profitability and success by paying closeattention to their pricing strategy.

According to (Michael Czinkota, 2009) price is the only element of 4Ps that generatesrevenue, all others are costs. Ultimately, the pricing strategy used for marketing winesshould be based on the demand for wine, as consumers are not directly concernedwith the cost structure in producing a wine they are interested in.

There are three main pricing strategies that 94wines could choose from, such as:skimming, penetration and market pricing. But in our report we will focus on laterone.

As there are similar wine products in Lithuanian market, market pricing would bethe best reactive approach that 94wines can use. The average price of competitorswine product is determined to be around 4,5 - 6 Euros, so by considering the ceilingprice and pricing 94wines product just above the average should lead to successfulmarket entrance. This pricing policy strategy allows 94wines to set prices quickly withand efficiently, since it does not require as accurate market data as other strategies.

Setting a low price is not the best option for a small business because the biggercompetitors in the market can easily defeat it. By choosing market pricing, anddiscouraging two other models 94wines would avoid potential negative consequences,such as: price war with big domestic Lithuanian wine companies that could lead torunning out of business.

Price policies related to wines are not homogeneous. It is argued that the price is asignal of wine quality to the consumer, that is why entrepreneurs should consider theirwinery strategies carefully before making final decision of setting in to the wine

market (Jones & Storchmann, 2001).

Distribution

Distribution channels refer to the ways in which products move from the manufacturerto the end user. Distribution channels consist of wholesalers, retailers, sales agentsand have a strong impact on the companys success and can increase efficiency andreduce costs (Charles Hill, 2008). Many product and services manufacturers orproviders use multiple channels of distribution that allow them to target widercustomer audience. For example, Apple products might be bought via online store,Apple store or through several independent retailers. In our report we have decided touse horizontal distribution through the mass multi channel (Diagram 1) that willincrease the sales of our product as we will be able to reach our customer not onlythrough the online store, but also through the corner shops in the biggest Lithuanianmalls e.g. Panorama, Ozas, Akropolis.

According to (Nibler, 1984) there are two different marketing systems to chose from:vertical and horizontal. We will focus on the horizontal system, as it is more flexibleand allows suppliers and intermediarys work close together instead of competing witheach other.

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While entering market through joint venture with Alita and using horizontal marketingsystem 94wines will be able to broad their knowledge about Lithuanian wineconsumers, plan delivery schedules, quality levels, promotions and prices moreefficiently. Moreover, as Alita is well established company in Lithuanian market it willbe able to push the product more efficiently through its distribution channels andintroduce the in corner shops within well known Lithuanian shopping malls, such asPanorama, Akropolis and Ozas.

This marketing system will also allow to reduce the transportation costs as 94winescould be bottled at Alitas factory that would lead to improved efficiency in distributionand lower transaction costs.

Product life cycle considerations

Every product goes through a series of steps from the time it is first originated andthe time the manufactured product is retired or rejected. The first stage for everyproduct lifecycle is introduction. During this stage a product is introduced to the publicfor the first time and is usually heavily promoted to create customer awareness. Since94wines is not currently present in Lithuania it will also require to go through thisstage. The problem with creating awareness for 94wines is that in Lithuania it isrestricted to promote alcohol drinks that have more than 5.5% on TV and othercommon media channels. This might have a huge impact on 94wines sales during theintroduction stage. However, as we discussed previously in promotional strategysection, there still are possible ways for 94wines to promote their products andincrease their brand awareness. It is important, however, to note that during theintroduction stage marketing costs may be high in order to study the market, launch

and promote the product, develop a market for the product and set up distributionchannels. In terms of the distribution during introduction stage, we suggest 94winesto focus mainly on their online store and open their first small corner shop inPanorama shopping mall. This should allow them to start their business in Lithuania atthe minimum cost incurred.

There are two most common and widely used pricing strategies for the introductionstage, which are: price skimming and penetration. Price skimming refers to thepricing, where a firm charges the highest initial price that early adopters will pay withthe intention to lower it down when demand from early adopters falls. Pricepenetration, however, refers to the pricing strategy, where a firm sets a relatively lowinitial entry price, often lower than the eventual market price, to attract newcustomers. In this case, the objective is to attract as many customers as possible andto increase market share. However, neither price skimming nor penetration strategy isappropriate for 94wines. The reason why price penetration strategy is not appropriatein this case is because it might lead to the price war with existing competitors andtherefore, might drive off 94wines from the business. In addition, price skimmingwould not be appropriate because the demand for alcohol products in Lithuania iselastic as there are many substitutes to choose from e.g. other wine products.Therefore, we suggest 94wines to set the price for their products above the averageprice for the wine products and keep it constant during the entire product life cycle.Although, as we mentioned earlier, the price should be determined with great care,therefore, it might be reasonable for 94wines to try setting slightly different prices

over time and see how the demand will change. This should allow them to determinethe best price and demand combination which will lead to the highest profits.

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Implementation

011 2012

June July Aug Sep Oct Nov Dec Jan Feb Mar April May June July Aug Sept Oct

Forming JointVenture WithAlita

Production setup with Alita

Launch Website

Communicationcampaign

Websiteadvertising

Open firstcorner shop

Inform theaudience

Social mediapromo;on

* Shaded boxes indicate the implementation period for the given task.

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