Twin Lotus

BM6806 : International Marketing Management

GROUP CASE STUDY

TERM PROJECT: A TWIN LOTUS COMPANY – ENTRY TO

CHINA

Submitted to

Jakarin Srimoon, Ph.D.

Submitted by

Ms. Napassakorn C. 451-9138

Mr. Wasan Pornjinda 451-9216

Mr. Artid Nataw 462-9107

Ms. Sutana Thangtumrug 472-9152

Mr. Lersan Kenikanont 473-9016

Mr. Suraj Karki 481-9034

Submission date

Aug 26, 2006

ASSUMPTION UNIVERSITY

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ContentsPage

CHAPTER 1: COMPANY AND PRODUCT BACKGROUND 3

SECTION 1 : OUR COMPANY 3

SECTION 2: PRODUCT BACKGROUND 8

CHAPTER 2 : MARKET ANALYSIS 13

SECTION 1 : COUNTRY BACKGROUND 13

SECTION 2 : COMPETITOR ANALYSIS 25

SECTION 3 : SWOT ANALYSIS 32

SECTION 4 : TARGET ANALYSIS 34

CHAPTER 3 : ENTRY STRATEGY 36

SECTION 1 : ENTRY MODE ALTERNATIVE 36

SECTION 2 : CHOOSING THE ENTRY MODE 41

CHAPTER 4 : MARKET STRATEGY 43

SECTION 1 : PRODUCT 43

SECTION 2 : PRICE 45

SECTION 3 : PLACE 57

SECTION 4 : PROMOTION 64

CHAPTER 5 : QUANTIFIED BUDGET 70

SECTION 1 : FORECASTED INCOME 70

CHAPTER 6 : CONCLUSION AND RECOMMENDATION 73

SECTION 1 : CONCLUSION 73

SECTION 2 : RECOMMENDATION 74

CHAPTER 7 REFERENCES 76

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Chapter 1: Company and Product

Background

Section 1: About the Company

“Twin Lotus, the purity from the nature, the product known

by word of mouth”.

History

Twin Lotus Co., Ltd. was established in 1977 in the

form of a small herbal drug store where the drugs

made from herbs were manufactured and sold. And

then the President of the Twin Lotus Co., Ltd., Dr.

Boonkij Silertphant wanted to see the Company’s

products to be more widely known, not only by the

small group of people who had chances to try the

good things offered by him, but he also wished all the

consumers around the world to get to know these good things as well. With his

farsighted vision, he who has been experienced not only as the Country’s number

one herbal export, but he had made the analysis on the market conditions within the

country at the time and the marketing opportunity had been closely observed.

At that time the herbal toothpaste had been produced by no one in Thailand,

only the toothpastes imported from the foreign countries were available in the market

but they were not made from the pure herbs and also the prices were very

expensive. With the marketing opportunity this has become the point of the beginning

for the Twin Lotus Co., Ltd. to commence its research and investigation of this new

product with the purpose for the creation of the toothpaste made from the Thai

natural herbs. Actually they have many failures at the trial steps but finally the

toothpaste with more than ten valuable Thai herbs had been originated for the first

time under the name of Twin Lotus Herbal Toothpaste.

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Marketing Channels

After the successful invention of the product and to distribute those products

around the country, Twin Lotus was looking for the reasonable marketing channels.

They hay many stage as following:

In the first stage the group of small truck units had been scattered into many

prime locations using the direct hand to hand selling system together with the sell

with right of redemption system strategy. After the products had been inclusively

marketed almost around the country, the radio advertisement began to be used as

the media for the second stage. Before long the sales had been continuously and

surprisingly increased. Upon the beyond expectation of success with the radio

advertisement the Company turned to the television for its commercials and the

products began to be widely known by the consumers who responded well to the

products and enabled the sales to be established around the country with the

substantial revenues. It has quickly become the country’s number one leader on the

herbal products manufacturer.

Distribution Channels

Nowadays the company has been provided with many channels for the

distribution of products to the hands of consumers. There are three main channels as

following:

1. Modern Trade Unit consists of the discount stores, superstores,

supermarkets and the convenient marts (7-Eleven, Family Mart). This unit is under

the supervision and service of more than 30 team staffs.

2. Whole Sale Unit takes care of the wholesale stores (middlemen) under

the supervision and service of more than 20 team staffs. Over 50 trucks are available

for quick delivery and transportation of the products.

3. Traditional Trade Unit protrudes the service to customers and the retail

stores around the country using the 6-wheel trucks with 2 employees available for

each truck ready for the delivery of the products to the customers’ sites under the

supervision of 20 employees for this unit.

In part of the foreign market, the local market has been extended to cover

those in the Asian countries such as China, Vietnam, Cambodia, Lao and the

countries in the Middle East where the Company’s products have been awarded with

the Halal sign by Sheikhul Islam, according to the Islamic Principle, resulted in the

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popularity of the Company’s products among the group of countries in the Middle

East. Furthermore, the company is now going to have the market extended to the

European countries such as Italy, Germany, England and many others.

Corporate Information

Today 350 employees are employed by the Twin Lotus Co., Ltd. with the

advanced Laboratory, operated by the most advanced machinery from Germany,

controlled by the digital computer system to deal with the current expanded market

and the export.

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Corporate Profile

Company Established: 7 August 1989

Registered Capital: 100 Million Baht

Business Type: Production And Distributor Herbal Product

Company Name: Twin Lotus Co., Ltd

Head office: Twin Lotus Co., Ltd

Location:

• Head office: 12/5 Soi Pattanavet, Sukhumvit Rd., Prakhanongnua, Wattana,

Bangkok 10260, Thailand

• Twin Lotus Branch: 37/235 Moo 6 Nongbon Pravet Bangkok 10250,

Thailand

• Twin Lotus Factory: 999 Moo 7 Soi Poolcharoen Bangna – Trad Rd.,

Bangchalong, Samutprakan 10540, Thailand

Product Category: Oral Care Product, Skin Care Product, Hair Care Product

Award And Certification: GMP, TISs , HALAL , Thailand's Brand

Total Employees: 350

Markets Channel: Modern Trade, Credit, Cash Van

Other Business: Hotel, Resort, Twinlising

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Executive Team

Dr.Boonkit Leelertphan: President of Twin Lotus Group

Ms.Sunantha Leelertphan: Vice President of Twin Lotus Group

Ms. Chitlada Leelertphan : Managing Director of Finance

Mr. Jakkapat Leelerdphan : Managing Director of Hotel and Resort

Mr. Piti Leelerdphun : Managing Director of Marketing

Mr.Bundid Leelerdphun : Managing Director of Production

Mr. Kamthon Leelerdphan : Managing Director of Beijing RO

Mr. Prasopsak Angsuthornchai : Human Resource Manager

Ms. Kobkamol Leelerdphan: Assistant Managing Director of Hotel &

Resort

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Section 2: Product Background

There are 3 category products as below

1) Oral Care

Toothpaste: Twin Lotus Herbal Toothpaste -Original formula, Twin Lotus Herbal

Fresh And Cool Toothpaste

Mouthwash: Herbal Mouthwash

Lozenge: Icicle Lozenge

2) Skin Care

Soap: Twin Lotus Herbal Soap

Bathing Cream: Twin Lotus Bathing Cream ….. Blending herbal value.

3) Hair Care

Shampoo: Twin Lotus Herbal Shampoo Extra for Dropping Problem, Twin Lotus

Herbal Serum Shampoo Conditioner: Twin Lotus Herbal Serum Conditioner

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Toothpaste

Twin Lotus Herbal Toothpaste, Original formula

It comes in the new form of advanced

appearance, they have maintaining with the

same quality of more than 10 valuable natural

herbs for healthy and strong gums and teeth

protection. It can help relieving sensitive teeth

and reducing cigarette, tea and coffee stains,

eliminating bad breath and keeping breath fresh

and clean.

“The color of the Twin Lotus Herbal Toothpaste is dark because it is made of

pure herbal ingredients.”

Twin Lotus Herbal Fresh and Cool Toothpaste

The complete fresh and cool formula can help to

protect various problems in the mouth cavity.

With whiter toothpaste texture and specific

cooling herb formula, it helps to increase the

cooling effectiveness in the form of Thai herbs

for fresher and cooler than the original one. It is

mixed with natural herbs with the healthy and

strong gum and teeth protection properly, and helps reducing the symptom of

sensitive teeth and bleeding along the gumlines. It also useful for oral healthy by

helps to reduce the cigarette, tartar, coffee and tea stains, eliminates bad breath and

keeps breath fresh and clean all day long.

Prices:

160 g. 35 Bath

100 g. 25 Bath

40 g. 10 Bath

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Mouthwash

Herbal Mouthwash

It is the mouthwash with antiseptic for

fresh breath made of pure natural herb extracted

from aloe Vera and honeysuckle. It helps to

relieve the bacteria and the inflamination in the

mouth cavity, reduce the accumulation of bacteria

which is the cause of bad breath. With the taste of the Twin Lotus’s Thai herbal

formula, it helps to increase the confidence.

Lozenge

Icicle Lozenge

Manufactured in France, this product consist of the

mixture of cooling substance, using sorbetal and

sucrose as sweetener instead of sugar, to make the

breath smell sweet and fresh, add to your confidence

every day.

With the changing age, new generation of customers come to replace the old

ones. Twin Lotus Company considers that there must be the adaptation of form and

characteristics of the product to suit the new group of customers in order to expand

the customer base of Twin Lotus Icicle Lozenge, through product development for

higher quality above that of the competitors. At the same time, the Twin Lotus logo is

imprinted on the product packages because the research showed that when the

customers think of the Twin Lotus, they think of herbal at the same time.

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Soap

Twin Lotus Herbal Soap

The sanitary soap for nourishing and

maintaining the complexion with the pure natural

herb ingredients. It will take good care of dry

and tough skin to become soft, fresh and

touchable, yet able to clean all filths and

bacteria which are the cause of body odor. In addition, it keeps to protect and treat

the infected skin if used it continuously. It also can take care of the cracked heel and

Hong Kong foot effectively without using together with other kinds of drugs.

“Twin Lotus Herbal Soap can respond to all skin conditions.”

Bathing Cream

Twin Lotus Bathing Cream

Extracting from nature to blend the value of Witch

Hazel Extract, Olive Oil Derivatives, Saffron and

special herbal formula of Twin Lotus, leading to

deeply clean bathing for the alleviation and

maintenance of the skin; at the same time, adding

freshness and revealing the smooth fair skin, with

freshness and tenderness, attractive to touch;

preventing wrinkles, uniting the skin as well as reducing rashes and itchy spots.

Shampoo

Twin Lotus Herbal Shampoo Extra for Dropping Problem

Extra Twin Lotus Shampoo concentrated herbal

formula is special shampoo with ingredients of natural

genuine herbs which are directly beneficial to hair and

scalp. It contains lemongrass oil and Clitoria Tematea

extracted from real plant. Every time your apply Extra

Twin Lotus Shampoo special concentrated formula,

your hair and scalp hygiene are naturally well treated.

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Twin Lotus Herbal Shampoo F1 for Dropping Problem

F1 Twin Lotus Shampoo with its transparent pure

solution ingredients extracted from genuine natural

herbs which have properties that reinforce hair and

strengthen hair-roof cells is especially suitable for those

who confront itch, dandruff or hair-dropping problems

Twin Lotus Herbal Serum Shampoo

The shampoo that is extracted from natural herbal

concentrated formular that emphasizes special hair

nourishment, with the main mixture of herbal from

Germany, together with the special Thai herbal

formular of Twin Lotus. The Juniper Leaf that helps

protect the hair from damaging by the environment.

The Stinging Nettle Leaf that helps adjust the

balance of the head skin. The special formular Thai herbal of Twin Lotus strengthens

the hair from roots to tips, enables the hair to be weighty, smooth and easy to set. It

is suitable for damaged hair or colored hair.

Conditioner

Twin Lotus Herbal Serum Conditioner

The hair conditioner that is extracted from natural

herbal concentrated formula in abundance of various

nutritious substances for the hair that nourishes and

permeate deeply through to the internal core. It consists of

the main herbal mixture from Germany, together with the

special Thai herbal formula of Twin Lotus. Juniper helps

protect the hair from damaging by the environment. Stinging Nettle helps adjust the

balance of the head skin. The special formula Thai herbal of Twin Lotus strengthens

the hair from roots to tips, enables the hair to become weight, smooth and easy to

set. It is suitable for damaged hair or colored hair.

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Chapter 2: Market Analysis

Section 1: Country Background

China is one of the four oldest civilizations in the world, now they are the symbol of

the rich culture of the Chinese nation. China has gone over a long history of primitive

society, slavery society, feudal society and semi-feudal semi-colonial society and the

present socialist society

GEOGRAPHY

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The greater part of the country is mountainous. Its principal ranges are the

Tien Shan, the Kunlun chain, and the Trans-Himalaya. In the southwest is Tibet,

which China annexed in 1950. The Gobi Desert lies to the north. China proper

consists of three great river systems: the Yellow River (Huang He), 2,109 mi (5,464

km) long; the Yangtze River (Chang Jiang), the third-longest river in the world at

2,432 mi (6,300 km); and the Pearl River (Zhu Jiang), 848 mi (2,197 km) long.

POPULATION

There is about 22 percent of total population in the world. China population is

distributed unevenly with more in the east (more than 300 persons per square

kilometer) and fewer in the west (about 40 persons per square

kilometer. The national average density of population is 119 per

square kilometer (1990 census). For basic urban population data,

The average size of household was 3.7 persons. The proportion of

population aged at 0-14 was 26.4 percent, those aged 15-64 was 67.2 percent, and

that of the people aged 65 and over was 6.4 percent. The Average Chinese Life-

Span of the population was 70.8 years, that for male was 68.71, and female, 73.04.

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Table below show Total population since 1949 to 2006

Year Total Population Urban Population Rural Population

1949 542 million NA NA







1985 1.058 billion NA NA




1996 1.224 billion 359.5 million (29.4%) 864.39 million (70.6%)




2000 1.2953 billion 36% 64%


2006 1.31397 billion FYA FYA

Table below show Birth rate, Death rate, Natural growth rate since 1970 to

2006

YearBirth Rate

(Per Thousand)

Death Rate

(Per Thousand)

Natural Growth Rate

(Per Thousand)

1970 33.43 NA 25.83

1995 17.12 6.57 NA

1996 16.98 6.56 10.42

1997 16.57 6.51 10.06

1998 16.30 6.50 9.53

1999 15.23 5.97 8.77

2006 13.2 NA NA

NATIONALITIES

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The People's Republic of China is a unified, multi-national country,

comprising 56 nationalities. The Han people make up 91.02 percent of the total

population, leaving 8.98 percent for the other 55 ethnic minorities. They are

Mongolian, Hui, Tibetan, Uygur, Miao, Yi, Zhuang, Bouyei, Korean, Manchu, Dong,

Yao, Bai, Tujia, Hani, Kazak, Dai, Li, Lisu, Va, She, Gaoshan, Lahu, Shui,

Dongxiang, Naxi, Jingpo, Kirgiz, Tu, Daur, Mulam, Qiang, Blang, Salar, Maonan,

Gelo, Xibe, Achang, Pumi, Tajik, Nu, Ozbek, Russian, Ewenki, Benglong, Bonan,

Yugur, Jing, Tatar, Drung, Oroqen, Hezhen, Moinba, Lhoba and Gelo. All

nationalities in China are equal according to the law. The State protects their lawful

rights and interests and promotes equality, unity and mutual help among them.

FAMILY NAMES

Chinese family names came into being some 5,000

years ago. There are more than 5,000 family names, of

which 200 to 300 are polular. The order of Chinese names

is family name goes first, following by given name. For

instance, the family name of a person is Wang, given name

is Dong, his/her full name would be Wang Dong . The most

popular Chinese family names are LI, ZHANG, WANG, LI,

ZHAO, LIU, CHEN. According to the most recent official

statistics, the three most popular family names are: LI,

WANG and ZHANG, occupied 7.9% (97million), 7.4 and

7.1 of total population in China respectively.

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RELIGIONS

China is a multi-religious country. Buddhism, Taoism, Islam, Catholicism and

Protestantism, with the first three being more wide spread.Various religions exert

different influence on different ethnic groups. Islam is followed by the Hui, Uygur,

Kazak, Kirgiz, Tatar, Dongxiang, Salar and Bonan nationalities; Buddhism and

Lamaism are followed by the Tibetan, Mongolian, Dai and Yugur nationalities;

Christianity is followed by the Miao, Yao and Yi nationalities; Shamanism is followed

by the Oroqen, Ewenki and Daur nationalities; the majority Han nationality believes in

Buddhism, Christianity and Taoism.

ECONOMIC GROWTH (1995-2005)

Year Economic Growth Rate

1995 10.2%

1996 9.8%

1997 8.6%

1998 7.8%

1999 7.2%

2000 8.4%

2001 7.2%

2002 8.9%

2003 10.0%

2004 9.5%

2005 9.3%

Source : http://www.princeton.edu/~gchow/Are%20Chinese%20Official.doc (Accessed on 10

Jul 2006)

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http://www.princeton.edu/~gchow/Are%20Chinese%20Official.doc

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Economic Growth Rate

MONEY

Chinese Money is called Renminbi (RMB) (means "People's Currency"). The

popular unit of RMB is Yuan . The official exchange rate between U.S. Dollar and

Renminbi Yuan currently is about 1 : 8.3 (1.00 Dollar = 8.30 Yuan). 1 Yuan to 10

Jiao, 1 Jiao to 10 Fen (There are parts of China the Yuan is also known as Kuai and

Jiao is known as Mao. Chinese currency is issued in the following denominations:

one, two, five, ten, fifty and a hundred Yuan; one, two and five Jiao; and one, two

and five Fen.

Thai Baht/Yuan = 4.7443 (Updated on August 11, 2006)

CHINESE CITIES AND PROVINCE

The total number of Chinese cities is 666.

11 cities with population over 2 million;

23 cities with population between 1 millions and 2 million;

44 cities with population between 500,000 and 1 million;

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159 cities with population between 200,000 and 500,000;

393 cities with population less than 200,000.

The number of Mayoress in China is 375;

The total urban population in China is 515.11 million.

(The data are based on the statement issued by the Second Session of Chinese

Mayor's Association in May 22, 1996 and the Report of China National Statistic

Bureau in 1997. Some data were updated on October 17, 1997)

There are 5 provinces with population over 50 million (2001)

All of China's 4 municipalities with population over 10 million (2001)

The most populated administration division: Henan Province with population 92.56

million (2001)

The least populated administration division: Tibet (Xizang) Autonomous Region with

population 2.62 million (2001)

Largest cities:

Shanghai, 12,665,000 (metro. area), 10,996,500 (city proper);

Tianjin (Tientsin), 9,346,000 (metro area), 4,333,900 (city proper);

Wuhan, 3,959,700;

Shenyang (Mukden), 3,574,100;

Guangzhou, 3,473,800;

Haerbin, 2,904,900; Xian, 2,642,100;

Chungking (Chongquing) 2,370,100;

Chengdu, 2,011,000;

Hong Kong (Xianggang), 1,361,200

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MAIN PORTS OF ENTRY

There are 3 ways to entry China as below:

Air: Beijing, Chengdu, Dalian, Guangzhou, Hangzhou, Harbin, Hohhot, Hong

Kong, Kunming, Qingdao, Shanghai, Shenyang, Tianjin, Urumqi, Xiamen and Xi'an.

Land: Alataw, Baketu, Erenhot, Friendship Pass, Hunchun, Ji'an, Kunjirap,

Manzhouli, Mohe, Nyalam (Zhangmu), Pingxiang, Ruili, Suifenhe, Tumen, Wanding,

Xunke and Yadong.

Water Beihai, Dalian, Dangdong, Guangzhou, Haikou, Hankou, Huangpu,

Jiujiang, Lianyungang, Nanjing, Ningbo, Qingdao, Qinhuangdao, Sanya, Shanghai,

Shantou, Shenzhen, Tianjin, Weihai, Yangzhou, Yantai, Zhangjiang and Zhenjiang.

TRANSPORTATION

Railways: total: 71,898 (2002).

Highways: total: 1,765,222 million km;

paved: 395,410 km (with at least 25,130 km of expressways);

unpaved: 1,369,812 km (2002 est.).

Waterways: 121,557 km (2002).

Ports and harbors: Dalian, Guangzhou, Nanjing, Ningbo, Qingdao,

Qinhuangdao, Shanghai.

Airports: 472 (2004 est.).

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GROWTH OF CHINA’S FOREIGN TRADE (1995-2000)

(Unit USD$ 1 billion)

Year Imports Exports

1995 132.1 148.8

1996 138.8 151.1

1997 142.4 182.7

1998 140.2 183.8

1999 165.8 194.9

2000 225.1 249.2

Source: Government Publication and official news release.

CHINA’S TOP 10 TRADING PARTENER IN 2000*

(Unit US$ 1 billion)

RankCountry &

Region(2000)Rank

Country &

Region (1999)Import & Export Export Import

1 Japan 1 Japan 66.2 32.4 33.8

2 USA 2 USA 61.5 42.0 19.5

3 EU 3 EU 55.7 30.2 25.5

4 Hong Kong 4 Hong Kong 43.8 36.9 6.9

5 ASEAN 5 ASEAN 27.1 12.2 14.9

6 ROK 6 ROK 25.0 7.8 17.2

7 Taiwan 7 Taiwan 23.5 4.0 19.5

8 Australia 8 Australia 6.3 2.7 3.6

9 Russia 9 Russia 5.7 1.5 4.2

10 Canada 10 Canada 4.7 2.4 2.3

Source: Government Publication Beijing Review Vol. 43 No. 14

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CHINA’S TOP 20 IN IMPORT & EXPORT VOLUME IN 1999

(Unit US$ 1 million)

Rank Company Volume

1 China National Petrochemical International Corporation 4,933.83

2 China National Chemicals Import & Export Corporation 4,765.96

3 China General Technology (Group) Holding Ltd. 2,873.68

4 Motorola (China) Electronics, Ltd. 2,664.75

5 Orient International (Holding) Co. Ltd. 2,610.30

6China National Cereals, Oils and Foodstuffs Import & Export

Corporation2,551.08

7 China National Electronics Import & Export Corporation 1,759.79

8 China Aviation Supplies Import & Export Corporation 1,642.70

9 China National Petroleum Corporation 1,584.06

10 China National Air Technology Import & Export Corp. 1,528.48

11 China National Metals & Minerals Import & Export Corporation 1,478.22

12 Baosteel Group International Trade Corporation 1,218.01

13 China National Arts and Crafts Import & Export Corporation 1,232.01

14 China Shipbuilding Trading Co. Ltd. 1,215.83

15 Seagate International Technology (Wuxi) Co. Ltd. 1,163.11

16 China National Machinery & Equipment (Group) Corporation 1,160.02

17 China National Coal Industry Import & Export (Group) Corporation 1,104.39

18 Shenzhen Seagate Technology Co. Ltd. 1,088.35

19 Intel International (China) Ltd. 1,080.05

20China National Native Produce and Animal By-Product Imp & Exp.

Corp.1,054.82

Source: Government Publication Beijing Review No. 33, 2000

Source: http://elsa.berkeley.edu/~yqian/econ162/econ162%20topic10s.pdf (Accessed on 10

Jul 2006)

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http://elsa.berkeley.edu/~yqian/econ162/econ162%20topic10s.pdf

ECONOMIC SUMMARY

GDP/PPP (2005 est.): $8.182 trillion; per capita $6,300.

Real growth rate: 9.3% (official data).

Inflation: 1.9%.

Unemployment: 4.2% official registered unemployment in urban areas in

2004; substantial unemployment and underemployment in rural areas; an official

Chinese journal estimated overall unemployment (including rural areas) for 2003 at

20% (2004).

Arable land: 15%.

Agriculture: rice, wheat, potatoes, corn, peanuts, tea, millet, barley, apples,

cotton, oilseed; pork; fish.

Labor force: 791.4 million (2003); agriculture 49%, industry 22%, services

29% (2003 est.).

Industries: mining and ore processing, iron, steel, aluminum, and other

metals, coal; machine building; armaments; textiles and apparel; petroleum; cement;

chemicals; fertilizers; consumer products, including footwear, toys, and electronics;

food processing; transportation equipment, including automobiles, rail cars and

locomotives, ships, and aircraft; telecommunications equipment, commercial space

launch vehicles, satellites. Natural resources: coal, iron ore, petroleum, natural gas,

mercury, tin, tungsten, antimony, manganese, molybdenum, vanadium, magnetite,

aluminum, lead, zinc, uranium, hydropower potential (world's largest).

Exports: $752.2 billion f.o.b. (2005 est.): machinery and equipment, plastics,

optical and medical equipment, iron and steel.

Imports: $631.8 billion f.o.b. (2005 est.): machinery and equipment, oil and mineral

fuels, plastics, optical and medical equipment, organic chemicals, iron and steel.

Major trading partners: U.S., Hong Kong, Japan, South Korea, Germany,

Taiwan (2004).

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Section 2: Competitor analysis

According to the Chinese toothpaste association, China is the world’s largest

producer of toothpaste turning out 5.2 billion tubes and earned a net profit of more

than US$70 million in 2005. Some of the products are promoted for teeth

desensitization, whitening and other hygienical purposes. The market share of

foreign toothpaste brands like Colgate and Signal (Unilever) in the three major

Chinese cities of Beijing Shanghai and Guangzhou is 55%.There are many brands of

toothpaste in the Chinese market. Among them some of the biggest players are

Unilever China, P&G China, Unilever Shanghai Toothpaste Company, Ghonzhau

Colgate, Liuzhou L.M.Z.Co., LTD, Shanghai Toothpaste Factory., LTD, Guangzhou

Masson Group Corporation, etc.

Some more numbers: Over the same period, the number of toothpaste brands

rose from 100 to almost 800

Unilever China

Unilever (China) Ltd., a holding company, was established in 1996. One of the

first ventures was with a well-known local brand, Maxam toothpaste in order to

improve its marketing and distribution system in the Chinese market. Before 80

years, Lever brothers established its first operation in Shanghai in 1923 which

became the largest soap maker in the Far East.Unilever reestablished itself in

Shanghai as a multi-local multinational in China. Unilever reestablished itself in China

in 1986 through strategic tie-ups with local companies. However, the joint venture

route that the company adopted backfired, and Unilever found itself losing out to its

American counterpart, Procter and Gamble. In late 1990s and early 2000s, the

company entered into a restructuring and consolidation mode to reorganize and

strengthen its position in China. The company management recognized the vast

opportunities that the Chinese market offered, and adopted well-planned strategic

means to exploit these to their fullest. Among the steps the company took during its

restructuring efforts were plans to get listed on the Chinese stock market,

consolidation of its various units into one holding company, replacement of

expatriates with local employees and localization of a number of products. Unilever

has introduced over 20 brands to Chinese consumers which consist of home and

personal care. F&B and ice-cream.From1986 to 2001, Unilever China adds up to

about $1 billion in investment, introduced more than 100 types of advanced

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technologies, creation of 14,000 job opportunities and more than 4000 local

employees. The company toothpaste brands for consist of: Zhonghua, Signal,

Pepsodent. The annual tax amount has reached RMB600 million.

Unilever invested RMB166 million to set up Unilever Research China, the 6th

global research center of Unilever. This center has access to the scientific knowledge

developed globally by Unilever and acts as a bridge to Chinese academia by

introducing more traditional natural ingredients into our products. In 2002, following

China's accession to WTO, Unilever established a global supply management office

in Shanghai. This office will provide more opportunities for Chinese suppliers for raw

materials to export to Unilever companies overseas.

In 2003, Unilever's manufacturing base for home and personal care products is

set up in Hefei, making it one of the biggest manufacture sites for Unilever global.

This site not only provides high quality products for Chinese consumers, but also has

the great potential to serve as the manufacturing center for Unilever global business.

In 2004, Unilever made the decision to build its own office building in Shanghai as

regional headquarter.

Unilever believes that successful localization starts with the localization of

employees. An outstanding local team can better understand and meet the needs of

Chinese consumers. In Unilever, 90% managers are recruited and trained

locally.Unilever seeks to be a responsible employer, business partner and good

corporate citizen, earning respect for our values wherever we operate.

Since 1996, the companies launched “Zhonghua” teeth protection campaign

across the whole country to established Unilever’s image as a responsible social

citizen in China and win the acknowledgement of the local society.

Strategies of unilever

In spite of major difficulties, Unilever was committed to building and sustaining

a successful business in China. The company therefore adopted several measures

like enhanced research and development, modern management systems and large

scale organizational restructuring to anticipate and integrate the needs and

aspirations of the Chinese customers into its growth plan. In the mid 1980s and

1990s, the large number of joint ventures entered by the company failed to earn

profits for the multinational and also proved unsuccessful in integrating Unilever to

27

mainstream Chinese economy. Therefore, in 1999, the company entered into large

scale consolidation and integrated its various units under one holding company.

Special localized strategies like hiring of local employees, setting up an R&D unit,

and planning for stock market listing were initiated to strengthen the company’s

position in China. Unilever China responded to the complex needs of the country’s

consumers by developing a portfolio of brands-both local and global, and

incorporated traditional Chinese sciences with technological enhancements. The

company aimed to identify itself as the brand that was quality conscious and

consistently endeavored to meet local needs and tastes. Global brands-Dove, Lux,

Ponds, Lipton-promised international expertise in their formulation and development

but had local professionals to manage them to ease communication between the

company and its customers.

P&G China

In 2005, P&G China became the first company for prime time advertising slots

on the China Central Television (CCTV) investing 394 million yuan for 2006

advertising space.P&G had been the biggest bidder for advertisement space for 2005

as well, spending about 385 million yuan. Earlier, in 2004, P&G had invested just 180

million Yuan. This sharp increase in advertising expenses reflected the increased

importance P&G attached to advertising its products in the fast growing Chinese

economy. Demand for items such as Crest toothpaste was rising faster in developing

countries than in developed countries. As of May 2005, sales of P&G in mainland

China, Hong Kong and Taiwan totaled US$ 2 billion, with a cumulative average

annual growth rate of 25 percent between 2002 and 2005. P&G's success in China is

due to its coverage of 400-plus cities. This means penetrating well beyond the

coastal region. It also means working with distributors, teaching them, strengthening

them, creating win-win partnerships that take time, are painful, but yield great

proprietary benefits.

LIUZHOU L.M.Z.CO., LTD.

Liuzhou LMZ was set up in 1980 and is able to maintain its position to a

National Grade 1 large enterprise. It has fixed asset worth 350 million RMB, self fund

300 million RMB and annual gross value of industrial output 600 million RMB from

28

previous fixed asset 0.6 million RMB and annual gross value of industrial output 4.5

million RMB within 20 years. Liangmianzhen (LMZ) has become one of the most

famous China’s national trade marks. Insisting on reforming and opening up,

economic construction as the centre, marketing demand as guidance, and sales of

products as leader, technology and management as power is the reason of the

company’s high-speed development. Company’s economic indexes have increased

for 32.96%, 34.87% and 28.3% average annually in turnover of sales, tax & profit and

net profit since 1990.

LMZ toothpaste contains a Chinese herb Liangmianzhen which is grown in

Guangxi especially. It is useful in eliminating periodontis, dental calculus, gum

bleeding, sensitivity and toothache. Its high quality has won a good reputation both in

China and abroad including title of Excellent Product issued by National Light

Industry Ministry and other 100 awards.

LMZ product information

LMZ Children Toothpaste　 The product contains fluoride between

400-500 PPM, just one-third of the adult’s

toothpaste. It helps prevent dental caries and

avoid side effect.

The power of the grind material is only half

of adult’s toothpaste, specially fit for children’s

non-grow-up teeth (younger than 18 years). The

natural fresh colored transparent paste gives

children more attraction.

LMZ Chinese Traditional

Medicine Toothpaste　

It is made of the extract of shiny lead prickly

ash root, chlorophyll and excellent abrasive. It

helps prevent oral diseases, toothache and

halitosis. It is an ideal product for oral care and

tooth clean.

LMZ COLORED STRIP

TOOTHPASTE　

The two-colored paste of LMZ colored strip

toothpaste contains natural essence plant and

fluoride, which has an efficacy in anti-

inflammation and pain easing, preventing dental

caries and strengthening gums, etc. Prolonged

use will protect your teeth in an all-round way,

29

and bring about your oral health.

LMZ F & F Toothpaste　 Made by natural plant essence and fluoride,

It offers and unique effect on inflammation,

prevent sensitively and provides anti-cavity

fluoride protection

LMZ Plant Essence

Toothpaste　

With added Chinese herbal medicine, this

product can fight dental caries, strengthen gums,

prevent sensitivity and stop bleeding. It has

obvious effect on diminishing periodonititis,

tartar, toothache and halitosis. No side effect.

Smooth compound abrasive and great cleaning

power,. Natural peppermint and spearmint flavor

refreshes your breath

LMZ Pure-white Toothpaste　 It has a natural formulation. It can whiten

and beautify your teeth. Using with LMZ Chinese

Traditional Medicine Toothpaste in turn can

protect your teeth and promote good oral health.

LMZ Sodium Fluoride

Toothpaste　

With significant whitening effect for complex

tooth protection, its special composition actively

helps to remove problems like yellow teeth,

creation of spots and carries. The special fine-

grained powder has whitening effects, removes

plaque and spots and it also helps to reduce

tartar creation when used regularly. Highly

effective combination of ingredients and cooling

taste of mint for healthy teeth and long-lasting

fresh breath.

LMZ Whitening Tooth Paste　 With whitening ingredient, this product is

able to clean up stained pellicle efficiently which

is caused by the long-term sedimentation of

residual food on dental surface. And enjoying its

as a regular toothpaste for daily use, you can

posses yourself of shinning white teeth again.

30

Shanghai Toothpaste Factory Co., Ltd.

Shanghai Toothpaste Factory has the history of more than eighty years and

takes the leader position in China toothpaste industry for its average output, industry

output value, sale income, tax and profit produced by one man. With advanced

technical process, stability of production quality, its output for export is 30% of total.

Among the main brands of toothpaste manufactured by the company are

Spearmint, Shanghai, Jade, etc. The Spearmint brand toothpaste offers fine paste,

rich foam, high abrasion and good testing; it also has the function of preventing tooth

from decay containing fluoride. Filled in high quality aluminum and laminate tube, the

production is exported to more than10 countries and regions, the company

manufactories the toothpaste asked by customer using their brand. The factory

manufactories and runs business with chemical raw material concerning with

toothpaste, cosmetic, detergent, such as: sodium lauryl sulfate, sobital, lauryl alcohol

sulfate ethanolamine, ammonium lauryl sulfate, potassium lauryl phosphate,

hydrated silica’s, coating, paint and also manufactories the equipments using in

toothpaste, cosmetic and detergent industry. All its products have obtained ISO9002

certification Standards & approvals ISO9002, other standards & approvals GB8372-

1995

C & T market

Foreign companies have successfully entered the C & T market, backed with

massive advertisement investment, and are primarily targeting young, urban parents

with a relatively high disposable income. They dominate China's C&T market,

"having been quick to enter, investing heavily in introducing brands that have been

mostly superior in quality to what was produced locally," says Access Asia. Procter &

Gamble heads the list with a 17% market share, followed by Unilever Shanghai

Toothpaste Company (9.5%), Unilever China (6.3%) and Guangzhou Colgate (5.4%).

In the face of the multinational onslaught, many Chinese consumers remain fiercely

loyal to local C&T, considering foreign brands overpriced and more likely to be fakes.

And today, there are many reasons to buy Chinese.

The presence of multinationals has forced domestic players from the outset to

formulate strategies in response to the foreign challenge. The leading local

companies took a proactive approach by entering joint ventures with the

31

multinationals, which had benefits for both partners. The foreign companies profited

from their partners' local knowledge and distribution network, while domestic

companies gained the expertise they had previously lacked, particularly

inmanagement and marketing.

Foreign brands dominate the cosmetics market in china. China's cosmetics

market has reached maturity, with more than 3,000 brands of cosmetics on offer

nationwide.

About 20 brands dominate the market. In fact, foreign and joint-venture

cosmetics enterprises are carving out the lion's share (80%) of the market, while

small- and medium-sized enterprises investing up to Rmb50 million (HK$47 million) –

and representing 90% of the players - take just 20%

32

Section 3: SWOT analysis

Company Analysis

Strengths

Modern laboratory under GMP standard.

The most advanced technological machine from Germany.

The qualified waste water treatment system.

Made of pure herbal ingredients.

Weaknesses

No safety license (Chinese).

New comer in Chinese toothpaste market.(low experience)

No relationship with distributors in China (especially in rural market).

Market Analysis

Opportunities

China’s fast-moving consumer goods (FMCG) sector recorded a 7% increase

in sales value in 2004.

The toothpaste is frequently purchased consumer products.

The rapid development of modern retail outlets, 30% increase in modern

outlets.

The non-food categories (shampoo, skin moisturizer, laundry detergents,

toothpaste and sanitary protection products) are the top five categories with

the largest share of sale value.

The huge number of consumer population in China is 1,307.4 million in 2005

(about 22% of total population in the world).

Highest average GDP growth (about 9.5%) of the world (2001-2005).

33

Toothpaste demand is mainly being driven by the overall market growth of 8-

10%

Threats

More than 90% of toothpastes sold in China now have one or more additives

purported to promote oral health.

China is the world’s largest toothpaste producer (5.2 billion tubes)

Main competitors such as Nestle, Colgate-Palmolive, Unilever, and Procter &

Gamble (Colgate has its market share over 30% in 2002).

Economic liberalization and sustainable growth alongside enduring political

control.

The rate of corporate income tax is theoretically 33%.

In certain professions a lack of skill has led to labors shortages.

The capital market remains underdeveloped in China.

The number of toothpaste brands is almost 800 brands.

The price of advertising spot on television is very high.

Launching a new brand is expensive.

Price sensitive in China market (especially in rural area).

A very different group of consumers in China.

Local companies enjoy a cost advantage of as much as 30% against their

foreign competitors.

MNCs (Multinational Corporation) in China usually have higher logistics and

supply chain costs than their Chinese counterparts.

34

Section 4: Target analysis

China is the new booming market since they open the market to the world

and joining the World Trade Organization in 2001. China's fast-moving consumer

goods (FMCG) sector recorded a 7% increase in sales value in 2004.

But not all of China is booming: rural areas have lagged behind. And growth

has not been without hiccups. In certain professions a lack of skills has led to labour

shortages. Pollution is rife, and health care strains rural resources. The banking

industry has been the target of recent reforms, but bad loans are on the rise, while

the capital market remains underdeveloped.

The company should focus on urban market that has high purchasing power

and consumption.

The target groups for Twin lotus toothpaste are;

Herbal-concern Group : Tend to be herbal-concern in China, especially in

urban area, is growing up. Due to increasing of demand in healthy tend, the

toothpaste consumers will not concern only chemical ingredients, 10 natural herbal

from the company are used for toothpaste ingredients to keep gums and teeth

healthy firmly, the herbal formula toothpaste from the company will be served this

target group. This group is willing to pay higher price for higher quality of product.

35

Patient in Hospital and Dental Clinic : The

patients in the hospital or dental clinic are facing teeth

problem. They need some product that can be useful to

their teeth. The selling product in the hospital and clinic

means the good quality product.

Twin Lotus toothpaste will have to obtain a

quality and safety license this year if they want their

products to be sold in the Chinese market, according to

the China Oral Care Products Industry Association,

China's oral care product watchdog.

More than 90% of toothpastes sold in China now have one or more additives

purported to promote oral health, but there are no state standards on the quality and

safety of these products.

The company must have their products pass clinical tests at leading hospitals

and provide authoritative clinical data to support the quality of the products.

36

Chapter 3: ENTRY STRATEGY

Section 1: Entry mode alternatives

1. Wholly Foreign-owned Enterprises

Wholly foreign-owned enterprises, which are totally invested by foreign party

in China by foreign companies, enterprises, other economic organizations and

individuals in accordance with the laws of China. According to the law of wholly

foreign-owned enterprises, the establishment of foreign enterprises should benefit

the development of our national economy and agree with at least one of the following

criteria: the enterprises must adopt international advanced technology and facility; all

or most of the products must be export-oriented. The wholly foreign-owned

enterprises often take the form of limited liability.

Formation procedures

A wholly foreign-owned enterprise is a limited liability company. The law and

regulations prohibit or restrict the establishment of wholly foreign-owned enterprises

in certain industries.

The Ministry of Foreign Trade and Economic Cooperation is responsible for the

examination and approval of wholly foreign-owned enterprises. The local

governments are also authorized to approve these enterprises, provided certain

conditions are met.

Which must include specific information requested under the regulations, to the

relevant government authority investor will receive a written response within 30 days

of submitting the report.

The investor must apply for registration and obtain a business license within 30

days of receiving approval. Tax registration must be performed within 30 days of

establishment.

37

Capital structure

The registered capital cannot be reduced during the term of operation, and

increases or transfers must receive prior approval from the authorities.

Foreign investors may contribute capital in the form of freely convertible foreign

currencies or certified RMB profits form other foreign investment enterprises. Subject

to certain requirements set out in the regulations, may be capitalized according to

their monetary value.

Requirements regarding the timetable for such contributions are published in a

schedule. The first installment must be made within 90 days and the last within three

years of the issuance of the business license.

After all the capital contributions have been made, a Chinese registered

accountant must be engaged to verify the contributions and issue an investment

verification report.

Liquidation, receivership

An enterprise engaging in a high-technology industry will have a life of around

20 years, although it may be extended to 50 years of longer if it has the special

approval of the Chinese government.

Any remaining assets of the enterprise that exceed the registered capital are

subject to income tax.

Wholly foreign-owned enterprises are required to make allocations to a reserve

fund and a bonus and welfare fund for its employees from its after-tax profits. The

reserve fund allocations must be not less than 10 percent of the after-tax profits.

Profits may not be distributed until the prior years losses have been cleared.

2. Equity joint ventures

38

An equity joint venture is a separate legal entity and takes the form of a

limited liability company registered in China. The partners have joint management of

the company, and the profits and losses are distributed according to the ratio of each

partner’s capital contribution.

Formation procedures

Equity joint ventures are governed by Law of the People’s Republic of China

on Joint Ventures Using Chinese and Foreign Investment, promulgated in 1979, and

the Implementing Regulations.

The Ministry of Foreign Trade and Economic Cooperation (MOFTEC) has

overall responsibility for approving joint ventures and for issuing the approval

certificates. The venture has one month in which to register with the State

Administration of Industry and Commerce in the relevant locality to obtain a business

license.

Capital Structure

Law requires the foreign partner to the venture contribute at least 25 percent

of the registered capital. Capital contributions can take the form of cash, capital

goods, industrial property rights, and other assets. All of them must be certified in a

report from a Chinese-registered CPA firm.

Liquidation

Equity joint ventures were originally allowed to operate for a maximum of 30

years. The joint venture must settle all its debts, including the cost of liquidation,

before the remaining assets can be distributed among the joint venture partners.

3. Representatives offices

Foreign enterprises are permitted to open representative offices in China.

Legally, these are to be established purely for liaison purposes, and their activities

are limited to the provision of services that do not give rise to any earnings. The

permissible activities of representative offices include the following

Researching and collecting market information.

39

Providing introductory services to potential buyers and sellers, such as setting

up meetings and passing on price and technical information to Chinese

customers.

Assisting in making arrangements for trade visits to China.

Coordinating with the parent company and other associated companies or

affiliates.

The company is required to register with the local tax authorities within 30

days of receiving the business registration certificate.

Limited liability Company

Shareholders – At least two but no more than 50.

Minimum registered capital – required minimum capital contribution, which

ranges from RMB 100,000 to RMB 500,000 depending on the industry,

Capital contributions – In the form of cash, tangible assets, industrial properly,

no patented technology or land-use rights. Industrial properly and no patented

technology may not exceed 20 percent of the registered capital.

Share transfers – Requires consent of a majority of the shareholders for

transfers to no shareholders.

Board of directors – Three to 13 directors, in a small company the executive

director may serve in place of a board of directors.

Supervisory committee – Reviews the financial affairs of the company and

actions taken or directed by the directors.

4. Processing and assembling trade

The processing and assembling trade constitutes a form of cooperation in

which foreign firms place orders with Chinese factories to carry out certain

manufacturing activities for export. These activities generally consist of processing or

assembling commodities according to the foreign firm’s specifications, with the parts

or semi processed items supplied by the foreign firm.

The advantages of foreign processing and assembling businesses are that they

do not require Chinese enterprises to make sizable investments, use scarce foreign

exchange or buy costly equipment. Increased pressure from domestic sales and

exports has created shortages in raw and semi finished materials, components and

spare parts.

40

In order to encourage and facilitate the development of the processing and

assembling trade, materials and components imported for processing and

assembling products for export are exempt from customs duties.

5. Exports

The company can apply export both own representatives and foreign agents.

Only those corporate entities that have registered with SAIC and issued a Corporate

Business License, and have registered with the local inspection and quarantine

authorities and granted an Import and Export Commodity Inspection Agent

Registration Certificate can act as agents for import-export commodity inspection

applications. The inspection and quarantine authorities will not process applications

submitted by unregistered agents.

The agents are responsible for contacting the inspection and quarantine

authorities, arranging the time of inspection, coordinating with the inspection and

quarantine authorities in connection with relevant investigations, and paying fees on

behalf of their clients.

Entry Mode's references-- Guide to doing Business in China(2004-2005),Page3-1to3-10 and 8-1 to 8-7, HKTDC Research Department-- http://en.ec.com.cn/pubnews/2004_02_20/200551/1003710.jsp-- Economic Analysis Department, Office of international commerce in Shanghai, 2 Feb 2005 and 5 Jan 2006-- China laws for Investment in China, Page 1-10, Chinalaw2/Viboon1/47(07-04-2003)

Income TaxStandard Tax = 33%Special Economic Zone (SEZ)* = 24% (Shanghai & Beijing are included)(source: Tax Laws System of Republic of China, Vibhoon Tangkittipakorn, Fareast Company Limited)

41

http://en.ec.com.cn/pubnews/2004_02_20/200551/1003710.jsp

Section 2: Choosing the Entry Mode

Generally, in selecting the entry mode, there are a number of factors needed

to be considered in China. The importance of each factor varies upon the purpose

and objective of the foreign company that want to enter into a specific market. The

following section will reflect the factors to be considered with the entry mode

available.

1. Formation procedures (include law and tax policy)

2. Capital structure (investment and cost of running the business)

3. Ability to control management

4. Liquidation

5. Effectiveness in reaching the target customer

6. Credibility

7. Risk

We would like to recommend Twin Lotus to enter the Chinese market by

considering with company’s objectives and plan in a particular time and period. As

the main product of Twin Lotus, Thai natural herbs toothpaste under the brand name

of Twin Lotus is first product to enter the market.

Company will implement the entry mode into three periods;

Preliminary phase is by International Trade Fair to introduce the product and

do market research.

Short term phase is by Exports.

Future plan in long term is by Industrial Manufacturing.

After International Trade Fair and launching first promotion, the company has

key entry mode based on the Exportation

Exportation in China is base on Socialism rather than Communism

China government had encouraged economy in China to be the root of world

production and exportation by supporting state enterprises and companies to invest

with International firms.

42

Special Economic Zones (SEZs) have been established in Shenzhen, Zhuhai,

Xiamen, Shantou, and Hainan. The new Pudong area of Shanghi, although not

designated as an SEZ, has SEZ status and is an area in which the Chinese

government hopes to attract extensive foreign investment for development.

China‘s Trade Policy

Exports of manufactured goods are encouraged in order to earn foreign

exchange. Import policy is directed toward acquiring capital goods that embody the

modern technology needed to develop China’s industries. This trade policy is

consistent with company long term plan.

Taxation Policy

China initiated the concept of tax incentive zones and established the Special

Economic Zones. This zone was created primarily to attract foreign investment by

offering investors tax and other incentives. Tax incentives include preferential income

tax rates and tax holidays.

Finance

The projects are generally financed by the foreign investor and by foreign

currency loans form overseas banks. Loans from local banks are available to foreign-

funded ventures in local and foreign currency. However, there are minimum capital

requirements that restrict the extent to which an investment can be financed by

loans.

Labor and Labor costs

A large labor force is available. In the major, more developed, cities

competition for good qualified staff may also be intense and additional incentives

may have to be offered to attract and retain qualified staff.

43

Chapter 4: Market Strategy

Section 1: Product Strategy

The products of Twin Lotus are oral care, hair care and skin care. The

company should target on the strongest product as toothpaste.

Product description

The complete fresh and cool formula can help to protect various problems in

the mouth cavity. With whiter toothpaste texture and specific cooling herb formula, it

helps to increase the cooling effectiveness in the form of Thai herbs for fresher and

cooler than the original one. It is mixed with natural herbs with the healthy and

strong gum and teeth protection properly, and helps reducing the symptom of

sensitive teeth and bleeding along the gumlines. It also helps to reduce the cigarette,

tartar, coffee and tea stains, eliminates bad breath and keep breath fresh and clean

all day long.

Product Position

The company should set the product position as “premium brand” better or

equal to Crest and Colgate. This Twin Lotus brand is a new brand in the China

market we can create product image as high quality product.

Packaging Design

The beginning to entry to China, product design and packaging will not be

changed anything except language. The company needs to translate product

description on the package as Mandarin.

For the next step, the company should try to change their product innovation

and design as customer needs.

Tube Design : Design as lotus flower with green , pump able.

44

45

Section 2: Price Strategy

How we set the selling price

FACTORS INFLUENCING PRICE DETERMINATION

• BASE PRICE or “list price” refers to the price of one unit of the product at its

point of production or resale. This price does not reflect any discount or

freight charges.

• Estimated Demand

– Look for a price that the market expects

• EXPECTED PRICE is the price at which customers

consciously or unconsciously value it, usually expressed as a

range of prices.

– Estimate the sales volume at different prices.

• INVERSE DEMAND is the higher the price, the greater the unit

sales.

Competitive Reactions

– Directly similar products

– Available substitutes

– Unrelated products seeking the same consumer dollar

Other Marketing-Mix Elements

– Product – product’s price is also influenced by whether:

• it may be leased as well as purchased outright

• it may be returned by the customer to the reseller for a refund

or exchange

• a trade-in is involved.

– Distribution Channels – channels and types selected

– Promotion -- retailers will be charged lower price if they are placed

with promotional responsibilities.

46

Cost of a Product

– “AVERAGE FIXED COST CURVE” declines as output increases.

– “AVERAGE VARIABLE COST CURVE” is U-shaped.

– “AVERAGE TOTAL COST CURVE” is the sum of average fixed cost

and average variable cost.

– “MARGINAL COST CURVE” has a U-shape.

PRICE STRATEGY

Market-Skimming Pricing - setting high price in relation to the target market’s range

of expected prices.

Market-skimming pricing is appropriate when:

1. The new product has distinctive features strongly desired by consumers.

2. Demand is fairly inelastic usually in the case in the early stages of a

product life cycle.

3. The new product is protected through such barriers as patent.

Advantages of Skimming Pricing

1. High profit margin so R&D costs are quickly recovered.

2. High prices can connote high product quality.

3. High price will curtail demand to levels that do not outstrip the firm’s

production capacities.

4. Greater flexibility --- firms can easily lower the price later when they find

out that the prices are too high.

Market-Penetration Pricing - setting relatively low initial price for a new product.

Market-penetration is suitable when :

1. A large mass market exists for the product.

2. Demand is elastic.

3. Substantial reductions in unit costs can be achieved through large-scale

operations or when there is economies of scale.

4. Fierce competition already exists or is expected to exist in the market.

Advantages of Market-Penetration Pricing

47

1. Immediately penetrate the market.

2. Generate substantial sales volume and a large market share.

3. Discourage other firms from introducing competing products.

GEOGRAPHIC PRICING STRATEGIES

1. Point-of-Production Pricing or “FOB factory pricing” or ( FOB mill

pricing ) – the seller quotes the selling price at the point of production, and the

buyer selects the mode of transportation and pays all freight costs.

- The seller pays only for loading the shipment abroad the freight carrier.

2. Uniform Delivered Pricing or “Postage Stamp Pricing” - the same

delivered price is quoted to all buyers regardless of their locations.

- Uniform delivered pricing is typically used where freight costs are a small

part of he seller’s total cost.

3. Zone-Delivered Pricing - divides a seller’s market into a limited number of

broad geographic zones and then set a uniform delivered price for each zone.

- The freight charge is an average of the charges to all points within a zone.

4. Freight-Absorption Pricing – manufacturer will charge a factory price

plus the freight costs that would be charged by a competitive seller located near that

customer.

- It is adopted to offset competitive disadvantages of FOB factory pricing.

- The supplier decides to absorb some freight cost as long as the net revenue

is larger than its marginal costs.

Freight absorption is useful when a firm has:

- Excess capacity

- High fixed costs

- Low variable costs per unit of product

48

SPECIAL PRICING STRATEGIES AND SITUATIONS

• One-Price Strategy - a seller charges the same price to all similar customers

who buy identical quantities of a product.

• Flexible-Price Strategy or “Variable-Price Strategy” - similar customers

may pay different prices when buying identical quantities of a product.

• Flat-Rate Pricing – a purchaser pays a stipulated single price and then can

consume as little or as much of the product as desired.

• Single-Price Strategy - all items are sold under the same single price.

• Pricing Lining involves selecting a limited number of prices at which a

business will sell related products.

• Odd-Pricing or “psychological pricing” is setting prices at uneven ( or

odd ) amounts.

• Leader Pricing - temporarily cut prices on a few items to attract customers.

– The items on which prices are cut are termed leaders; if the leader is

priced below the store’s cost, its a loss leader.

• High-Low Pricing – alternating between regular (high) and “sale” (low)

prices.

• Everyday Low Pricing (EDLP) - consistently low prices (on a frequent

basis).

• Resale Price Maintenance - manufacturers want to control the prices at

which middlemen resell their product to protect the brand’s image.

– Suggested List Price – price is set by a manufacturer at a level that

provides retailer with their normal markups.

Therefore, to set the product appropriated price, the company need to depend

it on many factors such as, expected demand, cost of product, competitors,

marketing mix, including with the product positioning that is the dictated price setting

factor.

We recommend using Market-Skimming Pricing strategy to set high price in

relation to the target market’s range of expected prices. And all items are sold under

the same single price or single price strategy at target market in Shanghai and

Beijing for showing company’s standardization. The selling price may differ by

different retailers and stores but it will be the same price for wholesales. The selling

price is 7 Yuan (90 g.)

49

COMPETITOR’S PRICES

There are too many competitors in China market. In the rural area, there are

many low price toothpaste products that produced from the local producer. In the

urban area, there are multinational competitors who hold the biggest market shares.

This below are the sample list of competitors in China.

CSA - Zhong Hua

Darlie - Darlie for Kids

Hawley & Hazel - Darlie Super Fluoro Natural Mint

Hung Cheong Hong - Jie Yin, Plant Essence Toothpaste

Kolynos - Kolynis Blue with Fluoride (Chinese Version)

LMZ - LMZ Super Strong Herbal Essence

LMZ - LMZ Super Strong Herbal Toothpaste Peppermint Flavor

NaFine - Fangganmao Yi Kou Jing Fang Gan Mao Zhong Cao Yao Ya Gao

Sensodyne - Sensodyne for Sensitive Teeth with Fluoride Fresh Mint

Shanghai Toothpaste Factory Co. Ltd. - Maxam Toothpaste with Fluoride, Original

Spearmint

Tianqi - Tianqi, Super tianqi medicated toothpaste, Soothing pain, Spearmint

Darlie

The black tea doubles key toothpaste 90g

(Goods number: 142,001) ￥6.20

The black tea doubles key toothpaste 160g

(Goods number: 142,002) ￥9.90

Black toothpaste 90g

(Goods number: 142,003) ￥4.90

50

Black toothpaste 225g

(Goods number: 142,004) ￥10.90

Black child toothpaste 40g

(Goods number: 142,043) ￥4.90

Black child toothpaste 40g

(Goods number: 142,044) ￥4.90

LG Bamboo

LG bamboo salt bear's gall drug efficacy

toothpaste 90g

(Goods number: 142,005)

￥9.80

LG bamboo salt bear's gall drug efficacy

toothpaste 120g


￥9.80

LG bamboo salt primary white toothpaste 145g

(Goods number: 142,007) ￥11.80

LG bamboo salt primary white toothpaste 105g

(Goods number: 142,008) ￥8.90

COLGATE

51

Gao Lujie Czechoslovakia tooth Bai Meibai

toothpaste 113g


￥32.80

Gao Lujie Czechoslovakia tooth white beautiful

white liquor 10ml


￥69.90

Gao Lujie entire effect beautiful white toothpaste

100g


￥6.50

Gao Lujie entire effect toothpaste 100g

(Goods number: 142,023) ￥7.50

Gao Lujie toothpaste fresh 200g

(Goods number: 142,024) ￥9.90

Gao Lujie toothpaste peppermint 140g

(Goods number: 142,025) ￥7.90

Gao Lujie bee glue fluorine calcium toothpaste

120g


￥7.30

52

Gao Lujie bee glue fluorine calcium toothpaste

200g


￥9.90

Gao Lujie ice crisp toothpaste delicate fragrance

lemon 100g


￥7.20

Gao Lujie ice crisp toothpaste natural tea fragrant

100g


￥7.20

Gao Lujie ice crisp toothpaste icy cold peppermint

taste 100g


￥7.90

CREST

The good clean gentleman sparkles 浜櫧

toothpaste 116g


￥33.80

Good clean gentleman pure white toothpaste

120g


￥7.70

Good clean gentleman pure white toothpaste

165g


￥9.90

53

Good clean gentleman white crisp white

toothpaste 100g


￥7.70

Good clean gentleman white crisp white

toothpaste 140g


￥12.70

The good clean store gathers toothpaste 120g

(Goods number: 142,018) ￥7.70

The good clean store gathers toothpaste 165g

(Goods number: 142,019) ￥9.90

The good clean gentleman at night multiple-effect

nurses toothpaste 120g


￥7.70

The good clean gentleman at night multiple-effect

nurses toothpaste 165g


￥9.90

Good clean gentleman tea clean worm-

preventing toothpaste


￥2.90

54

Chinese - CSA - Zhong Hua

Chinese key tooth white toothpaste 90g

(Goods number: 142,031) ￥2.80

Chinese key tooth white toothpaste 155g

(Goods number: 142,032) ￥4.10

Chinese gold plating entire effect toothpaste 100g

(Goods number: 142,033) ￥4.10

Chinese gold plating entire effect toothpaste 135g

(Goods number: 142,034) ￥5.50

Chinese worm-preventing toothpaste peppermint

120+10g


￥2.40

Chinese toothpaste worm-preventing fresh 170g

(Goods number: 142,036) ￥3.30

Chinese entire effect + 浜櫧 toothpaste 90g

(Goods number: 142,037) ￥4.90

55

Chinese entire effect + 浜櫧 toothpaste 130g

(Goods number: 142,038) ￥6.20

Chinese herb 5 treasures toothpastes 120g

(Goods number: 142,039) ￥2.40

Chinese herb 5 treasures toothpastes 170g

(Goods number: 142,040) ￥00

Chinese Chinese medicine toothpaste 120+10g

(Goods number: 142,041) ￥2.40

Chinese Chinese medicine toothpaste 170g

(Goods number: 142,042) ￥3.30

Chinese white clear toothpaste 75g

(Goods number: 253,222) ￥2.80

Chinese white clear toothpaste 130g

(Goods number: 253,223) ￥4.10

LMZ

56

LMZ Herbal Toothpaste with Pricklyash and

Gingko for Gum Protection - Fresh Mint $4.99

(Source :1. http://www.cpmall.com.cn/Product/Index.aspx?ProductCataID=59 2.http://www.cpmall.com.cn/Product/index.aspx?showType=&PageSize=&ProductCataID=59&ProChannelID=0&KeyWord=&BrandID=&Sorts=&PageNo=33. http://www.amazon.com/gp/product/B000FH7YK2/102-8789298-1600123?v=glance&n=37609014. http://www.globaldrugs.com/chinese/4510.htm5. www.westons.com)

57

http://www.westons.com/

http://www.globaldrugs.com/chinese/4510.htm

http://www.amazon.com/gp/product/B000FH7YK2/102-8789298-1600123?v=glance&n=3760901


http://www.cpmall.com.cn/Product/index.aspx?showType=&PageSize=&ProductCataID=59&ProChannelID=0&KeyWord=&BrandID=&Sorts=&PageNo=3



http://www.cpmall.com.cn/Product/Index.aspx?ProductCataID=59

http://www.amazon.com/gp/product/images/B000FH7YK2/ref=dp_image_0/104-3463241-7869515?ie=UTF8&n=3760901&s=hpc

Section 3: Place

The company should focus on urban market that has high purchasing power

and consumption. Three are three targeted provinces in China as shown below.

Shanghai (English meaning of name : Above the Sea)

Geographic

Area : 6340.5 km2

Population (2002) : 16,250,000

Population density : 2563/km2

Major Nationalities (2000) : Han 99%,Hui 0.4%

Organization : 19 counties; 221 townships

58

Economic

GDP (2002) : 540.9 billion yuan

GDP per capita : 33,285 yuan

Agriculture : edible fungus, flowers, vegetables

Foreign direct investment (2002) : US$5.03 billion

Industry : automobiles, bicycles, chemicals, electrical appliances, electricity

generation equipment, electronics, petrochemicals, sewing machines, steel, synthetic

detergent, telecommunications equipment, tractors

Transportation

Airports : Shanghai Hongqiao (SHA); Shanghai Pudong International (PVG)

Highways/railroads : two completed ring roads with a third under construction; five

radial expressways connect Shanghai with Nanjing, Hangzhou, Pudong and other

nearby cities; rail lines extend to Nanjing, Hangzhou and Ningbo

Major ports : Shanghai harbor is the biggest seaport in China; the Yangtze River

connects the city with upstream destinations like Wuhan and Chongqing; inland

waterways extend to Jiangsu, Zhejiang and Anhui provinces

Office Contact Information

Regional government office address : 19 Gao'an Road, Shanghai

Telephone : (86)(21)6321-2810

Website (Chinese) : www.shanghai.gov.cn/

Website (English) : www.shanghai.gov.cn/shanghai/node8059/index.html

(

Source : http://atimes.com/atimes/Others/shanghai.html Accessed on 16 Jul 2006)

59

http://atimes.com/atimes/Others/shanghai.html

http://www.shanghai.gov.cn/shanghai/node8059/index.html

http://www.shanghai.gov.cn/

Beijing (English meaning of name : Northern Capital)

Geographic

Area : 16,808 km2

Population (2002) : 14,230,000

Population density : 847/km2

Major Nationalities (2000) : Han 96%, Manchu 2%, Hui 2%, Mongol 0.3%

Organization : 18 counties; 318 townships

Economic

GDP (2002) : 321.3 billion yuan

GDP per capita : 22,577 yuan

Foreign direct investment (2003) : US$2.15 billion

Industry : automobiles, chemicals, construction, electronics, financial services,

machinery, pharmaceuticals, textiles, tourism

60

Agriculture : Beijing white pears, cotton, grapes, maize, millet, mushrooms, peanuts,

pears, persimmons, potatoes, rice, roses, sesame, soybeans, tobacco, wheat, wild

jujubes

Transportation

Airports : Beijing Capital International Airport (PEK), Nanyuan Airport (NAY)

Highways/railroads : 20,000 km of highways including 813 km of expressways with

four completed ring roads; eight major rail lines radiate from Beijing in all directions,

including international services to Russia and North Korea

Major ports : none (the municipality is landlocked); Tianjin is the closest major

seaport

Office Contact Information

Regional government office address : 2 Zhengyi Road, Dongcheng District, Beijing

100-001

Telephone : (86)(10)6519-2233

Website (Chinese) : www.beijing.gov.cn/

Website (English) : www.ebeijing.gov.cn/

(Source : http://atimes.com/atimes/Others/beijing.html Accessed on 16 Jul 2006)

61

http://atimes.com/atimes/Others/beijing.html

http://www.ebeijing.gov.cn/

http://www.beijing.gov.cn/

Shanghai, Beijing are not the big province in China, but all two provinces are

in business area. There are a huge number of populations in these two provinces as

30.48 million people (~45% of Thailand population). GDP per capita is very high as

22,557 - 33,285 yuan. There are many ways for transportation from Thailand to

Shanghai. These two provinces are represented as the urban market in China as

well.

There are three places we can penetrate our product and have enough

potential to be our selling point for our target customer.

1. Department Store/Supermarket : Retail

establishment that sells a wide variety of

goods. These usually include ready-to-

wear apparel and accessories, yard

goods and household textiles,

housewares, furniture, electrical

appliances, and accessories. There are many department stores in

Shanghai and Beijing. The company should have small display in the

department store to promote product. Fortunately, Super Brand Mall is the

big department store that owned by Thai company. We will focus on this

department store first.

Super Brand Mall is owned by CP Group

that founded more than 80 years ago, the

Bangkok, Thailand based Charoen Pokphand

Group (CP Group) maintains an extensive network

of 250 companies across 20 countries. The group

employs more than 150,000 people worldwide, and

is one of the largest international investors in

China.

As one of Asia’s leading global conglomerates with it’s China headquarters in

Shanghai, the CP Group’s multi-billion US dollar business portfolio includes

62

investments in agriculture, media, telecommunications, manufacturing, logistics,

financial services, petrochemicals, international trading, retail and real estate.

List of Department Stores in Shanghai and Beijing

Department Stores in Shanghai

Super Brand Mall 168 Lujiazui Lu(near Oriental Pearl Tower)Shanghai, China Tel. +86(21)6887-7888 web site : http://www.superbrandmall.com

Hong Qiao Friendship Shopping Center No. 6, Zun Yi Road (S) Shanghai, China

Huating Isetan Department Store No. 527 Huai Hai Zhong Road Luwan District Shanghai, China

Jiu Guang City Plaza No.1618 Nanjing Xi Lu, Jing An District Shanghai, 200040, China Tel.: 0086-21-62497556-229

Pacific Department Store-Luwan No. 333, Huai Hai Road (M) Luwan District Shanghai, China Tel: 862-1530-68888

Pacific Department Store-Xuhi No. 932 Hengshan Road Xuhui District Shanghai, China

Parkson Department Store No. 918 Huaihai Zhong Road Luwan District Shanghai, China

Shanghai No. 1 Yaohan No.501 Zhang Yang Road, Pudong Shanghai, China

Department Stores in Beijing

New World Department Store No. 3, Chongwenmen Wai Street Chongwen District Beijing, China

One World Department Store No. 99, Wang Fu Jing Street Dong Cheng District Beijing, China

Oriental Plaza No. 1, East Chang An Ave Dong Cheng District Beijing, China

Parkson Department Store No. 101 Fu Xingmen Nei Street Xicheng District Beijing, China

Shuangan Department Store No. 38 Bei San Huan West Road Haidin District Beijing, China

SOGO Department Store No.8, Xuan Wu Men Wai Street Xuan Wu District Beijing, China

63

http://www.superbrandmall.com/

Youyi Shopping City Beijing Lufthansa Center No. 52 Liang Ma Qiao Road Chaoyang District Beijing, China

Zhongyou Department Store No. 176 Xi Dan Bei Street, Hua Lan Tower Xicheng District Beijing, China

2. Convenient Store : Small centrally located store featuring ease of

access, late-night hours, and a limited line of merchandise designed for

the convenience shopper. Convenience stores charge above-average

prices compared to large supermarkets that generate large-volume sales.

The easy way for people to buy toothpaste is in convenient store. There

are too many convenient store in Beijing and Shanghai.

3. Hospital/Dental Clinic : Institution for diagnosing and treating the sick or

injured, housing them during treatment, examining patients, and

managing childbirth and also about the teeth problem. The twin lotus

toothpaste will show in the counter with brochure. The patient will easy to

see and they will think the product in hospital will provide good quality for

them.

64

Section 4: Promotion Promotional programs and tactics of company will create follow the way to

entry in China market. We consider by product attributes, product positioning, price,

place and related others. The first step of entry strategy is international and domestic

trade fair and the second strategic alternative is exportation. These two strategies will

cope with the possible promotion of Twin lotus.

Target audience

According to our target customer, our target audience is the urban

populations who are interested and tend to purchase herbal toothpaste of Twin

lotus’s product.

The objectives of promotional programs

To introduce our target customer about Twin lotus’s product.

To inform our target customer about product information.

To create brand recognition and positive attitude toward the product.

To encourage and persuade customer’s purchase.

Sales Target (approximately): 1,200,000 tubes per year (1% Market Share)

Promotion alternatives programs

We will consider by pros and cons or criteria and then we will recommend

the effective promotion programs and their practical implements.

1. Television commercial (TV advertising)

Television advertising is one of the major types of media advertising

Pros

Combines sight sound and motion which is more appealing to customers’

senses.

High attention given by customers

High reach to the customers.

Provides better knowledge of the product.e.g infomercials

Cons

High cost

65

High clutter

Fleeting exposure

Less audience selectivity

2. Event sponsorship with related Associated.

Pros

Fund raising for non profit organization

Draws attention to the new products

Promotion and positioning of the brand name

Establishes new and better links with associates

Attracts new customers from the related associated company

Customer education

Cons

High cost

Difficult to select the suitable event. Big event is related to high cost but

not guarantee the returns. Small event has low cost but lower

effectiveness.

3. Trade show/ Exhibition

Event sponsorship is one of the major types of trade promotion tools for

which the manufacturers devote 46.9% of the promotion whereas the

consumer promotion consists of 27.9% with media advertising capturing

25.2%.Business marketers spend around 35% of their annual promotion

budget on trade shows. More than 5600 trade shows takes place every year

attracting 80 million attendees.

Pros

Best for introducing new products

Maintains huge customer contacts

Generates new sales lead

Attracts new customer

More sales to the present customers

Educates customers with publications, videos, and other audiovisual

materials.

Cons

Cannot attract huge customers as expected if the customers are not

informed well.

Big chance of missing the display because of massive product lines.

4. Publicity

66

Pros

Assisting in the launch of new products

Assisting in repositioning a mature product

Build interest in a declining product category

Influencing specific target groups

Defending products that have encountered public problems

Building awareness and brand knowledge

Lower cost than advertising

Cons

Awareness time is short

5. Newspaper advertising

Pros

It is highly flexible

It can be done as per the required time as per the wish of the advertiser

It has good local market coverage

Accepted broadly

It is highly believable

Cons

It has short life

Poor reproduction quality

Small pass along audience

6. Magazine advertising.

Pros

High geographic and demographic selectivity

Credibility and prestige

High quality reproduction

Long life

Good pass along readership

Cons

Long ad purchase lead time

Some waste circulation

No guarantee of position

7. Radio advertising

Pros

Used by massive audience

67

High geographic and demographic selectivity

Lower cost

Cons

Audio presentation only

Lower attention than television

Non standardized rate structures

Fleeting exposure

8. Yellow pages advertising

Pros

Excellent local coverage

Is highly believed

Wide reach

Low cost

Cons

High competition

Long ad purchase lead time

Creative limitations

9. Outdoor advertising.

Pros

It is highly flexible

High repeat exposure

Low cost

Low competition

Cons

Limited audience selectivity

Creative limitations

10. Brochure

Pros

Flexibility

Full control

Can dramatize messages

Cons

Overproduction could lead to runaway costs

11. Direct mail

Pros

Audience selectivity

Flexibility

68

No ad competition within the same medium

Personalization

Allows early testing and response measurement

Cons

Relative high cost

Junk mail image

12. Interactive media advertising(websites/Internet)

Pros

High selectivity

Interactive possibilities

Relatively low cost

Cons

Relatively new media with a low no of users.

Criteria for selecting the promotion programs and recommendation:

1. Budget requirement

2. Target approach

3. Ability to give the information and ability to achieve its objectives

4. The policy of the company including with limitation of communication law.

The first promotional program is trade show and exhibition. Our new

product pipeline is full with innovations that address diverse consumer needs using

new ingredients and innovative packaging and design. Increased focus on consumer

and shopper insights is identifying new consumer benefits, helping to anticipate

future trends and expanding the knowledge. The company are increasingly benefiting

from understanding Chinese consumer habits and preferences and developing

products that address them.

According to the situation of our product to launch in Chinese market, we

should focus more on magazine advertising because our target market is the urban

area with customers who have the potential to by our product. The urban population

consists of population who are trendy, fashionable and up to date for which the

magazine would be very suitable. Since we are targeting the urban population, it’s

considered good to use advertising media than the promotional media such as,

outdoor advertising and interactive media advertising in order to reach the target

segment during its initial stage of entering the Chinese market which could then be

69

followed by different promotional strategies once the product is able to build its image

in the eyes of the customers.

70

CHAPTER 5 : Quantified Budget

SECTION 1 : FORECASTED INCOME

The below information is our quantified budget. It base on internet

information, Thai export department, interview, and also under our estimation. Due to

Twin Lotus Budget and Financial statements are not given. The market size in China

also could not be found. Then some numbers are under estimation based on relevant

information that our group found only.

Revenue

China population = 1.3 billion

Toothpaste tube in 2005 = 5.2 billion tubes

Tubes per year = China population / Toothpaste tube in 2005

Population in cities = 30.43 million (Beijing and Shanghai )

Toothpaste usage = Pop. in Cities x Tubes per year

Target Market share = 1%

Amount of sell (per year) = Toothpaste usage x % of Target Mkt. Share

Selling price = 7 Yuan (100 g.) (Average price)

Sales Revenue = Amount of sell (per year) x Selling price x

Thai currency exchange rate

Cost

Product Cost = 15 Baht (100g) (Approximately 60% of

Product price)

Cost of Goods Sold = Amount of sell (per year) x Product Cost

71

Cost of transportation :

Toothpaste box size (100g.) = 13 cm x 2.8 cm x 2.5 cm = 91 cm2

Ocean Freight (Leam Chabang ,Pat / Shanghai) = Container for 40 ' DC

= size 2.35 x 2.39 x 12.04 M. = 67.62 m2

= ~7000 Toothpaste boxes per container

Cost of transportation by Ship = Amount of sell (per year) / Ocean Freight

Cost of transportation from Shanghai to Beijing (by bus) = ~ 500,000 Baht

Total transportation Cost = Cost of transportation by Ship + Bus

Tax

VAT Rate = 17%

VAT = Sales Revenue x VAT Rate

Import Tax Rate = 13%

Import Tax = Cost of Goods Sold x Import Tax Rate

Income Tax Rate = 24% (Special rate in Shanghai & Beijing)

Income Tax = Sales Revenue x Income Tax Rate

Total Tax = VAT + Inport Tax + Income Tax

Others Expenses

Human Resource Management Expense (Salary + Benefit + Allowance + Air Ticket)

= ~3,000,000 Baht

72

Cost of Rental (Office) = 100,000 Baht/month

Advertising expense = 5,000,000 Baht

Revenue sharing = 10%

Total cost = Cost of Goods Sold + Total

transportation Cost + Total Tax + Human Resource Management Expense + Rental

+ Advertising expense + Revenue sharing

Income

Net income = Sales Revenue – Total cost

73

Quantified Budget (First Year, 2007)

Revenue Toothpaste Usage 121,720,000 China population 1.3 Billion

Amount of sell (per year) 1,217,200Toothpaste Tubes'2005 5.2 Billion

Target Mkt. Sales 1% Tube per year 4

Thai Currency Exchange Rage (per RMB) 5 Population in Cities 30,430,000 people

Selling Price (100 g.) 13

Sales Revenue 79,118,000

Cost Product Cost 15

Cost of Goods Sold 18,258,000

Cost of transportation : By ship 3,390,771 By bus 500,000Total Cost of transportation 3,890,771

Tax VAT 13,450,060 VAT 17%

Import Tax 2,373,540 Import tax rate 13%

Income Tax 18,988,320 Income tax rate 24%

Total Tax 34,811,920

Others Expenses Human Resource Management Expense 3,000,000 Rental Office Expense 1,200,000 Advertising expense 5,000,000 Revenue sharing 7,911,800 10% of Selling Price 10%

Total Expense 17,111,800

Total Cost 74,072,491

Income Net Income 5,045,509

74

CHAPTER 6: Recommendation&Conclusion

Section 1: Conclusion

Action Plan

First Step (Year 2007-2009, First 3 years):

1. The same package, same formula but need to translate to mandarin language.

2. Promote the product in proper media such as local newspaper, brochure

(Selling point in department stores and hospital/clinic)

3. Try to get quality and safety license in China.

4. Find more information about building manufactory in China or find the business

partner.

5. Market research is required in field of consumer needs and product innovation.

Second Step (Year 2010-2014):

1. Launch new toothpaste product : New design/packaging and formula

2. Launch more products as hair care and skin care

3. Expand to other urban areas

4. Build manufactory in China to reduce cost.

Third Step (Year 2015):

1. Expand to rural market by create new products with low cost

2. Enter to other countries such as Hongkong, Taiwan, Japan.

75

76

Section 2: Recommendation

There is many customers’ right protection in laws and regulations of China

rather than Thailand such as, brand name, different meaning of price tag’s color,

standard quality, production source, and other product information. Those

attributes need to concern much on the Chinese customer.

To penetrate China market, first business source could find out from

Chinese website. However, website’s information may outdate, we need to search

the fact and important figures from related international institutions. We

recommend to purchase other related sources from toothpaste market research in

China also.

Import and export international trade fair include special product exhibition

were supported by Chinese government to show many products in many areas of

China. Thus, this activity is one opportunity to run business of Thai product.

However, we have to set our objectives to enter the international trade fair such

as, doing market research, observing trade opportunity or observing competitors.

This is a time for entry the business into China. Especially now China is the

member of WTO, so the company would be supported for China international trade

organization more than past. China population have higher income and want good

quality of product as same as developed countries. The important strategy is to

analyze the strengths and weaknesses of competitors in China market and

International market also.

We recommended export for entry mode in China and positioning the

product more premium than Thai market. According to the objectives, we avoid

risk from introductory stage in China by saving production cost. We maintain the

same product and same quality but adjust a little in packaging.

The next future plan if the export is success, we recommended to establish

Twin Lotus’s manufactures to produce the products for Chinese market and target

more target market in the long run.

Thai natural herbs are famous in healthy and spa. We would like to make

innovative product by creating new formula at the same price to add its value,

quality, standard, and demand. For example, Lhaw wod leaf (ใบเหล้�าวอด) is Thai

77

natural herb in the Northern part of Thailand. It’s good for growth in low

temperature. Thai local primitive knowledge uses it for reduce strong smell in Thai

whiskey, and any water. It’s possible to use this herb into product’s ingredient for

the future after researching and testing laboratory from the company.

78

References

http://www.twinlotus.com

http://www.atimes.com/atimes/China/china-map.html

http://chinasuppliers.alibaba.com/search/china_products/Toothpaste.html

http://gbcode.tdctrade.com/gb/my.tdctrade.com/airnewse/index.asp?id=6556

www.personalcaremagazine.com/story.asp?id=715


http://query.nytimes.com/gst/fullpage.html?res=9F0CE7DD103DF93BA25752C1A965958260

http://www.made-in-china.com

http://en.ce.cn/Industries/Consumen-Industries/200605/12/t20060512_6942069.shtml

http://english.sina.com/business/1/2006/0514/75709.html

http://www.newsgd.com/culture/peopleandlife/200504210061.htm



www.westons.com

http://WWW.TOOTH-PASTE.COM.CN

http://english.china.com/zh_cn/business/news/11021613/20060710/13458336.html

http://www.nihaoouzhou.com/articles/news/200602/7734/en/






www.westons.com

79










http://www.nihaoouzhou.com/articles/news/200602/7734/en/

http://english.china.com/zh_cn/business/news/11021613/20060710/13458336.html

http://WWW.TOOTH-PASTE.COM.CN/





http://www.newsgd.com/culture/peopleandlife/200504210061.htm

http://english.sina.com/business/1/2006/0514/75709.html

http://en.ce.cn/Industries/Consumen-Industries/200605/12/t20060512_6942069.shtml

http://www.made-in-china.com/

http://query.nytimes.com/gst/fullpage.html?res=9F0CE7DD103DF93BA25752C1A965958260


http://www.personalcaremagazine.com/story.asp?id=715

http://gbcode.tdctrade.com/gb/my.tdctrade.com/airnewse/index.asp?id=6556


http://www.atimes.com/atimes/China/china-map.html

http://www.twinlotus.com/

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