While push strategy is promotional strategy designed to pressure channel members to carry a product and promote it to final users of the product. In other words, this strategy “pushes” its products and makes the next members of the channel promote the product themselves.
Deciding which strategy to use in a specific marketing environment depends on several factors:
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Distribution System. Implementing a push strategy is difficult when channel members (such as distributors) wield a great deal of power relative that of products. It is also ineffective when distribution channels are long, because the more members are in the channel the more members must be convinced to carry a product. In such cases, it is easer to create buyer demand using pull strategies.
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Access to Mass Media. Markets in developing situation have fewer available forms of mass media to implement pull strategy. So, in such markets it’s difficult to increase consumer awareness and to create demand. In such cases advertisers might turn to billboards and radios. But still, using pull strategy in such markets is ineffective.
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Type of Product. A pull strategy is most appropriate when buyers show a great deal of brand loyalty toward one particular brand name. In other words, brand-loyal buyers know what brand they want before they go to buy it. But push strategy is more appropriate for inexpensive consumer goods characterized by buyers that who are not bran loyal. Low brand loyalty means that a buyer just goes not planning which product to buy, and will simple buy that is presented by the retailer.
Distribution Strategies
Distribution is planning, implementing and controlling the flow of product from beginning to the end. The “path” that a product flows on its way is called distribution channel. Distribution is an important factor when entering foreign market.
Companies usually develop their distribution strategies based on two decisions: (1) how to get the good into a country and (2) how to distribute goods within a country. Here we’ll present distribution strategies within the country.
There are two main factors to pay attention when establishing channels of distribution: the amount of exposure a product needs and the cost of distributing a product.
Degree of Exposure. In promoting its product to the number of potential customers a marketer should determine the amount of exposure. An exclusive channel is one in which a manufacturer grants the right to sell its product to only one or a limited number of sellers. Thus, it gives a possibility of a strict control. It also can help a producer to constrain distributors from selling competing brands. And in such case the distribution channel makes difficult for outsiders to enter the market.
On the other hand, intensive channel is a distribution channel in which a producer grants the right to sell its product to many sellers. An intensive channel is location-flexible for a buyer because of the big number of outlets a product is sold. But, it does not create strong buyers for outsiders to enter, and also it is less controllable.
Channel Length and Cost. Channel length refers to the number of intermediaries between the producer and the buyer. In a zero-level channel producers sell directly to its end-user. A one-level channel places only one intermediary between them, and so on. Generally, the more intermediaries are in the channel, more costly it is because each additional “player” adds a charge for service on the product. This is an important factor for companies with price-sensitive consumers.
Business-Level Strategies
Business level strategies help to determine particularly which approach to choose for particular product. There are three general business-level strategies: low-cost leadership, differentiation, and focus.
Low-Cost Leadership Strategy is a strategy in which company uses economies of scales to have the lowest structure of any competitor on the market. This strategy also involves keeping cost low of their various primary activities, such as marketing, advertising, and distribution.
Low-cost leadership strategy works well with mass-marketed products that are aimed at price-sensitive buyers.
Differentiation Strategy is a strategy in which company designs its products to be perceived as unique in comparison with competitors’. As its products are perceived unique a company can charge higher price and have greater customer-loyalty than does the low-cost leader.
One way products can be differentiated is by improving its quality. Also products can be differentiated by distinctive brand images. One more factor of differentiation is product design – the sum of the features by which a product looks and functions according to customer requirements.
Focus Strategy is one in which company focuses on serving the needs of narrowly defined market segment by being the low-cost leader, by differentiating its products, or both. A focus strategy often means designing products and promotions aimed at consumers who are either dissatisfied with existing choices or who want something distinctive.
Empirical Findings
Interviews
The interview with export processes manager Goga Kipiani gave us overview on the export strategies and the information about markets they have. Teliany Valley wants to enter European and American markets, also they have already made export in 22 countries including as American so European markets, but they want to increase the number of countries. Their strategy is to get new markets. This strategy includes Teliany valley creating the potentially well developed markets. All this will take about 10-15 years, but its goes in its future plans.
After closing the Russian market Teliani Valley lost 30 % of sales. Russian market was the best for Georgian wines because Russians are the best customers; they like drink; Georgia was part of Soviet Union for a long time and between Georgians and Russians there is some connection, so for them Georgian wines are familiar. After closing the Russian markets a lot of biggest Georgian wine companies went bankrupt. By that time Teliani Valley had already distributed his products in other countries, also it had the best position in Georgian market. Nowadays its sales increase in Russian but not so mush as it would be without so many restrictions.
The process of exporting is next: Teliani Valley looks for the company it would like to make distribution and have contract, tries to interest them and after that they have meetings. After making contracts Teliany Valley gives them license of trading and exports wine were this company allocates the product in suitable place. There is business to business communication.
Telliani valley can not make distribute itself in foreign country because for these it needs some local office which requests finances, but the foreign market is not so profitable to make branch there. Also finances don’t play the great role in this process. The main subject is to make interest in local distributors. This kind of connection is profitable for Teliany valley, its brand becomes more known, sales increase, and in this market segment it builds some place which helps to strengthen position in future.
Telianyi Valley has fixed prices and sets it to every distributor company in each market. But the price of product that sells in certain country depends on tax rate, some kind of taxes on alcoholic drinks, distributors’ demands and so on.
Telliani Valley plans to make export in Lithuania. It looks for partner there. There are some distributors interested in Teliani Valley. One of them distributes wines in Latvia and Estonia. They want to purchase license but Teliani Valley needs another partner. Its strategy is to have different partners because it is more reliable and will make more positions.
We have made second interview with marketing processes manager George Khutsishvili, who gave as overview of the marketing strategies and the information about markets they have.
Teliani Valley exports to following countries: Russia, Ukraine, Kazakhstan, USA, Azerbaijan, Belgium, Poland, Israel, Finland, Turkey, Belarus, Bulgaria, Chech Republic, Ireland, The Netherlands, Moldova, Latvia, Japan, and Estonia.
Teliani Valley wants to become known brand so it enters as European market so American.
Its strategy is to have high quality product and create reliable brand. So its production has strict quality control system, which is introduced at all stages of the production process, from grape selection to bottling the end product.
On May 2004, Teliani Valley established strategic relationship with the European Bank for Reconstruction and Development (EBRD). It acquired a block of shares of Teliani Valley PLC. This investment enabled the company to build a new winery, plant new vineyards in the best micro-zones of Georgia, improve marketing initiatives and increase sales of its premium quality wines, partially updates existing production machinery and expands production capacity. Also for improving the quality of wine, modern pneumatic presses and stemmers were installed.
A silver medal in the international wine contest held this year in France "The challenge international du vin" and in “The International wine and spirit competition" held in Britain prove the quality of Teliani wines.
Teliani have produced a wide variety of quality wines every year, some of those brands are Teliani, Mukuzani, Napareuali, Kvareli and Saperavi.
Today Teliani Valley is entering Lithuania market so it has the same marketing strategy, high quality. But there are some obstacles; in order to have high quality it has high price. Wine market is quite competitive. Competitor products are as foreign wine brands so the companies which have counterfeited Georgian wines. Counterfeited Georgian wine is cheaper, so customer who wants drink will buy this one and not Teliani Valley which is more expensive. These types of customers are those who have disposition to wine and are of lower social level. But they are potential users of Teliani Valley. Real customers are the people of high social level, those who know quality wine, have wine collections and etc.
The distributor makes some marketing activity to sell wine. It has some marketing strategy or place were it productively distributes wine and sells. The wine will sell in supermarkets or hypermarkets, the biggest marketing place of country. Wines will be put in noticeable place on shelf.
Brief Overview of the Country
Lithuania officially the Republic of Lithuania is a country in northern Europe. Situated along the south-eastern shore of the Baltic Sea, it shares borders with Latvia to the north, Belarus to the southeast, Poland, and the Russian exclave of the Kaliningrad Oblast to the southwest
Ethnic composition
The population of Lithuania stands at 3.575 million, 83.6% of whom are ethnic Lithuanians who speak the Lithuanian language, which is the official language of the Country. Several sizable minorities exist, such as Poles (6.3%), Russians (5.1%), and Belarusians (1.1%).
Poles are the largest minority, concentrated in southeast Lithuania. Russians are the second largest minority, concentrated mostly in two cities; they constitute sizeable minorities in Vilnius (14%) and Klaipėda (28%) and a majority in the town of Visaginas (52%).
Population (2007 est.): 3,575,439 (growth rate: –0.3%); birth rate: 8.9/1000; infant mortality rate: 6.7/1000; life expectancy: 74.4; density per sq mi: 14
Languages: Lithuanian 82% (official), Russian 8%, Polish 6%
Literacy: 100%
Religion
Roman Catholic 79%, Russian Orthodox 4%, Protestant (including Lutheran, evangelical Christian Baptist) 2%, none 10%
Government
Type: Parliamentary democracy.
Constitution: On October 25, 1992, Lithuanians ratified a new constitution, which was officially signed on November 6 that year.
Administrative regions: 10 counties and 60 municipalities.
General government budget (2007): $8.2 billion.
Economy
Annual growth rate (2006): 7.5%.
Annual inflation rate (2006): 3.7%.
Unemployment rate (2006): 5.6%.
Per capita income (2006): $9.58.
Trade: Exports--$15.55 billion (2006): mineral products 23.9%, machinery and mechanical appliances 12.4%, textiles and textile articles 9.2%, wood and paper products 4.6%. Major export partners--EU 63%, CIS 21%.
Imports--$21.14 billion (2006): mineral products 23.4%, machinery and equipment 17.6%, transportation equipment 13.9%, chemicals 8.4%, base metals 7%, textiles and clothing 5.6%. Major import partners--EU 62%, CIS 28%
Transportation: Railways: total: 1,998 km. Highways: total: 75,243 km; paved: 68,697 km; unpaved: 6,546 km. Waterways: 600 km perennially navigable. Ports and harbors: Butinge, Kaunas, Klaipeda. Airports: 87.
Import Tariffs and barriers
The government licenses imports of sugar, grain, alcohol, and weapons. Lithuania’s tariff classification is based on the Harmonized Commodity Description and Coding System. In addition to tariffs, imports are subject to excise taxes and an 18% VAT.
Lithuania does not present significant barriers to the export goods and services beyond those the EU imposes.
Import Requirements and Documentation
Lithuanian customs authorities require a copy of the sales contract, an invoice, a bill of lading indicating the amount, weight and value of imported goods, and the certificate of origin. At the border, an importer or his agent must complete a customs declaration and a customs freight delivery note.
Labeling and Marking Requirements
The following information must appear in Lithuanian on retail packaging or be otherwise marked on the product (i.e., on a sticker or label):
- Product name (indicating the package contents);
- Manufacturer's name or the name of the company that had the product manufactured; and
- Content mass or volume (to be specified using the metric system).
The following information should also appear on the retail packaging or be otherwise clearly identified on the product: product contents, care instructions, operating instructions, and a warning of possible danger related to the use or disposal of the product.
Questioning
We have conducted a very simple questioner and asked 100 Lithuania citizens (chosen randomly) to fill it (we have contacted them through “Skype”).
The question and answers were simple, respondents were asked how often they drank spirits (>22°proof), or wine. Possible responses were daily, 2-3 times per week, once per week, 2-3 times per month, a few times per year, and never.
The results were next (in percentages):
Support
Lithuania is ready not only to open its market for the Georgian wine, but to promote it in other countries of the European Union, Lithuanian President Valdas Adamkus is quoted as saying on April 29, 2006.
The Lithuanian market is open for Georgian goods, particularly for wine,
Besides, the Lithuanian leader noted that market economy and the authorities cannot impose any conditions on business. “So, it is important that Lithuanian and Georgian businessmen come to an agreement and determine their plans for joint actions. The Lithuanian authorities will contribute to it,” Adamkus added.
April 27, 2006 Lithuanian students and artists staged a picket for the second time in a month and called consumers to buy Georgian wines “boycotted” by Russia.
Competitors
The Lithuanian market counts number of companies that offer wines to the customers; but there are two companies that own the great share of the market. These are:
- Alita
Alita was founded in 1963.
The production of sparkling grape wine started in 1980. Sparkling wine is produced by the continuous reservoir method from the grape wine imported from Moldova and other countries. The newest and most advanced technology allows to produce about 12 millions bottles of more than 10 brands of this noble white, rosé and red wine.
In 1993 and 1994 Alita was awarded quality certificates for its significant achievements in trade with the EU countries. At the international fairs of 1984, 1988, 1989, 1995 and 1996 the products of the company were awarded silver medals and diplomas.
- AB Anyksciai Winery
At the moment the company operates with five production lines. One of them is confectionery, producing candy; second is non-alcoholic beverages, with juice drinks and mineral water; third is the canning industry dried apple pomace and concentrated apple juice; and fourth strong liquor with 150,000 dcl. But the company's main activity is wine production. It produces and bottles 800,000 dcl of wine per year.
Distribution
Distribution is a key part in exporting process; but unfortunately, we could not find reliable distribution companies. The only one that is more reliable and offers good service is distribution company “Europa”.
“Europa” is a Great Britain based company. It was founded in 1966. As the managers of the company state: “It is a company that has constantly remained innovative, rising to the distribution and logistics challenges presented by today's ever-changing markets”.
“Europa” operates across 6 continents, in over 160 countries, including Eastern and Northern Europe.
The head office of the company is located in London, and also it has many branches in different European countries.
Contact information of the company: London (Head Office)
Europa House
68 Hailey Road, Erith,
Kent DA18 4AU
Tel: 020 8311 5000 Fax: 020 8310 4805
Email:
Analysis
We are analyzing our empirical data by comparing to the theories; we try to answer the questions:
What are the main problems when going in foreign market or country?
First step is to find distributor in Lithuania market. Sometimes happens so that distributor himself asks the company to give license him. Connecting to distribution is the best strategy of Teliani Valley. The company could not operate in foreign market in first stage himself. The appropriate partner helps them to take place and make some positions. There is business to business communication.
So, in export markets, the company is reliant on local distributors. However, it regularly reviews the sales performance, penetration and availability/reach of its wines and constantly seeks to enhance or upgrade the distribution arrangements
There are another issues, the company could give the only one distributor license of some of them.
Telianyi Valley has fixed prices and sets it to every distributor company in each market. But the price of product that sells in certain country depends on tax rate, some kind of taxes on alcoholic drinks, distributors’ demands and so on.
As we mentioned in empirical data in Lithuania there are several barriers and tariffs. Lithuania’s tariff classification is based on the Harmonized Commodity Description and Coding System. In addition to tariffs, imports are subject to excise taxes and an 18% VAT.
But for Teliny Valley this kind of restrictions is not the main problem this is the problem of distributor. They work with joint venture to solve problems.
There is also same kind of supports for Georgian wines. Lithuania is ready not only to open its market for the Georgian wine, but to promote it in other countries of the European Union, Lithuanian President Valdas Adamkus is quoted as saying on April 29, 2006.
The Lithuanian market is open for Georgian goods, particularly for wine. Besides, the Lithuanian leader noted that market economy and the authorities cannot impose any conditions on business. “So, it is important that Lithuanian and Georgian businessmen come to an agreement and determine their plans for joint actions. The Lithuanian authorities will contribute to it,” Adamkus added.
So for garment Telliani Valley has support and ability to operate here.
There is another topic, competitors. The main competitors are: Alita, AB Anyksciai Winery.
But as we see from interviews, competitor products are as foreign wine brands so the companies which have counterfeited Georgian wines. Counterfeited Georgian wine is cheaper, so customer who wants drink will buy this one and not Teliani Valley which is more expensive. The main distinguish between Counterfeited Georgian wine and Teliani Valley is: price, quality, and distribution place, Teliani sells in supermarkets or hypermarkets.
What is the opportunity that Teliani will sell in Lithuania Market?
Geographical position of Lithuania is very profitable for Teliani valley. Lithuania is the part of Baltic Sea countries. It shares borders with Latvia to the north, Belarus to the southeast, Poland, and the Russian exclave of the Kaliningrad Oblast to the southwest. In mentioned neighbors Teliani Valley already makes distribution and has position in markets. So it will be helpful.
The population of Lithuania stands at 3.575 million, several sizable minorities exist, such as Poles (6.3%), Russians (5.1%), and Belarusians (1.1%). This part of people like wine and “chacha”, especially Russians. They know Georgian culture and like Georgian drinks. So they are potential customers. The connection of Geographical position and ethnicity is the best reason to export wine in Lithuania.
Also another fact is that religion does ’t restrict drinks. There are these of religions: Roman Catholic 79%, Russian Orthodox 4%, Protestant (including Lutheran, evangelical Christian Baptist) 2%, none 10%. As you see none of religion restricts drinking.
In Empirical data we saw that government supports Georgian wine. Instead of this Lithuania is the member of EU and WTO this makes the market more prearranged, controlled and structured. Centralized market is the best place of selling. From this point the Lithuania market is very profitable.
Besides, economic situation is following:
Annual growth rate (2006): 7.5%.
Annual inflation rate (2006): 3.7%.
Unemployment rate (2006): 5.6%.
Per capita income (2006): $9.58.
This data means people are able to live richer and to buy different kind of products. In short, living level is becoming higher.
Also we found that volume sales of alcoholic drinks are expected to increase steadily during the forecast period in the Lithuania market. This depends on higher disposable income and decreasing unemployment allied to an overall increase in the purchasing power of Lithuanian consumers in 2005; these were some of the factors which positively impacted the performance of the alcoholic drinks industry during the final year of the review period.
There is an ongoing optimistic prediction for the performance of alcoholic drinks in Lithuania. Over the forecast period as the volume CAGR is expected to reach 1%. However, this will represent something of a slowdown compared to the review period which achieved a volume CAGR of 4%.
Nowadays the Lithuania market is the best for Teliani Valley. The opportunity of selling is high. This is supported by every aspect of the situation beginning with geographical position including economy, religion, ethnic composition, government and finishing with latest events in country.
Which promotional strategy is better for the company to use?
As already stated above there are several factors that determine which strategy is better for the particular situation. The most important factors of those are: distribution system, access to mass media, and type of product.
It is better to use pull strategy when distribution channel is long, when costumers are brand-loyal and when media sources are much and strong enough.
But as we see from interviews, Teliani’s strategy is to “push” products and the factors play in favor of it; distribution channel contains only two members, customers are not loyal to Teliani products (as it is just entering the market).
How to design the most effective distribution channel (for the particular situation)?
There are two steps in distribution process when entering the foreign country. First, you should determine how to transport goods into country, and second, you should find how to distribute it within the country. These two problems can be solved by selecting only one company (as distribution companies take into their responsibility as transportation so distribution). So the transportation problem will be solved automatically when appropriate distributor will be found.
When selecting distributor, the company should take into consideration two things: the amount of exposure and the cost of distribution.
As Teliani’s present goal is not to gain big market share of the market, but to make the brand familiar for customers, it should select law amount of exposure that will in order cause low cost of distribution (and make the product available for price-sensitive customers too).
Low-cost leadership, differentiation, or focus strategy?
The company will not be able to use low-cost leadership strategy as it imports products (so products are charged more for transportation and distribution), and also there are two big companies that own big market share and have great production possibilities; competing with such rivals by low-cost leadership is a bit difficult.
Focus strategy is not appropriate for the particular situation, as the company wants to make its brand familiar to great numbers of customers, and not only to some specific niche.
So, differentiation strategy is the very one that should be used. Using this strategy Teliani will also be able to charge higher price.
Conclusions
In the project we have worked on exploring the Lithuania market in order to find out whether it is worth to enter or not.
The market is really very attractive. The economic growth is pretty high and stable in the country. The GDP per citizen also constantly grows.
People’s welfare and stable political and economical situation in the country seems to continue for log run. So the environment is favorable for every company willing to export in Lithuania.
Also, the findings showed that Lithuanians know well wines and other alcoholic drinks, and that consumption of alcohol keeps growing (this is also affected by the stable economic situation) and seems to grow further. The demand is growing from year to year.
Taking into consideration the above mentioned facts Lithuania market is good target for exporting, especially for alcoholic drinks.
Implementing right strategies and using right approach will generate great revenues for the company entering this market.
However, for alcoholic drinks, and particularly for wines, the right strategy would be using “aggressive” approach, as there are already several leaders on the market. But it is not relevant to the strategy the company implements generally.
Teliani Valley’s goal is just to enter the market, and make the product familiar for customers (and not gaining the highest share of the market). It is planning for the long-run period. After gaining a small part of the market and introducing its products, the company easily and with less cost expands on the market.
As the environment is stable in the country, and even more, is improving every year, Lithuania is an attractive target for Teliani. Entering this market today will generate great opportunities for the company in the future.
In the recommendation part we suggest the steps Teliani should take.
Recommendations (Including 4p)
Price
As we see Telianyi Valley has fixed prices and sets it to every distributor company in each market. But the price of product that sells in certain country depends on tax rate, some kind of taxes on alcoholic drinks, distributors’ demands and so on. To our mind it will be better to differentiate the price which he establishes to distributors. Because the selling price is adjusted with tax rate and another factors this increase the last sum. In this result in some country price are very high or low. We suggest making different price to distributors and having restriction not to make selling prize not appropriate to country. They have to participate in establishing selling price.
Place
Teliany Valley sells in supermarkets or hypermarkets. We suggest selling it in the foreign restaurant and clubs.
Product
Teliany have different type of products have many kinds of wine. We suggest focusing to export wines and Chacha depend on cultural taste.
Promotion
Exporting products in foreign country happens with business to business communication. The main task for Teliani Valley is to find distributor. And the distributor makes the last step of selling. Our recommendation is to make the active participation in this process.
References
Web-pages
Interviews
Interview: Goga Kipiani, export manager
Date: 3 December, 5 December
Interview mode: face to face
Interview: Georg khutsishvili , marketing process manager
Date: 30 November, 4 November
Interview mode: face to face
Interview: Lithuania citizens
Date: October – November
Interview mode: Virtual (Skype)
Books
“International Business (third addition)” – John Wild, Kenneth Wild, Jerry Han.
