MGMT 102 Strategy Section G12 [Tues] Submitted to Professor Adel F Dimian April 14, 2012
Team members: Danny Khoo, Benjamin Lee, Lee Meng Yong, Tressilla Peh, Poh Keng Boon
Jia Duo Bao Group (JDB) - a Hong Kong-based enterprise established in 1995 focuses its business in the production and sales of specialized beverages. Currently, it is the largest nutraceutical drink manufacturer in China attributing its success to their main beverage product, a red-canned herbal drink called “Wong Lo Kat” (WLK). In efforts tie in with the nationwide market development strategy, the group set up 4 production plants in the different regions of China namely Beijing, Zhejiang, Fujian and Guangzhou to achieve greater reach within China. As of 2011, the group has managed to capture over 30 regions and provinces in China and exports to western countries such as the United States and Europe.
In the last five years, WLK allocated a huge portion of its budget to marketing. The strategy focused on mass marketing efforts indeed proved to be very successful in capturing the different target segments through various mediums used. This eventually translated to an all time high revenue of 17 billion yuan in 2010 and has made WLK a brand that consumers trust the most. However, in light of this success, WLK still needs to push ahead for further improvements in order to sustain its market position. Therefore, in doing this, we analyzed the internal and external business environment to better evaluate WLK’s position and ensure smooth execution of the proposed goals, strategies and tactics in the next 5 years. Vision: “To be the global market leader in the beverage industry” Mission: “Provide customers with high quality and best value herbal tea through the constant pursuit of innovation and excellence”
With the functional drink market enjoying greatest value and volume growth, many players have been focusing their efforts on differentiating their products. Today, there are over 50 other brands competing alongside WLK. However, the factor that distinguishes WLK from its competitors is their established brand name and customer loyalty. These two factors, coupled with a high set up cost and the inability to enjoy economic of scale (EOS) production acts as a deterrent for new entrants. WLK, being the market leader in the nutraceutical industry, significantly lessens the bargaining power of its suppliers as suppliers often like to leverage on the affiliation with big players and are unlikely to turn away from the huge income attached to such customers. At a current price point of 3.5 yuan, which is considerably higher than its competitors, WLK is still able to enjoy a high take up rate because of the strong beliefs in the quality and effectiveness of the drink. The fact that people tend to buy the drink for its functional benefits also suggests that substitutes do not post any threat to WLK. Therefore, due to the strong demand and brand loyalty of consumers, the power of retailers and substitutes are weakened to a large extent. Overall, the competitive forces surrounding the functional drink industry in China is relatively low. In essence, we see that WLK is a rising star in this category in addition to it being the dominant player in China.
Pertinent to the first tactic of our first strategy, the following graph charts the increase in financial contribution of fountain sales by 1.11% to the goal of 15% CAGR growth yearly.
Figure 1. Financial Contribution of fountain sales
Strategic Plan Recommendations
Figure 2. Y-Tree
Strategy 1: Establish a stronger presence in the local functional drink market
1. Enter the fountain market by collaborating with established food-chains The crux of this tactic will be to enter the fountain market by tying up with established F&B brands...
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