Look Out Lipton, Here Comes Oolong! Case Study

Introduction

The case study focused on the emergence and growth of the market for canned iced-tea while laying much attention on the Western markets. Basically, the development of these markets made the Taiwan Shin Shii and Unilever (also known as the USA Unilever Best foods) to further exploit such markets by employing efficient marketing strategies with the newly developed brands namely Kai Shii and Lipton.

This study intends to assess the effective market segmentation strategies as well as the prospective markets that companies which produce iced-tea could enter. Besides, factors which iced-tea companies could use when forecasting their future demands are underlined and consequently described.

Thus, this study objectively aims at:

1. Understanding the types of markets which drive the elevated iced tea demands in addition to the eminent motivations that cause them to occur.
2. Offering market entry strategies and market coverage strategies for both Shin Shii and Unilever.
3. Tendering the viably recommended brand positioning strategies for Kai Shii and Lipton as well as an alternate ready- to- drink, but hot tea beverage to Unilever.

Case study background

Basically, the Unilever Group is globally recognized as the leaders in supplying the fast moving consumers’ products or goods (FMCG) (Unilever 2010). The Lipton brand of these suppliers dominates the United States markets and also has an imperative worldwide presence.

The Unilever Group seems to have equally established the canned hot ready to drink tea products using the Brook Bond PG guidelines which according to this case is dubbed as the Brooke Bond. As a small corporation that is situated in Taiwan, Shin Shii proved to have already been triumphant in Taiwan with the famous beverage drink known as oolong iced tea. The company has enjoyed market dominance in Taiwan and currently has a target of joining the feasible and promising Western marketplaces.

However, to properly respond to this case study questions, the following assumptions have to be made.

1. The iced tea markets have not endured some everlasting changes be it negative or positive, on either the supply or the demand sides.
2. The iced tea market depicts a steady growth which will move along way prior to reaching its saturation point.
3. Both the oolong Kai Shii iced tea and the Lipton iced tea are perceived to be primarily similar or very close and could be categorized under identical products categories.
4. In this case, the entire North America markets are what are deemed to constitute the Western markets.

Despite being a narrative case study, there are some accruing limitations that might hinder the chances of properly answering the prevailing case questions. First, the Kotler and Armstrong (2001, p.302) text that is used as the main reference emanates to be somewhat old-fashioned since it might have failed to incorporate the business portfolio or corporation’s profiles alterations.

For instance, the alliance formed between Pepsi and Lipton might not be inexistence any more. Furthermore, obtaining the decisive information on Shin Shii was rather be difficult given that the corporation is still very murky and internationally less known.

Methodology and the theoretical framework

In trying to answer the case study questions, there are methodologies and theoretical frameworks that are drawn on. For example, to properly analyze the case study, theories of marketing which relates to strategic SWOT analysis planning as well as marketing planning was used.

Kotler and Armstrong (2001, p.302) critically described each of these theories and both appear to have various components which were well-defined and critically deliberated on. Further research was similarly performed particularly those that pertain to the forecasting of corporations demands. The provisional non-numerical statistics was adequate to support the offered marketing strategies recommendations apart from the situations where the market shares were to be deliberated.

Strategic analysis of the case study

The FMCG (fast moving consumer goods) market presents the market supply and demands trends which habitually fluctuate and are extremely volatile. When such circumstances materialize to be the case, it is advisable that corporations that enter this market ought to have well stipulated purpose and objectives in their strategic planning to guarantee their sustainability.

The Unilever for instance, universally aspires to accomplish the individuals every day’s requirements (Zhao et al. 2009, p.378). This is to be achieved through competitively and creatively responding to such needs with services and products that are branded and tailored towards augmenting the quality of people’s lives.

Since the strategic planning have been laid out, it now becomes significant to conduct the SWOT analysis for this corporation prior to embarking on the strategic market planning and a detailed evaluation of the brand positioning factors. The following matrix table highlights the strengths, weaknesses, opportunities and threats that Kai Shii and Lipton faces in the global market operations.

Bases for market planning strategies

To enter into the emerging and the already existing markets, companies must first assume proper market planning by determining the types of bases or factors that could be used in apt market segmentation. Basically, market segmentation entails the division of customers or consumers into some distinctive groups that may require different marketing mixes or products (Krider et al. 2008, p.2).

Each of these groups must have behaviors, characteristics and different needs. Companies might similarly have their iced tea market segmented according to the consumers’ perceptions or the apparent trends depicted when they purchase similar products.

Therefore, to succeed in such a very competitive market environment, companies can use the following bases in segmenting the market for the iced tea.

1. Geographic segmentation base including taking account of factors such as towns, villages, city suburbs and urban centers.
2. Demographic bases which entails incorporating factors like the apparent consumers age groups.
3. Behavioral bases which include taking into consideration the consumers who seek and hassle for fresh and convenient iced tea refreshments.

From these iced tea market segmentation base factors, it is clear that prices might not be deemed as a key factor that influences the perception of canned iced teas consumers. This is because such products are less or more similarly priced with identical products like iced coffee and soft drinks (Zhao et al. 2009, p.379). Nevertheless, for companies that compete in the production of similar product sets, pricing is considered to play a very critical role.

The identified potential market segments

After identifying the market segmentation bases for iced teas products, companies must target particular market segments that provide certain differential potentials which a company might use to gain the competitive edge or advantage over other market rivals (McCarthy, 1993). The selected market segment ought to assist the corporation to craft enduring clients’ values and consequently prop it up for a long time.

The designated market segment might however vary according to the resources possessed and the company size. Shin Shii for instance, has few resources which may force it to have few market segment targets as compared to the Unilever that might yearn for bigger market coverage as it targets various market segments (Greg 1992, p.46). The latter company has ample resources that could help it to meet market segmentation targets.

In the domestic Taiwanese markets, Shin Shii can exceptionally perform given that it has well established and aggressive advertising techniques that might help it create completely novel markets for the new product, iced tea oolong that was practically nonexistence (Sutherland, 2009).

These make the company to stand a chance of targeting each and every age group including the customary bound aged generations who previously enjoyed the consumption of hot tea and never showed any sign of relinquishing their habits.

The Kai Shii drinkers’ selling point should be the new breeds of individuals who consider themselves to be in a newfangled globe. The health benefits and natural ingredients that the product brags of should be made appealing to each consumer in the Far East not excluding the aged populace who very health cognizant.

Since the Shin Shii emerged to be different and unique, it became appealing to the youthful generations. In contrast, the iced tea seems to have therapeutic benefits which lured the middle age working classes that are stressed up in addition to offering a convenient canned drink that complemented their respective tiring routines (Grossman, 1994). The companies can also consider the geographical market segmentations even though the penetration levels could be difficult in some rural market areas.

While targeting specific market segments for Lipton, the Unilever Groups based their segmentation on identical factors including the iced tea health benefits. The company could nonetheless further narrow down its market segmentation by focusing on industrial workers and athletes who partake physical activities that are extremely mentally exhaustive (Krider et al. 2008, p.4). Most population in America is geographically situated within towns or urban centers which materialize to be well linked.

It therefore makes more sense if Lipton restricts its markets segmentation to appropriately serve the American town centers. Nevertheless, given that there are busy metropolises such as Chicago, Boston and New York City which pose unlimited potentiality for the working classes, Lipton iced teas need to be targeted to accomplish the demands of consumers in these areas because they always require quick refreshments amid lunch or snacks.

Conversely, for the Unilever Group, it becomes imperative to note that modifying the iced tea Lipton to serve the various demands within the country would be practically impossible. This follows the fact America is renowned to be a homogenously large market and barely has any assorted beverage tastes. On the other hand, Shin Shii may opt for the modification of oolong Kai Shii iced teas in order to suit the American consumers’ tastes and to equally counter the stringent market competitions through claiming it exclusiveness and superiority.

Forecasting the iced tea market demand

Currently in America, iced tea is hugely demanded to an extent that it constitutes nearly eighty percent of the total consumed tea in the American environs. In fact, it has exceptionally emerged to be the Americans habit regardless of the fact that it has a comparatively shorter participation time span in the marketing and trade of teas.

Whereas the ready to drink beverages and iced teas attract the emerging tea consumers, it is anticipated that an upturn impact might take place in the demands for different kinds of teas, particularly those that are specialized. This will eventually cause the demand for tea such as the iced herbal tea to increase.

Thus, companies might employ different factors while forecasting the iced teas demands for their chosen diverse market segments. A great chunk of these factors relates to the current market segmentation base growth rate including certain nationality groups, income and age.

Variations in both socio economic conditions and lifestyles are among the decisive development factors which could significantly influence the iced teas demand particularly in the long-run. For instance, specific to the market for iced teas, when the working class proportionally decreases as result of the ageing populace, the demand for iced teas might be hindered in the metropolitan cities specifically within the commercial regions.

The iced tea beverages outlook generally is still however considerably optimistic with the emergence of instant tea which has become additionally essential in some global markets (Altman, 2002).

While studying the producing nations commodity supply management between the fiscal 1951 and 1970, Goradia showed that the universal liquid tea consumption steadily increased by approximately 145.07% but the tea-leaves consumption increased by just 92.01%. There is absolutely no doubt that these fast progressions will still continue even in the prospective future (Krider et al. 2008, p.6).

Market coverage strategy that Pepsi/Lipton should adopt

Pepsi/Lipton has already differentiated the type of the market segment they want to enter into. Identifying and entering into the segment market depends on the company available facilities and resources. The problem of identifying and the segment market can only be sorted out by the market coverage strategy that the company utilizes to penetrate the market.

Normally the market coverage strategy is the method companies use to assess the various market segments in the marketplace (Boone & Kurtz 2011, p.423.). Also the market coverage strategies help the companied make decisions on which type of segment that should be covered in marketing their particular product (Rolnicki 1998, p.90).

There are three market coverage strategies that Pepsi and Lipton may adopt while marketing their product. These include undifferentiated marketing strategy, concentrated and differentiated marketing strategy (Rolnicki 1998, p.90). But the method that the Pepsi and Lipton will apply in their marketing plans will depend on the company available resources, the product variability or changeability, market variability and the competitors marketing strategies (Boone & Kurtz 2011, p.423).

But as Pepsi and Lipton have already established themselves across the market segments they have to use undifferentiated marketing strategy that targets the entire spectrum of the market segment (Kotler & Armstrong 2009, p.303).

As the number of competing companies continue to increase in the already saturated market, it is important for the Lipton and Pepsi to remain as the market leader in the western market. In order to achieve this, the combination of the two companies must ensure that they increase their presence and visibility across all the market segments. Lipton also should take advantage of the Pepsi wide distribution network to market its iced-tea to reach far-flung customers (Unilever 2010, p.3).

Moreover the wider distribution channel that has increased the Pepsi cola presence should also be used to increase the visibility of Lipton iced-tea. The reputation of the two companies will also increase the visibility of the Lipton iced-tea. Since iced-tea is kind of a product that cut across ages, occupations and all other factors used in determining the market segment, undifferentiated strategy is the most applicable for the companies.

Moreover as the demand for the iced-tea increases it becomes an impulse product to the majority of consumers. The implication is that the consumers postpone their decisions until they are capable of seeing the product on the shelves (Kotler & Armstrong 2009, p.303). In such a situation, the popular product customers see shelved neatly would immediately generate a want locking out all other influential alternatives.

As already been mentioned Pepsi and Lipton have enough resources such as distribution channels, reputation and company experience in iced-tea that they can use at their disposal to penetrate any market. Moreover the two companies can take advantage of their strengths to apply any marketing strategy.

However the iced-tea variability as well as the market niche will make the two companies use the undifferentiated marketing. In addition the undifferentiated strategy will also enable the companies achieve the economies of scale which is essential in cost saving and risk reduction (Boone & Kurtz 2011, p.423).

Iced-tea is such kind of a product that will not always change. Moreover the iced-tea has not penetrated the market or is new into the market. Lipton therefore has to target the whole market in the first stages in their product life cycle. This will be essential for the company in combating unforeseen risk that may come along the way (Rolnicki 1998, p.90).

Moreover there are many competitors offering similar product in the market as well as the presence of other competing products making the market variability to be high. This will make undifferentiated strategy to be the most effective approach for Lipton. Since the competitors are likely to segment their market and target particular customers, Lipton should look for hidden market through the application of the undifferentiated strategy. This will ensure an increase its market share as well as its profit margin (Unilever 2010, p.3).

Positioning Lipton iced-tea

The companies make use of undifferentiated marketing strategy where a multiple of segments are targeted. The iced-tea should offer increased flexibility and choice to suit the wide range of customers within each segment. For instance, the company can make use of different packaging together with different quantity and prices. Offering the product in different forms using such strategies as price, packaging and quantity increases its flexibility, choice as well as its penetrating capability (Kotler & Armstrong 2009, p.307).

Customers with low income will feel not locked out as there are some quantities that they can afford. Fashionable and classy consumers will always feel taken care of with their unique packing styles. In essence that whole market will often feel taken care of by the product thus putting iced-tea at the top of every customer mind.

Moreover the Lipton should claim to be the only company that is natural and by extension offers natural iced-tea. In addition the company should emphasize on the cooling effect of the natural iced-tea and make their customers feel as if they own the product.

Positioning Brook Bond canned-tea

Brook bond is already boasting of its canned hot tea as a revolutionary new concept. This new impression as the only company offering a canned ready to drink hot tea should make the company position itself as being the only company that considers the customers convenience and greater choice. Also by virtue of being the first to develop and patent the technology it should claim to be natural and perhaps charge higher prices (Kotler & Armstrong 2009, p.309).

Moreover, the product is considered to be an up market. But as the hot canned tea need heating cabinet it cannot be used or accessed outdoors. Therefore the company should ensure that the product is positioned in entrances or exits of the supermarkets where all the customers are capable of seeing the product. In other words the product visibility and accessibility should be enhanced in all indoor offering places.

As the Lipton iced-tea and brook-bong canned hot tea are products of the same company Unilever, they are marketed separately. In most cases the target markets for the two products overlaps as majority of the consumers are unaware that the two products come from the same company.

The company should also apply time or duration differentiation strategy to enhance its market share. As hot tea and cold are needed at different times of the day, year and even places the branding companies can take advantage of difference to reach customers during those times of the year, time and places.

Marketing recommendations for Shin Shii

The entry of shin Shii into the western market through Kai Shii would largely involve two important issues. The first important issue is the choice of the distribution network. The company has to look for partners that share similar objectives and have almost equal capabilities in the distribution and delivery of similar products. The partners must also prove successful business orientations.

This consideration is essential for Shin Shii as the stocks that will be returned without being sold would be expensive, burdening and limits the operation in other areas. However shin Shii is not a market leader in the western market and therefore should not put its products alongside its established competitors such as Lipton.

The reason is that its product will automatically be ignored as a result of zero branding recognition. Therefore Shin Shii should target other places such as amusement parks and cinemas where the potential consumers are more likely to test new products. This should be taken as a pilot marketing strategy which should provide an indication of the public response to the demand of its products.

As the demand for the product enlarges, Shin Shii will have an appropriate platform where it will be able to negotiate the shelf space with larger distribution retailers as well as larger supermarket chains. This will increase its positioning in the already saturated western market. Also Shin Shii should not segment its market rather it should apply the undifferentiated marketing strategy. This will enable it take advantage of the hidden market and quickly increase its market share.

Kai Shii brand positioning

Before entering into the western market Shin Shii must rebrand its product so as to conform to the western lifestyle and be holding on the average western consumer mind. Shin Shii must seriously consider the cultural gap between its native country Taiwan and the western or American culture.

Therefore for Kai Shii to succeed in the western market it must incorporate the western cultures. Another important strategy that Kai Shii can use to position itself is the price differentiation. Kai Shii should be offered at lower prices compared to the already established brands such as Lipton iced-tea and Brook Bond canned hot tea. This will offer an incentive to the consumers to try Kai Shii as an alternative product.

The lowering prices may also offer a competitive advantage to Kai Shii in case the American consumers realized that the Kai Shii is having a unique product with quality. In this way the product will become more popular among the western consumers. Therefore the company will begin to charge premium based on the product superiority and popularity. Moreover shin Shii may come out to be greener and fresher in its advertising image.

In other words it may be a direct opposite of the old-fashioned image of its competitors Lipton in its marketing campaigns. As the popularity of the company product continues to increase the company revenues also increase as increase in demand is concurrent with increase in prices. The increases in revenues as a result of increases in prices will ensure the company success as well as sustainability in the marketing campaigns.

Conclusion

As both Lipton and Kai Shii are set to serve the same market, they can apply similar strategies but different approaches to make each company achieve its own objectives and goals. Also, the companies are different in both size and in terms of financial capabilities which may influence the way each of these companies approach and implements its marketing strategies. Lipton is enjoying its competitive edge over Kai Shii due to its already established global demand in terms of expertise, taste and developed culture of its target market.

Moreover, Lipton possesses technological superiority and a wide range of products that it offers as an alternative to the consumers. In addition, Lipton is planning to introduce into the market a new set of products, Brook Bond canned hot tea. Although Shin Shii will be coming in as a new player through Kai Shii in the Western market niche with little international experience, its past achievements in the Taiwanese market should worry the already players in the Western market such as Unilever.

Shin Shii succeeded in revolutionizing the Taiwanese market through the introduction of the new product. Despite domestic competition in the already saturated iced-tea market, Unilever should relook into its marketing strategies to be able to maintain its competitive advantage over unpredictable but small competitors such as Shin Shii.

Nonetheless, both the companies are focusing into growing and encouraging market whose demand increase expectations that are high in the short and long-run. Therefore, fair competition combined with the company marketing strategies will be determinant factor on each of the company market share as well as increased revenue (McCarthy, 1993).

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