INTERNATIONAL MARKETING PLAN FOR STROH AUSTRIA

AN ANALYSIS OF THE CHINESE SPIRITS INDUSTRY AND THE

OPPORTUNITIES FOR STROH AUSTRIA WITHIN IT

Prepared by:
Martin Witthoeft

Module Title: International Marketing

Module Leader: Dr Jonathan Wilson
Module Code: BC315010S

Academic Year: 2008/9

Semester: One
Level: 3

Submitted: 17 December 2008

 Table of Contents

1. STROH on Course of Expansion ......................................................................................... 1

1.1. STROH in Austria ............................................................................................................. 1
1.2. STROH - Past and Present................................................................................................ 1
1.3. China - Land of Opportunity ............................................................................................ 2

2. STROH AUSTRIA in the Chinese Spirits Market ................................................................. 2

2.1. PESTEL Analysis of the Chinese Spirits Market ............................................................... 2
2.2. SWOT Analysis of STROH AUSTRIA.................................................................................. 4
2.3. Competitive Analysis of the Chinese Spirits Market ....................................................... 5
2.4. Target Market for STROH AUSTRIA ................................................................................. 6

3. Marketing Objectives for STROH AUSTRIA in China ......................................................... 7

3.1. Short-term Objectives for STROH AUSTRIA in China (0-12 months) .............................. 7
3.2. Medium-term Objectives for STROH AUSTRIA in China (1-3 years) ............................... 8
3.3. Long-term Objectives for STROH AUSTRIA in China (3+ years) ...................................... 8

4. Marketing Strategy for STROH AUSTRIA in China............................................................. 9

4.1. Ansoff Matrix Analysis for STROH AUSTRIA .................................................................... 9
4.2. Market Entry Strategy Analysis for STROH AUSTRIA .................................................... 10
4.3. Standardisation vs. Adaptation Analysis for STROH AUSTRIA ...................................... 11
4.4. Market Segmentation Analysis of the Chinese Spirits Market ..................................... 12
4.5. Targeting Strategy for STROH AUSTRIA ........................................................................ 13
4.6. Positioning Strategy for STROH AUSTRIA ...................................................................... 14

5. Marketing Plan for STROH AUSTRIA in China ................................................................. 14

5.1. Marketing Activities for STROH AUSTRIA in China ........................................................ 14
5.2. Marketing Budget for STROH AUSTRIA in China ........................................................... 15
5.3. Justification of Marketing Budget for STROH AUSTRIA in China .................................. 15
5.4. Schedule of Marketing Activities for STROH AUSTRIA in China .................................... 17

6. Future Outlook for STROH AUSTRIA in China ................................................................. 18

7. List of References ............................................................................................................. 19

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 List of Tables

Table 1: PESTEL Analysis of the Chinese Spirits Market............................................................. 3

Table 2: SWOT Analysis of STROH AUSTRIA ............................................................................... 5

Table 3: Competitive Analysis of the Chinese Spirits Market .................................................... 6

Table 4: Ansoff Matrix Analysis for STROH AUSTRIA ................................................................. 9

Table 5: Comparison of Market Entry Methods for STROH AUSTRIA ...................................... 11

Table 6: Standardisation vs. Adaptation Analysis for STROH AUSTRIA ................................... 12

Table 7: Segmentation Matrix of the Chinese Spirits Market .................................................. 13

Table 8: Targeting Strategy for STROH AUSTRIA...................................................................... 13

Table 9: Brand Positioning Statement for STROH AUSTRIA in China ....................................... 14

Table 10: Marketing Activities for STROH AUSTRIA in China ................................................... 14

Table 11: Justification of Marketing Budget for STROH AUSTRIA in China.............................. 16

Table 12: Schedule of Marketing Activities for STROH AUSTRIA in China ............................... 17

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To: Board of Directors, STROH AUSTRIA

From: Martin Witthoeft

Date: 17 December 2008

RE: International Marketing Plan for STROH AUSTRIA

1. STROH on Course of Expansion

As you are aware, STROH is Austria’s largest spirits manufacturer and market leader in
Austria (STROH, 2005). Michael Jackson & Co. have analysed several prospect markets
around the globe and have come up with a proposal for STROH’s future growth: Market
expansion to China.

1.1. STROH in Austria

The company’s main seller, STROH’s 80 (160 per cent proof) spiced rum is known by over 75
per cent of the Austrian population according to a 2001 IMAS brand awareness survey
(STROH, 2005).

The slogan “STROH – THE SPIRIT OF AUSTRIA” is popular in ski huts across the Alps and
associated with Après ski parties. The current promotion is about drinking STROH`s 80 pure
named the “Ultimate challenge” (STROH, 2008).

1.2. STROH - Past and Present

STROH’s history began in 1832 when Austria-Hungary had no access to colonies in tropical
regions and Sebastian Stroh therefore introduced a domestic spiced rum substituting sugar-
cane with special herbs (STROH, 2005).

1
In 2007, STROH AUSTRIA GmbH had sales of € 9.8 million and a yearly production capacity of
6.2 million bottles. Exporting 65 per cent of their production makes them one of Austria’s
export success stories. The company currently employs 33 people (Strasser, 2008).

1.3. China - Land of Opportunity

China is the sixth largest economy in the world with a GDP of $ 3,241 billion in 2007 and an
annual growth rate of 9.8 per cent in 2008. The growth of real disposable income at an
annual rate of 11.5 per cent is resulting in a rapidly emerging middle class (Economist, 2008).

This middle class has an increasing need for leisure and winter sports resorts are being
established in the northern Chinese provinces. Although still in their infancy, Chinese resorts
are destined to attract the new Chinese middle class due to the prestigious image of skiing
and the historical reluctance of Chinese to leave their country (Runckel, 2005).

STROH is the first foreign company to embark on developing the Chinese Après ski culture
giving it a first-mover advantage (Economist, 2008).

2. STROH AUSTRIA in the Chinese Spirits Market

2.1. PESTEL Analysis of the Chinese Spirits Market

Outlined in Table 1 below is a PESTEL analysis to understand the forces of change in the
Chinese spirits industry.

2
 PESTEL Analysis of the Chinese Spirits Market

I. Political II. Economic

• OPEN MARKET: 2001 opening of Chinese • ECONOMIC GROWTH: GDP growth expected to
spirits market due to WTO membership.1 drop from 11.9% in 2007 to 8.2% in 2012.
• MODERNISATION: Chinese government Domestic demand is to remain strong in the next
encourages the move towards western five years as consumption will rise due to overall
provinces.1 wage growth.1

• COUNTERFEITING: Empty foreign spirits • TAXATION: Tariff for foreign spirits 10% & rate
bottles filled with a cheaper spirit & fake for hard liquor 20%. Combined with 17% VAT
labels or bottles are sold to inexperienced equals overall tax of around 50% of product's
Chinese spirit consumers.2 value.3
• MARKET SIZE: Chinese spirits sales expected to
grow 13% to 14% annually.3
III. Social IV. Technological
• DEMOGRAPHICS: China’s population growth • DISTRIBUTION: Chain supermarkets & specialist
rate in 2008 is 0.629% with an average life retailers dominate retail channels providing basis
expectancy of 73.18 years. Age distribution is of distributing to local restaurants, bars &
characterized by a small youth group due to nightclubs.2
China’s one child policy since 1979.4
• INTERNET: So-called “Great Firewall of China”
• SEASONALITY: Consumption of spirits high controls websites available on the internet
during Chinese holidays & average according to policies of the Chinese
consumption is higher during winter months.5 government.6
• HEALTH AWARENESS: Chinese are advised to • MEDIA: Brand communication in China uses
cut down on liquor by government.5 symbols & targets local and national affiliation of
Chinese population.7

V. Environmental VI. Legal

• CONSUMPTION: China needs three times as • CLASSIFICATION: 2007 lifting of restrictions on
much energy per unit of GDP as US & nine above 60% alcohol content in spirits.2
times as much as Japan.8 • LABELING: 2006 abolition of pre-approval
• RECYCLING: Chinese government wants to process of labels upon entry into China,
introduce recycling programs through its plan translation into Chinese still mandatory.2
of “National Economy and Social Progress”.9 • STANDARDS: Standard retail sizes of bottled
• CONTROLS: China has become sensitive to the liquor in China are 350 ml & 750 ml.2
issue of pollution due to international
pressure → lately stricter controls of firms.10
Table 1: PESTEL Analysis of the Chinese Spirits Market

1 6
Sources: Economist, 2008 Taylor, 2006
2 7
Leu, 2007 Fuchs, 2004
3 8
Maheshwari, 2008 Nair, 2006
4 9
CIA World Factbook, 2008 China Daily, 2004
5 10
Zhang, 2004 Shipeng & Graham-Harrison, 2008

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PESTEL Summary: Educate the Market
New entrants to the Chinese spirits market need to focus on educating consumers,
bartenders and bar managers not only about their brand but also about its general spirit
category and its application in mixed drinks (Leu, 2007).

The spirits market is extremely brand sensitive and even new entrants with well-known
global brands might have to start building brand awareness from ground zero in China (Leu,
2007).

2.2. SWOT Analysis of STROH AUSTRIA

Shown in Table 2 below is a SWOT analysis to assess STROH’s overall strategic situation in
the Chinese spirits market.

SWOT (1/2): Chinese Spirits Market Environment

Opportunities Threats

• Steady year-to-year market growth • Economic slowdown might affect spirits

market negatively
• Promoting foreign spirits as healthier than local
spirits • Poor infrastructure & distribution channels
• Educating the market about spirits outside of • Consumption tax might be raised if domestic
traditional spirits brands are threatened by foreign competition
• Luxury & high social status are associated with • Perception that all spirits are equally
foreign spirits unhealthy
• Availability of foreign spirits limited to • Counterfeiting by refilling empty foreign
supermarkets & retailers in major cities bottles & reusing labels
• Foreign spirits are given as gifts, e.g. for Chinese • High prices of foreign spirits are too
festivals expensive for average Chinese consumer
• Expansion into the western & northern part of • Lack of knowledge about non-traditional
China => First-mover advantage spirits

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 SWOT (2/2): Internal Perspective of STROH AUSTRIA

Strengths Weaknesses

• STROH is successfully marketed in more than 30 • STROH will have high start-up costs due to
countries worldwide lack of experience in Chinese spirits market
• STROH holds 3rd position of the dark rum • STROH’s trial-and-error strategy is prone to
segment in worldwide duty free business create difficulties entering the market
• STROH has over 80% market share in Austria’s • STROH has a limited marketing budget due to
dark rum market being a medium-sized company
• STROH has steady growth in both home market • STROH will have trouble to find capable staff
& internationally in China
• STROH has experience in successfully entering • STROH has to rely strongly on its Chinese
foreign markets, e.g. strong in South Africa distribution partner
• STROH was awarded a gold medal at the 1900 • STROH will have difficulty in sourcing a
World Exhibition in Paris capable partner for PR activities
• STROH brand has cult appeal & an international • STROH needs a good pricing strategy for the
community of devoted followers extremely price sensitive market
Table 2: SWOT Analysis of STROH AUSTRIA

Source: Adapted from STROH, 2005 & Leu, 2007

SWOT Summary: Bank on History

Matching STROH’s internal strengths with the Chinese spirits market environment helps to
reveal the opportunities that STROH can exploit, i.e. STROH’s long history and local
background (Stroh, 2005).

STROH can minimize the impact of its internal weaknesses in perspective to the threats in
the Chinese spirits market by networking with experienced partners in China, i.e. the
“Austrian Business Circle” or the “Austrian Chamber of Commerce Hong Kong” (WKO
Austrian Trade, 2008).

2.3. Competitive Analysis of the Chinese Spirits Market

Outlined in Table 3 below is a competitive analysis to identify the main players in the
Chinese spirits market.

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 Competitive Analysis of the Chinese Spirits Market

Sector % Share
• Domestic Spirits
Bajiu 90 %
• Foreign spirits
Pernod Ricard Group 4.2%
Moët Hennessy Diageo 1.7%
Other 4.1%
Table 3: Competitive Analysis of the Chinese Spirits Market

Source: Adapted from Leu, 2007

Competitive Analysis Summary: Domestic Spirit most popular

The most popular spirit in China is the local Baijiu, a “white liquor” with a market share of 90
per cent. Consumed mostly in the rural parts of China with its estimated 700 million
inhabitants, it is considered the national drink and comparable to Russian vodka in both
taste and potency (Osnos, 2007).

Foreign spirits compete for the remaining 10 per cent of the spirits market which is
dominated by the Pernod Ricard Group with a 42 per cent market share and Moët Hennessy
Diageo Group with a 17 per cent share (Leu, 2007).

In the segment above 60 per cent alcohol content (>120 per cent proof) there are currently
no direct competitors in China. Since the ban on drinks containing more than 60 per cent
alcohol was lifted in 2007, no other foreign brand has entered the Chinese spirits market
within that sector yet (Leu, 2007).

2.4. Target Market for STROH AUSTRIA

The focus is on entering a single region since according to Leu (2007) “moving into a
province in China is like moving into a country in Europe”.

As the point of entry we have identified China’s largest ski area Yabuli Ski Resort, hosting
both the 2008 National Winter Games and the World Winter University Games in early 2009.
The resort is located about 200 km southeast of Harbin, the capital of the north-western
6
province of Heilongjiang which was formerly known as Manchuria. Yabuli has 170 day
average snow coverage and boasts of 15 skiing courses adding up to 30 km of slopes with
best natural conditions (Runckel, 2005).

Several five-star hotels are to be opened in 2008/09 bringing the resort towards Western
standards. Yearly tourist arrivals at Yabuli accounted for about 110,000 in 2000 and are
projected to grow to approximately 500,000 by 2010 (Runckel, 2005).

According to reports of visitors to Yabuli, Après ski culture is almost non-existent and hotel
operators are eager to expand their range of activities away from the slopes (Tiger, 2005).

3. Marketing Objectives for STROH AUSTRIA in China

3.1. Short-term Objectives for STROH AUSTRIA in China (0-12 months)

• PROMOTION: Increase brand awareness to 50 per cent of STROH in the selected winter
sports resort by May 2009.

This objective will be achieved through a promotional campaign introducing Austrian-

style Après ski culture to a high-class Chinese skiing resort. Local designers will adapt
the STROH label to the Chinese language and event managers will set up an authentic
STROH branded Austrian ski hut in Yabuli. STROH will also be a co-sponsor of the
2009 World Winter University Games.

By the end of the winter sport season brand awareness will be measured by
conducting a survey in selected universities in China.

• PROFIT: Selling of a minimum of 10.000 9-liter cartons of STROH by December 2009.

This objective will be achieved through special promotional offers directed at visitors
to Yabuli ski resort. Tasters at the STROH ski hut as part of the famous “STROH’s 80
challenge” will be accompanied with promotions at local hotels offering a special
room rate that includes a promotional bottle of STROH’s 80 in a gift package. The

7
 package also includes a list of preferred STROH suppliers around the country and a
booklet illustrating the use of STROH in combination with other drinks like green tea.

3.2. Medium-term Objectives for STROH AUSTRIA in China (1-3 years)

• GROWTH: Expanding number of STROH sales points to 100 by 2011.

This objective will be achieved through opening STROH ski huts in China’s No. 2
Jingyuetan Ski Resort and No.3 Beidahu Ski Resort (Runckel, 2005). Special attention
will be given to create close ties with both the major hotel chains and the major
developers of these regions. For this purpose we suggest the establishment of a Sino-
Austrian representative office in Yabuli to oversee the marketing activities in the
three resorts.

• MARKET SHARE: Become market leader in the above 60 per cent alcohol content spirit
market in China by December 2012.
This objective will be achieved through educating the Chinese winter sport fans
about Après ski culture and linking their experience to the brand of STROH. Hereby
the first-mover advantage is crucial since other domestic and foreign brands are
likely to set up copies of the STROH ski huts hereby adding credibility to the original.
The emerging middle class, which is considering skiing as a status symbol, and a lack
of competition in its segment of the market provides a promising outlook for STROH.

3.3. Long-term Objectives for STROH AUSTRIA in China (3+ years)

• BRAND LOYALTY: Make STROH the preferred high-volume spirit brand of the 20-35 year
old middle class in China by February 2014.

This objective will be achieved by distributing STROH promotional gear like T-shirts,
glasses and jackets with the image of STROH’s marketing symbol “STROHminator”
(Stroh, 2005) across the Top 3 winter sport resorts in China. In addition a multilingual
website will be set up with daily draws to win weekends at one of the STROH ski huts
as well as an online shop where both STROH’s 80 and STROH merchandise can be
purchased at preferred rates. Sponsoring of competitions and local activities in the

8
 geographical areas around the STROH ski huts will ensure the necessary media
coverage boosted by the employment of a national PR agency.

• PROFITABILITY: Achieve a 10 per cent return on capital employed by December 2015.

This objective will be achieved by stringent supervision of costs from the market
entry onwards by keeping a rigorous and prudent approach. Early investments into
property and costs for setting up of the website and distribution channels will be
compensated by projected sales resulting in a breakeven point in less than 5 years.

4. Marketing Strategy for STROH AUSTRIA in China

4.1. Ansoff Matrix Analysis for STROH AUSTRIA

Shown in Table 4 below is an Ansoff matrix analysis to achieve a better understanding of the
risks of different options for STROH`s growth.

Product

Existing New

Market Penetration Product Development

• Advertising/ promotions for • STROH & Tea mixers for rural

Existing

STROH’s 80 Chinese market

• Introduce Austrian Après ski • STROH & Cola in cans targeting
culture with STROH branding urban youth
Market

Market development Diversification

• Rebranding of STROH as a • STROH entering the franchise

New

“healthy” spirit market for its STROH Ski huts

• Emphasizing other uses of STROH • STROH creating a presence in
for cooking & baking Indoor Ski parks
Table 4: Ansoff Matrix Analysis for STROH AUSTRIA

Source: Adapted from Ansoff, 1957

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Ansoff Matrix Summary: Stick to the Original
Introducing the STROH brand through promotions involves low risk since an existing product
is placed in an existing market. Higher risk operations include rebranding STROH as a
“healthy” spirit, a move into a new market with an existing product; or the creation of a new
line of STROH & Tea mixers for China, where a new product is created for an existing market.
Most risky options include opening a franchise for STROH ski huts involving the move into a
new market with a new product. Going into multiple quadrants simultaneously further
increases the level of risk (Manktelow, 2008).

4.2. Market Entry Strategy Analysis for STROH AUSTRIA

Outlined in Table 5 below is a market entry analysis to identify the best method of delivering
STROH’s goods to the market and distributing them there.

Considering the size of STROH AUSTRIA, its core competences and the characteristics of the
Chinese spirits market, three options for market entry were considered:

Comparison of Market Entry Methods for STROH AUSTRIA

Method Pros Cons

1. Direct Sales • Distribution & pricing control • Solely responsible for advertising,
• High profit potential due to marketing, customer service,
Products are translation & required labelling
elimination of any middlemen
produced in home
• Must become an expert in the
market & sold to
market
customers
overseas directly. • Potential sales volume is low due to
low experience in the market
2. Agent/ • Products are represented by an • Exclusive agreements must be
Representative expert in the local market granted regarding geographic
regions or product lines
• Has established customer
A company legally
contacts • Control over pricing is lost
authorised to act
on STROH’s • Increased sales potential • Profit rate is lowered due to sales
behalf. commission

10
 Comparison of Market Entry Methods for STROH AUSTRIA (continued)

Method Pros Cons

3. Distributor • Dealing with one customer who • Relationship harder to end than
takes possession of goods with an agent or representative
A company that
• Takes control of promotion, • Lowest profit rate
specializes in
marketing, delivery, returns
distributing
and customer relations
STROH’s products.
• Sales volume potential
increases
Table 5: Comparison of Market Entry Methods for STROH AUSTRIA

Source: Adapted from NSW Department of State and Regional Development, 1998

Market Entry Strategy Summary: Employ an Agent

Since STROH AUSTRIA has no experience in the Chinese spirits market, we suggest turning to
an experienced agent for both the set-up of a Hong Kong based off-shore company and for
the distribution in China which will potentially increase sales volume potential. The agent
will provide the infrastructure and networks to quickly enter the market, but marketing will
remain solely in STROH’s hands.

4.3. Standardisation vs. Adaptation Analysis for STROH AUSTRIA

Shown in Table 6 below is a comparison of standardisation and adaptation to find out to

what extent STROH’s products and marketing campaign need to be changed in order to
match Chinese cultural characteristics.

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 Standardisation vs. Adaptation Analysis for STROH AUSTRIA

Standardisation Adaptation

Using a communication policy in China which is Altering different parts of the marketing campaign
identical to the one in the Austrian market. to the characteristics of China.
• EDUCATION: Introduce Après Ski culture and • AWARENESS: Chinese are not used to alcoholic
STROH rum mixed with tea, the famous beverages exceeding 60% alcohol content.
Austrian “Jagertea (hunter’s tea)”.
• LABELING: There is the need to change the
• COST MINIMIZATION: Besides translation no product name into the Chinese language,
need to adapt other marketing instruments. possibly giving it a completely new meaning.
• COUNTRY OF ORIGIN: Minimize changes & • DIMENSIONS: Since 350 ml or 750ml are the
emphasize “Made in Austria” brand. standard sizes for spirits in China, there is a need
• GEOGRAPHICAL REGIONS: Similarity between to adjust the size of the original 1-liter STROH
Chinese and Austrian mountains, therefore bottle.
the same marketing tools can be used.

Table 6: Standardisation vs. Adaptation Analysis for STROH AUSTRIA

Source: Adapted from STROH, 2005 & Leu, 2007

Standardisation vs. Adaptation Summary: Focus on Standardisation

STROH should use adaptation only where absolutely necessary and focus on standardizing its
campaign around the “Made in Austria” brand image using its slogan STROH – THE SPIRIT OF
AUSTRIA (STROH, 2005).

Possible threats due to the NIH (Not Invented Here) syndrome, where customers are
rejecting a product because it does not originate from their home country can be ruled out
due to the Chinese affinity to Western products (China Sourcing, 2007).

4.4. Market Segmentation Analysis of the Chinese Spirits Market

Outlined in Table 7 below is a market segmentation analysis to divide the Chinese spirits
market into key product categories.

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 Segmentation Matrix of the Chinese Spirits Market

>120% (STROH)
High Proof
Whiskey, Rum,
>80% Baijiu Cognac, Scotch
Vodka
>40% Liquors, Cream
Low Proof
>1% Beer Wine Champagne

Proof
Grade Social Lower Class Middle Class Higher Class
Standing
Table 7: Segmentation Matrix of the Chinese Spirits Market

Source: Adapted from Cohen, 1986

Market Segmentation Summary: No direct Competitors

There is currently no other high-proof alcoholic beverage in China giving STROH a first-mover
advantage in this niche market. In the future Absinthe, recently un-banned in the US, is likely
to enter the market of over 120 per cent proof spirits as well (Clarke, 2007).

4.5. Targeting Strategy for STROH AUSTRIA

Shown in Table 8 below is the targeting strategy for STROH in China focusing with its main
product on a niche market in a clearly defined location to create maximum exposure on the
target audience.

Targeting Strategy for STROH AUSTRIA

Target Area

• A single segment The above 120% proof premium spirit range

• In a single market Chinese spirits market in the province of Heilongjiang

• With a single product STROH’s 80 spiced rum

Table 8: Targeting Strategy for STROH AUSTRIA

Source: Author

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 4.6. Positioning Strategy for STROH AUSTRIA

Outlined in Table 9 below is the brand positioning statement for STROH in China.

Brand Positioning Statement for STROH AUSTRIA in China

For winter sport fans, STROH is the beverage that delivers true
Après ski feeling because only STROH has the SPIRIT OF AUSTRIA.

Table 9: Brand Positioning Statement for STROH AUSTRIA in China

Source: Adapted from STROH, 2005

STROH wants to be defined by the Chinese target market in relation to its competitors as
being the first to introduce the Après ski culture to China. Another important aspect is its
function as brand ambassador for the country of Austria (STROH, 2005).

5. Marketing Plan for STROH AUSTRIA in China

5.1. Marketing Activities for STROH AUSTRIA in China

Shown in Table 10 below is a summary of STROH’s planned marketing activities in China.

Marketing Activities for STROH AUSTRIA in China

On site Web based

• Preparing multilingual STROH marketing • Developing a STROH online web shop for
materials for Chinese needs China
• Renting a STROH ski hut in Yabuli Ski Resort • Creating one umbrella multilingual STROH
• Co-sponsoring of 2009 World Winter website with interactive elements
University Games • Interactive PR including daily STROH blogs
• Sourcing of capable staff • Webcasts from the STROH ski huts
Table 10: Marketing Activities for STROH AUSTRIA in China

Source: Adapted from Leu, 2007

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 5.2. Marketing Budget for STROH AUSTRIA in China

Marketing budgets worldwide are being cut on a large scale due to the current economic
crisis. However, those companies with the highest marketing spending will “come out on
top” according to Moray MacLennan, chairman at M&C Saatchi (SMEweb, 2008).

Considering the above statement and following the suggestion of Celia Rocks, partner at
INSIGHTS for Marketing, that in order to market successfully in the long-term “10 per cent of
gross revenue should be allotted for marketing”; STROH’s annual global marketing budget
will therefore be set to € 1 million in 2009 (IPFrontline, 2005).

STROH’s entry in the Chinese spirits market will take up 20 per cent of the available
marketing budget due to the start up costs in the first year.

5.3. Justification of Marketing Budget for STROH AUSTRIA in China

Outlined in Table 11 below is the justification for the allocation of the € 200,000 marketing
budget for STROH’s market entry in China in 2009.

1. Personnel
(€ 110,000)
STROH Project Director STROH Event Team Chinese Event Team
(€ 70,000) (€ 30,000) (€10,000)
• 1 member of current • 3 members of current • 15 local event
event management event management managers to be
department in Austria department in Austria recruited
• Full-time position • Temporary support for • Full-time positions
• Will be overseeing project director • Will be organizing the
STROH’s development in • Will be training Chinese STROH events
China staff
• 15x € 2,000 annual
• € 70,000 annual salary • 3x € 10,000 bonus for salary
three months project

15
 2. Capital Equipment
(€ 28,800)
STROH Ski Hut STROH Promotional Gear
(€ 27,000) (€ 1,800)
• € 20,000 annual rent for STROH ski hut • € 1000 for STROH snow mobile
in Yabuli Ski Resort
• € 500 for STROH giveaways
• € 5,000 for interior furnishing of STROH
• € 300 for STROH staff uniforms
ski hut
• € 2,000 for Après ski sound system

3. Consultant Services
(€ 19,000)
Agent Translator PR Agency
(€ 15,000) (€ 4,000) (€ 10,000)
• € 15,000 for set up of off- • € 4,000 for translation of • € 10,000 for annual
shore company & label, marketing retainer contract with
distribution channels materials, website & web national PR agency
shop
TOTAL: € 157,800
Table 11: Justification of Marketing Budget for STROH AUSTRIA in China

Source: Adapted from Leu, 2007

Budget Justification Summary: 5-year Amortisation

The overall set up costs for STROH’s marketing campaign in China are estimated at € 157,800
leaving a cushion of € 42,200 for running expenses and sponsoring.

STROH is a medium-size company and therefore has only limited resources to allocate to its
marketing budget. However, as costs and salaries in China are only a fraction of those in
Europe, we have assessed that STROH’s marketing budget is more than sufficient for a
successful market entry.

STROH’s marketing expenses for China are treated as an investment and will be amortized in
less than five years according to our long-term profit calculations (Miller, 2007).

16
 5.4. Schedule of Marketing Activities for STROH AUSTRIA in China

Shown in Table 12 below is a schedule for the implementation of STROH’s marketing

activities.

Schedule of Marketing Activities for STROH AUSTRIA in China

2009 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec

SEASON 2008/09 SEASON 2009/10

Translating
Chinese
marketing materials
ON SITE

STROH ski hut set up Yabuli Ski

Jingyuetan Ski Resort
Resort
Sponsoring World Winter
University Games
Website Chinese Multilingual
WEB BASED

Web shop Chinese

Blogs /webcasts Chinese
Find partners Distribution PR
ADMIN

Sourcing staff Chinese

Representative office Yabuli Ski Resort
Table 12: Schedule of Marketing Activities for STROH AUSTRIA in China

Source: Adapted from Gantt, 1915

Marketing Activities Summary: Employ Austrian Web hosting partner

The responsibilities for on site activities will be solely with the project director in China
whereas the web based activities will be initially set up by STROH’s web hosting partner in
Austria and then maintained by members of the Chinese event team. For administrative
activities STROH will employ an agent in China.

17
 4. Future Outlook for STROH AUSTRIA in China

Gap in the Market

In conclusion to the proposed marketing plan outlined above we have looked at the Chinese
spirits market and identified a “gap in the market” that STROH can capitalize upon. We have
also answered the old market researcher's cliché if there is a “market in the gap”, giving
detailed background information about future trends in the Chinese spirits market (Day,
2006).

Financial Crisis
There is an apparent concern that the current financial crisis might significantly impact the
Chinese alcohol consumption. According to Stella David, chief executive officer of Bacardi-
Martini in the UK, global consumption may see some impact causing consumers from higher-
priced brands to look for slightly lower-priced brands. We regard this volatile environment
as a welcome circumstance beneficial to STROH’s market entry in China (Goel, 2008).

We are happy to present this marketing plan to the STROH board of directors in person at an
agreed time.

18
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