Wang’s Fortune Tea Case

Immediate Issue/Problem Being Faced: What innovation strategy should Wang’s Fortune Tea adopt in term of position, branding and strategy in order to maintain leader position of herbal tea soft drink market in China?

Basic Issues:
• Cantonese believed that herbal tea is helping remove “internal fire” and maintain healthy balance to our body.
• Wang Zebang used to sell special blend herbal tea prepared daily basis. After Wang’s Fortune Tea becomes national wind, it occurred more than thousand local herbal tea shops all over China.
• In 1995, Chinese outside Guangdong is no believe in “fighting internal heat” concept, and they are more perceive that Wang’s Fortune Tea is a medicine than soft drink.
• SARS enter in China. It creates opportunity to Wang’s Fortune Tea to explode their sale for 400% from 2002 to 2003 due to people believe that Wang’s Fortune Tea helps against the SARS virus.
• There is no clear position of Wang’s Fortune Tea that it is the medicine or a soft drink?
• China’s population is about 21% of the world’s population. They are more interesting in drink herbal tea would maintain their body healthy. That is the reason Wang’s Fortune Tea would like to maintain leader position in China.
• More than 90% of growth in beverages consumption from 2005 to 2008 come from non-carbonated drinks.
• In 2006, Wang’s Fortune Tea have 90% market share in herbal tea in China; however, they have thousand local herbal tea shops, regional competitors, national competitors and international brands competitors that Wang’s Fortune Tea have to fight with.
• Wang’s Fortune Tea has only two packages even they have product lines cover high-end market to low-end market.
• Most Chinese people’s income is still with low level. Compare to competitors, Wang’s Fortune tea not have any price superiority.
• China’s food safety was becoming and increasing worry for international and domestic consumers, and they wanted safer and healthier foods and cared more about brand reputation.
• According to the World Cultural Heritage Protection Convention and China’s preservation laws, these 54 secret formulas made from 200 approved herbal ingredients could only be used by 21 companies. However, these 21 companies will become potential competitors, and share herbal tea market.
• It is a good marketing strategy that sought out restaurants and bars throughout China to partner with in order to create a larger distribution channel for Wang’s Fortune Tea. However, these partners may product their their own drink which can remove “internal fire” and maintain a healthy balance of the “basic elements and fluids”.

Urgency/Importance:
The most urgency and most important is Wang’s Fortune Tea have to think innovation strategy in order to maintain leader position of herbal tea market in China because there are so many competitors come in herbal tea market. Even Wang’s Fortune Tea is the first-mover, the herbal tea market are going to become red ocean where every company fighting each others. Wang’s Fortune Tea have to think innovation again to push themselves out of the rea ocean.

Decision Criteria:
– Perspectives of next generation of Chinese might not care in healthy products. China is very high competition in everything, they might care about timing more then other things else.
– Taste of Wang’s Fortune Tea that changing once from the traditional one due to preference of people is changing. In the future, they might change it again.
– Diversity of herbal drinks from competitors.
– Local herbal tea shops that produces daily basis.
– Wang’s Fortune tea earned some customer loyalty, but the problem of food safety in China so that they become cautious. Because of this, ensure product quality and brand image is essential.
– Define and identify customer base and their needs in order to improve the products and marketing strategies of Wang’s Fortune Tea.
– The price positioning of Wang’s Fortune tea should maximize their profit and market share.

Alternatives :
1. Due to Wang’s fortune Tea has only two package of product lines which is red can and green tea package. They should expand more product lines such as put more flavours in the same herbal tea or develop another kind of herbal tea.
2. Fill up the market (expand more distribution channel) by having a good due for all restaurants in China that buy Wang’s Fourtune Tea to sell in their restaurant.
3. Acquire and merger the small companies which were traditional brands that had remained strong as regional brands but had not captured market share nationwide.
4. Exploit overseas markets

Missing Information:
1. The comparing range in sales during 2003 to 2006 among key competitors.
2. The key competitors information such as when do they establish? what is their key of success? and the product amd price information?
3. The weakness of Wang’s Fortune Tea
4. How much Wang’s Fortune Tea cover in each area in China.

Assesment of Alternatives:
a) Due to Wang’s fortune Tea has only two package of product lines which is red can and green tea package. They should expand more product lines such as put more flavours in the same herbal tea or develop another kind of herbal tea.
Pros:
o Have variety of products
o More match preferences with next genaration of Chinese people
o Make company more wealthy

Cons:
o Spend time to study, also money to invest
o Have high risk in expanding. Chinese might not like it.
o New products might kill old product.Chinese might try something more, but consume Wang’s Fortune less.

b) Fill up the market (expand more distribution channel) by having a good due for all restaurants in China that buy Wang’s Fourtune Tea to sell in their restaurant.
Pros:

o Expand more distribution channel to sell more Wang’s Fortune Tea in every restaurant.
o Indoctrinate Chinese people’s habit to drink herbal tea
o Help Chinese’s restaurant in save more money by providing them a good deal

Cons:
o Less profit in short run result from deal and promotion with all restaurant in China.

c) Acquire and merger the small companies which were traditional brands that had remained strong as regional brands but had not captured market share nationwide.
Pro:
o Integrate and improve traditional brand strength, expand enterprise scale, and utilize the existing resources of these enterprises.
o Because every province will protect their local enterprise, some policy may against our competitiveness. By acquiring regional brands, Wang’s Fortune Tea will increase market share and get some policy support in local.

Cons:
o Lead to high acquisition cost.
o The risk of product quality for small company.

d) Exploit overseas markets

Pros:
o Expand new market which has wide potential and less competitors.
o Make the brand of Wang’s Fortune Tea international.

Cons:
o Foreign Consumers have no concept of “internal heat”, and they are not very clear the value of liangcha, because of this, they may not buy it.
o Invest much money

Selection of Preferred Alternative:
Acquire and merger the small companies which were traditional brands that had remained strong as regional brands but had not captured market share nationwide. The company needs to get more products on the market to ensure that they compete with the larger coca cola and pepsi companies. If they hope to keep being the leader in the market they need top expand product lines, and this will be easily achievable through mergers because they will be joinging with products that the country most likely already knows and they will be able to apply the same straegy to those products as they have to their own which has made them so successful. By doing this they will be able to achieve a higher market cap because they can take advantage of these new products they have gotten from the mergers.

Assumptions:
 Chinese people maintain believe in “internal fire”, and continue drink Wang’sFortune Tea in order to keep their body healthy.
 The next genaration still believe in it, and love the taste of herbal tea more than coca cola or pepsi.
 All competitors do not know about secret ingredient of Wang’s Fortune Tea. Thus, no one can copy it.
 The mergers are done with companies who already hold business in China.

Action/Implementation Plan:
First of all, Wang’s Foutune Tea should study key competitors in China to see what they do have in order to beat our company. For example; Coca Cola have very strong brand and variety of products line. Then, Wang’s Fortune Tea should list their weakness following urgency and important. By getting new products into the market and continuing to capitalize by using the strategy that has allowed them to be successful they will be able to again raise their products into the top of the market.

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