Marketing Analysis for the Olde Term Paper

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156). Not surprisingly, wine is far and away the most popular alcoholic beverage in Italy: "Italy is a country where people do not drink pure alcohol. Rather, Italians consume wine and, to a minor extent, other alcoholic beverages. Among alcoholic beverages, wine pervades most private and public spheres of life. It constitutes a basic ingredient of the Italian material culture as much as grapevines are an omnipresent component of the landscape" (Heath, 1995 p. 156).

This does not mean that everyone in Italy drinks wine, or any kind of alcohol, though. For instance, an analysis of alcohol consumptions trends across 15 European countries showed that abstinence rates, like consumption rates, tend to vary from country to country. According to Bloomfield and her colleagues (2003), "Among women, the rate of abstention was highest in Portugal and lowest in Denmark. Among men, the abstention rate was highest in Italy and lowest in Denmark" (p. 95). A study by Hupkens and her associates (1993) involving 12 EU member countries determined that Spain had the highest frequency of drinking for men, Italy had the highest frequency for women, and Ireland had the lowest frequency for both genders (cited in Bloomfield et al., 2003 at p. 96). Other researchers have determined that among various European countries, Italy had the highest daily drinking rates (see further analysis in Part B below).

Czech Republic.

According to one authority, "In the Czech Republic, beer is consumed the way wine is consumed in Mediterranean countries: regularly, on an almost daily basis, with meals [but] the manner of consumption was more important than the type of beverage" (Rehm, Gmel, Sempos and Trevisan, 2003 p. 39). In 2000, the International Research Group on Gender and Alcohol conducted a comparison among men and women in 10 countries in an effort to identify gender differences in drinking. Based on comparable measures constructed from the data sets collected in the study countries, the group found that lifetime abstention for both men and women was highest in Israel (ages 18-40 years) and lowest in the Czech Republic (Bloomfield et al., 2003). Likewise, a study by Wilsnack and associates (2000) was based on a sample of 10 countries and found the highest frequencies of drinking (i.e., number of drinking occasions in a month) among Dutch women and Czech men and the lowest frequencies among Estonian women and men (cited in Bloomfield et al., 2003 at p. 96).

Part B: (Comparative Market Attractiveness Analysis).

Because of the fundamental differences in drinking patterns that exist in different countries, there is no single best instrument that provides a basis for measuring consumption patterns and identifying dynamic preferences among consumers (Bloomfield, Stockwell and Rehn, 2003). Nevertheless, the relationship between the marketing function and the demand for alcoholic beverages represents fairly stable percentage of total consumer budgets for all countries other than the United States; for example, 6-8% is expended on alcohol products based on the experience of Australia and the United Kingdom (Fisher, 1993). In spite of this apparent stability in the relationship between marketing and demand, it is important to keep in mind that market structure differs dramatically according to the location; for example, as Fisher points out, "Australians show a marked preference for beer whereas Britons more often drink spirits" (p. 116). With regards to advertising, this author identifies three primary conclusions:

Advertising does increase demand slightly for the beverage advertised usually in a 10:1 proportion (i.e., a 10% increase in advertising yields a 1% increase in demand).

Due to the beverage substitution effects, advertising affects market structure through category switching; thus an increase in advertising of one beverage type will increase the share for that category, but there will be compensatory declines in other categories.

Given the interrelationships between beverage type consumption, the direct effects of advertising are dissipated system-wide such that the net effect of advertising on absolute alcohol consumption is negligible or nonexistent (Fisher, 1993).

A comparison of various demographic and economic metrics for the four countries under consideration herein is provided in Table 1 and illustrated in Figure 1 through 3 below.

Table 1.

Comparison of Respective Demographic and Economic Metrics: Ireland, Sweden, Italy and Czech Republic.

Metric

Ireland

Sweden

Italy

Czech Republic

Per capita income Median age

34.3 years

41.1 years

42.

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5 years

39.5 years

Population

Excise tax

Excise tax represents major source of government income; however, in real terms, the excise tax has declined since the early 1980s. Excise tax is adjusted each year to keep pace with inflation. Spirits (over 70 proof) were taxed at 38.7% per glass and 66% per bottle of whiskey.

Extraordinarily high excise taxes.

Excise tax is imposed on spirits is based on the quantity of alcohol they contain (not applied to wine). Spirits (over 70 proof) are taxed at about $653 per 100 liters.

Excise tax is imposed on beer, spirits and wine. In addition, starting 1 July 2005 spirits are also to be labeled with a spirit stamp.

Source: U.S. Government: CIA World Factbook (2007); Kurzer (1998); "Chapter 23, Italy: Other indirect taxes"; Selvanathan and Selvanathan (2005b); and, "Excise tax: Czech Republic," Price-Waterhouse (2007).

Figure 1. Respective Per Capita Incomes: Ireland, Sweden, Italy and Czech Republic.

Source: Based on tabular data in CIA World Factbook, 2007.

Figure 2. Respective Median Ages: Ireland, Sweden, Italy and Czech Republic.

Source: Based on tabular data in CIA World Factbook, 2007

Figure 3. Respective Population Rates: Ireland, Sweden, Italy and Czech Republic.

Source: Based on tabular data in CIA World Factbook, 2007 comparison of the respective annual percentage change in the average inflation of consumer prices in provided in Table 2, followed by a graphic representation of this data in Figure 4 below.

Table 2.

Inflation, Average Consumer Prices: Annual Percent Change.

Country 2004 2005 2006 2007 2008 Czech Republic 2.8-1.8-2.5-2.9-4.4 Ireland 2.3-2.2-2.7-2.5-2.1 Italy 2.3-2.2-2.2-1.9-1.9 Sweden 1.0-0.8-1.5-1.9-2.0

Source: International Monetary Fund, 2007.

Figure 4. Inflation, Average Consumer Prices: Annual Percent Change: Czech Republic, Ireland, Italy and Sweden.

Source: Based on tabular data in International Monetary Fund, 2007.

A comparison of the respective averages of frequency of drinking patterns during the past year is provided in Table 3 and shown graphically in Figure 5 below.

Table 3.

Respective Averages of Frequency of Drinking in Past 12 Months: Ireland, Sweden, Italy and Czech Republic.

Country

Average Frequency of Drinking

Ireland

Sweden

Italy

Czech Republic

Source: Bloomfield et al., 2003 p. 96.

Figure 5_. Respective Average Frequency of Drinking Rates: Ireland, Sweden, Italy and Czech Republic.

Source: Based on tabular data in Bloomfield et al., 2003 at p. 96.

A comparison of the World Bank's knowledge assessment methodology for the four countries under consideration herein is provided in Table 4 and shown graphically in Figure 6 through 9 below.

Table 4.

World Bank Basic Scorecard: Ireland, Sweden, Italy and Czech Republic.

Metric

Ireland

Sweden

Italy

Czech Republic

Annual GDP Growth (%), average 2001-2005

Tariff & Nontariff Barriers, 2007

Regulatory Quality, 2005

Rule of Law, 2005

Source: World Bank Knowledge Assessment Methodology, 2007.

Figure 6. Annual GDP Growth (%): Average 2001-2005: Ireland, Sweden, Italy and Czech Republic.

Source: Based on tabular data in World Bank Knowledge Assessment Methodology, 2007.

Figure 7. Tariff & Nontariff Barriers (2007): Ireland, Sweden, Italy and Czech Republic.

Source: Based on tabular data in World Bank Knowledge Assessment Methodology, 2007.

Figure 8. Regulatory Quality (2005): Ireland, Sweden, Italy and Czech Republic.

Source: Based on tabular data in World Bank Knowledge Assessment Methodology, 2007.

Figure 9. Rule of Law (2005): Ireland, Sweden, Italy and Czech Republic.

Source: Based on tabular data in World Bank Knowledge Assessment Methodology, 2007.

Part C: (Proposed Market Entry Strategy).

According to Rugman and Brewer (2001), "One of the classic issues in international business is foreign market entry strategy. This is a decision by a firm in a home country (country 1) to supply the market in a foreign country (country 2). Foreign market entry involves uncertainty, relating to either demand side factors, such as the size of the foreign market, or supply side factors, such as foreign costs of production" (p. 96). The foregoing approach to analyzing the most appropriate market for the company's high-quality line of whiskies is congruent with these authorities, who note that it is possible to "partition the state of the environment into a number of different categories, or 'states of the world', and then assign a subjective probability to each" (Rugman and Brewer, 2001 p. 96). Although there are a number of approaches to foreign market entry, export is one of.....

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