Carvel Beijing Question 1: SWOT Strengths| Weaknesses| * quality/taste of product * experienced American manager, combined with Chinese manager who understood the market * unique offerings of ice cream cakes in different shapes/designs| * disconnected management, and problems with the joint venture with New Continent * lack of brand awareness in Beijing * very high operating expenses * perception of Carvel as a purely “American” brand| Opportunities| Threats| market the product as a premium brand to differentiate and enter an untapped market in Beijing * New offers to imports vending carts and freezers much cheaper could help get around the imports taxes| * competition from other established Ice Cream companies, both local and American, that are cheaper * other typical Chinese treats sold cheaply on the street * other American companies in the market (McDonalds, etc) * lack of acceptance due to different cultural norms * Expensive tariffs on foreign imports made it very difficult to operate in China|
Question 2: Business Challenges Price: The challenge facing Carvel Beijing in terms of the price of the products was whether they should price, and therefore position, their ice cream and cakes at a high, premium price, to demonstrate to their customers the value and quality of the product. Or, if they should price their product to compete with other ice cream companies already in Beijing who sell their product at a lower price, and therefore potentially attract more customers who may not be able to afford a premium-priced product. Product:
There were two main challenges concerning the product itself. First, Carvel Beijing had to decide whether they would use their traditional American mix for the ice cream, or if they should use a less sweet mixture, which is more in keeping with Chinese tastes. Second, Carvel Beijing had to decide if they should use the same American designs, shapes and flavours, even though some of these were not familiar to Chinese consumers and did not sell well initially. Place: One of the main challenges in terms of place was which type of stores to set up to sell Carvel in Beijing.
Initially, Carvel set up large stores resembling the American locations. However, these were expensive to set up and run and did not do well. Therefore, they had to downsize to smaller stores with no seating in food courts and department stores. They also had to decide whether or not they should sell in grocery stores, like they do in the United States. They had stores in high volume locations, such as the East Four, but needed to keep looking for more affordable locations as well. Promotion: One of the biggest challenges for Carvel Beijing was promotion.
How they decided to promote and position their product would have a large impact on their success. Demadis felt that although the quality of the product was superior, he was lacking in the promotion area in Beijing, and needed to increase this greatly in order to improve brand awareness and positioning in the mind of the Chinese consumer. It would be a challenge to market correctly in a different cultural environment. Question 3: SMART Objectives: 1. Achieve trial, of either ice cream or cakes, by 40% of market in Beijing, by December 31st, 2005. 2.
Achieve 30% market share of ice cream companies in Beijing by December 31st, 2006, to become the market leader. In order to achieve these objectives, Carvel Beijing will have to overcome the main marketing challenge, of establishing themselves as the choice for premium ice cream, in a market with different tastes and tendencies than the traditional American market. To overcome this, the American Carvel employees working in Beijing must listen carefully and take into account the advice of Phil Fang and the other local employees, who have a much deeper understanding of the Chinese consumer. Question 4:
Objective 1: In order to achieve this objective, Carvel Beijing will need to overcome the notion that they are selling a purely American brand, as Phil Fang, the Taiwanese manager, did not feel that this would sell the product. Carvel must work to understand what makes Chinese consumers different from Americans and what compels them to buy. Knowing that quality is an extremely important factor, and not only price, will be integral to the marketing and brand-positioning plan of Carvel. Also, knowing that the majority of Chinese consumers are aware of American brands is a competitive advantage to be utilized.
Finally, as their advertising plan dictates, Carvel Beijing must advertise fountain and novelty products in order to achieve trial and therefore push cake sales, as cakes have the highest margin. Objective 2: In order to achieve this objective, Carvel Beijing will need to leverage its competitive advantages against the other ice cream companies currently in the market in Beijing. This would be difficult, as Chinese consumers tended to favour companies that had been in the market longer, such as Bud’s and Walls.
Carvel Beijing also considered Baskin-Robbins to be its main competition in Beijing, as they were its main competition in the United States. Although Carvel Beijing took market share away from Walls, it had yet to establish itself as the true front-runner in the ice cream market. By focusing on their superior quality as well as their product differentiation of flavours, cakes, and designs not offered by the other companies. By demonstrating to customers that their product is better and therefore worth paying more for, Carvel Beijing can also take market share from some of the lower end companies such as Meadow Gold.
Carvel Beijing, however, must be careful not to cannibalize New Continent, which they have a joint venture with. Question 5: Marketing Programs Recommendation: Specific activities Carvel Beijing will need to focus on strengthening their brand in China. Providing free advertising blasts in busy locations will be a great way to gain exposure and meet potential customers. Carvel can set up booths and hand out small samples of their delicious products. This is allows you to connect with your target market on a personal basis and create brand awareness. Timelines Focus on promotion, advertising and opening in small stores, by October 31st, 2005.
Achieve trial, of either ice cream or cakes, by 40% of market in Beijing, by December 31st, 2005. Achieve 30% market share of ice cream companies in Beijing by December 31st, 2006, to become the market leader. Budget In order to create a successful and strong marketing promotion and advertising plan and execute it, Carvel Beijing will need to invest some money. By December 31, 2005, Carvel Beijing should focus on a budget of 10,000?. This budget is sufficient enough to make important changes, and if spent correctly can help bring Carvel Beijing into the leading position of ice cream companies in Beijing.