Introduction:

The Olde Distillerie is a small independent Scotch whiskey distillery based in Dumfrieshire, South-west Scotland. Company has decided to investigate the sales potential overseas. They have identified Austria, France, Romania and Portugal to be examined in detail. Research method A study of various environments of the four markets are considered like population, economic environment, distribution systems, taxation & excise duties etc. these factors are weighted and weighted comparison is done. And a suitable entry strategy is suggested.

Part A:

Market environment study of Austria: Population:

Austrias estimated population is 8,210,281 (July 2009 est.). 1.54 million People which are twenty percent of them are living in Vienna. Six officially recognized ethnic group are Croats, Czechs, Hungarians roma/sinti, Slovaks and Slovenes. Majority of the population is Roman Catholic there are eleven other officially recognized religions in Austria. Age Structure: age group between 0 to 14 is 14.5% male population is 609,748 female populations is 581,144. Age group between 15 to 64 years is 67.5|% male population is 2,785,091 Female. Population is 2,785,091 and female population is 2,756,402.

Age group above 65 years and over is 18% (male 612,613/female 865,283) Median age: total population 42.2 years Estimated population growth rate is 0.052% (www1)

Political environment:

Austria has enjoyed political stability since 1955, between 1970 and 1999; the SPO formed the government with the help of junior coalitions. (www10) parliamentary elections were held in September 2008. The Austrian peoples party won 51 seats while SDP received 57 seats and freedom party took 34 seats. Heinz Fischer of the Social Democratic party won the elections. Austria have has occasional disputes with Italy over the sovereignty of Trentino-alto Adige. According to democracy ranking by global democracy website Austria is 8 strongest democracies. The Austria government is in potential problems created by immigration. Right-wing parties have tried to solve the immigration issue but it did not figure prominently in the latest election campaign. Medium-term prospects are poor but the chances that the economy may face a moderate recession according to most analysts. Reforms are required for the costly pension system. The approved increased benefits were hurting the Austrias competitiveness. The policy makers want to reduce the total tax burden in the medium term which is (42% of GDP). Austrias is in concern with its links with the East which may cost Austrias job market.

www9

Legal system: Income levels:

civil law system with Roman law origins

GDP per capita (ppp) $39,200 in the year 2008. Year GDP(PPP) 2008 2007 2006 $39,200 $39,500 $38,300 per capita

Austria has a decline in its GDP per capita (PPP) levels it was $39, 500 in 2007 but the income is reduced to $39,200 in the year 2008.

Whiskey consumption level:

Austria - Off-trade Volume Year Whiskey Off-trade 000 litres 1064.6 1080.2 1109.7 1139.1 1158.9 1178 2003 2004 2005 2006 2007 2008

The total off-trade volume of Whiskey in the year 2003 is 1064.6 thousand litres. In 2004 offtrade volume of whiskey at Austria has gone up to 1080.2 thousand litres and in 2006 the offtrade volume crossed 1139.1 thousand litres.

In the next year it reached 1158.9 thousand and 2008 saw the highest consumption of whiskey Volumes that is 1178 thousand litres.

Economic environment:

Austria with its well-developed market economy and high standard of living is closely tied to other European economies. Germanys membership in the EU helped Austria in attracting foreign investors. Austria reduced government spending and raised taxes to meet EMU deficit targets after facing unexpected difficulties in reducing the public deficit. GDP (2007) : 373.6 BILLION GDP real growth rate is 1.6% in 2008 and 3.1 %( 2007est) and 3.4 %( 2006 est.). Natural resources: Iron ore, crude oil, natural gas, timber, tungsten, magnetite, lignite, cement. Agriculture (1.9% of 2007 GDP): productslivestock, forest products, grains, sugar beets, potatoes. Industry: (31.2% of 2007 GDP): typesiron consumer goods. Services: 66.9% of 2007 GDP. Trade (2007): exports--$156.4 billion: iron and steel products, timber, paper, textiles, electro technical machinery, chemical products, foodstuffs. Imports--$155.9 billion: machinery, vehicles, chemicals, iron and steel, metal goods, fuels, raw materials, foodstuffs. Principal trade partnersEuropean union, Switzerland, US., and china. Austria has a strong labour movement. The Austrian Trade Union Federation (OGB) comprises constituent unions with a total membership of about 1.3 million about 39% of the countrys wage and salary earners. The OGB has always pursued a moderate, consensusoriented wage policy, cooperation with industry, agriculture, and the government on a broad and steel, chemicals, capital equipment,

range of social and economic issues in what is known as Austrias social partnership because of a scandal involving a bank the OGB owned, the OGB lost much of its political influence and is still trying to recover. (www2) CULTURE : Austrias culture can be traced back to 1050 B.C . Austria culture has largely been influenced its past and present neighbours: Italy, Poland, Germany, Hungary, and bohemia. During the 18th century the classical-music era dominated European classical music, and the city of Vienna was an especially important place for musical innovation. Austria is famous for its castles, palaces, and cemeteries, among other architectural works. Austria is rich in Roman Catholic tradition. One of Austrias oldest cathedrals is the Minoritenkirche in Vienna. Vienna became the cultural centre of the county and developed its own regional cuisine.

Excise duties per litre distilled spirits: According to knowledge for welfare and health statistics 2004, excise duties in Austria for distilled spirits around 10 Euros per litre distilled spirits.

Market environment study of France:

Population: France has been a cross roads of trade, travel, invasion. They are basically European ethnoic stocksCeltic, Latin, and Teutonic have blended over the centuries to make up its present population.

Age structure:

0 14 years: 18.6 %( male 6, 129,729 / female 5,838,925) 15 64 years: 65% (male 20,963,124/ female 20, 929,280) 65years and over 16.4 %( male 4,403,248/female 6,155,767) (2009 est.)

Median age:

total population 39.4 years

Estimated population growth rate is 0.549%. Total population : 64, 057,792 as per 2009 est.

Political environment:

Since the French revolution in 1989 and the first Republic democratic government in 1792 and the end of kings rule in France, there has been a parliament of some sort in France. Communism, Trotsky and nationalism are still fallowed in some parts of France. France politics has all ways saw swing from one side to other in every election. (www5) As per democracy ranking by global democracy website France has a stable democracy which has ranked 17. www9

Income levels:

Year 2008 2007 2006

GDP- per capita (PPP) $32,700 $33,300 $32,800

France has a small improvement year 2008.

in its income levels from $33,300 in 2007 to $32,700 in

Whiskey consumption level:

France - Off-trade Volume Year Whiskey Off-trade 000 litres 93,428.0 94,185.5 96,175.4 99,212.6 103,677.3 108,072.3 2003 2004 2005 2006 2007 2008

The total off-trade volume of Whiskey in the year 2003 is 93,428.0 thousand litres. In 2004 off-trade volume of whiskey at France has gone up to 94,185.5 thousand litres and in 2006 the off-trade volume crossed 99,212.6 thousand litres. In the next year it reached 103,677.3 thousand and 2008 saw the highest consumption of whiskey Volumes reaching 108,072.3 thousand litres.

Economic environment :

France is the worlds sixth-largest economy with a GDP of $2.865 trillion. It has extensive agricultural resources and with a huge industrial base. A active service sector accounts for an increased economic share. Real GDP increased 0.7% in 2008. According to organization for economic cooperation and development (OECD) projections, 2009 GDP will decline by 3.3%. Economic policy of the France government is aiming to boost the investment and domestic growth in a stable monetary environment.

The government continues to control a large share of economic activity. Government spending is 57% in 2008, which is among the highest in the G-7 nations.

GDP composition by sector: Agriculture: 2.2% Industry: 20.3% Services: 77.8% Total labor force: 28.5 million Major exports of France are machinery and transportation equipment, aircraft, chemicals, pharmaceutical products, iron and steel, beverages. (www4) Distribution systems:

France has an excellent and fast rail service. Mainly in the cities served by the TGV, and with very good domestic and international airline services. Widespread international ferry services are available in the north coast. Transport system in the rural France is poor. Public transport is generally inexpensive because of government subsidies and availability of discount on visitor tickets. (Www 6) Culture: French culture derived from an ancient civilization composed of a complex mix of Celtic, Greco-roman, and Germanic elements. There are number of monuments, especially from the period of roman occupation. Cultural activity remained largely focused on Paris. Culture of France is influenced that of entire western world. Wealth also created a leisure class, which had both the time and the means for developing elegance in dress, manners, furnishings, and

architecture. In the 20th century French cinema assumed a leading world position, particularly in the 1960s with the nouvelle vague (new wave) group of films directors, such as Jean-Luc Gordard, Alain Resnais.

Excise duties per litre distilled spirits:

According to knowledge for welfare and health statistics 2004, excise duties in France for distilled spirits ranges from 10 to 15 Euros per litre distilled spirits.

Market environment study of Romania:

Population: About 89% of the people are ethnic Romanians, Slav or Hungarian neighbours belong to Latin-speaking Romans, who in the second and third centuries A.D.Minority of the population belong to Hungary and Roma

Age structure:

0 14 years: 15.5% male 1,772,583 / female 1,681,539) 15 64 years: 69.7% (male 7,711,062/ female 7,784,539) 65years and over 14.7% male 1,332,120/female 1,934,076) (2009 est.)

Median age:

total population 37.7years

Estimated population growth rate is -0.147%. Total population : 22,215,421 as per 2009 est.

Political environment:

In April 2007 the Romania parliament suspended president Traian Basescu on the charges of unconstitutional conduct. The Liberal Democrats and Social Democrats formed a coalition after the 2008 elections. www8 According to democracy ranking by global democracy website Romania has an average democratic conditions it has ranked 44. www9

Income levels

Year 2008 2007 2006

GDP- per capita (PPP) $12,200 $11,300 $10,700

Romanias GDP per capita has improved from $11,300 in 2006 to $12,200 in 2008.

Whiskey consumption level: Romania - Off-trade Volume Year Whiskey Off-trade 000 litres 1,113.2 1,519.7 1,719.9 2,106.0 2,669.8 3,241.7 2003 2004 2005 2006 2007 2008

Whiskey consumption level: the total off-trade volume of Whiskey in the year 2003 is 1113.2 thousand litres. In 2004 off-trade volume of whiskey at Romania has gone up to 1519.7 thousand litres and in 2006 the off-trade volume crossed 2106 thousand litres. In the next year it reached 2669.8 thousand and 2008 saw the highest consumption of whiskey Volumes reaching 3241.7 thousand litres.

Economic environment: Romania has exceptional energy sources like coal, oil, natural gas, hydro and nuclear energy. With educated work force. Romania borrowed heavily from the west in the 1970s to make an extensive state-owned industrial base. Romania faced three-year recession which was started in the year 2000. Real wages has reduced to 40%, Unemployment in Romania was officially 3.9% in 2007. Inflation was the biggest problem for Romania in 1990s which was declined later and reached single digits in 2004. Gross Domestic product of Romania is $ 165.0 billion. Annual growth rate of Romania GDP is 5.7% (Jan- June 2007). Exports crossed $40.3 billion in the year 2007.

Over all Romania is one of the poorest countries in the central and Eastern Europe, and the reconstruction and Development (EBRD) rates Romanias transition progress the regions worst. GDP- composition by sector Agriculture: 8.1% Industry : 36% Services: 55.9% (2008 est)

Total Labour force 9.32 million. Major exports of Romania are machinery and equipment, textiles and footwear, metals and metal products, minerals and fuels, chemicals, agricultural products. (www7) Distribution systems:

state and private owned taxies are available in Romania to cover a significantly good distance. Romania offers following mode of transport. Coaches are important links between urban centres. They cover the whole country. The rail network in Romania is extensive rail network is available for a span of 11, ooo km. The main national carrier is TAROM which has flights to major cities. Culture : Even after Morden developments, Romania still offers a variety of customs, traditions, and forms of folk art. Wood carvings, brightly ornamented costumes, skilfully woven carpets, pottery, and other elements and traditional Romanian culture remain popular and, with the onset of tourism, have become known internationally. Folk melodies are preserved in the music of modern Romanian composers such as Georges Enesco. Romanian-born French

sculptor Constanin Brancusi was a notable contribution to modern concepts of 20th- century art.

Excise duties per litre distilled spirits:

According to knowledge for welfare and health statistics 2004, excise duties in Romania for distilled spirits ranges from 4 to 7 Euros per litre distilled spirits. (www9)

Market environment study of Portugal:

Population:

Portugal is a south-western European country with the similar land size of Scotland. Portugal is a member of European Union. Lisbon is the capital city and Algarve, Porto and Coimbra are fue of the cosmopolitan cities with some of the best museums and galleries in Europe. Portugals earliest recorded inhabitants-members of an Iberia-Celtic tribe known to imperial Rome as the Lusitania and first mentioned in the second century B.C have mixed with Germanic, Celtic, roman, Arabic, and African peoples to form todays relatively homogeneous Portuguese population.

Age structure:

0 14 years: 16.3% male 912,147/ female 834,941) 15 64 years: 66.1% (male 3,525,717/ female 3,554,513) 65years and over 17.6% male 772,413/female 1108193) (2009 est.)

Median age:

total population 39.4 years

Estimated population growth rate is 0.275%. Total population : 10, 707,924 as per 2009 est.

Political environment: The republic of Portugal has an executive president who is elected by universal suffrage for a term of five years and appointed the prime minster. Presidential elections took place in 2006 and Cava co Silva won the elections with 51% of votes. Reform of the EUs fisheries policy is a subject of frequent contention. Democracy ranking by global democracy website Portugal is in 18 in the world. www9

Income levels: Year 2008 2007 2006 GDP- per capita (PPP) $22,000 $23,000 $21,900

Portugal per capita declined from $23, 000 to $ 22,000 in the year 2008.

Whiskey consumption level:

Austria - Off-trade Volume Year Whiskey Off-trade 000 litres 7,850.6 8,124.0 8,095.5 8,145.2 8,209.9 8,311.6 2003 2004 2005 2006 2007 2008

Whiskey consumption level: the total off-trade volume of Whiskey in the year 2003 is 7,850.6 thousand litres. In 2004 off-trade volume of whiskey at Portugal has gone up to 8,124.0 thousand litres and in 2006 the off-trade volume crossed 8,145.2 thousand litres. In the next year it reached 8,209.9 thousand and 2008 saw the highest consumption of whiskey Volumes reaching 8,311.6 thousand litres.

Economic environment: Portugal is an upcoming capitalist economy with a per capita GDP two thirds that of four best Europe economies. Portugals markets are somewhat more regulated than in most other EU member state. Due to its restrictive employment protection legislations labour mobility is low. The country qualified for the European Monetary Union (EMU) in 1998. Financial initiatives have been introduced. They include reforms in social security, public administration and in local and regional finance. GDP ( purchasing power parity): $237.3 billion (2008), $236.8 billion (2007) GDP real growth rate: 0.2% 92008), 1.9% $21,900 (2007) GDP- composition by sector Agriculture 3%

Industry: 25.6% Services: 71.5% (2008 est) Total labour force: 5.64 million (2008) Export commodities: agricultural products, food products, oil products, plastics and rubber, skins and leather, wood pulp and paper, textile materials, clothing, footwear, minerals and mineral products, base metals, machinery and tools. Distribution systems: The nationalized Portuguese railway company entirely owns the Portuguese railways. As of 2002, the merchant fleet of Portuguese had 140 oceangoing vessels of over 1,000 gross tons. In 2001, Portugal had 67 international aviation. (www11) Culture : Portugal has many ancient and medieval monuments and buildings that include the Pena and Sintra palaces; the ex-royal residence of Queluz; the walled city of Obidos, the cathedrals at Batalha and Alco Baca, the castle of Sao Jorgo in Lisbon; roman temple ruins in Evora. Excise duties per litre distilled spirits: According to knowledge for welfare and health statistics 2004, excise duties in Portugal for distilled spirits ranges from 7 to 10 Euros per litre distilled spirits. airports, 40 with paved runways, because of their geographical

position; Lisbons portal airport and Santa Maria in the Azores are of great importance in

Part B: Whiskey consumption level:

It is an important factor to be considered before launching any product in the international market. As Scotch whisky is a consumer based industry, the weight age for this particular factor should be very high.Weight age for consumption is level 30

Political environment: As it is very important for any exporter to enter into an international market, to have a very good understanding about the political environment of the market, and looking at the political stability in that particular market, which may also affect the international trade policies introduced in those countries. If there are any frequent changes in the government it may affect the imports and exports of that country. So weight age for the political environment should be given a reasonable priority in considering, before entering into a new country. As political environment cannot be measured in numerical values, it is rated in the range of 1 to 5. Note: if it comes under 1 it means the political stability is very weak and facing many political problems. If it is 3 then it can be considered as politically good stabled country or if it goes to 5 then it can be said as very highly political stable country.

Weight age for political environment 15 Cultural factors: Cultures in these four countries (France, Austria, Portugal and Romania) are very similar as they all are European countries with similar drinking culture. So, cultural factors may not be that effective in choosing a particular country as the other factors (consuming level and political environment) do. So the weight age for this factor will be given low importance. Weight age - 10

Demography:

It is very important and deciding category for any exporter in choosing a foreign market. In this case population of above 18 years of age is taken into consideration. As consumption of alcohol in France, Austria, Portugal and Romania is not legally allowed for the people of fewer than 18 years of age. The calculation of weighting of population is done by rating them from 1-5 1 with less than 2 from to 3 to 4 to 5 to The overall weight age is multiplied by this rating.

Excise duties per litre distilled spirits:

Alcohol products are always been affected by the exercise duties and other additional tariffs which are laved by the governments. If the percentage of the duties on the product is very high it can even impact on the sales of the product in that particular market. So tariffs laved on Scotch whiskey in this four countries can bring a huge difference in selecting a market among these countries. Even the exercise duties is rated from one to five 1 country with huge exercise duty on Scotch Whiskey 2 countries with reasonably high duty

3 countries with a marginal exercise duty 4 countries with low percentage of exercise duty 5 countries with very low percentage of exercise duty

Economic environment:

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Total Country with highest total france

Part c:

Market entry methods

After assessing the environment in your selected country, how do you decide which are the best countries to enter? Paliwood (1993) suggests that before you enter an overseas market there are six factors that need to be considered: Speed CostsFlexibility Risk Factor involved Payback period When do you wish to obtain a return from entering the market? Are there quickness shown in entering selected market cost involved for the market entry How easy is it to enter/leave your chosen market political risk involved in entering the market what are the competitive risk

pressures to break even and return a profit within a certain period? Long- term objectives- What does the organisation wish to achieve in the long term by operating in the foreign market? Will they establish a presence in that market and then move onto others?.

Trading overseas There are a number ways an organisation can start to sell their products in the international markets. 1. Direct export. The organisation produces their product in their home market and then sells them to customers overseas. Direct exporting represent quite a different mode of supply, since the firm undertakes the export task itself, and therefore has to build up contacts, undertake market research, handle documentation and transportation, establish pricing policies, and so fourth. The product is then typically sold overseas by agents or distributors, a major difference between these two being that the distributor actually takes title to the goods and represents the manufacturer in the sale and service of the product which he carries; or through company technical specialist export salesmen; or through a sale subsidiary established by the

exporting firm. Generally, the move to direct exporting shows a genuine commitment to exporting, which may be absent when the indirect route is used, and facilitates greater control, information feedback from the foreign market and the development of expertise to be set against this is the fact that it is also a more expensive alternative. But the setting up of a sales subsidiary represents the most significant step in terms of export commitment since it requires direct investment in marketing institutions located in the target country.

2. Indirect export The organisation sells their product to a third party who then sells it on within the foreign market. 3. Licensing Another less risky market entry method is licensing. Here the Licensor will grant an organisation in the foreign market a license to produce the product, use the brand name etc in return that they will receive a royalty payment. Patents, where a patentor may license others to use his invention, until the period of expiration of the licensed patents. Copyright, which protects expression as in book publishing, films and television and, most recently, computer programs and other information transfer systems. Trade marks, being words or symbols used to distinguish particular goods and services and to vary between countries, although it is fairly easy to renew a trade mark registration once it has expired. Trade secrets and know-how, which are information not generally available and which may be disclosed either by itself or as part of a specification, quality-control procedures, factory layout drawings, in-struction manuals and the like. Compared with exporting, production under licence takes place in the foreign markets with both manufacturing and marketing the responsibility of the licensee. The licensor avoids the capital investment required to establish production and distribution facilities, and licensing

permits entry to markets which may be closed to exports or other forms of market servicing; conversely. Control is lost and the companys good name rests on the performance of the licensee. 4. Franchising Franchising is another form of licensing. Here the organisation puts together a package of the successful ingredients that made them a success in their home market and then franchise this package to overseas investors. The Franchise holder may help out by providing training and marketing the services or product. McDonalds is a popular example of a Franchising option for expanding in international markets. A franchise is a particular type of licensing or technical assistance agreement. Normally, the franchisee operates under the name of the franchisor, and the former provides the franchisee with a package including not only trade marks and know-how but local exclusivity and management and financial assistance and joint advertising as well. Fundamentally, the franchisee runs a controlled business using the reputation and techniques of the franchisor. The business operated by the franchise arrangements are most important in services, but there are a range of different types including the manufacturer-retailer type (car distributorships), manufacturer-wholesaler (soft drinks bottlers), wholesaler-retailer (grocery and hardware stores), trade mark licensor-retailer (fabrication textiles) and retailer-retailer systems (where the franchisor runs directly owned outlets as well as franchise operations). Internationally the sectors in which most rapid growth has been clothing and other consumer goods and medical services are emerging sectors. To a greater extent than licensing , franchising is very common between domestic firms as well as a form of international business, and there has been a great deal of interest in such agreements for generating small-firm growth. It is suggested that host-country benefits from franchising are high because training and development of management skills are incorporated within the franchising deal. For the franchisor effective market penetration may be achieved for a limited capital outlay. 5. Contracting Another of form on market entry in an overseas market which involves the exchange of ideas is contracting. The manufacturer of the product will contract out the production of the

product to another organisation to produce the product on their behalf. Clearly contracting out saves the organisation exporting to the foreign market.

6. Manufacturing abroad The ultimate decision to sell abroad is the decision to establish a manufacturing plant in the host country. The government of the host country may give the organisation some form of tax advantage because they wish to attract inward investment to help create employment for their economy. Scorch whiskey can not be produced abroad, so manufacturing abroad is not considered. 7. Joint Venture To share the risk of market entry into a foreign market, two organisations may come together to form a company to operate in the host country. The two companies may share knowledge and expertise to assist them in the development of company, of course profits will have to be shared out also. Joint ventures may represent a way into closed markets. In a situation of rapid technological change and large capital requirements, joint ventures may be the best way for smaller and non-dominant firms to improve their positions in the global industries. Joint ventures may be used to ensure access to distribution channels, suppliers and technology, in effect as per-emptive manoeuvres. Joint ventures may prevent potential entrants from teaming up with more dangerous opponents Joint ventures may be incorporated into global strategies as product lives shorten, cost advantages become more pronounced and larger numbers of firms become international competitors.

Conclusion Part 4

Referencing

http://workmall.com/wfb2001/france/france_economy.