UNIVERSITY OF NOVA GORICA SCHOOL OF ENGINEERING AND MANAGEMENT BRAND INTRODUCTION ON THE SLOVENIAN MARKET: CASE STUDY OF GURIELI TEA MASTER S THESIS

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1 UNIVERSITY OF NOVA GORICA SCHOOL OF ENGINEERING AND MANAGEMENT BRAND INTRODUCTION ON THE SLOVENIAN MARKET: CASE STUDY OF GURIELI TEA MASTER S THESIS Mariam Parekhelashvili Mentor: Assist. Prof. Armand Faganel Nova Gorica, 2016

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3 ACKNOWLEDGEMENT I would like to express my sincere gratitude to Assist. Prof. Armand Faganel for his guidance and constant supervision as well as for providing necessary information, constructive ideas regarding the project. Without his passion, enthusiasm, and encouragement this thesis would have never been completed. I strongly believe that I am fortunate to graduate under his guidance. I am highly indebted to Assist. Prof. Martina Bergant whose contribution in stimulating suggestions and encouragement helped me to coordinate my project especially in writing this report, as well as panels especially in our project presentation that has improved our presentation skills thanks to her comment and advice. I take this opportunity to express gratitude to the faculty members (Engineering and Management) for helping me with administrative issues and guidance. I owe sincere and earnest thankfulness to Infinity project in the framework of the EU Erasmus Mundus Action 2 for a chance and financial support which has opened the new world of the life experience. III

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5 TITLE Brand introduction on the Slovenian Market: Case study Gurieli tea ABSTRACT Human beings have always tried to create new, innovative things so as to gain profit out of them. Companies which are following the human beings nature strive to satisfy customers demand for high-quality products and services. Developing a new product is always a complex and experimental process. The process of introducing new products to an international market is as risky as it is vital for the long-term success of many companies. The number of new products introduced globally is increasing every year, but great majority of them fail. The main purpose of this thesis is to develop an effective marketing plan for the new product introduction to an international market - a successful launch of the Georgian Gurieli tea to the Slovenian market. Market research gave us a business view of the tea industry on the Slovenian market. By means of secondary research and market analysis, we identified potential customers, understood market conditions and competitive landscape. The main steps of proposed marketing strategy are segmentation, targeting and successful positioning (STP). STP focuses on commercial effectiveness, selecting the most valuable segments of the Slovenian market and developing the marketing mix and product positioning strategy for each recognized segment. Planned implementation of a subtle advertising campaign for the Gurieli tea would be a vital component of the strategy - through an innovative marketing communication mix the product would be successfully introduced and promoted to target customers. KEYWORDS Product development, tea, brand introduction, segmentation, targeting, positioning, market research, international market, marketing mix, communication. V

6 NASLOV Uvedba blagovne znamke na slovenski trg: Študija primera za Gurieli čaj IZVLEČEK Ljudje so vedno skušali ustvariti nove, inovativne izdelke, da bi s pomočjo le-teh ustvarjali dobiček. Organizacije ki sledijo človeški naravi, se trudijo zadovoljiti zahteve strank po visoko kvalitetnih izdelkih in storitvah. Razvijanje novega izdelka je vedno zapleten in eksperimentalen proces. Proces uvajanja novega izdelka na mednarodni trg je tvegan pa tudi ključen za dolgoročen uspeh številnih podjetij. Število novih izdelkov, ki vstopajo na trge globalno narašča vsako leto, vendar jih večina propade. Namen te naloge je razviti učinkovit marketinški načrt za uvedbo novega izdelka na mednarodnem trgu, pri čemer smo se osredotočili na uspešno uvedbo gruzijskega čaja znamke Gurieli na slovenski trg. Tržna raziskava nam je omogočila poslovni vpogled v čajno industrijo na slovenskem trgu. S pomočjo sekundarne raziskave in tržne analize smo identificirali potencialne stranke, spoznali pogoje na trgu ter obstoječo konkurenco. Glavni koraki predlagane marketinške strategije so segmentacija, ciljanje in uspešno pozicioniranje. Strategija se osredotoča na komercialno učinkovitost, pri čemer smo izbrali najdonosnejše segmente na slovenskem trgu ter razvili marketinški splet in strategijo pozicioniranja izdelka za vsak prepoznan segment. Pomemben del strategije bi bila izvedba primerne oglaševalske kampanje za čaj Gurieli. S pomočjo inovativnega marketinško komunikacijskega spleta bi podjetje predstavilo in promoviralo svoj izdelek ciljnim strankam. KLJUČNE BESEDE Razvoj izdelka, čaj, uvajanje blagovne znamke, segmentacija, ciljanje, pozicioniranje, raziskava trga, mednarodni trg, marketinški splet, komuniciranje. VI

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8 TABLE OF CONTENTS 1. INTRODUCTION Background Problem identification Importance of topic Thesis structure LITERATURE REVIEW Market research Developing information The marketing research process Demand estimation Buyer s intentions Sales force opinions Expert opinion Market segmentation Geographic segmentation Demographic segmentation Psychographic segmentation Behavioral segmentation Targeting Evaluating market segments Selecting the target market Positioning Differentiating markets Value positioning Product positioning Choosing a positioning strategy Selecting the proper competitive advantage Communicating and delivering the chosen position Country of origin and perceived product quality Deciding how to enter the market Exporting VIII

9 2.6.2 Joint venturing METHODOLOGY Research design Quantitative research Target sample and data collection Collection of secondary data Research data analysis SWOT analysis The purpose of SWOT analysis Internal factors External factors PEST analysis Case study Case study overview Types of case studies Data collection Data analysis RESULTS AND DATA ANALYSIS Company Overview Market entry strategies Exporting Market research Developing information The marketing research process Macro environmental analysis Political forces Economic factors Socio-cultural Technological factors Market segmentation Geographic segmentation Demographic segmentation IX

10 4.5.3 Psychographic segmentation Behavioral segmentation Targeting Positioning Product Place Price Promotion Value positioning Country of origin and perceived product quality Demand for tea Tea consumption CONCLUSION AND FUTURE PERSPECTIVES Conclusion Future perspectives Market development Product development Possible weaknesses of case study REFERENCES APPENDIX X

11 LIST OF FIGURES Figure 1: Thesis structure Figure 2: Market research process Figure 3: Undifferentiated Marketing Figure 4: Differentiated Marketing Figure 5: Concentrated Marketing Figure 6: Zero stage distribution channel Figure 7: One stage distribution channel Picture 8: Two stage distribution channel Figure 9: Three stage distribution channel Figure 10: Gender of research sample Figure 11: Beverage drink consumption in Slovenia Figure 12: Target market for Gurieli tea Figure 13: Acceptable price range for Gurieli tea Figure 14: Importance of promotional activities Figure 15: Country of origin influence on purchasing intentions toward Georgian tea Figure 16: Connection between country Georgia and tea Figure 17: Slovenian customers expectations from Georgian tea Figure 18: Tea as need or want Figure 19: Tea consumption in Slovenia

12 LIST OF TABLES Table 1: Tea competitor companies Table 4: SWOT analysis of Gurieli tea Table 3: Ideas about Georgian tea introduction to the Slovenian market Table 4: Slovenia country fact-file XII

13 ABBREVIATION STS - Segmentation, Targeting and Positioning GDP - Gross Domestic Product NPD - New Product Development 4Ps - Product, Price, Place and Promotion PDP - Product Development Process SCA - Sustainable Competitive Advantage MIS - Marketing Information System FMCG - Fast Moving Consumption Good XIII

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15 1. INTRODUCTION 1.1 Background Product launch process to the international market faces companies with competition and rapidly changing market environment. Companies try to get sustainable competitive advantage (SCA) by constant innovation. Today s business environment is rapidly changing. Therefore, companies should innovate constantly to survive and stay competitive. This is one of the key concepts for surviving and staying competitive. These are reasons that motivate ambitious company like Geoplant LLC to export product to international markets. Today, tea production has the economic and social importance. Currently, in 35 countries, the tea industry provides a vital source of employment and export earnings (Brouder, Billing and Uren, 2015). A part of society have a relationship with tea not just consumers, but sellers, traders, suppliers, pickers and growers. The global consumption of tea grew +60% in the last two decades and significant growth is a forecast that more and more people will become tea customers. Tea consumption also has an ancient history, dating back 5000 years, revealing a rich cultural history. (Brouder, Billing and Uren, 2015) Despite the ongoing economic crisis in Slovenia, high unemployment and decreasing private expenditure, demand for tea showed slight growth during the last few years and sales increased by 2% in value terms in 2014 (Euromonitor International, 2016). Demand growth stemmed from the relatively low price of tea in comparison with other drinks. Furthermore, the increasing demand for tea in Slovenia is attributable to its healthy image and growing health concerns among Slovenians. Due to the deep roots of tea culture in Georgia, country of origin has a big influence perception of high-quality product. The first tea bushes have been grown in Georgia in 1847, since then tea production has a significant role in the history of Georgia. Georgian tea is ecologically clean; local farmers rarely use herbicides. (Giorgadze and Kochlamazashvili, 2015) All these advantages enabled us to plan Georgian brand introduction to the Slovenian market. 2

16 1.2 Problem identification Product development for introduction to the international market may turn out to be a complex and experimental process. In today s competitive business environment, companies should innovate and develop new products which bring long-term profit for them. New product development and successful launch to the market are one of the ultimate aims for every entrepreneur. A successful product launch is not an easy process. Even though we produce a perfect product with distinguished features, it might not reach the market successfully. Companies should spend countless hours to produce a quality product. There are many reasons why product introductions might go wrong. In the thesis we discuss main problems connected with brand introduction to an international market, the proper way of strategic planning and successful operating on the market. In the end, we will be able to answer the following research question: Why do many products fail on the international markets? Every product introduction to the market has a slightly different procedure from others, but every product launch has certain common processes in its funnel. We concentrated on the research of tea distribution in Slovenia. Local tea market is already saturated, numerous competitors are present. Available space on store shelves is shrinking all the time and rivalry becomes more complex. Companies need to focus on the benefits of the product which arouse a positive and emotional feedback from the customer. They are supposed to promote clear information about the brand and its product. Merchants in stores are not educated about the product fully. The marketing plans are developed by the product developers without the knowledge of the market opportunities. Companies which are operating on the Slovenian tea market need to provide thorough product descriptions through the marketing communication mix. We found out that usually no strategic planning is being used during the product launch time for promotion, and that there is lack of information about the tea market 3

17 and competitors. The above-mentioned are the main determinants why it is difficult for tea companies to achieve and sustain a competitive edge. Besides a quality product, right price and appropriate distribution channels, successful positioning on the market mainly depends on promotion to sell the product on the market. The promotion of products via social media like Twitter and Facebook lacks. All these small activities play a vital role for future success. Peter Drucker commented some years ago: If we want to know what a business is, we have to start with its purpose There is only one valid definition of business purpose: to create a customer The customer is a foundation of a business and keeps it in existence. (in Wilson and Gilligan, 2012) Georgian tea has a huge potential on the Slovenian market. Increasing demand, a positive perception of the country of origin, and good quality of tea represent nice opportunities to be in the right place at the right moment. 1.3 Importance of topic With this study, we sensed a realistic opportunity to research the possible implementation of Georgian Gurieli tea to the Slovenian market. The main advantages for company Geoplant LLC: rapidly growing market shares; increased number of customers; longevity of product life cycle; maximization of profit; the popularization of a company and its product; gain new knowledge and experience. 4

18 The main advantages of the Slovenian market: development of tea market; increased assortment of tea packages; acquiring high-quality product on the local market; various benefits stemming from trade agreements; increased gross domestic product (GDP). And, the main advantage of researching the possibility of importing Georgian Gurieli tea to the Slovenian market is further development of a productive and friendly relationship between Slovenia and Georgia, and a chance to increase the knowledge about two countries products and markets. 1.4 Thesis structure The thesis content is divided into five chapters: Chapter 1 - Introduction: The chapter consists of introduces the background, problem identification, and importance of the idea of topics. Chapter 2 - Literature review: the chapter represents the analysis of relevant theoretical foundations which are useful for the study. The theoretical framework helped us to elaborate the methodology. Chapter 3 - Methodology: this chapter consists of methodologies and explains the scientific approach to the research of potential Georgian tea launch to the Slovenian market. Chapter combines several theories to obtain a useful theoretical framework for the research. Chapter 4 - Results and data analysis: chapter provides empirical data, which gave us the material to analyze the demand and opportunities on the Slovenian Market. Chapter 5 - Conclusions and future perspectives: this chapter provides some ideas, recommendations and future perspectives. 5

19 Introduction Literature review Methodology Results and data analysis Conclusion and future perspectives Figure 1: Thesis structure 6

20 2. LITERATURE REVIEW 2.1 Market research Market research is a process wherein current market data is collected and analyzed in order to reduce the risk and identify our perspectives on the local market Developing information The information needed by marketing managers comes from internal company records, marketing intelligence and marketing research. The information analysis system then processes this information to make it more useful for managers. (Kotler, Wong, Armstrong, and Saunders, 2005) Internal records information - information gathered from sources within the company to evaluate marketing performance and to detect marketing problems and opportunities. (Kotler, Wong, Armstrong, and Saunders, 2005) Marketing intelligence - everyday information about developments in the marketing environment help managers prepare and adjust marketing plans. (Kotler, Wong, Armstrong, and Saunders, 2005) Competitor intelligence - information gathered that informs on what the competition is doing or is about to do. (Kotler, Wong, Armstrong, and Saunders, 2005) Collecting information from the public documents Information plays an important role for future development. Companies themselves reveal the information by means of their annual reports, trade show exhibits, business publications, press releases, advertisements and Web pages. Collecting information by observing competitors Companies get useful information by observing their competitors products and examining their physical evidence. One of the best practices is benchmarking - imitating and improving your new product based on competitors features. (Kotler, Wong, Armstrong, and Saunders, 2005) Getting information from people who do business with competitors 7

21 Key customers can keep the company informed about competitors and their products. Intelligence can also be gathered by interpreting customers business operations. Getting information from recruits and competitors employees Companies can obtain intelligence through job interviews or from conversations with competitors employees. Marketing research - the function that links the consumer, customer and public to the marketer through information that is used to identify and define marketing opportunities and problems, to generate, refine and evaluate marketing actions, to monitor marketing performance, and to improve understanding of the marketing process. (Kotler, Wong, Armstrong, and Saunders, 2005) The marketing research process The marketing research activity (Figure 2) is divided into four steps: defining the problem and research objectives, developing the market research plan, implementing the research plan and interpreting the reporting of the findings. (Kotler, Wong, Armstrong, and Saunders, 2005) Figure 2: Market research process (Kotler, Wong, Armstrong, and Saunders, 2005) Defining the problem and research objectives The marketing development team and the researchers must work together to identify the problem carefully and must agree on the research objectives. Developing the research plan The second step of the marketing research process is to determine the information needed, developing a plan for gathering it efficiently and presenting the plan to marketing management. 8

22 Gathering secondary information - secondary data is already published information and it have been collected for another purpose. Companies can buy secondary data reports from outside suppliers. Online databases and Internet data sources are frequently used. The researchers can conduct their own search of secondary data sources. (Callingham, 2004) Qualitative research, quantitative research and focus group are the most common methodologies used for market research. Qualitative research - qualitative research is a situated activity that locates the observer in the world. It involves an interpretive, naturalistic approach to the world. This means that qualitative research studies things in their natural settings, attempting to make sense out of them, or to interpret the phenomena in terms of the meanings people bring to them. (Ritchie and Lewis, 2003) Quantitative research - quantitative research is an activity wherein useful data is collected by mail, phone, online or personal interviews. (Kotler, Wong, Armstrong, and Saunders, 2005) Focus group - a small sample of typical consumers under the direction of a trained moderator who elicits their reactions to a stimulus such as an ad or product concept. (Kotler, Wong, Armstrong, and Saunders, 2005) At this stage, the marketing research team should conclude and summarize the plan in a written proposal. A written proposal plays an important role, especially when we have large and complex research project. Implementing the research plan Implementing the research plan implies putting the marketing research into action, which involves collecting, processing and analyzing the information. For companies the information collection process and data quality are the mostly the crucial components of a market research. Researchers must process and analyze the collected data to isolate important information and findings. They should check the data from the returned questionnaire for accuracy and completeness. (Ritchie and Lewis, 2003) 9

23 Interpreting and reporting the findings At the final step, researchers should explain and present findings. Collated data must not be crammed with useless information. The marketing research team must represent only significant findings. (Ritchie and Lewis, 2003) Demand estimation A company should discover an attractive market and assess the market s size, market growth rate, future perspectives and, in general, total market demand. Total market demand for a product or service is the total volume that would be bought by a defined consumer group in a defined geographic area in a defined time period in a defined marketing environment under a defined level and mix of industry marketing efforts. Forecasting is the art of estimating future demand by anticipating what buyers are likely to do under a given set of conditions. Companies commonly use a three-stage procedure to arrive to the sales forecast. First, they make an environmental forecast, followed by an industry forecast and a company sales forecast. (Kotler, Wong, Armstrong, and Saunders, 2005) Buyer s intentions In order to identify the customer needs and wants, we should ask them directly. This type of survey is productive if the buyers have clearly formed intentions and if they can describe their demands in a proper way Sales force opinions On the global markets, companies sometimes assess their sales on the information gathered by the sales people. (Kotler, Wong, Armstrong, and Saunders, 2005) Expert opinion Companies can also make forecasts by turning to experts, such as dealers, distributors, suppliers, marketing consultants and trade associations. (Kotler, Wong, Armstrong, and Saunders, 2005) 10

24 Systematic marketing research has been shown in developing the marketing of nonconsumer products and services. There is clearly plenty of scope for this vital tool of marketing management in the dynamic and competitive market environment, where reliable information is more than ever necessary for success. (Chisnall, 1995) 2.2 Market segmentation The process of segmentation divides the market into distinct groups of buyers with different needs, characteristics or behaviors that might require separate products and marketing mixes. Each segment must identify a share of the market that they can serve at best. (Stone and Desmond, 2006) Market segmentation aims to analyze the features of the market and to identify a group of potential customers who have similar needs, desires and characteristics. The four most common determinants to segment customer market are the following: (Moore and Pareek, 2009) geographic: region, urban, rural and population density; demographic: age and life-cycle stage, gender, income, generation, social class; psychographic: lifestyles, personality, value perceptions and motives; behavioralistic: usage of product, brand loyalty and user status, buyers readiness stage and attitude Geographic segmentation According to the geographic segmentation, the market is divided into different geographical areas, such as countries, states, regions, and cities. Companies have an opportunity to operate in one or more geographic areas. (Onkvisit and Shaw, 2004) Demographic segmentation In demographic segmentation, the market is divided into groups on the basis of age, gender, income, generation, and social class. This is the most popular customer segmentation method, since customer wants, preferences and usage rate are often 11

25 associated with demographic variables which are easier to measure. (Onkvisit and Shaw, 2004) Age and life-cycle stage - consumer wants and characters are changing with age. As we are getting older, our lifestyle is changing as well as our interests towards the concrete subject. Gender - gender segmentation is significant in clothing, hairstyling, cosmetics, and magazines. Occasionally marketers notice an opportunity for gender segmentation and customized product for each gender. Income - income segmentation represents a means to segment target market according whose salary. In today's globally competitive environment brands are specifically developed and positioned within particular income segments in order to maximize the profit. Generation - every generation is influenced by the time in which it grows up movies, music, events of the period. Some marketers try to customize the product for each generation, such as Xers (those born between 1964 and 1984) while others target Baby Boomers (those born between 1946 and 1964) (Wilson and Gilligan, 2005). Social class - some companies design product for deferent social class. But we have to highlight that the style of social class is changing over the time Psychographic segmentation In psychographic segmentation, buyers are divided into different groups according to the customers lifestyle, activities and buying behavior. People within the same demographic group can exhibit very different psychographic profiles (Onkvisit and Shaw, 2004). Lifestyle - each individual is characterized by different lifestyle, the goods they are consuming express their personality. Personality - companies should customize their product with a brand personality that corresponds to the buyer s personality. 12

26 Value - the main purpose of value segmentation is to classify people s desires, choices, needs and customizing products to their value Behavioral segmentation In behavioral segmentation, customers are divided into groups based on the benefit sought, their loyalty to the brand, readiness to buy a product, the product s usage rate, the product s end use and the customer s attitude toward the product. (Moore and Pareek, 2009) Occasions - buyers can be classified according to the occasions on which they develop a need, purchase a product, or use of a product. Benefit - customers can be distinguished according to the benefits they wish to receive; User status - each market can be presented as nonusers, ex-users, first-time users, potential users, regular users of a product. Market leaders are oriented to attract the potential customers and even more, to lure consumers from the competitors. (Moore and Pareek, 2009) Usage rate - according to the usage rate, a segment can be represented by light, medium, and heavy product users. Marketers prefer to attract one heavy user than several light users. Loyalty status a loyalty of customers can be classified into four categories: 1) hard-core loyal - who always buy one brand. 2) Split loyal - who are loyal to two or three brands. 3) Shifting loyal - who shift from one brand to another. 4) Switchers - who show no loyalty to any brand. Buyer readiness stage the global market is segmented into different stages of readiness to buy a product. A certain amount of customers are aware of the product, some are unaware, some are informed, some of them are interested, some intend to buy a product and some desire the product. Attitude - in general, customers can be classified in five attitude groups: 1) enthusiastic; 2) positive; 3) hostile; 4) indifferent; 5) negative. 13

27 2.3 Targeting A market segment identifies the company s market opportunities. Companies have to evaluate different market segments and make a decision how many and which segments to target Evaluating market segments When companies decide in which segment they would like to operate, they must pay attention to the following factors: the size and growth of potential for each segment, market attractiveness and company fit. (Kotler, Wong, Armstrong, and Saunders, 2005) Segment size and growth Every company should determine the correct market size and growth opportunities. It is generally agreed that big companies prefer segments with large sale volumes and overlook small segments. Small companies serve small target segment. (Kotler, Wong, Armstrong, and Saunders, 2005) Segment attractiveness It is also significant to mention that, even though segment has desired growth and size, it may be unattractive in terms of profitability. Companies must find some important factors that affect long-term segment attractiveness. Porter has identified the five forces that determine the long-run attractiveness of a particular segment or the whole market. The five forces arise from: the degree of rivalry in the industry; barriers to entry; the power of suppliers; the power of buyers; the threat of substitutes. (Moore and Pareek, 2009). 14

28 The companies should identify potential and current competitors. A segment is already less attractive if it is saturated with many aggressive and strong competitors. The power of buyers also affects segment attractiveness. If buyers have a strong bargaining power, they will try to reduce prices, increase demand for the quality product, and increase competition on the market. A segment is not attractive if the suppliers of raw materials, equipment, labor and services in the segment are powerful enough to raise prices or reduce the quality of ordered goods and services. Business Strength and Objectives Companies should target the market with the right size and growth rate. Marketing objectives must be determined for that concrete segment. It is a far better idea to reject some unattractive segments which do not match with company s long-term goals. A low market share indicates its weakness. Every segment has certain requirements. A company should enter in the segment wherein it can offer superior value and gain competitive advantages over the competitors. (Kotler, Wong, Armstrong, and Saunders, 2005) Selecting the target market When the company evaluates the desire segments, it must decide how many and which segment to serve. The Figure 3, Figure 4, Figure 5 depict the process of selecting the target market. Undifferentiated Marketing On the undifferentiated market, the product and marketing mix are designed to appeal to the largest number of buyers, relying on quality, effective destitution and mass advertising to give the product a superior image in people s minds. (Stone and Desmond, 2007) Differentiated Marketing A differentiated marketing is aimed at the development individual marketing mix for the different segment. By using differentiated marketing companies allocate the risk across the market. If one market segment declines, the company still has the profit 15

29 from others. This approach requires high costs for marketing mix which is planned for the various products. (Stone and Desmond, 2007) Concentrated Marketing The concentrated marketing involves specialization in one segment. It leads to detailed knowledge of the target segment s needs and wants. Concentrated marketing can reduce investments for the market entry. Using this strategy, even small companies can realistically aim to become market leaders in their fields (Stone and Desmond, 2007). Figure 3: Undifferentiated Marketing. (Stone and Desmond, 2007) Figure 4: Differentiated Marketing. (Stone and Desmond, 2007) Figure 5: Concentrated Marketing. (Stone and Desmond, 2007) 16

30 2.4 Positioning To put it in a nutshell, brand positioning is the process of positioning our brand in the mind of our customers. Strong brand positioning requires true promises. Through the positioning strategy, companies should differentiate it their marketing offers and give customers more value than competitor s offers do. (Kotler, Wong, Armstrong, and Saunders, 2005) Differentiation It is difficult to develop a differentiation in every industry, but some creative companies have proved that any market can be differentiated. Product differentiation A company can differentiate its tangible product. Some companies offer a highly standardized product that allows little variations, even some meaningful differentiation is possible. (Kotler, Wong, Armstrong, and Saunders, 2005) Services differentiation Besides physical product differentiation, companies can also differentiate the service that accompanies the product. Installation and repair service play a vital role in service differentiation. Some companies offer consulting services to their customers. (Kotler, Wong, Armstrong, and Saunders, 2005) Personal differentiation Companies can gain a strong competitive advantage through hiring and training better people than their competitors. Personal differentiation requires selection of customer-conduct people carefully. They must have required skills and knowledge. The sales force needs to be friendly, restful, and courteous. They must serve customers with consistency and accuracy, communicate clearly and respond quickly to customer requests and problems. (Kotler, Wong, Armstrong, and Saunders, 2005) Image differentiation Nowadays companies work hard to reach an established image that distinguishes them from other competitors. Symbols, logos, companies cultural colors can provide 17

31 instant brand recognition or image differentiation. The chosen logo, symbols, the cultural colors should be promoted through the advertisement that represents the company s or brand s personality. (Kotler, Wong, Armstrong, and Saunders, 2005) Value positioning Customers usually choose the product from where they expect more value. This section provides the classification of five value positions which companies can use to operate on the market: more for more, more for the same, the same for less, less for much less, and more for less. (Kotler, Wong, Armstrong, and Saunders, 2005) More for more More for more positioning implies delivering the most upscale product and charging higher price in order to cover higher costs. Yet more for more brands can be vulnerable. They often invite imitators who claim the same quality at lower price. Luxury goods that sell well during good times may be at risk during economic downturns when buyers become more cautious in their spending. (Kotler, Wong, Armstrong, and Saunders, 2005) More for the same Companies can attack competitor s more for more positioning by introducing a brand offering comparable quality but at a lower price. (Kotler, Wong, Armstrong, and Saunders, 2005) The same for less Offering the same for less can be a powerful value proposition - everyone likes a good deal. Companies do not claim to offer different or better products. Instead, they offer many of the same brands as other stores but at deep discounts based on superior purchasing power and lower-cost operations. (Kotler, Wong, Armstrong, and Saunders, 2005) Less for much less A market almost always exists for products that offer less and, therefore, cost less. Few people need, want or can afford the very best in everything they buy. Less for 18

32 much less positioning involves meeting consumers lower performance or quality requirements at a much lower price. (Kotler, Wong, Armstrong, and Saunders, 2005) More for less Of course, the winning value proposition would be to offer more for less. Yet in the long run, companies will find it very difficult to sustain such best-of-both positioning. Offering more usually costs more, making it difficult to deliver on the for less promise. Companies try to deliver both may lose out to more focused competitors. (Kotler, Wong, Armstrong, and Saunders, 2005) Product positioning Companies can obtain sustainable competitive advantage by product positioning. Product positioning is a prospect s perception of a product, like low cost, quality of the product, which can influence a product position. Marketers plan positions that will give their product the greatest advantage on the selected target market and they design marketing mix to create the desired positions. We can classify three positioning alternatives: 1. The first strategy they suggest is to strengthen brand s current position in the mind of the customer. 2. The second strategy is to search for a new unoccupied position that is valued by substantial number of customers. 3. The third strategy is to deposition or reposition the competition. (Kotler, Wong, Saunders, Armstrong, 2005) Choosing a positioning strategy Some companies have found an effective and easy way for their positioning strategy. For instance, if a company is known for innovative activities in certain segments, it targets the group of the people who are seeking innovations. 19

33 2.4.5 Selecting the proper competitive advantage When a company possesses some different competitive advantages, it must choose one concrete segment and build its positioning strategy. A company should decide how many and which differences to promote Communicating and delivering the chosen position Once a company has chosen a position, it must make a profound step to deliver and communicate the desired position to target customers. Marketing mix efforts must be oriented to support positioning strategy. Developing the marketing mix - product, price, place and promotion - signifies to figure out tactical details of the positioning strategy. All companies should provide the market with high-quality product, set the relevant price, distribute through the professional intermediaries, and advertise in appropriate media. This is an effective way to build the successful positioning on the market. Marketing managers organize the marketing activities according to the four major decision areas. These are product, advertisement, selling locations and price. In the business world, these elements are known as 4P. (Drummond, Ashford and Ensor, 2001) Positioning through product In the business world, a product is more than just a physical object. It is a bundle of physical, psychological and experimental benefits that customer receives, which satisfies one or more of his/her wants or needs (Moore and Pareek, 2009). The wise start of positioning is gaining a thorough knowledge of a product or service s target market. They are the group of people who will best benefit from the use of the product and service. Positioning in marketing communication Marketing communication plays an important role in business positioning. By using promotion marketers send message and information about the product to their potential customers. The main purpose of marketing communication is to get customers attention and increase their interest in the product and inform buyers about product s availability. The marketing rationality is intended to bring coherence and unity of purpose to the various marketing communications. (Hackley, 2005) 20

34 Marketers are using the following marketing communication activities for product positioning: advertising; publicity; personal selling; sales promotion; direct marketing; online marketing. These activities are also known as a promotion mix. Advertising - advertising is the widely used activity for informing potential customers about the product, its features and quality. For advertising, we can use printed media (such as newspapers, magazines, billboards), radio, TV, etc. Publicity - publicity is the most effective tool for getting buyers awareness in the early stages and is more cost-effective than either personal selling or sales promotion. (Wilson and Gilligan, 2003). The main activities of publicity are press conferences, publications, news in the media, etc. Personal selling - personal selling is the most expensive and the most efficient element of the mix in relation to the audience reached. It is particularly used where merchandise is so complex or expensive that the customer needs one-toone help in reaching the decision to buy. (Fernie, Ferie and Moore, 2003) Personal selling is a direct communication between the sales person and buyers. Sale person must persuade the customer to buy the product. Sales promotion - sales promotion refers to the short-term incentives to buy a product. It includes a variety of tools, including money-off, coupons, competitions, two for one offers, gifts, trades, discounts, contests, games, which are primarily used to encourage customers to buy their products. (Fernie, Ferie, and Moore, 2003) 21

35 Direct Marketing - direct marketing is a personalized communication tool wherein the advertising messages are sent to a specific person through s, telephone, mobile messages, online , etc. Direct marketing offers highly interactive experiences, buyers and sellers are in constant communication with each other. (Moore and Pareek, 2009) Online marketing - online marketing implies using the internet and powerful mobile technologies so as to increase company efforts on the market and build customer relationship via social media, websites, mobile apps, online promotions, etc. Online marketing is the best way to communicate with the desired audience in a cost-effective, reliable, and quick way. (Kotler, Wong, Armstrong, and Saunders, 2005) All these aforementioned tools are an effective marketing communication mix for our business. Positioning through distribution The marketers use distribution channels or deliver the physical product to the final buyers or users (Kotler, 2002). Approaching the final customer is not simply the matter of advertising. It is also a better way to choose the right channels for distribution in order to reach the buyer s place for your product or service as close to target market as possible. The following elements are significant while we make a decision: Nature of market: many factors affect the choice of distribution channel. If there are limited numbers of buyers and their individual purchases are large, direct sale would be the most relevant choice. Nature of the product: a concrete feature of the product affects the choice of distribution channel. If it is perishable good, it must be delivered on the right time in the right place. Nature of the company: there are represented companies on the market which can afford their own distribution force. Companies which want to take a 22

36 responsibility and control of their distribution network create their own distribution channels. Middlemen consideration: if middlemen have the necessary working experience, financial strength, contacts and they can ensure the success of introduced product, they have a strong influence on the companies. Types of distribution channels Everybody knows that customers do not buy products directly from the producers. The product manufacturers use intermediaries in order to supply their goods to the final customer. We can see different types of distribution channels. Zero stage distribution channel - zero stage distribution channel exists when product manufacture directly supplies the goods to the final customer. (Marketing: distribution channels, 2015) Figure 6: Zero stage distribution channel. (Marketing: distribution channels, 2015) One stage distribution channel - in this case, there is only one intermediary between customer and manufacturer. The product producers sell their goods to retailers who in turn sell them to the product users. (Marketing: distribution channels, 2015) Figure 7: One stage distribution channel. (Marketing: distribution channels, 2015) Two stage distribution channel - this is a widely used distribution channel for the sale of products. At this juncture, there are two intermediaries used, wholesaler and 23

37 retailer. This type of channel is relevant to use where markets are spread over a large area, the value of the individual purchase is small and the frequency of purchase of the product is high. (Marketing: distribution channels, 2015) Picture 8: Two stage distribution channel. (Marketing: distribution channels, 2015) Three stage distribution channels - in the three-stage distribution channel agents, wholesalers and retailers are playing the main roles for product delivery to the final customer. Agents reduce the distance between the manufacturer and the wholesaler. Such companies have their agents in every region and sell their material to them. The agents supply the product to the wholesalers, the wholesaler to the retailers and, in the end, the retailer sells the product to the final customer. (Marketing: distribution channels, 2015) Figure 9: Three stage distribution channel. (Marketing: distribution channels, 2015) Positioning through price Price is the most flexible of the marketing Ps. This is a perceived value of goods which varies between individuals. Price is the money paid for the benefits individual receives by using the product or service. It is the exchange value of goods and service in terms of money. Customers always have a reference price in mind when making a purchasing decision. (Moore and Pareek, 2009) It is significant that there is to be found literature on the psychology of pricing in marketing. Many people associate high price with higher quality of product and low 24

38 price with a lower quality of the product. The marketing department must be cautious in product pricing in order to avoid possible confusion. We can classify pricing into the following categories: 1. Price skimming - we use the initial high price and then systematically reduce it over time. Customers expect prices to eventually fall. 2. Penetration pricing - we set the initial price low to accelerate the product adoption. 3. Experience curve - we set the price low to build the value and reduce costs through accumulated experience. 4. Leader pricing - we initiate a price change and expect other companies to follow. 5. Parity pricing - we match the price set by the overall market or price leader. 6. Low-price suppliers - we always strive to have the lowest price on the market. 7. Complementary product pricing - we price the core product low, while complementary items such as accessories, supplies and service can be priced higher. 8. Price bundling - we offer the product as part of the bundle of several products, usually at a total price that is lower than the sum of individual prices. 9. Customer value pricing - we price one version of our product at very competitive levels, offering fewer features than are available on the other versions. 10. Cost-plus pricing - we establish the price of the product at a point that gives us a specific percentage of profit margin over our costs. 11. Break-even pricing - we establish the price of the product at a point that will allow us to recover the costs of product development. 12. Price signaling - we use the price to signal the quality of our product to the customer. 13. Image pricing - we offer an identical version of the product at a higher price. 14. Premium pricing - we price one version of our product at a premium level, offering more features than are available on other versions. 15. The second market discounting - we price the product at very competitive levels for the purpose of exporting or selling in secondary markets. 25

39 16. Periodic or random discounts - we periodically or randomly lower the price to our product. 17. Geographic pricing - we price the product for different geographic markets. 18. Perceived value pricing - we price the product based on our customers perception of the products value. 19. Internet pricing - we price the product differently on our Internet website compared to the price we charge through our sales outlets. (Elgar, 2009) When a company achieves the desired market position, it must try to maintain the position through consistent innovation, performance and communication. It must meet new challenges on the market and use them for its future development. On the other hand, companies should avoid abrupt changes that might frighten and confuse customers. 2.5 Country of origin and perceived product quality It is already well known in the business world that how customers evaluate of the product depends on where it has been made. Customers categorize countries and use these categories to evaluate the product quality. To be more precise, customers might use country of origin as a main reliable source to assess the product quality. It is already agreed that products from less developed countries are less favorably received than products from developed countries. On the other hand, even for highrisk products from less developed countries, customers are ready to buy them as long as they carry known brand names. In this case brand name covers the negative influence of country s negative image. (Onkvisit and Shaw, 2004) When there is congruence between brand origin and country of production, country of manufacture has an impact on the product beliefs and brand attitudes. Incongruence takes place when a branded product is made in a country whose image is not as favorable as that of the brand origin. In this case, country-of-manufacture adversely affects product evaluation but only for low equity brands rather than high equity brands. Apparently, a brand can be strong enough to mitigate any negative perceptions derived from the country-of-manufacture information. (Onkvisit and Shaw, 2004) 26

40 Customers constantly merge product information with the country image, quality, image, and prestige. An international marketing team must pay attention to the relationship between country of origin and the perception of product quality. In most cases, country of origin information is even more important than price and brand information in affecting product quality assessments. (Onkvisit and Shaw, 2004) Customers in less developed countries prefer to purchase imported or foreign goods. They believe that those products have a higher quality and prestige. 2.6 Deciding how to enter the market When a company has decided to operate on the international market, it must choose the best way for entry. They can choose one of the following: exporting, joint venture, or direct investment. (Kotler, Wong, Armstrong, Saunders, 2005) Exporting The easiest way to enter a foreign market is through exporting. Companies produce the goods in its home country and export them to the global market through the direct exporting or indirect exporting. (Kotler, Wong, Armstrong, Saunders, 2005) Indirect exporting In most cases companies start operating in the international market with indirect exporting, working through the independent middlemen. Indirect exporting requires fewer responsibilities and investment from the company. Hence, they do not have overseas sales force or set of contacts. Indirect exporting involves less risk. (Kotler, Wong, Armstrong, Saunders, 2005) Direct exporting Sellers may eventually move into direct exporting, whereby they handle their own exports. The investment and risk are somewhat greater in this strategy, but so is the potential return. A company can conduct direct exporting in several ways. It can set up a domestic export department that carries out export activities, or it can set up an overseas sales branch that handles sales, distribution, and perhaps a promotion. (Kotler, Wong, Armstrong, Saunders, 2005) 27

41 2.6.2 Joint venturing Another option of entering a foreign market is the joint venture. This mode of entering means joining with foreign companies to produce market products or services. Licensing Licensing is a simple way for a company to enter into international market. This is an agreement between the business entities, a process of creating and managing contracts between the owners of a brand and a company or individuals who want to use the brand associated with the product for a certain period of time. By using licensing, companies buy trademark patent, etc. (Kotler, Wong, Armstrong, Saunders, 2005) Contract manufacturing By means of the contract manufacturing, companies contract with manufacturers in the foreign market to develop their product and provide an effective service. Management contracting Under management contracting the domestic company exports management services rather than products to the international market. (Kotler, Wong, Armstrong, Saunders, 2005) Joint ownership Joint ownership is a situation in which two or more companies or people co-own a property. Under the joint ownership companies joining foreign investors create a local business, where they will share control and joint ownership. Direct investment Direct investment is the commonly used method in a foreign market. This is about controlling ownership in a business enterprise in one country by an entity based in another country. If the company possesses a good experience in exporting and the foreign market is large enough and is growing rapidly, the foreign production makes economic sense. 28

42 3. METHODOLOGY In this part of the thesis, we have reviewed the scientific approach and methodology used for the thesis theme - Georgian tea introduction to the Slovenian market. The chapter presents several theories to obtain useful theoretical framework for the research. Analysis, synthesis and compilation of relevant scientific and professional literature have been deployed. Case study method has been used; tea industry has been analyzed through published statistic information, articles, and reports. The perception of target segment has been researched by means of an online survey on a convenience sample. PEST and SWOT have been executed for the screening of marketing environment. 3.1 Research design The research design from marketing viewpoint is a framework or blueprint for conducting the research project that specifies the procedure necessary to obtain the information to structure and/or solve the research problem. (Malhotra, 1996) As we mentioned above, quantitative research is one of the important methodologies for our case study. Secondary data analysis plays a significant role to build up the best practices for brand introduction to the Slovenian market as well as to design and develop the competitive marketing plan for the Georgian tea Quantitative research Our goal in conducting quantitative research study is to clearly determine what Slovenian customers think about the new tea brand entry to the local market; how strong is impact of country of origin on tea purchase; according to their idea how deep is bond between Georgia and high-quality tea and what benefits they are expecting from a Georgian product. Quantitative research of Slovenian market enables us to identify the important determinants of tea purchasing and customers readiness to adopt a new product/brand. In addition, Slovenian market survey helps us to get a general idea about the tea market and local tea consumption. It also helps us identify how deep rooted is the tea culture in Slovenia and the role tea plays in Slovenians everyday life. 29

43 Quantitative research deals with numbers and logic. It is focused on numeric and unchanging data, and detailed, convergent reasoning rather than divergent reasoning. Quantitative research is very helpful in many ways: it is good at showing the market size, structure and dynamics in terms of both the products that are sold and the segmentation in customer terms. This information is clearly important for the company to be able to put its overall strategy in context. Quantitative research is also good in terms of brand. It is useful for measuring the extent of product usage, understanding who is using the product, how well the product is rated and what people think about it in terms of image statement. (Callingham, 2004) Quantitative research is widely used in demography, economics, marketing, and business field too. This type of methodology is used to quantify the problem by means of the generating numerical data and generalize results from a big sample of population Target sample and data collection Quantitative data collection methods include online surveys, mobile surveys, face-toface interviews, paper surveys, website interceptors, online polls and systematic observation. From the diverse variety of data collection opportunities, we have decided for online survey. Sampling, as research methodological part, refers to the selection of individual unities and settings to be studied. Generally, quantitative research method strives for random sampling. It typically starts with some specific groups, type of individuals, processes or events. We have chosen our sample, target group very purposefully. Our goal was to spread the online questionnaire to reach widest possible audience. Survey has been addressed to individuals through internet sources. The first target group were students of the University of Nova Gorica. An online questionnaire was sent by and it was shared with the Facebook groups. As we know, students of the University of Nova Gorica come from different regions of the country. Individuals were chosen randomly from the entire country, but the majority of them are from western Slovenia. Except students, the online questionnaire was sent via the social network to employees, staff and other citizens of Slovenia. Along the invitation to fill out the questionnaire, the request to share further the survey has been added - this 30

44 method is called snowball sampling. Slovenian market online survey started May 15 th and it was closed on June 5 th. Quantitative questionnaire was sent to 245 people, but we got 111 responses. During the work on the master thesis, we were frequently getting and sharing ideas, thoughts, suggestions and recommendations about Georgian tea introduction to the Slovenian market Collection of secondary data Secondary data collection plays a significant role in an international marketing research, especially for entry to the new market. Data at the macroeconomic level includes governmental, economic and social statistics as well as data published by regional and world companies, such as the European Union, the World Bank, the United Nations, and commercial companies, such as the Economist Intelligence Unit. Trade associations, financial analysis and other companies, such as Euromonitor publish data for the industry or product market levels. Most of these sources are available on the Internet, but some of them charge a fee. (Craig and Douglas, 2005) On some occasions, the secondary source of information can be more accurate data than gathering from the primary research. The collected data is more reliable where government or international agency had undertaken a large survey. It is likely to get more accurate result if we implement a survey based on a relatively small and / or non-probability sample. During the collection of the secondary data, we discovered very useful information about the Slovenian tea market published by Euromonitor International a marketing research company. Quite interesting statistic information is available about the tea market development and its future perspective. We have seen tea market growth rate described in numbers and the demand for tea, we could identify our competitors and get information about them. Nowadays World Wide Web enables us to gather desired information in a fast and cheap way. 31

45 3.1.4 Research data analysis The collection of data is just one step of the research process. We have to analyze it as well. Statistical data is represented in tabulations, figures, and charts. Findings are conclusive and descriptive in nature. Collected data should be explained and interpreted in a profound way with their statistical treatment. Collected data requires inspecting, cleaning, transforming and presenting with the theoretical framework in order for a research problem to be successfully solved. In the following chapter, we linked our collected data with theoretical aspects. Statistical data is interpreted in figures and charts. Based on the Slovenian market research, we are able to identify main advantages of Gurieli tea in comparisons. We gathered information about local competitors and developed singular marketing steps, marketing communications, pricing and distribution are customized to their needs and wishes. 3.2 SWOT analysis SWOT analysis has been used in our thesis to evaluate the potential risks and rewards of our business, face its greatest challenges and find its most promising new market. SWOT analysis is one of the most frequently used tools within the marketing planning process. It is an overall evaluation of external and internal environment of business. (Kotler, 2002) The purpose of SWOT analysis As mentioned earlier, in the business world, by means of the SWOT analysis companies can identify both internal and external influences. In this case, companies can make deliberate decision before the important business changes Internal factors The first two letters, S - implies strengths and W weaknesses, refer to internal factors. More precise, these are the resources and experience readily available now to the new company. 32

46 Internal factors consist of: financial resources, such as income, investment opportunities, funding and budgeting; human resources, such as employees, workers, volunteers and stakeholders; physical resources, such as equipment, facilities, the location of the company; access to trademarks, patents, copyright, and natural resources External factors External forces include a number of factors on which company has little control and influence every company, company or individuals. These factors are directly or indirectly connected to opportunities and threats. (Bangs, 2002) External factors consist of: marketing trends, such as new technology and products; economic trends, like local, national and international financial trends; funding, such as charities, donations; demographics, like a target audience's age, gender, race, culture; relationship with partners, intermediaries, suppliers; environmental, political and economic regulations. SWOT analysis is the best way to improve decision making and develop effective business operations. It analyses internal and external factors and identifies what is favorable and unfavorable for a company to achieve its business objectives. 3.3 PEST analysis PEST analysis is a methodology that identifies effects of the environment as political, economic, social and technological. The PEST analysis classifies the influence of these factors on the business. It is getting more and more useful and 33

47 relevant for larger and complex businesses, but even for small businesses PEST analysis can reveal several significant issues that might otherwise be missed. PEST analysis is the scan of the external macro-environment in which a company exists. It is a useful tool for understanding the political, economic, socio-cultural and technological environment that a company operates in. It can be used for evaluating market growth or decline, and as such the position, potential and directions for a business. (Downey, 2007) PEST analysis consists of the following factors: Political/legal factors - political factors include governmental regulations which have a significant influence on the control of the business, such as: environmental regulation and tax policy; low employment; the political stability of the environment; governmental economic policies; governmental regulation regarding market ethics and customer rights; influence of governmental regulations that control the business; governmental trade agreements. (Performing the pest analyses, 2012) Economic factors - economic factors represent the wider economy which has a huge effect on the cost of capital and purchasing power of the companies. Economic factors include: economic growth rate; the level of employment and unemployment; state of inflation; the rate of interest; the rate of exchange; 34

48 gross Domestic Product; per capita income. (Performing the pest analyses, 2012) Social factors - social factors refer to the cultural and social factors on the market place. They include demographics, age distribution, population growth rate, the level of education, lifestyle, and living conditions. Social factors have a quite strong influence on the business and need to be carefully examined. These factors are: lifestyle; the level of education; living conditions; religion; women and men role in the society; demographics, population; education, health, fashion trends; earning capability. (Performing the pest analyses, 2012) Technological factors - technology is a useful tool for the attainment of market advantage. Technological factors have a strong influence on the make or buy decisions and investment in innovation, such as automation and developing new technologies. It comprises the following factors: the speed of technology transfer; technological shifts; implementing new technologies in a business; changes in information; new technology inventions. (Performing the pest analyses, 2012) 35

49 Political, economic, social and technological factors in PEST vary depending on the type of business. PEST analysis is known as a valuable strategic method to anticipate market decline and growth, as well as potential to develop future operation strategy. PEST analysis is beneficial when a company plans to enter new markets or other countries. PEST analysis will be actively developed in the thesis in order to determine the external environment of Gurieli tea on the Slovenian market. 3.4 Case study In the thesis, case study method will be used so as to get meaningful information about Slovenian market and determine the potential opportunities of the company Geoplant LLC on the international market. By developing a case study method data have been collected by means of documents, direct observation, interviews, and faceto-face conversation. By means of the case study method, our aim was to explore buying habits, behavior, and purchasing intentions of Slovenian customers. It is known that customers are needed to create profit for the company. Local customers are people who use Georgian tea and who judge the quality of the product. Hence, it is very important for the company Geoplant LLC to gain new customers, to retain their loyalty and develop business. To be more precise, we developed cumulative case studies for our master thesis. Useful information has been aggregated from several sites at different times. Thus, we were able to collect past studies without additional cost or time Case study overview By means of the case study method, researchers collect detailed information about the target audience. Researchers do not focus on the discovery of new ideas, views or thoughts, but rather than on exploration and description. The data is collected about participants using participants of records. 36

50 The case study is one of the several ways of doing social science research. Other ways include experiments, surveys, history, and analysis of archived information (as in economic studies). In general, case studies are the preferred strategy when how and why questions are being asked, when the investigator has little control over events, and when the focus is on a contemporary phenomenon within some real-life context. (Yin, 2013) Types of case studies Case study method can be divided into different categories. Each of them can be selected for specific goals and objectives. Illustrative case studies - they usually use one or two examples of the event to describe the current situation. Exploratory case studies - the basic idea of the exploratory case study is to determine the questions and choose relevant types of measurements for the main investigation. Cumulative case studies - the method aims to gather useful information from several sites at different times. The main advantage of cumulative case studies is to generalize past studies without additional cost or time. Critical instance case studies - this method is useful to answer the cause and effect questions. (Case studies, 1993) Data Collection We will see 6 types of data collected in case studies: 1. interviews; 2. direct observation; 3. archival records; 4. participant observation; 5. artefacts; 6. documents. (Case studies, 1993) 37

51 Case study method will be more reliable, convincing and accurate if it is based on several different sources of information. Besides, researchers might find a new key determinant emerging during data collection Data analysis Collected information requires analyzing and interpreting in a profound way. Data analysis is the process of illustrating, recapitulating and evaluating data. By analyzing collected data we have to draw conclusions based on the text as a whole. Merriam (1988) suggests seven analytical frameworks for the company and presentation of data: 1. the role of participants; 2. the network analysis of formal and informal exchanges among groups; 3. historical framework; 4. thematic framework; 5. resources; 6. ritual and symbolism; 7. critical incidents that change or reinforce fundamental beliefs, practices, and values. These frameworks have two purposes: to search patterns among the data and to look for patterns that give meaning to the case study. We as the researchers will make casual relations between our research data and exciting knowledge in the field of brand development on the international market. Furthermore, analysis of the current knowledge of the field gives us an understanding of the area and opportunity to develop a framework for the analysis of gathered data. Silverman (2004) suggests defining main topics for discussion and then allocating gathered data to some of the defined groups. The gathered information gives us an understanding of brand development to the Slovenian market. Finally, collected data is analyzed based on the theoretical concept so as to evaluate effective marketing plan for Gurieli tea. 38

52 4. RESULTS AND DATA ANALYSIS The chapter provides empirical data, and the analysis of collected information which led us to the verification of the potential success operation of Geoplant LLC on the Slovenian market. 4.1 Company Overview The idea of Gurieli was born in Two years of intensive work with the production managers, workers and farmers, financial institutions, government officials and international partners marketing companies, vendors and consultants followed. And in 2010 the first lots of packed, branded Gurieli, made of premium quality green tea leaves could be found in all shops across Georgia. (Gurieli, n.d.) It is noteworthy, that Georgia has played an essential role in the study of tea cultivation worldwide. Geographic location, climatic conditions, temperatures that vary drastically between summer and winter determine the unique character of Georgian tea. Due to natural factors, it is not necessary to use pesticides and herbicides. Therefore, Georgian tea is ecologically pure and the environment is less polluted. The company produces a wide variety of tea assortment: black tea, green tea, fruit tea and herbal tea. Gurieli has been awarded numerous awards and certificates for the revival and development of the tea industry, for Georgian corporate social responsibility and for various charity activities. The team of Public Relationship of Gurieli says: Each day, step by step, full of passion we strive towards our mission: to provide the healthiest drink of the millennium to the world from the finest, environmentally friendly, best tea plantations of rural Georgia. We see ourselves as partners with our valued customers, employees and community, promoting a healthier lifestyle and helping them to lead happier lives. Being proud of what we do, we would like to present the best Georgian brand of tea: Gurieli - Born in Georgia. (Gurieli, n.d.) 39

53 4.2 Market entry strategies Once a company has decided to sell its products in a foreign country, it must determine the best model of entry. There is a variety of ways in which companies can enter foreign markets Exporting The simplest way to enter a foreign market is through exporting. The company may passively export its surpluses from time to time, or it could make an active commitment to expand exports to a particular market. In either case, the company produces all its goods in its home country. Company Geoplant LLC should start the Slovenian market entry with indirect exporting, working through independent international marketing intermediaries. Indirect exporting involves less investment because the company does not require organizing sales force or set of contacts. In this case, the company normally is not responsible for collecting payments from the overseas customer, or for coordinating the transport logistics. Geoplant LLC uses indirect exporting for the normal assortment of tea, such as black tea, green tea, and fruit tea. As regards distinguished sorts of tea - black tea with bergamot, green tea with jasmine,and herbal tea - they will be distributed at the Slovenian market by Geoplant LLC. The company will deliver products to the tea houses, bars, offices through the direct exporting. At this juncture, the company has a greater degree of control over all the aspects of transaction. Customers provide faster and more direct feedback on their product and its performance in the marketplace. The company develops a better understanding of the market place. Direct exporting requires more time, energy and more than maybe Geoplant LLC is able to afford. The company has to handle all the logistics of the transition. That is why initially direct exporting will be used merely for the premium sorts of tea. 40

54 4.3 Market research Developing information The information needed by marketing managers comes from internal company records, marketing intelligence and marketing research. The information analysis system then processes this information to make it more useful for managers. Internal records information gathered from sources within the company enables Geoplant LLC to detect marketing problems and opportunities, strengths and weaknesses. Marketing intelligence - everyday information about developments in the marketing environment that helps managers to prepare and adjust marketing plans. Getting information from public documents and materials Nowadays competitors themselves reveal information through their annual reports, business publications, trade show exhibits, press releases, advertisements and Web pages. These circumstances make more understandable the current market conditions for the company Geoplant LLC. Euromonitor International this research company publishes information about current tea market size, demand for tea, current rivals, etc. Like Slovenia, many countries are being explored to analyze future possible perspectives for the tea market. Besides, the Euromonitor International, there are plenty of articles, reports, books available about the tea industry. Getting information by observing competitors or analyzing products Initially the company Geoplant LLC is supposed to observe the main tea competitors on the market, analyze their strategies and only after that it can build up its own competitive marketing plan. Getting the information from society Loyalty and important customers can inform company about competitors and their products. 41

55 All human beings have different attitude towards tea producer companies. Individuals possess useful information about the tea market. Slovenian market is quite small and accordingly easy to explore The marketing research process 1. Defining the problem and research objectives Marketing managers and members of research team should define the research problem carefully and must agree on the research objectives. The main objective of this thesis is to: identify the main competitors; identify market growth rate; identify major strengths and competitive advantages for Gurieli tea. 2. Developing the research plan The second step of the marketing research process calls for determining the information needed and developing a plan for gathering it efficiently. Gathering secondary information has been used in order to develop marketing research plan for the tea industry. Online databases and internet data sources helped us to analyze the current market conditions. Collecting the primary data has been deployed by surveying people about their buying behavior, knowledge, preferences and attitudes. Friendly and sociable Slovenians spread significant information about the local market and tea consumption. 3. Implementing the research plan This step involves collecting, processing and analyzing the information. By means of gathered information sources we gathered the following information: Competitive environment - Slovenian tea market structure can be estimated as a perfect competition wherein many companies are operating with an identical product. Competitors are the price-taker and they cannot control the market price. All 42

56 companies have a relatively small market share. Buyers have complete information about the product being sold and the prices charged by each company. The industry is characterized by freedom of entry and exit. Table 1 depicts the main competitors on the Slovenian Market. Table 1: Tea competitor companies Companies Online stores 1001 CVET Teapigs Merkator Erilo Spar Cha Teekanne Cokoladnica Herba Medica Flora Mogota Daoli Maestro Teatime Nanni Čajnica CHAI Matik Nutratea Emona Sir Winston Loyd Twiningls Franck Riston Dammann Tuš Lipton Market growth rate - the tea market has a high growth rate across the globe. Nowadays the way of production and consumption of tea has changed radically in comparison with XX century. (Brouder, Billing and Uren, n.d.) Despite the ongoing difficult economic crisis in Slovenia, high unemployment and decreased private expenditure, demand for tea showed slight growth of 2% during the review period in 2015 (Euromonitor International, 2016). This growth stemmed from the relatively low price of tea in comparison with other drinks. Furthermore, the increasing demand for tea in Slovenia is attributable to its healthy image and growing health concerns among Slovenians. 43

57 Competitive advantages of Gurieli - a SWOT analysis can help determine the likely risks and rewards, strength, weaknesses, opportunities and threats for Georgian tea on the Slovenian market. Table 4: SWOT analysis of Gurieli tea Strengths 1. High-quality tea 2. Wide assortment of tea 3. Unique aroma 4. Good packaging 5. Long expertise 6. New technical and man power skills 7. Effective communication 8. Perception of country and quality product 9. Fair product price among the competitors 10. Market demand 11. Avoidance of double taxation Weaknesses 1. High exporting costs 2. High advertising cost 3. Initially not enough brand awareness 4. Constantly changing customers need Opportunities 1. Position tea as healthy grin as compared to coffee 2. Increase its presence in rural market 3. Increasing market demand for tea with rising health concerns 4. Product exporting to other European countries. 5. development of product assortment Threats 1. Fluctuating economics 2. Political issues can impact 3. Growing inline shopping 4. The competitors are more oriented on tea accessory 5. High number of competitors 6. Preference for people having coffee or other beverages 4. Interpreting the findings To put it in a nutshell, the tea market has a significant growth rate during the last years. The reason is the increasing demand from a growing segment of the population. Growing customer demand for the tea and its easy availability at the low price is a driving factor behind the growth of the tea market in Slovenia. People consume tea not only for its refreshing beverage, but for its different health benefits. (Euromonitor International, 2016) 44

58 Consequently, quality of Georgian tea, a wide assortment of product, unique aroma, country of origin, fair tea prices and effective communication strategies in comparison with competitors allow Gurieli tea to build a superior advantage on the Slovenian market. Quantitative questionnaire in this thesis provides us with useful and productive information about the current statement of Slovenian market and potential development of tea market. One hundred and even people completed the questionnaires. 61.5% are females and 38.5% males. (Figure 10) Figure 10: Gender of research sample In the following table 3 are represented some comments of Slovenians think about Georgian tea introduction to the local market. 45

59 Table 3: Ideas about Georgian tea introduction to the Slovenian market. Slovenian market research showed that coffee is the most commonly used beverage drink. Statistically tea is another popular drink on the local market after coffee. (Figure 11) 46

60 Figure 11: Beverage drink consumption in Slovenia 4.4 Macro environmental analysis By developing the PEST analysis we can determine external macro-environmental factors and its effect on the company Geoplant LLC to the Slovenian market. PEST analysis is beneficial when a company plans to enter new markets or other countries Political forces Political factors refer to the stability of the political environment and the attitudes of political parties or movements. Slovenian government establishes regulations about quality, labeling, packaging of tea. All tea exporter companies are responsible for operating on the market according to the following regulations. In 2011, Georgia and the Republic of Slovenia made an agreement about avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital. (Agreement between Georgia and the Republic of Slovenia for the avoidance of the double taxation, 2011) This is an additional incentive and source of motivation for Geoplant LLC to do business in Slovenia and maintain a cost advantage over the competitors. 47

61 Table 4: Slovenia country fact-file (Euromonitor International, 2016) Economic factors Economic factors represent the wider economy, so they may include economic growth rates, levels of employment and unemployment, exchange rates and inflation rates. Table 6 provides information on the current economic condition of Slovenia. In comparison with 2015 there is a slight decrease in real GDP 2016, but increase in disposable income. In 2016, inflation rate is 0.4%. (Euromonitor International, 2016) Socio-cultural Socio-cultural factors represent the culture of the society that a company operates within. There was a population growth this year, which implies an increased number of customers. Moreover, healthy lifestyle plays a significant role among Slovenians. 48

62 Society prefers to consume a natural product and has an active lifestyle. They are involved in different kinds of sports Technological factors Technological factors refer to the rate of new inventions and development, changes in information and implementing the new technologies in a business environment. Nowadays online tea shops are widely represented all over the world. Internet sources will be actively used so as to spread information about the company and deliver product to the final customer. 4.5 Market segmentation Geographic segmentation Geographic segmentation calls for dividing the market into different geographical units such as nations, states, regions, counties, cities, or neighborhoods. Our desired market is the whole Slovenia, starting from big cities to small cities and villages. Initially, our target markets are Ljubljana, Maribor, and other big cities Demographic segmentation In demographic segmentation, the market is divided into groups on the basis of age. This is the most popular customer segmentation method, customer wants, usage rate, preferences are associated with the demographic variable. According to the age, the target customers are the people with buying potential who tend to try new brands and innovative products. Target segment is also the young generation from 2 years old and older. Both genders can consume our product as an enjoyable beverage drink. As a health and slimming claim, women tend to have more interest in the product rather than men. The lifestyle is determined by dividing customers by their hobbies, interests, and other aspects of their lifestyles. According to the type of the product, the main target group would be those who are health concerned and would like to consume healthy food. Gurieli tea is available from upper or upper-mid class down to the working class people. Furthermore, the product pricing and promotional activities have focused on the price acceptability to ensure 49

63 customers agreed that price is reasonable and income factor is determined for pricing for each social class Psychographic segmentation According to the psychographic segmentation, customers are divided into deferent groups. Geoplant LLC offers tea based on the attitudes, beliefs and emotions of its target market. For instance, the premium assortment of tea will be represented at the meetings and conferences for the high-level society Behavioral segmentation In behavioral segmentation, buyers are divided into groups on the basis of their knowledge of, attitude towards, use of, or response to a product. While discovering behavioral segmentation, Geoplant LLC went through the process of finding out the frame of people minds, about the new products that arrive at the market. People are health conscious all over the survey, but some also are diet conscious, they looked to be smart and beautiful and this product helps in the reduction of weight loss. But some need changes, so this is the change in the flavor. 4.6 Targeting Marketing segmentation reveals the company s market segment opportunities. The company now has to evaluate the various segments and decide on how many and which ones to target. At this point, we looked at how companies evaluate and select target segments. While evaluating market segments, a company must look at three dimensions: the current size and growth potential of the segment, market attractiveness and company fit on the target segment. Our target segment is considered as a differentiated market. The marketing campaign, distribution channel, pricing, is customized each segment. In this case, Geoplant LLC allocates the risk among the market. 50

64 Figure 12: Target market of Gurieli tea By analyzing the demand, market growth and segment attractiveness we identified the desirable target segments: retail shops; supermarkets; hypermarkets; tea shops; tea houses; bars; restaurants; hotels; offices. (government and privet sectors) Furthermore, in our survey, potential customers of Gurieli tea were asked to highlight the convenient places where they wish to purchase the product. The majority of them wish to purchase tea from supermarkets. 4.7 Positioning In brief, brand positioning is the process of positioning your brand in the mind of your customers. Brand positioning is also referred to as a positioning strategy, brand strategy, or a brand positioning statement. 51

65 4.7.1 Product It was back in 1809, when the first tea plant was cultivated in Georgia under Mamia V Gurieli, Prince of Guria. That marked the beginning of two hundred years of Georgian tea history. (Gurieli, n.d.) Black Tea - Premium quality Prince Gurieli black tea is ecologically pure, fresh tea with rich fragrance and subtle taste. Green Tea - Prince Gurieli green tea is an exclusive product of highest quality. The tea leaves are hand-picked in the morning hours when their technological and biochemical potential are at its peak. The drink has a special taste and lively color, having all the healing and natural properties that the green tea has to offer. Black Tea-Pyramid - Modern day pace is getting faster each day, time is becoming even more valuable, therefore company decided to create a tea bag, that would keep the maximum of loose tea properties like rich aroma, special taste and fragrance. What makes pyramid tea bags special and different from the classic tea bags is that they contain only whole leaves and no dust. Company Geoplant LLC made a new product line of Gurieli export tea and customized its tea for the international market. Gurieli Export Black Tea - Made of soft 1-2 leaf sprouts gathered in the morning in plantations of selection species grown in the highlands of the South Caucasian Mountains. It has special taste and fragrance, is rich in nutritional and healing substances that stimulate the nervous system and support a healthy heart. Gurieli Export Green Tea - Made of the best tea leaves from the plantations of selected species grown in the highlands of the South Caucasian Mountains. It has a pleasing light green appearance, is a refreshing drink that has a natural taste and a well-balanced astringency. Gurieli Export black tea with bergamot - Its flavor is created according to the special recipe developed exclusively by our specialists. All the features characterizing black tea are preserved and the distinct bergamot flavor is mixed with the appropriate ratio in order to enhance the taste and enrich make it even more fragrant. 52

66 Green Tea with Jasmine - Company uses the traditional recipe when mixing the freshly-picked jasmine flowers, grown in the mountains of Racha with the special green tea leaves that fully absorb the fragrance and create Gurieli Export - Green tea with Jasmine flavor with longer-lasting, exquisite taste and aroma. Gurieli Fruit Tea - Georgian nature unveiled to us the mystic art of fruit tea making. Since old times, Georgian fruit has been renowned for its delicate aroma and outstanding taste. Georgian Berry, Georgian Forest Fruit and Georgian Subtropics are three different types of fruit teas, which are all made of a mix of dry, wild-grown fruits. Gurieli Herbal Tea - Gurieli Herbal Tea combines natural soothing and stimulating features with a distinct antioxidant function. All the treasures of the Georgian nature are gathered in a single cup for your healthier future. Herbal tea line comprises mint, chamomile and alpine rose. By representing the wide variety of tea assortment, the company holds chances to enjoy the competitive advantage and gain the customers loyalty. The company offers normal black tea, green tea and fruit tea to the supermarkets, hypermarkets, small markets. As regards black tea with bergamot, green tea with jasmine, black teapyramid will be available only in special tea shops, bars, restaurants, hotels, offices, tea houses. Effective market positioning ensures that marketing messages compel target customers to take action Place Place or position your product or service as close to the target market as possible. It is also a matter of choosing the right channels for distribution. Channel is a passage that is connecting businesses and consumers. The company's products or services are delivered to the consumer through channels. Distribution channels are methods to achieve positioning, as well as reflection of position. Positioning needs to match with the appropriate distribution network and unique sales channels, which can display the desired effect. In terms of distribution channels building, Gurieli tea has tough positioning, company using modern channels to establish the brand image and to enhance brand value. 53

67 One stage channel distribution and two stage channel distribution will be used for product delivery on the market. For one stage of channel distribution companies sell their product to retailers, who in turn sell it to the final consumers of the product. One stage channel distribution will be used by Geoplant LLC for the unique, distinguished assortment of tea. At this juncture, the company is able to control prices, delivery deadlines, and product placement in the store. The company will be responsible for the distribution activities. Two-stage channel distribution is widely spread distribution channel for the fast moving consumption goods - FMCG. In this case, there are two intermediaries in the distribution channel: wholesaler and retailer. This is relevant for the products, wherein markets are presented over the big area. The value of the individual purchase is small, and frequency of distributed product is high. Two stage distribution channels used for the large quantity of tea production. Geoplant LLC would give the main responsibility to the local wholesalers to distribute Georgian tea in the whole Slovenia. The target market for wholesalers is represented by chains of supermarkets, hypermarkets, markets, such as Spar, Mercator, Hoper, Tuš, etc Price Different price strategies are used for each target segment for Gurieli tea. Before the identification of relevant pricing strategies, we have to discuss pricing of competitor companies. On the Slovenian market price of tea package with bags swings between 0.49 and 3.97 Euro. The price of 100-gram tea package fluctuates between 3.29 and Euro. 1 package (20-25 tea bags) = Euro 100 gr. tea = Euro Geoplant LLC implements competition-based pricing strategy. Hence, Slovenian market is very competitive and there is a slight difference in the quality of rival companies. Prices are mostly fixed and close to the price of other competing companies. We can discuss the above mentioned price strategy as penetration pricing. 54

68 Penetration price strategy will be profitable for supermarkets, hypermarkets and small markets. The company sets the initial price low to accelerate the product selling on the market. The target price of normal black tea, green tea and fruit tea with 25 tea bags will be available for 0.99 Euro. The price of 100-gram tea packages will be accessible by 3.99 Euro. This price strategy is also considered as psychological pricing. Hence, customers think their costs are less than 1 Euro and less than 4 Euro. This type of pricing helps Gurieli tea to cover the big segment of the target market. 1 package (25 tea bags) = 0.99 Euro 100 gr. tea = 3.99 Euro By means of the objective based pricing company aims to earn high profit. It takes advantage from the group of customers who care about their status and are willing to pay the higher price for it. This aforementioned pricing is planned black tea with bergamot, green tea with jasmine, black tea-pyramid and herbal tea which are available only in special tea shops, bars, restaurants, hotels, offices, tea houses. It is considered as a perceived value pricing - the company sets the product price according to the customers perception of the product s value. The product price will be high in order to highlight its distinguished and unique features. 100 gr. tea can be acquired by Euro. 100 gr. tea = Euro. In additional, from time by time, the company could use periodic or random discounts - the company periodically lowers the price of the product. This price strategy is the productive way to motivate our sensitive buyers who require a bundle of benefits for the price. Figure 13 depicts the acceptable price range of good quality tea for Slovenians. From researched group 30.9% of people are ready to pay 1-2 Euro, 30.5% would pay 2-3 Euro, 32.7% are willing to purchase good quality tea at more than 3 Euro. 55

69 Figure 13: Acceptable price range of Gurieli tea Promotion Through the advertising campaign company informs prospective customers about the new product on the Slovenian market. Initially, the company will publish informative advertisement through the television and radio. Georgian company should inform its customer about product s origin, quality, features, availability, etc. In the video commercial Slovenian celebrity and skiing champion Tina Maze will be represented. Presenting a familiar face is one of the fastest and easiest ways for the company to create brand associations in the minds of consumers. When a widely loved actress or a heroic sports figure endorses a product, that product gains immediate credibility. For more popularization, Gurieli tea will be a sponsor of morning TV shows - Dobro Jutro. Television sponsorship is a great tool to try and associate a brand with the values of a particular TV show/channel, etc. The reason for this is that sponsorship can be used as a tool to tap into the emotions of your audience. According to the study, sponsorship has a greater impact on the emotional, implicit part of the mind than the rational, conscious mind. This then makes sponsorship more memorable and brands enter the awareness set. Outdoor advertising - Geoplant LLC will use billboards, bus benches, interiors and exteriors of buses, taxis and business vehicles. 56

70 Billboard will be placed on highways and busy streets. People notice the billboard whether they like it or not. Another added benefit is that many people travel the same route repeatedly, such as when they commute to work each day. This means that they will see your billboard regularly, which makes it more likely to stick in their minds. The cost effectiveness of bus bench advertising is at the top of the promotion list. Bench ads will be placed at eye level, so they are visible to thousands of people waiting for the bus and establish a strong local presence in the community. Company Geoplant LLC will actively use interiors and exteriors of buses, taxis and business vehicles for tea promotion. For transport interiors, adverts are attached to the corners between the walls and ceiling overhead to catch the eye of passengers, in the same manner as used in rapid transit systems. For exterior, adverts are placed as basic rectangular motifs on the side or front of a transport. The outdoor sign is often the first thing a potential customer sees. Geoplant LLC tries to create sufficiently bright and conspicuous sign to attract attention and sufficiently informative to let prospective customers know what is sold there. Publicity - company tries to encourage a positive impact through its activities on the environment, on consumers, employees, communities and society as a whole. It participates in charity events that are in accordance with the corporate social responsibility principles of its company. These are: food safety, environment, development of rural infrastructure, health and promotion of healthy lifestyle. We are happy to offer a helping hand to community service projects, exhibits, concerts, and other social activities, which are keys to creating a sustainable, productive, and promising society. (Marketing team of Geoplant LLC) One of the significant activities on the Slovenian market includes Gurieli tea hour. The company offers restaurants and cafes an opportunity to establish new "Tea Time" tradition. During the tea hour, customers can drink Gurieli tea at the selected spots free of charge. The main goal of this activity is to support intellectual, family or friendly get-togethers and to pamper its customers with tea of premium quality and aroma. 57

71 Sales promotion - the activity refers to using some motivator actors and incentives to persuade the consumers to buy a new product. This activity includes gifts, trade shows, contests, discounts, etc. Generally, sales promotional activities are carried out at retail levels. For special days company offers some discounts to the target market. Under this policy, the customers are offered products on less than the listed price. For instance, giving a discount of 30% on one package of tea. Moreover, along with the main product some other product is offered to the customer as a gift, such as extra 50 gm of tea, teacups, teaspoons and different kind of accessories. Eventually, tea package will be represented with small gift boxes so as to make an impression on the buyers and lure users away from market leaders. Online marketing - nowadays we are living in the digital era. Companies make efforts to sell the product and build customer relationship via social media, websites, mobile apps, e-commerce, online promotions, etc. Geoplant LLC has its own webpage, Facebook page, Instagram, Pinterest and communicates with the target audience in a quick, reliable and cost-effective way. All these aforementioned communication sources are the crucial components for Georgian tea positioning on the Slovenian market. The role of advertising multifaceted, with a real possibility of increasing the total volume of quality tea sold to the public. Promotion Figure 14: Importance of promotional activities. 58

72 One of the important issues of the quantitative questionnaire is the importance of promotional activities in purchasing Georgian tea. 1 = most important and 5 = least important. As we can see in the Figure 14, promotion of Georgian tea has a strong influence on purchasing the product Value positioning Value positioning offers a range of the positioning alternatives based on the value an offering delivers and its price. Customers typically choose the greatest value (Kotler, Wong, Armstrong, Saunders, 2005) Gurieli has chosen more for less positioning strategy for the premium assortment of tea - black tea with bergamot, green tea with jasmine and herbal tea. The company offers more values, benefits with a lower price than other rivals on the Slovenian market. The same for less value positioning strategy is used for normal black tea, green tea and fruit tea. Gurieli offers its customer the same value, customer surplus with a lower price than rest of competitors on the local market. 4.8 Country of origin and perceived product quality Tea culture in Georgia is deeply rooted and tea production plays a significant role in the history of Georgia. Georgia was a leading producer of tea in the USSR, providing approximately 95% of the produce distributed across the Soviet Union. (Giorgadze and Kochlamazashvili, 2015) Since 1977 close relationship has been established between Slovenia and Georgia. There is a list of places in Slovenia having standing links to local communities in other countries. Two capitals - Ljubljana and Tbilisi - are represented as twin towns (List of twin towns and sister cities in Slovenia, 2015). Society is aware of ongoing processes in Georgia. The majority of them know about deep roots of tea culture in Georgia and how well specialized is the country in producing high quality tea. Product involvement and product knowledge do affect the customer choices in term of selecting the countries across different product categories. Customers differentiate 59

73 the products of one country from another and make a decision according to the country-of-origin. One of the significant issues of our research is to explore what Slovenian customers think about the perception of the country and how strong is its influence. As we can see from the Figure 15, 50% of respondents emphasize the influence the country Georgia has on their purchasing intentions that country Georgia somewhat influence on their purchasing intentions. 31.5% of potential customers highlight that country of origin has a strong influence on their decision making. As regards rest of respondents, country of origin is the least important determinant for purchasing the Georgian tea. Figure 15: Country of origin influence on purchasing intentions toward Georgian tea. Slovenians make a strong connection between Georgia and tea culture. They perceive Georgian tea as a high-quality product and beneficial for health. Figure 16: Connection between country Georgia and product tea 60

74 Figure 17: Slovenian customers expectations from Georgian tea 4.9 Demand for tea Despite the still difficult economic situation in Slovenia, high unemployment and low consumer purchasing power, sales of hot drinks post another increase in 2015, which is in line with the performance recorded for the overall review period. As the other hot drinks category is less active in terms of new launches and marketing activities, more activity is noticed in the traditional coffee and tea category, whose sales continued to benefit from their relatively low prices in comparison with other non-alcoholic drinks in Slovenia. Because of high unemployment and a reduction of purchasing power, consumer purchases are becoming increasingly considered, and a demand for lower prices has encouraged a price war between the leading retailers. In addition, shopping patterns are more fragmented between different retailers and smaller-format stores. Also, private label keeps benefiting from its favorable pricequality ratio and the expansion of discounters in Slovenia. Shopping at discount stores (Lidl, Hofer, Eurospin) was still on the rise, which mainly affected the domestic retailers Tuš and Mercator, whose 53% share was sold in 2014 to Croatian Agrokor. (Euromonitor International, 2016) 1001 cvet grabbed 52% market share in tea industry (Euromonitor International, 2016) cvet is the main competitor of Geoplant LLC. Its products are represented from 0.49 Euro on the Slovenian Market cvet is the best-known and the bestselling tea, but Gurieli enjoys a predominant position on the Slovenian market by the quality of product, successful positioning and effective marketing campaign. 61

75 Tea and coffee consumption in Slovenia is deeply rooted in tradition, with tea considered a hot beverage to be consumed mostly during the cold winter months. Most of the demand for coffee relates to fresh ground coffee formats to be consumed at home. Nevertheless, manufacturers and retailers are making strong attempts to introduce and promote new formats, such as coffee-to-go or tea-to-go in the on-trade channel (in plastic cups). These promotions are aligned with the changing lifestyle in Slovenia and represent prospects for further growth. Some shift will be seen in consumers shopping behavior. As consumer purchasing power is starting to rise again, more consumers are expected to purchase higher-priced products and be less focused on discounters. Demand for organic, premium and certificated products will also increase. Slovenian market research shows us that tea is a product that customer wants and not needs. In Georgia, people say the tea is a beverage drink which customer needs. From the following Figure 18, we can see that 36% of Slovenians think that consumption of tea is s need and majority of them (64%) think that tea is the product which they want. Figure 18: Tea as need or want 62

76 4.10 Tea consumption Slovenians consume kg tea per capita by annual, as of 2014 (List if the countries by tea consumption per capita, 2014). Slovenia is ranked as 131st. The country is not known by high numbers of usage of tea, but in consumption, with other European countries, in the last years purchasing power of local customers has vividly increased. We investigated how often people consume tea in Slovenia. The result is shown in the figure 19. Figure 19: Tea consumption in Slovenia 63