Developing Marketing Opportunities For Bonatelli Wines Pty Ltd: Exporting And Franchising

Background of Bonatelli Wines Pty Ltd

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Discuss about the Coaching Skills for Leaders in Workplace.

The purpose of this paper is to critically analyze a case study on Bonatelli Wines Pty Ltd.  This is one of the companies dealing will production of boutique red wine in Australia. In that connection, there is need to formulate marketing strategies for these products. This paper focuses on developing two marketing opportunities that can be applied by the company so as to assist in selling the products. The main marketing opportunities to be considered in this paper are exporting and franchising. Therefore, we will determine their feasibility to the case study and then generate two viability reports as described below.

The process of export requires international business and marketing connectivity so as to surpass rigorous procedures that must be followed. In that connection, Bonatelli Wines Pty Ltd requires a well-structured export guideline so as to fully exploit this marketing opportunity. There should be an appropriate international relation between Australia and other countries in order for Bonatelli Wines Pty Ltd to exploit the opportunity.

From the case study, Bonatelli Wines has a capacity to produce about 30,000 bottles each day when dealing with Australia market alone. This culminates in approximately 500,000 sales per year in Australian market alone. This is a clear indicator that the company has a potential to expand marketing opportunities from local level to international level.  This can be achieved by exploiting exporting market opportunities (Karskens, 2011). However, before this opportunity is achieved, there are certain significant costs that the company need to forego so as to achieve this objective. Again, we need to analyze the benefits of this strategy together with a return on investment. If we assess these factors, then we will be in a position to determine whether the opportunity is viable or not.

First, we consider costs that the company needs to budget so as to meet the requirements of this opportunity. The first item is production cost. If Australia local market can consume more than 500,000 bottles of wine every year, then the company need to calculate the costs of production for the number of bottles the international market would consume each year. It is not as simple as it sounds. In this case, Bonatelli Wines Pty Ltd needs to assess the international market before committing resources for production. Assuming the company aims at exporting products to at least five international markets, then we only need to estimate the consumption in one country and then apply cost-benefit analysis so as to reach the final consumption units for international markets. Therefore, the company needs to expand the production units in the factories and employ more workers so as to increase production. Production costs cannot be avoided but can be reduced once the company accesses the market.

The other cost involves compliance with export regulations and standards. The company needs to pay for a license required to access international markets. All documents to facilitate the process of exporting wine products need to be accessed at a cost so that the Australian government can determine taxation requirement for the company.

Marketing Opportunities for Bonatelli Wines Pty Ltd

Lastly, the company needs to meet costs of transportation, shipment, and warehousing. The cost of regional transportation involves the movement of wine products from production plants to the port for shipment (Kotler, 2011). Exporting wine products to international market can only be appropriate through shipment process. Therefore, the company needs to pay loading and offloading charges to shipment industry. Again, on the side of importing markets, the company must facilitate the payment of customs duty and storage costs so as to ease the process of distribution to potential buyers. All these costs must be calculated prior to make a decision on the export market opportunity.

The other important factors to be considered in financial viability are the benefits the company will accrue from this opportunity. These benefits can as well be distributed to other stakeholders. First, the company will gain international recognition as a brand. This has a lot of advantages to the company. Again, the company will be able to increase the profit and wealth margins. This will enhance business growth and development. Operating in large scale is also associated with advantages of economies of scale (Eric, 2012). Moreover, the Australian government will generate revenues from taxes paid by the company. Lastly, increasing production units in the company will involve employing more people. This will reduce the rate of unemployment in Australia.

The last factor to be considered is a return on investment. From accounting point of view, this refers to the value-added margin the company gain from this investment. It determines the ratio of net profit generated and cost of investment (Eric, 2012). In that connection, for this market opportunity to be feasible, the net profit must exceed capital invested. The company needs to determine the selling price of wine products after calculating to capital invested. This will ensure profits made will recover capital invested.

In this case, we consider goals and objectives of Bonatelli Wines Pty Ltd so as to determine the impacts of export marketing opportunity towards the success of the company. Bonatelli Wines deals with three red wine products. That is Shiraz, Merlot, Cabernet Sauvignon. These products are originally produced and consumed in Australia. Therefore, there exists a very big market gap that the company has not satisfied. This is the only way to satisfy this market. Every company has a common aim of business growth and development. For this company, this aim can only be achieved by expanding the market to the global level (Eric, 2012). This becomes an objective by default. Bonatelli Wines products are highly valued in the international market. The company is likely to sell more in the international market than at local Australian market. This is a clear indicator that this opportunity fits Bonatelli Wines.

There are a lot of expectation for this opportunity on current business activities and customer base. By targeting export markets, the company is likely to generate more profits as compared to current revenue generated in local markets. This is because the domestic market in Australia has low demand for boutique premium wines. On the contrary, there is a high demand for boutique premium wines in the international market. Thus, the impact of exporting market opportunity is positive towards the value added to the company (Eric, 2012). Again, the customers for wine products will increase to a sustainable figure that may force the company to set other outlets in international markets so as to meet the demands (Krugman et al, 2012). This is a unique opportunity that Bonatelli Wines should not turn down because the company will benefit extensively.

Assessing Feasibility and Costs of Exporting

The market structure of this business is a perfect competition market. It can also be a monopolistic market competition model with many buyers and many sellers. For such market structure, products are similar but have been branded and differentiated to satisfy customer’s needs. Therefore, the company is likely to face unfavorable competition from local and international markets. First, the local industry consists of other wine producers whose aim is to achieve competitive advantage in the market. Therefore, they may sell their products at relatively lower prices to their customers so as to attract potential customers. This will bring competition to Bonatelli Wines. On the other hand, international market contains their original brands of wine. Dealers in these markets will focus on dominating their markets. The company may face a difficult time trying to reach customers in international markets (Hunt, 2013). Trade barriers and tariffs may also expose the company to a more complex situation in the international market. This becomes difficult to achieve competitive advantage in the international market.

All factors remaining constant, Bonatelli Wines can use the following recommendation so as to fully exploit this opportunity for business growth and development in both short-run and long-run. First, the company needs to accumulate all resources required for this investment. These resources can be generated from profits saved from local business operations. The company may as well borrow resources from financial institutions (Eric, 2012). This process is important to guarantee financial viability for this opportunity. This will enable the company to deal with unforeseen circumstances that may arise in the process of implementing this opportunity.

Again, the company needs to work together with Australian government so as to negotiate better terms in the international markets. This will remove unfavorable trade barriers and tariffs that may be set by importing countries. In the same note, the company can apply for incentives from the government so as to reduce costs. The government can reduce costs on raw materials used in the production of wine. This will enable the company to save some money.

Lastly, the company needs to conduct market surveillance in international markets. This will enable the company to link with potential distributors in those countries. It is important to have prior knowledge of how sales will be made in those markets. In the long-run, the company will be able to establish deep roots in those markets thus achieving competitive advantage (Hausman, 2007). The quality of wines should also be remarkable so as to attract as many customers as possible. Furthermore, local arrangements with shipping industry should be reliable so as to maintain supply in the international market. This will enhance sustainability thus satisfying the forces of demand and supply in the market.

This is another opportunity that Bonatelli Wines can accommodate to marketing strategy. Typically, franchising is a legal agreement for business purposes. It can be defined as an agreement between franchisor and franchisee where the former grants the latter the right to use trademarks and certain business requirements to process, produce and market products and services based on the certain specification. In that connection, Bonatelli Wines will be required to obtain the trade-name from another company so as to operate on its behalf. This will be a contractual relationship based on certain business and legal specifications.

Benefits of Exporting for Bonatelli Wines Pty Ltd

Here we consider costs, benefits and return on investment associated with franchising market opportunity to Bonatelli Wines. First, we consider the costs. We can estimate the initial cost of opening a franchise. The data below may be applied by the company to determine the total cost.

The data above demonstrates some costs the company is likely to face if this opportunity is applied as a marketing strategy. Other costs include initial franchise, fee, training costs, leasehold improvement, real estate costs, equipment, professional fees, advertising, marketing, working capital.  The initial franchise cost refers to the fee paid to franchisor so as to be granted rights to operate. Therefore, in case Bonatelli Wines decide to utilize this marketing opportunity, then it will be required to pay costs so as to use the trademark, brand, business system and service marks from the franchisor.  Again, the company will be required to cater expenses for training sessions. Costs on renovations may be incurred so as to prepare the property for the grand opening. The franchisor will require the company to purchase certain services and products at agreeable costs. Lastly, the company may be required to pay expenses associated with start-up promotion efforts.

The other factor to be considered under financial viability test benefits. The level of benefits Bonatelli Wines will gain from this opportunity. In this case, Bonatelli Wines acts as a franchise in franchising agreement. There are some benefits that the company can gain from this opportunity. First, the opportunity will offer the company the independence of ownership (Dann & Dann, 2007). This is a small-scale ownership based on benefits of a large-scale business network. Again, the company will not require experience to sell wine products in the market. This is because the franchisor will provide relevant training so that the company can operate effectively and efficiently in the market using franchisor’s business model.

In addition, this market opportunity has a higher rate of success as compared to a start-up business. Therefore, the company will not struggle to lay down market foundations. The company will achieve a competitive advantage in the shortest time possible. Another benefit drawn from this opportunity is the cost of operation. This process may cost less as compared to setting a start-up business. Lastly, Bonatelli Wines will benefit from management, work practice, advertising, image, reputation and ongoing support from franchise market opportunity.

Lastly, we consider the return on investment. From the benefits of this opportunity, the company will have low initial investment. Low costs for this opportunity is a good start for the company. This implies that the profit and wealth margin to be generated using this market opportunity are much higher than initial capital invested. The ratio of net profit to capital invested will be favorable. Therefore, Bonatelli Wines will have a favorable return on investment if this market opportunity is applied.

There is an immediate need to venture into the international market by Bonatelli Wines before other companies fill the market gap. Due to the time factor, the company may not have the resources and strategies to initiate a start-up business in global market. Due to unfavorable competition in this industry, any minute counts. Potential competitors may identify the gap and fill it. This will be a great loss to Bonatelli Wines. It is there very important to apply franchising market opportunity that will be timely and less costly to fill the gap in the market. In the long-run, the company will decide either to renew the franchising contract or to use a different business system, trademark, brands, and business models (Dann & Dann, 2004). Either way, the company will be safe since competitive advantage will be established in the international market. Thus, this strategy fully fits Bonatelli Wines.

Assessing Feasibility and Benefits of Franchising

There are several expectations that the company aims to achieve this opportunity. First, the company will expand market venture. This will increase profit and wealth margins. In that case, the company will become sustainable in local and international markets. Again, the company will be able to use franchisor’s brand to operate in the market. This process may shield some threats and weaknesses that the company may be exposed to if it operates as an independent entity (Ryan & Deci, 2017). Therefore, the impact of franchising market opportunity is positive towards the value added to the company. Again, the customers for wine products will increase to a sustainable figure that may force the company to establish its own brand and trademark rather than using franchisor’s business system. This will be appropriate so as to meet the demands of the customer. This is a unique opportunity that Bonatelli Wines should not turn down because the company will benefit extensively.

This approach is likely to face unfavorable competition. The company needs to realize how this competition may affect its business growth and development. Some of the potential competitors include wine producers and franchise agencies. Other wine producers may decide low prices so as to attract customers. This will make franchising contract irrelevant. The company will not be able to sustain the conditions sets in franchising contract. In order for this opportunity to be effective, the market structure needs to be a monopoly in a way (Richard, 2013). This will prevent competitors from fluctuating prices in the market for their own advantage. The other potential competitors for this opportunity are franchising agencies. It is a difficult task to choose which franchising arrangement to join. The cost of engaging this contract differ from one franchise to another. Therefore, some franchisors may put favorable terms to attract the company. However, the company may later find out that the choice was not the best. There would be other choices that would have enabled the company to exploit the opportunity fully. This kind of competition acts as a limiting factor towards maximum utilization of franchising marketing opportunity.

There are a lot of strategies that Bonatelli Wines needs to apply in order to fully exploit this opportunity. First, the company needs to do surveillance on the most compatible franchisor to engage in their marketing strategy. This process should be done extensively by considering performance records of the franchisor for the last five years. This will enable the company to decide which franchisor best fit their goals and objectives. Again, the company should choose a franchisor who offer a long-term agreement so as to avoid recurrent expense associated with contract renewal.

The other issue involves the process of tightening the obligation of franchisor and Bonatelli Wines so as to act in good faith towards exploiting franchising market opportunity. This will prevent an unnecessary breach of contract (Henry, 2008). Again, there should be a comprehensive enforcement regime that should incorporate legal aspects such as financial fines for code breaches. This will make sure that the parties act in good faith.

Bonatelli Wines is focusing on the international market. For that reason, there should be advancement disclosure in matters such as online trading. This is because franchising market opportunity may apply e-commerce business model for trade between the company and global markets. Again, it is very important to advocate for transparency of franchising administration. This will make marketing funds more transparent for accountability.

In addition, it is significant to have prior knowledge of how sales will be made through franchising platform. In the long-run, the company will be able to establish deep roots in those markets thus achieving competitive advantage in the international market (Arnold, 2010). The process should not compromise the quality of products and services set in the manifesto of the company. It should be in accordance with goals and objectives laid down by the company. The quality of wines should also be remarkable so as to attract as many customers as possible. Furthermore, local arrangements with franchising management team should be reliable so as to maintain supply in local and international markets. This will enhance sustainability thus satisfying the forces of demand and supply in the market. In summary, if the two market opportunities are applied by the company without any reservation whatsoever, then the company will manage to achieve goals and objectives.

References

Arnold, J. (2010). Coaching Skills for Leaders in the Workplace: How to Develop, Motivate and Get the Best from Your Staff. How to Books.

Dann, S., & Dann, S. (2004). Strategic Internet marketing. Brisbane: John Wiley & Sons.

Dann, S., & Dann, S. (2007). Competitive marketing strategy. French’s Forest, NSW: Pearson Education.

Eric, H.S. (2012). “Marketing strategy: From the origin of the concept to the development of a conceptual framework”, Journal of Historical Research in Marketing, 4(1), 30-55.

Hausman, D. M. (2007). The philosophy of economics: An anthology (3rd ed.). Cambridge: Cambridge University Press.

Henry, A. (2008). Understanding Strategic Management. Oxford University Press.

Hunt, D. (2013). Girt: The Unauthorized History of Australia. Black Inc.

Karskens, G. (2011). The Colony: A History of Early Sydney. Allen & Unwin.

Kotler, P. (2011). Framework for Marketing Management. Pearson.

Krugman, P. R., Obstfeld, M., & Melitz, M. J. (2012). International Economics: Theory & policy (9th ed.). Harlow: Pearson Education.

Richard, A. (2013). Job Satisfaction from Herzberg’s Two Factor Theory Perspective. Grin publishing.

Ryan, R.M., & Deci, EL. (2017). Self-Determination Theory: Basic Psychological Need in Motivation, development, and Wellness. The Guilford Press.

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