Chapter 5
Summary, Conclusion, Recommendation
Summary
The focus of this study is to examine the impact of Chinese tea in the tea market industry of UK. This research project will attempt to explore and identify the developmental foreground of Chinese tea into the UK market, and to provide marketing strategies for tea companies to marketing Chinese tea into the UK market. The study incorporates information from both secondary and primary research. The primary research was carried out by the qualitative methods of focus group discussion and depth interview. The results of the primary research match well with the data from secondary research. The following objectives of the study are:
1. To investigate the challenges brought by the distribution of Chinese Tea in the U.K. tea market.
2. To examine how such challenges resulted in more business opportunities for the U.K tea. market.
3. To identify the consumer behavior and their tea drinking habits.
4. To determine if Chinese Tea could significantly affects the performance of the U.K. tea market.
5. To identify the competitive advantage of the Chinese tea in the U.K. tea market.
The study investigated the current situation of the UK tea market and how the penetration of the Chinese tea affected the tea industry in UK. The study formulated the following: 1) the related factors affecting the performance of the U.K. tea market, 2) the degree impact of relationship of the perception of respondents with the current status of the Chinese Tea and the U.K. tea market, 3) the positive and negative impacts of the Chinese Tea to the U.K. tea market, 4) the consumer behaviors in U.K. in terms of drinking habits and 5) the competitive advantage of Chinese Tea in the U.K. Tea market and successfully yielded a proof that the hypothesis is true “Chinese Tea has a significant impact on the performance of the UK tea market.”
Tea shares the principal characteristics of the supply of cocoa and coffee in that it is a tree crop which does not yield immediately on planting and which has a long life. The total output thus depends not only on the total acreage planted, but also on the age structure of the tree stock. Tea starts to yield around its fifth year and the yields increase to a peak around ten years of age. Thereafter, there is only a very slow decline until an advanced age (sixty or more years) is reached. For countries where the crop is well established and the annual change in acreage is relatively small, the yield would be correspondingly little affected by changes in the age structure. However, for relatively new producers, where the incremental area is substantial in relation to total area, yields can be expected to vary.
The most important import markets for tea in 1991 were the UK, the former Soviet Union, Pakistan, the USA, Iran, and Egypt. The former Soviet Union relied very heavily on imports from India, with a substantial share coming from China, but for all other import markets there was a much lower concentration of sources. It is particularly notable that the three developing countries in this list all imported from a wide range of sources rather than tying themselves to a narrow range of suppliers. Many factors are likely to determine the patterns of this country-to-country trade and its variation over time, but the role of relative prices is of central importance because the impact of economic policies designed to affect the tea market will work through the general level of tea prices and through the relative prices of competing exports.
The marginal growth of the UK tea market in terms of retail value sales have been driven mainly by demand for specialty and herbal/fruit teas, particularly green tea. Herbal/fruit teas and specialty tea bags are the two fastest-growing sectors within the tea market, with succeeded growth both in value sales and market share. Whereas the retail sales of standard teabags has declined since 1998, but it has suggested that this falling trend is now starting to level off.
The study used the Michael Porter’s Five Forces Model in analyzing the competitiveness of the UK tea market. The following concepts were utilized:
- Threat of rivalry among existing firms
The intensity of rivalry among competitors in an industry is associated with the existence of a number of factors.
1. Status of growth: An industry lacks opportunities if it grows slowly, stably or is declining.
2. Structure of competition: An industry is unattractive and has more intensive rivalry when it already contains numerous, strong, or aggressive competitors.
3. Structure of costs: High fixed costs lead to strong enticement of price-cutting.
4. Degree of differentiation: Less intense rivalry when there is great differentiation among products or services.
5. Switching costs: Rivalry is reduced when switching costs are high.
6. Strategic objectives: The competition is more intense when competitors are pursuing build strategies than when players are having hold or harvest strategies.
7. Exit barriers: More intense rivalry when exit barriers are high.
Since the Chinese Tea is considered to be a new entrant in the UK tea market, the Product Life Cycle was also employed in analyzing the competitive edge of the Chinese Tea. The following concepts were used: The consumers have practically consistent in changing their needs and tastes. Likewise, new technologies, shortened product life cycle, and increased domestic and foreign competition have greatly increased the desire of almost all firms to develop new and improved products. Moreover, the factors that make the success of the development of new products more and more difficult, costly and risky are the shortage of ideas for new products, increased global competition, increased market segmentation, strong special-interest group, and increased government regulation. Designing new products or services, the company must first identify the customer requirement to ensure that the product will be supported in the market.
The study used secondary data in order to answer its objectives and prove its hypothesis that “Chinese tea has a significant impact to the UK tea market.” The various sources of literature, including articles in marketing journals with subject-based textbooks were analyzed in this study.
The secondary sources of data all came from published articles, business and finance journals, theses and related studies on consumer behavior and competitive strategy. These sources provided the theoretical basis of the study as well as present the statistical information relating to the development of the companies. Further, the factors, issues and their analysis served as a guide to the researcher in establishing the relationship of market activities and the management framework in adapting to such changes. Consequently, the researcher provided an evaluation on the result of the survey and the prior findings made by these earlier studies.
For this research design, the researcher also gathered data, collated published studies from different local and foreign universities and articles from social science journals, and make a content analysis of the collected documentary and verbal material.
The research approach is concerned of existing relationships, effects, practices, ongoing beliefs and developing trends. The study calls for a Qualitative approach because it needs to gather existing information regarding the UK tea market. Through a Qualitative approach, the research will be able to integrate data in the analysis portion. The approach was able to highlight portions of the research and was able to elaborate further on the already existing information to shed further light towards the answering of the problem statement and the forming of the conclusion. The Descriptive method will allow the Research to be extensive and flexible. The method had enabled the research to recommend some measures and procedures that may be useful to the UK tea and Chinese tea in the future.
The study utilized the two types of the Qualitative or Descriptive method alone has several types. The specific type that this research used is the Documentary or the Content Analysis which involves the gathering of information and the examination of documents and records. The integrity of the findings were maintained through the usage of existing models and theories that are used to analyze the UK tea market. At the same time, the researcher’s findings will rely entirely on the data gathered.
Through a study of different data such as cases and reports, the research was able to keep track of development and progress of the UK tea and Chinese tea market with regards to the method in which it was run and managed, and how these techniques were able to usher its success.
Conclusions
According to the analysis of the collected data, the study arrived to the following conclusions:
- Big corporations like Unilever/Brooke Bond, Cadbury Schweppes, Allied-Lyons and Associated British Foods/Twining dominates the UK Tea Market.
- These big companies enjoy the 90% share of the UK Tea market.
- Since the price and profit of the UK Tea market depends on the supply and demand of tea, these large companies have their own tea plantation.
- These large companies also enjoy the purchasing control inside the UK tea market because of their capability to control the demand for a particular type of tea.
- The regeneration of the traditional tea products brought a tremendous competition with other health drinks.
- The consumers of tea in UK are more conscious on their health and believe that tea can make them live longer they are looking for some innovative and healthy type of tea and this was provided by the Chinese teas.
- The most popular Chinese tea ever penetrated the UK Tea market is the green tea. It has affected the UK Tea market because retailers and wholesalers are distributing green teas.
- The green tea also entered the mainstream tea market and shared a spot in the UK Tea market with the large companies.
- The Chinese tea have a very competitive edge than the other companies distributing teas in the UK tea market because of the following reasons:
1. They have unique flavors for their teas that health conscious consumers look for.
2. Chinese tea is more focus on the health benefits of their consumers.
3. Consumers love their green teas.
4. Asian retailers and wholesalers distribute Chinese teas and consumers often go to these stores for purchase.
5. The prices of the Chinese Teas are much lower than the large companies.
- The UK tea market depends of the supply and demand of tea, then the suppliers have bargaining power.
- The tea market is dominated by large suppliers.
- The bargaining power of the consumers is high in the UK tea market.
- Since the competition in the UK tea industry is very stiff, it was easy for the Chinese tea to enter the competition
- The Chinese tea market is considered as a threat to the mainstream companies in the UK tea market.
- In the product life cycle, since Chinese tea already penetrated the UK tea market, the UK tea market must promote environmental and sustainable development in order to maintain customer loyalty.
Recommendations
Tea has constantly been deemed as the favored beverage. Nevertheless, its dominance was exceeded by soft drinks and sodas as the world’s preferred beverage in the much recent parts of the century. The cause for its decline is that tea is frequently looked upon as ‘old fashioned’ drink for elder individuals with such narrow alternatives. Accordingly, the tea industry was encountering a fierce sequence of brand identity predicament where intense price cuttings and endorsements were the standard as consumers attempted to shop on price as tea has been condensed to mere commodities. However, in the advent of the tea culture in the recent years, the emergence of Chinese tea market in the UK tea market reinvigorated the tea industry. In addition, companies that distribute tea such as Unilever/Brooke and other companies have become an international phenomenon with thousands of branches all over the globe.
The international tea market is a very competitive segment, and both UK tea market and Chinese tea market have to contend in opposition to the likes of restaurants, coffee shops, and street carts. A chief player, with considerably superior fiscal, marketing and operating sources than the tea industry, may perhaps go into this market at any instant and vie openly against the company. The UK specialty tea market carries on developing and a growing amount of organizations are seeking to go into the market. Both UK tea market and Chinese tea have to be conscious of competition on every level and sustain its operational performance if it is to keep hold of its position as the world’s foremost tea trader.
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