Marketing Plan: the Tea Shop

Marketing Plan: The Tea Shop 1. 0 Purpose and Mission 1. 1         Purpose of the Marketing Plan This marketing plan for the Tea Shop in Spain is produced to review the future of the business. In this plan, strategies are identified for the growth of the business considering opening new lines of business such as distribution of tea in top-of-the-range restaurants and hotels and also opening new shops in other countries. 1. 2         Mission Statement Tea is one of the most drunk beverages in the world.

World tea production continued to reach new highs in 2004, when output grew by 2 percent to reach an estimated 3. 2 million tonnes, according to an FAO report prepared for the Intergovernmental Group on Tea meeting in Bali (20-22 July 2005) to review the current world tea market and its medium-term outlook. Tea is a natural source of caffeine, theophylline, and antioxidants, although it has almost no fat, carbohydrates or protein. It has a cooling, slightly bitter and astringent taste.

Tea also contains an important quantity of minerals and anti-oxidants which play an important role in protection from cancer and heart disease and the maintenance of oral health; that there is a connection between tea drinking and a healthier lifestyle; and that tea is a refreshing, reviving drink. But in spite of these, with the country that is generally coffee drinker and coffee producer, that is Spain, tea shops establishments had experience difficulties in penetrating the market. The Tea Shop which was established late in 1980’s by Per Sundmalm is an enterprise that imports high quality tea.

The first tea shop was opened in autumn of 1990 in Barcelona. Sundmalm has established the tea shop because of his search for good quality tea in Barcelona. Tea drinker in Spain is a rarity. Spaniards are generally coffee drinkers. Tea in Spain is mainly for medicinal purposes. But Sundmalm suggest that there is no problem in demand of tea in Spain but rather the problem is that there is low supply of good quality tea in Spain. The first years of their operation, the business was very slow. The company has having a hard time of convincing the community that the shop is not healthy shop but a tea shop.

However, in some years of operation and after Spain has entered the European Union, people in Spain has opened up their minds and consumption of teas increased by the year 2000. The tea shop vision of is to be the recognized as the quality seal that guarantees chain of specialized exclusive boutiques only sells high quality teas. The tea shop has tried to convince anyone in Spain who is interested of good quality tea. As what Sundmalm discover, there is no problem in demand but rather the availability of good quality teas in Spain that is the problem.

Tea Shop offers good quality of tea from plantation to customers. The company also offers their own blend of teas between taste and the local tradition. They also offer services like advising and orienting their clients in selecting the best blend of tea that would suit their taste. Their goal is that “our trademark The Tea Shop of East West Company be recognized as a quality seal that guarantees that our chain of specialized exclusive boutiques only sell high quality teas. ”             The tea shop offers only tea but more than one hundred varieties with maximum quality and freshness.

They also offer wide range of accessories and exclusive delicacies for perfect enjoyment of tea. The company takes care of providing their shops with the products and information necessary to satisfy all clients’ needs. The staff has broad and complete training that permits them to give effective advice to their clients. 2. 0 Situational Analysis 2. 1         Environmental Analysis In order to analyze the macroenvironment, PEST Analysis is used. PEST analysis is very important that an organization considers its environment before beginning the marketing process.

In fact, environmental analysis should be continuous and feed all aspects of planning. The macroenvironment includes Political and legal forces, Economic forces, Sociocultural forces, and Technological forces. These are known as PEST factors. Social and Cultural The life style of Spain is at odds with that of Northern Europe. It is unhurried, loud and smoke-filled. A general “buenos dias” (good-morning) or “buenas tardes” (good-afternoon) on entering a shop or bar and “adios” (good bye) on leaving is expected. In conversation, the Spanish aren’t likely to stand uncomfortably close, but they may still pat your arm or shoulder.

An expansive body language of Spaniards should not be mistaken or misunderstood for anger. Foreign blonde women continue to hold a particular fascination to older generations. Women must be prepared for lengthy gazes from admiring males. A 5% tip in restaurants and 10% in taxis will e appreciated. Public toilets are rare but it is quite acceptable to use facilities of a cafe or bar even if you are not a customer. Yawning and stretching in public is considered vulgar. Meals in Spain are perfect occasion for establishing personal relationship and rapport with business partners.

During a meal make an effort to eat everything as it is considered rude to dump food. When you have finished, place knife and pork parallel in your plate otherwise it will be assumed that you want more to eat. In the Spanish business culture, gifts are usually offered only at the conclusion of successful negotiations. If you are offered a gift, you should open it immediately and in front of the giver. Most offices are generally open Monday to Friday from 9:00 am to 1:30 /2:00 pm (morning) and from 4:30 /5:00 pm until about 8:00 pm (afternoon).

Banks and government offices open 9:00 am to 2:00 pm Monday to Friday and may not reopen at all in the afternoon. Whilst the “siesta” is still a distinctive feature of the Spanish way of life, Spain no longer ‘shuts down’ completely for the afternoon. Business can be conducted over meals but be aware that the Spanish regard eating mainly as a sociable activity. Spain is one of the least punctual countries in the whole Europe. Be prepared to keep waiting for some 15-30 minutes. It is always polite to use the basic titles of courtesy: “Senor” (Mr), “Senora” (Mrs), Senorita (Miss) followed by the surname.

Spaniards are very conscious about dressing and will perceive your appearance as an indication of your professional status. Designer clothes and brand names will be noticed with approval. Business cards should be printed in English on one side and in Spanish overleaf. You should hand your card with the Spanish side facing the recipient. It is also recommended to bring plenty of literature about your company, samples of your products or demonstrations of your services. It is always helpful to provide a printout of the summary of your presentation in Spanish.

Personal contacts are vital for all business success in Spain. You should select your Spanish representatives with care because, once you have made your choices, it can be extremely hard to change allegiance to other people. Honor and personal pride mean everything in Spanish culture. You should avoid insulting the Spanish ego at all costs. Political Factors Since emerging from its relative international isolation during the Franco era, Spain has steadily become a more active and important player in international affairs. Spain is the eighth largest industrialized economy in the OECD.

For the past five years, the Spanish economy has experienced one of the strongest rates of GDP growth in the European Union. In 2001, the Spanish economy was valued at US$ 582 billion and the total value of Spain’s imports totaled US$ 182. 6 billion. In recent years, the Spanish Government has pursued policies aimed at making Spain more attractive to investors, creating a welcoming environment for foreign investment. It has low labor and transport costs and the introduction of the single market has eliminated exchange rate fluctuations and reduced overall transaction costs.

Spain’s credit rating is AAA. Spain is a democratic parliamentary monarchy. The monarch is the Head of State. The Monarch is responsible for ensuring that the country’s institutions operate in accordance with the Constitution and ratifies the appointments of the most senior public officers in the executive, legislature and judiciary. The parliament or the Cortes Generales is vested with legislative power. The parliament is comprised of two Houses: Congress of Deputies (Congreso de los Diputados) and Senate (Senado) .

As of December 2002, representation in the 350-seat lower house is made up of the Popular Party (Partido Popular , PP , 183 seats) ; Spanish Socialists Workers Party (Partido Socialista Obrero Espanol , PSOE , 125 seats) ; Catalan Nationalists (Convergencia i Unio , CiU , 15 seats) ; United Left group (Izquierda Unida , IU , 8 seats) ; Basque Nationalist Party (Partido Nacionalista Vasco , PNV , 7 seats) ; and other regional parties (12 seats) . The Senate is currently comprised of 256 Senators. Members of parliament are elected every four years by universal suffrage.

The Head of Government is the Prime Minister. For administrative purposes, Spain is organized into 19 Autonomous Communities. While the Constitution recognizes the right of these various regions to autonomy, it also emphasizes the indissoluble unity of the Spanish State. Each Autonomous Community, including the Autonomous North African cities of Ceuta and Melilla, has its own assembly and executive government. Their powers vary considerably, with some, such as the Basque Country and Catalonia, enjoying relatively extensive powers, including regional policing, education and health services.

Europe is the central focus of Spanish foreign policy. Spain joined the European Community in 1986 and was one of the founding members of the Treaty on European Union, which was signed in Maastricht in 1992. As the European Union’s fifth largest country in terms of population, output and production, and second largest in terms of geographical size, Spain has become an influential economic player and trade competitor, not only within the European Union and with Latin America, but also in the wider global marketplace.

It receives generous assistance through the European Union’s structural and cohesion funds and the Common Agricultural Policy (CAP). In May 1982, Spain became a member of the North Atlantic Treaty Organization (NATO) with its full integration into the military structure of NATO approved by the alliance in December 1997. Spain now plays an active role in the Alliance, viewing NATO as the basis of European security and defense. It has established close political, economic and security ties with the United States.

Spain shares a close relationship with the countries of Latin America a reflection of their long historical association, shared language and common culture. Spain has become the world’s leading investor in Latin America and, as a consequence, its influence in the region is considerable. Another priority region for Spain is the Mediterranean Rim. Relations with Morocco, however, are currently at low ebb. The future of Gibraltar, including its sovereignty, is the subject of discussions between the governments of Spain and the United Kingdom.

Spain continues to take a close interest in Middle East affairs and enjoys good relations with both the Arab states and Israel. Economic The Spanish economy benefited considerably from Spain’s accession to the European Union, and has since undergone a remarkable transformation from a relatively poor, agrarian economy to the eighth largest industrialized economy of the OECD. In 2001, the Spanish economy was valued at US$ 582 billion. The overall standard of living in Spain has risen in recent years and per capita income is around US$ 15,000, steadily converging with the European Union average.

Over the past five years the Spanish economy has experienced one of the strongest rates of GDP growth in the European Union, averaging around four per cent per annum, driven by strong domestic demand and productive changes. However, in 2001-02 the economy experienced a period of slower growth as a result of the general economic slowdown in Europe and the United States, and weaker domestic demand. Spanish GDP growth slowed to 1. 9 per cent in 2002, the lowest rate of growth since 1993 but still the fastest growing of the large European economies. One of Spain’s main economic challenges has been high unemployment.

In 1996, the unemployment rate was around 24 per cent. A steady reduction since that time has been attributed to labor market reform. The rate of unemployment for 2002, at 11. 3 per cent, represents a small increase from 2001, attributed to the general economic slow-down. The balance of trade in 2001 was in deficit by US$ 7. 0 billion. The current account deficit was about 2. 9 per cent of GDP and is forecast to fall below 2 per cent by 2003. Total external debt was around US$ 465 billion at the end of 2001 and is forecast to rise slightly over the next two years.

However, as a proportion of GDP, it is expected to remain stable at around 80 per cent. At the end of 2001, Moody’s Risk Management Services upgraded Spain’s credit rating to AAA status, and the IMF rated Spain’s economy as the most dynamic in the European Union over the previous five years. Overall, despite the recent economic slow-down, the Spanish economy is still performing above the EU average and looks set to perform well over the next few years. Spain joined the European Economic and Monetary Union (EMU) on 1 January 1999.

Spain, along with other EMU members adopted the euro as the sole currency on 1 January 2002. The euro, although inflationary in the short-term, should benefit the Spanish economy in the longer-term, especially through the improved degree of price stability it will generate, as well as its encouragement of foreign trade and investment through the removal of exchange rate risk. It is expected to bring increased competition and lower transaction costs within the euro zone, leading in time to greater consolidation within the EU market and increased growth. Demographic

Spain has a total area of 505,000 sq km which is the second largest country in Western Europe. This includes the Balearic Islands in the Mediterranean, the Canary Island in the Atlantic and two North African enclaves, Cueta and Melilla. Spain is the second mountainous country in Europe with predominantly Mediterranean climate mild in winter and hot and dry in summer. Most extreme differences are found in the interior with cold winters and hot summers. North coast is relatively cool and wet. The largest cities include Madrid, Barcelona, Valencia and Seville.

Spain has a population of 41 million, the fifth largest population in the European Union. Their official language is Castilian Spanish. Legal Spanish labor regulations included in European Union law include a large number of written rules regulating the rights and obligations of both employees and employers. These laws are characterized by the special protection they give to employees. Employers and employees are able to influence labor relations through collective and individual work agreements and contracts. All Spanish individuals over 16 years of age have the right to work.

Workers under 16 years can only work under special circumstances. There are special rules to protect workers aged between 16 and 18 years old. There is no obligatory age of retirement as this could be considered discrimination on the grounds of age. Nevertheless, a worker is entitled to collect a retirement pension only when he/she reaches 65 years old or 60 years under certain circumstances. Technological With regards to the technology, Spain has undergone a process of rapid modernization over the last ten years, investing in an extensive renewal of its transport, telecommunications and banking infrastructure.

All main economic centers now have good transport links. Bilbao and Barcelona, two of the most important seaports, are currently being upgraded and modernized. They are also the primary industrial centers in Spain. At present, Spain has two high-speed train lines. One operates between Madrid and Seville, and a second, faster line between Madrid and Lerida/Lleida. Construction of the extension of this second line to Barcelona is already well underway. Madrid is the centre for transportation, banking, administration, as well as, the headquarters for numerous international companies. . 2         Current Product Analysis The Tea Shop is mainly offering their different selections of tea. They have their pure tea, aromatic teas, decaffeinated teas, infusion teas and other selected blends of tea. The presence of theine and caffeine in tea, two stimulants of the nervous system, can decrease fatigue and has the capacity to maintain the mind active and alert. Consumption of 4 to 5 cups of tea per day can reduce the quantities of triglycerides and cholesterol in the blood as well as contribute to proper circulation of blood pressure.

In addition, each cup of tea contains fluoride that can reduce the appearance of dreaded cavities. Therefore, tea is beneficial to health             The Tea shop has now 15 shops in the best places in Spain. Recently, they sell 120 varieties of tea and tea accessories which includes sugars, jams and marmalades, biscuits, liquors, chocolates and others. The company also offers excellent services to their clients. They advise and orient their clients in selecting between their tea selections and tea accessories. Promotion of the product was ultimately one of the reasons of the increase in their sales.

Tea shop brochures were delivered to the consulates and embassies, chamber of commerce, local newspapers and magazines with a small package of tea attached. They have also collaborated with the FAO in their program of informing the people of the benefits of tea. 2. 3         Current Target Market The company is targeting anybody that is interested in good quality tea. Mass market is the strategy of the company aiming to sell their product to broad market in Spain. Mostly, Spaniards like to try new thing being attracted to everything that is exotic and different.

Spaniards love everything that is sweet or citrus flavored, orange, lemon, tangerine, vanilla or teas containing any kind of berry. In Spain, teas are savored with more sugar but rarely with milk or cream. Spaniards also prefer green gunpowder teas with fresh mint. Women consume slightly more tea than men do. The proportion is around 60% female and 40% male. However, Spain remains generally coffee drinkers; about 99% of the population prefers coffee. But since 1990, increased in tea consumption is notable. The 2,000 kg of tea sold in 1990 has reach to 70,000 kg by the end of 2001.

In 1990, Spaniards drank approximately 1,000 tons of tea. The tea shop market share has also increased from 1% in 1990 to 3% in 2000. The increased in consumption of tea has occur when Spanish entered the EU. People have come into contact with other cultures and have obviously opened up their minds. The amount of information that has appeared in the media about the health benefits of tea has also positively influenced the way Spaniards perceived tea, inducing them to consume more. 2. 4         Current Distributor Network Currently the tea shop has 15 shops in some of the best locations in Spain.

In 1996-97, the idea of franchising has first crossed his mind, however, not all of them can guarantee the quality of such specialized products or service they required, thus, he concluded that the best way to sell teas was in his own highly specialized stores. 2. 5         Competitive Analysis Coffee shops are the main competitor of the tea shop in the sense that Spaniards are generally coffee drinkers. However, there is no really serious competitor of the tea shop since only fancy supermarkets, coffee roasters, herbal shops or delicatessen stores carry similar products. 2. 6         Current Situation in SWOT Analysis

The Tea Shop has also strengths, weaknesses, opportunities and threats. Strengths: 1. High quality tea 2. High quality service 3. expertise on the tea business 4. Entrepreneurial spirit and commitment 5. complete and broad training of staff Weaknesses 1. Promotion 2. Single line of product Opportunities 1. no serious competition 2. increasing market share 3. specialized products 4. can open new lines of business Threats 1. Political issues can impact 2. seasonal demand 3. misperception of tea consumption 4. Competition from coffee shops 3. 0 Marketing Strategy and Objectives 3. 1         Marketing Strategy

Market growth is the main goal of the company which includes higher market penetration to get current customers in Spain to buy more and buy more frequently and also find new markets. 3. 2         Marketing Objectives 1. To increase market share by 1% every year in the next 3 years 2. To increase the number of customers and volume by 45% in the next 3 years 3. Create more awareness of benefits of tea through extensive promotion in local newspapers, and magazines and also collaboration with FAO in promoting the benefits of tea 4. Opening new lines of business through distribution to the top-of-the-range restaurants and hotels in Spain . 3         Financial Objectives 1. Gross Margin of 45% or more. 2. Net After-tax Profit above 15% of Sales. 4. 0 Tactical Marketing Programs This part is the heart of the marketing plan. It contains description of tactics or strategies to achieve the objectives and goals to be carried out by the company. 4. 1         Target Market Issues The target market of the Tea shop remains the same which is the broad market of Spain. The company would like to offer more of their products to the Spaniards which has thought of tea as herbal medicinal products not as a beverage.

The company would like to continue to change the misperception of the tea. It is also more challenging for the company to offer a tea in a generally coffee drinker market. 4. 2         Product Issues The Tea Shop’s product would still be only tea but more than one hundred varieties. The company offer today 120 varieties of teas in their shops from which you can select from what best suit your taste. There would be no line of product to be introduced but only tea accessories that would enhance the enjoyment of teas. The sale of tea depends deeply on the packaging of the product.

Every ounce of tea at some point between harvest and consumption exists in a container, and retail point-of-purchase laws often make it necessary for packaging to display net weight, nation of origin, and company address. Recently, the trend of cardboard packaging is expanding. Although there other types of packaging like brass, ceramic, porcelain, fine hardwoods, and micro-engineered tins, it only contains a fraction of a single percent of tea sold worldwide. Cardboard packaging is the most popular mid-range packaging format which has captures the major market share.

The Tea Shop should consider using the cardboard packaging for their products which should compose of the complete label which is necessary in the law that includes net weight, nation of origin, and company address. Packaging labels send signals not just to consumers, but to other tea companies, proclaiming legally protected status for brand names, slogans, logos, design and text, warning competitors against duplicating their use. It is also important for the company to design the packaging. Blue, as what the trend suggest, generates the most sales.

The company could consider incorporating shades of blue in their packaging. Red and yellow also could capture attention of the customers. It is acceptable to use the company’s name in branding the product. 4. 3         Promotion Issues Promotions of products by the company are quite not at its best. The company only waits for the customers to visit their shop. There has been advertisement in the early years of operation but has no extensive promotions. If not with the EU membership of Spain and FAO’s promotion on the health benefits of tea, sales would have not increased in the next years of their operations.

With the increasing number of competitors carrying different products but of the same health benefits that tea offers, extensive advertising and promotions should be considered by the company. To reach the public, advertising is a necessity. Advertising takes two basic forms. The generic campaign promotes not a specific product, but tea-drinking in general. The other form is private advertising to promote the brand or brands of a company. These two forms perform very different tasks for the tea trade.

Advertising’s role is multi-faceted, with a real possibility of increasing the total volume of quality tea sold to the public. 4. 4         Distribution Issues The Tea Shop has currently 15 shops in some of the best locations in Spain. The company is opening 2-3 shops in other places in Spain every year to make the products available to more people. Franchising is again considered. Franchising is advantageous for the rapid expansion of business to countries and continents and can reap enormous profits so long as their brand and formula are carefully designed and properly executed.

Moreover, opening new lines of business through distribution to the top-of-the-range restaurants and hotels in Spain can expand the distribution network of the company. 4. 5         Pricing Issues Setting price may include understanding the true cost of delivering a product or service, target contribution margin, competitive price points, price elasticity, and perceived customer value. There are many strategies that can be used in pricing the tea products considering all the factors mentioned. Pricing strategies generally fall into one of two groups: cost-based and market-based.

Cost-based pricing is a strategy that set price in relation to the cost of production of the product while market-based pricing is a strategy that tends to focus on the customers and the competitors. There are various pricing objectives in which companies can consider (1990). This includes penetration pricing, skimming, investment pricing, pricing for stability and competitive pricing. From the pricing objectives penetration pricing can be used in order to achieve the increase in market share by 1% every year in the next three years.

Penetration pricing would be appropriate strategy for a tea shop in penetrating the market of Spain that is generally coffee drinker and has limited knowledge on the benefits of tea in their health. Moreover, competitive pricing can also be considered. Through this strategy, pricing is level off over the price of the competitors which is generally coffee shops. Psychological pricing can also be implemented. In this approach, customer responds to emotional rather than rational basis. For example, 99 cents instead of one dollar or 1. 99 instead of two dollars.

This would create an emotional reaction that the product is cheaper. 5. 0 Control The purpose of Tea Shop marketing plan is to serve as a review of the future of the business on its growth strategies. The following areas will be monitored to gauge performance: * Revenue: monthly and annual. * Expenses: monthly and annual. * Customer satisfaction. * Market share 6. 0 Additional Factors This marketing plan is just a plan. Plans don’t always work out and we have to be ready to deal with the possibilities of problems that be encountered in the process of implementing this plan. 6.          Internal Factor 1. Problems generating visibility. 2. There would might be low production of teas 3. Funding may not be enough 6. 2         External Factors 1. Overly aggressive and debilitating actions by competitors 2. Hotels and restaurants may the accept the lines of business the company offers 6. 3         Research Limitation The marketing plan is limited on the information gathered from the internet and some books and with the analysis of the case study given. Read more: http://ivythesis. typepad. com/term_paper_topics/2009/12/marketing-plan-the-tea-shop. html#ixzz1V9ElpZiP