VYTAUTAS MAGNUS UNIVERSITY

FACULTY OF ECONOMICS AND MANAGEMENT

MARKETING DEPARTMENT

PARVIZ JAFAROV

MARKETING STRATEGY OF AZERBAIJANI WINE ENTERING LITHUANIA

Master Diploma Paper

Programme: Marketing and International Commerce, State code 621N50005 Study Field: Marketing

Advisor: Assoc. prof. dr. Nina Klebanskaja (signature) (date)

Defended: Prof., Habil. Dr. P. Žukauskas Dean of the Faculty of Economics and Management (signature) (date)

Kaunas, 2015 CONTENTS

SANTRAUKA...... 4 ABSTRACT...... 5 GLOSSARY OF TERMS...... 6 INTRODUCTION ...... 8 1. THEORETICAL SOLUTIONS FOR MARKETING STRATEGY IN ENTERING THE FOREIGN MARKET ...... 10 1.1. Strategic planning for international marketing ...... 10 1.2. Target market selection and evaluation ...... 13 1.3. The selection of method to enter a foreign market ...... 15 1.4. Formation of international marketing strategy ...... 17 1.5. Marketing mix elements in the international context ...... 18 1.5.1. Product ...... 18 1.5.2. Pricing ...... 21 1.5.3. Distribution channels ...... 22 1.5.4. Promotion ...... 24 1.6. The theoretical model of the company entering a foreign market ...... 25 2. SITUATIONAL ANALYSIS OF TOVUZ-BALTIYA COMPANY AT THE INTERNATIONAL ASPECT ...... 27 2.1. Activities of Tovuz-Baltiya company ...... 27 2.2. Research methodology ...... 29 2.3. The results of the research in Kaunas city ...... 32 2.4. Product assortment and production potential analysis of Tovuz-Baltiya company ...... 37 2.5. Export peculiarities of Tovuz-Baltiya company ...... 39 2.6. PEST analysis of Tovuz-Baltiya ...... 41 2.7. Competitive analysis of Tovuz-Baltiya ...... 44 2.7.1. Market segmentation ...... 44 2.7.2. Competitive analysis ...... 45 2.8. SWOT analysis ...... 47 2.9. Identification of international marketing objectives ...... 50 3. THE FORMATION OF INTERNATIONAL STRATEGY FOR TOVUZ-BALTIYA COMPANY ENTERING THE LITHUANIAN MARKET ...... 52 3.1. Preparation of sales strategy ...... 52 3.2. Selecting target market ...... 52

2 3.3. Azerbaijani wine positioning ...... 54 3.4. The marketing complex strategies in Lithuanian market ...... 56 3.4.1. Product ...... 56 3.4.2. Price ...... 57 3.4.3. Distribution strategy ...... 58 3.4.4. Promotion strategy ...... 59 3.4.5. Personnel ...... 62 3.4.6. Promotion budget ...... 62 3.5. Tovuz-Baltiya international marketing strategy model ...... 63 CONCLUSIONS ...... 67 REFERENCES ...... 69 ANNEX 1...... 74 ANNEX 2...... 75 ANNEX 3...... 76 ANNEX 4...... 78 ANNEX 5...... 81 ANNEX 6...... 84

3 SANTRAUKA

Baigiamojo darbo autorius: Parviz Jafarov

Pilnas baigiamojo darbo pavadinimas: Azerbaidžano vyno įėjimo į Lietuvą rinkodaros strategija Baigiamojo darbo vadovė: Doc. dr. Nina Klebanskaja

Baigiamojo darbo atlikimo vieta ir metai: Vytauto Didžiojo universitetas, Ekonomikos ir vadybos fakultetas, Kaunas, 2015 Puslapių skaičius: 84

Lentelių skaičius: 9

Paveikslų skaičius: 24

Priedų skaičius: 6

Pagrindinis darbo tikslas yra naudojant analizuojamus teorinius modelius sukurti tarptautinę rinkodaros strategiją Azerbaidžano vyno įmonei Tovuz-Baltiya. Darbą sudaro trys pagrindinės dalys – teorinė, analitinė ir praktinė. Pirmoji šio darbo dalis skirta apžvelgti teorinius rinkodaros strategijos aspektus įėjimui į užsienio rinką. Šioje dalyje analizuojamas strateginis tarptautinės prekybos planavimas, nustatoma ir įvertinama tikslinė rinka, pasirenkami įėjimo į užsienio rinką būdai, analizuojami marketingo strategijos ir rinkodaros komplekso elementai bei pateikiamas teorinis bendrovės, įeinančios į užsienio rinką, modelis. Antroji darbo dalis skirta įmonės Tovuz-Baltiya eksporto veiklo ir įėjimo į Lietuvos rinką tyrimams. Vienas tyrimas buvo ekspertų interviu, o kitas – anketinis tyrimas – atliekamas analizuojant Tovuz-Baltiya galimybes patekti į Lietuvos vyno rinką. Tyrimo objektu pasirinktas Kauno miestas, nes šiame mieste Tovuz- Baltiya nori atidaryti savo vyno parduotuvę. Trečioji darbo dalis pristato skirtingas rinkodaros strategijas Tovuz-Baltiya – pozicionavimo, tikslinės rinkos ir rinkodaros komplekso elementų strategijas. Šis magistrinis darbas turi praktinės reikšmės, nes jo rezultatai gali būti naudojami kitoms panašaus dydžio kompanijoms, norinčioms įeiti į užsienio rinkas.

4 ABSTRACT

Author of diploma paper: Parviz Jafarov

Full title of diploma paper: Marketing strategy of Azerbaijani wine entering Lithuania

Diploma paper advisor: Assoc. prof. dr. Nina Klebanskaja

Presented at: Vytautas Magnus University, Faculty of Economics and Management, Kaunas, 2015 Number of pages: 84

Number of tables: 9

Number of figures: 24

Number of annexes: 6

The main aim of the work is by using the analyzed theoretical models to develop an international marketing strategy for Azerbaijani wine company Tovuz-Baltiya. The work consists of three main parts – the theoretical, the analytical and practical. The first part of this work was to overview theoretical aspects of marketing strategy in entering a foreign market. In this part the strategic planning for international marketing is being analyzed, target market selection and evaluation is done, the methods of entering a foreign market are being chosen, formation of marketing strategy and marketing mix elements are being analyzed and theoretical model of the company entering a foreign market is being presented. The second part is devoted to the research of company‘s Tovuz-Baltiya export activities and entrance to a Lithuanian market. One export interview and one research is carried out by analyzing the possibilities for Tovuz-Baltiya to enter the Lithuanian wine market. Kaunas city was chosen for the research, because Tovuz-Baltiya wants to open its wine shop there. The third part of the work presents different marketing strategies for Tovuz-Baltiya – positioning, target market and marketing complex elements strategies. This master thesis has a practical significance because the results of it can be used for the other same size companies that want to enter foreign markets.

5 GLOSSARY OF TERMS

Concentration – involves the purposeful selection of a small number of the most promising markets initially for more intensive development (Parish et al., 2004; Bradley, 2005; Doole and Lowe, 2008). Exclusive distribution strategy is when the manufacturer gives exclusive distribution rights to only one intermediate dealer (Constantinides, 2006). Export is the sale of products (services) beyond the national limits in direct or indirect way. Export pricing is often referred to as the complex for the domestic market pricing, a decisive extent on its experienced collision with uncertainties arising from different countries beyond the control of the elements of the business environment (Constantinides, 2006). External environment is defined as the totality of forces in a given area and affect business decisions, to which a company neither individually, nor jointly cannot make a direct influence (Brown, 2014). Direct export takes place when the firm sells products or services to the importer or buyer, located in a foreign market (Joachim, 2014). Direct distribution – the company’s products are sold directly to end-users (sales units). Diversification – corporate strategy to enter into a new market or industry which the business is not currently in, while also creating a new product for new market (Parish et al., 2004; Bradley, 2005; Doole and Lowe, 2008). Foreign market selection is awareness of foreign markets requirements and the evaluation of the company’s abilities to meet these requirements (Gubik and Karajz, 2014). Indirect export – an export method that is simpler and easier to implement and does not require the company obvious reallocation of resources, a major time and financial costs for market investigation and so on (Kotler and Armstrong, 2013). Indirect distribution – the company’s products are sold through one or more intermediaries, who are not subordinated to the production company. Intensive distribution is when a manufacturer tries to provide products to the consumer within a large number of brokers (Constantinides, 2006). Internal environment – all the company’s available resources (financial, material and human) and the performance results of industrial, financial and other areas (Hansen and Solgaard, 2004). Marketing planning is an integral part of the organization’s strategic planning (McNamara, 2007).

6 Niche strategy – a market that consists of a small group of customers with distinct characteristics or needs, focuses on a particular niche instead of an entire market (Parish et al., 2004; Bradley, 2005; Doole and Lowe, 2008). PEST analysis – macro environment factors that are divided into: economic, socio- cultural, political-legal, technological and natural, yet often called ecological, environments (McDonald, 2006; Schrader et al., 2010; MacLeod, 2010). Portfolio analysis is the organization’s principal strategic planning tool, demonstrating the attractiveness of individual market segments. Selective distribution is used when the manufacturer, according to certain quality parameters, limits the number of brokers (Constantinides, 2006). Socio-cultural environment is defined as the part of macro environment formed by structure of society, customs, traditions and culture. Strategic management is also one of the major control elements of the company operating in today’s global business environment (Ambang, 2010). SWOT analysis is a key instrument of environmental influences on the organization and setting of market potential.

7 INTRODUCTION

Relevance of the topic. In current circumstances, no state can achieve economic growth without doing businees actively in international trade. International trade is one of the most important and the most dynamic globalization factor. When a country’s domestic market is presented with products, companies are looking for new opportunities in export markets. The companies’ nternational marketing topic is important for economic development of all countries, so this field is examined by foreign scientists quite well. Predominance of large competitors in international markets creates the right environment for small and medium-sized enterprises occupy a strong position. Flexibility and adaptability to rapid changes in the market provides a competitive advantage. Low and medium-sized enterprises in the international market rapidly develops new product development, which allows to reach a larger market share. Increasing competition in the domestic market determined the Azerbaijani companies to seek for additional opportunities in foreign markets. So this is a good opportunity to enter Lithuanian market. Scientific problem. International trade cooperation is a complex variety of factors that include market research, new product development, distribution, promotion and sales. Over the past five decades, a vital issue, for both researchers and corporate executives, has been choosing the proper marketing strategy, but there is no consensus on what the internal market decisions choosen for export markets. Although scientists have developed standardization-adaptation theories in the context of global companies, but there is a lack of research for small and medium-sized enterprises. These companies often face with major competitors, limited resources and lack of competent staff. So the main problem can be formulated as follows – What kind of international marketing strategy can be choosen for Azerbaijani wine company that is intended to enter the Lithuanian market. Main aim of the work – by using the analyzed theoretical models to develop an international marketing strategy for Azerbaijani wine company Tovuz-Baltiya. Object of the work – Tovuz-Baltiya international marketing strategy. Main objectives: 1. to examine the theoretical aspects of international trade and international marketing strategy and prepare the theoretical model for entrance to the foreign market. 2. to carry out a research of Tovuz-Baltiya situation analysis in entering international market. 3. to form an international marketing strategy for Tovuz-Baltiya. Logical structure of the thesis. The work consists of three main parts. The first part deals with theoretical aspects of international trade and international marketing strategy, the theoretical model for entrance to the foreign market. The second part carries out a research for the possibilities of international marketing strategy formation for Tovuz-Baltiya and its wine entering Lithuanian

8 market. The third part presents the international marketing strategy for Tovuz-Baltiya. The diploma thesis is finished with conclusions and recommendations. Methods and techniques – scientific literature analysis, statistical analysis, content analysis of documents, expert interview, research. Grafic data depiction method is used for research results.

9 1. THEORETICAL SOLUTIONS FOR MARKETING STRATEGY IN ENTERING THE FOREIGN MARKET

1.1. Strategic planning for international marketing

International activity of the company is inseparable from the company’s strategic planning. Strategic planning and management allows an organization to achieve competitive advantage and guarantee long-term success (Alamil, 2010). Marketing planning is an integral part of the organization’s strategic planning. General organization strategy and general marketing strategy in many areas of activities overlap. Marketing evaluates the needs of customers and the organization’s ability to meet those needs. Strategic planning is based on the market’s part, its development, so it is sometimes difficult to separate the company’s strategic planning and marketing planning (McNamara, 2007). In order to develop an optimal marketing plan, preparatory work must be carried out – accurately assess the current state of the organization, and conduct a market analysis. External business environment continuously influences the capacity of the company and strategic decisions. Organizations compete with other market players for the contracts, customers, competitors, use active strategies and affect the industry by offering new products and services. According to T. Ambang (2010), strategic management is also one of the major control elements of the company operating in today’s global business environment. Planning is considered and systematic definition of what a company, providing certain circumstances, must do in the future in order to implement its mission and goals. The strategy describes the sequence of the overall business, and the plan precisely defines how this strategy must be implemented (Carner, 2011). The strategic marketing plan includes market segmentation, target market identification, positioning and value to the customer based on the analysis and marketing opportunities (Choonhaklai and Wangkanond, 2014). The process of developing a marketing plan is shown in Fig. 1.

SWOT Focus more on promotion

Conduct Clarify Identify and Developing Implement and Control and situational organizational describe marketing co-ordinate evaluate analysis and marketing customers and mix for each marketing plan performance goals target markets segment

Set goals Write up basic segmentation report

Fig. 1. The process of developing a marketing plan Source: the figure has been created by the author, based on the data from Seeds (2014)

10 Situational analysis is firstly conducted when preparing a marketing plan (see Fig. 2). It is adviced to divide situational analysis into external and internal environment (Amanor-Baadu, 2009). Analysis of internal factors are the most important strategic planning stage, because it allows the organization to describe the possibilities of fulfilling their tasks set. Organization’s success will depend on whether it will be able to notice the opportunities and take advantage of them, as well as to monitor threats and to prevent them (Stevenson, 2014). Through internal analysis of the situation, the organization determines what it is capable of making. These are the possible actions with specific resources, capabilities and competencies (Yafang and Shih-Wang, 2012).

External PEST environment analysis Porter‘s model SWOT

Internal Strategic advantages environment analysis Value chain

Fig. 2. The stages and methods of organization’s situational analysis Source: the figure has been created by the author

External environment are usually referred to as macro environment, which is defined as the totality of forces in a given area and affect business decisions, to which a company neither individually, nor jointly cannot make a direct influence (Brown, 2014). In most cases the macro environment factors are divided into: economic, socio-cultural, political-legal, technological and natural, yet often called ecological, environments. In the scientific literature, this is called PEST analysis (McDonald, 2006; Schrader et al., 2010; MacLeod, 2010). Qualitative analysis of the macro-environment related to the SWOT analysis which demonstrates the company’s opportunities and threats associated with the macro-environment factors (Yafang and Shih-Wang, 2012). As throughout the whole strategic planning process, by doing the SWOT analysis, the main goal is to develop the ability to creatively interpret a variety of situations, how to make weaknesses into strengths, or at least to improve, that they will not interfere with the emerging opportunities (Amiri et al., 2010). SWOT analysis is a key instrument of environmental influences on the organization and setting of market potential. Marketing goals are being set after the evaluation of the strengths and weaknesses of the organization. Marketing strategy is now developed for the marketing objectives and a plan of marketing complex and implementation is being prepared. Preparation of the company’s strategy for entrance into the market requires inevitable and necessary market and company research. The broader are areas of research, the more objective is assessment, resulting in more accurate prediction, and reducing the risk.

11 According to M. McDonald (2006), in turbulent economic environment, when there’s a need to adapt the business strategy, regarding the new challenges, one of the ways to achieve this goal is the application of complex research, including macro environment research (and assessment). These research helps to reduce the impact of unfavorable changes in the environment, and often – to use these changes (as revealed new opportunities) for acquisition (or maintaining) a competitive advantage. By choosing the optimal market strategy for entrance to the foreign market, the following elements should be analyzed: political and legal factors, demographic factors, technological factors, organization’s resources, competition, marketing mix, standardization concept to application of the selected country and customer analysis (Tayar and Jack, 2013; Kash and Deshmukh, 2013). Legal environment. Before penetrating into the foreign market it is advised to study the country’s political climate by evaluating the existing political forms, the system of political parties, state political stability and foreign business risk arising from political actions (Sukhoruchenko, 2007). The government and governance structures formed by the political forces operating in the country impact the company in two ways: stimulating way (more favorable operating conditions for investment promotion) or restrictive way (prohibition of certain activities or limitation). According to G. Albaum (2008), when analyzing the government policies, laws regulating business activity, it is important to assess possible changes. For example, during a general election significant government policy changes can occur that would lead to the emergence of new laws or replacement of the old ones, and it may be important to the company’s strategic policy. Start-export companies must assess the possibilities for change in the law – company laws, competition laws, employment laws, health care laws, environmental protection laws and so on. The analysis of the political business environment needs to assess the degree of government control to foreign organizations, the probability of the trade embargo, tax situation, strikes and worker riots probability. The analysis of the legal environment should be seen in commercial law (patents and trademarks are copyright protection, accounting conducting), and laws on environmental protection, safety at work, a new business entry and pricing (Kotler and Armstrong, 2013). Economic environment. By evaluating the economic environment of the selected country, it is important to take into account the fact that every business has a significant impact on macroeconomic factors such as the country’s overall economic situation and development prospects. These factors more or less influence the purchasing power of the population, their behavior in the market, the demand for goods and their sale (McDonald, 2006). Economic factors are crucial to business and the priority is given to them deciding to develop export in certain countries.

12 One of the most important factors is the economic condition of the country, whether it is in the depression or growth phase. If the economy of the country is showing poor growth, compared to other countries, it can be a major stimulus to plan trading in other countries. In order to have a more complete economic analysis of selected country, the government’s economic policy (unemployment, inflation, wage, exchange rate, interest rate) must be evaluated (Kotler and Armstrong, 2013). It is important to take into consideration such aspects: the size of the various markets and setting properties; risk, operating in a country, evaluation; high growth sectors; investment decision-making and the most efficient use of resources aspects of the company. Socio-cultural environment. Socio-cultural environment in the scientific literature is defined as the part of macro environment formed by structure of society, customs, traditions and culture. Demographic characteristics (eg., population composition by gender, age, education, place of residence, personal income and changes in distribution) analysis reveals the dynamics of the population end-use developments. Market demand, its structure, and thus the price of the products in the context of socio-cultural environment is also determined by the public attitude, value orientation, standards of conduct, manifesting themselves through the main cultural values formation (Albaum and Duerr, 2008). Technological environment. The environmental component of the marketing mix, covering scientific knowledge and its impact on the practical application of marketing. The impact of technological environment is associated with new product development and placing on the market. These changes will encourage companies to look for new, streamlined service delivery methods, reduce the cost and savings for other marketing measures. In all cases, it should be taken into account the Porter’s five forces model (Kotler and Armstrong, 2013). In conclusion, it can be said, that this model helps to carry out the company competitive analysis, which objective is to examine how the organization should develop its own strategy in order to survive in a strong competition. Strategically minded leader must analyze these forces and propose a program to affect them and their defense. The organization‘s purpose is to find a profitable and possible to defend niche.

1.2. Target market selection and evaluation

The choice of the market in the company’s international activity is one of the key solutions. Foreign market selection is awareness of foreign markets requirements and the evaluation of the company’s abilities to meet these requirements (Gubik and Karajz, 2014). Wrong choice of the market gives the company a double loss of income, i.e., company is losing investment to enter into the wrong market and losing the earnings, which it can get if the market would be appropriate (Bradley, 2005).

13 The choice of the SME (small and medium-sized enterprises) export markets is determined by their own and new export markets similarities, informal personal contacts, favorable future export taxes, a specific market segment found, brokers deals. According to K. Laufs and Ch. Schwens (2014), most SMEs dispose significantly lower capital and less staff than large firms, that’s why such companies tend to take a risk and more likely to enter new export markets, without undertaking the necessary marketing research and not undergoing the rational market selection stages. For these reasons, SMEs often choose the wrong market, so the process of internationalization is not that effective. The selection methods of foreign markets can be divided into expansion and proximity (Steenkamp et al., 2009). As well as traditional foreign market selection methods can be replaced by the portfolio analysis (Farias et al., 2006). Expansion methods are characterized by the fact that one of the market is picked as a standart, and selection of other markets is based on the similarities of economic, social and cultural, political, legal and institutional environments. This selection is based on the company’s market experience and also known as nearest neighbor or sectional method. B. Hynes (2010) SME survey showed that this method is the most popular (75% of all surveyed companies), since the choice of psychologically close market minimizes the risk of failure, the adaptation of goods needs less cost and time to enter the market. Principle of proximity method is that the optimal market choice begins by analyzing all potential foreign markets. Attractive foreign markets are selected rejecting unattractive ones. The market access, capacity, user loyalty for export goods, market stability, competition in the market and the company’s abilities is taken into account. SMEs choose this method when they already have a successful experience in the neigbouring export markets. Portfolio analysis enables the company to compare alternative foreign markets and to classify them according to the company abilities. The most important portfolio analysis task is to identify those markets, which will be expanded. Each foreign market is analyzed according to the selected criteria. Portfolio analysis is the organization’s principal strategic planning tool, demonstrating the attractiveness of individual market segments. This method is used when adopting national and regional markets and the entrance to certain market segments. The largest traditional foreign markets selection methods drawback is that the strengths and weaknesses analysis of the company is included in the selection process very subsequently and some of the favorable market or potential hazards go unnoticed. Small enterprises typically operate with limited resources and have a smaller risk of resistance compared to large companies, so networking, strategic alliances or partnerships is one of the ways to compensate for the deficiencies (Hynes, 2010). Two or more countries for attractive

14 investement opportunities are selected in the selection method of national country. One of the evaluation criteria is risk assessment. To wrap up, it can be stated that the right chosen market can help companies to expand into the foreign market. Which target market to select depends on the selection methods used.

1.3. The selection of method to enter a foreign market

A company, that made a decision to engage in international activities, and choose the right market, has to take a decision on the method of expansion into new areas of activity. The most common ways are appointed: export, licensing, franchise, joint venture, foreign affiliates, the company (shop), a foreign company, manufacturing under contract, strategic partnerships, acquisitions, greenfield investments (Bradley, 2005; Couturier and Sola, 2010; Kotler and Armstrong, 2013). The least risky, simple, requiring a minimum of financial investment and likely to be implemented to the foreign market form is export (Bradley, 2005; Zucchella and Palamara, 2007). This method is most appropriate to begin international trade for those who has little experience in the international market. Export is the sale of products (services) beyond the national limits in direct or indirect way. Export scheme is presented in Figure 3. Indirect export Direct export PRODUCER

Internal market broker STATE BORDER

Producer‘s trade Manufacturer’s or its Broker’s trade dealership broker’s trade dealership dealership

Wholesaler Wholesaler

Retailer Retailer

CONSUMER

Fig. 3. Export process Source: the figure has been created by the author, based on the data from FAO (2015)

15 Direct export takes place when the firm sells products or services to the importer or buyer, located in a foreign market. This method has more advantages in comparison with the indirect method, since the company has more opportunities to grow faster and be in control of their international activities, self-development of relations with foreign partners. The main drawback of this method – the company itself has to find the client and properly evaluate him. Direct export is more often choosen by the companies that already have export experience, because this method of selling involves significantly larger range of activities and responsibilities. The main advantages of this method is the ability to directly control the sales and marketing, direct communication with consumers. On the other hand, this method requires a longer period of preparation, financial and human costs (Joachim, 2014). Indirect export – is when a company sells its products for a company that exports to foreign markets and is engaged in all export operations (preparation of documentation, the movement of goods, promotion of goods, etc.). In this case, the organization has no influence on pricing, distribution channels, promotion and positioning. Typically, companies start from indirect export (Kotler and Armstrong, 2013). Indirect export – an export method that is simpler and easier to implement and does not require the company obvious reallocation of resources, a major time and financial costs for market investigation and so on. In addition to cost savings, the potential additional costs and loss of profit from paying broker should be assessed. Indirect sales disadvantages, such as high dependence on brokers, limited opportunities to accumulate experience in export (marketing) field, direct deficiency of communication with consumers, should be assessed too (Kotler and Armstrong, 2013). One of the key critical points of export strategy is the export method choice (Hynes, 2010). Which method to choose depends on many factors: start-export company business strategy, experience in the field of export, planned export volume or the qualification of the skilled workers (Couturier and Sola, 2010). Three-step entry into a foreign market scheme presented in Figure 4. The first step is the assessment of internal company resources. Next step is the definition of specific frames, for example, how much time the company takes to enter a new market abroad, who will take control over the penetration to foreign markets. And the last stage is the market analysis, i.e., what is the potential growth of the market, how the products reach the customers, how much time it would take to establish itself in the market and the size of market share to occupy. All of these factors should be assessed in a political-economic context, and only then decide what method of entering the market to choose from.

16 Step 1 Step 2 Step 3

To set possible To define The evaluation of 5 market factors: opportunities for strategic entering a market in guidelines: Market Entrenchment in the in the company’s growth the market local resource context: Time for entering a Does organization market have a reliable Distribution The applicability strategy entering Control of of the product foreign market? strategy implementation Does organization have all resources Political, legal and for foreign trade? economic context If not, what actions should be taken in Choice of method Step 2 and 3? for entering a foreign market

Fig. 4. The structure for entering a foreign market Source: the figure has been created by the author, based on the data from Couturier and Sola (2010)

The choice of entering the international markets depends on many factors. The lack of resources, not only determines the company’s way of internationalization, but also the future development opportunities. Low and medium-sized enterprises, because of their size and limited resources, opt for a simpler and cheaper method to access international markets. In addition, the major part of organizations begins internationalization process by export form, because less control and resources is required to enter into foreign markets.

1.4. Formation of international marketing strategy

The development of marketing strategy is often one of the most important aspects of the company’s activities, which helps to achieve business objectives and organize activities in a focused and targeted way. Marketing strategy determines how to act in order to achieve results, marketing strategy allows to evaluate the development of the market and to take changes into account. Before considering a marketing strategy, it is important to discuss the planning and development of the company‘s strategy in international business (Naidoo and Wu, 2011). When preparing a marketing strategy, firstly a prospective study is performed (SWOT analysis). After a prospective study, marketing objectives are formulated, which will help to prepare a marketing strategy, which is being organized in view of the target market, marketing mix elements and positioning method (Evanschitzky and Wangenheim, 2006). When formulating a marketing strategy, three main penetration into international markets strategies are covered: the selection of market, penetration time, organizational process forms. Also, every marketing strategy includes not only consumers but also the satisfaction of competition issues

17 (Naidoo and Wu, 2011). The analysis of international marketing strategies in the scientific literature shows such main strategies (Parish et al., 2004; Bradley, 2005; Doole and Lowe, 2008):  Diversification – corporate strategy to enter into a new market or industry which the business is not currently in, while also creating a new product for new market. Most risky.  Concentration – involves the purposeful selection of a small number of the most promising markets initially for more intensive development.  Niche strategy – a market that consists of a small group of customers with distinct characteristics or needs, focuses on a particular niche instead of an entire market.  Competition strategy‘s main purpose is to gain an advantage over other organizations – by reducing company’s production costs, increasing the quality of products (services) or etc. One of the most appropriate marketing strategies for small and medium-sized businesses is a market niche strategy, the essence of which is concentration in individual segments or product groups, identifying niche markets before in order to occupy a high competitive position in the chosen market segment. What kind of marketing strategy to choose for SME, depends on the business of the company, the objectives and the leader (employees) competencies. The following parts are frequently mentioned when forming the marketing strategy: the mission and goal setting, internal and external environmental analysis, the formation of alternative strategies, marketing mix creation, marketing plan execution, control and feedback. Most favorable markets to invest are neighbor markets, thus avoiding the currency exchange differences, complex labeling. Summarizing the views of the analyzed authors, the following main features of international trade can be distinguished: the owner’s competition, public support and understanding of the legal system.

1.5. Marketing mix elements in the international context

1.5.1. Product

P. Kotler and G. Armstrong (2013) states that the base of company’s international activities is product or service that is understood as a set of tangible and intangible elements, which distinguishes the product or service from others on the market. The company’s success in the international market depends on whether it will be able to distinguish its products or services from others on the market, and how successfully it can do so. It is important to know that the goods can vary from each other according to their composition, country of origin, tangible properties (such as packaging or quality), or added value (guarantees, installment sale, additional after-sales services). Companies often offer customers not only one product, but a range of them, which can be described

18 as the whole of products (Chen, 2011). The creation of organizations product decision process is presented in Figure 5.

Asortment selection for Granting of Assessment Product products, that the necessary of product assortment are designed features to the life cycle introduction for specific products market

Fig. 5. Product assortment Source: the figure has been created by the author

As shown in Figure 5, before forming the assortment of products, the company should firstly identify which market segment it is intended for. Taking this into consideration, the assortment of products is formed by providing the additional features needed (or not) for the products. Another important aspect – the planned product (assortment) demand, which can be described as the company’s share in the total market demand. Companies demand for goods is determined by market demand and market competition (Chen, 2011). When an organization has already chosen field of activity, it has to choose how to bring its products to market more effectively. International product life cycle (Fig. 6) has a significant impact on marketing decisions, and vice versa, marketing decisions affect specific international product life cycle.

Fig. 6. Product life cycle Source: Equerry (2008)

At the 0 stage, the product “is borned” and firstly reaches the local market. Then it develops and starts to enter other markets – export begins. The demand is sufficient and the product is made in foreign markets. Then the market becomes full of this product, the demand decreases and

19 the producer starts to look for some new markets. The minimizing export makes the producer to lower the output. Then the substitutes appear in the market and outrun the first producer. International product life cycle is unequal of individual products. It operates more for products which production technology has spread to many countries. The more standardized product, the stronger the impact of international cycle. To reduce the impact, the company may continue creating new or modify already proposed products to consumer (Equerry, 2008). Marketing strategy decisions related to product life cycle is contained in Annex 1. Depending on how the company changes the characteristics of the product and its production technology, when entering a foreign market, main product strategies for foreign market are as follows: unmodified products, modified products, new products and new product distribution (Marketing Mix Hub, 2015). The product-market growth matrix is specified in Figure 7.

Fig. 7. The product-market growth matrix Source: Marketing Mix Hub (2015)

Deep penetration strategy (old product – old price). This strategy can be applied when the market is still unsaturated with products. Selling old items in the old market, the advantage can be achieved only by reducing the cost of production and selling products at lower than competitors‘ prices. When this strategy is selected, the production costs must be reduced. Market expansion strategy (old product – new market). The goal of this strategy is to increase sales volume by offering the same product for new markets or for new segments in already existing markets.

20 Product creation (modification) strategy (new product – old market) is applied when a new product has been offered in an already taken market. The goal of this strategy is to offer a product that the consumer wants. Diversification strategy (new product – new market). When the manufacturer proposes a new market entirely new product or service. Using this strategy, it is important to familiarize consumers with the product and convince them to buy.

1.5.2. Pricing

The pricing problem is similar both in local and export market (to set new product price, change it, according to the actions of competitors). But the product pricing in export faces additional environmental factors such as the impact of government (eg., customs policy), consumer behavior differences between markets, different currencies, their fluctuations, cultural, legal and institutional barriers complicating export pricing (Homburg et al., 2012). Another important aspect – the delivery costs, which can be included or not included in the price of products sold. Standardized international trade terms Incoterms are widely used in international trade (Czinkota and Ronkainen, 2007). Flexible to changing market conditions, adequate export pricing strategy determines a company’s market share, revenue, profits, helps to increase the company’s ability to successfully compete in the international market. The improvement of export pricing strategy in organizations not only allows them to increase the quality of decision-making pricing, thereby increasing the efficiency of operating in foreign markets, but also expands the country exporters’ competitiveness in international markets that have impact on the country export‘s volumes (Gregson, 2008). Export pricing is often referred to as the complex for the domestic market pricing, a decisive extent on its experienced collision with uncertainties arising from different countries beyond the control of the elements of the business environment. Prices, particularly earnings, are highly dependent on the exchange rate, calculating indicators for base price, as well as intermediaries, whose actions are not always possible to control and manage (Constantinides, 2006). In a general sense, the environment of pricing strategy can be defined as a unified system of forces that affect price decisions, and combines direct and indirect influencing factors. The evaluation of these pricing factors affecting pricing environment and their accuracy is an important aspect of forming export pricing strategy. The environment of pricing strategy is usually divided into internal and external. Internal environment unanimously regarded as all the company’s available resources (financial, material and human) and the performance results of industrial, financial and other areas. External environment can be divided into two levels: macro environment and industry market environment. For calculation of export prices, it is proposed to use the Incoterms 2013 conditions shown in Annex 2.

21 There are three important factors influencing export pricing – market, company and product, but they include not only the consumer and competition-related aspects, but also governmental regulation (export barriers, price controls, anti-dumping regulation) and exchange rate factors (Hansen and Solgaard, 2004). The buyer usually thinks that the price depends on the seller, but when digging more deeply, it can be said, that the price is the result for mutual relations between the buyer and the seller (Khan, 2014). A conditional relationship between production costs and selling price exists, even though the producers often set the price based on cost price. Before proposing the products on the market for a specific price, the company should first calculate its volume of sales, that guarantees profit. Then it is necessary to analyze the reality of realization of this product amount. Production break-even calculation allows to analyze the profitability of different sales volumes, production or organization will be profitable (breakeven) at a given price of the product (Khan, 2014). Following base cost determining strategies are used both for the domestic and foreign markets: skimming strategy, application of the prevailing market price, the penetration strategy (Gregson, 2008). For the first time many manufacturers enter into international markets as exporters using indirect channels and selling at relatively low prices, and with little risk and having an early profit outlook.

1.5.3. Distribution channels

Even a very good product can not be demanded in foreign markets, if it is not presented in the appropriate way, at the right time and in the right place. Presentation of products to customers and their distribution is a complex task, involving the choice and management of distribution channels and logistics management (Constantinides, 2006). Various organizations have united their efforts in creating a marketing or distribution channels that allow them to supply their products to the industry and the end user. Marketing (distribution) channels can be defined as the set of interrelated organizations, making an option for different products or services and the opportunity to use them (Khan, 2014). Two criterias are dominating in planning product distribution scheme: the level of customer service and profit. Principal priorities and needs of the customer are raised in the first place. In this case, to satisfy the needs of the customer maximally. Profit criteria promotes oraganization to look for the optimal distribution channel, the way in which the customer is satisfied, and the company guarantees profitability of activities. Initial allocation step is always the manufacturer and the last – the customer, with one or more intermediaries interfereing, who are called trade chains (Constantinides, 2006).

22 Product distribution may be direct and indirect. Direct distribution – the company’s products are sold directly to end-users (sales units), indirect – through one or more intermediaries, who are not subordinated to the production company. Intermediaries can be sales representatives, agents, brokers, commission agents (Homberg et al., 2014). B. Hynes (2010) indicates such distribution channels:  Agents represent the foreign exporter in the market, find a buyer, lead to negotiations and forward an order to exporter. Exporter sends products and the bill to the buyer and when the buyer pays the bill, the exporter pays commissions to the agent. Commission sales agents assumes no risk, they get commission when the production is sold.  Distributors buy goods from the exporter and assume all further risk of sales. Distributors often work on consignment, i.e., they pay when the products are paid of, after a period of time. Distributor’s advantage is that he can better represent in the chosen market, he can store exported products and fulfill customers orders more quickly.  Intermediaries perform all operations on their own account. In most cases, they are wholesalers that have their own distribution network for retail trade. There can not be a definite opinion, which method is the most appropriate and advantageous for the company that starts export. The choice is determined by a number of internal and external factors, and the company can only make a decision by fully considered them. The final decision, which method to choose, should be taken on an assessment of the costs and expected profit. Trading intermediaries should be chosen if the payments to them are lower than the cost that would result from direct selling. When choosing a right export method, the company has to figure out which way the product will enter the chosen target market. P. Kotler and G. Armstrong (2013) distinguishes three basic types of distribution channels: 1. Manufacturer sells his products to the consumer in his own shops or by e-commerce (controlls distribution channels and at the same time is one part of the channel); 2. Manufacturer operates through independent brokers; 3. Business depends on the distribution system formed. There are three main product distribution strategies (Constantinides, 2006): an intensive, selective and exclusive. Intensive distribution is when a manufacturer tries to provide products to the consumer within a large number of brokers. Selective distribution is used when the manufacturer, according to certain quality parameters, limits the number of brokers. This way are usually distributed products that are periodically bought, carefully selected. Exclusive distribution strategy is when the manufacturer gives exclusive distribution rights to only one intermediate dealer. This strategy applies to expensive or exclusive products.

23 In summary, it can be said that by executing the distribution in foreign markets, it is most important to realize that the product, outside the company, is still a concern of the exporting company. P. Kotler and G. Armstrong (2013) emphasize that the exporting company should know each participant in the distribution channel, monitor the movement of products on the channel to the end-user and collect information about them.

1.5.4. Promotion

Promotion includes the creation of product demand, its maintenance and improvements. Major promotion solutions – the same support methods can be applied everywhere, or they sould be adapted for different markets (Kurtz, 2010). The promotion complex or its individual elements can be used both in international and domestic marketing. Classic promotion package includes: advertising, sales promotion, public relations and personal selling. Recently direct and interactive marketing can be added to this complex. Organizations usually apply an integrated marketing communication system (Khan, 2014, 2008; Homberg et al., 2014). B. R. Jewell (2002) argues that the buyer and seller relationship is the key to success in sales. The main objective of export promotion is to find foreign partners, which means that promotion covers the actions and decisions aimed at informing customers about products and promote to purchase these products. One of the main ways to start negotiations with foreign partners – participation in international fairs and exhibitions (Bradley, 2005). This method allows to meet with the relatively high number of potential business partners and therefore reduce the search costs. Also exhibitions give excellent conditions for the initial product testing and evaluation of it in particular market. E. Constantinides (2006) argues that the company, entering an international market should first decide:  which – “pull” or “push” – strategy is better suited for one or another foreign market, combining it with other elements of the marketing mix;  to what extent promotion program must be standardized or localized, taking into account the specifics of the markets in foreign countries;  what the content and nature of the information should be, taking into account cultural and economic characteristics, the state policy and legal environment of the target market buyers. Promotion strategy in foreign market is determined by international marketing environment and business strategy, tactics and the resources available (Hultman et al., 2011). N. Ashill and D. Jobber (2014) identifies three key elements in international marketing environment – cultural, social and economic, financial, political and legal. Another factor leading to choice of promotion strategy – company’s available financial, personnel and other resources. If the company lacks the money, the promotion campaign can be on a small scale (Hultman et al., 2011).

24 Another important aspect of the program of promotion is the forming of promotion budget and program. I. Bage (2012) presents such methods for establishing and allocating the promotional budget: 1. Top-down budgeting; 2. Bottom-up budgeting; 3. The affordable method; 4. Arbitrary allocation; 5. Percentage of sales; 6. Competitive parity; 7. Return on investment (ROI); 8. Objective and task method. When an organization has formed the promotion budget, it must allocate this amount to individual methods. The efficiency of various promotion tools varies depending on the product type and sales market. For example, a manufacturer of consumer products appoints more funds into advertising, while companies producing industrial purpose products appoints more funds into personal sales organization. Promotion programme is also affected by the size of the market, for example, when the segment of the market is small, personal sales is used commonly (Khan, 2014). In summary, it can be said that promotion is a business function, focused on the greatest possible return on the money invested, so before planning promotion budget, it should answer the following questions: is the goal of the company a fast sale, or a company would like a partner-user for a long time and whether the company has major objectives in foreign markets – to be a leader and so on., or is certain niche market enough for it?

1.6. The theoretical model of the company entering a foreign market

The summary of theoretical part of the work is best reflected in Figure 8, which provides a marketing strategy model for company, entering a foreign market. The first phase – is the identification of the company’s mission and strategic goals. The objective assessment of the company’s situation and the formulation of marketing objectives is very important in international trade. The novelty and uniqueness of this model presented occurs through the integration of state support to the company’s planned international activities. It is done in two steps in this model: carrying out market studies and by forming a long-term establishment of the company at the state financial support and reducing costs of entry.

25 Organization

Mission

Strategic objectives Internal environment

Strengths Weaknesses

Opportunities Threats External environment External environment

Objectives of international marketing

Target market selection Formation of international marketing strategy Correction

Method selection for Selection of foreign market entering the foreign market Choice of international marketing strategy

Direct export Method for Competition Cooperation market selection

Indirect export Analysis of Segmentation Allocation foreign market

International marketing mix Employees Analytics of state Companies that decisions export provide market development researches Correction

Product strategy Pricing strategy Distribution strategy Promotion strategy

Assessment of state support Volume of sales forcast and budget formation

Implementation and control of marketing strategy

Fig. 8. Theoretical model of organization entering a foreign market Source: the figure has been created by the author

26 2. SITUATIONAL ANALYSIS OF TOVUZ-BALTIYA COMPANY AT THE INTERNATIONAL ASPECT

2.1. Activities of Tovuz-Baltiya company

Tovuz-Baltiya LTD, a subsidiary of the Naig K° corporation, was founded in December 1989 and focuses primarily on the cultivation of grapes and the production of wine. In spite of the efficiency of a decree issued by M. S. Gorbachov to combat alcoholism, the collapse of the Soviet Union allowed „Tovuz“ to become the first private production plant for the manufacturing of wine and cognacs. Under the mutual collaboration with long standing associates from Latvia and Lithuania, Tovuz began to supply its cognacs and decided to rename the firm. In March 1993, the company was registered officially under its new title-Tovuz-Baltiya LTD. One of the highest parameters in activity of the company is that it possesses very favorable infrastructure for delivery of made production to the world market. The company is located in the western region, has a favorable site and is contained distance of 2,7 km from the Great silk way which connecting Europe with Asia. Most part of it passes through Azerbaijan. And also on distance of 2,4 km from the biggest trunk-railway, that considerably facilitates an output on external the market. Besides it, the company has the warehouse adequate to all necessary standards which are on suburb of tracks, that also considerably facilitates sending the goods on internal and a foreign market. The company is on geographical distance of 395 km from Black sea and 465 km from Caspian sea, that also is the important factor for an output on a foreign market, using thus the cheapest and favorable transport way – sea. The company is on distance of 45 km from the airport in the city of Gandja, which has flight to Moscow. The company possesses high-quality, long-standing cognac (25-50 years). Tovuz-Baltiya supplied a great amount of seeds and other important agriculture materials to the Khanlar Agro Industrial Complex. After the dissolve of the Soviet Union, the Khanlar Agro Industrial Complex could not pay its debt for the products it purchased and offered to calculate the stock of elite cognac material in its storehouse. Khanlar industrial complex specialized in the production on elite cognac for the central apparatus of the USSR for many years. Cognac materials were kept in special barrels made of 100-year old oak from the Limusin forest. At the present time, this stock of cognac material is kept in company storehouses in specially controlled temperature rooms, following European standards (Gold Reserve). The company Tovuz-Baltiya employs 120 people, most of them – the most qualified specialists and wine makers. 20 employees are working in administrative area, 70 – in production,

27 16 – in transport, others – in production package and warehouse. By the number of employees and turnover of 2014, the company attributable to medium-sized enterprise. Only highly-qualified specialists with experience and a Moscow education work in the plant. Thanks to experienced cadres and accumulated knowledge, the company produces high- quality wine from special varieties of grapes, as well as creating superior cognac alcohol. Cognac alcohol production is kept in 200-500 liter oak barrels, made of 100-year oak trees from Bulgaria, Italy and France. The flood of production is caused the purchase in apparatuses from French, German and Italian firms: Zeis, Gai and Costral, respectivley. The main priority of the company is that the technology of creating spring water is used, which is received from mountainous river Dzegam. This water has more significance for creating quality cognac. At the same time, climate conditions are an important factor as well. Azerbaijan is considered to be the world‘s grape-growing center. The quantity of active sun energy in Azerbaijan is two times more than in France. This is the main factor behind Azerbaijan‘s high quality grape harvest. Naig C° and Tovuz Baltiya have been awarded certificates for the quality of their products (Fig. 9). The company is a holder of the gold and superior medals for wines and cognacs at alcohol- testing competitions in Moscow and St. Petersburg, as well as other international awards from Frankfurt, Geneva and France.

Fig. 9. Some of the company‘s award certificates Source: Tovuz-Baltiyja (2015)

The company’s mission – to produce and supply quality products and services, ensuring their quality by implementing innovation, the assortment of products and services and increasing the quality of skilled workers ensuring the mutual benefit with the customers and partners. The strategic objectives of the company – to increase its own assortment of products and expand international trade.

28 All production, manufactured in the company, is certified according to the quality management of ISO9001:2011 and ISO14001 environmental protection: 2009 standards. Tovuz Baltiya manufactures its products using advanced and environmentally friendly technologies. By planning the company’s international marketing activities, it is recommended to follow the plan submitted in the theoretical part (Fig. 10).

Tovuz Baltiya Ltd Objectives of international Strategy of international situational analysis of marketing marketing international trade

Tovuz Baltiya Ltd Plan of actions International marketing international activity budget complex formation

Realization of plan

Figure 10. International marketing strategy plan for Tovuz Baltiya Source: the figure has been created by the author

Marketing plan is an integral part of the company’s strategic planning, which reflects the key milestone, what and when to do. The key points for Tovuz Baltiya international marketing plan preparation process are presented in Fig. 9. International marketing plan shows what actions must be followed to succeed in the implementation of the company’s mission and strategic objectives. The crucial moment in the preparation of marketing strategy is the company’s analysis of the situation. Internal factors were chosen that give the maximum impact on international trade affecting parameters – production and product mix analysis, and export performance analysis. For external environment it was decided to do the PEST analysis, because Tovuz Baltiya is a leader in wine making in Azerbaijan.

2.2. Research methodology

All marketing solutions are based on marketing research. The goal of international marketing research is to obtain information that might identify the best foreign markets and segments for entrance into foreign markets and combination of marketing program elements. The main difficulties faced by companies’ owners – lack of information, qualified personnel and financial resources for expensive market research. The research objective – to gather the necessary information to help build up Tovuz- Baltiya marketing strategy for entrance to the foreign (Lithuanian) market. The tools used to achieve the objective:  Expert interview method; 29  Survey method;  Analysis of statistics. Master’s thesis research strategy can be divided into four phases: I. First phase – situational analysis of Tovuz-Baltiya. Interview method was done by telephone, competent employees of the company in relation to international trade were interviewed. Internal factors analysis will be performed by the method of expert interview. Analysis of external factors will be done by the method of statistical data analysis. Questionnaire was given to Lithuanian people to find out the prespectives of Tovuz-Baltiya company entering Lithuanian market. II. Second phase – the selection of foreign market. Methods – statistical analysis of the data, content analysis of documents. III. Third phase – formation of marketing strategy. Methods – statistical analysis of the data, content analysis of documents, forecasting methods. IV. Fourth phase – conclusions and recommendations. Phase I – company Tovuz-Baltiya’s external and internal environmental assessment. The objective of this stage – to gather the information needed to develop international trade. A measure has been chosen for this objective – expert interview and questionnaire. Interview method is used in order to obtain a more precise and detailed information from each respondent. This technique is particularly useful when managers, specialists are being interviewed, when the subject (in this case, international trade) is their job. In order to get the most accurate information about company Tovuz- Baltiya’s activities and properly assess the company’s experience (positive and negative), an interview method was selected. Two top managers, i.e. managers from Production and Development department and Production department. The selected type of interview – unstructured interview, when it is questioned in a free form and if the need arises, a conversation can be directed in the right direction. Interview questions were sent to the participants in advance, making it possible to prepare replies and necessary data (turnover, sales volumes). Interview questions can be divided into blocks, shown in Table 1.

Table 1

Specifics of the research instrument (interview)

Block of questions Quantity of Goal questions Production activities 5 To obtain the necessary information relating to the company’s activities – production (equipment, quantities of goods). Products 5 Determine how much and what kind of products the company manufactures. Personnel 3 Figure out how many employees work in the company;

30 the proportion of the staff responsible for international trade. Segment description 1 To determine what is the target market of the company. Experience of sales 3 Assess the company’s sales experience (internal, foreign market). Assessment of export 7 Analyze export activities. activities International marketing 14 Figure out what decisions the company adopted mix decisions undertaking export activities (price, product, place, promotion). Source: the figure has been created by the author

Interview contained 33 main questions. Interview questionnaire is submitted in Annex 3. Another survey was done in Kaunas city. For this survey a questionnaire of 13 questions was prepared. The sample of the questionnaire is given in Annex 4 and 5. According to Drug, Tobacco and Alcohol Control Department (2015), the one tenth of people in Lithuania are drinking alcohol, so if Kaunas has a little more than 300 000 people, let‘s say 30 000 of them drink alkohol. So this number will be the general whole size in order to make a research successful and represent the whole population. The survey sample was counted by formula (1):

n (1) ∆ N

where: n – sample size; Δ – error size (0,05); N – general whole size.

n 394 , For a successful survey 394 respondents have to be interviewed. 400 questionnaires were handed out and 312 good ones for the research returned. The research was done from 2015 03 16- 2015 03 26 using an Internet (www.apklausa.lt) and giving to people personally (mostly students, their relatives, parents). A convenience selection was chosen for a research because it is cheap and convenient. The results then were adopted by Microsoft Office 2007 package and the results were represented in diagrams. At the end, the conclusions of the research were made. Phase II-Phase III. For the assessment of external factors, influencing the company in international trade, macroeconomic indicators are being analyzed. Methods used: graphic data and mathematical methods. Another important research method – main documents’ content analysis, which goal is to get specific information on the subject. Sales volume, product price and expected profit are calculated after the development of a marketing strategy.

31 The information obtained during the research is being organized and used for preparation the marketing strategy of the company Tovuz-Baltiya to enter a foreign market. Variety of research methods made it possible to analyze the issues seen by using a more objective way and therefore to adopt a more accurate decisions.

2.3. The results of the research in Kaunas city

First questions in the questionnaire were main questions about the respondents‘ sex, age, marital status, education, income, living place. Demografic characteristics are shown in table 2.

Table 2

Demografic characteristics of respondents

Questions Answers 1. You are?  Man 56%  Woman 44% 2. Your age?  18-25 23%  26-35 31%  36-45 28%  46-55 12%  more than 56 6% 2. You live?  In the city 67%  In small town 20%  In the village 13% 3. Your marital status?  Married 43%  Single 35%  Divorced 17%  Widow 5% 4. Your family income per month?  Up to 300 EUR 5%  300-400 EUR 6%  400-500 EUR 34%  600-700 EUR 37%  more than 700 EUR 18% 5. Your education?  Secondary 5%  Professional 16%  Higher 35%  University 28%  Not finished higher education 16% Source: the figure has been created by the author

So as it can be seen from table 2, that the target market of the wine market can be 36-45 year old people (28%), living in the city (65%), married (43%), having 600-700 EUR monthly income and having higher education.

32 Next questions were asked to find out if the customers like to drink wine, what are the buying habbits and etc. So 54% of respondents do buy and drink wine (Fig. 11). 37% buy and drink wine occasionally and only 8% do not drink wine at all. It doesn‘t mean, they don‘t drink alcohol at all, maybe they just do not drink wine.

37% Yes 54% No 8% Sometimes

Fig. 11. Respondents‘ opinion about buying and drinking wine Source: the figure has been created by the author

There were respondents, who do not buy and drink wine. So when asked why, the majority of them (54%) answered that they can‘t drink because of health problems (Fig. 12). 42% - do not like wine, but probably they drink other alcoholic drinks. 3% couldn‘t afford buying wine.

54% 60% 42% 40% 20% 3% 1% 0% I don’t like Because of I cannot Other bad health afford

Fig. 12. Whhy respondents do not buy and drink wine Source: the figure has been created by the author

The respondents, that don‘t drink wine didn‘t have to answer the next questions. Other respondents continued to the next question which contained information about drinking frequency. Usually 28% buy and drink wine once a month and 28% - 2-3 times a month. This shows that alcohol is being consumed continuously. 18% of respondents buy and drink wine 1 time a week, usually on the weekends after work. Even 11% of respondents drink wine 2-3 times a week, which is quite too frequent. 1% drinks wine every day, 8% - couple times a year and 3% - once a year.

33 Once a year 3% Couple times a yeear 8% Once a month 31% 2-3 times a month 28% 1 time a week 18% 2-3 times a week 11% Every day 1%

0% 10% 20% 30% 40%

Fig. 13. How frequently respondents buy and drink wine Source: the figure has been created by the author

Another important question was asked to find out what factors are important when buying wine. So the most important factors are taste (70%), quality (65%), quality and price ratio (49%). Not less important are price (53%) and country of origin (47%). Neither important, nor unimportant factor is health (56%), various additives (45%), opinion of family memebers and friends (30%). And totally unimportant factor is convenient and nice packaging (45%). Also unimportant are advertisement (23%), brand (14%) and manufacturer (14%).

15%16% Opinion of family members, friends 13% 26%30% 5% 14% Brand 17% 28%36% 16%23% Advertisement 0% 15% 46% Totally unimportant 0% Quality and price ratio 19% 32% 49% 1% 12% Unimportant Country of origin 16%24% 47% 11%14% Manufacturer 222%28%6% 16% Neither important, nor Various additives 1819%% 45% 2% unimportant 22% 45% Convenient and nice packaging 0%6% 27% 0%4% Importannt Health 13% 27% 56% 4% Taste 5%8% 13% 70% Very important 2%5% Price 182%2% 53% 0% Quality 5% 30% 65% 0% 10%20%30%40%50%60%70%80%

Fig. 14. Rating the statements by importance Source: the figure has been created by the author

Figure 15 shows what factors influence respondents to buy wine. So the very attractive factors are two products for one price (43%), product+little present (35%) and reduced price (30%). Also attractive are such factors: wine tasting (29%), recommendation of family members, friends (33%) and advertising in the wine shop (23%). So these factors must be taken in consideration when opening a wine shop in Lithuania. Neither attractive, nor unattracttive factors were advertising

34 in the company‘s website (55%) and in the press (44%), also advertising on TV and radio (35%). So this kind of promotion is not effective in this case. Unattractive factor was winning the lottery (31%).

9% Advertising in the 34% 55% company’s website 0%2% 1% Recommendation of family 2% 42% members, friends 22% 33% 1% 11% Advertising on TV, radio 35% 25%28% 6% 31% Advertising in the wine shop 29% 11% 23% 13% 20% Advertising in the press 44% 5% 18% 13% 18% Wine tasting 19% 21% 29% 12% The chance to win money or 28%31% a gift in a lottery after… 11% 18% 5% 21% Product+little present 19% 20% 35% 4% 10% Two products for one price 18% 25% 43% 3%4% Reduced price 21% 33% 39%

0% 10% 20% 30% 40% 50%60%

Totally unattractive Unattractive Neither attractive, nor unattractive Attractive Very attractive Fiig. 15. What factors influence respondents to buy wine Source: the figure has been created by the author

When asked what factors influence choosing wine, most of the respondents (33%) answered that country of origin. Most people like to buy specific wine, that comes from one or another region. 28% look for a brand when choosing wine. 15% of respondents care for producer and for always buying the same kind of wine. People that buy only certain kind of wine are conservatives, and to attract attention of such clients will be very hard for the company entering a foreign market. 9% of respondents think that brand and producer dooesn‘t mean anything, they choose wine not paying attention at this.

35 Producer

9% 15% Brand 15% Country of origin

28% Always buy the same kind 33% Producer and brand do not make an impact on me

Fig. 16. What factors influence respondents to recognnize and choose wine Source: the figure has been created by the author

When asked if they would like to buy Azerbaijani wine, only 8% said “yes” and 43% - “no”. Also 18% maybe would buy it after wine tasting. So here we have potential customers. Even 43% of respondents wouldn’t buy Azerbaijani wine. This question shows that Lithuanians’ wine drinking culture is rather high. They like to drink different kinds of wine from different countries. As Tovuz-Baltiya company is making only of good quality wine from the best grapes, it can use this factor when entering Lithuanian market and attract customers by presenting them good quality.

43% 50% 40% 30% 18% 20% 8% 10% 0% Yes No Maybe I would buy after the tasting

Fig. 17. The respondents opinion if they would buy Azerbaijaani wine Source: the figure has been created by the author

To make a conclusion of this research, it can be said, that it is a good time for Tovuz- Baltiya to enter Lithuanian wine market. Lithuanians value wine from Georgia, Armenia from old times, so wine from Azerbaijan would be a good product to enter a Lithuanian market too. Lithuanians value good quality so Tovuz-Blatiya wine is of the best quality and made from the best, special kind grapes. This factor would attract Lithuanian customers.

36 2.4. Product assortment and production potential analysis of Tovuz- Baltiya company

At the present time the company produces various cognac products following European standards: V.S. (Absheron), V.S.O.P. (Bouquet of Azerbaijan, Goy-gol, Ganja), V.V.S.O.P. (Azerbaijan, Baku, Shirvan), X.O. (Tovuz), Extra X.O. (Baku-Jeyhan, Leyli and Mejnun, Peter I, Gold Tovuz, Old Tovuz). The company Tovuz-Baltiya produces wine too, which is not delivered to Lithuania yet. The assortment of wine products are shown in Table 3.

Table 3 The assortment of Tovuz-Baltiya wine products Wine Features Picture Tovuz&N, Dry red wines from the elite Madrasa, Bayan-Shire, Merlotte and Recachitel and Merlotte grapes, contain only 12° Baku-Jeyhun alcohol.

Nizami, Leyli and Semi-dry red wines containing only 14° alcohol Mejnun and and 6 percent sugar. These wines are from the Bayati-Shiraz Madrasa, Cabirne-Franc and Merlot grapes.

Tovuz&R, Gold Desert wines from the Bayanshir, Rkatiseli, Risling and Deli Madrasa and Goldrisling grapes sorts, contain 19° Kur alcohol and 10 percent sugar.

Tovuz&A Dry white wine from the Bayanshir, Rkatiseli, Uni- Blan and Shardone grapes sorts. 100% non- polluting high-quality pomegranate wine from an exotic fruit pomegranate, which is growing only in territory of Azerbaijan. AzerNar 100% non-polluting high-quality pomegranate wine from an exotic fruit pomegranate, which growing only in territory of Azerbaijan.

Source: the figure has been created by the author, based on the data from Tovuz-Baltiya (2015)

At this moment the company can offer an assortment of 10 kinds of wine and 11 kinds of cognac. Most of the products sold by the company are made from natural materials without synthetic additives. These features promote the interest of certain buyers abroad, but not all products meet the requirements for organic farms. Some of the products of production is relatively cheap and available for many users. Based on the information obtained during the interview the most popular products (analyzing production in liters) are Tovuz&A, Merlotte and Baku-Jeyhun wines. Separately, the 37 most purchased products in domestic and overseas market are not eliminated. The most profitable product (highest profit margins) – Tovuz&A. Production cost is the confidential information, the company works with an average of 50 to 200 percent profit margin. At the moment, Tovuz-Baltiya has a brandy alcohol production capacity of more than 1000d/L per day and 65 ha of grape plantation (where such special sorts are grown for production of cognac alcohol and wine material, such as Recachitel, Gold-Riesling, Bayan-Shire, Uni-Blan, Shardonne and Cabirne-Savinion, but 265 ha of plantations under technical sorts of grape, in the rent of farmers). In 2014, 365 000d/L were produced in the output, or 15 percent more than in 2013. The growth of the maximum volume of production was influenced by an increase in domestic consumption. In 2014 it amounted to – 81,5 percent of the total production, in 2013 – 73,6 percent. Production volume in 2013-2014 is shown in Figure 18.

Azerbaijan 203473 239380

2013 2014 Export 106777 125620

0 100000200000300000400000500000

Fig. 18. Production capacity in 2013-2014, d/L a year Source: the figure has been created by the author, based on the interview data

To wrap up the production volume analysis it is determined that in 2014 the company has exhausted 65 percent of its production potential. Production growth is associated with increased use in the domestic rather than international trade. If the company will maintain a similar production rate, it will expect the maximum load of production in 2015. Currently, the company has manufacturing equipment needed for wine production and five semi-automatic dispensers for packing products. By 2016, the company plans to implement a new production plant. This will increase the company’s production potential of up to 400 000 d/L in 2016. Tovuz-Baltiya is expected to participate in national projects, which are intended for the purchase of new equipment, so the further industrial growth potential can be planned. Another important aspect of the company’s development – development of new products. In 2016 the company plans to offer 6 new alcohol products, which enable the company to expand the assortment of products offered by 29 percent. The development of products and the setting of the assortment of products, is focused on competitors products and news, also the needs of

38 customers through direct contact and finding out what products they want. New product development, testing and placing on the market takes about 4-7 months. Wine containers and labels are being regularly updated, because they are influenced by foreign consumer needs and analysis of products offered by competitors. The company has its own production of labels and adhesive equipment. Packaging design is done by designers hired under contract. The creation of the new label takes an average of 1 month, the container type, volume is often selected from what the company already offers. Labels are usually developed in English or Russian for export, and in Azerbaijani for domestic market. The label contains different wine names.

2.5. Export peculiarities of Tovuz-Baltiya company

The company Tovuz-Baltiya started its export in 2003. It exported to Russian market first. Tovuz-Baltiya at present exports to Japan, Poland, Germany, Ukraine, Russia and Belarus. And it is planning to expand the export to Hungary, the Czech Republic, Estonia, Lithuania, China, India and Scandinavia. In 2013, Russia was the largest foreign trade partner and accounted for 70 percent of all foreign sales (Fig. 19), but in 2014, the Russian market became smaller because of the events with Ukraine. 2013 2014

Russia Russia 6% 17% 22% 14% Japan Japan 41% Poland Poland 15% 18% Ukraine 13% Ukraine Belarus Belarus 12% 9% 19% 14% Germany Germany

Fig. 19. Production capacity in export markets Source: the figure has been created by the author, based on the interview data

So as it can be seen from Fig. 19, the biggest export partner in 2014 was still Russia (22%), but Ukraine (19%) and Germany (17%) is getting close to it. The export to Germany grew up by 11%, to Japan – 4%. The main contacts with foreign partners are building up by participation in international exhibitions. Most of the international trade and the peculiarities of the substantial differences

39 between domestic sales reflects by comparing them with the sales process in Azerbaijani trade market (Table 4). The customers of Tovuz-Baltiyja in Azerbaijan are retail chains. In foreign markets – wholesalers only. Trade directly to individual customers abroad doesn’t pay off because of the delivery costs, ordering small quantities and long delivery time (approximately 1 month). Foreign trade is in euros or dollars. Due to the instability of the euro zone, the international trade is sensitive to exchange rate fluctuations, for example, in Poland, compared the beginning and the end of 2014, national currency drop down against the euro by 13 percent, respectively, imported production cost went up (if trading is carried out in euros) in this country compared to local producers. Table 4 Comparison of the sales process in Azerbaijani and abroad Azerbaijani market Foreign market Customer Trade networks, shops Wholesaler distributor Search of customers Direct cooperation The most commonly through exhibitions, visits abroad Product distribution Own transport; Using the Only using the service of services of transport companies transport companies Promotion Free samples, seminars, “Push” strategy – all the attention brochures, direct communication to wholesaler. Sales promotion by applying discounts. Duration order implementation 1 week 1 month Currency Azerbaijani New Manat Euro, dollar Payment for production Payment terms vary. The most Prepayment for products commonly sold with deferred payment (30 days) Cost of distribution Free delivery Shipping is included in the price Production Produced for stock Produced only after ordering Number of managers 9 3 Marker research Performed by managers Performed by managers Product package Labeling in Azerbaijani Labeling in English, Russian Source: the figure has been created by the author, based on the interview data

The main form of payment in international trade is advance payment for products. When mutual relations with foreign partners are tested, other possible forms of payment can be used, i.e., deferred payment up to 30 days after delivery of the products. If the company pays the full amount in advance – a 5 percent discount is applied, otherwise, no discounts is applied. By offering products to foreign partners, the company uses Incoterms; usually they are EXW or CIP (for an explanation of the terms see Annex 2). Delivery of products to the client is free of charge in Azerbaijan, so this is yet another competitive advantage in the domestic market. For Azerbaijan, Turkey, Georgia markets the company uses its own distribution channels, i.e., their transport delivers the products (in this area there are 6 drivers). In some cases, courier services are used. By

40 development foreign trade, transport companies are only used, so the company can no longer control over the quality or time of delivery. Time from ordering to receipt of delivery – up to 1 week, while abroad (except Turkey and Georgia) it can be up to 1 month. The time of production of products matters: Azerbaijani market products are produced and stored in the warehouse, while for foreign buyers – only after the contract is signed. Foreign sales of products produced in 2014 amounted to 1 240 000 dollars and domestic market – 3 760 000 dollars. In order to achieve the company’s strategic objectives it is recommended to increase the number of export managers. Price elements of exported product are calculated as it is shown in Annex 6. First the export costs are being calculated and then the costs of transportation of exported products are added. Foreign market research is carried out by managers of the company, working with stakeholders in the countries concerned, participating in international trade fairs and trying to realize the company’s products successfully. They investigate the demand for products, customers, feedback. The company has never been cooperated with the companies that are doing foreign market research. The main reason for that is the high cost of such research.

2.6. PEST analysis of Tovuz-Baltiya

Technological environment Really strict technological requirements are being raised for the production of wines. The European Union wants to increase the competitiveness of their countries’ wines that‘s why it applies bigger restrictions for transported imported wines from the third countries. The EU sets technological limitations for wine production. For example, in order to adjust the acidity of the wines, some wines of Azerbaijan can be made with adding the malic acid. This method is permissible and approved by the International Organisation of Vine and Wine (OIV), but banned in the European Union. Therefore, it would lead to problems for the importation of Azerbaijani wines to Lithuania and a foothold in the retail market. Also the EU has such restrictions as the prohibition of imported wines containing added sugar (sweetened) in order to improve their properties. Political-legal environment Lithuania is one of European Union state. Lithuania is the member of European Union, the UN, the OECD, NATO, OSCE, Schengen area and the Council of Europe. Lithuania’s governing belongs to Seimas, which is the unicameral Lithuanian parliament. It has 141 members that are elected for a four-year term. About half of the members of this legislative body are elected in individual constituencies (71), and the other half (70) are elected by nationwide vote according to proportional representation. A party must receive at least 5%, and a multi-party union at least 7%, of the national vote to be represented in the Seimas (LR Seimas, 2015).

41 Keeping in mind the country’s multi-party system, all governments are coalition. Lithuanian state institution famous for its bureaucracy and an unusually long (from a few weeks to several months) waiting time. Current legal environment aspect – legislation acts and institutions that coordinate registration of exports from Azerbaijan. Wine production in the country and imports are regulated by state laws passed, regulations that govern these activities. For example specialized alcoholic beverages trade places besides alcoholic beverages may sell and accompanying range of goods, but only those listed in the law. Breaking the law orders face fines from 300 EUR and up (Republic of Lithuania Law on Alcohol Control, 1995). Probably the most important factors of legal environmental that affect the wine market is the state alcohol control policy principles given in Republic of Lithuania Law on Alcohol Control Act. For example, the state regulatory measures to limit private profit, obtained from the alcoholic beverages production, import and marketing support or non-alcoholic beverage production and trade, and so on. As well as the government on the special case of the Lithuanian population ilness from alcohol being above the set measurements, it can determine alcoholic beverages group production and import quotas and so on. Thus it is clear that the legal environment influences retail wine market very strongly. Economical environment Economical environment also influences retail wine market. For example, in order to offset the effects of inflation, excise taxes on alcoholic beverages are being increased. Also, by growing of the country’s economic level, the level of citizens’ wages are growing too, with a consequence that their purchasing power is growing. The inflation rate in Lithuania was recorded at -1.40 percent in March of 2015. Azerbaijan‘s inflation rate is 2.0 which is higher than Lithuania‘s. Lithuania‘s Consumer Price Index CPI evens to 107.20 (Trading Economics, 2015). But inflation rate of Lithuania, according to Lietuvos Bankas, will be growing in 2015 and reach 1.6 in 2016. According to Official Statistics Portal of Lithuania (2015), average consumption expenditure per household member per month | EUR on alcoholic beverages is shown in Table 5.

Table 5

Average consumption expenditure of alcoholic beverages per household member per month | EUR Urban and rural areas Largest cities 2006 2007 2008 2012 2006 2007 2008 2012 4.8 5.4 6.1 6.0 5.8 6.7 7.3 6.3 Source: the figure has been created by the author, based on the data of Official Statistics Portal of Lithuania (2015)

So as it can be seen from Table 5, the consumption of alcoholic beverages has been growing since 2006. 42 The cultural environment The cultural environment strongly influences the Lithuanian retail of wines. Yet from the Soviet Union there is a trapped conservative approach to alcoholic beverages consumption culture. Gradually, after Lithuania’s accession to the European Union, people’s perception of alcohol consumption is changing, it is more like western now. More specialized wine shops, wine clubs, wine associations are being opening up. For example, the Sommelier Association, which brings together wine connoisseurs, training and organization of events, thus helping to increase understanding of the culture of wine, its consumption patterns, traditions and so on. Increasing cultural understanding of wine consumption rapidly influence the current retail wine market. Demographic environment Lithuania retail wine market is influenced by demographic environment. Migration in Lithuania is diminishing, according to Official Statistics Portal of Lithuania (2015). In 2010, 132 953 persons left abroad and in 2014 – 98 036. That is 26,3% less (Fig. 20).

132953 140000 106062 120000 101153 96061 98036 100000 80000 60000 40000 20000 0 2010y. 2011y. 2012y. 2013y. 2014y.

Fig. 20. Miigration in Lithuania, persons, 2010-2014 Source: the figure has been created by the author, based on Official Statistics Portal of Lithuania (2015)

Emigration to other countries is a widely debated topic in Lithuania, in the opinion of thesis author, it does not do a very negative impact for wine consumption. People who emigrate to other countries, get acquainted with the consumer culture of these countries, which is different from Lithuania’s. So coming back they bring and transmit their knowledge to Lithuanian consumers, thus promoting the understanding of wine and its culture. Also, urbanization of wines on the market is not a negative case, since urban population is the most share of the retail wine market.

43 2.7. Competitive analysis of Tovuz-Baltiya

2.7.1. Market segmentation

The company needs to perform segmentation of the market, that could help to select the consumer group to which it is attractive and useful. Demographic criteria – monthly wage of consumers would be most appropriate criteria for segmentation of retail wine market (Fig. 21). Segment Segment size, % Description of segment Consumers that gets paid up to 5% This is a low-income consumers, who can minimum wage (>300EUR) purchase only low price product. Receiving per month from the 77% It is a medium-income consumers, who have minimum to the average wage the opportunity to purchase medium and (300EUR-700EUR) higher output prices. Users who receive more than the 18% It is a high income consumers, who can average wage per month purchase high-price products. Fig. 21. Segments and their size in the market Source: the figure has been created by the author, based on the interview data

According to preliminary data, segmenting the retail wine market according to consumer wages (obtained monthly income) earning the least are only 5 % of total market purchases, as these consumers’ purchasing power compared with others is low and they can buy low price and low quality of production or a higher quality products, but over a longer period of time. From the minimum to the average wage receiving people can acquire higher-quality products and a lot more often than the consumers with minimum income. This segment makes the principal, largest retail wine market segment of 77%, as this segment of consumers is mainly in Lithuania. Recievieng the highest incomes account for 18% of wine market segment, as this segment of people in Lithuania is not big. They have the ability to purchase expensive products and quite often, but the so-called ‘elite’ is not big enough in percentages that they could oust the largest retail wine market share – middle-income consumers. As an addition to core segment, desirable segment profile could be isolated, i. e., additional users are segmented by other demographic criteria – age and level of education and geographical – residence, wine country of origin. As the retail wine market is really broad, it would be useful to distinguish it into individual wine retail locations and analyze each of the segment. It would therefore be possible to define such venues groups: hypermarkets, specialized wine shops, small supermarkets and petrol stations and kiosks. There is not enough data to accurately assess the target segments in individual retail wine selling places. However, it is possible to do in preliminary data. Hypermarkets have all three groups of customers, from the ones, that receive the minimum monthly wages to the ones that receive the biggest wages. Specialized wine shops usually segmentate their customers by income, age, education, and the wine country of origin. However,

44 these venues often target the customers with average and high-income, because the production is more expensive compared to other venues. Small supermarkets often segmentate their customers by the monthly wages and place of residence. Since these shops offer truly a narrower selection of wines, they are targeted to lower price and quality of production, compared to the supermarkets or specialized wine shops, they are more oriented to minimal to average wage per month consumers. In order to properly meet the defined needs of the segments it is necessary to establish the motivation to use the product sold. These are: the need to identify and assess what the consumer segment is important, why he buys the products and the various ways to encourage and increase consumption. As the main consumer segmentation in the retail wine market is generated by their monthly wage, it is easier to assess precisely what motivates these market segments: Consumers that get the minimum wages, can be motivated by low price, various discounts and promotions; consumers with medium wages can be motivated by attractive price, discount programs for regular customers, promotions, product diversity, good service, the opportunity to select a higher or medium-quality products; consumers that receive more than the average monthly wage can be motivated by prestige, high-quality products, high level of service, a wide range of customer loyalty programs.

2.7.2. Competitive analysis

In today’s market, almost every company is exposed to sharp competition. A competitive battle wins the companies, which are able to meet customers’ needs better than the competitors. Therefore, the company, before proceeding with the preparation of a marketing strategy, has to learn more about its competitors, i. e. to perform a competitive analysis. The competition in the retail wine market environment every year is becoming more and more complex. It is very difficult for a newly established company currently to enter into the retail wine market. So the wine market has a large number of competitors in Lithuania. Retail alcoholic beverage trade is one of the biggest industries in Lithuania. But every alcoholic beverage retailer in its own range of products has wines. The main and largest retail wine market competitors are: ‘Maxima’, ‘Palink’, owning ‘IKI’shopping centers, ‘RIMI’ and ‘Norfa’. None of the less important are specialized wine shopes such as ‘Vynoteka’, ‘Tikro vyno parduotuve’, ‘Presto’, ‘Gero vyno parduotuve’, ‘Vyno meka’, ‘Vyno klubas’. Smaller competitors are the shops, that besides other products, sell wine too. These shops are: ‘Silas’, ‘Gerimu pasaulis’, ‘Siaurine’. Also ‘Statoil’, Lukoil’ and other gas stations, small shops in the houses, kiosks and etc. are small competitors too.

45 One of the steps in analyzing the competitive market is to analyze the strengths and weaknesses of competitors. So this analysis is done in Table 6. Table 6 Competitors’ strengths and weaknesses Competitors’ Characteristic strategies Strengths Weaknesses group Biggest Wide assortment of products, High income, notoriety, Everything is developed shopping good strategic place, good convenience, long working for a mass use, not centers promotion, wide choice of hours, wide assortment of paying attention to prices, a lot of discount and production, ability to serve individuals’ needs, a lack promotion programs many clients at one time of information about products, not qualified workers Specialized A wide range of assortment Well trained professional Narrow price range, wine shops and of wines, quality guarantees, staff, a lot of information worse strategic place, a clubs individual service, cosy about products, sales narrow range of other atmosphere, reliability promotion products Small shopping Oriented to the people living Convenience, simplicity and Narrow range of centers in the neighborhood, lower prices products, not a good convenience, lower prices, quality narrow range of assortment Gas stations, Fast, convenience, small 24-7 working hours, More expensive at night kiosks range of products precision, fast service time, narrow range of products Source: the figure has been created by the author

Tovuz-Baltiya will have to compete not only with the shops and supermarkets that sell wine, also it has to compete with wine brands. The main competitor brand of wine of Tovuz-Baltiya are wines from Spain and France. The company understands that those brands are very strong and valued by Lithuanian customers, that‘s why the company is ready to present the highest quality wine. The wine of of Tovuz- Baltiya will stand out because of the good quality and a little cheaper price than competitors. The competitive analysis of the brands is shown in Table 7. Table 6 Competitive analysis of the wine brands Brand Strenghts Weaknesses French The largest producer and consumer of wine, High price high quality product with an enhanced consumer value, long-term relationships with satisfied customers, good marketing Spanish High quality products, different kinds, good High price export possibilities Azerbaijani Lower price, lower production costs New in the Lithuanian market, not strong marketing Source: the figure has been created by the author

As it is seen from Table 6, Tovuz-Baltiya has very strong competitive brands. But it will try to settle in the Lithuanian market with the producing the high quality wine from the best grapes,

46 also properly introduce this wine to Lithuanian customer and applying the lower than competitors price, it will enter a Lithuanian market. So as it can be seen from the competitive analysis, it will be difficult for Tovuz-Baltiya to enter into a Lithuanian wine market because the market has a lot of big and smaller competitors. So for that reason the company needs to prepare a good marketing strategy. SWOT analysis has been done in the next chapter.

2.8. SWOT analysis

As the theoretical analysis shows, before starting to form a marketing strategy for entering a market, it is recommended to do a situational analysis of the company and evaluate the existant trade experience both in the local and in the foreign markets. The most effective method to do this – is to carry out an international trade SWOT analysis (Table 7), which will let to evaluate the situation of the company Tovuz-Baltiyja objectively. The composite parts of PEST analysis (social, technologic, economic and political-legal) can be seen through the prism of SWOT analysis opportunities and threats. Table 7 Tovuz-Baltiya international trade SWOT analysis Strenghts Weaknesses 1. Quality management of ISO9001:2011 and 1. Rarely updated website, lack of information. ISO14001 environmental protection: 2009 2. Production equipment capacity is not used at its standards. maximum. 2. The company participated in the export 3. A complex manufacturing and export defined by promotion program „New Opportunities“. strict laws and normative acts. 3. The company is participating in international 4. The main way to develop collaboration with exhibitions. partners – international exhibitions. 4. Its distribution channels to Russia, Georgia, 5. Lack of staff to work with foreign partners. Armenia. 6. The company does not use the services of market 5. Skilled permanent staff. research companies. 6. Experience in international trade. 7. Use of new technologies in the manufacturing process. 8. The development of product assortment. 9. The production values for money. Opportunities Threats 1. Production potential growth due to international 1. Due to reduced comsumption of wine, the trade. decrease in production volumes. 2. Possible new equipment acquisition by using the 2. Intense competition if going to European market. state support. 3. Complex recieving of alcohol licenses to EU 3. Expansion to Baltic countries‘ market gives good countries. opportunities. 4. The potential risk associated with inappropriate choice of export markets and the related significant financial loss. 5. Risks associated with exchange rate fluctuations. Source: the figure has been created by the author, based on the research data

47 Strengths. As shown in Table 8, the maximum strength of Tovuz-Baltiyja is Quality management of ISO9001:2011 and ISO14001 environmental protection: 2009 standards. Proper implementation of the system, optimizes business processes and the procedures of work order are adjusted. The implementation of ISO quality standards changes the customers, partners and employees‘ attitudes to the organization. The ISO9001:2011 certificate demonstrates that the company offers products or services that meet customer and legal requirements, i.e. the processes, going on in the company affect the quality and meet the requirements of the standard. Quality system management, implemented according to the standards ensures that the fullfilment of the client‘s requirements will be ensured from getting the order to project, production, storage and delivery. Other, but not less important standart is ISO14001 – Environmental Management System standard. Growing concerns about ecology encourages companies to implement environmental protection management systems. ISO 14001 standard abroad often becomes one of the criteria for the selection of partners. The main objective of this standard – to promote environmental protection and pollution prevention, taking into account the social and economic needs. Standards shall be implemented in different companies, regardless of the level of their environmental management system. Environmental management system helps to ensure business development, improve the company‘s image, reduce raw materials and energy costs, reduce waste management cost as well as preparing for stricter legal requirements, improves working conditions and reduces accidents, improves relations with the various stakeholders. The possession of all these certificates increases the company‘s competitiveness and credibility in international markets. In order to maximize the use of all the options, the company participates in the „Increasing business productivity and improving business environment 2015- 2017“ program, which aims to encourage companies to actively seek foreign partners and increase sales in foreign markets. Supported activities: the presentation of the company and its products abroad in the international exhibitions, contact fairs, business missions, including the delivery of the necessary preparation of marketing materials; products, which are scheduled for export, certification. This program would be a great opportunity for Tovuz-Baltiya to start its export activities in Lithuania. Tovuz-Baltiya participated in Wine and Environment, Traditions, Innovations exhibition that was in Ukraine (2013). Participation in this show room was also an effective promotional campaign for wine brands, conducted by famous wine experts, sommeliers and by wine expert and enologist Anatoliy Malinovskiy. In 2013 National Exhibition “Independent Azerbaijan in 20 years” more than 60 companies from Italy, Georgia, Bulgaria, Turkey, Republic of Moldova, Belarus, Russia and

48 Ukraine participated in the exhibition including large production and trading companies and wine producers of “new wave”, as well as private winemakers of Odessa region and Zakarpattia region. Basler Weinmesse fair was held in Switzerland, 2014. This was a unique opportunity to meet key international, UK, and South West food and drink producers, as well as service providers, alongside a superb selection of Taste of the West Members. Wine and Winemaking Exhibition 2014 was in Ukraine. It became not only holiday for wine makers but also platform for business negotiations, scientific discussions and professional growth. Another important advantage – the company has its own distribution channels, i.e., it delivers products to Russia, Turkey, Georgia and Azerbaijan by its own transportation. For this reason, customers receive products in time, not damaged and the closer ties between the clients and employees are being established. In some cases, delivery services are provided by transportation and parcel services. The staff of Tovuz-Baltiyja has high intellectual potential. There is a small employee change that can affect the international trade development. The company is constantly implementing new technologies that improve production processes. Innovative solutions enable the company to guarantee the quality of wine and customer satisfaction. Weaknesses. The website is updated rarely, lacks information. There are no options for drink ordering online. Also, the company offers customers a bigger variety of products, that are not described in the company‘s web pages. Left unused available production equipment capacity. The company has installed new technologies, but their capacity is not fully exploited. Lack of staff. Although the company is involved in the „Increasing business productivity and improving business environment 2015-2017“ program and has an export manager, it still uses the least risky way of getting to know foreign markets – exhibitions. In this way the company loses some potential customers, who could be attracted if the concrete strategy for the single market will be formed, instead of having to try all markets. Participation in exhibitions is an important element of support, but it is not sufficient to successfully implement the strategy. A complex manufacturing and export defined by strict laws and normative acts. Grape growing and wine making last a long time, so there is always a chance and risk that during that time, competitors can offer a similar product and occupy market share. Market research in the company is done by personnel, the company does not use the services of market research companies. The main reason – the financial resources to carry out market research. Trusting only the personnel conducting the study, contends that the main

49 information about a specific country‘s consumption of wine, export and import levels is not publicly declared, such data can be obtained only from payed databases. Opportunities. In connection with the possibility of export development, potential production sales volume growth is possible. This is the main reason, encouraging the company to look for new markets. State support – possible in acquisition of new equipment. State support under the program „Increasing business productivity and improving business environment 2015-2017“ relates to the new production process lines, deployment of existing production lines, technological modernization of company and etc. The company can choose the proper market by using the services of research companies. After the investigation, it is found that one foreign market research (Consulta Group data) costs – 5,000 EUR + VAT. According to Alcohol and Tabacco Tax and Trade Bureau (2010), an Import License is required for wine shipments larger than 3,000 liters (30hl) imported from “third countries” (such as Azerbaijan) into any EU member state. Such import licenses are issued in Lithuania by the National Paying Agency. However, it should be noted, that the company, which imports alcohol products in the Republic of Lithuania, must comply with the law requirements of Alcohol Control Act. The Alcohol Control Act lets to sell alcoholic beverages in the Republic of Lithuania only if you have an alcohol license of a wholesale or retail trade. Consequently, Tovuz-Baltiya seeking to gring to Lithuania alcohol products must have the appropriate license for the right to keep and sell alcohol products in the Republic of Lithuania. Threats. Wine production can have threats if the consumption of alcohol will deminish in Soviet and Baltic countries. Also the big competition in the EU wine market can be seen. This can result the possible decline in production of consumption and production volume decrease. Also there is a potential risk associated with the inappropriate choice of export markets and the related significant financial loss. In principle, this risk stems more from the company‘s internal environment, i.e. limited financial resources, expensive market research and the lack of qualified personnel (in this case, the market analysts).

2.9. Identification of international marketing objectives

In accordance with the international marketing plan (Fig. 10), summarizing the results of the company’s situation analysis, it is neccessary to formulate international marketing goals. After the examination of the company’s activities and production assortment, it can be concluded that the company specializes in the production of alcohol – wine and cognac. So such production should be offered when entering into new markets. It is recommended to offer products that have already been

50 tested and evaluated by users. The target segment of the company – major retail chains and distributors-wholesalers. Table 8 shows the international marketing objectives of Tovuz-Baltiya.

Table 8 International marketing objectives of Tovuz-Baltiya Objectives Qualitative expression Quantitative expression Find foreign export market for Carry out international marketing Find one of the most attractive company’s activities research in new markets foreign market development Increase sales volume Development of international Increase export profit margin trade twice in 2016; Find 7 new foreign customers in 2016 Use the most of production Set maximum output Increase sales volume in 2016 up capacities to 1500 d/L per day, in 2016 up to 2000 d/L per day Find out the needs of consumers To determine what the most Prepare the most favored foreign in foreign markets suitable products for international customers wine kinds. Make trade. recommendations for new products. Source: the figure has been created by the author

Summarizing the results and identification of the target market, international marketing objectives are being formulated (Table 9). The crucial moment is the implementation of goals – finding a good market, which would allow to optimize production and thus increase sales revenue. Marketing strategy drawn up to achieve the objectives in the third part of the master thesis.

51 3. THE FORMATION OF INTERNATIONAL STRATEGY FOR TOVUZ-BALTIYA COMPANY ENTERING THE LITHUANIAN MARKET

3.1. Preparation of sales strategy

As the theoretical and analytical parts of the thesis showed that each company that want to successufully develop its business, needs to do export and enter foreign markets. The analytical part of the work showed that Lithuania is a suitable country for expanding Tovuz-Baltiya‘s business activities and enter Lithuanian market with presenting its product – Azerbaijani wine. Planning activities allows to link and coordinate the various actions into a unified whole, and thus achieve better overall results. Since the company Tovuz-Baltiya is not a conservative company, but also a successful and rapid working, it is important to properly predict future changes and to plan its activities. What marketing strategy the company can choose depends on the product market and the degree of novelty, since the products sold can be divided into a long period and the new to the market products. One sales strategy can be replaced by another, in case it fails. Tovuz-Baltiya has chosen the following marketing strategies: 1. Target market strategy; 2. Positioning mode selection; 3. Strategy of separate functional element of the marketing mix; 4. The strategy of competition.

3.2. Selecting target market

In selecting the target market, the company is oriented to a differentiated marketing strategy because the market is not homogenous, but it is changing as well as the target segment is different too. As the empirical research showed, the target segment can be described using demographic criteria – the most users of wine are middle-income consumers. Also additional segment can be added according to the age and level of education and geographical – wine country of origin. However, when forming the marketing strategy companies need to assess the available resources. They shall also assess the country’s economic situation, which determines the level of personal income. In addition, specific actions and potential customers must be predicted. Since the success of sales depends on the success of strategy, this work must be done with special care. Sales strategy selection is very complicated and responsible thing. It is therefore very important that the 52 sales manager, choosing the sales strategy, should have more precise data, since all the company’s success depends on that. Sales forecasting – is a reflection how many services the company will sell in the future. The sales scale in Tovuz-Baltiya is determined by product groups. This is determined on the basis of the previous period the company’s statistics, their trend analysis. Using this method, the director of he company also uses the forecasts of all marketing managers. All forecasts are being added up to produce the scale of the projected sales. Due to the need to improve market research, in-depth information about consumers, product sales, competitor activity must be gathered. Market research should include consumer motivations and needs, efficiency of the sales organization, advertising and the like. The key is to predict a sale of the whole new level of marketing products, because it is a new product and it must have the appropriate promotion. According to the company’s kept statistics, it can be said that about every month a new type of product is being presented to the market. To ensure the sales process control in its Lithuanian sales center, the company performs sales analysis, which includes the collection of sale data, classification, comparison and studying the results. Sales analysis – is a detailed research in sales to determine the strengths and weaknesses of sales. Tovuz-Baltiya sales analysis is seen in several ways. First (and most important) actual sales volumes are compared to the planned and they are assessed. Later, they look for differences – analyze which products are being sold good or bad, which customers provide the most profitable sales. Inspections are carried out at the following intervals:  Once a week, the sales manager and Branch director review the sales results.  Once a month the company’s CEO randomly checks any manager served points of sale and checks their work.  In a couple months period, some manufacture representative with the sales manager evaluates the level of product penetration into the market.  Daily the head of managers checks the results of the work, based on sales data (bill of lading, contracts, VAT). Since the company’s success depends on the representatives’ job, the selling of products is not imaginable without control function. Branch director should work closely with the marketing division, because the company’s success depends of his decision and offer. In co-operation he can successfully control the activities that could make the sales program successful. Information,

53 analysis of the results, prospective action plans and other data that guarantees the sale program’s flexibility are being exchanged. The director performs the control of direct sales strategies, sales planning and financial part, checking his subordinates and the quality of decisions and results. Branch should need a few improvements, as evaluation by sales volume does not always reveal the lens view. It should take into account such factors as the financial condition of the manager’s serviced stores, its visiting customers. Sales volume and range in the villages will be different from the sales in the city. Managers sometimes fail to appreciate that and create unrealizable tasks. Employees feel frustrated, unable to carry out the plan. Therefore, the specific circumstances and their evaluation should be take into account and then the decisions are being made. Tovuz-Baltiya target segment are the users who receive an average and higher wages per month, so the majority of the company’s future products will focus on the needs of this particular segment. Particular attention should be paid to the very high quality of products and service. Professional sellers and Azerbaijani citizens should be working in the store to help the consumers choose the most appropriate Azerbaijani wine out of 50 different kinds. The sales place should be oriented according to positioning by the consumer. As a shop will be trading high-quality products, as well as exclusive attention given to Azerbaijan, the country’s culture, the company can attract inteligent people with higher income.

3.3. Azerbaijani wine positioning

The company’s positioning is its offer and image creation to occupy a unique position in the minds of the target market. In particular, the positioning is intended to give the company a competitive advantage. Tovuz-Baltiya, in order to gain a competitive advantage, must choose one of two basic strategies for positioning: The company gain a competitive advantage, if it is able to position itself as able to offer targeted consumers products at lower prices than the competitors, or products at higher prices, but with a higher value. Tovuz-Baltiya’s wine should be positioned under the first option – to offer products at a lower value. All positioning strategies can be defined by the following thought: Positioning starts from the product, service, company, institution, even from human being. But positioning is not what you do with the product. Positioning is what you do with the consumer’s thinking. That means that you position the product in the head of the consumer. Tovuz-Baltiya, gaining the consumer recognition, have to choose, what are the things he will relate in their customer’s mind. So Tovuz-Baltiya will use the following positioning strategies for its wine:

54 1. Product features. Emphasis is placed on the product characteristics. Tovuz-Baltiya’s wine can emphasize the age of wine, its strength, richness and quality. This strategy is mainly used by manufacturing companies that make technologically complex products. 2. The proposed benefits. In the case of Azerbaijani wine – it is a measure of quality leisure, communication, pleasure, relaxation, thirst. Tovuz-Baltiya could also emphasize these benefits by defining the good taste of wine. 3. Consumer opportunity. Wine could be positioning as refreshment, as a necessary component during a meal, but this strategy would not be exclusivity, all the more that this kind of wine you don’t buy for daily use. 4. Activities. Positioning example: Azerbaijani wine – attendant of business meetings. But this strategy is also too narrow for Azerbaijani wine. 5. Personality. Positioning the company through famous people, but it is, above all, too expensive for a small company, on the other hand, is prohibited by Alcohol Control Act. 6. Origin. Positioning the Azerbaijani wine according to its origin is quite useful, because its origin can be related to other wine kinds from Georgia, Armenia and etc. However, this strategy may not be very original, because almost all manufacturers emphasize their experience in the production of wine. By the way, positioning through the origin – is a very common strategy for alcohol business, especially wine. It shows that although it is not exclusive, but apparently quite effective. 7. Competitors. Product positioning can be done by dissociating from the competitors. This positioning has its advantages for Azerbaijani wine, because it is different from other wines on the market. Therefore in this case, it can obtain a clear competitive advantage. As we can see from the options discussed, the most suitable positioning strategy for Tovuz-Baltiya is positioning by the origin, benefits and competitors. Of course, these strategies can be united and used together. So Tovuz-Baltiya could use the following positioning strategies:  Promotion of national pride, highlighting Azerbaijani origin of wine.  Highlighting the quality of wine and encouraging customers to enjoy it.  Highlighting the brewing technology in comparison with technologies of comtetitors.  Azerbaijani wine can be positioned as a friend of wine drinkers, through participation in wine tasting events, emphasizing that Tovuz-Baltiya knows about wine and communicates with its customers.  Emphasizing the naturalness of a product, one brewer, love while producing the product.

55 3.4. The marketing complex strategies in Lithuanian market

3.4.1. Product

According to the purpose of the product, the wine can be attributed to the personal consumer products. Accordingly, the duration of the products it is a durable product, since the wine can be matured for several decades. According to the wine demand frequency it can be attributed to periodic demand products, usually because wine is purchased more frequently than once a year. The research showed that as much as 97% of respondents consumed wine more than once a year. As it was mentioned before, there is not much choice in the assortment of Azerbaijani wine in Lithuania wine retail stores compared to other countries (Italy, Spain, France, Chile), the assortment is very narrow. As the company Tovuz-Baltiya doesn’t have its retail store in Lithuania yet, the company’s managers should pay a really great value to introduction of Azerbaijani wine, to its consumption culture, product brands and so on. As there is a small selection of Azerbaijani wines, Tovuz-Baltiya retail store will be the main place where you can buy over 50 different wines from Azerbaijan. The packaging of wine is very important too. It has to be different from the ones that are used in Azerbaijan, and for other countries. The package should contain the Lithuanian translations, but it also should reflect the origin of Azerbaijan. The wine will come in the boxes. They will contain 6 bottles each. The bottles will be labeled – the label should be attractive, represent Azerbaijan culture and attract the customer‘s eyes. The trademark example is shown in Fig. 21.

Fig. 21. Trademark of Tovuz-Baltiya Source: the figure has been created by the author

This trademark will represent the company itself and its wine products. It is colourful, attracts the customer‘s eye and the grapes show that the product is made from grapes. So it is simple and informative.

56 3.4.2. Price

Pricing strategy formation begins when assessing the overall market situation and the factors that influence pricing are founded out. Since Tovuz-Baltiya mostly exports its production, the pricing formation is becoming more and more complicated, because the prices of exported products are influenced by many factors. In determining the prices for exports, it is necessary to draw attention to the company’s capabilities that the company’s international level can be evaluated. It is evaluated in the light of the company’s business practices, product sales or the object of the organization, the structure of organization, the company’s financial resources, personnel, and evaluating existing enterprise markets. Tovuz-Baltiya international level in Lithuania is initial. At this level, the company usually determines the prices of the exported production by the cost or demand method. Tovuz-Baltiya, if choosing the cost method, determines the price, taking into account the direct and indirect costs, fixed and variable costs and a certain level of profit. The final price of the product depends on the wine kind, that a company sells. In practice, it’s hard to find the same type of product in the same final price, because often different wine kinds requires different grapes, different fermentation and producing methods. To my opinion, like most of the retail wine market representatives, Tovuz-Baltiya should use a cost plus a mark-up method for its production. Mark-up of production is determined by taking into account the changing market conditions, the pre-existing competitors in the market prices of Azerbaijani wines. However, as it was mentioned, there are not a lot of kinds of wines on the Lithuanian market, so the company, which will have its own range of assortment of about 50 kinds, will have an easier way to identify the trade mark-ups (when the brought product is not yet on the market). This company, as like most other companies, should apply flexible mark up to its production, which could be changed in order to maintain or increase sales of a particular product. The most important internal connection that affects the price policy is operating costs. Trading wine is an attractive activity, because the wine features don’t make a negative influence on the operating costs (wine is a long-term product, and can stay for decades, what increases the product price only). However, this type of product requires consulting, which increases the demand for skilled personnel and related expenses. This must be taken into account in determining the prices of wines. Customer behaviour in Tovuz-Baltiya prices should be positive, since the price depends on the policy actions on the sold products’ features, and Tovuz-Baltiya’s attention will be paid to the quality, transparency, i.e., the customers will be able to taste different kinds of wine before buying. Applying discounts encourage to order greater production quantities, and the development of favorable billing system helps to faster settlement with the manufacturer, allowing the company

57 to increase production capacity and expand its market, reduce working capital deficiency. It’s like extra formation means of Tovuz-Baltiya pricing strategy. The price of the company is determined by focusing on the competition. It is recommended to choose the penetration of the market price strategy, the price is determined lower than its competitors. Since the company chose direct export, before setting the sales price, it should consider that the final price will not be the retail price to the consumer; wholesaler mark-up will be added to it. At present, the exact pricing of Tovuz-Baltiya production is not defined as products not yet entered into the market. The other countries’ wines in the specialized wine shops are rather expensive compared with Azerbaijani wines. Therefore, there is a discussion that Tovuz-Baltiya assortment will be wines with relatively lower prices and higher quality. Since the company itself will import wines to Lithuania, it is well placed to compete with other Lithuanian importers that bring wine and with their wine prices. The estimated price of the wines will be from 4EUR to 80EUR, but most of the production range of assortment will include wines from 6EUR to 10EUR.

3.4.3. Distribution strategy

All Azerbaijani wine production will be available only in the established specialized wine shop. A research showed that from all of the criteria for choosing wine, respondents would like to buy wine in the specialized wine shops. Therefore, after a thorough search for a place, it is planned to open up a shop in the Old Town of Kaunas. This decision was made in view of the large specialized wine shops and wine clubs localization sites, as it usually happens that specialized stores are opened in prestigious locations such as Old Town, luxury districts. Since the company’s major target segment will be higher and middle income consumers, the 'hassle' point of sale represents a significant value. Meanwhile, the customers would like the wine shop to be bigger, but it is important to reduce maintenance costs, so the premises of the shop will be of medium size (approximately about 150-200 square meters). For the assortment arrangement in the shop, a designer was consulted and he will make a project of how the wine bottle should be placed to represent Azerbaijani culture better. The company Tovuz-Baltiya is thinking about supplying wine to the wholesalers and other retail shops throughout the Lithuania, and also enter Estonia and Latvia markets. So Fig. 21 reperesents the possible distribution channels for Tovuz-Baltiya.

58

Tovuz-Baltiya

Wholesaler Retailer

Retailer

CUSTOMER

Fig. 22. Sales distribution channels of Tovuz-Baltiya Source: the figure has been created by the author

These distribution channels‘ model is already used by the company Tovuz-Baltiya for the other countries exports. It is especially useful when exporting to Eastern markets. Usually they were retailers, that helped to present and enter the production into the foreign market. The same distribution channel could be used by the company Tovuz-Baltiya in the Lithuanian market. Tovuz-Baltiya shoud carefully think about opening a specialized wine shop or doing its sales through wholesalers and retailers. If the company wants to be a trader and manufacturer, it should know that it is very hard to do both works quick and efficient at the conditions of the modern economy, so the author of the thesis suggests Tovuz-Baltiya to think about the other option and actively seek new sales brokers. According to the sales organization form of Tovuz-Baltiya, it can be concluded that the company should apply the selective strategy.

3.4.4. Promotion strategy

As the company’s Tovuz-Baltiya sales department in Lithuania is only in the initiative stage, the main objective of promotion strategy will be to populiarize its shop, its products and etc. The marketing promotion consists of such elements: advertising, public relations, sales promotion and personal selling.

Advertising:

 Promotional video clips on television. Since 2008 Lithuanian law confirmed that television advertising for alcoholic beverages can only be from 11 pm, so to reach its target segment 59 becomes difficult for the company due to restrictions on alcohol ads, they can be displayed very late, but not in the evening, when there is a peak audience of viewers. But it is clear that the video clips on TV are one of the most effective forms of advertising. The most important advantage of television advertising – it is possible not only to show the product, but also to demonstrate its features, the use and so on. Therefore, it would be extremely useful to create a promotional video for broadcasting wine commercial before the wine shop would opened and after it opened. In the first year it would be most appropriate to advertise on TV most popular channels – LNK and TV3.  Articles in the lifestyle magazines. It would be appropriate to order a variety of informative articles in magazines such as ‘Moteris’, ‘Laima’, Zmones’, ‘JI’ which could inform readers about Azerbaijani wine consumption culture, the country’s biggest wineries and so on. This form of promotion is really common and effective.  Articles in specialized food and beverage journals. It would be appropriate to put information about Tovuz-Baltiya, Azerbaijan, its culture, the country’s wine, wine consumption culture in magazines such as ‘Gurmano gidas’ and others.  Information on the websites. Since there are several informational and frequently visited sites (www.meniu.lt, www.vynai.com and etc.), which present Lithuanian users with the latest wines appeared on Lithuanian market, where there is a talk about the quality and price, consumption patterns, it would be appropriate to place the information about Tovuz-Baltiya production too in these webpages. Also, the most common form of interaction is an advertising panel links or tapping the link with the mouse (then the customer could be guided into the company’s website).  Company’s website. The objective of Tovuz-Baltiya’s website should be – to introduce potential buyers with the company, its production, enable the buyer to contact the company directly. The website should include: information about the company, information about the types of wines, the country’s regions of the products, product price list, promotions, the option of registration for potential customers, information on events and so on.

Public Relations:

 Press conference for the media. Its aim is to help the media to disseminate information to potential consumers about the future location of the shop, Azerbaijani production, the country itself. Also introduce the basic ideas of the shop – to promote wine culture in Lithuania, and promote Azerbaijani wine. At p-ress conferences the information could be disseminated not only about the Azerbaijani wine, but also about the country, its culture and so on. This would promote the appeal of Tovuz-Baltiya production.

60  Shop opening event. During the opening of the shop, it would be appropriate to send out invitations to many people who could be potential customers or could help them attract larger circle. In the opening day the company would arrange wines tasting, telling the stories about Azerbaijan, its culture, wine consumption, production methods, also provide some Azerbaijani delicacies and symbolic gifts.  Wine tasting evenings. As the wine is one of the main highlights of the Azerbaijani culture, it would be appropriate to promote the company’s products organizing wine tasting evenings in the shop. These events will be a good opportunity to taste and buy. In this way, people are introduced to the culture of Azerbaijan, wine taste, quality, a wide assortment of wines and a new Tovuz-Baltiya’s wine shop.

Sales promotion:

 One of the forms of sales promotion is to promote the consumer to purchase a larger quantity of wine bottles. To achieve this, higher discount programs can be organized when buying one wine box (containing six bottles), i.e. a bottle price would be significantly lower than if purchasing only one bottle. When purchasing two or more boxes – discount would be even greater.  As the customer would like to buy the wine, they already tasted, it useful to increase sales by organizing wine tasting every two weeks and enable the customer to taste different wines and buy them at a lower price than usual.  Also various loyalty programs can be implemented – discount cards, larger quantities delivered to your door and so on. The customer would get a chance to buy a discount card for a symbolic price. The card would provide a 5% discount on all products. After some time, if a certain amount of products were bought and a certain amount would be spent, the customer could get a discount of 7%. Customers who have purchased goods for higher amount of money would get higher discounts.  Under the appropriate amount of money spent would be appropriate a designated gift. As an example, if the purchase is 20 EUR for wine, some Azerbaijani delicacy can be added to the purchase.

Private sale:

Tovuz Baltiya shoud make a great emphasis on personal sales. Personal sale is a key success factor for trading companies. As the company will have a large number of different kinds of Azerbaijani wines in its assortment, it is important that the seller delivered them properly, offered the most suitable, made the buyer interested in the production, established and developed a communication with the client. Concealed need properly establish and maintain a relationship with

61 the buyer. Consequently, the company should give a lot of attention to proper, professional staff selection. A mixed strategy can be suggested for promotion, i. e. to apply both push and pull strategies. Firstly, all the actions should be directed to the promotion of a wholesaler to sell more (push strategy). Another important point – giving more flexible payment terms. It is a high risk to bring products to new customers without payment in advance, but using export credit insurance services in this process can be more flexible. In this case, risk and distrust are mutual, the client does not want to pay the full amount for the goods in advance, as he doesn’t know the manufacturer yet. Letter of credit or banking guarantee will let to attract more customers. In parallel with the push strategy, pull strategy is recommended – to inform customers about the company’s production in brochures, leaflets, which are recommended to be sent along with production. It is also proposed to order promotional items about the products and wholesalers who will distribute products in the country’s popular magazines.

3.4.5. Personnel

Since the company Tovuz-Baltiya is currently in the process of creating its shop in Lithuania, one of the most important tasks is to search appropriate staff. In order to implement the objectives on measurable marketing plan, well-versed in their field of work staff is required. The director of Lithuanian shop will be one of the company’s Tovuz-Baltiya shareholders. Managers will directly subordinate to director. The main task of managers will be searching of clients, sales, product presentation to information sources, the shop’s events (wine tasting), working with logistics companies and others. Managers will have the largest part of the implementation of a marketing plan. Therefore, variety of motivation lifting methods should be carried out: wage growth depending on the number of products sold, various training courses, carrier possibilities and so on. Four employees will be working in the shop, that understand perfectly the culture of wine consumption, type and production methods and will be responsible for the proper presentation of products to the buyer. Rather high requirements for future employees – excellent history of wine production and consumption, cultural knowledge. It is planned that one Azerbaijanian and three Lithuanians will be working in the shop. Azerbaijanian will represent the country well and in turn, the products sold. Azerbaijanian will be as the symbol of reliability, certainty to the consumer. The other three employees will advise and inform consumers about the assortment of Azerbaijani wines, consumption culture.

3.4.6. Promotion budget

One of the most difficult decisions in promotion actions is the formation of the budget. There are two different methods: the ‘top-down’ and ‘bottom-up’. Company Tovuz-Baltiya set a

62 fixed amount of money for promotion implementation for one year - possible for the fixed amount of money on Support for the implementation of the company for one year – 98 560 EUR. Therefore, in order to calculate the amount of money necessary for an individual promotion factor, the ‘top- down approach was used. Using this method, firstly the total amount for promotion is being calculated, then this amount is allocated to individual complex elements. So, knowing the amount of money for advertising, public relations, sales promotion and personal selling, the plan of promotion actions and budget for it was calculated in Table 9.

Table 9 Plan of promotion actions and its budget Promotion actions Period Costs (EUR) Advertising: 1. TV (LNK, TV3) 1. 2015 06 – 2015 07 1. 43 478,00 2. Press (‚Laima‘, ‚Moteris‘, ‚JI‘ 2. 2015 06 – 2015 10 2. 11 594,00 etc.) 3. Internet (www.meniu.lt, 3. 2015 06 – 2015 09 3. 2 028,00 www.vynai.com) 4. The company‘s website 4. 2015 06 – 2015 07 4. 2 898,00 Public relations: 1. Press conference 1. 2015 06 – 2015 07 1. 1 739,00 2. Opening 2. 2015 07 04 2. 7 826,00 3. Wine tasting evenings 3. 2015 07 – 2015 11 3. 13 043,00 Sales promotion 2015 07 – 2015 07 10 145,00 Personal selling 2015 07 – 2015 07 5 800,00 Total: 98 560

Source: the table has been created by the author

For the evaluation of promotional campaign it is appropriate to use the continuous surveillance. It must be systematically and continuously monitored and made insight into the effectiveness of the measures. For some of them failing, it is necessary to change, depending on the market environment, competitors, customers, and other influencing factors. It must be constantly monitored and controlled if the used promotional campaign resources successfully lead the ambitions of marketing goals.

3.5. Tovuz-Baltiya international marketing strategy model

After examining the company’s operations and identifying the marketing goals and following an action plan, the marketing strategy is being created. The main international marketing strategy decisions are reflected in the international marketing strategy model given in Fig. 23. In order to seek effective implementation of evaluated strategies in Lithuania, the execution plan of

63 these activities should be prepared and the control instruments should be identified. Monitoring the implementation of the strategy in Tovuz-Baltiya can be performed using the following indicators: 1. General business development: export growth, in connection with the sale in Lithuanian market. 2. Increase in the volume of sales: a year (monthly) achieved production volumes related to sales in the Lithuanian market. 3. Expanding the market: number of new customers and business partners; Lithuanian market capacity; market share increase; orders from new customers during the month (year) (according to the number and financial coverage). 4. Qualified personnel: personnel with professional development opportunities; the number of employees, participated in the development. The proposed marketing strategy for entering into the Lithuanian market can be put into practice and is a guide to how the company can achieve its goals and compete in this country.

64 Tovuz-Baltiya

Mission: to produce and supply quality products and services, ensuring their quality by implementing innovation, the assortment of products and services and increasing the quality of skilled workers ensuring the mutual benefit with the customers and partners.

Strategic objectives: to increase its own assortment of products and expand international trade. Internal environment

Quality management standards, participation in international Rarely updated website, lack of information, production exhibitions, distribution channels to Russia, Georgia, Armenia, equipment capacity is not used at its maximum, complex skilled permanent staff, experience in international trade, use of manufacturing and export, lack of staff to work with foreign new technologies in the manufacturing process, development of partners, no use of market research companies. product assortment, production values for money.

Decrease in production volumes, intense competition if going External environment External environment Production potential growth due to international trade, possible new equipment acquisition by using the state support, expansion to European market, complex recieving of alcohol licenses to to Baltic countries‘ market gives good opportunities. EU countries, risks associated with exchange rate fluctuations.

Objectives of international marketing – find foreign export market, increase sales volume, use production capacities, find out the needs of foreign customer

Target market selection – medium and higher wage customers Formation of international marketing strategy Correction

Method selection for Selection of foreign market entering the foreign market Choice of international marketing strategy

Direct export Competition Segmentation

Analysis of foreign market

International marketing mix Done by employees Consulta Group decisions 5,000EUR+VAD Correction

Product strategy Pricing strategy Distribution strategy Promotion strategy

Adapted Penetration into the market Selected Mixed

Volume of sales forcast and budget formation

General business development. Increasing sales Implementation and control of volume. Expanding the market. Qualified staffing. marketing strategy

Fig. 23. Marketing strategy model for Tovuz-Baltiya for Lithuanian market Source: the figure has been created by the author

65 This marketing strategy model presented in Fig. 23 have a significant value because it can be used practically by any company, that sells wine products and want to enter a foreign market. Of course, it can be adapted to the different needs of a particular company but the essence of a marketing strategy model will remain unchanged.

66 CONCLUSIONS

1. The theoretical part of the study showed that the main difficulties for companies seeking to launch international trade, are financial resources, qualified staff and a lack of knowledge about foreign markets. In the scientific literature, there are many marketing strategies and models that are complementary to each other, but they are more suitable for large capital companies. The analysis of the theoretical aspects of international marketing strategies developed theoretical entrance into foreign market marketing strategy model, adapted to smaller companies. Key moments in the model are situational analysis, foreign market selection, and international marketing mix preparation. Particular attention is given to the competence of directors and export experience (both positive and negative). This model is suitable for the use not only by the investigated company, but also for other manufacturing companies of the same size and capacities. 2. The main reasons for Tovuz-Baltiya going into international trade, are discrepancy between the company‘s strategic objectives and the general situation in the Lithuanian market. The company is expanding its production capacity and is planning to open its selling points in Lithuania. Taking into account all these factors marketing goals were formulated. By doing the business environment analysis of selected market, external environment has been evaluated (political and legal, economic and cultural factors), that may have a decisive influence on the development of export in Lithuania. In the competitive environment a detailed analysis was carried out of competitiors. Wine products in the market are more expensive than Tovuz-Baltiya would like to offer. 3. After competitive analysis, the third part of the thesis formed a line with the recommended products, pricing, promotion measures and distribution opportunities. For the purposes of the strategy formulated, the company will fail to achieve the objectives of international marketing, so it should be adjusted according to the results of the Lithuanian market research. This could help to achieve the goal – to double the profit margin, but the company would still have unused output potential. The international marketing strategy model was created for Tovuz-Baltiya, but also it can be successfully used by the other companies of the same size and similar production. Recommendations: 1. To hire more employees for export activities. At least one employess with the good foreign languages knowledge and experience in international sales, will help to reach objectives faster – to develop export activities abroad and look for new customers. Also it is recommended to divide export markets between export managers – one will work with

67 Russia, another – with Baltic States and etc.This would help to avoid the duplicate work, and better market analysis researches would be carried out. 2. Take advantage of Consulta Group market research services. Company employees do not have the possibility to carry out a detailed study on the foreign market information because of the lack of public information. Using the services of market analysts would reduce the possibility of errors in decision making process. 3. Introduce measures of control to the export managers. It is recommended by creating a customer data base where all found potential customers be registered. Each client will contain a space for filling in, and the managers will write their notes about this clients. This kind of information data base would be very useful and has many advantages. Firstly, it can control the amount of contacts (calls, e-mails) manager performs daily, weekly, monthly. Second, the data base has lasting value, i.e. if one employee stops working in the company, a new employees would have an access to all of the information, which was carried out in a particular market and won’t need to contact the same clients. 4. It is recommended to establish the minimum sales volume in international trade. It is proposed to make the assessment of production costs (in time) associated with bottling and packaging equipment for reprogramming in time to another product. It is also important to assess the costs of transport, it is recommended to establish a common minimum ordering quantity (500 litres). 5. For other researchers carrying out similar study – it is recommended not to set up another marketing strategy model, but to take advantage of already existing theoretical models. The most important moment – from a large number of models to choose the most suitable one.

68 REFERENCES

1. Alamil, L. R. (2010). Customer-Focused Business Architecture and Strategic Management // Contemporary PNG Studies: DWU Research Journal, Vol. 12. 2. Alcohol statistics (2015). Drug Tobacco and Alcohol Control Department. Internet access: http://www.ntakd.lt/en/ (accessed March 14, 2015). 3. Albaum G. and Duerr E. (2008). International Marketing and Export Management. Harlow: Prentice Hall. 4. Amanor-Baadu, V. (2009). Strategic Thinking for Agricultural Value-added Businesses. Internet access: , (accessed January 19, 2015). 5. Ambang, T. (2010). Influences of International Management Trends on Business Organisations in Papua New Guinea // Contemporary PNG Studies: DWU Research Journal, Vol. 13. 6. Amiri, S. R. S., Kavousy, E. and Azimi, S. Y (2010). The Role of Cultural Strategic Planning in Increasing Organizational Productivity, Development and Perfection // European Journal of Social Sciences, 15 (2). 7. Ashill N. and Jobber, D. (2014). The effects of the external environment on marketing decision-maker uncertainty // Journal of Marketing Management, Vol. 30, Iss. ¾, March. 8. Bage, I. (2012). Establishing Objectives and Budgeting for the Promotional Program. Internet access: , (accessed January 22, 2015). 9. Bradley, F. (2005). International Marketing Strategy, 5th edition. Harlow: Prentice Hall. 10. Carner, W. J. (2011). Developing a Marketing Plan // Community Bank Marketing Manual, Vol. 25, Iss. 7. 11. Chapter 7: Market Entry Strategies (2015). FAO. Internet access: , (accessed January 20, 2015). 12. Chen, C. W. (2011). Integrated Marketing Communications and New Product Performance in International Markets // Journal of Global Marketing, Vol. 24, Iss. 5, November- December. 13. Czinkota, M. R. and Ronkainen, I. A. (2007). International marketing. Mason, OH: Thomson/South-Western.

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70 28. Joachim, W. (2014) Exports, foreign direct investments and productivity: are services firms different? // Service Industries Journal, Vol. 34, Iss. 1, January. 29. Kash, B. A. and Deshmukh, A. A. (2013). Developing a Strategic Marketing Plan for Physical and Occupational Therapy Services: A Collaborative Project Between a Critical Access Hospital and a Graduate Program in Health Care Management // Health Marketing Quarterly, No. 30. 30. Khan, M. T. (2014). The Concept of „Marketing Mix“ and its Elements // International Journal of Information, Business & Management, Vol. 6, Iss. 2, May. 31. Kotler, Ph. and Armstrong, G. (2013). Principles of Marketing, 15th edition. New Jersy: Pearson Prentice Hall. 32. Kurtz, D. (2010). Contemporary Marketing Mason. OH: South-Western Cengage Learning. 33. Laufs, K. and Schwens, Ch. (2014). Foreign market entry mode choice of small and medium-sized enterprises: A systematic review and future research agenda // International Business Review, Vol. 23, Iss. 6, December. 34. LR Seimas (2015). Internet access: , (accessed April 1, 2015). 35. MacLeod, A. (2010). The EPPO Pest Risk Analysis Scheme: Comments on Using Risk Scales // EPPO Bulletin, Vol. 40, Iss. 1. 36. McDonald, M. (2006). Strategic Marketing Planning: Theory and Practice // The Marketing Review, No. 6. 37. McNamara, C. (2007). Field Guide to Nonprofit Strategic Planning and Facilitation, 3rd edition. USA, Mineapolis: Authenticity Consulting, LLC. 38. Naidoo, V. and Wu, T. (2011). Marketing strategy implementation in higher education: A mixed approach for model development and testing // Journal of Marketing Management, Vol. 27, Nos. 11-12, October. 39. Parish, E. D., Cassil, N. L. and Oxenham, W. (2004). Opportunities in the international textile and apparel marketplace for niche markets // Journal of Fashion Marketing and Management, Vol. 8, No. 1. 40. Product-Market Growth Matrix (2015). Marketing Mix Hub. Internet access: , (accessed January 20, 2015). 41. Schrader, G. et al. (2010). Enhancements of Pest Risk Analysis Techniques // EPPO Bulletin, Vol. 40, Iss. 1.

71 42. Seed, D. (2014). The Strategic Marketing Plan: Key Elements for Success // Smart Business Cleveland, September, Vol. 26, Iss. 1. 43. Steenkamp, E. et al. (2009). Export Market Selection Methods and the Identification of Realistic Export Opportunities for South Africa Using a Decision Support Model // Working Paper Series, November. 44. Stevenson, W. (2014). Operations Management, 12th edition. US: McGraw-Hill. 45. Sukhoruchenko, V. (2007). Foreign Direct Investment in an Emerging Market: Implications for Policy-Making in Kazakhstan // Doctor dissertation. University of St.Gallen. 46. Tayar, M. and Jack, R. (2013). Prestige-oriented market entry strategy: the case of Australian universities // Journal of Higher Education Policy and Management, Vol. 35, No. 2. 47. The International Product Life Cycle (2014). Equerry. Internet access: , (accessed January 20, 2015). 48. Tovuz-Baltiyja (2015). Internet access: , (accessed March 5, 2015). 49. Yafang, T. and Shih-Wang, W. (2012). Internal Marketing Establishes a Culture of Learning Organization // Northeast Decision Sciences Institute Conference Proceedings, March. 50. Zucchella, A. and Palamara G. (2007). Niche strategy and export performance. International marketing research: opportunities and challenges in 21st Century // Advantages in International Marketing, Vol. 17.

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ANNEXES

73 ANNEX 1

Strategy models through the entire product life cycle

74 ANNEX 2

Incoterms conditions

75 ANNEX 3

Interview questionnaire The production activities 1. How many and what kind of alkohol products manufactured Tovuz-Baltiya in 2014? Which part goes to export and which for domestic consumption? What product (products) are the most popular? 2. What is the company’s turnover in 2013-2014? The proportion of manufactured products? 3. What is the volume of production (d/L) from 2013 to 2014? What is the growth of production potential? 4. What kind of production / packaging equipment the company has? 5. Who are the main suppliers of the company? How often do they change?

Products

6. How long does it take to develop a new product? How it is developed? (analyzing competitors’ supply, consumer demand?) 7. Who creates the design of bottles? How long does it takes? 8. Does all of the products comply with international standards?

Personnel

9. How many employees work in the company (production, administration, marketing, distribution)? 10. How many employees work with foreign markets? 11. Is there a big change of staff involved in the production and exportation? How many employees have higher education?

Sales

12. How the company started cooperation with foreign partners (in whose initiative the relationship was developed)? 13. What kind of support measures the partners use? How it is informed about the new products? What is the scheme of payment for goods? What measures have been effective, what – not? 14. Is all of the information about the products available on the website? Are customers informed via e-mail about innovation? How frequently the information is updated? Who is responsible for this? 76 Description of segment

15. Who is the target audience abroad, in Azerbaijan (distributors, wholesalers, retailer)?

Export experience evaluation

16. When did Tovuz-Baltiyja started to export? What country, product, quantity? 17. Which country in 2013-2014 the company exported to? What quantity? What products? 18. Does the company have the strategic objectives relating to sales abroad? If so, which ones? (For example, expand foreign trade by x percent of the total production volume, etc.) 19. What foreign currency isused in sales? 20. What are the main difficulties related to trade abroad? 21. What main errors are done?

International marketing mix decisions

22. What principle the company uses to determine the cost of exported production? (analysis of competitors, according to production costs, a desired profit ...) 23. What are the conditions of payment for products and how sales is increased? (Discounts, percentage of sales) 24. How is the proposed price being written for a potential foreign buyer? Is Incoterms used? 25. How is (if any) budget support made (from the current turnover, from the expected income, etc.)? 26. What forms of promotion abroad the company uses? 27. In what language are the labels on the bottles? Are they being adjusted in each case by country language? 28. How does the company inform customers about new products (in Azerbaijan and abroad)? 29. Who takes care of the delivery of products abroad? If the company itself, what services are used? 30. Which trade shoows, exhibitions did the company participated in? What are the results? Is there a database, how many new contacts were aquired, how many boothe were visited, etc.? 31. What is the ordering scheme of production? How much time does it take from ordering to its implementation? 32. What is the cost of production? The proportion of the cost of production? Labor costs? Package? Distribution? Is it possible to obtain product cost calculations? 33. Who and how carries out market research? Do you make contacts with research companies?

77 ANNEX 4

Questionnaire

RESEARCH OF AZERBAIJANI WINE ENTERING LITHUANIAN MARKET

VMU master student conducts a research about the customers’ opinion of exported wine, product range, price, promotion. Circle the correct answer. The survey is ANONYMOUS, so your name and other personal information is not required. 1. You are?  Man  Woman

2. Your age?  18-25  26-35  36-45  46-55  more than 56

3. You live?  In the city  In small town  In the village

4. Your marital status?  Married  Single  Divorced  Widow

5. Your family income per month?  Up to 300 EUR  300-400 EUR  400-500 EUR  600-700 EUR  more than 700 EUR

6. Your education?  Secondary  Professional  Higher  University  Not finished higher education

7. Do you buy and drink wine?  Yes  No  Sometimes

78 8. If you answered “no”, why don’t you drink wine?  I don’t like  Because of bad health  I cannot afford  Other

If you don’t buy and drink wine, you don’t have to continue this survey. Thank you for your time!

9. How often do you buy wine?  Every day  2-3 times a week  1 time a week  2-3 times a month  Once a month  Couple times a year  Once a year

10. Rate the following statements by importance to you

Very Important Neither Unimportant Totally important important, unimportant nor unimportant Quality Price Taste Health Convenient and nice packaging Various additives Manufacturer Country of origin Quality and price ratio Advertisement Brand Opinion of family members, friends

11. Check the statements by importance that are attractive to you in wine sales promotion that affect your decision to buy

Very Attractive Neither Unattractive Totally attractive attractive, unattractive nor unattractive Reduced price Two products for one price Product+little present The chance to win money or a gift in a lottery after buying Wine tasting Advertising in the press Advertising in the wine shop

79 Advertising on TV, radio Recommendation of family memebrs, friends Advertising in the company’s website

12. What features helps to choose wine? (more than one answer is possible)  Manufacturer  Brand name  Country of origin  Always buy the same  Manufacturer and brand name don’t influence my choice

13. Would you buy Azerbaijani wine?  Yes  No  Maybe I would buy after degustation

Thank you for your answers!

80 ANNEX 5 Anketa

AZERBAIDŽANO VYNO ĮĖJIMO Į LIETUVOS RINKĄ TYRIMAS

VDU magistro studentas atlieka klientų nuomonės tyrimą apie eksportuojamus vynus, produkcijos asortimentą, kainą, rėmimą. Apibraukite teisingą atsakymą. Tyrimas yra ANONIMIŠKAS, todėl Jūsų vardas ir kiti asmeniniai duomenys nereikalingi. 1. Jūs esate?  Vyras  Moteris 2. Jūsų amžius?  18-25  26-35  36-45  46-55  Daugiau kaip 56

3. Jūs gyvenate?  Mieste  Miestelyje  Kaime

4. Jūsų vedybinė padėtis?  Vedęs / ištekėjusi  Vienišas, vieniša  Išsiskyręs / išsiskyrusi  Našlys / našlė

5. Tavo šeimos mėnesinės pajamos?  iki 300 EUR  300-400 EUR  400-500 EUR  500-600 EUR  600-700 EUR  daugiau kaip 700 EUR

6. Jūsų išsilavinimas?  Vidurinis  Profesinis  Aukštasis neuniversitetinis  Aukštasis universitetinis  Nebaigtas aukštasis

7. Ar Jūs perkate ir geriate vyną?  Taip  Ne  Kartais

8. Jei atsakėte “ne”, kodėl negalite vartoti vyno?  Man nepatinka

81  Dėl sveikatos priežasčių  Negaliu sau leisti, neįperku  Kita

Jei Jūs neperkate ir negeriate vyno, toliau nereikia tęsti anketos. Dėkui už sugaištą laiką!

9. Kaip dažnai perkate vyną?  Kiekvieną dieną  2-3 kartus per savaitę  1 kartą per savaitę  2-3 kartus per mėnesį  Kartą per mėnesį  Kelis kartus per metus  Kartą per metus

10. Įvertinkite pateiktus teiginius pagal svarbumą Jums

Labai Svarbu Nei svarbu, Nesvarbu Visiškai svarbu nei nesvarbu nesvarbu Kokybė Kaina Skonis Sveikumas Patogi ir graži pakuotė Įvairūs priedai Gamintojas Gamintojo šalis Kokybės ir kainos santykis Reklama Prekės ženklas Aplinkinių, šeimos nuomonė

11. Įvertinkite šiuos teiginius pagal svarbumą Jums, kurie įtakoja Jūsų apsisprendimą pirkti vyną

Labai Patrauklu Nei Nepatrauklu Visiškai patrauklu patrauklu, nepatrauklu nei nepatrauklu Sumažinta kaina Du produktai už vieno kainą Produktas+maža dovanėlė Šansas laimėti pinigų ar daiktą loterijoje po pirkimo Vyno degustacija Reklama spaudoje Reklama vyno parduotuvėje Reklama televizijoje, radijuje Draugų, šeimos narių rekomendacijos Reklama gamintojo internetiniame puslapyje

82

12. Pagal ką Jūs atpažįstate ir renkatės vyną? (gali būti keli atsakymai)  Gamintoją  Prekinį ženklą  Kilmės šalį  Visada perku tokį patį  Gamintojas ir prekinis ženklas neįtakoja mano pirkimo

13. Ar pirktumėte Azerbaidžano vyną?  Taip  Ne  Galbūt pirkčiau po degustacijos

Ačiū už Jūsų atsakymus!

83 ANNEX 6

Price elements of exported product UNIT PRODUCTION COSTS Material...... ______Labor...... ______Overheads...... ______Administration costs………………………...... ______Export management costs…………………...... ______Promotion costs……………………………………. ______

1. EXPORT COSTS Special labeling and packaging costs……………… ______Marking costs……………………………………… ______Loading costs……………………………………… ______Shipment: Documentation processing………………. ______Insurance………………………………… ______

All costs of exported product Plus a profit margin……………………… ______

Initial price Plus sales agent commissions (if any)……. ______Plus bank interest………………………… ______

Sales performance costs…………………………… ______

2. THE COSTS OF TRANSPORTATION OF EXPORTED PRODUCTS Internal fracht……………………………………………….. ______Wharfage……………………………………………………. ______

Total (FOB port) product price……………………………… ______Plus: Air transport price…………………………………. ______Ocean fracht………………………………………. ______Insurance………………………………………….. ______

Total CIF port recipient……………………………………… ______

84