Global Opportunity Analysis

GSBS6041
Global Opportunity Analysis
For T2
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Executive Summary
T2 is Australia’s leading tea retail company which provide fragrant, premium
tea. Over the past decade, it has continued to innovate and expand globally. Its
international commercial operations have become diverse, including
participating in markets in the United States, the United Kingdom, New Zealand
and Singapore, with more than 100 stores. Today, it has become a large tea
company and continues to sell significant volums of tea equivalent to 9 million
cups. For the tea business as a single industry, it is a challenge to continue
global expansion, especially in Asia, a region with a different cultural
background from Australia. This report focuses on the preparation of a
situational analysis for T2’s entry into the China market to determine a strategic
fit for future expansion.
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CONTENTS:
1. Introduction………………………………………………………………….. 3
2. Company Structure, Capabilities and Resources………………. 3
2.1. Company structure…………………………………………………… 3
2.2. Capabilities and Resources ………………………………………. 4
3. Products/ Markets/ Distribution & Supply…………………………. 5
3.1. Products…………………………………………………………………. 5
3.2. Market……………………………………………………………………. 5
3.3. Distribution & Supply………………………………………………… 5
4. Competitive Environment, Industry Situation ……………………. 6
4.1. Industry environment ……………………………………………….. 6
4.2. Competitor analysis …………………………………………………. 6
5. Synthesis of Strengths ………………………………………………….. 8
6. Strategic Fit Evaluation …………………………………………………. 9
7. Conclusion…………………………………………………………………. 10
8. Reference： ………………………………………………………………. 11
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1. Introduction
With the global economy growing strongly, retailing has become a global
business (Deloitte Australia, 2019). With the progress of science and
technology, it becomes easier for retailers to enter new markets, and the
strategy of globalization will continue to develop into the future (Forbes.com,
2017). Therefore, the identification, analysis and evaluation of opportunities are
essential for Australian retailers. The main purpose of this report is to analyze
the market opportunities of the tea product line of T2, one of the Australian retail
giants, in China. It will analyze the internal environment, including company
structure, capabilities and resources, and then conduct in-depth research on
the external environment which include industry, competitors, distribution and
supply. Finally, potential opportunities will be identified and justified in order to
help the company realize its mission for global expansion.
2. Company Structure, Capabilities and Resources
2.1. Company structure
T2 was founded in 1996 by Maryanne Shearer and Jan O ‘connor in Melbourne,
Australia where the TEA TWO name represents the TWO co-founders
(En.wikipedia.org, 2017). Inspired by the people they met and the places they
visited, T2 changed the traditional tea ceremony and placed emphasis on
innovation in their range of tea flavours. The business is thought to have paved
the way for a revival of tea consumption. In the following ten years, T2
continued to expand the domestic Australian market, creating a store
experience that customers were obsessed with through a strong artistic
atmosphere and decoration. In 2005, it entered the digital market and launched
the T2 website to expand the brand influence and distribution channels
(T2tea.com, 2018). In 2013, it was acquired by Unilever where it was able to
push its unique products to the global market. By 2020, it had more than 2200
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employees (T2tea.com, 2018). With the development of global expansion, the
number of stores worldwide has exceeded 100 till now.
2.2. Capabilities and Resources
Resources are inputs into a firm’s production processes, it can be classified as
tangible and intangible (Pike, Roos & Marr, 2005). First, having Unilever as the
parent company behind T2 to provide resources in terms of product innovation
and global expansion is advantageous (SmartCompany, 2017). Secondly,
brand equity cannot be underestimated. T2’s logo has almost become the icon
of supermarkets and shopping malls in Australia, thanks to the company’s
excellent efforts to cultivate a positive and recognizable brand image, and
artistic atmosphere within its in-store experience. In addition, T2’s customers
have grown due to its high-quality products and the trend for premium tea
drinking culture it has created. Such a dedicated customer base is also seen
as an important resource.
All the above resources are pooled to become strategic capabilities of T2, which
give company the ability to compete in its market and often developed in
specific functional areas (Sussan & Johnson, 2003). From a marketing
capability perspective, T2 effectively used both in-store and online channels to
launch new products at the same time and invited key influencers to master
classes in store, which allowed them to experience products first hand and
again influence their followers to visit T2 stores (Power Retail, 2017). In terms
of distribution, T2 has also penetrated the business market by selling its
products through many high-end hotels and a special gift for enterprises to
maintain relations with clients.
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3. Products/ Markets/ Distribution & Supply
3.1. Products
The wide variety of T2 tea blends is thought to reflect Australia’s growing love
for premium teas. As of 2017, more than 250 varieties of tea blended were
reported, including traditional black and green tea, fruit tea, health tea and other
functional tea was gradually being developed. To enrich the product line, T2
also includes a tea set category.
3.2. Market
According to IBISWorld (2019), the general market size of T2’s home market in
Australia is about $1 billion. But weak growth in disposable income has limited
consumer spending on food services and retailers (IBISWorld, 2019). Despite
this weak growth, strong consumer demand for tea has driven revenue growth
in the sector over the past five years including the demand for premium tea
indicating the resilience of the tea product category.
3.3. Distribution & Supply
T2 has more than 100 stores around the world as the main sales channel. In
addition, other channels have been opened up to enrich the distribution
including coffee shops, hotels, leisure and entertainment places outside
mainstream supermarkets like Woolworth and Coles. T2 seeks a subtle blend
in the supply of tea. In pursuit of product uniqueness, all T2’s teas, herbs, fruits
and spices mainly adopt a combination strategy of ingredients sourced globally,
such as black tea sourced from India, certain fruits from Turkey, and mint from
the northern United States as illustrated below in Figure 1 (T2tea.com, 2019).
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Figure 1: Origin of ingredients
4. Competitive Environment and Industry Situation
4.1. Industry environment
In the tea industry of Chinese, the agriculture that tea belongs to has always
been the first in the national economy. Green tea, oolong tea and other
traditional cultivation of tea account for about 85% of the market share. The
overall Chinese market is about $52.3 billion (Bg.qianzhan.com, 2020). From
the perspective of the development demand and direction of the current tea
industry, tea has gone beyond the traditional meaning. Tea culture, tea dance,
and tea picking performances are all important contents in the development of
the tea industry.
4.2. Competitor analysis
Many companies operate in international business environments such as
Australia and China. Given the size of the tea industry and its potential for
growth, the world has seen a rush of competitiors. In the process of global
expansion, Porter’s 5 forces model can help explain five salient forces to
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measure the competitive intensity, attractiveness and profitability of an industry
or market (Porter, 2008).
The Primary competitors in China include the following:
Lipton: It has been in China for nearly 20 years, selling tea types including
green tea, herbal tea, diet tea and milk tea unique to the Asia Pacific
region (Lipton US, 2020). Its advantage lies in the low price, high brand
awareness and high-quality tea ingredients. The disadvantage is that its
clientele is concentrated in the young generation.
NESTEA: Since entering the Chinese market, a variety of tea products have
been introduced, including concentrated and powdered tea, refrigerated tea
and instant tea (Nestlé, 2020). Advantages are that it contains more flavors
and varieties, and a wide range of distribution channels. The disadvantage
is that the negative feelings of customers of other products such as coffee
and milk powder tend to have a negative impact on these tea products.
Traditional teahouse market: Well-classified tea brands are present in
every city, which is the primary choice of most consumers for traditional tea
(O-cha.net, 2017). Its advantage lies in the richness of tea flavour, the
resonance of tea culture and tea ceremony, and the wide recognition by the
society. The disadvantage is that the customer base is limited and mainly
concentrated in the middle and older age groups.
Threat of Substitutes is the area that T2 needs to observe carefully. If the
market exists in the substitute products, customers will be able to choose
these instead of the T2’s products, so as to weaken the strength of the
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company (Dobbs, 2014). The following markets also need to pay more
attention:
Milk tea market: the emerging milk tea industry in recent years diverts
market share from the traditional tea industry. With the gradual rise of rich
brand levels and the innovation of its marketing methods, milk tea has
become the daily life of modern young people.
Coffee market: more and more global coffee brands are entering the
Chinese market. By creating a comfortable environment in store, it has
become the first choice for business meetings and social gatherings of
consumers in city locations.
5. Synthesis of Strengths
T2, as a global brand, has great advantages to develop the Chinese market,
because the Chinese market is very inclusive and partial to international brands
(Drummond, 2017). T2’s continuous product development and innovation
provides it a great opportunity to secure market share of traditional Chinese
tea. Health care products are highly sought after from Chinese consumers at
present, which will bring a great opportunity for T2 health care tea. Although
there are a large number of competitors in China, including traditional centuryold tea brands, and new substitutes, T2’s unique blend of tea and its
fashionable, cool, and passionate aesthetic appeal can be special benefits of
the brand that is different from other competitive products. Such fusion
between fashion and flavour will likely appeal to young consumers who enjoy
fashion and style as well as the middle-aged and elderly people who enjoy tea
within a brand community. Although majority of brick-and-mortar stores in
China are facing the impact of e-commerce (Forbes, 2017), T2’s strategy on
experiential marketing can also be an opportunity and source of strength. For
instance, T2 can create an immersive, frictionless experience for customers
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through provision of a T2 branded experience that offers online promotions, instore drink tasting and mobile channel communication for up to date
information about the brand.
Based on the analysis of the T2 brand, the following SWOT analysis is
synthesised and summarized below in Figure 2.
Figure 2: SWOT Analysis of T2
6. Strategic Fit Evaluation
In terms of the economic environment, the global tea market is forecast to grow
at a steady rate of more than 4% compound annual growth rate by 2021,
according to Technavio’s latest market research (2020). Much of this growth
was attributed to major revenue contributions from the Asia-pacific region. From
the perspective of the social environment, tea consumption in the Chinese
market is very high, and Chinese consumers are very receptive to overseas
brands. From the perspective of the technology environment, Chinese ecommerce infrastructure can provide T2 with the means to implement an online
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and offline omnichannel retail strategy to achieve a broader market coverage
and more precise customer communication in China. Therefore, considering
the scale of Chinese tea industry and its growth potential, the Chinese market
is undoubtedly an important opportunity for T2 to develop and expand, and to
further its footprint in the Asia-pacific region.
7. Conclusion
Although T2 has occupied a large market share in the Australian market and
is considered an iconic brand, in order to continue growth, entering the
Chinese market, the birthplace of tea, is an excellent opportunity for global
expansion. T2 will be able to reach a large market of tea drinking consumers
in China by promoting the almost lost art of the tea ceremony and presenting
it in a very modern and innovative way. Nevertheless, further understanding is
needed on how the product range is marketed with further consideration of
various markets segments and brand positioning is recommended.
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8. Reference：
Bg.qianzhan.com. (2020). Analysis on the market status and development
trend of Chinese tea industry in 2019. [online] Available at:
https://bg.qianzhan.com/report/detail/459/190219-50b4b42d.html.
Deloitte Australia. (2019). Global Powers of Retailing 2019 | Deloitte Australia
| Consumer & Industrial Products. [online] Available at:
https://www2.deloitte.com/au/en/pages/consumer-industrialproducts/articles/global-powers-of-retailing.html.
Dobbs, M. E. (2014). Guidelines for applying Porter’s five forces framework: a
set of industry analysis templates. Competitiveness Review.
Drummond, S. (2017). Understanding the Foreign-Local Brand Dynamic in
China. [online] Ashton Media. Available at:
https://ashtonmedia.com.au/understanding-foreign-local-branddynamic-china/.
En.wikipedia.org.(2017). T2 (Australian company). [online] Available at:
https://en.wikipedia.org/wiki/T2_(Australian_company).
Forbes. (2017). E-Commerce Is Affecting Brick And Mortar Retail, But Not In
The Way You Think. [online] Available at:
https://www.forbes.com/sites/quora/2017/11/27/e-commerce-isaffecting-brick-and-mortar-retail-but-not-in-the-way-youthink/#3187e0f122bd.
Forbes.com. (2017). Going Global: Done Right, A Growth Opportunity For All
Retailers. [online] Available at:
https://www.forbes.com/sites/walterloeb/2017/07/24/going-globaldone-right-a-growth-opportunity-for-all-retailers/#7113dd9f42fc.
IBISWorld, (2019). Market Research Reports & Analysis | IBISWorld AU.
[online] Ibisworld.com.au. Available at:
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https://www.ibisworld.com.au/industry-trends/specialised-marketresearch-reports/consumer-goods-services/tea-coffeemanufacturing.html.
Lipton US. (2020). Chinese Tea Party Ideas – Chinese Tea Ceremony |
Lipton. [online] Available at: https://www.lipton.com/us/en/world-oftea/how-to-host-a-chinese-tea-ceremony.html.
Nestlé. (2020). homepage. [online] Available at: https://www.nestle.com.cn/.
O-cha.net. (2017). [online] Available at: http://www.ocha.net/english/association/conference/documents/Liu.pdf.
Pike, S., Roos, G., & Marr, B. (2005). Strategic management of intangible
assets and value drivers in R&D organizations. R&D
Management, 35(2), 111-124.
Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard
business review, 86(1), 25-40.
Power Retail. (2017). T2 on Going Global – Power Retail. [online] Available at:
https://edm.powerretail.com.au/news/t2-global-success/.
SmartCompany. (2017). Tea chain T2 sells to Unilever: Four lessons from the
company’s loose-leaf success – SmartCompany. [online] Available at:
https://www.smartcompany.com.au/finance/economy/tea-chain-t2-
sells-to-unilever-four-lessons-from-the-company-s-loose-leafsuccess/.
Sussan, A. P., & Johnson, W. C. (2003). Strategic capabilities of business
process: looking for competitive advantage. Competitiveness Review:
An International Business Journal.
T2tea.com. (2018). T2 Tea. [online] Available at:
https://www.t2tea.com/en/au/Home.
T2tea.com. (2019). [online] Available at:
https://www.t2tea.com/on/demandware.static/-/Library-Sites
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T2SharedLibrary/default/dw8c9a4785/pdf/T2_Impact_Report_2018_F
A.pdf.
Technavio. (2020). Tea Market by Product, Distribution Channel, and
Geography – Forecast and Analysis 2020-2024. [online] Available at:
https://www.technavio.com/report/tea-market-industry-analysis.