An evaluation of the Chinese market illustrates an explosive demand for imported wine. The expansion of the wine markets entails a growing middle class who are willing to spend their income on imported products (Reuters, 2017) (Introduction). The crackdown on corrupt individuals has shifted the consumption of the upper class and government officials from premium products to avoid lifestyle exposure to the government (Lockett, 2016). The sporadic expansion wine market China illustrates support for growth and sustainability of entrant firms. Therefore, the establishment of CA Wine Trading Co. seeks to avail cheap wines from California to the Chinese consumers in cities and major towns. It will capitalize on low pricing, the expanding middle-class, the absence of adequate quality wine, and familiarity of the Chinese consumers with American wines (Benefits). As a result, the establishment and management of CA Wine Trading Co. will require $2.5 to begin operations with a warehouse in California, and agents and distribution centers in Chinese cities and towns (Budget).

Introduction

An evaluation of the Chinese market illustrates an explosive demand for imported wine. The expansion of the wine markets emanates from the growing middle class who are willing to spend their income on imported products (Reuters, 2017). Besides, the local production is insufficient to meet the local demand. It fosters the importation of wine to supplement its burging consumption in the country. The crackdown on corrupt individuals has shifted the consumption of the upper class and government officials from premium products to avoid lifestyle exposure to the government (Lockett, 2016). It means that the averaged priced from foreign countries have to increase to meet the demand previously occupied by the premium products. Therefore, the establishment of CA Wine Trading Co. seeks to avail cheap wines from California to the Chinese consumers in cities and major towns. It will ensure the middle and upper classes have products that can afford regularly without excessive strain on their budgets.

Needs Statement

Reuters (2017) reported that the Chinese wine market is growing exponentially. The 40% annual market expansion will make China the second largest wine consumer in the world by 2020. Reuters (2017) further indicates that the volume consumed will increase with the expanding middle class in the country. The active purchasing of wine will increase due to extensive crackdown on corruption that inhibits the provision of business gifts (Lockett, 2016). It will reduce smuggling of wine into the country while requiring the government officials to purchase the product after the termination of the insincere rewarding practice. As a result, the wine production and import will rise to meet the new demand from surging middle class and government officials leading to the entrance of new firms in the market.

Radic (2017) opines that the Chinese are consumers of wine as opposed to the previous propositions that they cordon any form of alcoholism. He indicates that the millionaires in China are beaucoup who are willing to spend more than $300 on a wine bottle. Meanwhile, the liberalization of the economy makes it appear like it is emerging from the doldrums. As a result, the Chinese wine uptake behaviors illustrate an upswing with rising per capita consumption. For instance, in cities such as Shanghai and Beijing, the residents are accustomed to holding parties in their homes where they serve wine. It means that the availability of cheap wines in the market will increase their consumption while making the parties more frequent.

Moreover, the myth describing China as a patriarchal society is winding out with the rise of independent and working-class women who perceive sparkling wines as part of their lifestyle. The establishment of a new wine importer in the country will not strive to introduce new product in the market, but will focus on changing the consumer taste to incline towards California brands. The consumption of the product by all genders and adults across all age sets will ease marketing design. In this view, wine business across China is a booming enterprise that is supporting the sustainability of existing and entrant firms particularly those venturing in previously neglected markets.

According to Rieger (2015), the imported wine in China from 2003 to 2013 grew by more than 600% where liter consumed per year rose from 600,000 to 31 million. CA Wine Trading Co will deliver additional liters of wine to the market to cater for the increasing demand while supplementing the local production.

The figures indicate that the annual growth rate for importation averaged at 60%. Although the growth in 2014 and 2015 fluctuated due to government policies, Handley (2017) indicated that China recorded a 15% increase in the importation of 638 million liters of wine valued at $2.4 billion. It illustrates that there is an adequate market to support the establishment and growth of CA Wine Trading Co in China.

Verot (2017) attributes the expansion of the market for foreign wines to 1% annual decline of local production. It is evident that consumers are shifting from the traditional Chinese alcohol baijiu to the uptake of imported wines, such as Gallo Family Vineyards from the United States, Lafite from France and Suntory Yamazaki from Japan (Verot, 2017c). Therefore, the local wineries dominate 70% market share, but the increasing availability of imported products is diluting the control. Thus, the consumers are increasingly purchasing their favorite imported brands from free markets that are supported by the surging online sales in the cities and major towns. It seeks to compensate the declining production of the commodity in the country. CA Wine Trading Co will avail imported wines to the local market to enable customer access them with greater ease. The company will be bridging the gap in the supply chain.

Reuters (2017) acknowledges that China will have to import 94.5 million nine-liter cases by 2020 to meet the local demand. The 80% expansion of imports will require the formulation of new firms in the business. In this view, the establishment of CA Wine Trading Co. to export wine from California will provide the Chinese consumers with quality products throughout the year. It will further assist in meeting the local demand for the American wine. Therefore, market factors in China support the establishment, growth, and sustainability of CA Wine Trading Co. to meet the expectations of upper and the developing working classes.

Goals and Objectives

CA Wine Trading Co. aims at supplying China with cheap wines from California to ensure the consumers can afford the product consistently. The company will establish a warehouse in California and institute contracts and partnership with wine distributors in the main towns of China on the stocking of the California brands. CA Wine Trading Co. also aims at reducing the customer response time through air transportation of the product.

CA Wine Trading Co. will attain objective by striving:

1. To become the preferred distributor of quality wines from California through the establishment of distribution centers around China.

2. To avail the cheapest wines in the market for consistent affordability to the middle class.

3. To guarantee quality imported wine through the year.

4. To cooperate with local distributors in China who stock and ensure supply is consistent.

5. To ensure all secondary cities in China have distribution centers and agents for accessibility by the middle-class income earners who are distributed throughout the country.

Implementation

The company has to follow business establishment procedures in California to gain appropriate licenses and permits to conduct the operations legally.

Meanwhile, the business will countercheck its name to ensure it does not have similarities existing firms. It will further pay $10 to the California Secretary of State to have the name preserved for the next 60 days pending incorporation. It will file Articles of Organization for its registration through the presentation of the business name, purpose, and physical location to the Secretary of State at Sacramento. CA Wine Trading Co. will also be securing premises, branding, and furnishing it ready to begin operation. Before the completion of preparing the facility, several employees and supervisors will be hired to coordinate functions and ensure the design meets expected qualities.

The incorporation of CA Wine Trading Co. by the end of October 2017 will facilitate the appointment of a registered agent who assumes all the legal issues on behalf of the business. The shareholders will design and present operating agreement before beginning to train employees and orienting them to the organizational culture. In the meantime, some supervisors and marketers will travel to China and identify distribution centers and agents in major towns around the country. The will provide the traders with catalogs, contacts, and company website where they can consult through chats at any time of the day. On December 2017, the company will file a Statement of Information with the state to affirm its legal status and compliance.

On November 2017, CA Wine Trading Co. will pursue different compliances to promote safe and friendly working environment. The business will acquire a healthy and safety policy to cover employees when in the premises. It will further procure a beer and wine wholesaler and Industrial Alcohol Dealer permit to promote compliance with federal regulations.

Budget

The total costs of setting up CA Wine Trading Co. will be $2.5 million. The investors will raise capital from their saving and loans whereby individuals will have shares that are equivalent to their capital contribution. The capital contribution will fund the acquisition of machinery, procurement of assets, and business operations for the first one year. Table one presents the utilization of $2.5 million in the firm’s operations and functions. Meanwhile, the company will be registered a corporation to protect the corporate interests and values from shareholders’ manipulation. In the event of expansion, CA Wine Trading Co. will seek additional investment from the shareholders, or they concur to incorporate new partners through mergers and purchases of shares.

Table 1: Deployment of shares in CA Wine Trading Co.

Item or Function	Amount Allocated in US dollars
Legal and Ethical Compliance	$8,300
Premises Lease	$240,000
Branding and Machinery Installation	$76,000
Handling Machinery	$117,000
Office Equipment and Stationaries	$59,000
Website, Management System, and Maintenance	$30,700
Salaries and Wages	$170,000
Agency and Distributor Recruitment	$60,000
Initial Procurement and Flight Charges	$1,230,000
Overhead (Utility bills)	$9,000
Total	$2,500,000

Benefits

The establishment of CA Wine Trading Co. will benefit a large number of wine consumers who are not residing in the major cities. The firm will distribute products of lower prices but higher quality to ensure the middle-class population that could not afford premium wine regularly have an alternative.

The majority of wines in China is prepared from immature fruits, making them low quality (Verot, 2017). Therefore, the emergence of CA Wine Trading Co. in the market will provide an opportunity for the Chinese to enjoy high-quality wines from California. As a result, the firm will promote California exports leading to an expanded market for local products. The manufacturers, distributors, and vine growers will enjoy higher returns from the expanded and assured market abroad. The establishment will further enable the state to generate foreign income in addition to direct and indirect employment. Therefore, the formulation of CA Wine Trading Co. in California will provide its economy with diverse benefits.

Evaluation

CA Wine Trading Co. will have several approaches to assess its performance in the market. First, it will conduct consumer surveys in China, requiring the distributors to provide the performance overview of its products. Appendix A presents the questionnaire that will frequently be presented to the distributors. The firm will analyze them to determine consumers’ preference while evaluating how its product match the expectations. Second, the company will conduct a performance evaluation for the employees to ensure they are providing the required results in their execution of the job specification. The performance evaluation will be regular at specified intervals to ensure the workforce is consistently productive. Finally, the business will have targets to compare its achievement with expectation at each time instance as illustrated in Appendix B. It will enable the firm to determine whether market plans are propelling towards the attainment of the objectives.

References

EU SME Centre. (2011). Wine market in China. EU SME Centre.

Handley, H. (2017, March 21). Changing tastes: China’s imported wine industry. China Briefing. Retrieved from http://www.china-briefing.com/news/2017/03/21/chinas-wine-industry.html

Lockett, H. (2016, October 9). China anti-corruption campaign backfires. Financial Times. Retrieved from https://www.ft.com/content/02f712b4-8ab8-11e6-8aa5-f79f5696c731

Radic, R. (2017, April 2). China’s wine market is growing. Huffington Post. Retrieved from http://www.huffingtonpost.com/entry/chinas-wine-market-is-growing_us_58965452e4b061551b3dff72

Reuters. (2016, December 28). China: Anti-corruption efforts working, No Letup in 2017. VOA News. Retrieved from https://www.voanews.com/a/china-anticorruption-campaign/3655166.html

Reuters. (2017, April 27). China set to become world's second-biggest wine market-IWSR. CNBC. Retrieved from https://www.cnbc.com/2017/04/27/reuters-america-china-set-to-become-worlds-second-biggest-wine-market-iwsr.html

Rieger, T. (2015). Challenges and opportunities in China's wine market. Wines & Vines. Retrieved from https://www.winesandvines.com/features/article/143862/Challenges-and-Opportunities-in-Chinas-Wine-Market

Verot, O. (2017c, July 16). September 9th, it is the wine festival in China! Zhongguo Wine. Retrieved from http://www.zhongguo-wine.com/2017/07/16/september-9th-it-is-the-wine-festival-in-china/

Verot, O. (2017, July 18). The imported wine market in China reaches 2 billion dollars. Zhongguo Wine. Retrieved from http://www.zhongguo-wine.com/2017/07/18/the-imported-wine-market-in-china-reaches-2-billion-dollars/

Verot, O. (2017b, May 11). Imported wine: 40% market shares in China. Zhongguo Wine. Retrieved from http://www.zhongguo-wine.com/2017/05/11/imported-wine-40-market-shares-in-china/

Appendices

Appendix A

Questionnaire

1. Are the orders delivered in time and the right quantities? (please tick one answer)

O Yes

O No

2. Are the customers happy with the quality of wines? (please tick one answer)

O Yes

O No

3. Do the wines from CA Wine Trading Co provide adequate profits?

O Yes

O No

4. Are you willing to continue marketing and distributing our products?

O Yes

O No

5. Which brands are doing well in the market? (List at least three)

a. _________________

b. _________________

c. _________________

d. _________________

e. _________________

6. Provide Suggestion on how to improve customer relation.

Appendix B

Milestones

Activity	Oct ’17	Nov ‘17	Dec ‘17	Jan ‘18	Feb ‘18	Mar ‘18	Apr ‘18	May ‘18	Jun ‘18
Check for name availability
Reserve the name
File for Articles of Organization
Acquire Premises
Hire Employee
Procure machinery
Brannd premise & install machines
Full Registration
Promote business & work ethics
Staff training & Placement
Begin Operations
Acquire Addional staff
Achieve $100,000 sales
Export wines beyond in towns