In your role as a marketing advisor to a new client which has established domestic market leadership, you are required to;
1 Critically review the current market environment by using a marketing audit framework.
2. Summarise the audit through a focused actionable SWOT analysis
3. Select ONE marketing opportunity and then explain with justification how this can be commercialised over the next three year period with specific attention to proposals for the following:
3.1 Market Attractiveness
3.2 Market Segmentation and Market Targeting
3.3 Impactful Brand Value Propositions to secure a competitive position
3.4 Specific, relevant, marketing mix plans for the next 3 years to build customer loyalty
3.5 Marketing Resource requirements
4. Justify this innovation in terms of potential financial contributions through revenue grow, cash flow and profit contribution
The report will focus on identifying the market opportunity that is available for “Imperial”. The product has already established itself in the UK market. The market opportunity available for the product will be explored in the report. Prior to the discussion of the market opportunity, an existing market analysis of the product has been conducted. The internal and external market factors affecting the product have been analyzed for the product.
As the domestic markets are becoming mature and saturated, it has become fashionable for the organizations to seek for the opportunities of growth in the foreign country. The communication system has become faster with the development of new technologies; it is easier to enter into business in the International markets. Imperial is a well established soft drink company in UK. It is one of the largest manufacturers of soft drinks in UK (Monaghan, 2014). They manufacture non –alcoholic drinks. It has survived in the domestic market for the last 20 years. They offer range of drinks of different flavors. The flavors are quite popular amongst the customers in UK. But it receives severe competition from other reputed beverage companies with strong worldwide presence. They receive severe competition from big well known brands like Coca-cola, PepsiCo. Thus Imperial has to struggle to maintain the market share. It must expand itself in the global market in order to remain competitive.
A market analysis of Imperial has been presented. An analysis of the external market and the internal market has been presented. The external market analysis has been done using PEST while the internal market analysis has been presented using the Porter’s 5 forces.
PEST Framework
The macro environmental analysis can be done using PEST framework. The external factor that has been affecting Imperial for the past years has been identified. The external factors affecting the organization are the laws in the country, barriers of trade, change in the demography and policies of the government.
The political factors can be explained by the various policies of the government which acts as intervention in the economy. The political system in UK is a multi party system. It is one of the most important tools of strategic management that can be implemented by various organizations for the analysis of the macro environmental factors affecting the organization. Imperial will be able to set its future goals and objectives on the basis of the environmental analysis. The political factors can be explained by the extent of intervention that is imposed by the Government. The major interventions of the Government can be in the form of policies of taxation, tariffs, restrictions of trade, environmental and labor laws. The political stability of the economy will affect the business to a considerable extent. The issues in the regulatory framework by the Government can affect the business. The political condition in UK is favorable for the growth of Imperial. UK is one of the developed nations in the world. There is certain amount of intervention from the Government in the industries. The intervention from the Government is seen in terms of fixation of rates of tariff, tax rates and various laws that has been implemented by the Government. There are various regulations that have been provided by the Government regarding the health and safety of the workers and the consumers. Thus Imperial has to abide by the health and safety regulations (Mirzaee Ghazani and Khalili Araghi, 2014).
The economic condition of the country is crucial for the success of the business. The purchasing power of the consumers will be affected by the economic condition of the country. The consumers with high level of income will have greater purchasing power. The affordability power of the consumers will rise. The economic condition of UK is stable. The economy of UK has been performing well due to the rise in the business and the confidence of the consumers. The credit conditions of the home have been better and the global economic conditions have improved. The encouraging factor is that the growth of the economy in UK is broad based and there has been an increase in the investment in the business. The growth of the economy has been forecasted at 3.1% while the earlier prediction has been 2.8%. The growth of Britain has been the highest in the short term growth. The Bank of England has kept the rate of interest low so that that it can bring more investments. The business scenario is favorable for Imperial. The sales of Imperial in the domestic market of UK have been increasing every year. However a major fall was seen in the business aftermath the global financial crisis in 2009. There was contraction in the GDP of the country. But it recovered from the situation since 2012 (Cooke, 2007).
Imperial is a UK based company so it is overwhelmed by the western culture. There is division in the society of UK into upper, middle and lower class. The soft drink is popular among the consumers in UK in all rungs of the society. But the major problem faced by Imperial is the severe competition in the beverage industry. There are already established companies like Coca-Cola and PepsiCo. It is difficult for Imperial to maintain its market share amongst the competitors. Thus it has to constantly reinvent itself in order to maintain its competitive advantage. The consumers have easy access to the substitute drinks. The culture of UK is mixed. 86% of the population in UK is white, 7.5% of the population is Asian and 3.3% of the population in UK is black. On the other hand, 2.2% of the population in UK belongs to the mixed culture. The business of Imperial is affected by the rise in the competition. It is a matter of great concern for the business (Wynarczyk and Watson, 2005).
Over the past decade there has been vast innovation in the field of technology. This has increased the exposure of Imperial to the residents of UK. The technological developments have increased the scope of Imperial to reach out to wide range of customers. The customers can have easy access to the company via the internet. The various promotional activities by Imperial are easily available to the customers via the internet. The discounts and offers are updated in their website. This has increased the customer strength of Imperial over the years. Imperial has been continuing its operations of promotional activities using social media platform like Face book, Twitter and you tube. It has been easier to communicate with the customers using the social media platform. The customers are aware of the various offering of the company along with the discounts that will attract the customers towards the company. The massive growth of the social media platform has served has as a tool for the easy communication with the customers. This has increased the strength of the customers of Imperial over the years and they have formed a strong holding in UK.
There are minimum basic legal obligations that are posed by the Government in UK which has been followed by Imperial over the years. They abide by the minimum legal standards of UK. Imperial has followed the jurisdiction of UK in terms of ingredients in the drinks as well as packaging. The legal standards for food processing have been followed by Imperial (Cave, 2005).
The sales of Imperial have been affected by the environmental changes in UK over the past years. The temperature of UK is extremely cooler during the winter season. The climate in winter is drier and the eastern region has less windy climate. There are severe natural calamities that the country suffers. The natural calamities include hurricanes, earthquake, forest fires and other calamities which have severe impact on the environment. The sale of Imperial is hampered during the period of the natural calamities. Thus it is difficult for Imperial to maintain its sales in such difficult conditions. There has been significant rise in the cost of transportation which has increased the logistics cost of the company. The prices of the cold drink had to increase in such a condition. The company has to maintain a good image in front of the customer. Thus it has to make investments in the packaging of food. This will bring a positive impact towards the customers with the increase in the brand value (Web resources for international economics & business: (Formerly titled Internet resources for international economics & business, 2002).
The internal market analysis of Imperial has been done using Porter’s five forces.
The framework for the analysis of the level of competition of Imperial can be done using Porter’s five forces analysis. The framework is used as a measure for scanning the environment. The scanning of the micro economic factors is done using Porter’s five forces framework. The model is used to analyze the existing competition in the market and it will help the company to take various strategies depending on the existing position of the company in the market. The five forces that are used to analyze the competitive advantage of Imperial includes threat of new entrants, bargaining power of the customers, bargaining power of the suppliers, threat from the substitutes and intensity of rivalry.
UK market is a highly profitable market and there is threat of new entrants in the market. Various organizations will try to gain from the profitable market in UK. The return from the investment is high in UK. Thus in such a highly profitable market, the threat of new entrants will be high. The market structure of UK is profitable for business. In case of similar structured markets like oligopolistic and perfectly competitive markets, there are no barriers for entry and exit. But in case of monopoly markets the barrier of entry in the market is high (Hernándezâ€ÂEspallardo and Delgadoâ€ÂBallester, 2009).
In case of Imperial, the market in which it operates is perfectly competitive. There are competitor brands like Coca –cola and Pepsi Co that has large market share. At the same time there is threat of high competition from new beverage companies. On the other hand, the already established beverage brands in the foreign countries want to venture the market of UK. They will serve as threat for Imperial.
The threats of substitute products for the Imperial are the alternative products that are consumed by the customers. There are various factors that can influence the customers to switch to alternative products. Thus the potential factors that can influence the buyers switch to the alternative products are the relative price performance of the substitutes, switching cost of the buyers, level of differentiation of the products, differences in quality and the ease of substitution. There are various alternatives present in the market that threaten the market share of drinks sold by Imperial. Thus it can be said that the threat from the substitute is high.
The price of drinks of Imperial is done by competitive pricing technique. The power of bargaining of the customers has affect on the sale of Imperial drinks. The power of bargaining of the buyers is medium in the market. The bargaining power of the buyers is medium in the market. There is existence of close substitutes in the market which can affect the sales of Imperial. Thus the power of the customers influences the sales of drinks of Imperial (Dorling, Scott and Deakins, 2006).
The bargaining power of the suppliers has low effect on the sales of Imperial. The existence of few suppliers in the market can have significant power over the firms but the in case of Imperial, the situation is different. There is existence of large number of suppliers. This reduces the power of bargaining of the suppliers. Over the years, Imperial has established itself as one of the reputed companies in UK. Thus company has maintained good relationship with the suppliers.
The intensity of rivalry for the beverage market is high in UK. There are large multinational beverage companies like Coca-cola and PepsiCo. They are famous chain of beverage companies with high brand value. But Imperial has been constantly reinventing them to establish as a reputed beverage company in UK. But it has to keep a close eye on the strategies of the competitors while formulating its own strategies. Thus it can be said that the threat of rivalry is high in case of Imperial (Lu, Liu and Wang, 2010).
On the basis of market analysis of Imperial, SWOT analysis of Imperial has been provided.
1. The drinks offered by Imperial have heavy reliance on the carbonates. This can affect the brand in future as the consumers are becoming more health conscious.
2. The products of Imperial are sold in the domestic market. It should start venturing the International market to increase its market share.
Imperial has established itself in the domestic market. The special venture unit of Imperial can devise strategies for the company so that it can explore the Asian market. The Asian market is an emerging market with high rate of growth opportunities. The Asian market is highly attractive.
Especially for the companies in the West, Asia has emerged as one of the most attractive markets in the world. It is important to have knowledge of the Asian market before venturing into the market. There are various challenges faced by companies during expansion in the foreign markets. It requires intensive interaction with the customers. The sales growth in the Asian market is magnificent. The stagnation of the domestic market has opened the doors for the global markets. The annual compound growth rate of Asia’s GDP is at 4.7% from the year 2005 to 2010. However the growth of North America has remained fixed to 1%. The rate of growth in the Asian market remains highly attractive and it is projected that the GDP growth will increase by over 5.6% per annum through 2015. Amongst the various countries in the Asian continent, China and India are the most attractive markets for business. The strength of the consumers is very high (Morath, Krieger and Krupp, 2015).
Imperial will focus on the Chinese market at the beginning of its venture. Then it will diverge its business in the Indian market. The major customers of Imperial will be the people from all age groups. At first the beverages will be sold in the urban markets of China. Later on they will explore the rural market of China. The management operations in China will be looked after by a group of administrative personnel who will be analyzes the market on a regular basis to maintain their reputation in the Chinese market. The beverages will be sold in the supermarkets and other shops in China. Once it has established itself in the urban market in a year , it will explore the rural market of China. Imperial has to make extensive marketing to establish their brand in the foreign market.
The target market strategy for Imperial in China will be based on making the right choice of product for the right customers. The marketing strategy of the company will convey the sense of quality of the product in every picture of the product. They will promote the product so that the customers will understand the value of the product. At the beginning, Imperial will face tough competition from the already established brands in China. It will be difficult for Imperial to establish itself in the Chinese market. Thus it has to make huge investment on marketing its product in China. It has to establish the distribution channel in China. Imperial has to develop the relationships with the suppliers, distributers and the retailers. This will ensure a strong presence of the brand in the Chinese market.
The value proposition of Imperial is to offer the customers with refreshment and enjoyment at prices that are reasonable. The company will ensure that after drinking the product the consumers will have peace in the body and mind. Thus the major intension s of Imperial is as follows –
The value proposition of Imperial will be communicated via personal selling, advertisements, sales literature, catalogues and referrals. The advertisements will emphasize on the approach of company towards maximizing the satisfaction of the customers (Jackson, 2006).
The marketing mix will be an important element of delivering quality products to the customers at quality price. There is high degree of exposure of the competitors in the Chinese market. Thus the marketing mix of the company will be on the basis of the drawing the existing customers of the older brands towards Imperial. This requires a well planned marketing mix.
Imperial will offer the range of beverages in various flavors to the customers in the Chinese market. The flavors of the product will include lime, orange, mint and regular drink. They will target customer from all age groups but especially it will attract the students and the working group. The service to the customers will be enhanced through infrastructure support in the form of merchandising and credit facilities. There will be alternative facilities for distributing the products (Cohen and Winn, 2007).
Imperial will follow a competitive pricing strategy. The price of the beverage drinks will be based on the price charged by the competitors. Initially the price will be low than the competitors so that Imperial can make a strong presence in the market. The price will accommodate the mark ups that are prevailing in the industry. Imperial will offer discounts to the customers. This will help the company to make a strong presence in the market and establish customer loyalty. The prices charged by Imperial will be extremely competitive.
Imperial will focus on the urban market of China at the initial stage. The product will be sold at all the super markets in China. It will be available in the local shops in China. Later it will venture the rural markets of China. For this purpose, Imperial has to maintain a network of suppliers. The distribution network at China has to be well connected. This can be achieved by offering extra payment to the suppliers at the initial stage. The relationship with the suppliers will serve as an effective tool for making its presence prominent in China. The competitive advantage of Imperial will increase and it will be an established brand in China. The product will be sold at the supermarket at special discounts on specific days of the week. This will attract more customers towards the product (Cherni and Kentish, 2007).
The promotional strategy of Imperial will be based on informing the customers about the product offering of the company. The advertisements will feature top models and actors promoting the product. The social media like facebook and twitter will serve as an effective tool for communicating with a wider audience. The promotional strategy of Imperial will be based on driving the overall strategy of the company to make a strong presence in the Chinese market by offering quality product at competitive prices. The company can leverage their presence by using quality brochures and other sales literature which will include the promotional materials like pens, stickers. The company will arrange for small promotional events at the shopping malls to raise awareness among the public about the product offering of Imperial. Free samples of the drink will be offered at the event. This will enhance the association of the customers with the new brand in their country.
Imperial will market its requirements from its home country. At the initial stage Imperial will source its products from the manufacturing unit in UK. Later on they will set up manufacturing units in China. But at the initial stage the resource will be met from the UK manufacturing unit of Imperial. But Imperial will maintain a strong network of suppliers in the Chinese market. They will be responsible for channelizing the product throughout the Chinese market. There will be head office in Beijing and branch offices in other parts of China. The management team will be responsible for looking after the entire marketing, sales and operational activities of Imperial. They will communicate regarding the requirements to UK team on a regular basis. This will be achieved by effective supply chain management. An ERP framework for supply chain management can be established to maintain the logistics and distribution network in China (Xue et al., 2005).
The innovation strategy of Imperial can be justified by the potential contribution of the company in terms of growth in the revenue, cash flow and contribution to the profitability. The break even analysis of the strategy of Imperial has been provided.
|
Profit and loss |
|||
|
Year 1 |
Year 2 |
Year 3 |
|
|
Sales |
¥ 1,465,026.00 |
¥ 1,613,629.00 |
¥ 1,805,144.00 |
|
Cost of Sales |
¥ 810,975.00 |
¥ 902,072.00 |
¥ 1,010,441.00 |
|
Other |
¥ – |
¥ – |
¥ – |
|
Total cost of sales |
¥ 810,975.00 |
¥ 902,072.00 |
¥ 1,010,441.00 |
|
Gross margin |
¥ 654,051.00 |
¥ 711,557.00 |
¥ 794,703.00 |
|
Percentage of Gross Margin |
45% |
44% |
44% |
|
Expenses |
|||
|
Sales and Marketing |
¥ 440,000.00 |
¥ 484,000.00 |
¥ 532,400.00 |
|
Payroll |
¥ 130,200.00 |
¥ 130,200.00 |
¥ 130,200.00 |
|
Depreciation |
¥ 11,200.00 |
¥ 11,200.00 |
¥ 11,200.00 |
|
Rent |
¥ 35,000.00 |
¥ 36,500.00 |
¥ 38,000.00 |
|
Insurance |
¥ 4,100.00 |
¥ 4,200.00 |
¥ 4,300.00 |
|
Utilities |
¥ 4,350.00 |
¥ 4,850.00 |
¥ 5,150.00 |
|
Total operating expenses |
¥ 624,850.00 |
¥ 670,950.00 |
¥ 721,250.00 |
|
PBIT |
¥ 29,201.00 |
¥ 40,607.00 |
¥ 73,453.00 |
|
Tax expense |
¥ 2,920.10 |
¥ 4,060.70 |
¥ 7,345.30 |
|
Interest expense |
¥ 1,900.00 |
¥ 1,910.00 |
¥ 1,920.00 |
|
Net profit |
¥ 24,380.90 |
¥ 34,636.30 |
¥ 64,187.70 |
|
Net profit per sales |
2% |
2% |
4% |
|
Cash flow |
|||
|
Year 1 |
Year 2 |
Year 3 |
|
|
Cash receipt |
|||
|
Cash from operational activities |
|||
|
Cash sales |
¥ 366,506.00 |
¥ 403,156.00 |
¥ 451,535.00 |
|
Cash from receivables |
¥ 821,688.00 |
¥ 1,181,687.00 |
¥ 1,317,933.00 |
|
Cash from operations |
¥ 1,188,194.00 |
¥ 1,584,843.00 |
¥ 1,769,468.00 |
|
Net receipt from investment |
¥ 78,000.00 |
¥ – |
¥ – |
|
Cash received |
¥ 1,110,194.00 |
¥ 1,584,843.00 |
¥ 1,769,468.00 |
|
Cash spending |
¥ 331,201.00 |
¥ 331,201.00 |
¥ 384,000.00 |
|
Payment of bills |
¥ 977,834.00 |
¥ 1,179,478.00 |
¥ 1,245,267.00 |
|
Cash spent on operations |
¥ 1,309,035.00 |
¥ 1,510,679.00 |
¥ 1,629,267.00 |
|
Sales tax paid out |
¥ – |
¥ 25,000.00 |
¥ – |
|
Cash spent |
¥ 1,309,035.00 |
¥ 1,535,679.00 |
¥ 1,629,267.00 |
|
Net cash flow |
¥ -198,841.00 |
¥ 49,164.00 |
¥ 140,201.00 |
Conclusion
It is evident from the analysis that Imperial can explore the Asian market in order to increase the competitive advantage. The Company will explore the Chinese market. There are already established beverage companies in China but the company can establish itself in the Chinese market by its promotional and marketing activities. It has to establish itself as a quality product in China. This will be able to increase the market share of the company. The Chinese market is a highly established market. In order to establish itself in the Chinese market it has to implement innovative strategies that will make a strong hold of the company in the market. Imperial will flourish in the market by its competitive strategy. The profitability of the company will increase and it be will be able to venture into other parts of the Asian market.
References
Cave, M. (2005). Competition and the exercise of market power in broadcasting: a review of recent UK experience. INFO, 7(5), pp.20-28.
Cherni, J. and Kentish, J. (2007). Renewable energy policy and electricity market reforms in China.Energy Policy, 35(7), pp.3616-3629.
Cohen, B. and Winn, M. (2007). Market imperfections, opportunity and sustainable entrepreneurship.Journal of Business Venturing, 22(1), pp.29-49.
Cooke, P. (2007). Social capital, embeddedness, and market interactions: An analysis of firm performance in UK regions. Review of Social Economy, 65(1), pp.79-106.
Dorling, K., Scott, J. and Deakins, E. (2006). Determinants of successful vendor managed inventory relationships in oligopoly industries. International Journal of Physical Distribution & Logistics Management, 36(3), pp.176-191.
Hernándezâ€ÂEspallardo, M. and Delgadoâ€ÂBallester, E. (2009). Product innovation in small manufacturers, market orientation and the industry’s five competitive forces. European Journal of Innovation Management, 12(4), pp.470-491.
Jackson, J. (2006). Developing regional tourism in China: The potential for activating business clusters in a socialist market economy. Tourism Management, 27(4), pp.695-706.
Lu, J., Liu, X. and Wang, H. (2010). Motives for Outward FDI of Chinese Private Firms: Firm Resources, Industry Dynamics, and Government Policies. Management and Organization Review, 7(2), pp.223-248.
Mirzaee Ghazani, M. and Khalili Araghi, M. (2014). Evaluation of the adaptive market hypothesis as an evolutionary perspective on market efficiency: Evidence from the Tehran stock exchange.Research in International Business and Finance, 32, pp.50-59.
Monaghan, A. (2014). Britain’s economic prospects brightest in more than a decade, survey finds. [online] the Guardian. Available at: https://www.theguardian.com/business/2014/may/30/uk-economic-growth-forecasts-revised-upwards-amid-positive-surveys [Accessed 30 Mar. 2015].
Morath, B., Krieger, S. and Krupp, M. (2015). Attractive business opportunities in Asia for market expansion services. 1st ed. [ebook] pp.1-15. Available at: https://www.rolandberger.ch/media/pdf/Roland_Berger_Attractive_Business_Opportunities_in_Asia_20120209.pdf [Accessed 30 Mar. 2015].
Web resources for international economics & business: (Formerly titled Internet resources for international economics & business). (2002). Choice Reviews Online, 39(12), pp.39Sup-0488-39Sup-0488.
Wynarczyk, P. and Watson, R. (2005). Firm Growth and Supply Chain Partnerships: An Empirical Analysis of U.K. SME Subcontractors. Small Bus Econ, 24(1), pp.39-51.
Xue, Y., Liang, H., Boulton, W. and Snyder, C. (2005). ERP implementation failures in China: Case studies with implications for ERP vendors. International Journal of Production Economics, 97(3), pp.279-295.
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