Pocari Sweat Case Study: Company's Report - Essay Example

?Company Case Report Contents Company Case Report 1 Contents 2 Introduction- About Company 3 Macro environment analysis- PEST Analysis 3 Competitive Analysis- Porter’s Five Forces 4 Strategic Capabilities of organizations- Strengths and Weaknesses 5 Porter Generic Strategy model- Competitive Advantage of the Organization 6 Corporate Strategy of organization 7 Leadership Styles 8 Conclusion 9 Reference 10 Introduction- About Company The beverage sector has been expanding rapidly across the world. This is especially with regards to the number of carbonated and non-carbonated drinks in the market which is constantly on the rise. Pocari Sweat is a refreshing and mild tasting sports drink manufactured in Japan by the company Otsuka Pharmaceutical. Launched in the year, 1980, the drink has successfully established itself across Southeast and East Asia and in the Middle East. Possessing some of the unique attributes like body fluid replenishing capacity lost through perspiration, the drink is especially recommended for physical activities like exercises and sports. The most notable thing about the product is its contents or components. Apart from water, Pocari Sweat contains electrolyte minerals like Sodium, Potassium, Calcium and Magnesium. Containing the right amount of the minerals the beverage acts as a mild replenishment of the same lost through sweat caused due to excessive physical activities (Pocari Sweat, n.d.). The project aims to bring forth the macro-environmental analysis of the beverage industry which is done by conducting a PEST analysis. This is followed by making a competitive analysis of Pocari Sweat using the five forces model presented by Porter. This gives the attractiveness of the industry in which the company exists. In-depth analysis of the company’s resources and capabilities are discussed to bring forth its strengths and weaknesses. The competitive position of the company is analysed using the generic strategy model presented by Porter. Based on the above analysis the project studies the corporate strategy that is pursued by the company. Lastly, a brief description is included with regards to the leadership style that is followed by the company and how it influences the motivation level of employees. Macro environment analysis- PEST Analysis Political- In Japan there has been a switch over of the dominance of the State on the management of the economy to decentralization of power to the local governments and the private sector. The role of the Government has minimised considerably over the last few years. This has been particularly favourable for the Japanese companies as they can operate in an environment free of restrictions. In fact the State led model is considered to be major obstruction towards development and considers that companies must be free to develop and express their capabilities (Imai, 2002). Economic- For about three decades the region has shown strong growth potential, growing at a rate of more than 10%; however, it has slowed down fairly since the 1990s mainly due to the asset price bubble and inefficient investments. The global recession has also taken its toll on the region. The unfavourable news for the private investors is that in 2002 and 2003, the real economic growth was -0.6% and it is expected to continue in the coming years. This downturn in business conditions has been responded to by the Government by expansionary fiscal policies and investments. The rates of inflation remain low, at -0.7% in 2010 and the unemployment rates also remains low at 5% in 2010. This is fairly advantageous for the private investors as they would face no dearth of human capital and product prices would also remain low (Central Intelligence Agency, 2011). Socio-Cultural- There has been alarming scientific, sociological and industrial in the population of Japan since last 100 years. Together with entry of Buddhism, it is highly under the influence of the Chinese culture. Characterized by a highly urban society, only 4% of its total workforce is engaged in agricultural activities. Farmers are even found to supplement their incomes through part time jobs found in the nearby cities and towns. Highly metropolitan in nature, the region faces certain problems characterised by all industrialized nations like overcrowded cities, air pollution, congested roads and juvenile delinquency (Bureau of East Asian and Pacific Affairs, 2011). Technological- Japan’s advancement in the area of technology and innovation has been far greater than most nations. Moreover, its relationship with USA to collaborate in the areas of science and technology is a great advantage for investors. The technological advancement of the region is not only beneficial for the information and the telecommunication sector but all other sectors at large as most of them are directly or indirectly dependant on technology (Bureau of East Asian and Pacific Affairs, 2011). Competitive Analysis- Porter’s Five Forces The competitive intensity of the company and the market attractiveness is provided by means of Porters five forces. The five components are bargaining powers of the buyers and suppliers respectively, threat of new entrants into the market, threat of emergence of substitute products and finally competitive rivalry existing in the industry. The East Asian market has shown a growing popularity of sports drinks in the recent years. Sports drinks account for as high as 9.5% of the nation’s non alcoholic beverage market in 2010 according to the Japan Soft Drink Association (Nutra Ingredients, 2011). Among the major competitors are Amino Vital and Vaam which has been launched by some of the major sports personalities. Dakara is another sports drink which was launched in 2000 (Nutra Ingredients, 2011). The threat of substitute products in the East and South East Asian regions remain high as there are a large number of players in the soft drinks market in the region. Also tropical climatic conditions have excessive demand for fresh fruit juices, aerated drinks, energy drinks, tea and coffee as well. Coca Cola is one such company which has massive presence in the East and South East Asian market which can pose serious threat to the company as a substitute product. There has been growth of a number of alertness and relaxation drinks in UK which have been targeting the Asian market. Although the market is still niche and is targeted at the growing stress and other related syndromes, consumer demand has been growing for new beverages in the markets. Five main countries where the demand for alertness and relaxation drinks is forecasted to be high are Germany, Canada, USA, UK and Japan. Thus this category of drink can be a high threat for Pocari Sweat in the region (Zenith International, 2011). The sports drinks market is not very large in East and South Asia in terms of the number of buyers. On the contrary there are large numbers of soft drinks buyers in the market which can account for a poor position for bargaining for the consumers of sports drinks. However, there has been an increasing health consciousness among masses which is expected to pull the masses towards consumption of the product which could consequently strengthen their bargaining power considerably (PR Newswire, 2011). Due to the congestion of the Asian market with a huge number of soft drinks and health drink companies, the bargaining power of suppliers is inevitably low. This is complimented with strong labour union activities and employee relations in the region which further weakens supplier’s bargaining powers (PR Newswire, 2011). Strategic Capabilities of organizations- Strengths and Weaknesses From the above analysis the company’s strategic capabilities can be derived. The growth of the beverage market in East and South East Asia accounts for a major strength for the company. This is complimented with the existence of a large labour force which comprises of both skilled and semi-skilled labour. Moreover, Pocari Sweat accounts for the dominant market player in Japan in the category of sports drinks which is its most important strength. The fact that it has already established itself as the leading provider of non carbonated sports drinks strengthen the company’s position even further. The market for amino acid products, soft drinks and products coming in the form of powders and jellies accounted for a sale of 30 million yen which a good news for the company. It is also seen that Japan has been providing greater freedom to the private investors with the consequent reduction in government regulations and responsibilities. This can provide the organization to operate more freely towards attaining business objectives. Finally Japan’s growing health consciousness is expected to rise considerably in the coming years which provide strong support for Pocari Sweat in the region. However, the company is not devoid of weaknesses either. The macro-environmental analysis shows that some of the nations in the region has been showing very slow economic growth and are still under the impacts of the recent global economic crisis. They are yet to recover from the recession which could lower its prospects of market penetration in the region considerably. For example, Japan’s DGP growth has been negative in the recent years. The already existent soft drinks market could pose threat to its establishment and penetration in the region further. Moreover reports claim to forecast the emergence and evolution of new categories of drinks like the alertness and relaxation drinks in USA which has been slowly trying to penetrate into the Asian regions. Porter Generic Strategy model- Competitive Advantage of the Organization Michael Porter had developed the generic strategy model which can be undertaken by any type of businesses even applicable to a non profit organisation. As per the theory of Porter generic model, a company can have only three types of strategies from which a company needs to choose from. The three strategies include, cost leadership strategy, differentiation strategy and focus strategy. But before a company adopts a strategy it is important to know about the competitive scope of the company (Kossowski, 2007, p.5). Pocari Sweat is the market leader in isotonic sports beverage in Japan with a quite large amount of market share. The brand has adopted the differentiation strategy. Pocari Sweat is offered as a health drink to all the sections of the society. Pocari Sweat is the pioneer of the isotonic beverage, thus innovation played a major role in the success of Pocari Sweat. The founder of the brand Pocari Sweat, Takaichi confidence, determination and hard work for three years to produce something innovative, to create a health drink and at the same time the drink must not taste boring, the drink must make a feeling of goodness when consumed. These innovation strategies lead to the outcome of Pocari Sweat. This is one of the major differentiation strategy adopted by Pocari Sweat, of innovation. Also the brand targeted the family and not only individuals or a particular section of the society. Corporate Strategy of organization Corporate strategy can be defined as the identification of purpose concerned with the organisation and the plans and its relative actions in order to achieve the purpose (Lynch, 2007, p.36). It is a strategy where firms work together so to achieve a share objective of the company. Some of the types of corporate strategies are diversification strategies which include the vertical and horizontal integration, alliance such as joint venture or acquisition. When a company diversify, it moves from its current markets as well as product to a completely new area. This diversification strategy involves a huge risk but risk can be minimised if the organisation plans to move to related market, which means a market that have some connections with its products. This is known as diversification in related markets. Diversification into related products is more profitable because of the economies of scope in capabilities and resources. Diversification strategy involves the mode of integration such as forward, backward and horizontal integration respectively. In forward integration a manufacturer tends to get involved in the activities of the firm such as transport, distributor etc. In backward, the firm extend the activities such as plant and machinery, suppliers of raw materials and in horizontal integration, the firms tend to move into those areas which are related to the firms existing activities by means of acquisition. For example, BMW acquired Rover in 1994. Diversification into unrelated market involves a huge risk as the market is new and the mode of strategy applied is of international expansion (Lynch, 2007, p. 499). Strategic alliance refers to the combined resources, capabilities and core competencies of the organisations which are based on mutual interest in manufacturing, designing, or distributing the goods or services. Joint venture is one of the types of strategic alliance. In joint venture, firms create independent company by way of sharing the firm’s resources and capabilities (Middlemist, 2004, p.3). Pocari Sweat has applied the diversification strategy, mainly the unrelated diversification, introducing its product in new market by way of international expansion. The company has expanded globally since its inception and has launched its product globally. The company has always wanted to make its presence felt in the global market and thus its vision has become a reality. The company Otsuka is a worldwide business which has already marked its global presence in United States, Asia, and Europe (Otsuka, 2008). For example the brand is available in UK, US, Singapore, China, to name a few. The brand is made available in 16 countries and recently the company has launched its product in Philippines. Leadership Styles In Laissez-faire leadership style, there involves neither any agreements nor transactions with the followers. The decisions to be made are mostly delayed which is complimented with the absence of rewards, feedback or any kind of involvement. The leader does not take any attempt to motivate the followers and to recognise the need and satisfy them accordingly (Schyns & Hansbrough, 2010, p.156). Bureaucratic leadership is often felt in policies and standing order which are issued by the management. These types of leader follow exactly what the policies or the standing order depicts to be. They are preferred to be termed as the head of the hierarchical system and they are the leader who leads from the top. Transformational leader are those types of leaders who are believed to have a good relations between the leaders and its followers. They motivate and inspire its followers by helping the members of the group to feel the importance of the task. They are the leader who not only encourages growth among the groups but also enhances individual growth and success. In case of charismatic leadership, the leader often motivates the followers using their enthusiasm and energy. The followers also tend to compliment the leader by crediting the success achieved to the leader. This type of leader believes in themselves more than its people (Brophy, 2010, p.17). A democratic leader delegated authorities to others, encourages and motivates participation of the employees, relies on the decision made by the subordinates and also for the completion of task (Daft & Lane, 2007, p.44). The task oriented leader puts more emphasis on the task and are concerned about achievement and production. The CEO of Otsuka, Tatsuo Higuchi takes active participation on the decision making of the employees. The employees are motivated as the company believes in transparency, open mindedness and diversity. The CEO respects the view point of each and every individual working with the organisation, experiment with the ideas given by the employees and finally puts them into test. Thus the CEO of the company follows a democratic style of leadership (Otsuka, 2010). Conclusion Pocari Sweat, a product of Otsuka Group has strived to create unique products and one such example is of Pocari sweat. The company involves in a high degree of innovation which can be referred to the strength of the company. The company believes in transparency, open mindedness and diversity. The company has expanded globally across the world and has captured the major market share of Japan. Pocari Sweat was pioneered in Japan thus the demand always tends to remain high but also in other countries because of its health factor involved, produces a decent growth rate. In 2006, the drink was announced to be the official sport drink for the Doha Games in the UAE. Therefore the brand has achieved success and is primarily due to the innovation made by Takaichi. Reference Brophy, J.R. (2010). Leadership Essentials for Emergency Medical Services. Jones & Bartlett Learning. Bureau of East Asian and Pacific Affairs. (2011). Background Note: Japan. [Online]. Available at: http://www.state.gov/r/pa/ei/bgn/4142.htm. [Accessed on November 29, 2011]. Central Intelligence Agency. (2011). East & Southeast Asia :: Japan. [Online]. Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/ja.html. [Accessed on November 29, 2011]. Daft, R. L. & Lane, P. G. (2007). The leadership experience. Cengage Learning. Imai, T. (2002). Current Political and Economic Conditions in Japan. [Online]. Available at: http://www.keidanren.or.jp/english/speech/20020217.html. [Accessed on November 29, 2011]. Kossowski, A. (2007). Strategic Management: Porter’s Model of Generic Competitive Strategies - Theory and Analysis. GRIN Verlag. Lynch, R. (2007). Corporate Strategy, 4/E. Pearson Education India. Middlemist, R.D. (2004). Cooperative strategy. [Pdf]. Available at: http://www.personal.kent.edu/~vberardi/44285/44285--ch09notes.pdf. [Accessed on November 30, 2011]. Nutra Ingredients. (2011). Japan’s growing taste for amino acid sports drinks. [Online]. Available at: http://www.nutraingredients.com/Consumer-Trends/Japan-s-growing-taste-for-amino-acid-sports-drinks. [Accessed on November 29, 2011]. Otsuka. (2008). about us. [Online]. Available at: http://www.otsuka.com.ph/aboutus.aspx. [Accessed on November 30, 2011]. Otsuka. (2010). Annual report 2010. [Pdf]. Available at: http://www.otsuka.com/en/ir/library/pdf/2010/2010_01.pdf. [Accessed on November 30, 2011]. Pokari Sweat. (No Date). About Us. [Online]. Available at: http://www.pocarisweat.com.ph/about.aspx. [Accessed on November 29, 2011]. PR Newswire. (2011). Sports & Energy Drinks Market by Types, Ingredients, Distribution Channels, End-Users & Top Brands Trends and Global Forecasts (2011 - 2016). [Online]. Available at: http://www.prnewswire.com/news-releases/sports--energy-drinks-market-by-types-ingredients-distribution-channels-end-users--top-brands-trends-and-global-forecasts-2011---2016-133956183.html. [Accessed on November 29, 2011]. Schyns, S. & Hansbrough, T. (2010). When leadership goes wrong: destructive leadership, mistakes, and ethical failures. IAP. Zenith International. (2010). Alertness and Relaxation Drinks Report. [Online]. Available at: http://www.zenithinternational.com/reports_data/139/Alertness+and+Relaxation+Drinks+Report. [Accessed on November 29, 2011]. Read More