Feasibility study for punch drinks - Coursework Example

? FEASIBILITY STUDY FOR PUNCH DRINKS College Introduction Punch drinks is a beverage company which isinvolved in the production of an energy drink; punch energy drink. Punch drinks is a firm established with a main goal of retailing in energy drinks at a relatively low cost but with high quality level as expected. It is with this motive that the firm drove to revolutionize the energy drinks sector with the natural taste. With an extraordinary vision, this firm is expected to take it all in strides, effectually balance out the dynamics of business while making fundamental inroads in a competitive market of the beverage industry. Punch drinks unlike other business firms has an ultra-successful sortie into the beverage market which is driven by necessity; being set up in a society where sports is valued, and the disappointing taste of existing energy drinks. The existing drinks had questionable ingredients and could not be believed to be in synchrony with the changing lifestyles. Establishing the feasibility Punch energy drink is a visually clean and appealing brand which gets the eye of the consumer at sight. Punch drinks comes into the energy drinks production industry with an intention to meet the changing demand of the clients in a classy way. As the tastes of people change with the ever-changing trend if the world, it is important to note the aspect of moving with the change in order to succeed in the industry. Currently people have developed concerns over their health in terms of what they take. Thus, a result was the calls for natural drinks which have no additives. Punch comes as a solution by producing an energy drink which has no additive; has only the natural ingredients and changes the way the drink tastes. The drink is presented as a pleasant tasting assortment of juice flavours and ingredients of energy which gives the product a natural taste of a fruit. This is a big leap towards the mild but sweet flavour which ends with a crisp and clean finish. In the production process, a number of additives used by other firms have been eliminated, such as gurana. In the real sense, punch energy drink is a valiant product which in it presents the first hand thought of innovation combined with the realities of its viability which makes punch drinks a business firm of the 21st century as it respects the need of the people and move along with them. Market research and competitor analysis Based on PEST analysis, it is likely to identify the essential environmental effects on punch drinks. Firstly, it is eminent that the main economic issue is the universal recession which was initially caused by the U.S. housing bubble over 2005 to 2008. This financial crisis has been to sturdily motivate consumers to purchase affordable products with immense quality. This means that punch drinks will attract a good number of consumers without much efforts in advertising and sales promotion. Due to this, it is not essential to adopt complex strategies to grow the customer base. On the other hand, the recession resulted in the increase on the production costs, thus creating a doubt in the lowly priced and high-quality products. Therefore, the business should consider this problem for it to ensure that it will succeed in the market. Furthermore, social aspects which influence punch drinks include the variation in consumer taste, lifestyle and health concerns. It is definite that over the recent years, customers have changed their taste preferences such as the rise in the demand for natural and organic drinks. Punch drinks should consider this aspect since it may have effects on the future strategies of product developments. Furthermore, there is no doubt that the changes in lifestyle might escalade the need for natural drinks. At the present, health concerns have become global issues, with consumers purchasing healthier products without many worries (Elliott 2005). In order to analyze the competitive environment of punch drinks, porter’s five forces are utilized (Porter 1985). There is a possibility of new entrants in the drinks industry. Although it is clear that the competitive advantages enjoyed in the market by some players such as red bull, and full throttle, creates considerable barriers to new entrants, the market is so dynamic and driven by the vastly changing tastes of the customers. Furthermore, it is also clear that the buying power of consumers is high since they had a number of choices which could lead to price declines. Moreover, it is believed that the power of suppliers is low because of the low cost of production resources and the availability of alternative sources of raw materials. The competitive rivalry is extremely high in the drinks industry. The basis of this competition is pronounced since there are price wars amongst existing beverage firms. Therefore, basing on price wars, punch drinks being a winner, can get more market share. The threat of substitute products is the main threat that punch drinks would face. There are a wide range of drinks which could rival energy drinks in the market such as soda. Punch drinks would face a good force in competition as it competes with businesses such as red bull and monster which are already established. Finances It is estimated that a smooth start-up of punch drinks would need approximately $100,000. With the current economic crisis it has become much of a challenge to establish a firm with a capital of less than $100,000 dollars. In the case of punch drinks the source of funds would be bootstrapping, family sources, banks and grants. Bootstrapping involves the use of every resource at hand to take the business to the next level. Home equity loans and personal savings would play much contribution to the capital. Personal savings and equity loans will; raise 20 % of the total capital needed. The other source of funds is family and friends where, funds will be raised from relatives, colleagues and closest people. This source is not reliable as such and would need a proper plan to be developed to guide so as not bring conflicts. Therefore, it would be maintained at 5% of the total capital. The most important source of capital is the banks. However, it might be a hard challenge, getting the loan, it with a good and viable business plan that loans will be awarded. Moreover, as seen in earlier cases, banks have been inclined towards the manufacturing sector in awarding loans, which punch being in the production sector would stand a better chance. In fact bank loans would service up to 60% of the capital Since punch drinks involves the application of innovative technologies to produce natural energy drinks, an application for the Small business innovation research grant will be considered. This program is funded by the state through funds set aside by certain agencies with various interests in the interesting innovations made. If awarded, the funds would contribute t 30 % of the capital or more depending on the funding. Marketing strategy- operation issues The marketing efforts of punch energy drink will be directed towards the execution of the business strategies of developing an energy drink with natural ingredients, creating awareness of the benefits of consuming the drink. The blend of strong innovative marketing and partnerships with various marketing agencies is anticipated to result in many consumers who will become loyal, determined customers. The business expect the utilization of various marketing tools including grassroots/ guerrilla marketing, online marketing, affiliate marketing approaches, public relations, and significant strategic partnership to drive the competitive advantage positively(Kumar 2006). With respect to grassroots marketing the business believes that it is very essential to utilize word of mouth campaigns which, includes the launch of the product in the market. The business also looks forward to the engagement of media in the advertising strategies in order to reach to a great base of potential customers. The business also intends to utilize the internet in marketing the energy drink which includes the use of online social platforms to create awareness on the distinctiveness of the product and create awareness of its ingredients. This advertising strategy will be precisely targeting the demographic audience of the youth. Thirdly, the business would engage in affiliations with other marketing organizations to raise the potential markets. The business would also participate in public relations and social responsibility programs such as sports, health awareness programs and promotions to enhance the sales of the product. In the aspect of production, the business will employ the use of the finest technologies employed in the beverage industry to arrive at low costs of production while not compromising the product quality. Pricing strategy The retail industry is an extremely competitive market. Worst of all is in the food and drinks industry where the case is aggravated. There is a requirement for retail players to give customers a value for the money spent. Consumers are transforming the industry from the quantity strategy to best quality and affordable strategy in the shopping trends. Consumers need services with the lowest prices possible. Bestowed with the stiff and large competition in the market the retail industry should strive to understand the tastes and the preferences of the consumers. These two major concerns linking to the satisfaction are surely, what the pricing strategy will be based on in order to win the loyalty of the customers to the energy drink. The pricing strategy to be adopted is the penetration pricing strategy. We choose to adopt the low strategy because it enables the stimulation of demand for the drink and allows the business to gain a strong market share by introducing the product with a low price initially. This strategy is chosen since the business has no competitive advantage and also because economies of scale achievable with the production of high volumes of the product. With reference to other companies, which produce energy drinks such as red bull and full throttle, their prices are relatively high, however, they enjoy a high competitive advantage as they have gained the loyalty of the consumer through producing quality products. For punch energy drink to rock the market, it prices must be lower than the prices of the other energy drinks while at the same time maintaining the standards the business guarantees. Penetration pricing aims to support the introduction of punch energy drink to the existing market which has relatively little differentiation between products and an elastic pricing, therefore, the use of this strategy would benefit the business as an initial lower price is much of a competitive advantage. Summary and recommendations Punch energy drink is a viable which business idea which should be explored as it gives an advantage over the other rival products. The beverage industry is a matured market with established players, but, with the strategies employed by punch through the pricing and distinctiveness of the product, punch can gain substantial market share and competitive advantage which can earn it more profit like any other business venture. References Elliott, V 2005, Nine-year BSE ban on older beef lifted, viewed 1 may 2013 http://www.timesonline.co.uk/tol/news/uk/article567064.ece Kumar, N 2006, Strategies to Fight Low-Cost Rivals, viewe 1 may 2013, http://hbr.harvardbusiness.org/2006/12/strategies-to-fight-low-cost-rivals/ar/1 Porter, ME 1985, Competitive Advantage: Creating and Sustaining Superior Performance, Free Press, New York. Read More