Food and Agriculture Organization of the United Nations - Term Paper Example

? Dorato Company Table of Contents 2 Firm Analysis 4 Company overview: 4 Management philosophy: 4 Global ranking and analysis 5 Industrial analysis (Domestic and Global) 5 Domestic Analysis 5 Global Analysis 7 Industry Growth, trends, characteristics 7 Trends and characteristics 9 Competitive Analysis 10 The 5 Forces of Competitiveness (Porter p40) 11 SWOT Analysis 13 References 16 Abstract Dorato is a newly formed company whose mandate is to sell coffee products locally and internationally. This paper work outlines major planning activities that are to be carried out in its jurisdiction. This work provides the answer to why, how and when these plans will be implemented in the long run. Dorato was established after market research revealed that there are some regions both locally and internationally that still need some coffee products that are either poorly offered or are not being offered at all. Strategizing is always considered to be the most appropriate way for new businesses to go about daily operation, hence the need for this paper. Introduction It is estimated that about 83% of adults in the United States of America take coffee. According to this figure, U.S remains the world major consumer of coffee. According to a New York-based group, 63% of adults consume coffee on a daily basis compared to 65% annually. Daily intake of gourmet-coffee remains stiff with about 31% of the total users as compared to other brands whose intake fell drastically; this is according a New York based research company. Arabica-coffee prices have dropped in New York with a margin of 5.8% recently, while in London, Robusta prices have gained almost 12% (FAO p64). Arabica is mainly found in Latin America and manufactured by giant companies such as Starbucks and McDonald. Robusta Beans, majorly used in instant coffee are widely cultivated in Asia and some parts of Africa. Brazil has posed to be the second largest consumer after U.S.A, trailed by Germany as per the International Coffee Organization which is based in London. These are some of facts and figures that lured Dorato partners to initiate the business. With these challenging financial periods, it is appropriate for the company to strategize to avoid flopping in the event of their operations. Firm Analysis Company overview: Dorato was founded in the year 2012 after top investors who are the main financers agreed to partner in order to come up with the coffee business. Dorato is meant to provide coffee beverages in and outside U.S. The firm has received it funds through major donations from friends, at the same time the partners have used their assets to acquire loans from various financial institutions in the United States. Management philosophy: Quality in products and services to customers and staff members is Dorato’s top priority. Dorato believes that increased quality production and services gained from the staff members is expedited by a conducive working environment. An environment that appreciates good work performance, flexible, prize fairness encourages free communication and respecting the views of individuals. This optimizes Dorato staff’s performance and health. Self-esteem to attain excellence maximizes especially when the staff members are handled with trust, decency and respect. Quality in Performance: - Dorato has an interest for tracking its mission to improve coffee selling as a business and profession and as a way of promoting farming, uptake of coffee, good business practices and culture. This passion is shown by workers’ perseverance, patience and dedication to advancing coffee uptake. Dorato managers are always available to provide assistance to staff; this is achieved by setting achievable goals, schedules and timetables for its goods and services and inspires staff members to be responsible as a result of its products and services integrity. Excellent Customer Services: - Dorato strongly believes in its customers and value of relationships, both internally and externally. To satisfy customers, Dorato management equips their staff members with operative systems and updated information. The management also exhibits a caring approach towards its internal and external consumers. To achieve excellence in its daily performance and customers’ expectations, Dorato believes that staff management is an involving process that is mostly useful when established on a joint expectations and values. Global ranking and analysis Since its founding, Dorato has been on the verge to increase it operations and services to become a world renowned coffee seller. Currently the company is ranked 6th in the market according to American Coffee research board. The company plans to expand its operation beyond Africa to potential emerging economies like China and Africa. The management is determined to establish potential customers for its products and services domestically and externally. Industrial analysis (Domestic and Global) Domestic Analysis Americans always love coffee. Even though U.S coffee industry has been hampered as a results of recession, demand has remained stiff and revenue has seen tremendous growth. Research findings on the benefits of coffee health-wise have also contributed to increased growth (Tucker p125). Researchers anticipate that the industry is likely to be hit by shortage of raw materials and higher price for the commodity while demand is expected to increase. Consumption of specialty coffees and increased accessibility of coffee retail outlets will also see growth. The increased amount of value added at the time of production has aided the coffee industry’s major businesses to obtain high profit margins and perform well notwithstanding high level of unemployment and rates at which individuals save in the past years. Major companies in the coffee production industry include; Starbucks corporation, Nestle South Africa, J.M Smucker, Kraft Foods, Yuban and Seattle Best among others. The weighty brand patriotism that the major companies control is also a contributory factor to high sales volume and profit margins. A stable market and internal instability in supplies have resulted to increased international trade involvement. According to IBIS-World analyst, in the year 2011, imports of coffee products are approximated to increase 60% to $ 2 billion, comprising 18% share of demand domestically. It is anticipated that export figures are to increase by 25% in 2014 to $ 1.9 billion and be accountable for 12.1% of industry income. Analysts also anticipate that growth in population in U.S.A is likely to level a gradual reduction in per capita consumption of coffee. The ability of industry to adapt to shifts like amplified cognizance of better trade, organic coffee manufacturing methods and increase of ethical consumer will adversely affect future consumption and demand. The IBIS-World approximates that industry income will increase at a yearly rate of 0.8% over the next five years to total $10 billion in 2018. Anticipated decrease in coffee bean cost over the next few years may result into lower industry expenditure and end up with higher profits margins. This gives Dorato confidence that once they join the market then whatever is invested is likely to brew profit. Global Analysis Coffee is considered to be the highest consumed beverage worldwide. The product is also the second most traded commodity in the world next to oil (Daviron & Ponte p80). Worldwide coffee market is informed by high volume of speculation and instability, and is increasingly steered by trends in production that exist in major coffee producing countries. Coffee consumption globally increased last year, with top segment dominated by ready to drink products while other popular drinks also feeling the increase. Despite financial crisis being witnessed, coffee consumption has performed well generally. This clearly shows that consumers still need this product despite financial jeopardy. In the last years, consumption digits have always exceeded the production digits. Recent financial crisis has seen most of consumer shift to instant coffee not minding the price; this indicates a shift away from fresh coffee. With increased complex drinking habits, current customers are extra curious regarding the quality and origin of coffee they consume. This gives Dorato an excellent opportunity to invade the market and take advantage of high demand globally. Industry Growth, trends, characteristics There are several changes in the market which include; new industries entering the market, changes in coffee price, changes in purchasing trends of both the customers and the company, and if or not the market has experienced saturation through nonstop expansion. Industry growth It is very true that coffee market is swiftly growing and shifting due to new industries entry into the market and unpredictable consumer habits. Aggressive rivalry and exponential growth in the coffee sector keeps the players on toes, but recently it appears that coffee’s long history has entered another chapter. Fast food operators are making good use of the increasing popularity of coffee-based products by initiating new products. Dorato and other market players have contested for market power in the category, nevertheless, with the unveiling of McDonalds McCafe specialty beverage as well as amazing entries into the group, the race is boiling up for the market share. Since 2001, the number of food transactions in food outlets has greatly increased by 24%; this is according to the NPD Group. The fast food sector is the force behind this trend. Results also indicate that fast food operators who are conventionally known for donut and hamburger services may gradually be offering beverage from gourmet coffeehouse chains. Recent consumer survey indicates that the notion of value and quality for specialty beverages from hamburger restaurants is increasing as more chain stores are launching specialty coffee lines. Last year but one, Burger King unveiled its Mocha, a cold drink of coffee; on the other hand Wendy’s did not hesitate to reveal that plans are underway to unveil coffee-scented smoothies. Others have also launched coffee based drinks. Dorato has decided to capitalize on the trend to enhance coffee by offering new distinct presentation of same coffee products. People were not used to espresso-type beverage; they started taking more food and beverages in restaurants as opposed to homes. Dorato stands a better chance by offering unique products and services, there has been a new consumer pattern and the consumers are cognizant of their room in the social arena. Trends and characteristics Commodity price has been falling and rising depending on the market situation. The U.S consumes a fifth of total worldwide coffee production. The department of Agriculture estimates that 2006-07 saw an increase in production of coffee beans (Bacon p156). The subsequent years have also seen drastic rise in coffee production according to the department of agriculture. Coffee production in the year 2008 is currently estimated to be 130 million bags. Global coffee exports totaled 7.76 million bags in July 2009. An increase of 1 per cent equated with the capacity of 7.76 million bags recorded in August last year. An overall export in the subsequent 11 months of year 2008 is currently approximated to rise by 13.5% from the same period in the last year. This has seen the industry experience increase in number of bags it receives from the farmers. The top 5 worldwide coffee producing countries are summarized in the following table; Country Estimated production (Millions of bags) Brazil 36 Vietnam 19 Columbia 12 Indonesia 7 Ethiopia 5 The following graph also tries to summarize; Sources from U.S Agricultural cooperation Dorato has planned to lure new suppliers to ensure that supply is stable and that the unpredictable changes in price are well taken care of. This can be achieved by building a well-established network of suppliers especially from regions of high yields. Dorato is as well hinting to establish its own farms especially in regions of high yield to supplement its supply. Competitive Analysis Coffee provides a living for over 21 million individuals worldwide, global estimation shows that sales from outlets are expected to rise by a compound rate of 7% from 2005 to 2010. Dorato’s marketing strategies involve locating its outlets in places where consumers can spend more time other than their work or home. Dorato can achieve this through making each and every store more relaxing and comfortable at their level best. The company wants to be recognized as the third place after home and work places. The company intends to purchase more relaxing furniture and music. Such won’t miss offerings such as free internet, appropriate books and magazines, handicapped access and common spaces for collaborations. As Dorato focuses on comfort and flexibility, price and quality are other factors that are strongly going to be friendly the moment they strike the market. The 5 Forces of Competitiveness (Porter p40) Rivalry among Existing Firms This is the most authentic force hindering the intensity of company completion. This jealousy is created since some firms have the feeling of being threatened or sees an opportunity to improve their position in the market. For instance, firms may take slow growth in an industry as a threat and opt to change approach in order to acquire larger market share. Dorato is ready for any kind of competition to ensure it attains a reasonable market share. With its well organized market squad, the company plans to implement vigorous campaigns the moment it enters a new market. This will also be catered for by producing unique services and goods. Threats of new companies into the market Not all markets are difficult to enter; such markets do not need huge investments and unit shifts little as quantities rise. Existing firms may feel threatened by another company entering the same market. As a result the level of completion could rise drastically to try gain market share and maintain that specific share before any other company enters the market. Dorato will try investing hugely in advertisement to create awareness among consumers in order to be ready for such threats. The company will use modern techniques such as online selling and short messaging options to capture the market segment. Threats of substitute products A substitute good or service is an alternate good or service that can perform the same thing the original product offers. Development of substitute products entirely depends on technological change. As a result, industries should be well aware of what is taking place in the world of technology. Dorato cannot survive minus technology. The company will ensure increased number of employees who are technically fit to curb changes that are unevenly taking place in the world today. The company will use modern technology in both manufacturing and promotion activities. Buyers bargaining power Buyers really dominate in controlling completion level of an industry. In case of more buyers, each purchase becomes significant to the industry firms; the level of completion at this point will remain stable. Although, if a small number of consumers purchase heavily, then the consumers have considerable say over the industry firms. Buyers may opt to demand reduced price of a particular good of which if denied they might opt to go for another seller. This will increase the level of competition because the firms supplying the products will need to lower prices to meet buyers’ demand but the firm’s major competitors will also be in the verge to seek for the same consumers. Dorato will ensure that their prices are economical and pocket friendly in order to maintain its customers. There will be fixed relatively reduced price to avoid the power of bargaining. This will make the consumers be psychologically aware of the prices. Suppliers bargaining power Sometimes the firms supplying materials to the industry can exert pressure and increase the intensity of competition. When there are only a few suppliers and there is no threat of substitutes for the supplied materials, firms in an industry might fight over keeping certain suppliers, particularly if the materials are highly differentiated. This naturally raises the competition intensity in an industry. At times suppliers may opt to increase and exert a lot of pressure resulting to intense competition in the industry. When it happens that there are few suppliers and the demand is high, firms may initiate rivalry wars by bribing suppliers in order to maintain them, especially if the raw materials are largely differentiated. This automatically increases the intensity of competition in a firm. Dorato will ensure that it source for its suppliers directly from their farms while keenly focusing on regions that have not been invaded by its competitors. SWOT Analysis Strengths • Various ranges of coffee beverages sold through the firm’s retail outlets. • Market research and growth capabilities aimed at consolidating product qualities. • Setups in more than 20 countries and good relations with established firms such PepsiCo, Kraft company and Dreyers-Grand ice cream. • The company has strong ethical values, dedicated to business environment and civic activists Weaknesses • Product returns by consumers hinders margins and brands the company with bad image • The company has a strong existence in Unites States of America with more than half of its outlets located in the local market. • Dorato has a well-known reputation for new product innovation and creativity. However, the company remains susceptible to the possibility that their innovative work at one time may strain resulting to product hardly being accepted; this may eventually derail growth efforts. • Backward turn in economy, consumers becoming more cognizant of their expenditure and seizing the less costly option, Dorato not being part of them. Opportunities • Cost decrease measures such as vindicating worldwide retail network in order to increase profit margins. • Launching ready to drink coffee beverages in Europe and collaborating with other partners. • Unveiling Dorato via coffee crux in the Asian continent, • Even credit rankings strengthen stakeholders’ assurance. Threats Increased minimum salaries by the government present a challenge in operations. Unrestricted expenditure adversely affects margins. Cumulative health awareness among consumers may see reduction in demand. Constant threat in the coffee industry as a result of competition may affect Dorato. Recommendations Dorato should focus on expanding its retail operations. Since it does not only manage coffee franchises and coffeehouses but as well sells some products through retail outlets; the company should develop a large channel of retailers in with an aim of increasing its sales volume. The firm can take advantage of emerging retail trends in other countries like Nigeria, Kenya, Ghana and South Africa among others. This will see the company increase its income as a result of offering its coffee products at retail levels in potentially emerging markets. One of the most appropriate alternatives for Dorato is to majorly rely on retail services. Commercial market arena has developed to an extent where sales from retails do not have monopoly on the consumer world [refere]. To expand on this, consumers at one time extensively depended on retail shops for their goods, but presently, online marketing has evolved, wholesale outlets are becoming rampant, centers of liquidation and in some cases one can decide to go straight to the manufacturer. Since Dorato sell merchandise products, retail outlets still remains the best place to ensure increased sales in its products. Retail outlets offer a variety of goods and customers are exposed to products they did not know they needed. Through consolidating several merchandised products at one point, a company drastically increases its sales volumes. References Bacon, C. M. (2008). Confronting the coffee crisis: Fair trade, sustainable livelihoods and ecosystems in Mexico and Central America. Cambridge, Mass: MIT Press. Daviron, B., & Ponte, S. (2005). The coffee paradox: Global markets, commodity trade and the elusive promise of development. London [u.a.: Zed Books. FAO (Rome). (2003). Medium-term prospects for agricultural commodities: Projections to the year 2010. Rome: Food and agriculture organization of the United nations (FAO). Porter, M. E. (2008). On competition. Boston, MA: Harvard Business School Pub. Tucker, C. M. (2011). Coffee culture: Local experiences, global connections. New York: Routledge. Read More