Present Issues and their Impact in Greggs Plc - Lab Report Example

Business Strategy Report of Greggs Plc. Table of Contents Table of Contents 2 Introduction 3 Present Issues and their impact 3 Political and legal factors 3 Economical factors 4 Social factors 4 Technological factors 4 Environmental factors 5 Competitor behaviour analysis and its impact 5 New entrant threats 5 Threats of substitute 5 Rivalry competition 6 Bargaining power of customers 6 Bargaining power of suppliers 6 Usage of Value Chain 6 Inbound and outbound logistic 6 Sales and marketing 7 Operation 7 Procurement 7 Technology 8 Firm’s infrastructure 8 Potential Course of Action 8 Globalization of business 8 Product diversification 8 Supply to super market 9 Ecommerce 9 CSR 9 Conclusion 9 Reference List 10 Introduction The report is based on the study of the current business issues of Greggs Plc. Greggs Plc is one of the oldest and well-known bakery chains in the UK. The organisation had started its operation in 1951. Currently, they have 1671 outlets across the UK. The organisation is headquartered in Newcastle upon Tyne, England. The product ranges of Greggs include pasties, sandwiches, sausage rolls, vanilla slices and doughnuts. The organisation has also diversified its product line to low-fat sandwiches and coffee blend. Over a period of time, the organisation has received a number of mixed reviews from their consumers (Greggs Plc., 2013). A certain portion of their consumers are supporting the traditional marketing approach and fixed product line of the organisation. On the contrary, a range of consumers are opposing the old-fashioned marketing strategies of the organisation (Greggs Plc., 2013). The further analysis of the study will illustrate the impact of competitive environment on the growth of the organisation. It will also suggest necessary recommendation to the organisation to sustain their competitive position. Present Issues and their impact Over the period of time, Greggs Plc. has encountered an increased competition in the market. Various governmental regulations are also creating a number of obstacles in the sustainability of their business venture. The analysis of external environment of the UK pie shop industry will highlight different issues that the organisation is facing. This analysis will assist the organisation to determine the current issues and obstacle in the different market environment. It will also allow them to analyse their current market position to design new competitive strategies (Nestle, 2013). Political and legal factors The government regulations regarding the production and sales of snacks and high calorie food items are changing rapidly. The European Union government has tightened the food hygiene legislation which has affected all the businesses that are indulged in regular production, packaging and supply of food items. The Pasty Tax can also be considered as one of the major reason to worry. This system has created concern within the pie industry as it entitle the consumers to avoid the value added tax for cold and previously cooked snacks products (Darkow, Foerster and von der Gracht, 2015). The new regulations regarding the food value and hygiene parameters of the products have directed the management of Greggs Plc to reform their production and food supply procedure. The introduction of Pasty Tax has influenced the organisation to deliver the freshly baked hot snacks to reduce the chances of VAT skip by consumers (Webb, 2013). Economical factors The inflation and high interest rates are influencing organisations within the pie industry of the UK to increase their production costs that is subsequently affecting their end product price. On the contrary, the low disposable income and unemployment is influencing the consumers to switch their consumption pattern with the low cost and affordable food items. This shift in the consumer behaviour is forcing the organisations to lower down their profit margin in terms of maintaining their sales growth and consumer loyalty (Darkow, Foerster and von der Gracht, 2015). This economical condition has affected the sales growth of Greggs Plc. It has also provided a great impact on their profit margin. The sale of the organisation has witnessed a downfall of 4.4% by the end of 2014 (BBC News Business, 2013). Social factors The changing taste and preferences of consumers is one of the major issue faced by a number of leading organisations within the pie industry of the UK. Consumers are rapidly moving towards the healthy and nutritional substitute of snacks and fast food products. Consumers also prefer to buy low calorie organic food products (Nestle, 2013). Greggs is facing huge challenge in the competitive market due to the absence of diversified food categories in case of their sweet items and pies. The organisation is losing the health conscious consumers as well as the consumers with cholesterol, diabetes and heart disease (BBC News Business, 2014). Technological factors The development of technology is directing the organisations to adopt different procedure of online marketing. Ecommerce has become one of the integral parts of the sales procedure of these organisations. The increased usage of internet has elevated the popularity of online sales procedure within the consumers. The management of the snacks organisation is also concentrating on the online promotion and advertisement procedures (Darkow, Foerster and von der Gracht, 2015). The increased demand of online sales and marketing procedure is challenging the traditional sales process of Greggs Plc. The absence of Ecommerce facility is hampering the overall sales of the organisation. The inadequate online marketing is also hindering the market growth of the organisation. Environmental factors The production facilities of the organisations within the pie industry of the UK are causing huge amount of waste disposal every day. This situation is causing harm to the environment of the society. The awareness regarding environment friendly production procedure is gradually increasing within the consumers. They are getting more inclined towards eco-friendly product substitutes and packaging material (Nestle, 2013). The absence of proper corporate social responsibility strategies of Greggs Plc. is affecting their ethical presence across the UK market. The organisation is also not providing adequate guidance to their supply chain management which may assist them to create a strong relationship with the consumers from different market segment (Griffiths, 2014). Competitor behaviour analysis and its impact Along with the external business environment, the organisation also needs to analyse the impact of competitors on their business venture. The five forces analysis of Porter will enable the organisation to understand the current position of the organization within the competitors in the market (Griffiths, 2014). New entrant threats The threat of new entrant is very high for Greggs Plc. as the primary cost of entering the pie industry is very low. The higher demand of the leading supermarket chains is also influencing the business ventures of the new bakery shops. The traditional production facility and lack of diversification in product line of Greggs Plc. has increased their competition with the newly initiated businesses in pie industry (William Reed Business Media, 2004). Threats of substitute The introduction of healthy and nutrition rich bakery products has increased the pressure of substitute on the management of Greggs Plc. The increased demand of organic products is also shifting the preferences of consumers towards different and innovative product line. The initiation of a large number of supermarket chain and convenience store is also hampering the sales procedure of the organisation (William Reed Business Media, 2004). Rivalry competition The major competitors of Greggs Plc. are Tesco, McDonalds and Whitbread Plc. Though the organisation is leading by the number of outlets available across the UK, they are facing huge rivalry from their competitors in terms of their extensive diversification of product lines. Their product line lacks different varieties of low-calorie and fat free snack options and beverages. This situation has decreased the market share of the organisation among the major competitors (William Reed Business Media, 2004). Bargaining power of customers Consumer’s bargaining power is high due to the presence of a various bakeries, super market and fast food chains. The length and breadth of product offering of the supermarket chains are reducing the market share of Greggs Plc. (William Reed Business Media, 2004). Bargaining power of suppliers The accessibility of a huge number of product suppliers has neutralized their bargaining power. The organisation is capable of selecting the most viable and practical suppliers within the options in the market (William Reed Business Media, 2004). Usage of Value Chain The value chain of any organisation represents various interdependent networks of activities. These are generally termed as primary activities and supportive activities. Greggs primary activities include their inbound and outbound logistics, operations and marketing and sales. The supportive factors consist of the procurement functions, technology and firm’s infrastructure. The management of Greggs Plc. can modify different parts of this value chain to secure a competitive position in the local market (Fearne, Garcia Martinez and Dent, 2012). Inbound and outbound logistic The inbound logistic involves the selection procedure of suppliers and the proper handling of all the raw materials. The huge availability of suppliers can assist the organisation to choose the best suitable alternative in terms of the product quality, price margin and value of contract. This procedure will enable the organisation to reduce their production cost (Fearne, Garcia Martinez and Dent, 2012). The outbound logistics indicates the supply chain management of the organisation. The management of Greggs Plc. need to closely monitor all the activities of their supply chain to ensure proper distribution of their goods among the potential consumers. They also need to confirm whether the intermediaries of the supply chain are following all the ethical codes and conducts (Fearne, Garcia Martinez and Dent, 2012). Sales and marketing The marketing department of the organisation needs to consider the changes in the society and the consumption pattern of the market. The increased problems regarding obesity and health related issues need to be allocated by the marketing management during the segmentation and targeting of the market (Greggs Plc., 2013). Therefore, they also need to offer more personalized products as per the demands and requirement of the potential consumers. For instances, the organisation needs to classify the market in terms of age, lifestyle, health condition and food habits of the population. They need to offer low calorie and high nutritional products to the aged population, busy professionals and children. This procedure will allow them to maintain the consumer loyalty towards their product ranges. Operation The operation procedure of the organisation needs to concentrate on abiding all the governmental and legal regulations to eliminate penalties and strict actions. This section of the organisation also needs to make sure the proper delivery of the freshly baked product to the take away customers to ensure the proper execution of Pasty Tax policies. To avoid the improper delivery procedure of the freshly prepared products, the management must situate the production location very near to their take away outlets (Sillitoe, 2014). Procurement The procurement department of the organisation is responsible to supply all the required materials for their operation procedure. The management needs to analyze all the available options to provide the high quality and moderately priced products for their production procedure. This facility will enable them to maintain their product quality while reducing the overall production cost. By this way, the organisation will be able to maintain their customer loyalty and sales growth (Sillitoe, 2014). Technology The organisation must utilize the latest technological developments to connect with the potential consumers. They need to create innovative pages within different social media sites to actively communicate with the consumers. The technology department should utilize different websites and search engines to promote their product line and services. This will assist the organisation to broaden its horizon to reach maximum number of consumers. Therefore, it will impart a positive effect on the sales growth of the organisation (Greggs Plc., 2013). Firm’s infrastructure The organisation can plan and control their financial, accounting and corporate strategies to generate positive effects for their business venture. The management requires eliminating excessive expenditure on their supply chain management and traditional advertisement procedure. These finances can be utilized for the new product diversification plan and online advertisement procedure. Therefore, it can balance the production as well as strategic venture of the organisation (Greggs Plc., 2013). Potential Course of Action Globalization of business The organisation has to concentrate on the globalization of their business to reduce the effect of local market saturation. Exploring the new international markets will assist the organisation to elevate their sales growth. Almost all the competitors of the organisation have global presence. This course of action will allow them to improve their competitive position with their immediate rivals. Product diversification The management of Greggs needs to diversify their product line into new sections such as fruit juices and other beverages, low calorie sweet products and donuts and organic food products. This procedure will enable them to target a huge section of local as well as global market. It will also increase the consumer database of the organisation. Supply to super market The organisation must tie-up with the largest supermarket and convenience stores of different locations of the world. They should supply their products to different super market and stores to increase their visibility and sales ratio. Ecommerce The management must work hard to introduce Ecommerce facility to their local as well as global consumers. Electronic commerce procedure will allow them to reach to a wide range of potential customers. It will improve their consumer loyalty by increasing their comfort to avail required product. CSR The organisation must indulge in different types of CSR activities to improve their market reputation. They must initiate waste recycle procedure to reduce the environmental harm due to excessive waste disposal. The organisation also needs to introduce eco-friendly packaging materials to grab the interest of potential consumers. Conclusion The study has evaluated a number of issues caused by the external environment of Greggs Plc. The competitor analysis has also illustrated the current market position of the organisation. The major weaknesses of the organisation are their inefficiency in diversifying their product line and introducing online marketing procedure. The discussion has conveyed that this situation has affected the sales growth and market reputation of the organisation in the UK market. The value chain of Greggs Plc. has been analysed to understand their competitiveness in the present market. Therefore, the study has suggested various courses of actions, such as internationalization of product, extensive diversification, tie-up with super market and CSR activities, to improve their market competitiveness and sales growth. Reference List BBC News Business, 2013. Greggs bakery in profits warning after sales fall. [Online] Available at [Accessed 19 March 2015]. BBC News Business, 2014. Greggs shares fall 9% after profits drop. [online] Available at [Accessed 19 March 2015]. Darkow, I. L., Foerster, B. and von der Gracht, H. A., 2015. Sustainability in food service supply chains: future expectations from European industry experts toward the environmental perspective. Supply Chain Management: An International Journal, 20(2), pp. 6-39. Fearne, A., Garcia Martinez, M. and Dent, B., 2012. Dimensions of sustainable value chains: implications for value chain analysis. Supply Chain Management: An International Journal, 17(6), pp. 575-581. Greggs Plc., 2013. Greggs Plc.: Annual report. [pdf] Greggs Plc. Available at [Accessed 19 March 2015]. Griffiths, B., 2014. Tougher competition and bad weather sees profits at bakery chain Greggs go stale. [Online] Available at [Accessed 19 March 2015]. Nestle, M., 2013. Food politics: How the food industry influences nutrition and health (Vol. 3). California: Univ of California Press. Sillitoe, B., 2014. Greggs focusing on operational effectiveness. [Online] Available at [Accessed 19 March 2015]. Webb, S., 2013. The return of the pasty tax: Greggs to add new hot snacks with VAT mark-up after complaints about food being cooled down to avoid levy. Available at [Accessed 19 March 2015]. William Reed Business Media, 2004. Greggs sees increasing sandwich competition. [Online] Available at [Accessed 19 March 2015]. Read More