Market Feasibility Analysis - Research Paper Example

Feasibility Analysis Report Feasibility Analysis Report Research Background This feasibility report is based on a controlled study of identifying opportunities, market niches, economic obstacles, and as cost versus benefits approach to providing solutions for problems identified during the study. The report is a market feasibility report for a supermarket retail chain that seeks to open up a new branch near the University. The purpose of this research is to identify problems and opportunities, to determine objectives, to describe situations, to define successful outcomes and assess the costs versus benefits associated with satisfying the market niche in the new area. The advent of the declining trade barriers and the liberalisation of trade has made it easier for supermarkets to open up new chains. Random distribution of the supermarkets associated with new market entries across geographical regions help restructure. The increase in demand in the food retail sector has made it easier for retail chain to open up new branches across the nation. The university environs present a potential market with a huge population that is ready to spend especially on consumables and clothing. The supermarket branch would, therefore, fill a market gap that already exists in the area. This is because the increase in mergers and acquisitions has led to a reduction in food retail in various regions across the nation, including the university and its environs. This report presents the results of a feasibility study that explores the situation at the University and its environs, the marketing objectives of the supermarket retail chain in a bid to ensure that the business will become a going concern and sustainable within the competitive environment. Sources of Information Primary sources of information using Questionnaires to conduct a survey on the feasibility of starting up a multinational supermarket retail chain near the University. The primary sources of information seek to establish a market gap in the area, the possible opportunities, the products and age group that is most likely to purchase goods or services in the supermarket, and the marketing strategy that will be needed after examining strengths, weaknesses, opportunities and threats in the new area. This research also employed secondary data, from books, journals and online articles as a reference point for techniques of critical reflection, critical analysis, measures of dispersion, and to explore any past cases of new market entry strategies and outcomes. Survey Methodology Research design This study draws its insights from qualitative and quantitative data based on secondary and primary data. The research design involved a survey conducted on a sampling frame of one hundred respondents, picked randomly within the University and its environs fifty five of these respondents agreed to participate in the focused group discussions. Qualitative interview and focused group methods were used in collecting data. Qualitative interview is advantageous in that it captures and describes program processes, establishing personal differences between respondents’ experiences and outcomes, evaluate programs that are seen as evolving or dynamic, and it is easy to conduct as the respondents are controlled from giving irrelevant information (Rubin & Rubin, 2005). Focus groups are advantageous in that, adequate information is collected as people exchange views, it is easy and cheap to assemble the members who will participate, deeper insight is developed and the information collected is from participants’ mouths, and it becomes easy for people to build on others responses and come up with ideas which they might have not thought by themselves (Morgan, 1997). The survey involved a cross sectional study of the market needs through the use of questionnaires. The questionnaires were used in collecting data about University students’ shopaholic trends. Five-minute interviews and focused groups were also used to make it easier to collect information that was open ended, allowing the research to draw precise and accurate data on issues such as shopping trends, shopping preferences, and shopping needs. Randomization techniques were employed in choosing the respondents to ensure that the data was not biased. Research questions and Results For the purposes of adequate collection of information from the field in the process of testing the hypothesis, this research will be guided by research questions that will help the researcher to adequately and competently collect the relevant information. In this case therefore the main research questions in this study include; 1) What products do youths often buy from convenience stores and supermarkets? 2) Is Morrisons a lovable brand in the area? 3) What is the image and effect of Morrison’s policy on age verification before the purchase of alcohol? 4) Does advertising play a big role or is buying influenced by peer pressure? 5) How beneficial will opening up a new branch be for the residents and students in the area? 6) What products should be stocked in the supermarket? 7) What other services can be offered at the supermarket? 8) What and who is the competition and what does the company need to do to gain a competitive advantage? Company Analysis Wm Morrison Supermarkets is among the top five largest supermarket retail chains in the United Kingdom; it is most commonly referred to as ‘Morrisons’ and is headquartered in Bradford, England. Morrisons is an established retailing chain in the United Kingdom with a total 569 stores. The retail chain ensures that staffing requirements are up to par, so as to mitigate costs, maximize profits while serving the interests of consumers. The supermarket has a wide range of products that it sells as its own; most are healthy foods, clothing lines, a cellar, and a grocery brand that is the fastest growing in the country. It also offers other products for kids, but this will be inappropriate in this scenario of expansion. The company also endures a strong online network and a large customer base online, therefore, the company already has an established brand that is recognizable across the nation. Morrisons operates both superstores and convenience stores; for purposes of this feasibility study, the retail chain wishes to open up a convenience store due to the fact that the population in the area does not meet the required demand to establish a super store. However, the convenience store in this scenario will be aimed at satisfying the needs of the market based on the findings gathered. The new store is part of a project of expansion and restructuring following the losses made in the previous financial year as shown below. 52/3 Weeks to Turnover (£’m) Profit (loss) before tax (£’m) Profit (loss) after tax (£’m) 2 February 2014 17,680 (176.0) (238.0) 3 February 2013 18,116 879.0 647.0 29 January 2012 17663 947.0 690.0 30 January 2011 16479 874.0 632.0 31 January 2010 15410 858.0 598.0 The above chart shows a financial performance over a five year period. It also shows that the supermarket retail chain’s efforts to expand amounted to some huge losses in the last financial year. The company has a market share of 12.2%, a 0.1% drop from the previous year. Therefore, it seems appropriate that the retail chain expand to reach out to a wider market, seize new opportunities and establish a sustainable business that will gain a competitive advantage over actual and potential competitors. Customer Analysis The target market is a range of youth in the university and the few residential households around the University. Based on a sampling frame of 100 respondents the average age is 22 years. The age group is between 17-30 at the university, and over 30-60 years in the neighbourhoods. The young people are becoming extremely busy due to their lifestyles and they do not have time for extensive shopping. It is therefore, highly recommended to have an ‘all in one roof’ experience at the convenience stores; the products should be well organized for easier access. Young people are also into buying ready-to-eat foods such as coffee, pastries, rotisserie, porridge, meat, salads, fish etc. This data is based on the survey conducted throughout various university students and residential households in the area. Based on the research and feasibility study, the university and its environs provide a good market for consumables and a more complete line of products based on the estimated demand. The table below represents the final breakdown of goods based on data collected through primary research. It is an estimate of the potential demand, based on potential customer requests and needs. Groceries 26% Cookies/ Snacks 7% Ice Cream 4% Candy 3% Soft Drinks 12% Frozen snacks 5% Health/ Beauty 4% Meat 2% Dairy 10% Non-foods 5% Other Produce 3% Tobacco 2% Deli Items 7% Magazines 5% Baked goods 3% Alcohol 2% Out of the one hundred respondents, at least sixty people preferred to have groceries for the preparation of vegetarian dishes, salads and as side dishes. 80% of the respondents in the focused groups would prefer deli items and frozen on weekdays to fresh produce, such as meat because of the lack of enough time to prepare one’s food in between classes. As can be seen from the table, alcohol, tobacco and candy are at a bare minimum, this is because of the restrictions in the school environs regarding smoking and drinking in public. Most of the respondents (57%) in the questionnaire would like to have access to a food court that serves food, coffee, alcoholic beverages; an environment that makes them feel as part of the general public, outside school. The forty five-minute to one hour focused group discussions enabled the research to draw that the most highly demanded products were consumables, leisure items and services, trendy, and fashionable items. From the one hundred students. Only two were below 18 years of age, the mode data shows that most of the students were 20 years and above, the mean/ average age is 22 years across the university. Most of the neighbourhood residents feel that campus students are somewhat rowdy so it would not be advisable to start up a club at the convenience store since this would fend off the elderly customers. Results showed that most people were influenced by peer pressure and that shopping for designer brands made them feel classy and gave them an identity above those who wore common things. This desire for a sense of importance is very common among youths; it has made the designer goods be valued at a high price making them only accessible to the rich. This increases the global prices for these products. Below is an analysis of the current market trends at Morrisons by value explorer on 9th May 2014 that clearly depicts that the growth, net income, and profit margins of the company are improving, which means that customers are beginning to accept the improvements that the retail chain is implementing and that tapping into the new market will enable it to increase its market share and thus increase in net income. Recommendations Based on the data collected over the course of the research, it is evident that there is a market gap to fill in the area. However, there are many licences that need to be acquired when starting up the convenience store in the area; municipal business licence, video rental licence, garage licence, gasoline retailers market, food service establishment licence, tobacco retailer’s licence, petroleum storage system licence, music licence (in case there will be loud music), service station licence. Various permits are also required by the authorities in the area; vendor permit, building permit, compressed air/boiler permit, refrigerants permit. To fend off the competition, the retail chain should start advertisement campaigns in the university and its environs, it should offer coupons on its products to attract customers. Price reduction should be part of its main priorities especially on consumables since it attracts customers. Morrisons is already well known for its highly qualified and efficient customer service, therefore, these standards should continue to be upheld since the young people are very sensitive to customer relations. There has been controversy over the strict rules imposed by Morrisons, this is not attractive in the eyes of the young people. However, it is advisable to allow students with valid student ID cards to purchase alcohol without the proof of a national ID since the mode data shows that many are above the legal drinking age, otherwise, the customer service attendants should not compromise. Another recommendation is that to reduce start-up costs, the retail chain should rent premises for the new supermarket/ convenience store, instead of building a new store altogether. This is a good alternative since there are various buildings around the university that can be rented and modified for such purposes; as the business picks ups, the retail chain can construct their own store based on future forecasts and market trends. QUESTIONNAIRE This research questions are based on a feasibility study for a retail chain supermarket that wishes to start a new branch in your area. It is important that this research be conducted to make it easier for the company to identify and possibly fill the market gap. For that purpose, the consultancy requests you to spare some time to fill in this questionnaire that is intended to find out the feasibility of starting up a new convenience store in your area. Please assist by filling in this questionnaire. Thanks in advance for your support. You are kindly requested to fill in the blank spaces at the end of each question, or simply put a tick where appropriate. SECTION A BACKGROUND INFORMATION 1 What is your gender? a Male b Female 2. What is your age [tick bracket]? a 18- 25 years b 26- 35 years c 36-45 years d 46- 55 years e 56 years and above 3. Indicate your highest level of education a ‘O’ level b Diploma c Degree d Masters e Others specify …………………………………………………… 4. How long have you lived in this area? a 1-5 years b 6-10 tears c 11-15 years d 16-20 years e Over 20 years SECTION B: SPECIFIC INFORMATION 1. What products do you often buy off convenient stores and supermarkets? ……………………………………………………………………………………………………...…………………………………………………………………………………………………………………………………………………………………………………… 2. Do you recognize Morrisons as a brand that people would love? ……………………………………………………………………………………………………...……………………………………………………………………………………………………………………………………………………………………………………… 3. What do you think about Morrison’s policy on age verification before purchasing alcohol? ……………………………………………………………………………………………………...……………………………………………………………………………………………………………………………………………………………………………………… ……………………………………………………………………………………………………...……………………………………………………………………………………………………………………………………………………………………………………… 4. Does advertising play a big role or is buying influenced by peer pressure? 5. In your opinion, do you think that starting a convenience store around the campus would be beneficial to you? If so, how ……………………………………………………………………………………………... …………………………………………………………………………………………………………………………………………………………………………………………… 6. What products would you like to be stocked in the store and what should be the percentage in terms of their distribution or stock? ……………………………………………………………………………………………………...…………………………………………………………………………………………………………………………………………………………………………………… 7. What other services would you like offered at the supermarket? ……………………………………………………………………………………………………...……………………………………………………………………………………………………………………………………………………………………………………… 8. What do you think our competitors are doing better and what can we do to bridge the gap? ……………………………………………………………………………………………………...……………………………………………………………………………………………………………………………………………………………………………………... Bibliography Kopsova, M. (2012). Feasibility Study Report Writing.Price Waterhouse Cooper Academy. Retrieved May 7, 2014, from http://www2.dupont.com/Superfibers_Cont Hegarty, R. (n.d.). Morrisons forges ahead despite trading blips.TheGrocer.co.uk. Retrieved May 10, 2014, from http://www.thegrocer.co.uk/companies/supermarkets/morrisons/morrisons-forges-ahead-despite-trading-blips/230060.article Morgan, D. (1997). Focus Groups as Qualitative Research. London: Prentice Hall preliminary Results For The Year Ended 2 February 2014 And Strategic Update . (n.d.). Morrisons. Retrieved April 8, 2014, from http://www.morrisons-corporate.com/Documents/Corporate%20d Rubin, H. J., and. Rubin, I. S. (2005): Qualitative Interviewing – The Art of Hearing Data. 2. Edition, Sage Publications, Thousand Oaks, London, New York. Stonehouse, C. (2009, October 11). Mother is refused wine at Morrisons – in case daughter, 17, drinks it. The Observer. Retrieved May 8, 2014, from http://www.theguardian.com/society/2009/oct/11/morrisons-wine-ban-mother ValueExplorer.com - Simply the Webs Best Value Stock Screens and Analyses. (2014, May 9). WM MORRISON SUPERMARKETS. Retrieved May 9, 2014, from http://www.valueexplorer.com/analyzer/?isin=GB0006043169 Wright, C. (n.d.). Tesco slides again in latest Kantar rankings. TheGrocer.co.uk. Retrieved May 7, 2014, from http://www.thegrocer.co.uk/companies/supermarkets/tesco/tesco-slides-again-in-latest-kantar-rankings/226628.article Read More