Environmental Analysis of Fentimans Company - Case Study Example

Fentimans Company Name: Professor: Institution: Course: Date: Fentimans Environmental Analysis Introduction Fentimans are mini drinks companies in the beverages market. They specialise in botanical methods of preparing soft drinks, by use of old recipes and drinking styles. Fentimans is a restoration brand which operates on its historic origination and images. Its product is described as superior and targets an adult premium market for soft drinks and mixers. The company has its ancestry in the north east of Great Britain and was established in 1905 by Thomas Fentiman in Gateshead (Anderson & Coughlin, 1987). This company was performing well for over 60 years, but by the 1960s it had become out-of-date, and this has been as a result to various environmental factors. a) Macro – Environment Analysis There are many factors in the larger environment that have always affected the overall decision-making processes of the company’s management. The changes in tax, new laws, barriers in trade, demographic change and changes in government policies are some examples of external change. The fentimans managers are advised to use pestel in their analysis. This model talks about the following: Political factors These factors refer to the policies of the government like the degree of intervention to the economy. The kind of goods and services that the government want provided to its citizens and to what extent it believes in the subsidising of firms. These are the priorities and terms of business that the firm supports and works with in order to achieve the best in the overall mission of the company. The question that is put forward is the case where if such priorities are suitable to the government. Decisions made politically can impact various sections of the business in one way or another such as the education of the staff, the nation’s health and the quality of the infrastructure like the road and railway system (Copley, 2004). This will in turn affect the running of the company for example the transportation of the product from the industry to the market and so on. Poor infrastructure affects the economy in a great way. Economic factors Economic factors are factor like the rates of interest, changes in taxation, growth in the economy, inflation and exchange rates. Economic change is one of the areas that have the largest impact in any business and its behaviour (Khoury, 1984). The following are just examples:   High rates in interest putts off a business because borrowing costs a lot more. Exporting of a product is made difficult by a strong currency because the price needed may rise in terms of foreign currencies. Price inflation will definitely trigger the demand for higher wages from the employees raising costs for the company in turn. The growth of the national income may boost the demand for products from the company. Social factors Fentimans products are actually social products: products taken when socialising with other people. Therefore any changes in the social trends will impact the products demand and availability. This will in turn affect the willing heart of the fentimans staff to work hard. A good example is the United Kingdom where most of the population are old people (Copley, 2004). This causes the firms to keep their staff longer since they live longer. It also means that most organisations will start to recruit older employees to work for them. These old workers also impact on demand. For example, they have to be accommodated and catered for medically. Technological factors The case of shopping online, bar coding and designs aided by computer are some of the improvements that come along with the new technology (Copley, 2004). Fentimans should therefore take advantage of such cases. Technology can cut down costs, improve the quality of the products and services and lead to innovation. Such developments always benefit the organisation and the consumers as well. Environmental factors The known factors of the environment that could positively or negatively impact business are weather and climate. Temperature changes can impact on numerous industries like production, farming, tourism and insurance. Major firms should consider the fact that weather and climate changes drastically from time to time (Piercy, 1982). The increasing desire to save the environment turns out to be having effects on a lot industries like for example, air travel is being highly taxed and the manufacturers of hybrid cars are being urged to produce environment friendly products (George, 1994). Fentimans could be affected by the high taxation on air travel since exporting it products will be costly. b) Micro – Environment Analysis Income & GDP analysis & consumer behaviour analysis Consumer behaviour analysis is a very important aspect to any business person who would like to market their products especially in a new environment. Fentimans should look at the consuming behaviour in all the three countries then decide which is the most suitable for expansion. Take for example china and India both has ready market for their product but Dubai will pose a challenge for them since not most people consume brewed beverages. Dubai should therefore be ruled our (Piercy, 1982). Of course there might be people in Dubai who drink but they will not measure up to the numbers of India and china. Therefore the income of the people is quite lower. That of china is higher because of a better developed economy. Therefore Fentimans should consider china basing on all these factors. In depth analysis In waiting for the results of a competitor's adventure into a new region, the company can validate for itself whether demand really exists and if the existing benefits really outweigh the overall risks. In this case, the company’s competitor's lead does not automatically mean that it has to copy exactly what they are doing. As an alternative, you can use their ideas to inspire your own thinking. In case your competitor's growth proved to be a mistake, then you can be lucky that it was not your business that perished in an expensive misjudgement (Brigham & Houston, 2007). Is the company in a position to finance the expansion internally? Before making a decision, the financial benefits of such an expansion need to be studied carefully and if the cash flow is in a position to support the additional investment. It is of necessity to determine where and how you will get the currency to pay for the additional inventory, new services or equipment (Shipley & Neale, 1995). If there is need for additional capital, be it a loan from the bank or an equity infusion, ensure that the new course of action will be profitable enough to allow you to produce money and repay the loans. A lot of small businesses met unfortunate deaths with their aggressive growth strategy, only to find that they were buried deep in debt with no other option than to file for bankruptcy or liquidate assets (Shipley & Neale, 1995). Transaction cost analysis Company Fentimans runs high level of potential this because the emerging of global markets, stable economy and a consequent rise in discretionary spending power fuelled on nonessential goods. eastern Europe  Africa and middle east are fastest growing regions over the year where Fentimans company can sell their products, despite that the developed markets in particularly north America, western Europe and Australia witnessed growth saturation and weak growth level. Economic stability is also being justified by the fact that the city state of Singapore has had a banner year with its GDP being up to 7.9% during year 2006, not forgetting its stock index also rose to 19%, and its 40 wealthiest citizens are worth a collective $32 billion,$4billion more than last year (Singapore Food and Drink Report Q1 2009) With the other sectors like fortune centered on real estate, shipping and palm oil still performing particular well. Ng Teng Fong takes the top spot of richest his success based on his hotel and mall holding in Singapore and Hong Kong. The level of risk been involved in the market is of medium this is justified by the fact that bottled water overtook carbonates as the leading soft drinks sector by off-trade volume. It benefited from the changing attitudes to health, both in developed and emerging markets. Rising temperatures are due to climate change which also boosted sales of bottled water in 2006 as consumers became increasingly aware of the importance of hydration. The sector witnessed a notable upturn in new product activity as manufacturers looked to position themselves strongly in an increasingly competitive marketplace. Key themes in innovation included sugar-free flavored waters and functional waters targeting specific consumer groups with added-value health benefits. Beside the risk being brought by the bottled water, carbonates is the leading soft drink its market growing at a steady rate .it generated total revenue of$552.2 million in 2007, more also Market consumption volumes increased with a CAGR of 6.8% between 2003-2007, to reach a total of 617.7 million liters in 2007 (Singapore Food and Drink Report Q1 2009). The market's volume is expected to rise to 884.4 million liters by the end of 2012, representing a CAGR of 7.4% for the 2007-2012 period this is showing the level of potential in the market .Carbonates’ sales proved the most lucrative for the Singaporean soft drinks market in2007, generating total revenues of $340.4 million, equivalent to 61.6% of the market's overall value. In comparison, sales of bottled water generated revenues of $78.8 million in 2007, equating to 14.3% of the market's aggregate revenues this showing the little risk the bottle water brings in the market (Singapore Food and Drink Report Q1 2009). The economy in Singapore is expected to expand. Merchandise trade and investments into the country are also expected to continue in an upward trend this been not a big risk for the Fentimans Company when undertaking its business. There is no a great threat imposed by the soft drinks' substitutes except from traditional coffee and tea or homemade juices, along with the tendency of consumers switching towards the fruit juices. Conclusion Still marketing and selling its drinks in stone jars and making deliveries to people’s homes, it was unable to keep up to the competition of a fast changing industry and consumer, however more importantly it had missed out on the key to consumer supply, supermarkets. The trend was for faster processed fizzy soft drinks produced and packed in bottles and cans, with constantly changing extensions and alternatives to their originals. This matched the preferred delivery outlet larger shops and supermarkets. Soft-drinks branding and marketing necessitated fat budgets and television advertising was more common as larger institutions acquired a more aggressive market share stance (Anderson & Coughlan, 1987). Core Resources and Competences of Fentimans Company Introduction Fentimans Company has evolved to position itself at a level of being one of the most recognizable Companies globally, and this has taken place without an extensive marketing effort on behalf of the Fentimans Company. The expansion of the business has gone deep into the market upon word of mouth and also point of sale experiences that has helped in the spreading the overall quality message of the Company, especially at comfy locations. This has been considered to be an effective mode of expansion. Another core resource is internally oriented, where the Company has given its focus on the existing strong employee support structure. In this case, the Company has opted to refer all Company workers as “partners” with the company. This has helped it be in the position it is because of the effort that employees are investing in their work. There is a strong worker loyalty and company devotion by employees as the Company has devoted itself to the offering of various work benefits, such as stock options and employee healthcare. This has turned out to be an almost revolutionary way of treating most of the workers, especially those working on the hourly basis.  Conclusion Fentimans felt they were not able to cope up with the change and closed down their production. In 1988 the great, great grandson Eldon Robson to the founder determined to bring the brand back to life. The thought that a company may survive by going back to essentials including basic recipes and process of production has most recently been in line with altering consumer attitudes for looking for authentic taste and a longing for quality and originality (Subrata, 2003). Fentimans Company Strategic Choices Expansion overseas Currently Fentimans Company moving well with overseas business expansion strategy, of which during the contemplating phase on the expansion of the company overseas, there are various things they are taking into consideration. Are there scales of economies that will gain through an expanded operation? The Costs per unit fall as a business increases in size resulting in either lower prices, higher profit or both (Brigham & Houston, 2007). One should only enlarge if economies of scale will permit the business to either sell your products or services at subsidized prices or to acquire more profit per item. Economies of scale are achieved in such a way that by growing and expanding one’s business, they may be able to purchase more (Brigham & Houston, 2007). Other than buying for a solitary store, the owner is now buying for two or more stores. These high-volume purchases will make it possible for you, the owner, to find lower prices for everything from raw resources to transportation and warehouse space and even cleaning services. As you diverse out to other markets, you could be able to increase your sales by selling more. Larger volume sales will allow you to equalize lower price per-unit profit. The business may also gain from the aspect of having more resources and this could be in form size and better premises, amplified marketing resources and additional product features that provide more value for customers (Brigham & Houston, 2007). Something else to look at is if the competitors are expanding, the company may be in a position to retrieve important indications about how the market is doing, and also some hint about the situation of your competitors. Having information about your competitors gives you the leading edge because it can demonstrate to you ways in which your company benefits the customer and how to be unique (Brigham & Houston, 2007). In case your competitors are expanding their operations, it is possible that they have noticed new, untapped opportunities in the market. They may have stumbled upon a good idea. If this is true you can approach the situation in two ways: wait and observe how the competitor does or follow the competitor's direction (Brigham & Houston, 2007).  Currently the company is expanding in the Asian market, China and India which have been identified to be good investment regions. There is however risk of product counterfeiting, dilution of the brand or financial risks (Korey, 1986). With such countries that are highly technological, the mentioned can not be hard to achieve. Is it true that by expansion one is diluting beyond acknowledgment the passion that originally started the business? Such kind of an Expansion, the one that takes you miles away from the original vision or even passion could make you richer, but minus happiness (Piercy,1982).For a creative person, chances are that the trade of taking care of business will destruct you from creative work. Growth may vigorously make you leave alone the total control you took over the company when it was much smaller and that may not be easy to adjust to (Shipley & Neale, 1995). Development and expansion are not all the time good or pleasing especially in markets such as India or china. A lot of entrepreneurs have seen their businesses fall apart as a consequence of uncontrolled expansion. Slow, steady yet incremental growth is much more recommended. The transaction cost entails one when a company is engaged in the market. In most case this cost usually occurs in the event that a company participates in the market. For examples the costs incurred during bargaining or during the search for the various information about a product or some services to be rendered. In this case, this cost can be termed as one which is not feasible (Shipley & Neale, 1995) a) Indian economy India is one of the countries that the Fentimans Company contemplates their expansion. The economy of India is ranked among the twelfth largest economy in the whole world by use of the nominal value and ranked number four by purchasing power parity. India began to experience a rapid economic growth in the 1990s when markets began to run for international competition and investment (Brigham & Houston, 2007). Now, India is rising in economic power with enormous human and natural assets and a huge base for knowledge. b) China economy China’s economy is the third largest in the world, following the United States and Japan with a nominal Gross Domestic Product of four point nine one trillion United States dollars in exchange-rate terms measurements. It is number two in the whole world after that of the United States with a Gross domestic Product of eight point eight trillion as of 2009 when measured on the basis of the purchasing power parity (Brigham & Houston, 2007). Moreover, it is among the fastest growing economy in the world it has also had the fastest growth in its major economy for 30 years consecutively with a standard annual Gross Domestic Product growth rate of above ten percent. The per capita income of china has grown at a pleasant rate of above eight percent radically reducing poverty levels. However, this extensive growth was followed by instability in the income that various people receive. China is known for efficiency in trading around the world and the biggest exporter and number importer of goods. Based on facts, china’s economy is more developed that that of India (Brigham & Houston, 2007). India is c classified as twelfth largest economy as per exchange rates china is occupying the third position overall. The estimated gross domestic product of India is at one point two while that of china is at seven point eight trillion. India still drags behind in its gross domestic product compared to china’s. Therefore I would heavily advice the Fentimans management to consider china compared to India. c) Dubai economy The gross domestic product of Dubai as of the year 2005 was at thirty seven billion United States dollars. The revenue that Dubai gets from oil and natural gas is below six percent of its economy in as much as its economy was built on the oil industry. It has been estimated that Dubai produces two hundred and forty thousand barrels of oil in a day. The people of Dubai are of Islam religion and it is said that their social lives do not revolve around brewed or fermented beverages (Copley, 2004). Therefore in as much as the rate of growth of their economy is favorable for any business, the Fentimans may get a hard time trying to sell their product since there is no readily available market. I would strongly advice the management to keenly observe such facts in their quest for expansion. Fentimans Company has implemented other strategies, such as new labour increase plan, may prove to be costly, but in the real sense, they are necessary to bring the Fentimans brand back to the market (David, Kurtz & Kim, 2009). They are also worthwhile in the overall effort of making the overall experience of Fentimans Company much quicker and more customer-friendly; especially with overseas expansion program (Collett, 1991).  For the purpose of maintaining positive growth and profits of the Company’s operations, the logo of Fentimans needs to be re- connected with the existing customer intimacy, and probably also with small town themes. This means that Fentimans needs to launch a unique connection with all existing local outlet, rather than just approaching off as trendy. For this strategy to be successful certain establishments will be eliminated in most of the locations that are over saturated. Lower rates should be offered in eliminated locations for the purpose of establishing new and better locations (Frank, 2005). Strategy to be Pursued by Fentimans Company There is still hope for Fentimans Company to continue having positive and profitable future operations. Most of the implemented strategies, such as new labour increase plan, may prove to be costly, but in the real sense, they are necessary to bring the Fentimans brand back to the market (David, Kurtz & Kim, 2009). They are also worthwhile in the overall effort of making the overall experience of Fentimans Company much quicker and more customer-friendly; especially with overseas expansion program (Collett, 1991). For the purpose of maintaining positive growth and profits of the Company’s operations, the logo of Fentimans needs to be re- connected with the existing customer intimacy, and probably also with small town themes (Allen, 2005). This means that Fentimans needs to launch a unique connection with all existing local outlet, rather than just approaching off as trendy. For this strategy to be successful certain establishments will be eliminated in most of the locations that are over saturated. Lower rates should be offered in eliminated locations for the purpose of establishing new and better locations. The competitiveness of the product in all the three countries will depend on the above factors. The income of the people in the various countries, the pestel factor and the swots will also influence the competitiveness of the soft drinks (Piercy, 1982). Cultural practices, religious beliefs and social practices will also contribute a lot in the competitiveness. Another thing to look at is the exporting and importing factors, for the purpose of understanding if they will have any barriers to the overall business operation. Conclusion A recession in the economy, war and crime or an event that can drastically change lives like the September 11 attack which can seriously decrease consumer demand for your product. How certain is the entrepreneur that the limited variety of their consumption will comprise the organisations products or services? Especially if they are not spending like before. Ensure that the business environment is able to support the expansion except if one has a huge pocket that can sustain expansion even in the case of reduced demand (Brigham & Houston, 2007). Whether a Company is opening an additional store, a change in the role that you play should be greatly expected. As an individual business, you may start the recruiting of new personnel to deal with your new undertaking. In business expansion, one should be prepared to entrust responsibilities to others and be open to new techniques of approaching things. If you were previously working alone, you now have an added responsibility of being a personnel manager (Shipley & Neale, 1995). Bibliography Allen E. Buchanan. (2005). Ethics, efficiency, and the market, Philosophy and Society. New York: Rowman & Littlefield, p 85. Anderson, E. and Coughlan, A. T. (1987). 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