Knowledge Base Representing Porter's Five Forces Model - Term Paper Example

Strategic Marketing Planning [Name] [Professor Name] [Course] [Date] Contents Contents 1 Executive Summary 3 Current marketing issues 3 Potential for market and brand growth 5 Category lifecycle stage 5 Market Segment 6 Competitive actions and future behavior 7 Porter’s Five Forces Analysis 7 Threat of new entrants 7 Threat of substitute goods 8 Suppliers’ bargaining power 8 Customers’ bargaining power 8 Competitive Rivalry in the Industry 8 Analysis 9 Marketing Mix 9 Product Differentiation 10 Pricing Strategy 10 Place & distribution strategy 11 Promotional strategies 11 Conclusion 11 References 12 Executive Summary Mars Petcare is global manufacturer of petcare products. The company’s key range of products includes Whiskas, Pedigree, Schmackos, Dine and My Dog (Mars, 2013a). In Australia, the company operates under the trade name Mars Petcare Australia. The Australian Head Office is situated in Wodonga in Victoria where the company’s first manufacturing plant started operations in 1967. The company has also established marketing sites in Ballarat, Brisbane and Barthurst in South Wales (Langley, 2013). This paper proposes a strategic marketing plan for Pedigree brand of wet pet food. This paper outlines Mars Petcare Australia plan to extend distribution of Pedigree into new Australian frontiers to increase customer base. The two opportunities identified for the pet food include strategic pricing and product differentiation (Mars, 2013b). Current marketing issues Australia is a nation of pet lovers with some 63 percent of households owning a pet or more (Petnet, 2013). The nation’s pet food industry continues to cater for an ever increasing number of consumers who have for the past five years attuned to online shopping (IBISWorld, 2012). The PEST analysis below outlines the factors affecting the manufacturing and sales of pet food in Tasmania, New South Wales and Victoria. Political: Tasmania, New South Wales and Victoria have many pressure and interest groups, and government agencies advocating for animal rights. Since there is no legislation governing the manufacture of pet foods in the Australian states and territories, the standards should comply with Pet Food Industry Association of Australia Inc (PFIAA) standards. The PFIAA has traditional regulated the Code of Practice for manufacture and sale of pet foods. The Code is however superseded by the Australian Standard for the Manufacturing and Marketing of Pet Food, AS 5812-2011. In cases where Pedigree would have to be imported into the country, it will have to comply with the provisions of the Quarantine Act 1908. Currently, there is no other legislation regulating safety or labeling of imported pet food (Anonymous, n.d). Societal: Australian communities in Tasmania, New South Wales and Victoria mostly espouse their respective ethnic heritage as well as multicultural integration. This means that retail stores and groceries operating in these areas have tailored their advertorial messages to appeal to multicultural settings. This provides opportunity for diversity in advertisement (Consumer Victoria, 2012). Environment: Currently, environmental lobbyists across Australia are pressuring Australian manufacturers to go green. Increased environment awareness among pet lovers in Australia offers Mars Australia an opportunity to sell itself as green to win customer loyalty (Consumer Victoria, 2012). Technological: Australian communities living in suburban Victoria and New South Wales comprise a fast growing technological savvy population. The population has a nominal digital divide and embraces latest technologies in the guise of mobile phones, tablets, PCs, internet technologies and apps and online video. This offers Mars Australia an opportunity to use various platforms for advertising such as text messaging platform (SMS), websites, mobile ads and newsletters (Consumer Victoria, 2012). Potential for market and brand growth Through the marketing theory, the outstanding problems facing Australia’s pet food industry can be identified, analyzed and solved (Saren 2009). As a result, the potential for market and product growth can be established. This marketing plan is developed to increase Pedigree’s market share, satisfy customer needs, increase length of product line promote competitiveness and most importantly, increase Mar’s Australia’s profitability. Pet foods have in the past five years experienced a growing demand (Euromonitor International 2012). Marketing researches have indicated that pet lovers in Australia could buy more of the product than what the pet food industry currently offers (IBISWorld 2012). This shows that there is greater demand for pet food than supply. Mars Petcare Australia expects to take advantage of online trading which has been greatly responsive to the company’s other pet foods such as Whiskas, Schmackos, Dine and My Dog. Therefore, the company should use strategic pricing and product differentiation (Civic Technologies 2009). Category lifecycle stage Currently, Pedigree is at its growth stage in the Australian pet food industry. Factors including stiff competition and rapid technological growth affect the product’s lifecycle. The product has recently started making profits with the revenue from sales increasing steadily over the past five years (Funding Universe, 2013). The cost of production has been high on brand building and marketing. Additionally, profits have been increasing exponentially over the period. Competitors such as Nestle Purina Pet Care and Australian Pet Brands have just recently entered the market. This means that competition is steadily increasing even as more competitors are fast recognizing the profit potential of Australia’s petfood industry (Funding Universe, 2013). Generally, the analysis of the brand life cycle shows that the company’s strategies should focus on product differential and strategic pricing. Consequently, Mars Petcare has to focus on product differentiation. This may comprise improving the quality of the pet food by adding unique flavors and features to compete against the range of brands with almost similar products (Kanagal, 2004). The company should also focus on strategic pricing. This means that the company has to lower the prices of Pedigree to make the price more competitive. Market Segment Pedigree’s potential customers in Australia mainly comprise the pet owners. Some 63 percent of Australia’s 8 million households consist of pet owners. This shows the highest number of pet owners in the world. The level of pet ownership in Australia has been comparatively static in the past one decade. Indeed, Australian’s share their homes with nearly 2.3 million cars, 3.6 million dogs, 13.2 million fish and 7.5 million birds (ACAC 2010; Denniss 2004; Petnet 2013). New South Wales and Victoria accounts for some 60 percent of the overall Australian pet owners. Victoria leads with nearly11.6 million pets while New South Wales has 7.7 million pets. On the other hand, Tasmania is the leading state for cat ownership per 100 people (ACAC 2010; Australian Veterinary Association 2013). The selected therefore segment accounts for the largest pet owners in Australia and hence forms a potential market for consumers of pet food (Consumer Victoria 2012). With reference to the market segment, the Pedigree brand must be strategically aligned to target this segment (William, McMellon & Torres-Baumgarten, 2004). Competitive actions and future behavior Mar Petcare Australia’s major competitors have mostly focused on using advertisement to promote their products. The competitors such as; Nestle Purina and Australian Pet Brands – have taken to online trading to retail their petfood products. The competitors also use platforms such as TV commercials, cable and satellite channels and radio FM channels to target the pet owners. Counting on these prevalent actions, it is clear that the competitors will continue using advertisement to promote their brands (Karadeniz, 2010). Porter’s Five Forces Analysis Porter’s Five Forces Model is applied to structure out the pet food industry analysis and to develop a business strategy. Five different forces, as singled out by Porter, affect the competitive intensity in the industry. In addition, it depicts the image of the level of attractiveness and profitability of the cat food market. The forces include threat of new entrants, supplier’s bargaining power, suppliers substitute good, customers’ bargaining power and lastly, competitive rivalry (Aarons & Waalewijin, 2002). Threat of new entrants Australia’s pet food industry is small and less competitive. This means that more companies are venturing into the business to gain a share of its profitability. With regard to Mars Pet care Australia, it has been in the pet food industry since 1911 and therefore boasts of brand image, quality products and consumer satisfaction. This has enabled it to attain substantial market share. The threat of new entrants is as a result restrained (Funding Universe, 2013). Threat of substitute goods Mars Petcare Australia is beset with threats of substitute products given the nature of the petfood industry in the country. Potential threats include homemade petfoods and several similar products. These offer direct competition to Pedigree. The company should as a result focus on product differentiation (Funding Universe, 2013). Suppliers’ bargaining power Mars Petcare is an established brand across Australia. The company has an established repute for establishing and maintaining positive relationships with its suppliers globally. This means that the company has a large purchasing power. It also has a large supplier of agricultural products. Therefore, the company has a stronger bargaining power than its suppliers. Customers’ bargaining power Mars Petcare Australia’s customers have a stronger bargaining power based on their consumption of Pedigree. This is because Pedigree has close substitutes and hence pet owner’s preference is more influential (Funding Universe, 2013). Competitive Rivalry in the Industry Pedigree faces direct competition from petfoods such as Nestle Purina, Australian Pet Brands, Avon Pet Meats, Quinn's Foods Robinsons Investments, Wirrawidgee, Big Dog Australia, Tip Investments and Kinta. The companies are engaged in continual clash for more market share and spend millions of dollars in product promotion. The implication is that the Australian petfood industry will continually experience ever-improving quality if petfood brands (Funding Universe, 2013). Analysis Based on the above analysis, the “Threat of Substitute Goods” is the most appropriate for Mars Petcare’s Pedigree petfood product. The Five Forces Model depicts competitive and profitable market for petfoods (Aarons & Waalewijin, 2002). It however places Mars Petcare Australia at a comfortable position. The model further indicates a moderate threat of new entrants into the petfood market and a significant threat of substitute products (Kotler 2009). In addition, it indicates that the company has an advantage over its suppliers although the customers will continue to maintain control of the market. Hence, Mars Petcare Australia should improve the quality of its products (differentiation) and engage in competitive pricing (strategic pricing) (Rasoava & Russell 2003; Chaneta n.d). Marketing Mix The above strategic marketing tools (promotion, place, price and product) have to be adjusted to ensure product differentiation and competitive pricing. Figure 1: Mars Petcare Australia's Current 4 P's of Marketing - The Marketing Mix Sources: Professional-paper-writing-service.blogspot.com Product Differentiation Mars Petcare Australia offers a brand of high quality pet foods bearing the company logo and slogan. The packaging and the labeling should also be that that communities in Tasmania, News South Wales and victor enjoy (based on findings of the PEST analysis above). The company, the company should engage its research and design (R&D) team to develop unique flavors that can be identified with its Pedigree brand of pet food (Civic Technologies, 2009). Pricing Strategy Mars Petcare Australia should price its flagship product (Pedigree) with the view of making the petfood more competitive. Consequently, setting low prices for Pedigree and offsetting low prices through sale of large product quantity will is significant (Mars, 2013b). The price for Pedigree will need to be set at a level where Mars Petcare can break even, basing on its new design and improved quality. The company needs to sell at reasonably large quantity of products to increase the prospects of success through increased awareness via advertisement. The company should also establish an online retail site as well as offer free delivery or the product across New South Wales, Victoria and Tasmania. Additionally, the company should situate internet kiosks at mega stores across Australia to allow its customers to order and receive products that are customized to the health needs of certain cats (Pulendran,Speed & Widing 2003). To help determine the price point, Mars Petcare Australia will need to estimate the costs associated with production and demand curves. As the situational analysis has shown little direct competition, a competitive analysis will be based on the features and the consumption of the product. This will be applied in establishing alternative prices as well as choosing the price that generates a price based on target returns and mark-up methods. Mars Petcare Australia will also need to establish the demand curve for Pedigree to help in setting the price (Chaneta n.d.) Mars Petcare Australia can thereafter analyze the demand by conducting surveys of the pet owners. Nestle Purina will then estimate the cost of Pedigree production (variable and fixed cost) to determine the average cost. Mars Petcare Australia will use the mark-up pricing method, through adding a standard mark-up to the cost of production (Chaneta n.d.). Place & distribution strategy Mars Petcare should ensure that the distribution channels (such as retail stores) are structured in a way that informs the pet owners of Pedigree’s differential features. Mars Petcare Australia should have established an online retail site offering free delivery in New South Wales, Victoria and Tasmania. Additionally, Nestle Purina should place internet kiosks at mega stores to allow its customers to order and receive products that are customized to the health needs of certain cats (Pulendran, Speed & Widing, 2003) Promotional strategies Mars Australia should use strategic advertisement platforms such as an email listing of its customers and start direct mailing that inform the pet owners in the market segment of the differential features of the product (Pulendran, Speed & Widing, 2003). Conclusion Petfood in Australia is at its growth phase. Factors such as competition and rapid technological growth affect this product lifecycle stage. At this stage, competition is steadily increasing even as more competitors are fast recognizing the profit potential of Australia’s petfood industry. The company’s strategies should therefore focus on product differentiation and strategic pricing. This means that the Mars Petcare Australia has to lower the prices of Pedigree to make the price more competitive. It also needs to improve the quality of the product. References Aarons, S. & Waalewijin, P. (2002) A Knowledge Base Representing Porter's Five Forces Model. Retrieved from http://repub.eur.nl/res/pub/753/eur-few-cs-99-02.pdf ACAC (2009). Pet Ownership Statistics. Retrieved from< http://www.acac.org.au/pet_care.html> ACAC (2010). Contribution of the Pet Care Industry to the Australian Economy. 7th ed. Victoria. Rockwell Communications. Retrieved from http://www.acac.org.au/pdf/ACAC%20Report%200810_sm.pdf Animals Australia (2013). Companion Animals Fact Sheet. Retrieved from Anonymous (n.d.) Enclosure 7: Summary of Regulation Specific for Pet Meat and Pet Food in Australia Australian Veterinary Association (2013). Pet ownership statistics. Retrieved from Chaneta, I. (n.d.). ‘Cost-Oriented Pricing,” Journal of Comprehensive Research, 8, pp1-12 Civic Technologies (2009). Using Market Segmentation for Better Customer Service and More Effective Strategic Planning, A White Paper for Public and Academic Libraries. Retrieved from Consumer Victoria (2012) Consumer outlook: the baby-boomer generation’s implications for consumer policy. Melbourne: Consumer Affairs Victoria. Euromonitor International (2012). Pet Care in Australia. Retrieved from Funding Universe (2013). Mars, Incorporated History. Retrieved from GlobalData (2013). Nestle Purina PetCare Company - Strategic SWOT Analysis Review. Retrieved from http://www.marketresearch.com/GlobalData-v3648/Nestle-Purina-PetCare-Company-Strategic-7329092/ Ghodeswar, B. (2008). "Building brand identity in competitive markets: a conceptual model," Journal of Product & Brand Management, 17(1), pp.4–12 IBISWorld (2012). Online Pet Food & Pet Supply Sales in Australia: Market Research Report, Retrieved from http://www.ibisworld.com.au/industry/online-pet-food-pet-supply-sales.html Kanagal, N. (2004) "Role of Relationship Marketing in Competitive Marketing Strategy." Journal of Management and Marketing Research, pp.2-17. Retrieved from http://www.aabri.com/manuscripts/09204.pdf Karadeniz, M. (2010). "The Relationship Marketing Approach and Strategies In Retailing Management To Constitute Customer And Brand Loyalty." Journal of Naval Science and Engineering, 6(1), pp. 15-26 Kotler, P. & Keller, L. (2009) A Framework for Marketing Management. 4th ed, Prentice Hall, Englewood Cliffs. Retrieved from http://wps.pearsoncustom.com/wps/media/objects/2426/2484677/MKT101_Ch04.pdf Kotler, P., Armstrong, G., Saunders, J. & Wong, V. (1999). Principles of Marketing. London: Prentice Hall Europe Langley, S. (5 March 2013). Victorian Government gives cash for Mars expansion. AFN. Retrieved from http://www.ausfoodnews.com.au/2013/03/05/victorian-government-give-cash-for-mars-expansion.html Mars (2013a), Petcare. Retrieved from Mars (2013b). Mars Petcare. Retrieved from http://www.marsgraduates.com.au/marspetcare.aspx Rasoava, R. & Russell, A. (2003). ‘A framework for concentric diversification through sustainable competitive advantage,’ Management Decision, 41(4), pp.362 Rijken, M. & Beek, S. (2011). ‘About cats and dogs... Reconsidering the relationship between pet ownership and health related outcomes in community-dwelling elderly,’ Social Indicators Research. 102(3), pp.373-388 Saren, M. (2009). Marketing Theory. Retrieved from William, J., McMellon, C., & Torres-Baumgarten, G. (2004). ‘Pets and cats rule: A new insight into segmentation.’ Journal of Targeting, Measurement and Analysis for Marketing, 13(1), 70-77. Retrieved from< http://www.palgrave-journals.com/jt/journal/v13/n1/pdf/5740133a.pdf> Petnet. (2013). Pet Statistics. Retrieved from Pulendran, S., Speed, R. & Widing, R. (2003), ‘Marketing planning, market orientation and business performance.’ European Journal of Marketing, 37(3), pp.476-497 Read More