Strategic Management Theory and Practice - Vineyard Company - Case Study Example

Executive Summary In an increasingly competitive food industry, the Vineyard Company seeks to develop, produce and distribute its beverage products in the market. The company will deal with manufacture of non-alcoholic beverage named the Vine Energy drink. The energy drink is expected to roll out in the UK region as the primary market. Consequently, the drinks targets teenagers and young adults aged between 20 and 35 years in the segment. The beverage market has been faced by an increased competitive market among different competitors. Nevertheless, the company will use proffered competitive strategy in penetrating the food and beverage industry. Background The Vineyard Company, is expected to be developed in the UK region given the availability of proffered market in the region. In this regard, the company will focus on the sale of the Vine energy drink throughout the market. Its headquarters will be based in London, it will set up its operational factory will facilitate the production of the canned drink. Additionally, the produced drinks will be stored in warehouses where potential suppliers will collect and distribute the products in different stores and hypermarkets. Business Environment Vision The company aims at being the market leader in the UK through competence and satisfying consumer preference. Mission The company’s mission would is: i. To develop value and the make a difference in all the ventured markets ii. To inspire the moment of the optimism in all the brands and actions Strategic Goals Product and Services The company will specifically deal in the production and sell of energy drink in the market – Vine energy Drink. The drink would be packaged in metallic cylindrical can with a capacity of the 500 ml of the Vine energy drink. The beverage will contain 85 percent water, 3 % caffeine and 12 percent assorted ingredients. The product would be distributed distributions chains such as hypermarkets, convenient stores and sporting arenas. Business Organization and Finance Structures The organizations will be structured in such a manner that employees would be functioning under different departments and would be supervised by plant supervisions. Managers would be placed at the different warehouses and manufacturing facility to oversee the process. Through the incorporation of an ERP systems, resource planning, business organization and finance structures will be easily planned. SWOT analysis Strength Since the company is new to the market, it would offer a new and preferably better product to the market. As such, the consumers will be inclined in trying out the new product. As opposed to the competitor such as Red Bull and Monster, the product would offer a better quality at a reduced price. On the other hand, the company will employ a dynamic and effective marketing team with an aim of promoting the products in the best possible strategy. Through a dedicated and competent staff, the company will favorably compete with other market giants. The robust marketing campaign will support the development and sale of the new product. Supply Chain The company will enjoy a sustainable supply chain in the UK market. The availability of the increased distributive power facilitated by the increased number of suppliers offers great support for the product’s distribution. The anticipated bottling systems constitute the company’s greatest strength in entering the new market. As opposed to coca cola, who employ subsidiary companies in bottling their products, the company enjoys an in-house bottling facility capable of developing many canned products at a time. Weaknesses Despite the anticipated growth in the new market, the company expects to be met by a number of challenges in different fields. Some of these challenge will include; Health Criticism The Vine energy drinks is considered to contain high levels of calories that negatively contribute to the consumer’s health – Obesity. Health effects span in greater length, given the advent of an increasingly health aware consumers. It has been argued that high dosage of caffeine results to increased blood pressure, headache and severe fatigue, and gastrointestinal disturbance (Temple, 2009).As such, the consumption of the energy drink among nursing women or pregnant women is not recommended (Temple, 2009). Opportunity The forecasted consumer increased in UK offers a lucrative market for the beverage. As such, the company can take advantage of these demands in providing its services. On the other hand, the increased demand for the organic products, can offer an opportunity in venturing into developing the organic range of different fruit flavors. Changing consumer preference offers platforms for the introduction of a variety of new products in the market. Threats The high availability of substitute drinks in different outlets such as vending machines augments the level of brand switching that underpins Vineyard’s market share and Loyalty. Premises, Plant and Equipment The plant will be located in Argyll County. The city is strategically positioned, compounded by the availability of cheapo land and labor. Nevertheless, an industrial plant will be constructed whose sole purpose will focus on processing the product. The production and packing of the products would be constructed in the same factory, so as to reduce cost and improve its efficiency. Tentatively, warehouses would be purchased from the different regions in order to improve distribution throughout the region. The regions will have access to railway line where the products will be transported directly to the warehouses. These region will include Cardiff, Manchester, Birmingham, Telford, Norwich and Glasgow. The company will use supplier’s truck in transporting the product. Information Systems and Telecommunication Given the nature of the nature of the industry the company will employ the use of an Enterprise Resource Planning Information systems (running on Oracle). With the help of this system the company can standardize Vineyard can standardize its business processes in employing the proffered practice. As such, the ERP systems will offer a basic framework for manufacturing such as; i. Budget management ii. Article Calculation iii. Bill of materials iv. Quality systems definitions v. Maintenance methods Intellectual Property, licenses and Memberships Intellectual Property The company will incorporate a formal intellectual property rights protection strategy. These will necessitate the use of the intangible assets that would oversee the protection of its assets. Further, it would patent the drinks to avoid infringement or imitation by other companies. Memberships The company will apply as a member of the British Soft Drinks Association. License The company will be licensed with the Food Standards Agency. Insurances A manufacturers insurance would be used that will comprehensively cover buildings, accidental damage, subsidence and Products liability. Goals, milestones and Strategies Goals i. Sales of Over $ 1.8 million in the first year ii. Sales of over $ 3 million by the third year iii. Achieve Cash flow self Sufficiency Milestones Marketing Identification of the business unit is imperative. This will be realized through the BCG matrix that would significantly help in the allocation of resources and appropriate strategies in meeting its objectives. The matrix is essential in assessing the level of growth and the products market share against competition. Vineyard’s business unit is classified as a question Mark denoted as V. It will necessitate for a heavy investment tom building its market share. Accordingly, Pettitt (2001) advocates that marketing strategy is aimed at achieving growth. As a result of the maturity of the market identified earlier, it is evident that the Market Development would be the appropriate strategy. In increasing the company’s market share a differentiated marketing target would be used. This facilitates for the tailoring of the product in suiting the market, hence increasing customer satisfaction and loyalty. It further in enabling the risk to spread across the marketing through helping it survive the competitive UK market. Sales Vineyard’s products cycle showcases the anticipation if the development of its sales and profit over the years. Evidently, Vineyard’s products life cycle is expect to showcase the distinct stages of the products. This stages will include introduction, growth, maturity and decline. Its maturity stage is typified by fragmented markets and low sales growth. Nonetheless, it is expected that the product sales will considerably rise during the first months of introduction. Market modification strategies will be employed in the promoting the new products at this stage. Insert UK retail sales of adult drinks Customer Management and Retention Investment will be made in the establishing an integrated marketing communications that will sustain natural refreshing premium adult soft drink. A successful brand acknowledges a successful brand attracts and retain customers hence allowing Vineyard to have a robust share in maintaining a proffered price levels. Push and Pull Strategies The consolidation of these strategy will increase awareness of Vineyard’s benefits in the target segment. Additionally, it will encourage the higher levels of brand loyalty and encourage subsidiary to carry the company’s branding thus increasing its availability on the trade environment. Pricing The pricing of energy drink in the U.S. stands at $ 2-$4 per ounce of the purchased products. As such, the energy drink will cost about $8-$8 for every purchased product. In this regard, Vineyard will employ a strict pricing strategy will favorably compete with rival companies. Thus, two fundamental strategies will be incorporated red namely; OFF Sector: Simply put, it refers to the locations where the products are bought and consumed at a later times as preferred by the consumer. This include convenient stores and hypermarkets. ON Sector: Prices will be determined by the regional manager, since the products are purchased and consumed immediately. This include restaurants. Business Competition The Industry The increased appetite and unquenchable thirst for the food and drinks industry in UK has resulted to the hugely profitable sector that generates billions of dollar every year. Essentially, household spends nearly 5,000 Euros on food and drinks, welling the coffer of the industry to nearly 76 million Euros (London Stock exchange Group, 2014). As such, food and drinks account for over 16 percent of the country’s manufacturing sector employing about 400,000 people in this regard (London Stock exchange Group, 2014). Regardless of the financial times the food and beverage industry performs strongly against other products. The British public enjoys a big appetite for the beverages judging by the latest consumer figures (London Stock exchange Group, 2014). In principle, the food and beverage sector is anticipated to continuously growing over the years. Target Market (Segment) Energy drinks are affiliated to teenagers and young adults of between 20 and 35 years. The target market for energy drinks is broadening given the development of new products in meeting the consumer preference. Tentatively, the athletes will form the company’s secondary target, insistingits ability to increase physical performance and reduce a subsequent fatigues levels. Market Competition Porter’s five Forces Degree of Rivalry There is a considerably high extent of rivalry from existing companies. Competitors such as Red Bull, Monster andLucozade have turned the niche market into a regular buy and mass market in all their market. The rivalries brand familiarity has given these company’s competitive advantage against the Vineyard. Evidently, the rivalries have secured a robust distribution channel hence presenting a loyal customer base. Threats of New Entrants The threats of new entrance is medium given the cost incurred in establishing the factories andaffiliated systems. The development of the products requires an R & D programs and set up of the manufacturing factories that would manufacture the products. Tentuavely , the cost incurred in setting up bottling factories are significantly high. Threat of Substitutes Price sensitivity within Vineyard’s target segments and because Vineyard is a spurt at the moment purchased good, convenience is significantly important. The company’sproducts are low priced ad high quality products hence identical substitutes do not affect its market. Other stimulants such as five Hour energy, coffee or energy smoothies have a trade off duration, convenience hence offering Vineyards its own niche in the market. Buyers’ Bargaining Power Given that it is a small market with a high customer loyalty, the company has all the pricing power and client to have a low bargaining power. The energy drink market is typified by a derived demand or pull hence giving the retailers little bargaining power. Supplier’s Bargaining Power Vineyard’s supply chain is exceedingly short hence, it is capable of generating high profits at each stage. Consequently, the production process for the products are uncomplicated hence leaving suppliers with little power due to their low input cost. Financial Forecast The overall financial performance of the company is expected to improve over the next five years. It is expected that the company sales will increase by 12 % to about £17.63m with a subsequent pretax profit increase of about 40 % to £ 1.06 million. Accordingly, its earnings per share is expected to increase by 86 % to £ 2.93, with a subsequent increase in financial dividend to about £ 0.75. Read More