Marketing Mix Food Master Company - Case Study Example

Food Master Company Contents Contents 2 Introduction 4 Background 4 External and Internal Analysis 4 PEST 5 Political 5 Economical 5 Social 6 Technological 6 Internal Environment 6 SWOT 6 Strengths 6 Weaknesses 7 Opportunities 7 Threats 7 Issues in Business 8 Competitor Analysis 8 Ansoff Matrix 8 Marketing Mix 9 Conclusion 10 Reference List 11 Introduction Since the emergence of liberalization and globalization, the global economy has become highly integrated. This has made the state of commercial affairs volatile and complex. Business firms in the open economies are subjected to various types of opportunities and challenges. However, it should be noted that free market economic system has increased the degree of competition in most of the industrial segments. At this, juncture marketing and strategic management have become indispensable aspects of business management process. This case study tries to throw light on the basis of Foodmaster Company. The case study tries to analyze the issues faced by the company at the first instance. The company had experienced high growth in bossiness until 2007, when its sales has fallen from 60$ million to 48 million. Due to fall in sales, the profit of the company was also found to fall from 25$ million (2006) to 18 $ million (2007). The context of the case study will analyze the issues faced by the company after implicitly detailing about its internal and external business environment. In the latter half, the case study will enumerate some strategies and fallacies of marketing with the help of which the company would be able to overcome the challenges of its business and prosper amidst all competition in the long run. Background The Foodmaster Company was founded by a group of young businessmen in 1995. The company engages in providing dairy products and is based from Kazakhstan. Its founders critically analyzed that until 1995, diary product availability was limited in the country and products like yogurt was just not domestically produced in its market. In a country where dairy farming was traditionally and widely practiced, such scarcity of diary product production only signified that the segment was not exploited for commercial purpose. Hence, the inception of the company with dairy business was primarily undertaken to tap the unexploited dairy market in its domestic economy for the first instance. The company’s diary factor shop in the town of Issyk was the first yogurt producing factory of the country. Overtime, the company has significantly expanded its scale and scope of business operations. At present it owns 2 dairy farms, 4 factories and 16 retailing branches. It has now owned the prestige of being the biggest dairy product producing company in Kazakhstan. The company produces a wide range of diversified dairy products to meet the requirements local demands of its domestic markets. Since 2004, the company has started to operate in the international market, by being a member of Laktalic International Group (France), that is a joint international organization engaging in the manufacture of high premium quality dairy products and under its operations it brings together around 200 small diary producing firms from different nations (Food Master, 2014). External and Internal Analysis The rationality of the commercial activities of the company can be analyzed with the help of internal and external analysis tools like SWOT and PEST respectively. This is because; the business of profit making companies significantly depends on matters of external business world along with the same of its internal aspects. PEST This model will analyze the impact of political, economical, social and technological aspects on the company’s business. Political The government of Kazakhstan have actively taken its responsibilities since independence of the country in 16th December 1991. The public authorities of the nation are actively trying to implement ways through which its degree of commercial activities and domestic productively can increase. This is because with rise in the extent of commercial activities, the amount of employment opportunities in the country would increase and hence it would lead to a rise in per person as well as domestic income level of the nation (Anon, n.d.). Perhaps this is the reason for which Foodmaster Company shares a good relationship with the government authorities of the country. The political establishment of the country provides special incentives and benefits to the company with the help of which it could expand its business substantially till 2008 (CIA, 2014). Moreover, the political authorities of Kazakhstan have adopted import substitution and export promotional strategies, through which it provides additional benefits to the domestic companies of the nation relative to the foreign firms. Since Foodmaster Company is the only dairy company in Kazakhstan, it gets special inducements from the government of the country relative to that received by its market competitors (that are all foreign firms). However, since 2005 the amount of subsidies received by the company from government has lowered. This is because due to global recession, the extent of money supply in all the developed and developing nations has fallen. Recessionary trails in the market had forced the government of Kazakhstan, to lower the extent of its expansionary policies. Thus, Foodmaster Company had received high supports from the government of its domestic market till 2007; from 2007 onwards the amount of benefits received by it has fallen. Economical The government of the country has implemented industrial policy in its economy. Under this regime, the economic entities of Kazakhstan are trying to lower their overdependence on oil sector and foreign investments. The economy of the country since its independence is experiencing higher productivity and diversity. The proportion of income generated from the nation’s primary, secondary and tertiary sector has significantly increased. In 2006, the domestic income of the nation was $ 158.2 billion but in 2008 it increased to $ 175.8 billion. With the essence of higher domestic economic diversity and productivity, the domestic income of the nation was significantly improving. Along with its aggregate income, the per capita income level of country had also increased from $ 10400 (2006) to $ 11500 (2008). Thus, as the individual income level of the country was increasing, the discretionary spending of its consumers enhanced along with rise in disposable income (CIA, 2014). This helped Foodmaster Company enjoy higher market demand for its products. However, since 2008, due to recession, fall in employment opportunities in the country lowered the purchasing power capability of its customers and hence created detrimental impact in the sales of the company. Social Overtime individuals in almost all the nations like Kazakhstan have enhanced their dairy product consumption rates. People are becoming more health conscious and thereby preferring highly protein based less fattening food products. Such changing trends in the tastes and preference patterns of the consumers have enhanced the demand for foods like yogurt that are healthy and rich in calcium. Such rise in yogurt demand has helped the company achieve higher sales since its inception. Due to growing incidence of choric degenerative diseases, individuals are reducing their consumption of high calorie food items and in exchange of that they prefer healthy dairy products like yogurt. Moreover, the products produced the company experience composite demands in the market, like yogurt is demanded for various types of uses. Thus, composite demand created for the products of the company and increasing health consciousness of the consumers have enhanced its aggregate sales in Kazakhstan. Technological Due to the liberalization of global trade and open door policies, the state of technological knowhow in Kazakhstan has significantly improved. The government of the country has also invested large sums of money for improving the technological expertise of the nation and hence augmenting its productivity. Foodmaster Company has appropriately reaped the benefits of technological progress of the nation. Only with the help of superior technologies the company has become successful in increasing its productivity and lowering its cost in production. Internal Environment The internal analysis model will help to access the strengths, opportunities, threats and weaknesses of the company. SWOT Strengths The company enjoys large amount of benefits from its domestic political authorities and shares good relationship with the government. The company has implemented quality management system in business according to the approved standards of IS0: 9001 to 2000. It is also the only domestic dairy producing firm in the Kazakhstan and hence shares high brand value and reputation in the market. In addition to that it sells diversified products of high quality and low prices in the market. Kefir, Lapped Milk Bio-C Immune +, Dolce Yogurt, Lactel Milk and Nenny Yogurt drink are some popular products sold by the company. It shares a good inbound and outbound logistic network in its business. Like, its factories and retail outlets are located in almost all the busy locations of Kazakhstan. Moreover, the company’s dairy products experiences high sales in its market and hence it enjoys a wide base of customers. Weaknesses The company is a leader in its domestic market but in reality in the international market it shares very small demand. Since, 2008 the revenue and profit of the company is significantly decreasing. Though, the government of Kazakhstan helps to protect the interests of the firm but still it faces high competition in its business against the foreign multinational trading companies that operates in its country. At the same time it lacks adequate financial reserves to match up the advertisement and promotional expenditures incurred by its rivals in the market (The World Bank, 2014). The biggest weakness of the company is its low market share in the international business world. Opportunities Since, the emergences of globalization, the government authorities of most of the nations have adopted strict open door policies in business. The business firms in the contemporary era can exploit their productive resources in business for expanding their business across growing international marketplaces. The costs of business internationalization of the firms have significantly fallen due to the free trade policies adopted by the political authorities in most of the nations. Hence, if Foodmaster Company expands its business across the foreign markets, then it would enjoy the benefits of economies of scale in production with the help of higher demand. Moreover, it can also enhance its brand value in the market with the help of such internationalization policies. By exploring the foreign markets, the company would become more efficient after experiencing higher competition. Moreover, the consumption spending of the consumers across emerging nations like India, China and South Africa has significantly increased with time, if the company extends its business branches in such nations, then it would be able to tap its booming market demand. Threats The global financial crisis has become a threat for the organization. The property bubble and market irrationalities in the European nations had generated severe recessionary trails in almost all the economies of the world. This has lowered the monetary base of Kazakhstan, and because of this, the facilities that were received by the company from its government has fallen since 2008. Foodmaster Company is now exposed to strong competition in its domestic market, as the government of the nation is now less strict about foreign investments. Along with this, it should also be noted that the company is only a dominant player only in its domestic market. If in the long run, the domestic market demand becomes saturated then the company would face severe loss in business. From the above internal and external analysis it can be stated that Foodmaster Company is at present facing some strategic issues in its business. Issues in Business From the internal and the macro economic analysis of the company it appears that market saturation is one of the biggest problems that are being faced by the company. Over time the company has strengthened both its financial position and its reputation. However, in order to compete efficiently with the major competitors like Danone and Chudo the company must extend its operations abroad. This case study concentrates on the possible course of action that can be taken by the company. The reduction in the subsidy by the government has been one of the most important impediments in the growth of the business. The reduction in the barriers to the entry of the foreign firms has increased the competition in the home market which is also creating pressure for the business. Competitor Analysis Dannon, the French dairy product giant is already a well known company in Kazakhstan. It has been observed that this company has consistently been improving its nutritional commitment towards its products which has hugely increased the revenue for it. The company has been constantly creating new products to gain more market share. The nutrition rich and low fat content of the food products produced by this company is attracting higher customers in Kazakhstan. Though Food Master enjoys the leading market share yet completion from Dannon is rising (Prepared food Network, 2014). Apart from the competition from the multinational companies Food Master also shares stiff competition from the farmer distributors. This also provides a very steep competition to the company. Another major characteristic of this competition is that is that it is seasonal in nature and most of the farmer distributers are active during the summer season. These farmers directly supply the products from the firms to the households and operate at a lower cost (Esenova and Dobson, 2001). Ansoff Matrix Ansoff Matrix is one of the most significant marketing tools that are useful in describing the alternative corporate strategies that can be adopted by a firm. The four strategies are presented in the following figure. Table 1: Ansoff matrix   Products   Markets Market Penetration Product Development     Market Development Diversification           (Source: McDonald and Wilson, 2011) Food Master can either use product development or market development to arrest the fall in the revenues. The first one relates to the introduction of new products in the existing markets and the second one relates to the introduction of the existing products in the new markets. There are two rationales behind this strategy. The market in Kazakhstan is already saturated as Food Master has been operating in the market for more than ten years. In order to compete aggressively with the existing competitor the company needs to create new products to combat the competition in the existing market. The second rationale, following the market development strategy comes directly from the fact that there is not much room in the domestic market. The company has already been highly successful in the domestic market and has maintained high financial strength. Food Master can therefore venture into the foreign market with its already existing products for venturing new business opportunities. Marketing Mix Products: Food Master has five major products which it produces namely Kefir, Lapped Milk BIO-C Immun+, Dolce Yoghurt, Lactel and Nenny. Most of these are flavoured milk or frozen yoghurt rich in nutritional content. In order to diversify its products the company can reduce the calorie content of its products which will likely be popular among the health conscious people in Kazakhstan. This will also serve the purpose of introducing new products in the existing market. Price: Pricing is the most flexible among the four P’s of marketing as the company can increase or decrease its price compared to the rivals to suit the market conditions. As the competition in the market is high so competitive pricing is followed by Food Master. This strategy has been one of the key reasons which had cemented the position of Food Master as the leading company in the Kazakh market. The high quality of the products combined with the affordable pricing of the products has provided the company a competitive advantage over its competitors. The growing competition in the market makes the competitive pricing strategy for the company. Place: Place refers to the strategy of distribution that is followed by the company to increase its visibility as much as possible. This is important from the aspect of the business because the probability of a product being sold directly depends on the accessibility of the product by the customers. Food Master mainly uses the retail distribution channels to market its products. This ensures that the product is available in all the major retail stores in the neighbourhoods so that the customers can have easy access to the products (Bloomberg Businessweek, 2014). If the company takes up expansion in the new markets then it should ensure that its products are available in all the major retail stores. Additionally to increase the visibility of the products the company should target the major departmental stores and the supermarket. This enhances the visibility of the products. Finally, the company can set up booths, carts and kiosks to enhance the accessibility of the product. Promotion: Promotional strategies play a major role in the way in which consumers perceive the product and finally make their purchasing decision. Promotional strategies by a firm mainly refer to the advertising strategies that the firm uses to communicate the value of its products. These include advertising, word of mouth promotion, direct marketing and discount offers. Food Master uses both the traditional mode of advertising like television, radio, newspapers and print medium. The company can also use the online mode of advertising through the social networking sites like facebook and twitter to promote its products. Online advertising not only increases the knowledge about the products for the buyers but also it is cheaper than the traditional mode of advertising. Conclusion This paper has analyzed the case of Food Master; a Kazakhstan based dairy product company. It has been observed that ever since its inception the company has managed to maintain high growth in its revenue and has been earning profits. The problems of the company started emerging after the global financial crisis when the subsidy of the company received by the government began to fall. As the support received from the government had fallen so automatically the competition faced by the company in the market increased. Foreign multinationals began to compete with the firm aggressively which threatened its market position. After conducting an analysis of the market conditions the most preferable strategy for the company will be to explore into the foreign markets. This is because the domestic market is almost saturated and the scope for expansion is limited. Under these situations the company can follow two strategies to enhance its sales. The first one is the introduction of new products in the existing market keeping in mind the requirements of the health conscious segment of the population and the second one is the expansion into new markets with its existing products. Expansion into the emerging markets like India, China and other Asian countries can open new avenues of business for the company. Reference List Anonymous, n.d. Kazakhstan. [pdf] International Trade Association. Available at: [Accessed 7 April 2014]. Bloomberg Businessweek, 2014. Company overview of foodmaster company jsc. [online] Available at: [Accessed 7 April 2014]. CIA, 2014. The World Factbook. [online] Available at: [Accessed 7 April 2014]. Esenova, S. and Dobson, W. D., 2001. Doing business in an industry with difficult economics—food masters experience in dairy processing and marketing in Kazakhstan. [pdf] The Babcock Institute. Available at: < http://ageconsearch.umn.edu/bitstream/37656/2/2001-1.en.pdf > [Accessed 7 April 2014]. Food Master, 2014. About us. [online] Available at: [Accessed 7 April 2014]. McDonald, M. and Wilson, H., 2011. Marketing Plans: How to prepare them, how to use them. New Jersey: John Wiley & Sons. Prepared food Network, 2014. Dannon pledges to health. [online] Available at: [Accessed 7 April 2014]. The World Bank, 2014. Kazakhstan overview. [online] Available at: [Accessed 7 April 2014]. Read More