Complex Company Market Analysis - Report Example

Report for the Board of Directors Table of Contents Page Section Sodacious’ Readiness for Internationalisation 3 A. Situation Analysis3 Vulnerability to copycats 3 High production cost 4 Assessment of product readiness 5 B. Growth Strategy Recommendation 6 Product differentiation 6 Overall cost leadership 7 International expansion 7 C. Target Market Selection 8 Section 2. Market Entry Strategy and Marketing Plan 9 A. Description of Proposed Market Entry Strategy 9 Segmentation 9 Targeting 9 Positioning analysis 9 Product 10 Price 10 Place 10 Promotion 10 B. Outline Marketing Plan 10 Projected sales 10 Market share 11 Proposed development opportunities 11 Appendix 12 References 13 Section 1. Sodacious’ Readiness for Internationalisation It is the main concern whether Sodacious would go international or not. Regarding this matter, the following are relevant information that could totally help evaluate the firm’s actual level of readiness for internationalisation. A. Situation Analysis This section includes the relevant discourse in order to consider the level of Sodacious’ readiness to go international in its market coverage outside of the UK. Sodacious is losing in the competition within the UK market, as the new entrants are too aggressive enough to take the plunge into the game just to gain their market share. Despite the fact that the firm is building state of the art production facility, which must be its ultimate advantage over its competitors, Sodacious is too confident about its ability to know well about the consumers’ prevailing preferences. This at some point has become the significant reason why the firm has become too insensitive to early and weak signals, leaving its products susceptible to be copied by the copycat producers. The most important proof concerning this claim is the prevailing situation of Sodacious as manifested in its recent sales report. Based on the sales report, Sodacious sales are decreasing, it is eventually losing market share, and its brand image in particular suffered. Thus, the feasible action next in line is to consider finding a new market outside of the UK, but Sodacious needs to address some areas of its weakness. Vulnerability to copycats As stated, Sodacious has less immunity when it comes to producing product offerings that competitors could hardly copy. This is due to its being too insensitive to identify early and weak signals in the market. It seems Sodacious is becoming too confident that it knows well the preferences of its target customers. However, in the presence of competition and by which the target consumer could have different options, Sodacious must take time to consider the customers’ actual preferences in order to ensure giving them the additional value they deserve. Sodacious must therefore make sure of some important factors in designing a product offering, which in particular should include preferences and costs based on its case. To determine the consumers’ actual preferences, Sodacious must have to be careful and aggressive in initiating market research to identify relevant information prior to its actual decision-making process. It is important to identify the actual needs and preferences in order to create product offerings that could satisfy the target market. After all, products are entities that are supposed to create satisfaction in the presence of addressing the needs, wants or desires (Karkkainen and Elfvengren, 2002; Chen et al., 2009). This will further guarantee that Sodacious is not going to lose in the competition because they would become up to date of the prevailing needs in the market. Next in consideration is the actual price of Sodacious’ product offerings. One important point why a certain product may lose its chance in the market is the linked up price with it that the other alternatives might have potential advantage. This according to Porter’s theory would make the market entrants more willing to give lower prices for their offerings just to beat some probable barriers to entry. Over all cost leadership is therefore one essential competitive strategy that a leading firm should consider in order to achieve continuous economies of scale. The economies of scale are important especially in creating barriers to entry for the new entrants (Porter, 1980). Therefore, Sodacious must move to create major consideration in its value chain. One important point of doing this is to eliminate its prevailing concern when it comes to high production cost. High production cost One elemental reason why Sodacious’ turn out and profitability move in a downward spiral other than the prevailing competition in general is due to a high cost incurred for its supply of raw materials. Sodacious needs to consider the best materials in order to promote consistent quality for its product offerings. However, in its prevailing set up, the firm spends higher for its raw materials, which leads it to add the cost directly to its final products. The customers therefore would have to shoulder costs just for the firm to guarantee its profitability. As a result, Sodacious would end up offering products that might be relatively expensive compared to its competitors that are already taking the lead in the market. A perfect gateway for Sodacious to address this problem is to consider further assessment of its prevailing value chain. A value chain after all provides a good insight at which point to cut unnecessary costs in the actual creation of product or service offering (Porter, 1980; Yao et al., 2008; Lai et al., 2002). Assessment of product readiness Sodacious’ product offerings have long been in the market and actual competition. In the product life cycle model, there is an important claim that a certain offering declines (Solomon et al., 2009; Ostlin et al., 2009; Hsueh, 2011). For this reason, Sodacious must consider further evaluation to find out if there is an actual decline of the market acceptance of its offerings due to the associated trend showcased in the product life cycle model. This would also help its chance in the international markets because it would introduce new products to them. Understanding this information would eventually lead the firm to open its door towards innovation for a highly saturated market and introduction to a new developed market. Innovative products for instance would have greater chance of market acceptance (Siro et al., 2008; Huang and Hsieh, 2012). However, this goes with the point of considering the prevailing needs as the basis of the actual innovation. Understanding the above prevailing situations of Sodacious paves us the way for a growth strategy recommendation. B. Growth Strategy Recommendation Product differentiation As already mentioned, Sodacious has three essential problems namely, decreasing sales and market share, and declining brand image. Growth strategies are therefore important in order to address these problems. Based on the above discussion, it is clear that Sodacious’ problems could start right from its formulation of product, as it is the most important element of the marketing program (Kotler et al., 1999; Boone & Kurtz, 2006). A highly differentiated product offering could become a major competitive advantage of a certain brand (Gebauer et al., 2011). This could not only address Sodacious’ problems with declining sales and market share, but also brand image. For this reason, Sodacious needs to make sure it aligns its product differentiation directly with product categorization. While it tries to consider international expansion, Sodacious should continue to promote product categorization at the local level in order to support and sustain its global marketing activities in the future. At the local level, Sodacious should continue to consider the prevailing preferences of its target market. Thus, the actual product differentiation should also consider the prevailing segments that it is offering its products. After all, market segmentation is one of the easiest ways to ensure brand growth, increase sales and market share (Hunt and Arnett, 2004). By doing this, Sodacious would have a better chance of continuing its market activities at the international level as it could have better guidance on the trend at the local level. In fact, there are international firms operating in the international context, but their approach is local for them to ensure growth (Ghauri and Cateora, 2010). Product differentiation is therefore a good strategy for Sodacious because it could address crucial solutions to its problems and its recent condition in the market. It could help this firm evaluate the market potential for its products. Product saturation level for instance is an important determinant of market potential for products (Solomon et al., 2009). Understanding this point would further give Sodacious the necessary ideas on its products’ life cycle and how it would further differentiate its offerings. Over all cost leadership Over all cost leadership is a general approach for Sodacious in order to obtain higher flexibility to employ pricing strategies, especially in the international arena. At some point, this could mean it may be able to implement important strategies in its value chain in order to create final products with competitive price. With relevant pricing technique, an organization could guarantee revenue (Zhuang and Li, 2012; Koenig and Meissner, 2010). Increase in revenue is an essential component of growth. International expansion Finally, the ambitious desire of Sodacious to go international is another important strategic move to ensure growth. Going international is a way of exploring opportunities. This means seeing the opportunity for growth because there are some other markets that would require introduction of new product offerings. The degree of acceptance on the other hand would vary knowing there are some relevant factors that could determine the market potential of the products. These include product saturation levels, national income levels, technology standards, cultural conditions and others (Solomon et al., 2009). In other words, international expansion is indeed a great opportunity for Sodacious for expansion, as there are relevant international markets that are able to provide maximum opportunity for the market potential of the products. In the case of Sodacious, its opportunity in the international setting could be somewhere in the market of Germany or India. C. Target Market Selection Two of the most important markets that qualify for the said market expansion for Sodacious are Germany and India. In Tables 1 and 2 are some relevant information linked up with these two international markets. In the case of Sodacious, one significant consideration of market expansion is the cost. This could have better chance for realisation in Germany because of the low distribution costs. However, Sodacious would still have to address these problems: decreasing sales and market share, and declining brand image aside from the associated costs. While the associated distribution cost is low in Germany, India on the other hand has great affinity for Western brands. To sum it up, the market in Germany is much sophisticated compared to India. However, there is great potential in India because of the market acceptance of Western products and this is still a growing market for sodas and soft drinks. Furthermore, the barriers to new entry in Germany are intense compared to India of which the only hard problem investing in the latter would only be the Bureaucracy and Government import/export laws. Marketing-wise, it is hard to invest in Germany because of the existence of other renowned product brands like Coca Cola and Pepsi and the customers show great loyalty to either of these brands. In other words, the barrier to entry is tough in this market. Unlike in India where there is great acceptance to Western brands, the market for soft drinks and sodas is still growing. This means the barriers to market entry are not that tough to overcome in the case of Sodacious as a Western brand in India. In international market expansion, barriers to entry and creation of brands are important considerations to ensure growth. Porter believes that barriers to entry hinder growth (Porter, 1980). Creation of brand on the other hand is a form of competitive advantage as it could determine customers’ loyalty (Kim et al., 2012). All of these are at Sodacious advantage if it would consider the market in India. This is a place where barriers to entry are minimal and there is a higher chance for creating loyalty to Sodacious product offerings and brands. Section 2. Market Entry Strategy and Marketing Plan Below are relevant information for the market entry strategy and marketing plan in India. A. Description of Proposed Market Entry Strategy Segmentation Sodacious would create a market for those customers in the middle class and with desire for western brands. However, considering that there is a general desire for Western brands in India, it is therefore possible that Sodacious would treat it as a whole market for its product offerings. Targeting It is important on the part of Sodacious as a market entrant to learn more about the new market beforehand. For this reason, as part of its segmentation activity, it is good to consider the entire country as the general market for its product offerings. It could start treating the whole group as a market and ignore segments for the mean time just for understanding which potential groups have a maximum acceptance for its product offerings. Sodacious could promote its offerings as commodity products. Undifferentiated marketing strategy is a good choice for this matter (Solomon et al, 2009). Positioning Analysis Considering that there is a higher desire for Western brands in India, Sodacious must be able to employ the right process of positioning. The process of positioning includes understanding consumer perceptions, positioning the products in the mind of the target segment, and designing of relevant mix to convey the relevant positioning (Ghauri and Cateora, 2010; Solomon et al., 2009). Therefore, a detailed marketing research is necessary for this process. Product Sodacious should emphasize a Western brand image on its actual product packaging to maximise acceptance. Price With high recognition as a western brand, Sodacious’ product offerings should therefore equate price with quality. Place Relevant to its targeting strategy, Sodacious should consider national distribution considering that it is cheaper to initiate this in India. Promotion Sodacious should consider maximum exposure for its product offerings by sponsoring major activities in India. This could provide recognition and optimum acceptance for its brands. The above marketing mix shows how exactly a firm would be able to achieve its marketing objectives (Ghauri and Cateora, 2010; Solomon et al., 2009). Therefore, it would make sense to consider initiating the stated strategies on the part of Sodacious with its marketing objectives in India. B. Outline Marketing Plan Projected sales Table 3. Projected sales within 18 months 3 months 6 months 9 months 12 months 15 months 18 months $2.8 million $5.6 million $11.2 million $22.4 million $44.8 million $89.6 Population = 1.21 billion Target price = $1.00 for 1 litre Sales are expected to double every quarter as aggressive promotion and market penetration continue. Sales are also expected to be this way as explained based on the product life cycle. So as not to deteriorate sales innovation is also necessary. Market share Table 3. Projected market share within 18 months 3 months 6 months 9 months 12 months 15 months 18 months 2% 4% 8% 24% 48% 60% With aggressive market entry and strategic marketing activities, it is not impossible for Sodacious to hit the above figure. Proposed development opportunities In order to achieve the above figures, Sodacious should undergo product innovation, as it is the key to a manufacturing firm’s competitive advantage (Angelmar, 1990; Roberts, 1998). This is in relation to product life cycle, and prevent probable decline of the brand. Sodacious should always something new. Consistent market research is also important as it could help identify consumers’ preferences and competitors’ move. Continuous market segmentation if necessary should have better implementation. This is to provide diversified product offerings to specific market segments. This would ensure better coverage of the product brand. Appendix Table 1. Information on the market in Germany Plus Factors Negative Factors Proximity to UK production centres – relatively low distribution costs. An extremely competitive market for soft drinks – dominated by well-known brands such as Coca Cola/ Pepsi and other domestic products. Customer loyalty is high. Single European market means ‘common standards’ in Health & Safety, Weights & Measures, Legal Protection etc. Price wars and discounting are frequent. This can have a direct impact on ‘bottom line’ profitability. Well established retail/leisure & tourism sectors – which represent the target market The big retailers and distributors have contracts with the major soft drink manufacturers. This can make extremely difficult for smaller competitors to reach the mass market. An understanding and informed affluent middle class – conscious of health issues and prepared to pay premium prices for quality. Worries about the European Union and the current economic situation seems to be having a negative impact on the consumers’ spending – people are cutting back on ‘non-essentials’. Integrated communication and media networks. Exporters of niche products (such as Sodacious) have a relatively poor record of achieving long-term success and profitability in Germany. Table 2. Information on the market in India Plus Factors Negative Factors A rapidly growing middle class – with increasing disposable income and desire for western brands. Bureaucracy and Government import/export laws – (particularly relevant to inward investors) A potentially huge market of > 1 billion people – more than 10x the size of the German market. Poorly developed infrastructure (retail/distribution/transport). A growing market for soft and carbonated drinks. Low levels of awareness/understanding about branded drinks – other than Coke/Pepsi. ‘Cost of business’, including labour, retailing, distribution etc, relatively cheaper than West. Vast size of the market and lack of reliable market research data. Market more fragmented and less dominated by the major global drinks companies – creating more gaps (or niches) for smaller brands. Communications can be a challenge – with 18 official languages and almost 350 spoken languages spoken. References Angelmar, R. (1990) Product innovation: A tool for competitive advantage. European Journal of Operational Research. Vol. 47(2): 182-189. Boone, L. E., and Kurtz, D. L. (2006) Contemporary marketing. 12th ed. Mason: Thomson/Southwestern. Chen, S. L., Jiao, R. J., and Tseng, M. M. (2009) Evolutionary product line design balancing customer needs and product commonality. CIRP Annals – Manufacturing Technology. Vol. 58(1): 123-126. Hsueh, C. F. 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