Marketing Fundamentals Summative Assessment - Case Study Example

Nando’s Marketing Report Table of Contents Introduction 3 Nando’s UK Internal and External Environment 3 External Environment 3 PESTEL Analysis 3 Porter’s Five Forces of Competition 4 Internal Environment 5 2.Audit of Nando’s Stakeholders 6 3.Segmentation Variables 7 4.Marketing objectives 8 5.Nando’s Current Marketing Mix 8 Product 8 Price 9 Place 10 Promotion 11 Recommendations to Improve Corporate Social Responsibility 11 References list 12 Appendices 13 Introduction This case study analysis explains various aspects of Nando’s UK related to strategic management. It entails an analysis of the external and internal environment of the company, stakeholders, segmentation variables, marketing objectives, and current marketing mix. The report will then provide recommendations to the company. 1. Nando’s UK Internal and External Environment External Environment PESTEL Analysis Political Factors: Politically, the UK experiences democratic political environment with high level of political stability. This enables the business to operate in a peaceful environment without losing its resources through unrests or any other political instability. Economic Factors: global economy is becoming volatile but UK’s economy is expected to recover in 2015 and 2016 (PWC, 2015). According to Euromonitor (2014) UK economy has shown signs of recovery, giving consumers confidence and budget constraints will no longer be a problem to consumer spending. As a restaurant targeting people with significant disposable income, the company is likely to benefit from increasing consumer spending as the economy recovers and is expected to perform well over the next twelve months. Social factors: changing demographics, income distribution, lifestyle changes and consumerism. A trend of consumerism is experienced in the western world currently, including UK. Specifically, consumption is increasing in UK. Furthermore, UK’s population is becoming increasingly health-conscious in their eating patterns. Therefore, Nando’s should produce healthy food. Technological Factors: New discoveries and technological developments also affect the Nando’s UK. For instance, internet, YouTube and social media enable the company to communicate with its customers and advertise its products effectively. Environmental factors: include operations include environmental regulations, energy problems, waste and recycling, global warming, etc. The UK Department for Environment, Food and Rural Affairs (2015) recycling states that there are 177 million tonnes of waste generated in UK every year, causing households and businesses money. Nando’s UK is also required to comply with the UK’s laws on environmental policies. Porter’s Five Forces of Competition Competitive Rivalry: Nando’s UK faces competitive rivalry from McDonalds and KCF who are aggressively seeking market leadership at the lower-quality end, and Pizza Express and Wagamama’s aggressively seeking leadership at the higher quality. McDonald’s is gaining a significant following in UK through its franchising strategy in which the company choosing the right partner and franchises their business to serve local customers (McDonald’s, 2015). Wagamama’s strength lies on the efforts of 3,500 employees hired worldwide to support its businesses. Threat of entry: firms provide economies of licensing, scale, experience, access to supply, and differentiation as the major barriers to entry of other firms. With a free European market, the UK’s food industry is open to entrants – there are low legal barriers to entry. Threat of substitutes: include the products and services that offer the same benefit as Nando’s, such as McDonald’s and Wagamama’s products. Nando’s products are superior in quality and cannot be expected to lose in the market. Bargaining power of buyers: there is a high bargaining power of buyers due to the high buyer concentration. There are a lot of buyers in the market with low switching costs, so they have high bargaining power. Bargaining Power of Suppliers: Supplier power is low because there are many suppliers. Switching costs are also low for the company because the company can easily switch to other farm suppliers of chicken. Internal Environment The internal environment can be assessed using resource based view. This model examines the firm’s essential resources. The company’s resources include tangible and intangible. Tangible Resources: In terms of tangible resources, Nando’s has a lot of financial resources including annual revenue of £500 million. Physical properties are also abundant, including 300 outlets in major cities and towns Heterogeneous Resources: The Company also has human resources including about 182,000 people who ensure that the company operates effectively using effective skills and capabilities. Therefore, the company is expected to perform well within the next 1 year. Intangible Assets: Nando’s has a good reputation and brand image in the higher-end segment of food product market in UK. This places the company in a good position to compete effectively in the market. 2. Audit of Nando’s Stakeholders Stakeholder analysis is done using the power-interest matrix as shown in the appendices. This method classifies stakeholders based on power influence and the level of interest of the stakeholders in the organisation (Kotler & Armstrong, 1991). The stakeholders of Nando’s include: Customers: These stakeholders are the most powerful in the company because they have high bargaining power and can drive down prices in the industry if they demand low prices. They also have high interest in the company. So the company should manage them closely and work hard to achieve their satisfaction. Employees: These also have high power and high interest in the organisation. They the success of operations and relationship with external stakeholders. They therefore influence operations and relationships. The company should manage them closely and motivate them through effective compensation and benefits plan. Suppliers: These are in the bottom right quadrant of the power-interest matrix. They have low bargaining power in Nando’s but they have a high interest in the company as a customer for their products. So the company should keep informed about them. Shareholders: These have high power and low interest in the company because they can vote for major management decisions but they do not get involved often. The company should always keep them satisfied. Government: This stakeholder is powerful but has low interest in the company. It determines regulation and allows the company to operate in UK, but it does not get involved in the company’s daily operations. Community: The community has high interest in the company but low power because they have high expectations and interact with the company often within the community but they have low power to influence its operations and management decisions. 3. Segmentation Variables Nando’s Segmentation is done in terms of three variables in terms of customer needs (Kotler & Armstrong, 1991). Customer needs vary for various reasons, which forms the basis for segmentation. Others choose price, others quality, others geographical location, and others social factors. Characteristics of people: the company may segment the consumer market based on characteristics if the population including age, gender, ethnicity, income, family size, life-cycle, location and lifestyle. Benefit/use: customers are also segmented based on the benefit they derive from using the product (Wood, 2003). In this case, consumer markets characteristics include: size purchase, choice criteria, brand loyalty, purchasing behaviour, and importance of purchase. User’s preferences: in this case, markets are segmented according to product similarity, price preference, quality preferences and desired features. The company positions itself in the market according to the following bases relative to its competitors. Geographic location: Nando targets young people in towns and cities with affluent lifestyles. Age: Nando’s also targets teenagers and young adults aged between 24 and 34 years of age with cult-like following. Product Characteristics (Quality): the company segments its market according to product characteristics. It targets customers with high quality preference. 4. Marketing objectives The key SMART marketing objectives for Nando’s UK that can be set from the case study are as follows: Increase the number of stores from 300 to 350 in the next 12 months in order to take services closer to customers in cities and towns where populations are high and are not fully served by the company Continue business growth over the next one year by increasing the company’s turnover from £500 to £600 million within the next twelve months To achieve the increase in turnover, the company should also increase its customer base by 15% and the sales revenue by 5% over the next 12 months. 5. Nando’s Current Marketing Mix Product Strengths The products are of high quality – sourced from approved farms and delivered fresh. There are no artificial preservatives, flavour or colours added. Chili source is added to Per-Peri chicken to make them sweeter and nutritious. Wide range of products including sauces, salads and vegetarian options which allow customers to experience Nando’s flavours at home and the business to diversify. Brand loyalty because customers have a cult-like following Effective sourcing strategies from the suppliers to get quality inputs that add to the desired quality of the product Weakness The company does not offer wide variety of nutrients in their products such as vitamins, carbohydrates, etc. The company also lacks preservatives that can keep the products edible for long Recommendations Use preservatives and produce large quantities of food to serve over a longer period of time without compromising quality The company may also add other food ranges that all diet in their menu, including drinks in order to attract more customers within the next 12 months. Price Strengths The pricing strategy is a competitor pricing strategy which allows the company to adjust its prices to reflect prices charged by direct competitors The prices reflect the food quality and experience they offer. Weaknesses The prices of the company are targeted at the upper end customers – so the products are relatively expensive compared to traditional fast-food chains Recommendations Nando’s UK may offer some fast-food products at low prices and the higher quality products at higher prices through price discrimination in order to meet the needs of both the high end and low end customers (Wood, 2003). The company should also offer different prices in different cities depending on the purchasing power of each city, giving higher quality and experience offer for each additional unit price. Place Strengths The company operates its own stores – over 300 stores in major cities and towns in UK, shopping centres and night-spots. The outlets are the primary route to the market. They sell to students by locating stores close to universities where they find their target customer group. The company also sells sauces and ingredients through supermarkets as their distributors The use of online functions as ordering portals also acts as an important access point to the market. Weaknesses Their outlets are not standardized so the customers may not develop good loyalty. The outlets are mainly located in big cities and towns so the people in suburb towns are not able to access their products. Recommendation To increase access to customers, the company needs to locate its outlets in suburban areas Their outlets also need to be standardized in order to strengthen their brand Promotion Strengths Nando’s UK makes effective use of social media and public relations as advertising strategies. National media advertising is also used as a communications channel including print, cinema and outdoor advertising. “Wing Roulette” campaign was recently used as a promotion strategy. It was successful in its approach of playing finger-licking habits of diners. A loyalty scheme is also used to enhance customer loyalty Weaknesses The company lacks short term sales promotion and discounting operations which would fill the restaurant at quieter times. Recommendations The company needs to adopt discount promotion strategies to supplement its loyalty schemes in order to increase customers in quieter times over the next 12 months. The company should also use short term direct sales promotion to attract customers in quieter times. Recommendations to Improve Corporate Social Responsibility In order to receive stakeholder legitimacy in its corporate social responsibility, the company needs to use free-range chicken. Currently, the company uses UK based approved farms to supply chicken but it fails to use free-range chicken to enhance healthy and safe consumption as a way of taking care of society’s social interests. The company’s current impact on the environment is not satisfactory and should do more. Therefore, it needs to take care of the environment by reducing wastes and emissions which eventually reduce land degradation and environmental pollution. Some of the options including recycling, using renewable energy sources and encouraging low carbon footprint. References list Euromonitor (2014). Consumer Health in the United Kingdom. Accessed April 27, 2015 from http://www.euromonitor.com/consumer-health-in-the-united-kingdom/report Kotler, P., & Armstrong, G. (1991). Principles of marketing. Englewood Cliffs, N.J: Prentice Hall. McDonald’s (2015). Franchise Opportunities. Accessed April 27, 2015 from http://www.mcdonalds.co.uk/ukhome/Aboutus/Franchising.html PWC (2015). UK Economic Outlook. Accessed April 27, 2014 from http://www.pwc.co.uk/the-economy/publications/uk-economic-outlook/. Wood, M.B. (2003). The marketing plan: A handbook. Upper Saddle River, NJ: Prentice Hall. Appendices Appendix 1: Stakeholder Power-interest matrix High Power Low Low Interest High Appendix 2: Porter’s five Forces of Competition Appendix 3: Resource-Based View Appendix 4: Segmentation Variables Read More