Pestel Analysis and Competitors Analysis of Chapstick Company - Case Study Example

PESTEL and Competitor’s Analysis PESTEL Analysis is of great importance for Chapstick® Company as it focuses on future prospective of other production factors. This is because of the dangers and effects of powers and external pressures that will face Chapstick® Company as they try to focus on internal pressure facing production of lip balm for men (Armstrong, Harker, Kotler and Brennan, 2009). Political factors will comprise trade restrictions, labor law, political stability, and tariffs that Chapstick® Company will face. Political factor in this lip balm manufacturing will include limitations in advertising the lip balm. However, because Chapstick® Company already deals with female cosmetics, it is already aware of some of these political factors. ‘Metro sexual’ and wearing of lip care products stigma is likely to be a major hindrance to development of the lip balm for men. Those are two major social factors that may affect the sale of lip balm. However, social trends are changing towards favouring men’s personal care from recent surveys that have been done by data monitoring showing that more men are spending more time in front of the mirror. This is an indication of likelihood that men are likely to use the lip balm. Economic factors include economic growth, and economic crises that may eventually affect the overall sale of the lip balm in the current market. Economic crises had adverse effects on the development of new lip balm by Chapstick®. In 2009 this should not deter the development of lip balm product development in the market as the recession is short lived (Donald and Swedberg, 2007). Technological factors include environmental and ecological aspects like automation, Research & Development activities as well as technology incentives on the production of the lip balm. Environmental factors include climatic changes and weather alterations that may have an effect on the use in products manufactured. Changes of weather conditions are likely to compel men to use lip products to protect lips from the effects of the environment. Legal factors include health and safety law, employment law and consumer law on the lip balm (Institute of Marketing Management, 2008). Competitor analysis will assist Chapstick® Company in laying out strategies to compete with other existing products in the market. Such existing products include Vaseline, Nivea, Zinc lip, Blistex, and Moisturizing Lip Balm among others. It will involve getting information concerning competitors and using that information in predicting the behaviour of competitors. Competitor analysis will assist Chapstick® Company in achieving a competitive advantage currently as well as in the future (Fleisher and Bensoussan, 2007; David, and Per, 2003; Frederic, Agnes and John, 2009). Lip balm by Chapstick® for men will meet other existing products in the market from other companies. The unemployment rate in Australia has declined from 5.7 percent in mid 2009 to 5.3 percent by 2010. The number of employed has increased significantly from 10,760,000 in mid 2009 to 11,010,000 by April 2010. This is an indication that more people will have enough income to spend on male cosmetic products in general. Australian GDP increased to 0.9 percent by January 2010. This is an indication that lip balm will sell greatly in the local Australian market. Consumer and business confidence index in Australia has increased from 90 to 120 indicating that the lip balm will receive a positive lead and penetration in to the market. This means that consumers will spend more on products like lip balm hence increase sales (Meredith and Dyster, 2010). Interest rates in Australia have not increased and they are expected to remain at 4.5 percent, hence they may not affect the lip balm after being introduced in the market. These economic factors will not affect the introduction of the lip balm in to the market; in fact they will favour its penetration into the market greatly. Goals and objectives Short- term goals and objectives Table 1 Goal/ Objective Measure 1st Month 2nd Month 3rd Month Brand Awareness Brand awareness in % 20% 30% 40% Sales / Product penetration Number of units sold 50,000 80,000 98,000 Product usage Number of product usage per day 10% 15% 22% Test marketing Sales in dollar value 125,000 200,000 245,000 Publicity/PR Sales 50,000 80,000 98,000 Brand Awareness and Product Penetration One of the main objectives is to ensure that the product penetration into the market increases with time. This will include a three month period when the initial launch will take place and, thereafter, a three year period of goals and strategies, as shown in Table 1. Increased penetration of the market by Chapstick® will ensure an increased market and increased awareness. Product penetration will be measured by the number of lip balms that shall be sold over time. Increased product penetration will be achieved through extensive marketing and promotions. Increasing brand awareness on the use and importance of lip balm is another major goal that requires to be achieved in the short term to ensure the product penetrates into the market rapidly as well as increasing the market range within Australia. Initially, the cost of increasing brand awareness will be high but it will be reduced after the first month. Increasing brand awareness of lip balm will be achieved through marketing, advertising of the product as well as promotions. Advertising will be through the internet and popular male magazines (Men's Health, M2, GQ, 10 MEN and Alpha). This can also be achieved through promotions and gifts in order to ensure that the product becomes known to as many people as possible within the targeted audients in Australia. T-shirts with the lip balm label and USB devices will ensure brand or lip balm awareness is increased greatly within Australia (Campbell and Tom, 2005). Increasing the amount of product usage is also another goal by the company in order to expand the demand and market of the product. Diversification of the product usage is of great significance in ensuring the lip balm can be used by the target market more than three times daily. Increasing the product usage will ensure the intended market size of 2.4 million males in Australia is reached. Diversification of product use is expected to rise from 10 percent to 22 percent after three months as shown in table 1. Increased product usage will be possible through continued research and development (David, George and Bill, 2002). Test Marketing In order to gauge the viability of our line of male cosmetics in the Australian market, we will first release our product line in Victoria only. We have chosen Victoria as our test market because it consist a large metropolitan city such as Melbourne, where the majority of our target market resides. If the response for our line of products is positive, we will then roll-out a national launch of our product line. Sales will be the main determinant of whether or not to proceed with the range. Publicity Media releases will be constantly distributed to all media stations throughout Australia to gain free publicity. Events will also be organised to show off our product range to industry professionals such as dermatologists and makeup artists. We will measure the success of this publicity, again by the number of sales we make. Long-term Goals and objectives Table 2 Goal/ Objective Measure 1st Year 2nd Year 3rd Year Changing consumers’ behaviour Number of men changing their behaviours 456,000 697,680 948,845 Sales Growth in percent Number of Sales in percent 100% 229% 181.33% Sales Growth (dollars) Amount (dollars) $2,280,000 $5,232,600 $9,488,448 Market Share market share in percent 20% 30% 40% Market Share market share in number of men 456,000 697,680 948,845 R & D for new product Keeping up to date with competitor analysis N/A Introduce 2 new products Introduce 2 new products Product penetration Number of units sold 912,000 2,093,040 3,795,379 Total Quality Management Quality Audits / minimize product quality complaints 2% 1% 0.5% Changing consumers’ behaviour The main goals and objectives by Chapstick® Company are aimed at ensuring lip balm penetrate into the market and to targeted audients who are mainly men. Changing the behaviour of men towards the usage of invisible lip balm is one of the main objectives by the Chapstick ® Company. This aims at ensuring that within 2.4 million of the males between 17 and 34 years in Australia, over 60 percent of men becomes familiar with this lip balm and use it as their daily product. This mostly includes men in urban areas and areas affected greatly by changes in the weather conditions. In the first year, men’s behaviours towards the usage of lip balm will be 456,000. This will increase to 948,845 after three years according to table 1. Quality management Long-term goals include total quality management as well as increasing sales growth. This will ensure the lip balm produced and method of production will be of great quality and extremely effective to the users. Involving every person from management production and quality departments in Chapstick® Company will ensure that this objective or goal is achieved. Total quality management in Chapstick® Company will ensure high quality standards are adopted at all manufacturing and production levels. Ingredient quality and composition of lip balm will be taken into consideration to ensure the general quality of the lip balm is outstanding. In order to improve the production quality, management staff will document progressively the production and quality of the lip balm. Research and Development Research and Development is also another strategy that aims at increasing the sale of the lip balm in the long run. Research and development will also ensure that lip balm continues to stay in the market and gains the largest share in the market through improved quality. This objective will be achieved through continued research of the product development among the consumers or men who will use the lip balm. Continued research and development of the raw materials and ingredients to be used will ensure the lip balm competes effectively in the market. Research and Development will continue over the years in order to ensure the new Lip balm of Chapstick® sustains and improves the quality. Market share Increasing the size of market share is another objective or goal that is required to be achieved. This can be achieved through increased marketing and creating awareness among men. This is possible through intensive promotions and advertisements through the media and internet. Sales promotion will play a great role in ensuring lip balm gains popularity among men. This can increase the market share significantly within the first three years up to more than 30 percent compared to other products. This will also be achieved through analysing other competitors’ strategies and actions (Boddy, 2008). Sales growth Increased market share is expected to increase the growth rate of sales. Increased market growth will be achieved through extensive training of marketing and sales team throughout Australia. This will ensure increased growth in the amount of sales of the product. The number of sales is expected to rise as extensive campaigns and promotions are adapted and taken into consideration with time so as to achieve this objective. Increased market share will also be achieved through quality improvement while maintaining a lower price. The market share is expected to rise from 20 percent to 40 percent after three years as illustrated in table 2. Increased market share means increased sales growth that is predicted to rise from 15 percent in the first year to 25 percent after 3 years as illustrated in Table 2. Marketing Strategies Chapstick® for men The reputation and quality of the product will ensure that the product will be able to penetrate into the market effectively. Lip balm must satisfy the men’s requirements as well as having the invisible colour to become a preference among the intended consumers. The lip balm product requires having a positive effect on the intended user in order to increase and change the behaviour that men will have towards this lip balm product. Positive experience of the product will also increase the awareness among consumers, and create word of mouth messages. This can all be achieved through manufacturing a high quality product. Product improvement and increased quality will ensure that the long term objectives are achieved in the long run. It is also crucial to manufacture a product that has diversified uses. This is also another strategy towards achieving increased number of consumers (Linda, 2006). Chapstick® Price The intended lip balm to be manufactured will cost $5.00 at retail price and $2.50 at wholesale price. This is a cost that many consumers at any economic level will be able to afford comfortably. This is a good price compared to other related products from other Companies. $5.00 retail price will be crucial in ensuring the lip balm competes effectively with other existing lip balm products in the market. Price consideration will ensure the short term goals are achieved within the first three months after developing the product. The Wholesale price of $2.50 will ensure that intended distributors will have a good chance of making a profit if they sell lip balm in their shops by gaining 100 percent profit if they sell at a retail cost of $5.00 . This price will be an added advantage in ensuring the lip balm is accessible to people through wholesalers. Manufacturing or producing a good quality lip balm product with an affordable price of $5.00 is extremely crucial as a marketing strategy. However, this initial price will have to increase with time after gaining popularity as expected. Chapstick® Promotion Lip balm promotion will occur through include advertising and sales. In the first 3 months, Gifts will be attached to the lip balm to ensure the more men are attracted by the product. A USB 2GB is such a device that will be attached as a gift. Gift vouchers will be part of this promotion strategy where gifts such as winning amounts of money associated with numbers which will be printed on the lip balm tube. Customers will logon to Chapstick® website and enter the product number along with some basic personal information Name, Mobile and e-Mail. Chapstick® will hold several seminars to educate men on the importance of using lip balm as well as its effectiveness. Seminars will be held all firstly in Melbourne CBD by July 2010, the next step is to go over Australia. TV and radio talk shows will be used as a means of maximizing promotions within Australia. T-shirts displaying Chapstick® lip balm will be printed and distributed in CBD streets during the seminars. Chapstick® product packaging Chapstick® product packaging will be focused on reflecting the main image for the product. The Product package will use blue, black and silver colours. Lib palm tube size is 15 oz, Chapstick® packaging will be as follows: Lib palm tube Point of sale display 1 Point of sale display 2 Distribution Distributors of other products of Chapstick® Company will play a great role towards the distribution of the lip balm. Wholesalers and stores will also play a great role in ensuring that the lip balm reaches the intended consumers in several parts of Australia. Such stores that will assist in distribution of Lip Palm include Coles, Safeway, and major Australian pharmacy in Victoria in Australia. There are several wholesale distributors who have been appointed throughout Australia to distribute and sell the lip balm to men in Australia. This distribution strategy will ensure the lip balm penetrates deeper into the market. Lip balm will be available in several retail outlets throughout Australia which deal with other beauty products where men will be able to access it easily. The product will be found in retail outlets that distribute and sell other products by Chapstick® Company including Coles in Melbourne and Australian Pharmacy in Victoria. Internet is also another place where information about the lip balm will be found by. Consumers will then be directed to various distribution outlets in Australia through the internet where they will find the lip balm. Internet will act as a guide to the product information and their price and available outlets like Cole, Safeway and Australian Pharmacy in Victoria. Customer selection Relationship marketing Customer service Loyalty program Community building – Facebook Contingency Planning The marketing strategies being put in place may fail to work effectively in the long run as expected or planned. Chapstick® Company has put some contingency plan that includes increasing more promotions and gifts to the consumers who buys balm. More finances will be planned for in case the current planned marketing plans will not work out effectively. Production team will be ready to change the quality and ingredients composition of the balm in case it will fail to work as it is expected. Men’s response towards how effective the lip balm will determine how the production team will put in place their contingency planning. The price reduction will also be a contingency plan that will be put in place to ensure lip balm will not lose the intended number of consumers due to its unit cost. Social factors like ‘Metro sexual’ may rise up as the lip balm will try to enter into the market. In ensuring this will not have effect on Chapstick, the marketing team will prepare on such factors through increasing more funds in this sector in order to educate men on the importance of the lip balm through increasing promotions and advertisements (Centre for professional Development (Melbourne, Vic., 2005). References Armstrong, G., Harker, M., Kotler, P. & Brennan, R. (2009). Marketing: An introduction. Sydney: Financial Times Prentice Hall. Boddy, D. (2008). Management: An introduction. New York: Prentice Hall. Campbell, D. & Tom, C. (2005). Organization and the business environment. London: Butterworth- Heinemann. Centre for professional Development (Melbourne, Vic.). (2005). Contingency Planning. Melbourne: Centre for Professional Development for the Australian Society of Accounts. David, C., George, S. & Bill, H. (2002). Business strategy: and introduction. London: Butterworth-Heinemann. David, H. & Per, V. (2003). 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