The Launch of a New Ice Cream Dessert - Term Paper Example

30-10-2007. Ice Cream Assignment The new economy has brought success to numerous organizations that use technology to apply marketing concepts like customer focus, good value, quality service and efficient exchange mechanisms for satisfying customer needs and wants. The new economy is based on the digital revolution and the management of information about customers, products, prices, competitors and every other aspects of the marketing environment. The digital revolution has placed a whole new set of capabilities in the hands of consumers and businesses. Consumers have increased buying power and only a click away from comparing competitors prices and product attributes, making purchases and even quoting prices for the products. Consumers have great amount of information access power. As the demographics has been continuously changing worldwide, needs and preferences has been changing. In any part of the globe it’s the consumers demographics and culture plays an all-important role in shaping any marketing strategy. For the product like Ice cream consumers’ age as well as eating culture always plays a major role to decide preference and needs. In general, today’s youth particularly interested in technology and gathering information in emerging economy, is more aware of its environment and changes that is taking place globally. Young are more technology friendly and connected through Internet, TV and other communication gadgets. They are more information oriented. Today’s youth is more assertive and they have specific preference and needs as well as they are more influential in shaping others buying behaviours to buy almost anything. Children age 2 to 14 indirectly influence as estimated $300 billion in annual household purchase (Mc Neal, 1998, pp 37-41). Reaching and influencing the young segment is ever more challenging. Consumption patterns are shifting from mass media towards micro media for the masses. Savvy media empowered consumers often under age of 25, are being influence by trends from all over the globe. So children and youth represent an important demographic market because they are potential customers, they influence purchases made by parents and households and they constitute the future adult market (Mc Neal, 1998). Marketers segment target audiences by age to build brand awareness and brand loyalty early in life that will be sustained into adulthood. Child and young consumer role in one of the important aspects to be studied before marketing for the products like Ice cream. Children’s consumers’ socialization and behaviour influences food choices, both by direct purchases and by substantial influence children have on family purchases. Isler et Al. (1987) examined the location; types and frequency of products that children aged 3-11 requested their mother over 30 days. Food accounted for more than half (55%) of total requests and desert food (24%). Adolescents influence their parent’s purchase of fast foods, soft drinks, desserts etc. Parents also acknowledge the influence that children have on their food purchases. Parents reported that 47% children influence their desserts purchasing. Mc Neal (1998) studied brand awareness among children and youth and found that children as young as 2-3 years can recognize brands. Although brand choices can be important for youths but they are likely to experiment with brands. Young people tend to change their consumption habits for more than over 35s. They are promiscuous consumers. So every organization, which is focusing on young, must have to constantly talk with then and if they found not good as competitors they will ditch you. So certainties have gone. A lot has been changing all around. This is a generation brought up in an age of technology and globalization. Youth brands have to be relevant if the product have quality. If marketers want to segment the youth market, they should carefully distinguish trends and subcultures with in the age group and demographics. When affiliating to sub cultures brand need a deep, long-term commitment to actually gain credibility among youth. Allowing communication between target group members is one of key success factors in youth marketing. It is significant to notice that most of the biggest brands online today are digital channels themselves. If any organization willing to market youth segment, they have to adopt actually the core variables i.e. Be innovative and dare try out, activate the logical side of marketing, Build behavioural know how, opinion leaders bring credibility, listing and networking, partnering, fresh and unique and create sustainable communication. Global marketers need to remember that buyers often hold distinct belief about brands or products based on their country of origin. Studies have found that the impact of country of origin varies with product type. In addition, attitude towards country of origin can change overtime. When a products place of origin turns off consumers and company can consider co production with a foreign company that has a better name. Another alternative is to hire a well-known celebrity to endorse the product or the company can adopt a strategy to achieve world-class quality in the local industry. IBIS world estimates that ice ream manufacturing revenue will increase from $640.5 million 2003-04 to $705-3 million in 2008-09 representing an average increase of 2.0% per annum. Over the outlook period, industry value added is forecast to increase from $153.7 million in 2003-04 to $162.4 million in 2008-09 representing an average increase of 1.1% per annum which reflects increased price competition. Now if Ice Cream Company has to launch its product worldwide it has to adopt strategic marketing planning before launching the new product. Strategies could be sorted out according to prevalent macro (PESTEL Analysis) and microenvironment (SWOT Analysis) (For detail see Appendix). Market oriented strategic planning provides, the managerial process of developing and maintaining a viable fit between organizations objectives, skills and resources and it changing market opportunities. Strategic marketing deals with the bigger picture in a market which links customers, competitors and organizations ability to meet demand. The four steps in the marketing management process are: I) Analyzing market opportunities II) developing marketing strategies III) planning marketing programme includes marketing expenditures, marketing mix i.e. product, price, place and promotion (Perrault & McCarthy, 1996) and market allocation IV) managing the marketing efforts includes feedback and control (Dekimpe & Hanssens, 1999). Most of successful companies stand out as master marketers. These companies focus on customers and organized enough to respond effectively to changing customer needs. Now two major companies worldwide are Nestle and Unilever moving ahead and trying to capture Ice cream market worldwide. Nestle going on consolidating its position through merging Dreyer’s Grand ice cream holding and proposed takeover of Delta ice cream in Greece would fetch it a 17.5% share of the global ice cream market. Unilever on the other hand, the 2nd largest ice cream company in the world relaying on “flavor pioneer” i.e. innovation of new products. Ice cream market is growing again but in Europe now the growth rate is almost stagnating. Asia & Chinese markets are growing markets. Global position of market has to be taken into consideration before launching new product. Especially SE Asia and Chinese market offer greatest opportunities for phenomenal growth. India and China have combing over 2.5 billion people and mostly young and have surplus income due to liberalize economic policies, which provides assertive youth market to company. China entry into WTO brings new opportunity to imported dairy products. Removal of Govt. Barriers and internationalization of the market provides greater opportunities for the company. Recently Nestle acquire 29 local ice cream manufacturing companies in China. So big players are already making inroads in emerging markets. Our company also has to avail the opportunity and expand itself in emerging markets. New and improved ice cream with innovative flavor combination, convenient pack format could be successful. In Europe Primiumisation is the key to unlocking future growth in Ice cream. The trend in ice cream is certainly towards “indulgence” and the sales prove it as premium and super premium quality ice creams (with 41.4 percent of the total dollar sales) continues to outsell regular ice cream as well as the light (7% of overall sales), reduced fat (0.7% of overall sales), low fat (3% of overall sales) and nonfat (2% of overall sales) products all showing declines. There is growing expectation that premium ice creams, with premium prices should be free and artificial stabilizers and additive as standard. People are increasingly concern about their health and looking for reassurances about ingredients Premium ice cream brands appeals to people because they know and trust the origin of the ingredients. Going green is on other strategy likely to be employed more regularly by ice cream manufactures captures the attention from the younger generation. Total use of organic ingredients and certain standard of production, range of flavours continues to excite customers. Now consumers are seeking more healthful choices like low calorie, low sugar and low cab products. Another challenge facing ice cream manufacturing companies comes from ice cream parlors and restaurants. Consumers aged 18-24 prefer to eat ice cream at shops like Baskin Robbins or Ben Jerry’s rather than at home. Even with certain advantages, branded companies’ accounts for less than 50% of market share. Most of the local and regional companies have larger market share due to their local national feelings of customer. Branding is a major product strategy issue. Branding is such a strong force today that hardly any thing goes unbranded. Brands indicate certain quality and standard and strengthen buyer preferences. Overtimes, each type of brand can be developed further. A Company can introduce line extension, brand extensions, multi brands, new brands and co branding. Ice cream manufactures use fine extension of branding which introduces additional items in the same product category under the same brand name, such as new flavors forms colors, added ingredients and package sizes. Line extension of strong brands, symbolic brands, brands with strong advertising and promotion support and early market entrants are more successful. (Padmanaban, Rajiv and Srinivasn, 1997, 456-72). Line extensions have a much higher chance of survival then to brand new products. So company has to adopt a global brand strategy world wide for its ice cream and desserts. Company has to extend its product range through branding with its already successful brands in the market. For example Unilever’s caret D’ range is traditionally consumed as a dessert and is usually offered in tub ranges as a result. Carte D’ is available from out of home scooping units that allow consumers to choose from many of their favorite flavours. So it has been quite evident that company have to adopt a global brand for its ice cream desserts. Products that appear to have been mass-produced in a factory, somewhere faraway does little to appeal to today’s consumer. Provenance is critical in the ice cream sector, as it provides personality and identity for products. Karine Hayhow, marketing director of Mackie’s of Scotland, told just food that the premium ice cream brand appeals to people because they know and trust the origin of ingredients. Hayhow said: “We make our ice cream on a form in Aberdenshire and use real milk and cream. Many people choose our brand because they know where it is coming form. We don’t have a complicated supply chain. Ice cream marketing is a capital-intensive business. The location of manufacturing units is a major factor in product pricing. Because of the perishable nature of the product at any temperature above 180C to serve a global network Company has to have many manufacturing units strategically located. Company has to spend a lot on creating cold chain infrastructure and product handling. Before planned entry into global market company has to concentrate on putting in place a cold chain. Company has adopt decentralize manufacturing strategy so that a dramatic reductions in supply chain costs could be achieved. To decentralize manufacturing facilities, regional factories should be acquired and upgraded. Ice cream shops are also beginning to make more ice cream on site rather than buying it from a supplier. Freshly made ice cream is a huge draw to customers. Customers can taste the difference in old vs. new ice cream and also in the different ingredients that may be used. They are looking to eat a higher quality product that is fresh and made specifically with them in mind. There is an old saying in the ice cream business there are three important things: Location, Location, and Location! So it has been the first and foremost thing to decide for production unit or the shop. For any organization, production units cannot be established everywhere so they have to device such marketing strategies, which could fit into organizations needs. Companies are increasingly taking a value network, which is a system of partnership, and alliances that a firm creates to source, augment and deliver its offerings. Franchising is one of the modes of expansion for the organizations (Scoot, 2005). Franchising is also becoming a more common business model, as franchises have replaced independent businesses in industries as diverse as fast food, banking etc. Franchising is growing faster internationally. Despite the common perception that it is all about small business, franchising is a strategy adopted by a surprisingly larger number of big businesses. There are nine characteristics that make franchising appropriate for an industry i.e. production and distribution occurs in limited geographical markets, physical locations are helpful to serving customers; local markets knowledge is important to performance; local management discretion is beneficial; brand name reputation is a valuable competitive advantage; the level of standardization and codification of process of creating and delivering the product or service is high; the operation is labour intensive; outlets are not terribly costly or riskily to establish; and the effort outlet operators is hard to measure relative to their performance. Now if we analyse our business i.e. Ice cream it is ideal to expand the business through franchising. Franchising provides effective model for selecting and providing incentives to outlet operator. Franchising is an efficient mechanism for obtaining capital and human resources for rapid firm growth and a lucrative economic model, generating financial return at relatively low risk. But before providing franchising major disadvantage has to be taken care off. Franchisors and franchisees may have different goals, which come into conflict and Innovation and change at the headquarters, level often difficult to implement at franchisee level. To implement effective franchising, company has to adopt right policies in the area such as: Polices to ensure owner operation of outlets; rules for controlling franchisee behaviour; policies for setting the correct contract term and rules about franchisee advertising. So Ice cream company that cannot easily install production facilities overseas must rely on franchisee because adopting this, company could expend horizontally without much of investment and risk. ***************************************************************** References: 1. Scoot, Shane A. (2005), “ From ice cream to the Internet “using Franchising to drive the growth and profits of your company”, Pearsons. Education. 2. Iseler, L. Popper, Et, Ward S. (1987), Children’s purchase request and parental response: Result from a dairy study, J Advert Res 27(5): 28-39. 3. Report by Board on children, youth and families, Food & Nutrition Board (2006): Food marketing to children and youth: Threat or opportunity; Washington Accessed on http://books.nap.edu/books/0309097134/html. 4. McNeal, James U., (1998), “Tapping the three kids’ market” American demographics, April, pp 37-41. 5. Padmanaban, V., Rajiv, Surendra and Srinivans, Kannah, (1997), “New products, upgrades and new release: A rational for sequential products introduction Journal of marketing research (Nov.): 456-72. 6. “Ice Cream: New flavors, new trends, and the truth about the “ice cream headache”,” Supermarket Guru, July 19, 2003. Accessed online 29th Jan. 2007 from http://www.supermarketguru.com/page.cfm/2184. 7. “Screaming for ice cream: a rapidly growing market, ice cream nevertheless faces its share of possible demons. What will be the effect of changing demographics on the frozen treat, and how will manufacturers respond?” Prepared Foods, by Amy C. Rea April 2004. Accessed online Jan. 29, 2007 http://www.findarticles.com/p/articles/mi_m3289/is_4_173/ai_115490578 8. Youth Marketing In the Broadband Era accessed on 29th Jan. 2007 from http://voice.satama.com. 9. Dekimpe, M.G., & Hanssens, D.M. (1999), “ Sustaining spending and persistent response: Anew look at long-term profitability”, Journal of marketing research (Nov.): 397-412. 10. Perrault & McCarthy (1996), Basic marketing: A global managerial approach, 13th ed. Burr Ridge, IL. 11. The Phenomenon of Global Youth Marketing by Ian McFadyen October 1992, Accessed on 29th Jan. 2007 from (http://members.ozemail.com.au/~imcfadyen/index.htm). 12. Market is heating up for premium, natural, convenient and green ice cream 23 November 2006| Source: Helen Lewis, Accessed on 28th Jan. 2007 from http://www.just-food.com/article.aspx?id=96729 13. Nestlé takes global ice cream lead 19/1/2006, Accessed on 28th Jan. 2007 from http://www.foodanddrinkeurope.com/news-by-product/news.asp?id=65201&idCat=140&k=nestle-takes-global. Appendix: 1. PESTLE Analysis (PEST analysis) The PESTLE acronym. Political Economic Social Technological Legal Environmental PESTLE Analysis is a simple technique, which can be used in a fairly sophisticated way, particularly when it is combined with Risk Analysis, SWOT Analysis, an Urgency/Importancy Grid and expert knowledge about the organisation and its external factors. PESTLE Analysis is normally used to help organisations identify and understand the external environment in which they operate and how it will operate in the future. 2. SWOTs - Keys to Business Strategies Having built up a picture of the companys past aims and achievements, the all-important SWOT (strengths, weaknesses, opportunities and threats) analysis can commence. Strengths & Weaknesses Strengths and weaknesses are essentially internal to the organization and relate to matters concerning resources, programs and organization in key areas. These include: Sales - marketing - distribution - promotion - support; Management - systems - expertise - resources; Operations - efficiency - capacity - processes; Products - services - quality - pricing - features - range - competitiveness; Finances - resources - performance; R&D - effort - direction - resources; Costs - productivity - purchasing; Systems - organization - structures. If a startup is being planned, the strengths and weaknesses are related mainly to the promoter(s) - their experience, expertise and management abilities - rather than to the project. The objective is to build up a picture of the outstanding good and bad points, achievements and failures and other critical features within the company. Threats & Opportunities The external threats and opportunities confronting a company can exist or develop in the following areas: The companys own industry where structural changes may be occurring (Size and segmentation; growth patterns and maturity; established patterns and relationships, emergence/contraction of niches; international dimensions; relative attractiveness of segments) The marketplace which may be altering due to economic or social factors (Customers; distribution channels; economic factors, social/demographic issues; political & environmental factors) Competition which may be creating new threats or opportunities (Identities, performances, market shares, likely plans, aggressiveness, strengths & weaknesses) New technologies, which may be, causing fundamental changes in products, processes, etc. (Substitute products, alternative solutions, shifting channels, cost savings etc.) Once the SWOT review is complete, the future strategy may be readily apparent or, as is more likely the case, a series of strategies or combinations of tactics will suggest themselves. Use the SWOTs to help identify possible strategies as follows: Build on strengths Resolve weaknesses Exploit opportunities Avoid threats The resulting strategies can then be filtered and moulded to form the basis of a realistic strategic plan. 3. Value Chain framework of Michael Porter The Value Chain framework of Michael Porter is a model that helps to analyze specific activities through which firms can create value and competitive advantage.   The activities of the Value Chain Primary activities (line functions) Inbound Logistics. Includes receiving, storing, inventory control, transportation planning. Operations. Includes machining, packaging, assembly, equipment maintenance, testing and all other value-creating activities that transform the inputs into the final product. Outbound Logistics. The activities required to get the finished product at the customers: warehousing, order fulfillment, transportation, distribution management. Marketing and Sales. The activities associated with getting buyers to purchase the product, including: channel selection, advertising, promotion, selling, pricing, retail management, etc. Service. The activities that maintain and enhance the products value, including: customer support, repair services, installation, training, spare parts management, upgrading, etc. Support activities (Staff functions, overhead) Procurement. Procurement of raw materials, servicing, spare parts, buildings, machines, etc. Technology Development. Includes technology development to support the value chain activities. Such as: Research and Development, Process automation, design, redesign. Human Resource Management. The activities associated with recruiting, development (education), retention and compensation of employees and managers. Firm Infrastructure. Includes general management, planning management, legal, finance, accounting, public affairs, quality management, etc. Read More