Background of Arnott’s Biscuits

Arnott’s biscuits is one the leading biscuit manufacturer of Australia (campbellsoupcompany.com 2019). This report will put its emphasis on Arnott’s Tim Tam biscuits which is rightfully the most popular biscuit of Australia. The company plans to expand further to markets that are characterised by high income elasticity (Markusen 2013). The product is already a market leader and the following strategic plan will focus on how the brand can retain its place as a market leader. Penetration pricing is the strategy that the company aims to use to carry out its operation in the target markets as the company believes that pricing their products lower than will pose better attraction for individuals of low income countries. The purpose of this report is to device a strategic or marketing plan for Tim Tam biscuits. The paper will provide a complete theoretical analysis to describe the internal and external market opportunities in the upcoming days with the number of potential competitors going up. This report presents the company background, the strategy, reason behind choosing the strategy and will assess the external environment using the five forces model.

Arnott’s biscuits was founded by William Arnott in 1865 and since then have been producing quality biscuits. Arnott’s biscuits received global recognition when the Tim Tams where created. The name ‘Tim Tam’ came from the name of the winning horse of the derby of Kentucky 1958. Ian Norris gathered inspiration from British Penguin biscuit and created the Tim Tams that are heavily appreciated all over Australia. The Tim tams come in a variety of flavours such as the Chocolate cherry coconut, the iced coffee, the salted caramel and vanilla and others (arnotts.com 2019).  Tim tams are the Australian market leaders when it comes to cream sandwich biscuits. They however aim to acquire market share in Asian countries that are characterised by high populations. Thus the company recognises a need of creation of a strategic position plan.

The Tim Tams are positioned as the market leader in the realm of biscuits. The Tim Tams are operating in an FMCG (Fast Moving Consumer Goods) markets and such markets are subject to entrance of competitors at any point. The competition include products such as the Temptins, the Chit Chats from New Zealand, the Choccy slams and the biscuits known as Chocolate Surrenders. The company expects to formulate a strategy that can be considered as an Intended Strategy (Hill, Jones and Schilling 2014). This has been done taking in consideration the threats that might appear from the above mentioned rival brands.  

Strategic Position Plan for Tim Tam Biscuits

Tim tams are priced around the $3.50 mark in Australia (shop.coles.com.au 2019). This might transcend well in high income countries such as the United States and the United Kingdom. This could however turn out to expensive in countries such as India, Bangladesh, Myanmar and Indonesia which are characterized by low per capita income (Lewis 2017). The company intends to introduce Tim Tam biscuits into such nations with the help of Penetration pricing strategy. This would ensure that the product are affordable for every individual of the low income countries. The Tim Tams would be served in smaller sizes that it would sell through departmental stores and the company also plans to dedicate franchises for the sale of the same. This reduces the overall cost of the product after it incurs the import charges in the respective countries. The smaller biscuits would be priced much lower than the Australian price.

The market opportunities of the above mentioned countries are huge as a result of the population. The population of the countries can present a higher number of potential customers who can be transformed into actual customers. Along with this company plans to introduce a sales promotion technique of giving a small token as a gift inside each packet of the product (Familmaleki, Aghighi and Hamidi 2015). Giving gifts with products with the products are said the increase the chance of the product satisfaction that the consumers face from the consumption of the same (Oliver 2014).

The company plans to carry out penetration pricing in the mentioned countries and also plan to utilise the sales promotion technique of gifting on the purchase of Tim Tams. In the mentioned countries there exists a selection of huge variety of products that the people can chose from. Maximum people of such countries have high income elasticity and that is the reason behind majority of the population sticking to cheaper products. The normal price of the Tim Tams would make it very unacquirable for the locals of such nations. With penetration pricing, the company aims to position itself as the provider of high quality products at cheap prices. Furthermore gifts will encourage certain groups of the population (mostly children) to go for the company’s product rather than its local competitors.

The target countries are characterised by low level of capita income which is the main source of formulation of the idea of introducing the Tim Tams at cheaper rates (Miller, Kim and Holmes 2015). There exists a huge income gap between people in the target countries which call for introduction of a product that can be enjoyed by the rich and less economically able individuals, the formulation of the strategy. Following factor were consider before framing the strategic position plan;

Market Opportunities and Competition

The target countries for which the product is devised for, are characterised by high population (Koepfli 2015). The population makes the availability of potential customers more as compared to countries with low population. Greater number of people automatically implies high number of potential customers who can be pitched with promotional activities (free gifts with each pack along with advertisements on various media platforms). Arnott’s identifies the opportunity that the population presents and the former looks to capitalise on their planned investments with the strategies that have been put forward. The countries are also said to have high rates of unemployment which is a need that will be catered to by the company’s initiative to introduce franchises.

Although there are presence of local rivals in each country, the products produced in such countries are not even closely similar to the Tim Tams. Thus the Tim Tams will be presented as an exclusive products in the countries. Furthermore, the absence of the Australian brand’s rivals such as the Temptins, Choccy Slams and Chit chats makes the market up for the company’s domination.

The opportunity of capitalizing on the developing countries was rightly identified by the company as it provides scope of achieving favourable results.

Expanding from the local markets into new foreign territories is not new for the company and with the plans to capitalise on the big emerging markets, the company expects to generate a considerable amount of profit (Nartea 2017) As discussed above it is known that the population of the above mentioned countries are huge. This factor gives the Tim Tams a greater scope for capitalizing on the enormous market sizes. The size of the markets presents a high number of potential customers, which can be additionally bolstered with the introduction of sales promotion strategies.

It is the goal of every company to align their activities and operations with the interest of the stakeholders (Tricker and Tricker 2015). The stakeholders are important to the company and the following efforts of implementation of the strategic plan will help in satisfying the demands of the stakeholders. Generating high returns from investments will ultimately result in increased prices of the stocks and lead to further earnings per share. Increased earnings per share is an indicator of good overall performance of the company and will thus result in attracting new investors and satisfied stake holders.

Service to the community should be of key importance to every company (Cuzzi, Estrada and Davis 2014). The operations of the company in will focus on markets that are characterised by high population, such the Indian market. The inadequacy of the employment opportunities is quite problematic for such countries. While operating in countries with high rates of unemployment, the company would be providing employment to the people of such countries. The company could have served the nation with the its products through online services and big local dealer, it will still carry out such operations along with the delegation of the sales to proposed franchises which will require sales personnel and administrative officials and personnel. This would help in generating considerable amount of employment opportunities.

Penetration Pricing Strategy for Asian Markets

It is a strategy through which Arnott’s plans to introduce Tim Tam biscuits into the market at a low price (Spann, Fischer and Tellis 2014). The price being low automatically attract people and in case of economies featuring low per capita income and high price sensitivity, it is a strategy that marketer have been adopting since the coining of the concept. This strategy also triggers a switch from a brand that the potential consumers were acquainted to and helps in acquiring more market share. This strategy is applicable in the operation of Tim Tams in the target countries and will help in generating additional sales apart from the fact the product is highly differentiated which will generate sales on its own.

Corporate sustainability better known as corporate social responsibility is a regulatory framework through which companies are said to provide service to the public; the citizens and the stakeholders (Tai and Chuang 2014). Through this strategic plan the company aims to generate higher amounts of revenue which will lead to satisfied stakeholders. On the other hand, formation of franchises in economically challenged countries with high levels of unemployment, will lead to reduction of the issue. Catering to both the factors will lead to improved corporate governance.  A company that is paying proper attention to Corporate Social responsibility is said to be providing benefits and services that satisfy the needs of both the stakeholders and the public in general (Bernardo et al. 2015).

Michael Porter devised the 5 forces model, which is a tool that helps a company analyse the competition that they might face while venturing into new operations (Dobbs 2014). According to the model there exists five forces that help Arnott’s determine the external conditions that it will face while taking new business initiatives or while shifting or expanding market horizons.

Figure: Porter’s 5 forces model

(Source: As created by the author)

1. Competition among existing companies (LOW): Although the target countries of Tim Tam have a high number of competitors, they provide nothing close to the product that is being offered by the company. Product differentiation is high, thus there will be low rivalry among established firms.
2. Buyer’s bargaining power (LOW): The countries have zero sellers offering similar product thus bargaining power of the buyers is low.

• Seller’s bargaining power (LOW): Bargaining power of the sellers are low as a result of availability of no local suppliers in addition to level of product differentiation.

1. Threat of new entrants (MODERATE): The possibility of new entrants is moderate since the rivals companies can come up with similar products and others can start export plans although one cannot replicate the company’s products.
2. Possibility of Substitutes (VERY LOW): The product that the company is offering has no close substitutes especially if considering the new market.

Conclusion

To carry out the plan successfully in the target nations it is recommended that the company should follow the following guidelines:

• Carry out research through questionnaires and interviews that will give the company a proper idea about the taste and preference pattern of the consumers.
• Carry out PESTEL analysis through which the company will be able to screen and point out the possible points that they could improve on or take care of.
• Set CSR as a goal as that would help the company maintain satisfied stakeholders and through which the company will be able to pay service to the welfare of citizens of the country they are operating in.

The outcomes of the proposed strategic plan are deemed to be favourable for the long term survival of the company. The price penetration policy that the company expects to implement on the subject markets will help sustain the long term operations of the company. It is recommended that a survey should be carried out in denser parts of the nations which would give the policy makers a generalised idea about the preference styles of the consumers. Thus it can be concluded that a favourable five forces model analysis, the prevalent economic conditions and the population of the countries along with the fact that there is no competition, ensure that the operation of the company would turn out to be successful, profitable and charitable.

References

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