PEST, SWOT and Five Forces Analysis

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Barclays bank is providing its services in India in some their selected business divisions. Barclays bank now wants to expand its services in India with other corporate units. This report is a helping tool for their expansion as it provides basic information needed for this expansion. External Environment Analysis by the help of PEST, SWOT and Porter’s five forces provides essential information for the management of Barclays bank while making and implementing business strategies with more knowledge, authority and control.

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Task 1:
Business Structure of Barclays Bank:
Barclays is one of the leading British based multinational banks having branches in 5 different continents across the world. Barclays bank has strong position due to its asset estimation of more than 2.3 US dollars. Banking structure of Barclays is divided into Personal and corporate banking, Investment banking, Investment management and the unit of credit cards.
The main headquarter of Barclays is located at London and the customer’s base of Barclays bank is more than 48 million in different continents including Africa, Asia, Europe, North and South America. The basic structure of Barclays is divided into two clusters:
1. Corporate and investment banking plus Wealth and investment management.
2. Retail and Business Banking
The further business units division is already explained.
Barclays bank also plays part in providing consultancy services for people in operating their small scale business. The unit of personal banking provides its services to manage the investment of small scale businesses. The security and easy access ability level for borrowing purposes makes Barclays one of the standard financial service sectors. The business unit provides consultancy for personal banking borrowing. They provide innovation to start different small level businesses and provide attractive financial services and opportunities for personal loans. Corporate banking is one of the profitable units of business unit of Barclays as it has more than 50,000 customers in five different continents. Risk management unit is also important to provide advisory for businesses which have potential to invest and get profit and also provide opportunities for investment. Wealth and Investment management unit works in more than 20 countries to provide its services. The basic functions of this unit are international and private banking services, investment management services, fiduciary services and brokerage services. Business structure of Barclays bank allows world class banking solutions for corporate customers as well as personal banking clients. Using up to date technology in term of online banking solutions and mobility services provide an edge on competitors due to the latest procedures used in these services. Barclays rely on its global relationship approach. Different relationships teams work across the world to add value to the business of corporate and personal clients.

Impact of Market Structure

The basic purpose of Barclays is to increase its business in term of customers and profit, looking for potential customers all around the world, looking for growing economies and to expand in such economies to fulfill its vision of growth.
Barclays bank is working in India for more than three decades. Investment banking division was the initial business of Barclays banking in India. Now Barclays bank is providing its corporate and personal banking services in India. This technique of using selected divisions is because of the market structure of India which is different as compared to Europe, Africa or America. People hesitate to deposit in banks and also there was less focus on borrowing from banks. The trend is changing due to awareness and availability of latest technology. The businesses of selected divisions in India shows that market structure have impacts while working in international economy. Changes in business structure while working internationally are basic requirements due to different values, structures and perceptions of the customers living in international market.
Task 2:

The change in the trends of international economy damaged the working of different organizations. The negative trend of economy of different European and American business environment allows organizations to look for new markets, customers and better economic regions. This is one of the biggest causes of globalization. The other cause is the advancement in technology and the availability of easy ways of doing business. People came to know about latest processes, new innovations in products and services, the differences in the quality of products and services and new ways of communicating. These cause international companies to expand their business across the borders to target the needs and wants of such customers. The concept of international free trade also caused globalization to take place due to the incentives associated with free trade. Availability of better suppliers in the international market causes organizations not to rely on domestic suppliers. Availability on quality suppliers on competitive basis is a reason of globalization. Lower wages rates in other regions as compared to domestic labors in Europe and America encouraged organizations to expand their business in Asian countries which are less costly for infrastructure and low rate employees. All of the above mentioned reasons are primary causes for globalization. Advancement in technology, use of internet, emails, mobiles, and better traveling provided the basis for globalization to take place. The advancement in online technology provides basis for improved Management Information System to collect and analyze data all around the world to make investment decisions.

Implications of Globalization

Better business control through internet, mobiles and MIS provides comfort for organizations to handle business from anywhere in the world. This has made strategic decision making easy and fast as response from customers and management is speedy as compared to previous systems. The improvement in the living style and standard are implications of the availability of international standard products and services in those regions. People came to know about the variety and quality of products due to increased and reliable products and services as a result of international expansions. One can now see and buy products through online websites, emails and mobiles phones as these are easy and less costly way of communication now days. Now people have more choices in term of products, services and prices. One can compare product quality and prices by the help of internet and websites to buy more reliable products according to their budget. The other implications of globalizations are E-Commerce, better procedures, improved manufacturing techniques, computer simulations and low cost products and services due to availability of reliable suppliers and processes in region.

There are different causes and implications of globalizations but still there was a need of laws and procedures for globalization and international business. WTO is an international organization to provide standard rules and regulations for global businesses. Providing guidelines for business expansions in other countries by taking inputs from host and guest countries. Providing a list of social, legal and moral responsibilities to both parties for better business is one of the tasks of World Trade Organization. Different members across the world have provided their inputs and suggestions to generate standard laws for global businesses. Every organization and country has to wok according to these laws. Providing soft barriers for investment organizations and implementing the concept of free trade for global business are the major tasks of World Trade Organization. (THE ASSOCIATION OF BUSINESS EXECUTIVES, 2011)
Task 3: PEST Analysis of Barclays
External Environment Analysis of Barclays Bank
Analysis of business environment through PEST analysis, SWOT analysis, Force Field Analysis and Porter’s Five Forces provides authentic and important information to decision making unit before formulating or implementation of business strategies. The macro and micro forces can impact the strategies of management due to their dynamic nature. External environment analysis is not a onetime process; it is a continuous process to make changes in strategies according to external environment. (T R JAIN, MUKESH TREHAN, RANJU TREHAN, 2009)
PEST Analysis
Analysis of Political, Economic, Social and Technological elements which can affect the strategies and decision made by management is done under PEST analysis.
(P)olitical Analysis
India is a country where people choose their members of parliament through elections in a fix time period. The member of parliament makes policies for foreign investors and multinational companies. There is no clue of intervention of any third power in the political system. Opposition provides suggestions for policies. So, there are fewer chances of changes in the policies for foreign investors which are a good thing for Barclays bank.
(E)conomic Analysis
One of the growing economies of the world with have emphasis on research is an attractive place for foreign investors to invest. The continuous growth in the GDP for the last 10 years provides opportunities for Barclays and other foreign companies to expand in India.
(S)ocial Analysis
One of the countries having high population and high growth rate of population in future provides opportunities for Barclays bank to have more targeted customers. Increase in literacy rate and awareness about latest and up to date services in region provides opportunities for Barclays bank to invest in India.
(T)echnological Analysis
Use of internet banking, mobile banking, ATM, credit cards, e-commerce and social media provides a lot of opportunities for Barclays bank to introduce their up to date and latest services in growing economy of India. Barclays can provide their services to improve banking operations in India which is the reason why India allowed Barclays operations three decades back.
SWOT Analysis of Barclays Bank
(BARCLAYS BANK PLC.)Using strengths of Barclays bank in term of latest technology and operations to get benefits of opportunities available in India in term of large term of customers and markets can be possible by having knowledge about these internal resources and external business environment. SWOT analysis provides this information.
(S)trengths

Global Leader in providing financial and investment services in five major continents.
Strong brand name in corporate banking system having more than 50,000 corporate clients all over the world.
High credibility in the growing market of Pakistan which is also based in Asia.
Personal banking with no limit on minimum deposit provides an edge on majority of competitors.
Focus on risk management.

(W)eaknesses

Need of bailout in UK due to economy crises in recent past.
Bad impact on image due to government funding issue in Zimbabwe.
Less innovation in marketing campaigns related to Indian culture. Barclays is working in India for a long time but they fail to adopt market orientation related to Indian culture

(O)pportunities

Past business experience of India provides an extra advantage to make an expansion decision.
Growing banking sector of India, focus on corporate banking and increased personal funding due to reliability and credibility of Barclays bank.
Investment opportunities in IPL and other Indian leagues due to corporate image of these leagues can provide global promotional opportunities for Barclays bank.
India is a country with wide geographical area and second highest population. India can provide a lot of potential corporate and personal customers by making an expansion decision in other parts of India.

(T)hreats

Increase in interest rates has decreased the funding from personal banking sector. Government banks and investment policies provides more attraction for personal investors due to bigger output of these services.
Domestic banks with cultural related strategies is a threat for Barclays
More international banks are moving towards Indian market due to the availability of business and customers. It can increase the scale of competition in India.

Porter’s Five Forces

The entrance of new multinational banks like HSBC and other are expanding their businesses in India due to soft barriers of entering and availability of customers. This situation can increase the competition scale and number of saturated markets in India.

Services provided by different local and international banks are of the same type. So, it is important to change interest rates and services charges to attract more customers as compared to other banks. The switching of financial services for customers to other banks is easy and not much costly so banks need to develop latest and up to date processes to facilitate customers.

Innovations in the products and services provided by banks, including car financing, house financing and education financing provides opportunities for bank to focus not only on traditional banking system. The local financing institutes with less interest rate for personal borrowing are also a threat for banks in India.

Bargaining Power of Suppliers

Reserve bank of India takes actions regarding monetary suppliers which impact the supply of money in the economy. Customers provide supplies in deposits for personal banking and majority of banks are offering same interest rates. So, there is a need of innovation in services to attract financial suppliers.

Bargaining Power of Buyers

Providing alternative services in term of finance for car, houses, education, businesses and consultancy can bring the bargaining power of customer low as all the banks are providing same type of services with same interest rates.
(Barclays, 2008)
Task 4:
Business Objectives of Expansion
Capturing the potential customers in other attractive regions in other cities
Boosting the current market orientation of Barclays bank in India
Increasing the number of divisions working in India to capture more opportunities
Investment in Global promotional opportunities in tem of Indian Premium League and other Leagues which have global impacts
Focusing on international revenue to carryout domestic and international operations. India can provide opportunities for larger scale of revenue due to its population and geographical area as compared to domestic branches in UK
Providing E-Commerce services in India due to increased level of interest showed by Indian customers for online operations
Capturing corporate customers of India as Barclays bank has strong base and experience of dealing with corporate customers. These customers can provide vast opportunities for revenue as compared to personal or investment banking. Having more than 50,000 corporate customers is good enough experience for Barclays to target corporate banking in India
India is growing economy as compared to major European countries so it can provide more opportunities for business in India. There are number of corporate sectors in India and number of Billionaires businessmen who can provide a lot of opportunities for Barclays bank through their operations
Resistance from Employees
Making any change in the business structure or operations can help to bring employees out of the comfort zone. This is the reason why some of employees resist against any type of change in structure of operations. Making an expansion decision in Indian market means there will be a lot of changes to be made to formulate and implement strategies for new geographical areas and segments. Altering the operations of employees to take their assistance in expanding operations can bring resistance from employees. Providing them incentives associated with successful expansion of Barclays bank can help to bring down any resistance from employees. Expansion can bring a lot of opportunities for managerial positions in new branches. Good human resource management can communicate these opportunities with existing employees by giving them attractive growth and career paths for potential employees to bring down the level of resistance from employees.
(T R JAIN, MUKESH TREHAN, RANJU TREHAN, 2009)
Recommendations
Focusing on promotional activities associated with global marketing can help Barclays in Indian and international market. Recent Olympics, Indian Premier League, Formula race and other global events in India can provide a lot of help for Barclays in their promotional activities if they use these events for marketing purposes.
Proving online services in domestic languages can provide a differentiation edge and USP for Barclays to target more customers.
Barclays should invest in social activities of education and green environment to build a better corporate social image in India
Focusing on innovation in term of substitute products can help to bring more revenue and customers to Barclays bank.
 

SWOT, PEST and Competitive Analysis

1. Introduction and History
A successful example of a European no frills airline is easyJet. Stelios Haji-Ioannou (Greek) founded the company in 1995. It is based on the low-cost, no-frills model of the US carrier Southwest. The concept of easyJet is based on the belief that demands for short-haul air transport is price elastic. That means, if prices for flights are being reduced, more people will fly. Traditionally airline concepts are based on the assumption that airline traffic grows in line with the economy and that cutting prices will only lead to a decrease in revenues. With the introduction of the ‘no-nonsense’ concept to the European market, after its deregulation in 1992, easyJet has proven this theory wrong and goes from strength to strength by actually increasing the size of the market and more recently by taking away passengers from the majors (see www.easyjet.com for passenger figures, financial data and employee statistics). Today, it offers 125 routes from 39 European Airports (see www.easyjet.com for route launch dates), with Luton, Liverpool, Geneva, Amsterdam as base airports  and is operating 72 aircrafts (November 2003).

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November 1995: easyJet starts flights from Luton to Glasgow and Edinburgh with to leased Boeing 737-300 with a capacity of 148 seats at a price of £29 one way. Seats are being sold over telephone reservation system only. In 1996 easyJet takes delivery of its first wholly owned aircraft and goes international with first services to Amsterdam from Luton. One year later easyJet launches its website, easyjet.com which will from 1998 onwards form an integral part of the business concept (and which provides for some 90% of the bookings today  ). In August 2002 easyJet expands its fleet and routes by acquiring British Airways’ low-cost subsidiary Go. In October 2002 the airline signs a deal to purchase 120 Airbus, which will facilitate the airline’s ongoing growth strategy. Up until now, one of the cornerstones of the easyJet’s low-cost model has been to operate a single aircraft type fleet – which so far has been the Boeing 737 series – because uniformity means efficiencies in training, maintenance and operating costs. However, easyJet’s new deal with Airbus is being viewed by the company as “stunning” as the additional costs, which incur through the new type of aircraft are “far outweighed by the financial benefits of this deal”.
EasyJet argues that both Boeing and Airbus aircraft have broadly similar characteristics but that a wider aisle on A319 will make it quicker to embark and disembark, that it has an extra seat on board (150 vs. 149) and that overall the A319 will lower costs by about 10% compared to the current mix of aircraft, which will contribute to lower ticket fares.
(See appendix 1 for Stelios Haji-Iannou’s other easyGroup enterprises).
2. The Mission Statement of EasyJet
To provide our customers with safe, good value, point-to-point air services. To effect and to offer a consistent and reliable product and fares appealing to leisure and business markets on a range of European routes. To achieve this will develop our people and establish lasting relationship (see www.easyjet.com)
The basis of an organisation’s mission statement should answer the question “What business is the company in?” easyJet is doing this by stating that it provides ‘point-to-point air services’ to its customers. That clearly underlines that easyJet is not in the people or food business, neither in the service business as such, but in the mass-transportation business, and as such its model is based on cost efficiency of the mass-transportation business. Moreover, it reflects several decisions about what kind of air service easyJet wants to provide. Evidently, its focus is on ‘European routes’, targeting business and leisure travellers alike. Furthermore, it aims to offer ‘safe, good value’ transportation. easyJet’s mission statement also gives information on the ‘How to get there?’ by putting emphasis on its ‘people’ and ‘suppliers’. What is missing from the statement is the importance of the customer’s point of view, which could be expressed by saying, for instance, ‘we want to be recognised as….’. Also, as the mission statement is the bedrock for the marketing plan it should be more quantifiable, as to how much market share easyJet aims to gain in the future, for example.
3. Competitive Analysis
In order to analyse the airline industry in detail, it is useful to apply Porters five competitive forces.
The threat of substitutes
Minimal threat from other modes of transport like train and car on domestic routes. Usually the time and cost advantage of the low-cost carriers far outweigh the increased comfort and flexibility of trains or cars (e.g. on the route Luton/London to Glasgow a train takes around 6 hours and costs around £80 while a easyJet plane takes just one hour and costs around £29).
On international routes distances are usually too great for car or train to be an alternative to air travel, expect maybe from London to Paris, which can be reached by Euro Star.
The threat of new entrants
High capital requirements negate threat to some extent. easyJet was started with a loan of £5 million, with 2 leased aircraft, but required a £50million investment raised by debt and equity in year two to speed expansion and buy 4 new planes.
The UK low-cost market is quite mature in comparison to the rest of Europe and easyJet, as the biggest operator has quite a comfortable position. However, expansion into new European markets might prove more difficult as established; cash strong holiday firms like TUI are setting up their own low-cost operations (see information about Hapag Lloyd Express, www.hlx.com)
Lack of take-off and landing slots makes it difficult for new carriers to find suitable airports.
Loss leader is required in order to join the low cost market.
The power of suppliers
The price of aviation fuel is directly related to the cost of oil, as an individual company easyJet does not have the power to alter this.
Airplane manufacturers are concentrated in the industry, with Boeing and Airbus providing the majority of commercial planes and with easyJet operating one type of aircraft until recently. easyJet’s deal with airbus however shows that favourable agreements can still be reached. The dependence on spare parts from one manufacturer could pose a risk.
The more easyJet expands the more power it will posses over its suppliers
The power of buyers
Buyer power within the airline industry – and especially the low-cost market – is relatively strong, as customers will often shop around for the better price, particularly with the dependence that the low cost airline has on Internet sales. Price discrepancies can be easily found and exploited by the consumer, meaning that the operator must keep a regular check on prices.
Need for customer loyalty because of low switching costs
Customers have the Civil Aviation Authority (CAA) on their side which provides:
1. protection against the consequence of travel organiser failure for people who buy package holidays, charter flights and discounted scheduled air tickets; and
2. licenses airlines and ensures compliance with requirements of European and UK legislation relating to financial resources, liability and insurance of airlines.  
Rivalry among existing firms
Ryan air, BMIbaby, MyTravelLite and Buzz are major competitors of easyJet in the UK. Virgin Express, Hapag Lloyd Express, Germanwings and Air Berlin already are or might become competitors in the light of future expansion plans. Ryanair is the only one of these so far to have succeeded and shown a continuous yearly profit (see appendix 2 for financial data).
A growing number of tour operators (like Thomas Cook and TUI) are selling air only scheduled seats to reduced prices  .
British Airways and other traditional carriers out of the UK are competitors as well but on a lower scale as they target different market segments (see appendix 3 for more detail).
4. Marketing Mix
Price

Low price is a key element of the brand.
Uses differential pricing; off-peak travelling and booking in advance makes a ticket less expensive.
Discounts for tickets booked online.

Product

“no-frills”, point-to-point air services
also car hire on its website (use of the Internet for bundling products) and links to other easyGroup websites (see appendix 1 for other easyGroup enterprises).

Place/distribution

Internet booking system (over 90% of bookings).
Telephone reservation system.

Promotion

Highlights its number one position among Europe’s low-cost airlines (advertising strap line: “Size matters!”, slogan: “the web’s favourite airline”)
Advocates internal marketing, creative work done in-house.
“No Bullshit” approach (Stelios), humorous, attention-catching campaigns (e.g. the giving away of free tickets on Go’s inaugural flight and Stelios protesting in a orange boiler suit against an increase of airport fees at Luton in a branch of Barclay’s bank which owns the airport).

5. SWOT – Analysis
5.1. Internal Analysis
(S)trengths

Image, differentiation on price and brand.
Is financially successful.
Is being seen as an innovative and flexible organisation.
Has a strong e-business.
Is part of the consortium that has been awarded to run UK’s air traffic control system (NATS).

(W)eaknesses

Has no customer retention policy
Has little or no scope outside of Europe.
Lack of service, flexibility and business focus (such as frequent flyer programmes e.g.) make the low-cost model unappealing for most business travellers.
The two drivers of growth, the focus on price and the focus on convenience (frequent flights, few connections, more nearby airports e.g.) are reaching their natural limits. Differentiation from there remains to be difficult.
easyJet’s own success makes it difficult to recruit and train staff quickly enough.

5.2 External Analysis
Opportunities

Experts predict great potential for future growth in the next years (see appendix 4).
The current recession is favourable as people and businesses are more cost-conscious.
More full-service airlines may withdraw from the regional market to focus on more profitable long-haul routes leaving the market to the low-cost operators.
The short-breaks market, an important market for easyJet grows more rapidly than the UK travel market as a whole .
Reduced aircraft prices

Threats

Difficulties to expand as viable new routes from London are scarce.
Competition is likely to intensify, given the saturated market and the shortage of other options .
Increased competition is likely to lead to greater difficulties in demanding incentives from communities, like the very low fees easyJet received at Luton .
Companies cut on business travel in times of economic downturn and because of new time-consuming security measures travel substitutes like videoconferencing are introduced .

6. Situational Analysis
easyJet seems to be positioned very well with experts predicting excellent growth opportunities for the low cost-sector. Given the saturated market and the shortage of other options in the UK, competition is likely to intensify – inevitably followed by consolidation, an early sign of which is easyJet’s purchase of GO. The UK market offers little growth opportunity, therefore concentration will be on the continental market, a step forward in this direction is setting up a major new base at Berlin, with flights from 11 European cities  , and possibly as well on Eastern Europe. Focus remains on pricing Strategy and expansion of its route network. Promotion needs to persuade people that it is safe to fly
and establish easyJet as Europe’s largest low-cost carrier (as easyJet is already doing in its advertisement: “Size matters!”)
7. PEST Analysis – Marketing Plan
PEST analysis for easyJet for the next 5 years
The following factors are likely to have an influence on the airline industry and should therefore be taken into account when formulating a Marketing Plan for easyJet.
(P)olitico-legal factors

Threat of war in the Middle East
The Air Miles scheme is not considered as a taxable perk by the government in the way that company cars are taxed which may change to allow easyJet to compete on more equal grounds with the likes of BA.
A EU east-enlargement may provide access to viable, new markets.

(E)conomic factors

Likelihood of increasing fuel costs, congestion and other environmental restrictions, as well as the prospect of higher security and insurance costs to reflect the risk of terrorism.
As the recession is likely to last for some more time, business travellers will keep an eye on their travel expenses.
Globalisation should continue to boost traffic in the long-term.
The introduction of the single currency in Europe is likely to bring more business to easyJet as Europe becomes more integrated.

(S)ocio-cultural factors

To win over the French and German publics might cause problems as there appears still to be a general reluctance to use credit cards over the phone and Internet  .
The public are general quite friendly to the prospect of cheap flights. However they may feel begrudged where they see promotions found in newspapers where flight are for £10 only to find that the actual cost is much higher for the particular time or day they wish to fly on.

(T)echnological factors

A key issue will be the extent to which technological advancements – such as the use of the Internet on distribution and cost synergies from industry consolidation – can offset upward pressures on prices and costs.
easyJet has to keep track of technological developments in the field of e-commerce and aircraft manufacture in order to gain a competitive advantage.

8. Conclusion
8.1 Strategic issues facing the airline industry
The face of aviation is gradually evolving. The long-standing problems of the industry- in the form of large numbers of network carriers and substantial over-capacity in many markets – were exacerbated by the events of September 11th (see appendix 5 for a post-Sept. 11th overview). This is likely to pave the way for some acceleration in the process of airline restructuring and consolidation. Experts believe that there is not room for the current multitude of carriers in Europe, and that these will eventually be whittled down to three or four major airlines, with the others absorbed or restructured to focus more on regional traffic. This also represents an opportunity for ‘no-frills’ carriers to increase their market share. Along with this, some restructuring of the industry’s complex and outdated regulatory system will be required.
In the longer term, trend growth may itself slow gradually as the big air travel markets mature. In addition, falling yields, which have boosted air travel growth in the past, cannot be relied upon to persist, at least at the rate they have for the past decade or so. If cost trends are less favourable – for example because of increasing fuel costs, congestion and other environmental restrictions, as well as the prospect of higher security and insurance costs to reflect the risks of terrorism – the scope for lower yields would be less, and this might reduce future growth trends. A key issue will be the extent to which favourable cost trends – such as the impact of the Internet on distribution costs and cost synergies from industry consolidation – can offset these upward pressures on prices and costs. The full-service airlines, saddled with big networks and strongly unionised workforces, cannot easily embrace the management strategies of the no-frills airlines. Moreover, their scope for defensive mergers is limited by competition policy. The ability of international airlines to expand is limited by ownership restrictions (In the US foreigners cannot own more than 25% of a national airline, in the EU the restriction is 49%  ).
The “no-frills” market within Europe is immature relative to that of the US. The sector accounts for only around 5% of all intra – European capacity, though the share is much higher in the UK domestic market and on services between the UK and Europe, closer to 20%. Further strong growth is expected over the next 2-3 years as new operations start up, and new destinations are added to the existing carriers’ networks. However as the UK market becomes saturated, these carriers are likely to focus their development at continental European hubs. The experience of the US market suggests that deregulation will be followed by industry consolidation. So far there has been limited progress in this direction but many are viewing the current crisis as the catalyst necessary to completely restructure the European airline industry . In the US the industry has consolidated into seven major carriers, which carry over 80% of passenger traffic of US airlines. Europe is far more fragmented with the equivalent figure for the seven European majors at only 47%  .
8.2 easyJet’s Future
easyJet has to consider whether it should respond to new entrants by ceding niche-segments or by competing aggressively on price, routes and service in an attempt to drive the entrant out of the market. To make the strategic decision market research on the size of different combinations of pricing and service is needed. easyJet also needs to know how much it costs the competitor to serve, and how much capacity the competitor has for, every route in question. Finally, the new entrant’s competitive objectives are of relevance to anticipate how it would respond to any strategic moves easyJet might make. By obtaining these information residual uncertainty would be limited, and the incumbent airline would be able to build a confident business case around its strategy  . It is advisable that easyJet targets mainly leisure travellers as business often demand frequent flights to a wide range of destinations, seek quality service and frequent flyer programmes, and are willing to pay a premium for these benefits. Also, trying to appeal to widely different customer needs runs counter to the overall trend in service industries, in which distinctive approaches, tailored to different customers, have generally come to dominate  . No real opportunity offers the long-haul business as it is very different, both technically and in customer needs, to short-haul travel. easyJet should continue to focus on price and attempt to connect the dots in its network, which cost less than opening new cities. Thereby, it needs to make sure that a growth in its network and fleet does not lead to higher operating costs. It should also consider putting more emphasis on direct marketing by e.g. introducing a customer retention scheme. To differentiate its brand further on promotional lines, easyJet could introduce a CRM (cause related marketing) scheme, developing a reputation for being a ‘caring airline’, e.g. by selling shares in forest help programmes over its website, collecting foreign currency on flights for charity etc., thereby giving its passengers ‘a sense of psychological comfort and well-being’  when they choose to fly with easyJet. Overall, easyJet has to develop a realistic and accurate assessment of the market-niche to be served. A relentless commitment to quality service and cost control is as important as the discipline to establish a growth plan (see www.easyJet.com for easyJet product life cycle and marketing strategy).
(Word count 3,144)
Appendices
Appendix 1
Under the easy brand Stelios Haji-Iannou has furthermore established and Internet car rental service (easyRentacar), a chain of Internet cafes (easyEverything), a financial services site (easyMoney), a portal site for bargains on the net (easyValue) and a free e-mail service (easy.com). In all his ventures he is using “yield management to extract the ideal margin from each customer”  and keep costs down. Furthermore, yield management “can help to better use price in the marketing mix to best reach the most customers”  . However, there are no cross-shareholdings between easyJet and these other easyGroup companies. easyJey operates independently from the other companies although some cross-marketing agreements do exist. Also, results of the non-airline businesses have been mixed as they have lost £75m in three years  .
Appendix 2
Profit for Ryanair
April – September 2002 Year-on-year increase
151m € (£96m) 71%
Source: Tran, M. (2002)  
See http://www.ryanair.com/download/morganjune.pdf for actual data.
Appendix 3
Compare Airline Traffic Data (Europe) – Air Transport World http://www.atwonline.com/Pdf/worldairlinereport_2002.pdf
Appendix 4
The airline market is currently being re-shaped by the expansion of existing low-cost airlines. It has been estimated that they will expand their European market share from 5% to 25% by 2010, establishing themselves on a long-term basis.
(Source: International Travel News (2003), available on http://www.internettravelnews.com/article/20223 Friday, 28th November 2003)
Low-cost airlines are gearing up to take large chunks out of their rivals. In a decade, low-cost airlines may be the dominant form of air travel in Europe. …. In Europe, no-frills travel accounts for only 5% of European air travel, but it is likely to grow to claim a 12-15% share in the next decade.
(Source: BBC News (2002), available on http://news.bbc.co.uk/1/hi/business/2038192.stm; Friday, 28th November 2003)
 

Michael Kors PEST and SWOT Analysis

A brief Overview of Michael Kors
Michael Kors
Holdings Limited has been regarded as one of the leading brand in the luxury
fashion industry of America. The company was established by designer Michael
Kors in 1981 and the product mix includes the hand bags, watches, footwear, apparel, jewelley, leather
goods and other accessories. Michael Kors is operating more than 550
stores and over 1500 in-store boutiques in different countries across the world
(Michael Kors, 2018).

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Although the
Michael Kors started its operations in 1981 but they opened their first retail
store in 2006. The main competitors of the Michal Kors include Louis Vuitton,
Kate Spade and Coach. The hand bags and accessories are most popular among
teenaged girls all over the world as per the survey of 2016. The company has
focused more on sustainability and corporate social responsibility since the
last year and announced that the company will no longer use animal skin and fur
in the manufacturing and production of any of their products.
The existing markets of Michael Kors include United
States, North America, Asia Pacific, Europe, Germany, Italy, France, Middle
East countries including Dubai, Bahrain and some Asia Pacific Countries.
Besides that, Michael Kors has online presence in many countries where they
don’t have any physical stores. The largest geographical
market of Michael Kors is North America and then Europe and Asia Pacific.
In 2017, in order
to increase their market share, the company acquire the business of Jimmy Choo
PLC and they have also plans to expand their business in some other regions of
the world. Moreover, they opened a store in Waterloo in 2018 in order to expand
their presence in the international market.
The Emerging Market for Entering
For the luxury
fashion and retail industry, Asia Pacific is considered as the most attracting
region that provides numerous opportunities to the fashion retailers.
Similarly, Michael Kors has witnessed remarkable increase in the retail value
sales by implementing their expansion strategy in this region. In the year
2017, the retail value sales of Michael Kors Holdings Ltd were 9% of the total
sales of the company. By keeping this thing mind, the company expanded its
international business operations by using different mergers and acquisitions
strategies. For instance, in Greater China regions such as Taiwan, Macau, Hong
Kong and China, they expand through acquisition of its geographic licensees.
Besides that, they have recently acquired some businesses in North Korea
(Almor, 2013).
On other hand, the
company is facing some serious challenges in the North America as their sales
was less than their previous fiscal year. These challenges make it difficult
for the Michael Kors to acquire or expand more business in the region because
it requires a lot of efforts for the company to rebuild their brand reputation
and sustain long term growth in the United States.
By doing through
analysis of the markets in which Michael Kors is operating, the assignment
suggests that India would be the best region for Michael Kors for expanding
their business as people are becoming more aware of the brands and they are
agreed to pay higher prices for luxury fashion brands as well. Therefore, the
report chooses India for expanding the business of Michael Kors as it is an
emerging market in the retail fashion industry and there is a need to expand
business of the company in this region (Barney, 2014).
In order to check
the feasibility of expanding business in India, an analysis of the macro and
micro environment will be conducted and the best strategies will be recommended
on the basis of that. Under the macro environment analysis, the effect of some
factors like Political, Economic, Social and Technological will be analyses
whereas the micro environment analysis includes the impact of consumers,
suppliers, distributors etc. on the growth of the business.
Macro Environment (PEST)
When expanding internationally, firms usually face new political, legal, social and cultural environments. Consequently, foreign operations have many characteristics that are distinct from domestic operations. Facing a new environment in a foreign country, a firm may feel an uncertainty that may negatively affect its operations in that country, and, to reduce the uncertainty that stems from its foreign operations, may act cautiously in its international expansion process. As noted above, the incremental model also argues that firms develop their international operations gradually over time because firms lack sufficient knowledge about foreign market conditions, and international expansion may require a time-consuming accumulation of foreign market knowledge.

India
is a democratic country and the political environment of the country is greatly
influenced by the government’s rules and regulations, policies and different
ideologies. Government has imposed different types of taxes such as the income
tax, sales tax and service tax and it can be said that the India has a
well-developed taxation system. The government encouraged the international
companies to start their business in the country.

India
has a stable economy and its GDP is increasing with each passing year due to
different policies of industrial reforms. India’s economic environment has
achieved tremendous growth since past few years due to various factors such as
liberalization and business reforms. A constant improvement has been witnessed
in the past few years.

Social
factors play an important role in the fashion and retail industry; however, the
social factors of India are suitable for the business operations of Michael
Kors. There is a flexibility and adaptability in the attitudes, behavior and
culture of the people in India. Moreover, the disposable income of people is also increasing due to
which they are attracting towards luxury fashion brands.

Technology highly impacts the product
development and manufacturing processes of an organization. Besides that, it
also enables the companies to introduce latest cost cutting processes (Barney,
2014). India has high level of technological advancement as it possesses one of
the strongest IT sectors in the world. The country promotes developments within
IT sector, software updates and other technological advancements that enables
the international companies to start their business easily.
Micro Environment (SWOT)
The micro environment of a company is affected by different factors such as suppliers, employees, customers and some others. In order to assess the micro environment, SWOT analysis (strengths, weaknesses, threats and opportunities) is conducted to identify the current situation of the luxury fashion industry in India.
The luxury fashion industry of India is booming rapidly
as different fashion brands including Kate Spade, Calvin Klein, louis Vuitton,
Hermes and Gucci have opened their stores in big cities of the country and
people are inclines towards buying luxury fashion products. The retail industry
of India is growing at the rate of 40% every year and its estimated worth is
$200 million. Besides that, it has been estimated in a marketing report that
the Indian luxury fashion goods market was worth around $3.4 billion in 2016
(Quartz India, 2018).
The threat in the Indian luxury fashion industry is not
very high because very few international brands have opened their stores in the
country. However, it is good opportunity for Michael Kors to open their stores
at different cities of the country and also make their digital presence strong
because the trend of online shopping is also increasing among consumers in
India. Moreover, some of the considerable threats and challenges that may face
by some international brands for market entry includes growing market of
counterfeits, rental costs, high tax rates and lack of suitable infrastructure
in the country (Economic Times, 2018).
Target Audience of Michael Kors in India
Basically, the
target market of Michael Kors is both men and women under the age of 25-54
years with annual income above $50, 000 (Business Wire, 2013). However, the
teenage girls and boys also use the luxury products of Michael Kors; the
handbags and shoes are widely popular among young girls all over the world. For
the long term growth and marketing strategy, Michael Kors target young
customers who overlooked by luxury brands and having affluent demographics (Almor
(2013). Similarly, they can target the same segment of the market for their
products as the youth population of India is highly energetic, working and
spend more on luxury goods market.
Most Appropriate Entry Mode
For entering into
a new market, Michael Kors always uses the innovative approach for which it is
also termed as an omni-channel retail (Nasdaq, 2018). For expanding its
business in India, purchasing Liscece has suggested as the most appropriate
approach. The licensee may find that the cost of the agreement is less than if
the development were accomplished internally. From the licensor’s point of
view, the use of a licensing agreement might be a feasible option because risks
associated with operating facilities and holding inventories can be reduced. However,
the licensor may face fundamental problems and certain risks. By transferring
rights to the licensee, the licensor undoubtedly loses a measure of control
over the asset. The licensor also risks developing a future competitor after
the licensing agreement expires (Hoffman et al., 2016). Even before an
agreement is terminated, the licensor may have to compete with the licensee
because the licensee has made improvements on the licensed technology that make
the original patents obsolete.
In the process of
international expansion, firms usually begin with exporting and then come to
directly manage foreign operations through FDI. Investigating international
expansion within a specific operational form only, both the export development
models and the FDI development models fail to view export or FDI as part of a
firm’s overall choices among diverse operational forms. Given the limitations
of the export development models and the FDI development models, attention must
be paid to the whole process of internationalization that a firm may implement
over time, and in particular to the incremental model (Autio et al., 2011).       
A substantial
amount of research investigating firm internationalization has focused on the
exporting activity of firms. The exporting development models explain how firms
change their exporting operations over time. When engaged in exporting, firms
may face uncertainty due to lack of information on foreign markets and
operations. Such uncertainty is greater for firms at initial export stages when
firms usually have limited knowledge about not only exporting itself but also
foreign market characteristics (Frasquet et al., 2018).
Firms at initial
export stages thus enter li foreign markets via indirect export methods, such
as export merchants, trading companies, resident buyers, or export agents. As
firms gain more experience and knowledge, their level of uncertainty about the
export market gradually diminishes (Al‐Aali & Teece, (2014). Firms at
advanced stages thus come to use direct export methods, such as agents,
distributors, and sales branches. The models identify major facilitators and
inhibitors in the export development process. The pattern of firm behaviors in
the export development process depends largely on the type and amount of
organizational resources available for export expansion (Aversa et al., 2018).
Firms in more advanced stages need to commit more organizational resources to
their expansion efforts. Organizational resources thus either facilitate or
inhibit export expansion. Foreign market experience also facilitates or
inhibits foreign expansion because it determines the level of uncertainty firms
face.
The effect of foreign market uncertainty on
incremental expansion is expected to vary from firm to firm, moderated by
variables at the firm, industry, and host country levels. The amount of
resources available to a firm may affect its international expansion process.
They also argue that firms strive to minimize the risks. As other researchers
maintain, variations in international expansion can be explained, to a
significant extent, by organizational and management characteristics. Thus,
variation in firm resources and risk-taking orientation may affect a firm’s
propensity to undertake incremental international expansion (Vicari, 2016).
The Product Mix
The product mix of the Michael Kors includes hand bags, shoes, accessories, jewelry, watches and other accessories for men and women both. The company do not need to change its product mix while entering into India because people in India are trendy and acceptancy is higher among them. Moreover, hand bags of Michael Kors are more popular among teen age girls all over the world so they can also same product mix to people in India with some affordable prices (Ritala et al., 2014). The response of young people in India is fast and quick towards changing fashion habits and retail trends.
References
Al‐Aali, A., & Teece, D. J. (2014). International entrepreneurship and the theory of the (long‐lived) international firm: A capabilities perspective. Entrepreneurship Theory and Practice, 38(1), 95-116. doi:10.1111/etap.12077Almor, T. (2013). Conceptualizing paths of growth for technology-based born-global firms originating in a small-population advanced economy. International Studies of Management & Organization, 43(2), 56-78. doi:10.1108/03090561211202602 Autio, E., George, G., & Alexy, O. (2011). International entrepreneurship and capability development: Qualitative evidence and future research directions. Entrepreneurship: Theory and Practice, 35(1), 11-37. doi:10.1111/j.15406520.2010.00421.x Autio, E., Pathak, S., & Wennberg, K. (2013). Consequences of cultural practices for entrepreneurial behaviors. Journal of International Business Studies, 44(4), 334-362. doi:10.1057/jibs.2013.15 Aversa, P., Haefliger, S. and Reza, D.G., 2017. Building a winning business model portfolio. MIT Sloan Management Review, 58(4), p.49.Barney, J. B. (2014). How marketing scholars might help address issues in resource based theory. Journal of the Academy of Marketing Science, 42(1), 24-26. doi:10.1007/s11747-013-0351-8Fernfort University (2018). Michael Kors Holdings Limited PESTEL & Environment Analysis. Retrieved from http://fernfortuniversity.com/term-papers/pestel/nyse4/713-michael-kors-holdings-limited.phpFrasquet, M., Dawson, J., Calderón, H. and Fayos, T., 2018. Integrating embeddedness with dynamic capabilities in the internationalisation of fashion retailers. International Business Review.Hoffman, R.C., Munemo, J. and Watson, S., 2016. International franchise expansion: the role of institutions and transaction costs. Journal of International Management, 22(2), pp.101-114.Quartz (2018). “If you’re looking for affordable luxury, India is the ultimate shopping destination”. Retrieved from https://qz.com/1030728/indias-luxury-market-stands-apart-from-the-rest-of-the-world-because-its-actually-affordable/The Economic Times (2018). “India’s luxury market to cross bn by year-end: Assocham”. Retrieved from https://economictimes.indiatimes.com/industry/cons-products/fashion-/-cosmetics-/-jewellery/indias-luxury-market-to-cross-30-bn-by-year-end-assocham/articleshow/63110503.cmsRitala, P., Golnam, A. and Wegmann, A., 2014. Competition-based business models: The case of Amazon. com. Industrial Marketing Management, 43(2), pp.236-249.Vicari, A., 2016. The international expansion of fashion retailers through franchising networks: goldenpoint case study (Bachelor’s thesis, Università Ca’Foscari Venezia).Nasdaq (2018). What are Michael Kors’ Strategies for Long-Term Growth? Retrieved from https://www.nasdaq.com/article/what-are-michael-kors-strategies-for-long-term-growth-cm911528
 

Nim’s Fruit Crisp PEST Analysis

Table of Content

Sr. no.

Title

Page no.

1.

Table of diagrams and charts

3

2.

Executive summary

4

3.

Company description

5

4.

 4.1.

4.2.

4.3.

4.4.

4.5.

4.6.

4.7.

Industry analysis

Political factors

Economical factors

Social factors

Technological factors

Environmental factors

Legal factors 

Competitors

6-11

5

5.1.

5.2.

5.3.

Market analysis

Packaged food

Healthy snacks

Fruits and vegetable chips

12-13

6

6.1.

6.2.

6.3.

6.4.

6.5.

6.6.

Target market

Demographic

Geographic

Psychographic

Behavioral 

Culture Consideration

Buyer Behavior

14-19

7

Conclusion

20

8

References

21-23

9

Appendix 1

24

10

Appendix 2

25

 

 

Table of Diagrams and Charts

Sr. No.

Figure No.

Page No.

1.

 

 

2.

 

 

3.

 

 

4.

 

 

5.

 

 

6.

 

 

 

 

 

 

 

 

 

 

Executive summary

Nim’s fruit crisp is a UK based company which in recent years gain popularity in UK region receiving award for most innovative business idea in year 2017. The company is now 5 years old and is now well established in UK. So now when company will export chips to India there are few things it needs to take care about like India’s macro environment as in India’s political issues, economy of the country, culture, environmental issues etc. Nim’s crisps is segmented as packaged food>> healthy snacks>> Fruits and vegetable chips. The target market is classified on basis of demographic, geographic, psychographic and behavioral aspects of the customers.

Basically, it can be seen that India is a safe and stable growth option for the startup like Nim’s crisps and has a first mover advantage as there is no company providing fruits and vegetables chips is present in India.

Company description

In 2012, Nimisha raja with the idea of air-dried fruit chips. The chips were first launched in the UK market in the name of Nim’s fruit crisps. Being a mom and also being an entrepreneur café owner, the concern was the lack of healthy yet tasty snack which would be loved by both aults and children.

It is a Private limited company Located in 3/1 trinity trading estate, tribune drive, sittingbourne, United Kingdom. Nim’s are official partners with change4life.

Nimisha developed her products first sourcing exceptional quality fruit and then perfecting the process of air-drying them for crispness and sweetness of flavor. Passionate about British manufacturing, last year Nimisha took a step to improve the quality and consistency of her already award-winning products by setting up her own UK-based factory. 

Her mission is to make snacks which are healthy and tasty and liked by both children and adults. 

Products: Five fruit ranges: apple; pear; pineapple; melon & orange; and pineapple &kiwi. Three vegetable range beetroot&parsnip; cucumber&tomatoes; and peppers&courgette.

Industry analysis

Asia Pacific is the fastest growing region for organic chips market owing to developing economy and improved disposable income in the emerging markets of India and China.

Nim’s fruit crisp is at its initial stage and so the expansion should be taken into consideration thinking of various majors which will be in favour of the company to have speedy and safe growth.

Here is the PESTEL analysis which will help us with things we need to keep in mind before entering the Indian market place.

4.1. Political factors

Political stability:

India has made major strides towards development in a short span of time because of political stability and the country has ignited a new hope in the world. Also, after the current government the country has faced lots of changes making it easier for new business to enter.

Recent campaign by government “Hum fit toh India fit” is to motivate people to live a healthier lifestyle.

 

Trading policies:

In the new regulation, which was notified earlier this month, the FSSAI said: “No article of food shall be cleared from the customs unless it has a valid shelf life of not less than 60 per cent at the time of import”. (The Economic Times, 2018)

Taxation policies:

In recent times a new common tax has been implied for the country in common known as goods and services tax, making it easier for companies to work across different states.

While, there are few taxes which are implied on imported goods such as custom tariffs and basic custom duty.

 

4.2. Economical factor

National income 

Though there was a time of demonetisation where the economy of India became weak, but it recovered really soon with the consistently growing GDP. The imports of food industry in india is favourable and huge and growing at the rate of 20% due to increase in disposable income in middle class society because of which purchasing power of people is increasing.

Economic growth:

According to the IMF 2017 economic forecast, India’s GDP is worth $2.4 trillion making it the 7thlargest economy in the world by nominal GDP. The GDP will grow by 7.0% in FY18 which is expected to increase to 7.4% by FY20. (The World Bank Group, 2018)

 

4.3. Social Factors

Changes in life-style:

India is one of the most attractive markets in the world in many sectors. Standard of living is gradually improving, and country has a growing middle class with good disposable income.

Education levels: 

As the result of increasing educated class of society and the increasing spending capacity of the people in india the youth now in diverting towards the healthier lifestyle. Also, now they are educating parents to develop a healthier lifestyle.

4.4. Technological Factors

With technology advancing, it helps food corporations reach consumers in new and easier methods. In India no. of people using internet is growing at rapid speed it’s the third largest user on internet in the world, which can help company to develop an online market later in the stage.

4.5. Environmental factors

India’s climate is regularly fluctuating which makes it difficult to keep food in open air for longer time. So, heavy handling and be left in open air longer than anticipated are area’s to be concerned about and must be according to India’s climate.

Also importing in India gets easier and cheaper through the means of water transport, which covers major stated like Maharashtra and Tamil Nadu.

4.6. Legal factors

Industry-specific regulations (labeling):

Labelingis an important element for products being exported to India. English is the favorable language for labeling. 

As per a Notification issued by the Ministry of Commerce on November 24, 2000, all pre-packaged commodities (intended for direct retail sale only) imported into India must carry the following declarations on the label:

Importing regulations

 

 

 

Consumer laws

Consumer laws of India:-

4.7. Potential Competitors

As per the current scenario there is no such competitor of Nim’s crisps in Indian market but in future years companies like ITC, Kellogg’s, Pepsico etc who are planning to add variant in their products which are healthy but still haven’t come up with that yet. There is competitive advantage as there is no brand with organic chips in the market but also there is a disadvantage as company will have to create a buzz about this product in Indian market. Also, it will have to do localization in flavors. As off now competitors can be Kellogg’s (Pringles), Pepsico (Lays) etc.

Market analysis

5.1. Packaged food

India is 5th highest consumer of packaged food in world and 2nd in Asia with average sales of about 34 million tons of food and about 40 billion dollars. The sale is expected to grow with the rate of 7% per year making it 3rd largest consumer till year 2020.

The market is expected to grow rapidly due to rising income and changing lifestyle of middle-class families. Though the urban region accounts for 80% of the packaged food consumption there is huge potential in semi-urban and rural areas.

Ethical labels, branding and nutritional information are the reason for the growth of packaged food in India. Consumers are now more concentrating on the nutritional benefits, ingredients and value for money before purchasing packaged food.

The main items for packaged foods include frozen food, canned food, meal replacements product. While some of the emerging products are ready-to-eat, healthy snacks, probiotic drinks etc. Also, 60 percent of our food consumption is in the form of snacks or mini-meals today.

5.2. Healthy snacks

Recent reports have also indicated that healthy organic packaged food industry will grow by 25% in next 3-4 years. The urban consumers have adapted the healthier options in packaged snacks and now also have a growing demand for organic packaged food. 

Healthy snacking is on the rise because of the increase in disposable income, a tradition of having snack meals in middle of meals and an easy go to healthy food in fast-paced lifestyles.

Because of the increasing demand of the healthy food due to changing lifestyle companies like ITC and Britannia are also adding healthy variant to their list of products. This shows the lot about evolving future of the people towards healthy snacks.

In year 2017 it was reported that fruits snacks accounted for highest share of retail value sales in NH packaged food followed by few others with all these made up of natural ingredients with less processed than other food products.

5.3. Fruits and vegetable chips

On the basis of the source, it is segmented into vegetable, fruits, cereals, grains, and others. Among all, organic chips one which is sourced from vegetables is dominating the market owing to easy availability and high production volume of the commodity on a global platform.

Though there is no big and specific segmentation based on fruits and vegetable chips in Indian market but many companies like ITC and Kelloog’s are planning to add a variant of healthy chips in their products. So Nim’s have an advantage of entering the market first.

Target market

Snacking has always been an option as a go to food in middle of heavy meals for Indian culture and will continue till decades, but there has been surely one change that is the changing lifestyle of people and growing health awareness because of which healthy munchies has become popular snack.

6.1. Demographic

Age: Our target market can be anyone from teenagers to adults and aged people who loves mid snacks and loves to eat healthy food with pride and happiness.

Occupation: People belonging from any occupation from earing parents to students who have busy lifestyle and needs something healthy to fill their stomach.

Income: The income level can be middle class earning disposable income to the rich class of the society.

Education: The main consumers will be the educated class of India who are aware about health disadvantages caused by savory snacks and instead want some healthy snacks.

As per the graph, our most important customers while targeting the market will be students and the youth of the nation belonging to the age group of 16-25.

(Nielsen, 2018)

(Nielsen, 2018)

6.2. Geographic

As we know India is a very vast country in terms area and population both, so it makes it little harder for a startup to reach to every corner of the country. So, our main focus in terms of location will be places where we can reach mass and the educated class of the society resides.

In recent reports it is seen that supermarkets channel has dominated the organic chips market. Above mentioned cities will help us gain popularity and help reach mass. Later we can reach out to the tier 2 and tier 3 cities to gain market share.

Online market: Also, with the development in technology people now like to purchase online whether its clothes or grocery items, so there can be scope for an online market later in the stage to expand distribution.

6.3. Psychographic

Activities: The main target market based on their activities, are the people who are dieting or are conscious about the health and gym freaks. So, these people are the ones we can target based on their activities and interest.

Priority: Also, people with various heart disease or high cholesterol have a routine to follow.

(Nielsen, 2018)

6.4. Behavioral

People now can be classified into 3 behavioral patterns in snacking industry: pleasure eating (people who want to experience organic snacks with the taste as addition to it are our customer), regular treating and Non-Indulgence.

(Nielsen, 2018)

(Nielsen, 2018)

Overall, Fruit snacks industry will take growth with the increasing health awareness amongst the people and will further increase due to easy storage as compared to other ready to eat and fresh foods and with increasing product variants.

6.5. Buyer behavior

As we know buyer behavior is mostly based on time, money and effort people put before purchasing an item. Here, in case of Nim’s fruit crisps it is low involvement as the product price is really low, so the amount of time people here will spend to buy the product is also low. Also, it is found that consumer loyalty towards a product largely depends on the availability of product at convenient supermarket during their once to twice visit in a week.

6.6. Culture consideration

As Indian market mostly consists of buyers who are vegetarian there is upper hand for the company. In addition to that, product is less processed and organic and with the changing time people are become vegan, which is plus point for the product.

Conclusion

As seen in the report there is huge potential in Indian market for the product in all terms. Either its macro environment or the market study of the place. We can see how organic food and less processed food is in demand for the market because of the growing health concern and increasing disposable income of middle class. Also, company has first mover advantage and only potential competitors for now. Company should gain trust of the consumers before already existing companies comes up with the same product. Also, one thing that should be taken care about is the flavor should be according to Indian taste. Also, India has a biggest growing market of packaged healthy snack food which give company an advantage to enter the market easily with the product in demand. The only disadvantage which could possibly harm the company’s profit margin is, if the acceptability of the product in Indian market due to lack of brand recognition in less. So, one thing which company needs to keep in mind is availability of the product at supermarkets at all time because that the driving factor to increase brand recognition and brand loyalty. Overall, company has a great opportunity in Indian market just few things should be taken care of before and after entering the market and selection of target market should be specific.

References:

 

Nim’s Fruit Crisps. (2018). About Us – The Original Air Dried Fruit & Veg Crisps | Nim’s Fruit Crisps. [online] Available at: https://nimsfruitcrisps.com/about-us/ [Accessed 12 Nov. 2018].

Beta.companieshouse.gov.uk. (2018). NIM`S FRUIT LIMITED – Overview (free company information from Companies House). [online] Available at: https://beta.companieshouse.gov.uk/company/06961718 [Accessed 12 Nov. 2018].

Digitaljournal.com. (2018). Organic Chips Market Analysis 2018 | Size, Share, Future Growth, Regional Trend, Leading Players Review, Business Prospect | Industry Research Report by Forecast to 2023 – Press Release – Digital Journal. [online] Available at: http://www.digitaljournal.com/pr/3759246#ixzz5Vl5PRorE [Accessed 12 Nov. 2018].

Digitaljournal.com. (2018). Organic Chips Market Analysis 2018 | Size, Share, Future Growth, Regional Trend, Leading Players Review, Business Prospect | Industry Research Report by Forecast to 2023 – Press Release – Digital Journal. [online] Available at: http://www.digitaljournal.com/pr/3759246#ixzz5WVY3oCNv [Accessed 12 Nov. 2018].

Anon, (2018). [online] Available at: https://www.nielsen.com/content/dam/nielsenglobal/eu/nielseninsights/pdfs/Nielsen%20Global%20Health%20and%20Wellness%20Report%20-%20January%202015.pdf [Accessed 12 Nov. 2018].

Quartz India. (2018). For Indians, living a healthy life trumps travelling the world or making better friends. [online] Available at: https://qz.com/india/947904/for-indian-consumers-living-a-healthy-life-trumps-travelling-the-world-or-making-better-friends/ [Accessed 12 Nov. 2018].

The Economic Times. (2018). Global Investment Immigration Summit 2018 | Economic Times. [online] Available at: https://economictimes.indiatimes.com/immigrationsummit.cms [Accessed 12 Nov. 2018].

Indianretailer.com. (2018). How healthy Snacking items are changing retail selves?. [online] Available at: https://www.indianretailer.com/article/sector-watch/food-and-grocery/How-healthy-Snacking-items-are-changing-retail-shelves.a6215/ [Accessed 12 Nov. 2018].

India and Analysis, I. (2018). Indian FMCG Industry Analysis. [online] Ibef.org. Available at: https://www.ibef.org/industry/fmcg-presentation [Accessed 12 Nov. 2018].

International, E. and International, E. (2018). Naturally Healthy Packaged Food in India. [online] Euromonitor.com. Available at: https://www.euromonitor.com/naturally-healthy-packaged-food-in-india/report [Accessed 12 Nov. 2018].

International, E. and International, E. (2018). Health and Wellness in India. [online] Euromonitor.com. Available at: https://www.euromonitor.com/health-and-wellness-in-india/report [Accessed 12 Nov. 2018].

Pwc.in. (2018). [online] Available at: https://www.pwc.in/assets/pdfs/industries/retail-and-consumer/rc-wellness-report-20120829.pdf [Accessed 12 Nov. 2018].

Fnbnews.com. (2018). FNB News – “India to be world’s 3rd-biggest packaged food market” | FNB News. [online] Available at: http://www.fnbnews.com/Interview/india-to-be-worlds-3rdbiggest-packaged-food-market-43250 [Accessed 12 Nov. 2018].

Gminsights.com. (2018). Fruit Snacks Market Size, Price Trends – Industry Share Report 2024. [online] Available at: https://www.gminsights.com/industry-analysis/fruit-snacks-market [Accessed 12 Nov. 2018].

Appendix 1

Appendix 2

 

PEST and Organisational Analysis of Tesco

Portfolio 1:

Key characteristics of Tesco:

One of the many key characteristics of Tesco is that it is a Public Limited Company (PLC), which essentially means any member of the public can buy shares. Another factor to take into consideration is that it has limited liability. Moreover, this is advantageous for a large company such as Tesco because they can receive a higher influx of investors making the company more valuable/ give a more prestigious profile (increased popularity etc.). However, there also disadvantages too, such as more exposure to public scrutiny because Tesco’s financial statements are published online for anyone to see (Tutor2u, 2018).

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Additionally, another key characteristic of Tesco is the organisational structure. Due to the fact that Tesco is a large organisation; it has a tall structure. The total number of employees is over 440,000 and they have over 6,800 stores located worldwide (Tesco PLC, 2018). This leads to a long chain of command via different levels of hierarchy which is shown in the diagram below (Marked by Teachers, 2016).

Finally, the last key characteristic is that Tesco have expanded into other markets. Own brands such as Tesco Mobile and Tesco Bank have been created. Due to changes in the market, they needed to respond effectively and expand their market. Unfortunately, one disadvantage is that already existing companies such as Vodafone, Three and EE have already built up their brand reputation, whereas Tesco is a relatively new/emerging competitor within that specific market. According to the Statistisa website as of last year Vodafone (21%) and Three (12%) had a much higher market share percentage- compared to Tesco Mobile (6%) (Statista, 2018). However, the pros outweigh the cons substantially because Tesco can not only delve into new sectors and evolve more as a company, but they can also expand their customer base. In the long run, this will lead to an increased amount of profit generated overall.

PESTEL Analysis:

Political:

Tesco operates in 13 countries (Tesco, n.d.), therefore Tesco is exposed to many political factors that can affect the operations of Tesco such as tax rate. For instance, lower tax rates can either make or break a business. Lower tax rates mean more money to spend which could increase sales for Tesco. However, customers will be able to afford more expensive products that are rich in quality which could lead to losing customers to higher end supermarkets like Waitrose.

Another prevailing issue is Brexit which is currently occurring in the UK, however, the official date that the UK will no longer be part of the EU is 29th March 2019. Brexit may impact the supermarket sector negatively because a fall in the value of the pound could lead to higher food prices in the UK as the costs of imports will increase. This means that in order for Tesco to cover their increased cost(s) spent on imports they will increase the prices of their products/services.

Lastly, if there is war and/or conflict(s) in places where Tesco’s suppliers are based, then supply may be affected. Tesco has a huge customer base and serves thousands of people every day in their stores, which means huge demand for their goods/products. Moreover, conflict can cause supply demanded to decrease and may even cause production to go to a halt. It can affect investment in conflict-affiliated countries as well.

Economical:

One Economical aspect are interest rates, which may affect Tesco in a negative way because business costs may increase. In turn, Tesco will need to raise prices of products to cover costs. However, this will have a negative affect because customers will go to rival supermarkets where prices are cheaper. Conversely, a decrease in interest rates will have a positive impact on Tesco because for example, machinery and the cost of borrowing will be cheaper.

Another positive impact is it will increase investment and drive investors seeking higher returns for their money. Moreover, the cost of borrowing will decrease meaning that customers have more spending money and more disposable income. In relation to Tesco, this means that customers will spend more at their stores meaning more profit.

The current inflation rate is 2.4% (RateInflation, 2018). Any fluctuation in the inflation rate can affect Tesco in both positive and negative ways. Low inflation rate can lead to disruption in business planning and lead to lower capital investment. On the other hand, high inflation rate is bad and can affect currency exchange rates which can lead to higher prices as imports of products for Tesco will be at a higher price.

Social:

Ageing population is a very important factor for Tesco to take into consideration because the population is growing. In the UK alone last year, around 18.2% of the UK population were aged 65 years or over at mid-2017, compared with 15.9% in 2007, this is projected to grow to 20.7% by 2027 (Coates, 2018). However, as the population is ‘ageing’, customers are likely to be older (as presumably healthcare will be better) so products may need to be adapted to satisfy customer needs.

Furthermore, it also includes changes/shifts in lifestyle and culture. Specifically, I will be explaining about how much the Muslim population has grown (and is predicted to grow). Due to this factor, it means that Tesco would need to increase the amount of halal food that they already provide in their stores around the world. Failure to do so can lead to Tesco losing a lot of money as Muslims are an increasing customer base. As you can see from the graph below, it shows that Muslims are predicted to be the fastest growing religion.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technological:

Technology has massively impacted Tesco regarding reducing costs, increasing efficiency etc. Machinery such as self- scan tills can reduce the number of workers, which will reduce the number of salaries that need to be paid. Due to technology, computers/tablets are used more and more which saves time.  However, one factor that Tesco must be careful of is making sure that the company’s data is secure and safe. Furthermore, Tesco will soon be using radio frequency identification (or RFID for short). RFID automatically counts and removes stock after sales which is helpful as Tesco employees would know if something is running low on stock. Depending on popularity more can be ordered and vice versa if the products are not selling as much.

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Additionally, online shopping has had a positive impact on Tesco because customers who are busy can still order and purchase products 24/7. The customer base of Tesco will increase as customers can order from the comfort of their own home. For example, people may not be able to in-store due to childcare reasons or someone may be physically disabled making shopping in- store a difficult task.  This will increase Tesco’s market share and will allow Tesco to have an advantage over their competitors.

Environmental:

The environmental factor of Tesco relates to external factors such as pollution. Tesco have been heckled on numerous occasions regarding their plastic bags and bio-degradable. The bags themselves, are supposed to decompose within three years. But it also depends on where the bags are dumped because they need to be presented to warmth and daylight for particles in the plastic bag to separate quicker. Any small abandoned plastic particles could hurt winged creatures like birds etc.

Tesco, are also trying their best to increase their sources of renewable energy. Tesco has announced it will run 100 per cent on renewable electricity in the UK and Ireland this year and worldwide by 2030 (Johnston, 2017). Moreover, Tesco works with Sustainable Fisheries Partnership (SFP) which allows there to be plenty of fish while meeting the needs of their customers by providing good quality fish for a decent price (Tesco PLC, 2018). The partnership enables the fish to repopulate and makes sure that species do not become endangered.

Legal:

The legal factors of Tesco concerns specific laws including the Minimum Wage Act, Health and Safety at Work Act etc. According to the Health and Safety at Work Act (introduced in 1974) employees must work in a safe environment. For example, there shouldn’t be any exposed cable wires etc. to prevent any accidents such as electrocutions.

Government policies and legislations directly impact the performance of Tesco. Failure to comply with them could risk in getting fined, or stores getting closed down- in a worst-case scenario. One example of this is that Tesco was fined £95,000 due to them breaching five of the Fire Safety Orders, later pleading guilty at Wood Green Crown Court in April 2010 (Johns, 2015). Moreover, it can leave Tesco with a negative reputation which means that they could lose customers, therefore, decreasing profit. Another example of Tesco failing to comply with the legal factors was the Tesco horsemeat scandal back in 2013 which meant that nearly £300 million was wiped off their market value according to The Guardian (Fletcher, 2013).

Business Functions:

I will now be evaluating two important business functions and how Tesco might address the issues identified within my PESTEL analysis; the two functions that I have chosen are finance and operations. Firstly, is finance which involves profit, revenue and so forth. As of February, last year Tesco made £57.5 billion in revenue and £1,298 million profit before tax (Tesco PLC, 2018) . I have chosen finance because it relates to the legal factor of my PESTEL analysis. One issue is the National Minimum Wage (NMW) Act put in place in 1998. Therefore, it is imperative that Tesco pay their employees the correct wages as well as adhering to the National Minimum Wage Act. Failure to comply could lead to Tesco getting fined and taken to court for misconduct of the law.

Finally, the second business function I have chosen is operations, which they have already been successful with as they have opened many stores worldwide in 13 countries (Tescopoly, 2018). I have decided to link operations to the environmental factor of my PESTEL analysis. One issue that could be tackled is sustainability for the future. For example, it is vitally important (in my opinion) for Tesco to focus on farming and suppliers because this is where Tesco’s fresh produce is from. Without suppliers Tesco would not survive or would have to grow their own crops which would be expensive, time-consuming and so on. Furthermore, by Tesco coming up with ways to stay more sustainable such as preventing overfishing it shows that’s Tesco wants to the operations of the company.  By ensuring that operations are run efficiently, it can lead to a better economy in the long run. This shows that they’re an ethical business via trying to reduce their negative impact on the environment. Due to this, Tesco may attract more customers leading to more profit overall.

Bibliography

Tutor2u, 2018. Public Limited Companies. [Online] Available at: https://www.tutor2u.net/business/reference/public-limited-companies [Accessed 08 12 2018].

Tesco PLC, 2018. Our businesses. [Online] Available at: https://www.tescoplc.com/about-us/our-businesses/ [Accessed 08 12 2018].

Marked by Teachers, 2016. Tesco organisational structure. [Online] Available at: http://www.markedbyteachers.com/as-and-a-level/business-studies/tesco-organisational-structure.html[Accessed 08 12 2018].

Statista, 2018. Market share held by mobile operators in the United Kingdom (UK) 2018, by subscriber. [Online] Available at: https://www.statista.com/statistics/375986/market-share-held-by-mobile-phone-operators-united-kingdom-uk/[Accessed 08 12 2018].

Tesco, n.d. TESCO WORLDWIDE. [Online] Available at: http://www.tescopoly.org/worldwide[Accessed 06 12 2018].

RateInflation, 2018. UK Inflation summary for October 2018. [Online] Available at: https://www.rateinflation.com/inflation-rate/uk-inflation-rate[Accessed 06 12 2018].

Coates, 2018. Overview of the UK population: November 2018. [Online] Available at: https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/articles/overviewoftheukpopulation/november2018[Accessed 06 12 2018].

Johnston, 2017. Tesco to switch to 100% renewable electricity this year in UK and by 2030 worldwide. [Online] Available at: https://www.independent.co.uk/environment/tesco-switch-renewable-lectricity-energy-uk-2017-by-2030-worldwide-supermarket-a7739076.html[Accessed 06 12 2018].

Tesco PLC, 2018. Seafood policy. [Online] Available at: https://www.tescoplc.com/reports-and-policies/seafood-policy/[Accessed 06 12 2018].

Johns, 2015. Top 25 Expensive Fines for Fire Safety Breaches. [Online] Available at: https://www.staylegal.net/top-25-expensive-fines-fire-safety-breaches/[Accessed 08 12 2018].

Fletcher, 2013. Horse meat scandal wipes £300m off Tesco’s market value. [Online] Available at: https://www.theguardian.com/business/marketforceslive/2013/jan/16/horse-meat-tesco-market-value-shares[Accessed 06 12 2018].

Tesco PLC, 2018. Financial performance. [Online] Available at: https://www.tescoplc.com/investors/reports-results-and-presentations/financial-performance/[Accessed 09 12 2018].

Tescopoly, 2018. Tesco worldwide. [Online] Available at: www.tescopoly.org/worldwide[Accessed 09 12 2018].

 

 

Green Tea Organics PEST, SWOT and Porter’s Analysis

When an organization gets prepared to step into the international market, it has a lot of things to do. The term “marketing” will always be an inevitable term for them whether they are supplying the products domestically or internationally. There are many differences between the domestic and international business in terms of marketing.
Whenever an organization sees itself doing great in the domestic market, it also aims to capture the international market. But capturing the international market is not an easy thing. It needs a lot of research, planning and effort. The managers need to do understand all the complexities and diversities of international marketing. After understanding these things, they also need to build up the skills, aptitudes and knowledge so they can achieve their target in the international level.

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There is a need for strong research and development team in the organization to learn about the need of the products in the market and also to learn about how to establish their brand in that particular country for attracting and satisfying the new range of customers. There is a need to perform the PESTLE analysis- political, economic, social, technological, legal and environmental analysis. They also need to learn about the strengths, weakness and the opportunities of the organization in that market.
As the consumption of tea in Malaysia is increasing day by day and there is a growing need for organic tea, Green Tea Organics Limited, a recently formed organization thought of exporting organic tea to Malaysia. This report will focus on the external environment analysis by Green Tea Organics Limited. It will also try to analyze the strengths, weakness and opportunities and at the end, this report will try to design some marketing strategies for Green Tea Organics Limited for coping up with the market.
Planning is always defined as a systematic way for relating things to the future. It is basically an attempt which is taken to manage the effects of external, uncontrollable factors on the strengths, weaknesses, objectives and the goals of the firms for attaining a desired end. Again, it is held to be a commitment of resources to the market of a country for achieving specific goals. We can also say that, planning is basically the job of making things happen in a synchronized way otherwise things might not occur. (Enderwick, 2009)
It can also be related to the formulation of goals and methods for accomplishing them. So, it can be termed as both a process and a philosophy. Structurally, there are three ways to be used to define planning- corporate, strategic and tactical. International corporate planning is defined to be a long-term goal incorporating generalized objectives for the organization. The highest level of any organization conducts this planning. They also deal with the product, capital and research.
International marketing strategy is the kind of a corporate planning which the highest levels of managers undertake to place their products in the international market (Cadogan, 2009). For that, they design different market entry strategies along with new marketing mix strategies so the products can catch the essence of the market and can also attract the right base of consumers.
According to many researches, a cup of tea contains less caffeine than coffee. This is the reason health conscious consumers are more driven to drink tea. The invention of organic green tea is leading these consumers to prefer tea more than coffee as it has been widely promoted these days and it has also so many positive health benefits. (Waranantakul, 2014)
There is an increase in the health conscious consumer base in Malaysia for which Green Tea Organics Limited chose it as their market place for organic green tea.
International marketing is defined as the application of marketing principles by an organization or association in more than one country. There is a much debate between international marketing and global marketing. Coincidentally they both are held to be the same. (Peter and Olson, 2010)
Situational analysis is performed to better understand the complexities and advantages in the market for the newly arrived organization. It consists of 5C’s- Company, Competitors, Customers, Collaborators and Climate. (Pandurangarao, 2015)
3.1 Company
Green Tea Organics Limited started its journey in Assam, India. Domestically, it has a strong market of a 3.5 crores of organic tea consumer base in the all-over India. It has approximately 200 farmers in the different areas of Assam and among them, 120 farmers are certified. Seeing this growth, they want to export tea now.
3.2 Competitors
Green Tea Organics as several competitors in Assam, India. But they have been able to differentiate themselves among them because of their quality and price range. Now it wants to capture the market of Malaysia with the same attributes.
3.3 Customers
The growing health conscious consumer base of Malaysia is the main customers of Green Tea Organics Limited. Since they prefer tea to coffee and also want to have it in a low price range, Green Tea Organics has a strong potential to catch the market.
3.4 Collaborators
Collaborators are the agencies or the media who help the organization from the foreign countries in setting up their business in the other country. Green Tea Organics will use the indirect channel for the distribution of their products. They will look for the third party agencies so they can sell their products in the market for the first few months. The advantage of using an indirect channel is that it doesn’t require sales personnel to be present at the market.
3.5 Climate
The climate for a business means the external environment. Green Tea Organics is currently ready to face all the complexities in the Malaysian market.
4.1 Mission Statement
Right now, Green Tea Organics Limited wants to export their product organic tea to Malaysia to capture this international market with the quality of their product and also the low price range.
Basically the roadmap of Green Tea Organics starts with the mission which is held to be enduring. It very well establishes the purpose and also declares the standard against which it will always weight their actions and decisions. The missions are-

To give a refreshing start to the day
To motivate people with optimism and happiness
To create a value
To make a difference in the society

4.2 Product
Green Tea Organics Limited wants to introduce their signature product organic green tea in the Malaysian market. There are some very important health benefits in it. There is the presence of polyphenoloxidase in it. According to doctors and researchers, there is an abundant supply of antioxidants which is said to have the prevention and curing power of more than 14 diseases, such as skin diseases, cancer, cavities, food poisoning, virus and excessive fat etc.
4.3 Target Market
The target market for the organic green tea product of Green Tea Organics is those above of 5 years of age and who are also health conscious. This product can be consumed by any one above 5 years of the age. It will be very helpful for the fat people as it reduces fat and also for those who have diabetic problem as it doesn’t contain sugar. So the age range of the customers basically will be from 20 to 75.
4.4 Financial Analysis
Primarily, it will be priced at 5.29 ringgit for 1.5 liter and 2.55 ringgit for 500 mile liter. In this price range, it is assumed that it will be able to increase the overall sales of the company by 40% which will also contribute to the profit maximization of the company.  It is also assumed that it will produce a profit of 17% in the beginning of the year and it is assumed that it will increase to 25% to 30% by the end of the year.
Researchers basically use PESTLE- political, economic, social, technological, legal and environmental analysis framework to understand the external environment (Waranantakul, 2014). It is said that it helps to understand the macro level factors of the business. This report will use this framework to analyze the external factors that might affect the business of Green Tea Organics in Malaysia.
5.1 Political Environment
There are many political elements which have the potential to affect the organic tea product of Green Tea Organics. One of the reasons will be the duty and tax rate in Malaysia. It has the ability to affect the customer spending and also the enterprise expenses in Malaysia. Recently the Malaysia government has brought down the interest level to boost up the economy. There is another variable which is the interest rates. It would have a positive impact as it will help to bring much investment. Green Tea Organics will be able to bring in investment through loans. Apart from this, currently Malaysia has a very calm political atmosphere which shows the sign of no war and no distressing situation.
5.2 Economic Environment
The business of Green Tea Organics will be profoundly affected by the current economic environment of Malaysia. The last year was a difficult year for Malaysia but they were able to close it on a good note. In the last quarter the GDP had recorded the strongest performance. It expanded in a better than expected rate of 4.5 %. Acceleration in the fixed investment and resilient private consumption underpinned the robust result. Researchers are saying that ringgit has become weaker and there has been an increase in the oil price which has contributed significantly towards the development. However, they are also saying that the net contribution by the external sector got stable as the imports had gained steam. That’s why Green Tea Organics can hope for a better result when establishing their business in Malaysia looking at all these factors.
5.3 Social Environment
Many social and cultural changes are being seen in Malaysia which can have impact on the consumption of organic green tea. Since there is an increase in the sense of health consciousness among people, they want to consume those foods which have positive health effect on them.
One of the very popular domestic tea manufacturers of Malaysia earned a value share of 34% with a sale of MYR90 million with the introduction of their new product called Green Tea Latte with instant tea back in August 2016. The company also invented a recipe to make jelly by using that green tea latte. They promoted this recipe using Facebook and other social media which earned a lot of attention and popularity. So, they created a social trend of having different foods with the use of green tea. Green Tea Organics Limited has to keep it in mind.
5.4 Technological Environment
As there has been an intense technological growth in Malaysia, it will help Green Tea Organics Limited to create an online business for their organic green tea product. It is told to be one of the most accepted models of the customers in Malaysia. Consumers prefer the online social networking sites like Facebook, twitter and YouTube to be the most interactive platforms for their communication with the manufacturers and others. Academicians and market researchers proclaim this to be as one of the main ingredients for a successful marketing strategy which allows the customers for finding the best facilities and also for developing effective communication that involve using different apps on their smartphones.
5.5 Legal Environment
It is important that Green Tea Organics Limited maintain all the legal procedures while starting their business in Malaysia and exporting the products in here. They will have to maintain the standards that are enforced by the jurisdiction. They will have to maintain the regulations of processing the tea, the packaging, sourcing and manufacturing and distributing it to the market.

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5.6 Environmental Analysis
The climate of Malaysia is warm throughout the year. The temperature of Malaysia ranges from 20 degree Celsius to 30 degree Celsius on an average. It has been observed that basically a tropical weather is observed by Malaysia. It is also believed that it is never too hot. That’s why it can work as a positive thing for Green Tea Organics as their organic green tea product will have the need all the year round. If it was too hot, people would have rather gone for cold drinks. So the tropical weather of Malaysia will give a head start to the business of organic green tea.
Green Tea Organics Limited is going to establish a premium positioning for the first time. For their product, the tea leaves are brought from drying. Just after plucking, the fresh tea leaves are steamed. It is said that a dietary source of biologically active compounds is provided by tea. They are assuming to prevent a wide variety of diseases. There is much evidence which say that a moderate level of the consumption of tea will protect against various forms of diseases. Still, to establish a business, Green Tea Organics will have to analyze their strengths, weaknesses, opportunities and threats. (Krstic and Becic, 2011)
6.1 Strengths

Green Tea Organics has a strong brand image in Assam, India.
They produce good quality products with fresh ingredients.
Their products have an affordable price range. They are considered cheaper among all the other competing brands.
Their products taste delicious
It doesn’t contain sugar
It will work as a savior of thirsty
In the drinkers, it will have a calming and soothing effect.
It bears international standard.

6.2 Weakness

It is primarily having a poor advertising strategy.
It is a brand-new product in Malaysia.
The rate of awareness among the consumers is still pretty low.
It has some very strong competitors in the Malaysian Market.
It is still having a less promotion.

6.3 Opportunities

Green Tea Organics Limited can introduce more unique flavor and fragrance in their product. As it doesn’t contain any sugar, it will be much valued by the diabetic patients.
Other products by the competitors have been introduced a long time ago. The life cycle of their products have been approaching to decline stage. So Green Tea Organics has the opportunity to capture the market.
They have the opportunity to increase the promotion and awareness of the product through proper advertising and promotional strategies.

6.4 Threats

Brands like Lipton have established their products a long time ago for which they also have a strong brand image. Their old label is well known to the people of Malaysia. They will approach to their well-known product.
As it doesn’t contain any sugar. So the consumers may feel bored at a time with the single taste. So if they don’t introduce new flavor, they will not be able to retain the market.

Strategy is basically defined as the art of coordinating and managing the processes of the organizations, such as human resources, money and material for achieving the profit, company growth and customer satisfaction by following the policy and objectives of the company. So the marketing strategy of an organization is also defined as an implementation process through which the manager will be able to achieve the objectives of the company easily. (Krstic and Becic, 2011)
For a marketer, it is hardly possible to satisfy everyone. For every individual, the taste and preference would vary. Everyone wouldn’t like the same product or service. That’s why, there is the need to segment the market demographically, psychographic or behaviorally. There is a need to bring difference among the buyers. (Waranantakul, 2014)
The market for the organic tea product of Green Tea Organics has been segmented. Since it has aimed to do an online distribution, it then eliminates the geographical barrier. Anyone will be able to order the product through the website of Green Tea Organics. Apart from the online consumer base, there will be a consumer base in Malaysia.
For any efficient marketer, he will target the market after segmenting the market. For Green Tea Organics, the consumer base consist the age range from 20 to 70. They include the health conscious consumers. The introduction of new beverages has not really been able to affect the consumption of tea of these people. Their main priority is their health. For them, maintaining their health by having green tea is a priority. Again Malaysia has a tropical weather which inspires having tea at home rather than going out. (Enderwick, 2009)
Green Tea Organics has aimed to position itself by following the premium positioning. So anyone will have an interest to it.
7.1 Marketing Mix
To ensure a proper marketing strategy, there is a need to device marketing strategies and also integrate the marketing programs properly. So, marketing mix is followed which contains 4P- Product, price, promotion and place.
7.1.1 Product
Green Tea Organics Limited will be introducing the very best organic tea product in the market which contains no fertilizer or chemical when growing them. The company will be exporting the tea directly to Malaysia just after deriving it from the garden to protect its originality. Green Tea Organics will be using their own brand name to sell the product. They will be selling it in bottles and tea bags for the convenience of the consumers.
7.1.2 Price
The price range of the organic tea products will be an affordable one. A 35% of the margin will be kept aside for the retailers who buy in a bulk. After the product is delivered, the company will give them a month of bonus period. They will also give a month of credit period to those who will buy in larger quantities.
7.1.3 Promotion
Green Tea Organics will be using the line advertisements. They will advertise and promote it by using their public relation.
7.1.4 Place
Green Tea Organics will rent a place at first where the products will be stored for distribution. Various kinds of distribution channels will be used to reach the customers. The product will have its availability at various super markets. It can also be found in the shops in the neighborhood.
Apart from all these, Green Tea Organics will have its own website for carrying out their online transaction.
Thus Green Tea Organics Limited will be following the marketing mix strategy of 4P to market their product.
For any organization, it is difficult to capture the essence of the international market at first.   It requires a great deal of research, analysis and effective decision making process to give a head start to the business. For any business in the international market, there will be strong competitors. To differentiate the business from them, there is a need to develop the kind of a marketing strategy that will promote the product and the organization to the consumers literally in a different way. This report has tried to develop the strategy by analyzing all the issues of the international market. Now Green Tea Organics Limited will be following all these strategies to capture the market of Malaysia with their organic tea products.

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Globally United Way Analysis – SWOT and PEST

Curtin University
Marketing for professional practice 300
Client Briefing of United Way
BACKGROUND
Globally United Way was founded in 1887 in Denver, Colorado in the USA. It is a non-profit organization founded by five people a Denver woman, a priest, two ministers and a rabbi to distinguished the welfare problems and get suitable actions in their city. They assembled to get solutions of problems and connected with welfare societies and make organization to collect funds for local charities and coordinate wellbeing services. United way doing works on providing caring power and create better lifestyle for people.

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In 1986, United Way WA was established twenty eight years ago by a group of Perth businessmen in Western Australia Inc to growing requirements of society and increasing charitable requests. They developed a 12 months pilot program in July 1988 they begun full operation of United Way. The United Way do struggle for providing better opportunities to improve the lives of societies by fulfill their basic needs so they mainly concentrate on three fields EDUCATION, HEALTH and INCOME because these three fields play an important role in society. Quality education helps the youth to achieve good knowledge and skills so students will get suitable jobs and enough income for fulfill the basic needs of their families. United Way WA also created so many activities in Health sector, they works to improve health services by caring to individuals and organizations(“A 50-Year History of United Way and Toronto-the-Giving; the City’s Needs and Generosity Have Both Grown over the Decades” 2007).
MILESTONE ACCOMPLISHMENTS
Community Engagement– United way WA has more focus on corporate social responsibilities towards the society so they involved in communities to find and understand the problems of community and take appropriate steps to solve these problems and provide help to community.
Customer relations Management– United Way create relationships with their customers and they always concern about the demands of their customers then they fulfill the needs of people and helping families and individuals become financially stable and independent.
Unique position for philanthropy– United Way wants to involve in particular social activities of Western Australia. In this way they do works to improve health and welfare services to give better lives of society. They make better lives with solving social problems and advance the career of people of society and individual(Anonymous 2011).
MAJOR SPONSERS OF United Way WA
Corporate Donations – Corporate Partner organizations make important annual lump sum donations.
Workplace Giving – an licensed Australian Tax Office program where employees make a donations from their pay and receive an immediate tax deduction.
Corporate volunteering – a program where teams of employees from our corporate partners volunteer for a specific project at a local community organization such as painting, gardening or mentoring.
Other ways to collect money for United Way:
They are store some other events such as casual dress Fridays, Football competitions, Easter food hampers and adopting and funding special projects in the workplace.
These Sponsorship Agreements provide funding to projects from origin to end. United Way has the reputation, resources and relationships on a worldwide scale so it is not simple to handle such a largest privately funded non -profit organization because of this the partners and sponsors of United Way contribute their ideas, skills and volunteering power more than money in the projects(Smith 2005).
VOLUNTEERING WITH UNITED WAY WA
United Way WA enhance their activities in education, income and health for individuals and society but they do not handle these three areas alone so they have 2.6 million volunteers and 9.6 million donors for creating and improving the lives of communities. They bring changes to make societies better.
Corporate connect – (Team volunteering)
In the team volunteering they make small groups up to twenty people to handle the projects from origin to end they collect the information about the needs of societies then they safely improving and fulfill the basic needs of societies.
Education volunteering
They provide education to children of communities and children have the opportunity to reach their potential with quality education. It is improving the literacy rate and volunteer opportunity. They works in groups who are agree to spend one hour, one day or one year during school. They enroll in those activities who supporting to the children in reading, coaching, and create a differences and make strong decisions in their lives.
Skilled volunteering
They put their good efforts, knowledge, talent and skills to improve the communities and increasing the capacity of people for better results.
WORKS OF UNITED WAY WA

Give -This means donate something to open your heart in United Way WA. By providing some part of earning to fulfill the needs of common people and make a wellbeing community. There are easy ways to give some money to organization, people can directly transfer money from their earning to United Way it will be tax free and they will be give regular updating of money where and when it is used.
Volunteer – United Way WA provide volunteering to people because anyone put their skills and knowledge to improve the lives of community. They have a opportunity works in groups, who spend their time to help and improve the communities.
Advocate– United Way has lots of programs for improving the community through their supporter’s skills, knowledge, talent and experience and they provide better lives to society(Jean C 1986).
ORGANISATIONAL OVERVIEW

In Western Australia United Way existence some twenty eight years ago, concerned about needs of society and increased charitable requests, In west Australia it is established in 1986 by a group of Perth businessman they develop a 12 months pilot program then begun full operations of United Way in July 1988 and to supply more than $16 million everywhere in Western Australia.
United Way performs at a National level – They have large networks toward Australia with offices in Sydney, Melbourne, Queensland, Ballarat, Glenelg, Central Coast, Perth and South Australia. They hold over 3400 volunteer who invest $6million in the community project in the country for improving the lives of 18,000 Australians.
United Way perform at a International level – This organization established 125 years ago in Denver, Colorado in the USA by five people a Denver woman, a Priest, two ministers and a rabbi to identify the welfare problems and take cooperation actions to solve these problems in their city. They got together plan the first united campaign for ten health and welfare agencies and make organization to get funds for local charities for coordinating wellbeing services.
Denver created a movement by increased $21,700 and spread over the country to become a United Way in that year. United Way concentrated on to assemble the caring powers of societies and create a difference in lives of people.
Nowadays United Way spread in forty-one countries and territories, they increase $5 billion in a year for local communities nearly by 1800 communties.

MISSION
To enhance the lives of societies in Western Australia they take care of all aspects of life by mobilizing and take good steps to provide better lives of societies.
Energize and inspire people to make a difference;
Provide meaningful opportunities to individuals to realize their potential;
Increase investments in our community by expanding and diversifying our own resource and fundraising efforts and supporting those of others;
Ensure our investments have recognizable impact;
Strengthen the United Way movement and Brand at the local and national levels.
VALUES OF UNITED WAY
Demonstrate trust, integrity, transparency, inclusivity and respect;
Measure, communicate and learn from the impacts of our efforts;
Endorse innovation, partnerships and collective action;
Encourage and promote volunteerism and volunteer leadership; and
Embrace diversity(Gracie Bonds 2008).
CHALLENGES FACES BY NON- PROFIT ORGANIASTIONS
These all are major issues faces by non-profit organization in 2012.They have lots of difficulties with business structure. First of all, Economic Unrest- After the 2008 people are not willing to donate money in the non-profit organization in this way they lose their funds but the needs of services raised, it is big issue resource problem in economy.
Leadership Succession- Non-profit organization has intelligent leaders for participating in the growth of sector annually, but some of the leaders find a difficulty to make a plan for strategy of business to improve the welfare programs because of this they do not get success in their plans.
Change Management- Most of the non-profit organizations face this big challenge in their business, because they change their structure of business such as selecting members of board, using volunteers, remain with their resources.
CHALLENGES FACES BY UNITED WAY WA
Losing Donor: It is an important part of United Way’s programs so they are not concentrate on their business structure in this way they lose their donors day by day.
Strategic philanthropy: Most of the Companies moving to “strategic philanthropy” approach.
Overreliance on Old economy business: United Way mostly dependent on old economies business in this way they do not follow advance techniques to handle their business.
Large trust gap: In this business has a large trust gaps toward age groups in this way they faces some challenges in their business because they have different age groups of employees and they do not pay well attention on their works.
Low public trust: They have low public trust compared to other large non-profit organizations it is one of the important reasons go their business down. (Beatty 2007).
SWOT
SWOT is known for Strengths, Weaknesses, Opportunities and Threats in the organizations
SWOT of United Way WA
Strengths– Strengths always give ability to achieve the organization’s mission. It can be perceptible and imperceptible. Funding is strength of United Way. It is a Public Ancillary Fund – include DGR Item 2 Status. These funds are links between donors and organizations, who can receive tax deductible donations as deductible gift recipients (DGRs). Ancillary funds are two types-private ancillary funds and public ancillary funds.
Weaknesses- Weaknesses are the properties that prevent the organizations from their achievements of mission and full potential. Weaknesses are presents in United Way like 20% of children are not preparing to go school in their early year, other weakness is “Homeless Coalition” means there are lack of permanent place of residence in the organization.
Opportunities– Opportunities are defined by the environment and works of organization. United Way have so many opportunities such as grant, exemptions and tax deductions, these all collect by donors and government.
Threats– Threats are difficult condition of united way because this will affect the economy of business such as funds, donations and charities. It happens when external environment conditions threat the profit of organization.
PESTLE ANALYSIS
Pestle analysis gives the information of whole situation of business .It includes political, social, economic, technical, and legal and environment factors.
Political factor– This factor effect the economy of non-profit organization because it’s find out that areas which effected by government such as new tax and duty which change the whole revenue structure of organization, these includes tax policies, fiscal policy, trade tariffs.
Economic factor– This factor identify the economic performance of non-profit organization, this includes inflation rate, interest rate, foreign exchange rates, demand and supply and economic growth. United way concentrate on their strategy of business they work with their economic factor for providing opportunities to community.
Social factor– This factor identify the social conditions of the market like cultural trends, demographics and population. United way works with the different communities to fulfill their needs.
Technological factor– In this factor non-profit organization influence by inventions of technology. United way follows the innovative techniques to enhance their skills and experience in the business.
Legal factor-This factor affect the business from both external and internal sides, it affect the certain policies and certain laws. In this way United Way WA concern about these laws- consumer laws, labor laws and safety standards because they take- care the whole business.
Environmental factor-All the organizations affect by their surrounding environment. United way uses their resources carefully to fulfill the basic needs of people of society and also they think about location of business in the suitable areas which prevent the environment clean(“Pestle Analysis Vital for Strategic Decision Making [Column]” 2015) .
CONCLUSION– United Way works very well in the society it is a non- profit organization so they fulfill the needs of society with donations, funds and charities.
References
“A 50-Year History of United Way and Toronto-the-Giving; the City’s Needs and Generosity Have Both Grown over the Decades.” 2007. Toronto Star, 09/13/
2007 Sep 13. P4 http://search.proquest.com/docview/439287051?accountid=10382
Anonymous. 2011. “Historic Achievement of $113.2-Million Completes Week of Milestones for United Way.” Canada NewsWire, 01/20/
2011 Jan 20. http://search.proquest.com/docview/845679535?accountid=10382
Beatty, Sally. 2007. “Philanthropy (a Special Report); a New Way: The Chief Executive of United Way Talks About the Challenges Facing the Organization.” Wall Street Journal, 12/10/
2007 Dec 10. http://search.proquest.com/docview/399041103?accountid=10382
Gracie Bonds, Staples. 2008. “Faith & Values: ‘We’re with You’ Is United Way Theme.” The Atlanta Journal – Constitution, 09/13/
2008 Sep 13. http://search.proquest.com/docview/337508494?accountid=10382
Jean C, Hill. 1986. “Interfaith Council Part of United Way’s History.” Richmond Times – Dispatch, 11/05/
1986 Nov 05. A-14 http://search.proquest.com/docview/420068701?accountid=10382
“Pestle Analysis Vital for Strategic Decision Making [Column].” 2015. AllAfrica.com, 12/31/
2015 Dec 31. http://search.proquest.com/docview/1752565050?accountid=10382
Smith, Dennis. 2005. “Macisaac New United Way Chair; Part of Charitable Organization’s Plan for Stronger Burlington Presence.” The Post, 05/15/
2005 May 15. 01 http://search.proquest.com/docview/362708200?accountid=10382

Business Model of Aldi | PEST, 5 Forces

Analyse the business model of supermarket chain Aldi
Introduction
Aldi, a German supermarket chain, entered the UK market in 1990 and now operates a network of over 500 stores (Aldi, 2014). The competitive landscape for UK supermarkets is fierce (Sandberg, 2013) with many different strategies being adopted, each aligned to a different segment of the market. Aldi focuses on delivering a basic, value for money shopping experience (Naslund, 2013). Such a cost leadership strategy and lower cost structure enables discount companies to enter and take a larger percentage share of the market (Harvard Business Review, 2005).

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As consumers focus on saving money in times of recession, the business model used by Aldi presents an opportunity to save money on weekly food shopping whilst still buying healthy food. Supermarkets following a low cost leadership strategy often stock the same product as their rivals but deliver it under a different service model (Harvard Business Review, 2005). Smaller companies, such as Aldi, do not spend as much time publicising their plans or marketing their products, this can create competitive advantage as they are less exposed to public opinion. This leads to an information gap, however it also allows them to develop and grow quickly whilst adapting to the changing trends (Skordili, 2013). The increased demand for cheaper food is better served by discount retailers. It also removes a significant cost associated with in store branding, technology and functionality, enabling the same or similar products to be offered cheaper.
The external business environment is made up of two elements; the general macro environment which takes a wide lens view of the environment in which the business operates and the micro view which focuses on the specific industry or sector in which the business operates (McLean, 2005). The external environment refers to events or trends, which are relevant to the business, as well as being uncontrollable by the business. The external environment directly contributes to the success or failure of the business, for example in 2010 Aldi left the marketplace in Greece citing unfavourable external factors as the reason (Skordili, 2013). By understanding the external environment leaders make better decisions (Kefalas, 1981); knowing the likely impact of that decision and knowing what might affect the organisation in the future. The external business environment is changing faster than ever (Mason, 2007) and therefore being able to understand, anticipate and adapt to changing trends is a key leadership skill (Kotter, 1996).
This essay presents an analysis of the external business environment in which Aldi UK operates. Analysis of the general macro environment using PEST before a more focused analysis of the retail supermarket sector is conducted using Porter’s Five Forces Model in order to draw conclusions.
The External Business Environment
Stacey (2011) explains that the dynamic of this macro external market place can be categorised into a number of headings for the purpose of analysis. PEST allows a business to periodically scan the environment to anticipate future trends as well as identify current challenges. PEST scanning splits the environment into 4 key factors: Political, Economic, Social and Technology. This is a commonly used, simple model which allows the general market to be scanned.
The micro external environment was described by Porter as being concerned with getting raw materials to consumers, suppliers to buyers and how the connection are made in a competitive way (Linstead, Fulop and Lilley, 2004). In this model the specific sector or market in which the organisation operates is analysed, this allows the specific market challenges within that sector to be understood for that organisation. To undertake this micro level analysis Porter created a model called the Five Forces which looks at the interaction between the forces. At the heart of the model is ‘competitive rivalry’ which is impacted by 4 other forces:

Power of suppliers
Threat of new entrants
Power of customers
Threat of substitutes

Porter argued success was created by the organisations ability to negotiate with suppliers to get the right prices which enable a low cost leadership model or enable larger margins. By putting itself in this position the organisation remains in the driving seat.
PEST Analysis
There are a number of factors which Aldi need to consider as part of their PEST analysis of the UK marketplace.
The Political Environment

The UK elections in May 2015 may result in a change of government. A new government may impose new legislation, tax implications and market conditions. Furthermore, with some of the parties pledging a European referendum as part of their campaign, such a move could lead to the UK leaving the European Union which, as a German company, may present a further risk which will need to be addressed.
Employment legislation continues to change on a regular basis, 2015 has already seen significant changes with the introduction of shared parental leave (ACAS, 2015). There are continued discussions around the extension of paternity leave. Such changes have an economic impact on the business but also create risk that staff may take a case to tribunal.
It is proposed that zero-hour contracts will be abolished in 2015 (ACAS, 2015), as a supermarket it is likely that seasonal staffing is used in busy periods such as Christmas. Without zero hour contracts this could become harder to staff and more expensive.
As a European company, EU legislation is also a factor to consider as any change at a EU level will also have a direct impact on the organisation.

The Economic Environment

As the UK economy moves out of recession, there could be a change of buying behaviour from low-cost stores back to mainstream supermarkets. This shift could have a detrimental effect on market share. Aldi may need to consider how to compete in such conditions, if at all.
During times of financial pressure consumers turn to cheaper food suppliers (Skordili, 2013), which has created an ideal market for Aldi in the UK and has contributed to its growth.
This may in turn change demand, supply and fundamentally affect pricing creating instability in the company as customers go back to higher priced competitors.
A change in government may also create a different in tax requirements, which could become more costly.
Success is created through a finely tuned supply chain, with distribution and logistical capability becoming one of the key competitive weapons available (Sandberg, 2013). Aldi operates a model which has created success in Germany where the main point of competition is price, with consumers preferring lower levels of service and a narrower choice to enable a lower price (Fernie and Arnold, 2002).

The Social Environment

Discount chains could be met with a degree of social stigma, as the economy rises individuals may want to shop at more expensive leading names such as Tesco, Sainsbury’s or even Waitrose.
The UK has an aging population (Cracknell, 2010), an older workforce may be more costly in terms of sickness and present further problems for employers. With the introduction of auto-enrolment for pension schemes this adds a further cost to the business as employers will have to contribute to employees pensions.
As competitors such as Asda, Tesco and Sainsbury’s introduce a more diverse range of products including clothing, non food items, opticians, chemists, travel agencies and more which could see a change of buying behaviour.
Competitors also offer a 24 hour opening service, as the way people work becomes more diverse over time will this see a change in buying habits. Aldi may need to consider this strategy as a way to maintain market share. This will carry increased costs both in terms of overheads and staffing costs.
There have been a number of international companies highlighted in the press due to their accounting practice and what this means in terms of where they pay their tax (Barford and Holt, 2013) This could lead to a change in favour by UK consumers who may feel increased loyalty to UK established firms.
By operating a narrower product range, Aldi has moved away from abundance of choice and created a streamlined shopping experience. Busy family life may benefit from this approach of making the shopping process quicker and more focused.

The Technological Environment

Online and mobile shopping is becoming increasingly popular (Butler, 2013), currently not offered by Aldi this may be a strategy that needs to be considered. This may also need to be enhanced with other technology led initiatives such as in-store media, self-checkout and access to Wifi.
Technological infrastructures are a key component of the supply chain of the modern business, intelligent stock management and supply is key to success.
Point of sale systems and checkout facilities are significantly different in larger stores, Aldi operates a traditional conveyor belt approach with no options for self service. Enhanced service from competitors such as offering to pack up bags for consumers creates a different in store experience however the average time per person will increase.

Five Forces Analysis
Within the grocery sector in the UK there is fierce competitive rivalry. A micro analysis is presented below:
Threat of New Entrants – Low
The threat of new entrants is relatively low due to the cost of entry and the competitive environments.

The cost requirement for a new brand to establish itself in the market is high. Building a large retail estate network coupled with stock levels will take significant investment.

As Tesco enters a period of decline, due to what is widely considered unethical practice, bad financial management and abuse of power (Proud, 2015). This may lead to a decline in consumer favour leading to opportunities for merger and acquisition of the brand.

Threat of Substitute Products – Medium / HighBy offering a narrow product range, Aldi remains agile to changing trends. Products can be changed quickly in the event of changing market trends.
Aldi operates relatively small stores therefore limiting the number of products that can be offered. Substituted could therefore be offered by larger stores, with more space to offer an increased product range.

The Bargaining Power of Suppliers – Low

Supermarkets have greater bargaining power than suppliers, often pushing for discounts and favourable terms due to the scale of buying power (Proud, 2015).
Suppliers may favour larger orders from the bigger competitors, therefore are less willing to offer discounts and offers to the Aldi chain. However Aldi still operates a chain of 500 stores so has a degree of buying power in its own right. It also has the additional power to buy across multiple countries in order to get favourable terms.

The Bargaining Power of Buyers – High

Buyers can make choices about which supermarket to use very easily based on offers, availability of items and ease of access.
Aldi does not offer a loyalty scheme so there is no additional incentive to return week on week.

Rivalry among Existing Firms – High

The sector is subject to intense rivalry with a focus on cost. Many brands offer to match prices of their competitors and undertake price comparison activities. This fierce rivalry leads to aggressive marketing campaigns with each player trying to win market share from the other. This increase competitive activity creates additional costs through advertising and marketing as well as leading to reduced prices (Linstead, Fulop and Lilley, 2004.
Aldi operates on a low level of fixed costs in order to deliver lower priced products, with competitors also targeting this lower price point this presents a risk to Aldi if they are not able or willing to invest in advertising to address such activity.

Conclusions
Aldi operates in a highly competitive market place, both the macro and micro perspectives show challenging market conditions. Whilst new entrants are unlikely there is a clear need to explore changing customer buying trends and how interactive routes to market contribute to customer loyalty. With buying patterns moving towards 24 hour shopping, online marketing and self-service, consideration needs to be made around whether this needs to be included in Aldi’s long term strategy.
The UK election in May 2015 presents the most immediate challenge, particularly if that results in a change of government and possible European referendum. Should the UK leave the EU this is likely to present Aldi with a financial challenge as well as imposing possible import restrictions for products. Equally, such a move could also see buying trends move towards British companies.
Aldi continues to thrive in the market, however a change in the disposable income of its customers may also change buying habits. Focus on retention of market share needs to be integrated into the strategic sustainability plans, particularly in the absence of any loyalty schemes. Continual development and alignment to its target market is critically important to maintain market share and ultimately survive.
Consideration needs to be made around what consumers want from their experience. By undertaking market research and focus groups Aldi will be able to understand what is working and what may be useful to start to consider. In a world where change is the norm it should be expected that all businesses will have to adapt and become more agile to some degree.
References:
ACAS (2015). www.acas.org
Aldi (2014). www.aldisuppliers.co.uk
Auyama, Y. (2007). Oligopoly and the Structural Paradox of Retail TNCs: an assessment of Carrefour and Walmart in Japan. Journal of Economic Geography. 7. P471-490.
Barford, V. and Holt, G. (2013). Google, Amazon, Starbucks: The rise of tax shaming. BBC News (retrieved from http://www.bbc.co.uk/news/magazine-20560359)
Butler, S. (2013). Online and Upward: UK internet shopping hits record high. The Guardian (retrieved from http://www.theguardian.com/business/2013/dec/17/online-internet-shopping-high-street-record)
Cracknell, R. (2010). The Ageing Population. Key Issues for the New Parliament. House of Parliament Library Research. (retrieved from http://www.parliament.uk/documents/commons/lib/research/key_issues/Key-Issues-The-ageing-population2007.pdf)
Fernie, J. and Arnold, S. (2002). Walmart in Europe; prospects for Germany, the UK and France. International Journal of Retail and Distribution Management. 30 (2). P 92–102.
Harvard Business Review (2005). Strategy; create and implement the best strategy for your business. Boston, MA.
Kefalas, A. G. (1981). Analysing Changes in the External Business Environment. Planning Review. 9 (4). P26-46.
Kotter, J. P. (1996). Kill Complacency. Fortune. 5. P 122-4.
Linstead, S., Fulop, L. and Lilley, S. (2004). Management and Organisation; a critical text. Palgrave, New York. NY.
McLean, J. (2005). Management Techniques and Theories. British Journal of Administrative Management. 48. 17-17.
Mason, R. B. (2007). The External Environment Effect on Management and Strategy. Management Decisions. 45 (1). P10-28.
Naslund, D. (2013). Keeping the Customer (relatively) satisfied. Strategic Direction. 30 (3). P13-15.
Proud, A. (2015). The decline of Tesco is a good, old-fashioned morality tale. The Guardian. (retrieved from http://www.telegraph.co.uk/men/thinking-man/11351115/The-decline-of-Tesco-is-a-good-old-fashioned-morality-tale.html)
Sandberg, E. (2013). Understanding logistics-based competition in retail; a business model approach. International Journal of Retail and Distribution Management. 41(3). P.176-188.
Skordili, S. (2013). The Sjourn of Aldi in Greece. Journal of Business and Retail Management Research. 8 (1).
Stacey, R.D. (2011). Strategic Management and Organisational Dynamics. Laureate Education Inc. London, England.
 

Pest Analysis of McDonalds in Malaysia

PEST stands for – Political, Economic, Sociological, and Technological. PEST analysis is an effective tool to audit company’s environmental influences which can be used for strategic decision-making. The PEST analysis is a very useful tool to understand and analyze market growth, market position, future potentials and direction for a particular business so A PEST analysis can be termed as a business measurement tool. PEST analysis summarizes the external environment in which the business is planning to operate or already operating. However, an effective follow up and proper response plan is required to ensure optimum use of PEST analysis (Luthans & Doh, 2008). This report aims to discuss PEST analysis of McDonalds in Malaysia. The report is divided into five parts. First part is introduction where the basic theory and application of PEST analysis is discussed. The next part is detail explanation of four components namely Political, Economic, Sociological, and Technological of PEST analysis. The third part of this report highlights PEST analysis for McDonalds in Malaysia. The final part of this report discusses conclusion and summary analysis.

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2.0 Background of the Company:
2.1 Introduction:
McDonald’s is a popular brand name in fast food industry. McDonald has 34,000 restaurants in 119 countries serving roughly 69 million people every day. Worldwide around 80% of McDonald’s restaurants are franchised and generally owned and operated by independent local entrepreneurs (McDonald’s, 2013). McDonald’s annual report 2012 shows that worldwide the company generated operating income of 8.5 billion in 2011 with 9.7% growth over 2010 (McDonald’s Corporation, 2012). McDonalds Malaysia opened its first store in 1982 in Kuala Lumpur. According to the figure of 2009, McDonald’s Malaysia manages 194 restaurants nationwide catering the need of 10 million customers monthly. McDonald’s Malaysia is growing significantly with 15-20 restaurants per annum. In order to manage day to day operations McDonalds Malaysia has around 8,000 local employees who are working in different outlets and near about 150 personnel are working in the headquarter (McDonald’s Malaysia, 2009).
2.2 Company History:
Ray Kroc the founder of McDonald’s corporation started his business with Richard and Maurice McDonald by buying franchising right in 1950s to operate McDonald’s restaurants in the USA. In 1961, he bought complete shares of the company from the McDonald brothers. In the last quarter of 1980, Golden Arches Restaurants Sdn. Berhad. (GARSB) received permission to bring McDonald’s in Malaysia. The first McDonald’s opened on 29 April 1982 at Bukit Bintang, (McDonald’s Malaysia, 2009).
2.3 Products are Services:
McDonalds offer wide variety of fast food and beverages including burger, nugget, chicken fries, French fries, set meals etc. Moreover the restaurant serves different type of coffee, carbonated beverages, ice creams and flavored drinks (McDonald’s Malaysia, 2013). McDonald’s continuously does research and update its menu to keep the market share. Cost leadership and price differentiation is McDonald’s one of the key marketing strategies (McDonald’s Corporation, 2008).
3.0 Introduction to PEST analysis:
It is mentioned earlier that PEST stands for Political, Economic, Social, and Technological. This tool is used to evaluate the market for both new entrants and existing business units. This analysis tools are a framework for assessing a situation. It can be applied to evaluate a position or a strategy, company direction, new marketing proposition or even a new idea. Thorough analysis of the environment in which the firm functions empowers a company to take advantages of opportunities as well as minimize the threats. PEST framework often encourages proactive thinking and brainstorming rather than relying on instinct (Luthans & Doh, 2008).
3.1 Political:
Political factors often refers government intervention, entry barriers, tax or tariff structures which are designed to benefit Government or the citizen. The political environment has huge influence on the business. Political stability, regulations, spending power of consumers often shapes the profitability of a business (Oxbridge Graduates, 2013). There are certain factors which influence political situation of a country which includes ecological or environmental issues, current legislation home market, future legislation, international legislation, regulatory bodies and processes, government policies, government term and change, trading policies, funding, grants and initiatives, home market lobbying/pressure groups, international pressure groups, wars and conflicts (businessballs.com, 2010).
3.2 Economic:
Economic factors comprise many factors e.g. stability, income status, income parity, purchasing powers, unemployment rates, exchange rate, interest rates etc. there is no doubt that these factors plays a vital role in decision making for an industry or a business (Oxbridge Graduates, 2013). It is necessary to consider certain factors while analysis economic situation of a country, for example, home economy situation, home economy trends, overseas economies and trends, general taxation issues, taxation specific to product or services, seasonality and weather issues, market and trade cycles, specific industry factors, market routes and distribution trends, customer or end-user drivers, interest and exchange rates, international trade and monetary issues (www.businessballs.com, 2010).
3.3 Socio-Cultural:
Socio- cultural factors refer to the pattern and trend of demand which generally occur due to the nationality, religious or culture. As for food industry it is evident that local taste and preferences will decide the acceptance of particular food products. In order to survive and grow local likings and disliking should be followed. So a thorough understanding about local market is required to ensure successful business (Oxbridge Graduates, 2013). The cultural and social influences on a particular business vary country-wise. When a Socio-Cultural situation is analyzed lifestyle trends, demographics, consumer attitudes and opinions, media views, law changes affecting social factors, brand, company, technology image, consumer buying patterns, fashion and role models, major events and influences, buying access and trends, ethnic or religious factors, advertising and publicity, ethical issues should be considered (www.businessballs.com, 2010).
3.4 Technology:
Technological factors shape the production output and efficacy of the plant and operation. As for the food industry it is seen that employment of technology brought fruitful results in the food industry (Oxbridge Graduates, 2013). Technology is a critical success factor to achieve and sustain competitive advantages. Moreover, this is a key driving force of globalization. An analyst considers competing technology development, research funding, associated or dependent technologies, replacement technology or solutions, maturity of technology, manufacturing maturity and capacity, information and communications, consumer buying mechanisms or technology, technology legislation, innovation potential, technology access, licensing, patents, intellectual property issues, global communications while evaluating technological situation (www.businessballs.com, 2010).
4.0 PEST analysis for McDonalds in Malaysia:
4.1 Political Components:
Malaysia is a multicultural country with three major ethnic groups namely Malay, Chinese and Indian. Moreover, the country has few indigenous groups who live mostly in East Malaysia. Evidently, these groups live in peace without any major clashes (Rex, 1991). Moreover, this country is a popular tourist destination. According to Malaysian Tourism Board in 2012 around 25.03 million international tourists visited Malaysia and on an average 64,000 tourists landed in Malaysia everyday which is 7.2% higher than the inbound tourist in 2011 (MTPB, 2013). The apparent political stability is one of the main attracting factors for foreign as well as local investors. Pro- business government mentality, stable political situation and a good legal system shows attractive prospects for investors. Moreover, in order to attract large investments, the government offered greater portion of foreign equity ownership in businesses and enterprises under the Promotion of Investment Act (PIA), 1986. Market-oriented economy and an educated multilingual workforce made Malaysia as one of the popular destinations for investment (Tsen, 2005). So, McDonald’s has tremendous opportunities in Malaysia and the company can capitalize this harmonious political situation for further expansion.
4.2 Economy Factors:
The global financial crisis has affected the whole world at the end of 2007 resulting sharp decline in global trade and it also increased the unemployment rate in many countries. The good thing is Malaysia was not affected severely by the recession like its neighboring country Singapore. One reason could be Malaysia learnt its lessons from the previous financial crisis which occurred in 1997. Moreover, McDonald’s dealt the problem efficiently by reducing product price and offering value meals. This is how McDonalds managed to maintain sales figures and performed better compared to its competitors. Currently, Malaysian economy is growing at a pace of 4.5-5% per annum. The rate of Malaysian Ringgit against US Dollar was steady at average 2.95 (Zheng, 2009). The .
4.3 Socio- Cultural Factors:
As it was mentioned earlier that Malaysia is a multi- religion and multicultural country. Islam is considered official religion in Malaysia and more than 50% of population is follower of Islam in Malaysia. So naturally the concept of ‘Halal’ plays important role in Malaysian food industry (Muhammad, Isa, & Kifli, 2009). To respect the religious sentiment of Muslims and to comply government rules McDonalds in Malaysia does not serve any pork item. Moreover, McDonalds follow strict ‘Halal’ compliances while buying the main ingredients e.g. chicken or meat from suppliers. Beef is one of the popular food items for many Malaysians especially Muslims, that is why data shows that in Malaysia the bestselling McDonald’s product is Big Mac (McDonald’s Malaysia, 2009). Recent trend shows that the Millennial generation in Malaysia are becoming health concern.
4.4 Technological factors:
Malaysians are becoming more and more technology oriented. Social networking sites are playing vital role in every aspect of Malaysian people’s lives especially the younger generations are heavy users of internet and other IT gadgets (Miniwatts Marketing Group, 2010). McDonald’s Malaysia has its own website and also it has strong Facebook and other online social networking presence. It disseminates corporate information as well as various promotions and events through these channels (McDonald’s Malaysia, 2013). However, it certainly lacks in some aspects where the other competitors are way ahead. For example, McDonalds did not have internet ordering system until recently. Moreover, the delivery service in inadequate and often does not cover most of Kuala Lumpur let alone other cities (McDonald’s Malaysia, 2013). In order to sustain in today’s competitive business world McDonald’s should design appropriate strategies to response changing need of the customers.
5.0 Conclusion:
A PEST analysis is an excellent tool to understand the external affecting factors of business. It enables the company to capitalize the opportunities as well as minimize the potential threats. This report has outlined a PEST analysis for McDonald’s Malaysia. However, it should be remembered that today’s business world is very dynamic, demanding and ever changing so in order to ensure maximum success, the factors should be analyzed and updated on a regular basis (Luthans & Doh, 2008).
5.1 Summary of the PEST Analysis:
The summary of PEST analysis McDonald’s Malaysia is mentioned below:
Political: Despite of being a multi-cultural society, Malaysia enjoys a peaceful environment. Moreover the government is trying to encourage investments in various ways so McDonald’s can use this opportunity for further expansion.
Economic: Though Malaysia was not badly affected by 2007 world recession but still McDonald’s was prepared and had taken timely measures. The overall economic improvement of Malaysian opens new opportunities for McDonalds.
Socio- Cultural Factors: McDonald’s has managed to blend with Malaysian culture nicely and understood local preferences very well, as a result McDonald’s is a household name in Malaysia. However, recent health consciousness among Malaysians poses a threat for McDonalds. However, McDonald’s can capitalize this change in consumer behavior by offering healthier foods e.g. organic foods, salads etc.
Technology: McDonald’s understands the need of technology applications. It has strong presence in online social medias e.g. Facebook. The communication patterns and preferences are changing, McDonalds should respond to these changes by innovation.
 

Pest Analysis Of The Bae Company Finance Essay

This article want to analysis the five-year of financial data which from 2004 to 2008 of BAE ,in order to understand the company’s business profitability and development capacity and found the further possibility to enhance the utilization efficiency of it ,so that to promote the investment activities of the enterprise’s business goal of maximizing value in accordance with a benign operation.

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Instruction
BAE Systems is the merger of British Aerospace (BAE) and Marconi Electronic Systems (Marconi Electronic Systems) which was established in November 1999. In September 2004 BAE Systems acquired Alvis Vickers and merged it with its RO Defence ordnance division to form BAE Systems Land Systems.In June 2005 BAE Systems acquired United Defense and reorganised its land systems businesses into BAE Systems Land and Armaments, with Land Systems and Land Systems Hägglunds as subsidiaries of this U.S. based operating group.
It is an international company engaged in the development,delivery and support of advanced defence and aerospace systems in the air,on land,at sea and in space. In 1999 the net sales of the company was 89.29 billion pounds (14.449 billion U.S. dollars)of which military sales was 5.837billion pounds. In 2000, it becamed the third of the world’s 100 largest military companies. Now, the company employed more than 100,000, and annual turnover of the company is 12.3 billion pounds and orders amounted to 37.5 billion pounds.
PEST analysis of the BAE company
1.Politics.
BAE Systems is a global company which conducts business in a number of regions, including the Middle East.Sales market over more than 130 countries, this brought great opportunities to the company. However,Government regulations and administrative policies of some countries could change quickly and restraints on the movement of capital could be imposed; governments could expropriate the Group’s assets; burdensome taxes or tariffs could be introduced; political changes could lead to changes in the business environment in which the Group operates; and economic downturns, political instability and civil disturbances could disrupt the Group’s business activities.
New threats and conflict arenas are placing unprecedented demands on military forces and presenting BAE Systems with new challenges and opportunities to assist those forces in meeting changing defence and security needs.( Susana Callao,2007)
2.Economic and Society
Global passenger traffic is forecast to increase by approximately 5% per year. Strong growth is expected in Asia and the Middle East and lower growth in the more mature North American and European markets. The market for large commercial jets is forecast to continue to grow on the back of rising passenger travel. Annual revenue passenger kilometres (RPKs) are forecast to grow by approximately 5% through to 2023 creating an expected average demand of some 830 aircraft deliveries a year. The US represents over 45% of the total forecast global defence spend (including equipment, personnel and operating costs) to 2010. Defense and transport development brings a huge market demand for the BAE.
3.Technology
BAE Systems has played an important role in transatlantic,most notably has advanced technology in the M777 howitzer and F-35 Joint Strike Fighter programmes. The US and the UK have a long history of defence industrial cooperation that has provided significant benefits to both countries.In today’s environment of coalition operations it would be the advantage of both governments and defence industries to allow and,indeed, to encourage freer technology sharing between the UK and the US. For BAE Systems an improved technology sharing environment would enable its engineers and scientists in the US and the UK to collaborate more effectively,and bring together their collective skills and expertise to the benefit of its two major customers, the UK and US governments,as well as to its shareholders.
Review and anlaysis of company stratey
1.Pricing policiys. BAE company’s major pricing policy is before business sales occure sign fixed price contracts with clients. Large part of the company’s sales come from fixed-price contract. Because the company’s largest partner is the United States, the U.S. team a great need for defense products, so the business mainly occure in sectors such as government troops, using a fixed-price sales contracts to ensure fixed sales and also to simplify transactions.
2.Market position.BAE Systems has major operations across five continents and customers in some 130 countries. Global businessof the company is based around six home markets in US, Saudi Arabia Australia, Sweden ,South Africa, and the UK. It is the world’s second-largest defense company and the third-largest Airline’s defense and also the third-largest electronics Airlines.
3.Comparison with that of its competitors. The Group’s business is subject to Significant competition. Most of the Group’s businesses are focused on the defence industry and subject to competition from national and multi-national arms with substantial resources and capital, and many contracts are obtained through a competitive bidding process.( Tim Sutton,2004)The Group’s ability to compete for contracts depends to a large extent on the effectiveness and innovation of its research and development programmes, its ability to offer better programme performance than its competitors at a lower cost to its customers, and the readiness of its facilities, equipment and personnel to undertake the programmes for which it competes.
4.Development Strategy of BAE Systems
BAE Systems is a large international companies who has the responsibilities to its clients shareholders, employees and partners.Its strategy goal is to maximize the interests of shareholders. In order to achieve the company’s strategic goals, the Board promotes to enhance the company’s culture atmosphere and establish Operational Framework. .That is based on principles of good governance, aset of definitions, values, policies and processes that guide the company’s work and behaviour, and a uesful system of delegated authority(David Tyrrall,2007). In order to realise the management of the company’s business and deliver their strategy,the Operational Framework covers all wholly andmajority-owned businesses and describes the Group’s mehods to its organisation, culture which including ethical principles of business conduct, values and governance framework vision, delegated authorities , and corebusiness processes.
Financial Analysis for BAE Systems
Industry Analysis
In the global aerospace and defense industries Europe accounts for 19.6% of the global market’s value. In 2004 the European aerospace and defense market grew by 0.9% which reached a value of $249.9 billion. The civil aerospace sector generated the second largest revenues in 2004, reaching a value of $62.3 billion, equivalent to 24.9% of the market’s value.In the next five years, it is expected to be greatly growth. By 2009, the market is forecast to reach a value of $278.2 billion, which equates to a CAGR of 2.2% in the 2004-2009 period, higher than the global market as a whole. However, Asia-Pacific will see spending rise by 4% per annum while the US market is predicted to decline with a 0.6% rate over the same period.During thie time the third biggest aerospace and defense company it will also play an increasingly important role in operation and management in the future.
BAE Systems recorded revenues of $20 billion during the fiscal year 2005, an increase of 25% over 2004. The operating profit of the company was $1.6 billion during fiscal year 2005, an increase of 16.3% over 2004. The net profit was $1 billion in fiscal year 2005, compared to a net profit of $5.5 million in fiscal 2004.Rolls Royce is the leading player in the global civil aerospace, defense aerospace, marine and energy markets. Compared to BAE systems’s business performance, Rolls Royce company recorded revenues of $7.4 billion during the fiscal year 2005, an increase of 5.2% over 2004. The increase was primarily attributable to an increase in revenues from the company’s civil aerospace division. The operating profit of the company during fiscal 2005 was $397.5 million, an increase of 43.5% over fiscal 2004.
The European aerospace and defense market generated total revenues of $234.9 billion in 2005, this representing a compound annual growth rate (CAGR) of 1.3% for the five-year period spanning 2002-2006. The US and Asia-Pacific markets grew over the same period with CAGRs of 6.7% and 3.4% respectively, to reach the values of $502.6 billion and $157.2 billion in 2006.
BAE systems occupies an important position in the industry. In the whole industry it can realized its business very well. The following financial analysis is to analyze 2004 to 2008, the specific circumstances of these years.
Here collect the relevant data of the BAE for five years. These data which is important can best reflects the company’s operation. The preparation of data sheets is as follow. The following analysis mairly use dynamic ratio of fixed base method and ues the data of 2004 as a fixed base period to analyze the indicators.
FINANCIAL STATEMENTS
Five-year summary
Income statement î-³ î-³ î-³ î-³ î-³ 2008 2007 2006 2005 2004
Sales including Group’s share
of equity accounted investments 4,459 3,916 4,007 3,697 3,063
Electronics,Intelligence&Suppo
rLand&Armaments 6,407 3,538 2,115 1,270 482
Programmes & Support 4,638 5,327 4,615 4,660 –
International 3,333 3,359 3,428 3,138 –
Programmes – – – – 2219
Customer Solutions & Support – – – – 2,856
Integrated Systems & Partnerships – – – – 2,022
HQ & Other Businesses 235 243 295 471 464
Intra-operating group sales (529) (673) (695) (655) (417)
18,543 15,710 13,765 12,581 10,689
Underlying EBITA6 (restated)
Electronics, Intelligence & Support 506 437 429 324 256
Land & Armaments 566 324 168 86 (8)
Programmes & Support 491 456 331 261 –
International 35 435 412 403 –
Programmes – – – – 10
Customer Solutions & Support – – – – 497
Integrated Systems & Partnerships – – – – 95
HQ & Other Businesses (101) (203) (146) (117) (50)
1,897 1,449 1,194 957 800
Profit/(loss) on disposal of businesses 238 40 13 (4) –
Uplift on acquired inventories – (12) – (44) –
EBITA5 2,135 1,477 1,207 909 800
Amortisation and impairment
of intangible assets (424) (297) (139) (122) (110)
Finance costs including
share of equity accounted investments 697 93 (174) (196) (132)
Profit before taxation 2,408 1,273 894 591 558
Taxation expense including shar
e of equity accounted investments (640) (373) (248) (147) (219)
Profit for the year from
continuing operations 1,768 900 646 444 339
Profit/(loss) for the year
from discontinued operations – 22 993 111 (336)
Profit for the year 1,768 922 1,639 555 3
Balance sheet
Intangible assets 12,306 9,559 7,595 8,217 6,115
Property, plant and
equipment, and investment property 2,558 1,887 1,869 1,922 1,901
Non-current investments 1,040 787 678 1,730 1,535
Inventories 926 701 395 485 498
Payables (excluding cash
on customers’ account) less receivables (5,866) (5,373) (4,298) (4,596) (3,891)
Other financial assets and liabilities 240 52 6 (7) –
Retirement benefit obligations (3,365) (1,629) (2,499) (4,101) (3,210)
Provisions ( 845) (809) (695) (718) (491)
Net tax 256 63 648 1,012 876
Net cash/(debt) 39 700 435 (1,277) (668)
Disposal groups held for sale – 64 – 137 –
Minority interests (55) (36) (17) (16) (10)
Total equity attributable
to equity holders of the parent 7,234 5,966 4,117 2,788 2,655
Financial statement and cash flow analysis,
After the 2003 recession, Europe’s aerospace industry will experience a steady growth phase. As prediction, there will be a 3.9% annually growth, which is also reflected in BAE System’s financial report after 2004.
Profitability Analysis
Profitability mainly in Revenues ,Sales, Operating profit, Order book, Return on sales, Net cash, and Cash inflow from operating activitie.
The company recorded revenues of $20 billion during the fiscal year ended December 2005, an increase of 25% over 2004. The operating profit of the company was $1.6 billion during fiscal year 2005, an increase of 16.3% over 2004. The net profit was $1 billion in fiscal year 2005, compared to a net profit of $5.5 million in fiscal 2004.And for the company Europe – Aerospace & Defense in 2005 it generated revenues of $42.5 billion, an increase of 7.7% on the previous year. The European aerospace & defense market generated total revenues of $184.3 billion in 2008, representing a compound annual growth rate (CAGR) of 9% for the period spanning 2004-2008. However the BAE system has higher the average.
Sales represents the amounts derived from the provision of goods and services, and includes the Group’s share of sales of its equity accounted investments. Compared with 2004,the sales of BAE increased by 14.2% in 2005,2.1%in 2006,16.4% in 2007 and 37.6% in 2008. Overall,BAE’s sales revenue is in a increase trend. Starting in 2006, a significant increase had been showed and compared with 2007 the sales of 2008 increased by 18%.he significant increase in sales in 2008 has primarily been caused by the Land & Armaments operating group due to high armoured wheeled vehicle volumes in the US and full- year impact of the Armor acquisition. This shows that BAE’s products have strong market potential.
Operating profit.Operating profit is a indicatore to measure of business efficiency. BAE Systems recorded revenues of 16,671 million in the financial year 2008 which is an increase of 16.5% over 2007. For the 2008, the US which is the company’s largest geographic market, accounted for 56.4% of the total revenues. Operating profit in 2008 is 2.2 times of 2004,in 2007 it increased 52.1%,from ¿¡774m in 2004 to ¿¡1177m. Operating profit is showing the trend of rising year by year reflects a good profitability of BAE’s business. There is a very good market prospects of the enterprise.
Inventory turnover.Decline in inventory turnover .However, when compared with the same industry Boeing it is still very high. Accounts receivable turnover in 2005 and 2006 was lower than that in the other early years. However, in 2007 and 2008, BAE’s accounts receivable turnovera increased substantially¼ŒTotal asset turnover ratio is relatively stable, but slightly higher than the industry standard.
Order book.Order book reflect the popularity of the product, it also shows the potential of products in the market.However, the number of orders can not be a comprehensive response to the operating performance of companies.Between 2005 and 2004,the order book was increasing ,while in 2006 the book order was only 31.7 bn ,reduced almost by 37%.then there was a recover and in 2008 the order book was 46.5bn although it was still less than 2004. Reduction in order book illustrates the business sales market in the shrinking.Reduction in main business volume, indicating that the development of enterprises might have gone wrong strategy.
Return on sales.From the table it can be seen that the return on sales is increasing year by year , But the order is indeed the in reduction.The Prorfit for the year in 2006 is very high however the cash inflow from operating activities in this year was the lest. It may be there is something can not be reflect in the financial report, the other businesses increasing cause income to increase,so it is not be reflect in the financial report which is about the return on sales.
Cash inflow from operating activitie.Cash inflow from operating activities is used to determine the the actual gap between company’s operating cash flow and financial reporting operating income or net income. (Hans,2007) . From the table that the operating business cash flow show a downward trend during the five years.That is to say compared with 2004 the cash inflow from operating activities reduced by 10.7% in 2005, 61.1%,in 2006, 8% in 2007, 14.5%, in 2008.The 2008 reduction in operating business cash flow largely reflects utilisation of Saudi Typhoon advances received in 2007 and an agreed repayment to the UK Ministry of Defence in respect of the Astute programme.However, it reflacted there is something wrong with the company’s cash flow.
Net cash. The cash flow was ¿¡700m in 2006,however, in 2007 it reduced by 28% and becomed to ¿¡435m,even worse in 2008, it is only ¿¡39m. In 2008, 83.43% of the cash flow ratio is too high compared to the same industry. Capital utilization rate is low, so a decline in cash flow to investors is a positive message. And in 2008 29.65 percent of the cash-flow ratio compared to the industry is relatively high. The company Europe – Aerospace & Defense recorded a net cash of $2.1 billion up 40% in an average .
The reduction of the net cash flow shows that there is some problem in the cash inflow of the company,it may have a bad effect on the operating and develpoment of BAE. However overall level still very high for the company .
Solvency analysis.
Overall there is a very strong solvency.In particular, in year 2005 and 2006, current ratio were more than 2¼Œquick ratio exceeds 1.But it is also the performance of the low efficiency of fund utilization。Although the 2007 and 2008, the flow rate and the liquid have declined more .But does not affect the solvency¼Œand the increased utilization of funds. Assets is responsible for rising rates, leading to long-term solvency has been reduced low¼ŒBut the asset-liability ratio does not exceed 50% ,the long-term solvency remains strong.
Analysis of share price performance
Comments on company management/board of directors and the stock market
The Board promotes a common culture and identity through the Operational Framework. It sets out the way we do business and what it means to be part of the Group. It is the Group’s framework for a sound system of internal controls. All employees are required to comply with the Operational Framework in their business conduct.
The BAE Company’s TSR (share price growth plus dividends) ranking relative to a comparator group of 18 other international defence and aerospace companies such as Boein,General Dynamics,Raytheon ,Cobham,Dassault Aviation,EADS,Embraer PN,Finmeccanica and so on.. None of the shares vest if the Company’s TSR is outside the top 50% of TSRs achieved by the sectoral comparator group and 100% vest if it is in the top quintile (ie top 20%) as set out below(Herve,2006) Rationale for performance measures: importance to major investors as an indication of both earnings and capital growth relative to other major companies in the same sector and to ensure that awards only vest if there has been a clear improvement in the Company’s performance over the relevant period.
EBITA .
EBITA refers to a company’s income before the deduction of interest, tax and amortization expenses. It is also consistent with the profi t measure which is used by BAE to analysis internal performance and as a measure of operating profitability that is comparable over time.。Underlying EBITA increased 86.7% in 2008 which reaches to ¿¡1,897m compared with 2004,and 31% compared witn 2007.according to the calculation ,compared with 2004, EBITA increased 45.4% in 2007,18.8% in 2006 and 16.3% in 2005. Underlying EBITA during the five years is increasing growth all the time . View of the circumstances from the BAE, there is a very good return on investment .That is very likely to achieve value and hedging to buy its stock.
Underlying earnings per share.
From the table it can be seen that Underlying EPS is 37.1p in 2008 which increases 23% compared with last year.And there is a 28.1% increase in 2007, 30.6% in 2006,29.3% in 2005.All these increase are compared with the year brfore. Companies and the stock market do not like fluctuating EPS’s. In the past BAE EPS growth rate 35.25%¼Œgrowth potential is still very good and EPS Stability is very good too.Companies operate is stable and reasonable.
The Underlying earnings per share of BAE does not fluctuate badly,so it is good for its sharehooders.And Underlying EPS continue to rise mainly reflecting higher underlying EBITA of the BAE.
BAE as an aviation industry leader¼Œin the 2004-2008 years, the company’s revenue and profit growth.From 2006 to 2008 BAE’s profitability continued to rise.In particular, rising faster in 2008.
Recommendation to investors
Based on the above analysis,it can be seen the company’s operating capacity is very light, and development prospects is very good,its position in the industry is also high. The company will continue to develop, and will continue to grow. With the recovery in economic development, the company’s operations development will gradually resume, which will cause the Company’s stock price rebound. Therefore, the long-term investors can look up a little,and continue to hold its shares, to realise the purpose of increasing the value of their money. For short-term investors they will have to stage development according to the company, select the appropriate strategy to achieve their own purposes.
SWOT ANALYSIS
Strengths
Weaknesses
BAE achieved with many business acquations, and establish friendly and long-term relationship with the United Kingdom and other countries, through the merger, the company’s growth has been greatly improved.
Diversified business
The company has advanced technical level.
Strong growth in revenue and profits
Relatively low employee productivity
Unfunded employee post retirement benefits
Sluggish performance in key segments
Fixed-price contracts risk
The Group is exposed to risks inherent in operating in a global market.
The Group is involved in consortia, joint ventures and equity holdings where it does not have control.
Opportunities
Threats
With the intensification of regional conflicts more demand for defense products is also increasing, thus creating a large demand for the company’s products, especially the United States, defense products demand is very huge.
Huge international market and the demand for defense products offers great opportunities for BAE’s development.
Growth in global aerospace and defense
Intense competition
High dependence on government contracts
Recommendations
Minimize the fixed-price contract and control the initiative rests in its own hands.At the same time to manage contract-related risks and uncertainties, contracts are managed through the application of the Lifecycle Management (LCM) business process mandated by the Group’s Operational Framework at the operational level¼Ž(Flower,1998)
The Group has formal systems and policies in place which are mandated under the Group’s Operational Framework to ensure adherence to regulatory requirements and to identify any restrictions that could adversely impact the Group’s future activities.
The Group has formal systems and procedures in place to monitor the performance of such business arrangements and identify and manage any adverse scenario arising.
In order to protect itself against currency uctuations, the Group’s policy is to hedge all materialrm transactional exposures, unless otherwise approved as an exception by the Treasury Review Management Committee, as well as to manage anticipated economic cash ow exposures over the medium term.
Conclusion
BAE in a leading position in the aviation industry .Both operating profit margin or asset turnover ratio is higher than the level of the same industry.However, compared with other companies in the industry, the use of financial leverage is not very good, capital utilization rate is not high. From the above there is still great room for BAE development.The future development considerations from the following two¼šOne is to raise operating margin¼ŒSecond, make full use of financial leverage effect,because of its financial leverage below the level of the same industry.
The most important thing for the company is upgrading in innovation and technological.Encourage the development of a new ideology¼Œnew technologies and new ways of working and bring them with a lasting competitive edge.
And for the investors, because in the past BAE EPS growth rate 35.25%¼Œgrowth potential is still very good and EPS Stability is very good too,so they can buy stocks of the company at present time.( David Tyrrall,2007)Under the financial Crisis, government purchases declined, but as the recovery of the financial environment the company’s business will increase, operating profits will increase substantially.Therefore, with the improvement of operating conditions the stock price will be in a good direction.