Water from Iceland. Bottled Water Industry - Speech or Presentation Example

? Water from Iceland Summary of the case Stan Otis, a fresh graduate from a major Northeastern private universality, had just received a call from Citicorp via Roger Morey. Although he was excited at the thought of acquiring a job after a three-month search, was not extremely anxious at starting working. In his mind, as the case tells us, he had business thoughts in his mind. Since his tour in Europe, fully funded by his parents as his graduation present, the waters of Ice land fully captivated him. For one reason, he felt that he would do good business if he started a company that was to import this water to the United States. Ice land did not have any industries. Mainly, it relied on the fish export business for its income. The idea kept ticking in his mind until he made up his mind to conduct a market research for the viability of his idea. Later in this presentation, I will discuss his findings after the research. After much thought, perhaps he realized he was more business oriented as he went into the research full throttle. It is interesting to find a fresh graduate contemplating on becoming an entrepreneur at the expense of a full time job. However, due to his business acumen, Otis was ready to make his idea a reality in case he found the industry viable enough. He was certain that if the idea were successful, the company would be a success. Water from Ice land tasted wonderful. In comparison to the United States water, what he tasted during his trip was great. He considered an imports company that would import water from Ice land and bottled it in the United States for the United States market. Armed with a business idea in his mind, he went to the market to conduct a market research about the American bottled water industry. In this section, I will discuss the business environment in relation to the American bottled water industry. Otis, in order to complete his research, he relied on the services of his schoolmates who worked in a market research company. Through their assistance, he received a substantive wealth of information on industry. As he realized, the United States market enjoyed a large share of total beverages consumption. In total, bottled water enjoyed 16% of all the beverages consumed in the United States. Further, he gathered that there were several types of drinking water in the market. These were treated or processed water, mineral water, sparkling water, effervescence water and spring well water. Through the entire investigation, he realized that no water was from European region. This was a big opportunity for him. To make his dreams even appear more real, he realized that the consumption of water was increasing with time. Four reasons were responsible for this growth. Among these factors was increased awareness among the consumers of the impure nature of the city water supplies, increased dissatisfaction with the taste and odour of the city water, rising social influence and the increased desire for consumption of caffeine, sugar, and other coffee substances as well as soft drinks. Further, the highest consumers of bottled water were in the states of California, Texas, Florida, New York and Arizona. He also found out that the industry made numerous profits annually both on the retail and wholesale business. For instance, in 2001, a total of $6.5 billion accrued from wholesale alone and $7.7 billion in retail. In the recent years, some companies had started importing water. Although this kept rising, between 1998 and 2000 the volumes had declined. He discovered that ice land in specific accounted for only 0.05% market share of the total water imported into the United States. With this information, Otis extended his research on two significant countries in his imported water from Ice land. The United States bottled water regulation and the economic condition of Ice land. Regulation of the bottled water industry in the United States was both at the federal government level and by various states government levels. While some states had stringent regulations that those of the federal government, others did not instil additional regulations. Further, he realized that bottled water fell under the category of food and regulated by the Food and Drug Administration (FDA). FDSA requires that bottled water products be clean and safe for human consumption. It also required the processing of water to take place under sanitary conditions and produced in accordance to the FDA good manufacturing practices. Iceland as he realized depended on imports and especially the fish crops. Recently, Iceland created an Export Board mandated to develop new products for export and promoting them in an aggressive manner abroad. Further, he realized that Iceland id a member of the United Nations, the European Free Trade Association and world trade organization. There is no tariff charged on natural water and the government charges only 0.33 cents tariff on carbonated water. From the information provided on the situation, I would recommend Otis to start a business of importing nature water from Iceland. According to the Iceland trading regulations and the export policies, exporting nature water from the country is tariff free. He however faces the problem of choice that leads to creation of an opportunity cost. The carbonated water business in the United States is very promising as it has high returns. This means instant returns for him. Nevertheless, carbonated water in Iceland attracts a tariff of 0.33 per litre, increasing his operational costs. In business, the only way of maximizing profit is through cost minimization and therefore, nature water was the best import option for him. Most of the cited issues favoured the business. It is easy to obtain a licence to start a water bottling company in the United States as the FDA is responsible for all the regulation and licensing activities for all food related businesses. As such, obtaining a licence would a simple task if he fully met all the requirements for the business. Other reasons why he should consider importing water was that the bottled water industry in the United States was big and still growing. Secondly, the industry recorded annual rising profits, and this proves that it was a high returns business. Third, there were few imports of water into the United States from Iceland. Finally, apart from California and Florida, al other states in the United States adhered to the federal regulations. Only these two did extend their regulatory mandate beyond the federal regulation. Additionally, the economic condition of Iceland was favourable enough for such a business to thrive. In setting up his business, Otis must consider his capital availability and the kind of importing business to set up. If he has adequate capital, he should consider setting up an individual company. It is however unlikely that he would receive such an amount of money to set up a sole business and can thus consider a joint venture with a joint venture with another person with access to adequate capital. On the other hand, he could sell his idea to an existing company that has already performed wonderful in the bottled water industry. This would transform his idea into as fully owned subsidiary based in Iceland. The advantage of this is that the owning company will perform all the administrative functions. Read More