Market Entry Strategy for a New Lifestyle Drink - Term Paper Example

Juice Business Plan Research Proposal Market Research for Kompot, an Eastern European non-citrus low sugar Juice According to IBIS, the Juice market is plenty competitive. There are 211 beverage enterprises making fruit juice that amount to $12.5 Billion in sales in 2014. The biggest players in the juice market are Pepsi, Coca-Cola, and Dr. Pepper Snapple who combined own about 47% of the market. In order to compete, companies need to be specialized in niche and high-quality products. However, there is room for growth. There has been a 1.3% increase in annual growth in the juice industry stemming from a steady increase in disposable income and health conscious families. American health conscious diets have been on the rise over the past twenty years. IBIS’s healthy eating index projects a 3% from about 66% in 2014 to about 69% in 2019. The healthy eating index is a “percentage of a recommended diet that an average American consumes. The percentage represents the degree that the average American adheres to the consumption guidelines set out by the US Department of Agriculture that are regularly updated every five years. The last recommended diet was released in 2010.” The current juice market is composed of 57% citrus juice, 5.1% vegetable juices, and 37.9% non-citrus juices. The rising price of citrus fruits has caused health-conscious juice consumers to explore alternative non-citrus juices. Many of these non-citrus juices, focus on decreasing the amount of sugar infused into each serving. Natural fructose is preferred by health-conscious families as opposed to corn syrup or a large quantity of cane sugar. Many of these non-citrus juices are exotic fruit based. Additionally, with the decline of the demand for carbonated drinks, the demand for juices, particularly non-citrus exotic fruit juices will rise. Therefore, if logistics, distribution, and costs are optimal, there may be room for an exotic non-citrus juice. However, the juice industry comes with many difficulties. It is positively correlated with the rise or fall of disposable income. The financial crisis of 2008 and 2009 significantly impacted the buying power of families, therefore decreased their spending on commodities, such as juice. It is unknown when the recession will take place, so it is paramount a new beverage company takes a potentially fatal macroeconomic effect into its planning. FDA regulations have also been stricter in recent years. With the passage of the Food Safety Modernization Act in 2011, the government is taking a more preventative stance than a responsive stance on importing food safe to eat. Some produce will be returned to the country of exportation if the produce does not meet American standards. Therefore, produce is expected to see a rise in price over the next decade. Lastly, it is a highly capital intensive industry. The industry spends about $0.45 cents of capital for every dollar of labor. Manufacturing juice is notably more expensive than developing software. As an entrepreneur, one has to decide what has the biggest potential in earnings with the lowest costs to start when generating ideas. Key partners The first thing that is necessary for any business idea is to identify partners and establish key relationships that will hold the business together. For the sale and sustainability of Kompot in the United States of America, the following are to be established. Strategic Alliances with Non-Competitors Forming alliances with non-competitors will ensure that there is continuity and advantage that is not enjoyed by our competitors. These alliances may be with producers of complimentary goods such as All American Containers, who produce plastic and glass containers that will be necessary for the packaging of our juice. The agreement can be such that the containers are customized to desirable shapes preferred in the market. Strategic Partnerships with Competitors Forming strategic alliances with juice producers in the United States will ensure that there is fair play in the market. It will ensure that competition is based on health grounds that ensure that will ensure all producers have access to the market without negativity from the competitors. Major juice producers such as Pepsi, Coca-Cola and Dr. Pepper Snapple can be of very great use. First of all, they can act as a useful resource and provide our Kompot Company with market variation information, and a wide range of information based on their long time experience in the market. With information from these companies, it becomes possible to identify ways of isolating a niche market for our produce. Joint Ventures to develop new Businesses This may involve two or more companies pooling their expertise, ideas, and resources for the achievement of a common goal. This ensures the sharing of risks, however much the rewards are also shared. Joint Ventures ensure business expansions and enable the development of new products. It also ensures widening of the market for the produce, especially overseas. The company may venture jointly into this business with producers of the same kind of juice from Eastern Europe who have more experience. This will ensure a continuous exchange of ideas, and resources. The company may also be part of the wider market enjoyed by the other company’s earlier development. A successful combined venture, however, also have risks that ought to be watched out for. Problems may arise if the partners have different goals, if there is an imbalance in the levels of investment, expertise, or the amount of assets that each partner brings into the Venture. The difference in cultures and styles of management may also result in poor cooperation and integration. In the early stages of the joint Venture, sufficient support and leadership will need to be provided, failure to which the business joint venture may come down falling. Buyer –Supplier relationships to assure reliable Supplies Sustaining a reliable buyer – supplier relationship is quite vital for the success of a young business. The supplier’s relationship management strategies should ensure compliance and emphasize conduct, and strategic financing. The relationship between a buyer and a supplier can be quite complex because each of them wants to maximize its time, resources and investment and may cause a completion between their priorities leading to a strained relationship. As such this relationship should be maintained according to the three key aforementioned points. The relationship should be aimed at assuring both of minimized risk of loss. Key Activities Key activities are those activities that any company must engage in to ensure that its business model is successfully operating. These activities differ depending on the business model type that the company decides to use. However, these activities can be important in the building block of any business, but are more specifically prominent in the several aspects discussed herein. Production This activity dominates the any business model, especially for processing companies like the one targeted by this plan. It is highly related to the processes of actual conversion, packaging, delivery and the process of quality control. In the production process of citrus juice for example, there is the process of washing, peeling, extraction from peels, finishing from the cells, collection of pulp, separation, buffering, evaporation then collection of the concentrate. The concentrate can then be dissolved in treated water to obtain citrus juice which is the packed and distributed to different supply zones. Problem Solving The main problem targeted by juice production is the increasing public desire and demand for juice (kompot) in the United States. This is further escalated by the desire to try out food stuff from different cultures and producers. However, certain problems may be faced in this process and the management may have to seek ways of dealing with them effectively. In problem solving, the first stage would be to identify the problem. This may involve observing symptoms and associating them to a cause. If the problem is measurable, let it be measured, understood and documented. Secondly, identifying the root causes of the problem may be necessary. Tools of analysis, such as histograms, process flow charts and scatter diagrams may be used in pointing out the exact point in the process where the problem arises. After identifying the causes of the problem, it becomes possible to brainstorm on possible solutions. A cross-functional group may be used to prepare the alternative solutions after which the most appropriate solution may be selected based on the specificity of the problems identified. The solution may then be implemented and checked after some time to see if the problem has been solved. Platform/ Network When designing a business model, entrepreneurs should concentrate on certain specific issues that are of great concern in the success of a business. The effects of a network are evident when any customer’s willingness to pay for a product depends on the number of other customers that they can interact with by using the product. The effects of a network arise in Platform-mediated networks, which include users who would like to interact with each other together with an intermediary, who provides a platform that encompasses rules and infrastructures that facilitate the interaction of the customers. As a startup, it is necessary to aspire to either profit by offering compliments that leverage existing platforms or by building new platforms. These networks and platforms are necessary for the development and continuity of businesses. Value Proposition A value proposition is that statement that a company uses to clearly identify the advantages that a customer will receive by purchasing its products of services. It describes the target buyer, the problem that the product targets to solve and why this specific product is better than any other alternatives. During the creation of the value proposition, the following steps are to be followed. Definition of the problem Diving into solving a problem before it is clearly defined will lead into failure. As such, the problem should be understood and clearly outlined so that its solution may be specific. For the purpose of this definition, it is necessary to determine if the problem is workable, determining whether fixing the problem can (not) be avoided, if solving the problem is urgent and if the problem is underserved. In this case, it is necessary to identify the need for a new type of a juice in the market, if bridging this need will be necessary and if it will be possible. How urgent this product is needed will help in determining the speed with which the establishment will be effected. Evaluating the solution After defining the problem, it becomes possible to evaluate whether the breakthrough that you are providing is unique and compelling. The most useful approach is to look at it as a combination of discontinuous innovation, defensible technology and disruptive business model. The solution should be able to offer transformative benefits by looking at the problem differently, offer intellectual property that can be protected to avoid unfair competitive advantage and yield value and cost rewards that can be of use in catalyzing the growth of the business Measuring the adoption of the customer using the Gain/Pain Ratio It will be necessary to measure how much customers will adapt to using the products as much as the company may dwell on how to make the product better. It will be necessary to measure the amount of gain that the customer will gain from using the product against the pain they will undergo in acquiring the product and using it. Building the Value Proposition After defining, evaluating and measuring the impact of the product, it is now necessary to build the proposition. The proposition should be built to target customers who are dissatisfied with the current alternatives together with those who are comfortable with the alternatives so as to broaden the market scope. The product being new, it will be necessary to ensure that it comes out as a new fresh, acceptable brand that everyone would want to be associated with. Customer Relationships This is the way through which the company deals with and communicates with existing customers. The company may be tempted to concentrate on how to increase their sales, forgetting that most attention should be placed on the existing customers, however small they may be since it is essential in making any business successful. It involves giving customers reasons not to move to a new alternative. You should let the customers understand what you are specially doing for them. The relationship should be kept personal and the customers should feel like they are being served directly by the company. This can be done through handwritten notes, voice mails, and emails appreciating them being part of the big team and informing them of new products and developments. Follow-up calls should be considered for mega customers after sending supplies or if it has been long since you talked. The company should also remember major special occasions like anniversaries, holidays and customer birthday and may send regular cards and gifts with the company logo/name on them. This will increase the customers’ loyalty to the company (Pinson 156). Customer Segmentation This involves placing the customers into groups of individuals that are similar in certain specific ways for the purposes of marketing and distribution. The Mass Market This is the largest group of end consumers for a specific product. Naturally, the company’s product targets the American citizen who is enlightened by new refreshing juice. The Niche Market This involves the specific group within the American population that is enlightened by exploring European products and more specifically, the Kompot Juice from Eastern Europe. This may include European tourists in the United States or American tourists who were enlightened by the juice when they visited Europe. Furthermore, this may include the group of Americans who are delighted by trying out new things in the market. Other Segments The company may further segment its market based on age, gender, interests and spending habits. During the production process of the juice, the company may produce different types of juice categorized based on age, interests, gender and spending habits (VignaliandCurland 13). There may be a juice for those who spend more costing more because it is prepared differently from the rest. Key Resources This is the building block that describes the most essential belongings/assets that are needed to make a business to thrive. Through these resources, companies can generate their value propositions and produce revenue. They can be physical, financial, intellectual or human in nature. These resources can be owned or leased by the company (Reading 212). They can also be acquired from the key partners. The Physical Resources In the production of this juice, physical assets such as the processing facilities, vehicles, machines, buildings, systems, sale points and networks of distribution may be considered as necessities. These physical assets play the biggest role in processing companies. Intellectual Resources This category includes the resources that are not necessarily tangible, but which a company relies upon for its success. The juice company needs a brand, proprietary knowledge, a patent and copyright to ensure knowledge of its production process is not stolen by another company. A database for the customers will also need to be developed to ensure there is a record of how many constant customers there is, and how much juice they have been buying from the company (Tran 189). This database can contain specific information about each customer that may be considered confidential and kept away from competitors. Partnerships and information about them also fall under this category. Human Resources The company will rely heavily on human resources. There will be a need for skilled scientists to work in the processing system and in coming up with the specific recipes for the different juices. The company will also need to consult legal resources for the patent and copyright production. In the distribution, sales promotion and marketing areas, the company will need more human resources. Financial Resources The business model that will be used in this processing company will also highly depend on finances. This is because there will be need for cash to establish the physical resource bases and to set off the production process. The company can depend on guarantees as cash, lines of credit and may opt for a stock pool to hire key employees (Katsigrisand Thomas 165). The company may opt for a loaning fund to establish itself into stability before it can start paying back the loan. The key partners will pool in their financial resources in this establishment too. Business Channels of Communication These are the communication channels that can be controlled by the firm. When the firm needs to communicate with its customers, this option is opted for. The company can make advertisements on Television Channels, on Print Media, or through Radio Stations, banners, posters, fliers, stickers and many other ways. These are cases where the general market is targeted by the producer. In cases where the company targets a specific audience/customers, more specific communication may be needed. This may include calls, emails, mobile phone messages, faxes or through letters. There are some forms of information that the company may see simple, but the client may feel like a non-disclosure channel should be followed (Poonprasit et al. 202). As such, the company should always find out how the customers want to be communicated to in cases where privacy comes up. The company should ensure that these are planned carefully and designed for its needs. Formal communication ensures efficiency, prevents bogging, allows monitoring, and creates a good atmosphere since they reflect professionalism. The company should ensure that any rumours (grapevine) that may be misleading and lack a sense of direction are corrected by its own formal communication. This can be achieved by following up on the social media grapevine to observe for these rumors and correcting them as they come up to prevent their effects from sinking in too deep (Akabawi andHodeeb 194). Cost Structure The cost structure is used to describe the entire costs incurred to make a business model work. It becomes much easier to calculate these costs after the key resources, key activities and key partnerships have been defined. Our business model targets to minimize the costs. The company has the choice of choosing between a cost-driven and a value-driven model. Cost-Driven If the company opts for this option, it will be necessary costs wherever necessary and possible. The low price value proposition is commonly used to achieve this. The company can use this approach too by assuring its customers of a lower cost for an equally good product that would cost much higher for other producers such as Coca-Cola or Pepsi. Maximum automation and extensive outsourcing may be used to reduce the cost of labour that would, otherwise, increase the cost of production consequently increasing the cost of the product. Value-Driven If the company opts for a value-driven approach, it will have the task of making sure that it assures its customers of a higher value/quality of juice that will necessitate a higher cost. This is because the company will spend more in the production process to that will need to be catered for with the elevated cost. This may be, especially, when targeting high spenders of those who value quality over quantity. Other cost structure parameters Fixed Costs are the costs that a company will incur constantly regardless of the amount of produce. These will be the salaries of the workers, the cost of maintaining the factories and pool vehicles. The company will also incur variable costs. Variable Costs are the costs that will vary based on the level/volume of production. These may include distribution costs or costs incurred due to change in modes of advertising. The other major aspect under this section would be the economies of scale. This is expected to occur when production volumes rise (Filippaios and Rama 68). The higher the amount of input that the company will buy, the lesser the cost it will incur. Therefore, as the company increases its production, its expenditure on the raw goods go down. Revenue Streams This represents the amount of cash that a company generates from each selling group (customer segment). It is different from the profits, which deduct the costs. They can be generated majorly through the following ways. A company may generate revenue streams by selling its assets that are no longer needed so as to acquire new assets. For example, once the company has grown, it can sell of its processing facilities, buildings and vehicles obtain newer bigger ones. However, if the company does not see the need to sell these assets, it can lease/rent/lend them out for a fixed period of time at a fee. Pricing mechanisms may also be used to generate/maintain a revenue stream. This may include allowing discounts to encourage more purchases. A dynamic mechanism that highly depends on the market conditions may be used. When the demand in the market goes up, the prices may be increased proportionally and when the demand goes down, the prices may be lowered to maintain the sales. These may be accompanied by controlled production volumes. Work cited Akabawi, Sami, and HebaHodeeb."Implementing Business Intelligence in the dynamic beverages sales and distribution environment."Cases on Performance Measurement and Productivity Improvement: Technology Integration and Maturity: Technology Integration and Maturity (2012): 194. Filippaios, Fragkiskos, and Ruth Rama."Globalisation or regionalisation?The strategies of the world’s largest food and beverage MNEs."European Management Journal 26.1 (2008): 59-72. Katsigris, Costas, and Chris Thomas.The Bar & Beverage Book. Hoboken, N.J: John Wiley & Sons, 2012. Print. Pinson, Linda. Anatomy of a Business Plan: A Step-by-Step Guide to Building the Business and Securing Your Companys Future. Tustin, CA: Out of Your Mind & into the Marketplace, 2008. Print. Poonprasit, Mudjalin, et al. "The application of waste minimisation to business management to improve environmental performance in the food and drink industry." In: Procs of the 7th Finnish Conf on Environmental Science, Jyvaskyla 2005. 2005. Reading, Clive. Strategic Business Planning: A Dynamic System for Improving Performance & Competitive Advantage. London: Kogan Page, 2004. Print. Tran, Vu Ai. "Business plan for a european style coffee shop in Ho Chi Minh city: case: AT Ltd. Company." (2013). Vignali, Claudio, and Sue Curland. "Liquid applepie: Market entry strategy for a new lifestyle drink." Journal of Food Products Marketing 14.2 (2008): 3-15. Read More