Innocent Drinks Internal Environment - Report Example

ANALYSIS OF INNOCENT DRINKS COMPETITIVE ENVIRONMENT AND STRATEGIES FOR IMPLEMENTATION By Innocent Drink’s internal environment encompasses a number of core tools such as Resources, Core competencies, VRIO Analysis, Value Chain, and Value network. A combination of these tools defines the Innocent’s strengths and weaknesses for they are vital in identifying gaps to sustain competitive advantage. Innocent’s Resources: Innocent’s most evident resources are technological advances and reputation or a brand image that has continued to define its progress. Technologically, Innocent Drink is a leading entity in the use of modern, innovative technologies to increase its efficiency not only in product processing, but also in improving its communication channels. For instance, the firm has continually adopted various recycling technologies, a factor that favoured it to use almost 100% of recycled bottles and roughly 25% recycled labelling paper for its products. Consequently, Innocent is a leading use of online advertisement that has contributed to its tremendous for about 15 years since its establishment (“innocent - little tasty drinks”, 2014). Human resource: Innocent’s HR also forms another significant resource whose training, expertise, adaptability, and loyalty have seen the company succeed to deliver best services to customers. Although its staff structure started as an entrepreneurial at establishment, it has continually transformed to a hierarchical structure. Since it started with three staff members in 1999, an entrepreneurial was suitable for a quick decision-making and increases its market share. Currently, there are over 300 employees include those working in its outlets outside Europe. These staffs are assigned different roles including a team in finance, in commercial, business delivery, in marketing, in production and a team in logistics. Innocent Drinks’ Core competencies Innocent Drinks’ core competencies include practices, activities, and processes that have given it a competitive advantage and ability to sustain its clientele. For this reason, its main competencies are in terms of its unique product, reliable processes, and the ability to develop relationships, culture, knowledge, and technologies to do better. Unique product: Since its establishment, Innocent has exhibited expertise in integrating multiple technologies in development of both unique and customer attracting products. Their key products are smoothes that unlike main contenders in the market are made of fresh fruit having a shelf-life of eight days, thus providing high-quality products (Green, 2014). Their competence is evident even through their packaging; each bottle depicts what it contains (such 26 cranberries, 12 raspberries, and so forth) (Janik & Böttger, 2008). Speedy in next-generation of products: The firm’s line expenditure is far greater than the rest of the drinks market combined. Exceptional public relations department, constant fresh product innovation, unique packaging, and its annual endorsement of free summer music fiesta known as the Fruit stock have facilitated this. Another competence aspect apparent by Innocent is the ability to develop special relationships with their clients. For instance, they have what they refer to an “open door” strategy through which they encourage their clientele to visit their head office to give opinions, and ideas to improve their product (“innocent - little tasty drinks”, 2014). In so doing, Innocent has been able to satisfy its customers and always give them the best. VRIO Analysis Value: Evidently, Innocent Drinks exhibits unique capabilities that have got a place in the hearts of its clients and such has enabled it to respond well to any turbulences. One such capability is the creation of Innocent family (“innocent - little tasty drinks”, 2014). Through this family, they developed a website detailing the packaging and asked people share their sentiments through emails and that way they continue to receive news that innocent makes from time-to-time. Rarity: Their high valued capability together with a unique brand image presents a hard to reach capability to its competitors. For example, they can come up with 32 different label sorts that they uniquely change after every three months. Clearly, only a few entities can be able to match its capability. Inimitability: Innocent Drinks’ capabilities highlighted above, and many others are apparently hard to imitate. Considering that they have enabled them to achieve a milestone to become one of UK’s top brands, their strategies should have been imitated. However, no significant imitation is available. Organisational support: Innocent is well organised with plans to utilise its capabilities fully for its triumph. For instance, each staff has to undergo a two-day training program to get equipped with tools and ideas to support its innovativeness and effective product delivery (“innocent - little tasty drinks”, 2014). Value Chain: Its value chain has support activities that include ample infrastructure (plants for recycling bottle and labels), motivated Human Resource, up-to-date innovative prowess, and efficient sales teams, both for retail and wholesale ends. Another part of Innocent Drinks’ value chain are primary actives that engross, inbound and outbound logistics department, operations control team, markets and sales department and services. These departments have for long worked for Innocent to meet its target market (Davis, Lockwood, & Alcott, 2013). Current Competitive Environment: PESTLE Analysis Political: Like any other juice-based companies Innocent’s Smoothies are influenced by UK policies such as trading standards that require that their product follow a fair trading that guarantees consumer safety and maintain top-notch quality standards. With the rise of obesity cases, the UK Department as from time-to-time advised and recommended Smoothies as supplement of fruits and vegetables. Innocent Smoothies have as a result gained a sales milestone from Government policy (Europa.eu, 2012). Economic: Continually since 2008, following the Europe recession the inflation stability has never been guaranteed and as a result at times Innocent has been realized losses as customers try out cheaper Juice and Smoothies alternatives. Consequently, inflation rise has not only led to the rise of oil price but also forced the firm to increase its staff’s wages to survive in hard times. Social: Innocent Drinks is one of UK’s most social responsible firms, as it donates 10% of profits towards the Innocent Foundation. They make sure that all their fruit is morally grown in up to standard work conditions all its fruit pickers. With the realisation that customers are willing to purchase their products due to 100% fruit content, they have been motivated to develop a wide range of Smoothies varieties to increase customer preferences (Secretariat, 2014). Technological: On top of its list of technological advancement, Innocent Drink’s introduction of 100% of recycled plastic bottles and subsequent recyclable labels gives an edge over its peers in the market (“Britvic - 2014_27_03 Soft”, 2014). In terms of marketing, Innocent have been able to gain vital reputation in the use of social networks platforms such as YouTube, Facebook and website and recently on Instagram to market its products. Legal: Like the rest of food producing companies, Innocent has to conform to the set safety laws to the letter. For instance, their manufacturing processes are all subjected to pollution controls. Environmental: Consumers always have preference for products they believe are free of chemicals. Innocent’s ability to make their products from organically produced fruits with no artificial elements has made customer more loyal to their products significantly due to their environmental consciousness (Europa.eu, 2012). Porter’s 5 Forces New Entrants: There is opportunity for new entrants to the Smoothies and juice industry, but they are often faced with hampers in trying to compete with Innocent considering that it has a huge European market share of over 63% (Wilson, 2010). Its major entrants are Tropicana, which have at times become a threat, as consumers tend to try out new and cheap Smoothies. Buyer’s power: Innocents capability to put completely unique products has consistently attracted clients to their products perhaps due to their healthy and nutritional value they contain. Innocent appeal to buyers is inclined in the fact that their range of Smoothies have 100% natural fruits content with no added sugar, nor concentrates (“Innocentdrinks.co.uk”, 2014) Supplier’s power: With the merger with Drinks giant Coca-Cola, Innocent continues to gain a huge distribution scale, with experienced suppliers and distributors that will foster margin improvements while sustaining price competition. They are well positioned to obtain better suppliers due to significant financial backing by a corporation with huge scale as Coca-cola. Threat from substitute: Latest threat to Innocent’s line of products include top supermarkets move to have their brand of Smoothies and juices. Consequently, Finest high-street brands in the likes of Waitrose have also come up with the own tagged products at a very competing prices. Innocent for has felt these threats for even with discounts, they have failed to arrest the sharp decline of the Smoothies market (Green, 2014). Competitive rivalry Intensity: The competitive rivalry in the drinks industry is apparently intensive, considering the existence of giant entities such as Coca-Cola, Tesco, PepsiCo and other fresh entrants. However, Innocent Drinks has been a dominant contender in the Smoothie market, by successfully overwhelming new rivals and the recession through its health positioning and exceptional marketing techniques. Innocent’s Scenario Planning Political uncertainty factors Subsidies for greener substitutes: It is doubtful how the soft drinks’ market particularly in the Europe will look like as with government policies regulating the carbonates sector. Host nations’ Political Stability: Political intrigues are bound to surface not only in the UK and Europe but also in other Innocent’s emergent markets and thus Political Stability is not guaranteed. UK’S state of Healthy sector: Though currently, UK has favoured Innocent’s Smoothies as a healthy substitute, it is uncertain if such patronage is sustainable in the future. Social Uncertainty Factors Public perception of the company: It’s hard to anticipate how the consumer’s perception might be in the future, perhaps due changing consumer patterns and tastes. Demand level for safety: Regulation governing safety and related effects keep on changing, and the dilemma of how they may look in the future and the impact on the company can only be speculative. Advertising models: Although so far, Innocent has succeeded to harness TV advertisement, online platforms, and outdoor posters and enabled the company to build an n exceptional brand, the future of advertisement is uncertain. The expenses incurred and the effectiveness of these advertisements is just a fallacy. Economic Uncertainty Factors Inflation Rate in Europe: The inflation rate in Europe may be lower than the previous recession, but it poses another uncertainty if the economic downturn might re-occur or not. Price of Raw materials (fresh fruits): Major Innocent’s inputs include Fresh fruits, labels and recyclable bottles. Their prospect price is uncertain, perhaps because, a slight rise in inflation with lead to an increase in oil prices. Exchange rates: Another uncertain factor of contemporary economics which due to its links to oil prices, inflation, and price of commodities makes if the most technical factor to predict. Technological Uncertainty Factors Rate of Innovation and development: Every player in the Smoothies and Juice industry is one way or the other and are willing to pump resources to get best of their talents. Such high rate only indicates the level of uncertainty that companies like Innocent will face in the future. Technological effectiveness: So far, most of Innocent’s technologies such the 100 % recyclable bottles. However, their efficiency in the future is not guaranteed. Security levels of internet transactions: Online transactions have become the order of the day, but the online systems keep on changing thus casting an uncertainty of their future efficiency. Potential Future Strategies Market penetration: Ample access to the market will enable Innocent to increase its market share of its currently offered Smoothies and juices. This strategy will focus profoundly on developing the quality, expertise and differentiation for customers to cherish its products. Product development: As it is apparent throughout this analysis, Innocent’s core marketing is inherent on their prowess to deliver naturally sustainable products. The future of the Innocent is reliant on not only sustaining the current innovativeness, but the capacity to develop new exceptional products and triumph, will be inevitable. Market development: though Innocent Company is not the pioneer in the Smoothies and juice production, they have been able to utilize their resources innovatively to reign in the market. In order to sustain continuity, Innocent must continue to embrace new marketing platforms to guide their customers as to why their products are unique and best option. Diversification: However, the Company has been able to diversify its Smoothies into 32 different brands with unique labels. This should be an enduring process for the future, continually embracing the diversification, to gain substantial growth, profits, and stability. Unrelated markets: Innocent should also live up to future events, be it Olympics or any other marathon, for ventures such as summer festivals will enable the firm to influence its clientele positively. Though unrelated, this extension of its expertise will boost clients’ loyalty. Forward Integration: Rules to govern the industry’s operation will always be there and even stiffer in the future. Innocent should be ready to takes ownership in compliance with safety regulation in disposing of its outputs. They will have to join distributors collectively to extend their open market through various outings and festivals. Related markets: After thorough consideration of both ends, the merger with Coca-Cola should never be the last as much as the future in concerned. As a budding company with nearly 15 years of existence, such alliances will provide finances to extend its market share. Backward Integration: Since the establishment, the company has had the motivation to produce its inputs such fresh fruits, its green energy, recycle its bottles. The future is inherent in these capabilities; a wave away will be disastrous. Full Integration: Innocent’s prospect is reliant on how best it can sustain an entire compact company with the ability to produce its main inputs and manages all its outputs. Differentiation: Similar as diversification, neglecting differentiation will be disastrous for Innocent. Instead, it must delineate its products as not only unique but also valuable to its clientele in future. Value chain development: Through this strategy, Innocent will be able continuously put a significant amount of finances and effort in developing partners and associates in its value chain. While it is not a vertically integrating approach, such commitment will increase its relationship with its suppliers and patronizing its ecosystem. TOWS MATRIX Weaknesses (W): High price; some people may prefer to make own juices; and Allergy of some fruits. Strengths (S): Reputable as environmental friendly; Seasonal Products such as Big Knit; Extensive range of product. Opportunities (O): They can improve their brand by opening own stores; Having Coca-Cola provides opportunity for global venture; Government legislation to promote healthy living favours Innocent. Threats (T): They have Competitors such as Tesco resorting to developing their own brand; Likelihood some sporadic marketing restrictions by the European Union (Hudson, 2006). Strategies to Implement Innocent drinks can perk up their brand by developing their own store such as juice bars in city centres. Even if there is still some space to sell their products in the main supermarkets such as Sainsbury and Tesco, they can create their main own stores. Such step will not only boost their proceeds as they could sell their merchandise themselves but also fortify their brand. It will also proffer them the best opportunity for them to introduce novel products or new services in their own branded stores. Another strategy is to continue utilising the potential offered by Coca Cola and use it to set operations internationally. Currently, Coca-Cola owns a significant stake in Innocent Drinks; it creates a pool of opportunities for Innocent to succeed using Coca Cola’s outlets globally. Coca-cola is one the most authoritative brands globally with operation in almost each country and the market leader in the sale of soft drinks. Instantaneously this can profit innocent for they will have additional command and money to devote to new markets. Consequently, the Coca-Cola‘s experienced staff and management teams can optimistically influence their tactical decisions and increases the probability of being triumphant in another nation. Lastly, Innocent can exploit its strong environmental figure to remain competitive in the ever-changing drinks industry. Such can be achieved through promotions and campaigns that will collectively raise awareness and rally round to convince clients why innocent are involved on environment issues more than their competitors. That way, they will be able to outdo competitors’ like Tesco’s branded Smoothies that cannot be considered as environmentally friendly due to their packaging. Innocent’s considerable amount of thought and innovativeness into packaging will, therefore, become apparent as eco-friendly. ARTICULATE STRATEGIES International: Fifteen years of operation that has seen Innocent Drinks dominate the European drinks market indicates that it prime priority should be at exporting its Smoothies and juices to other countries. This endeavour should be accompanied by a robust plan on how to train its staff to study cultures of new settings effectively. In other way, it can partner with other foreign companies such as what it did with Coca-Cola to augment its core competencies such ability to produce unique brands to emergent markets. Innovation: At the core of Innocent’s success is its innovative prowess that can enable it transforming one product to the other. For instance, Innocent can initiate a radical development of novel brands of non-alcoholic drinks with a variety of flavours as they have succeeded with the Smoothies. This will proffer the company ability to respond to client’s changing preferences and tastes in regard to new flavours. Business-Level: With this strategy, Innocent can exploit its core dexterity in overcoming some of its weaknesses. It should, therefore, utilize both its green credentials and healthy image by putting emphasis on them as its top promotional activities. This way, it can be able to close the gap between the value of its products and its promotion of environmental consciousness. Corporate-Level: Clearly, there is a need for Innocent management structure to move from a portfolio manager model that was best for the start to a parental developer to employ its core capabilities. Such an office will be well positioned to move Innocent products globally, for it will be able to communicate with other global giants from an informed parental management (Johnson, Scholes & Whittington., 2014). References Britvic - 2014_27_03 Soft Drinks Review, 2014. Available at: http://www.britvic.co.uk/en/Media-centre/News/2014_27_03-Soft-Drinks-Review.aspx [Accessed 24 Jan. 2015]. Davis, B., Lockwood, A., I., & Alcott, P., 2013.Food and beverage management: Labeling of foodstuffs. (2012, December 1). Available at: http://europa.eu/legislation_summaries/consumers/product_labelling_and_packaging/co0019_en.htm [Accessed 24 Jan. 2015]. Green, F., 2014.Green Smoothies: Natural juices, Smoothies, and tonics. Hachette UK. Hudson, P., 2006. Example Business Report: Innocent Smoothies. Change, 2007, 2008. Innocent - little tasty Drinks. 2014. Available at: http://www.innocentdrinks.co.uk/us/being-sustainable/legacy [Accessed 24 Jan. 2015]. Janik, C., &Böttger, C., 2008. “Look after your smoothie” new trends in British and German drink packaging texts. A contrastive study on communication strategies in differing markets. In Sprache, Kultur und Zielgruppen (pp. 139-156). DUV. Johnson, G., Scholes, K., & Whittington, R., 2014. Exploring corporate strategy: text & cases. Pearson Education. Secretariat, M. A., 2014. Small Fruit and Fruit Juices. Sloan, A. E., 2007. FOOD TRENDS. Food technology, 4, 23-39. Wilson, J., 2010. Information Smoothies: embedding information skills in assessed learning. Assessment, Teaching & Learning Journal (Leeds Met), 9, 30-33. Read More