Marketing Aspects of Food Drinks - Research Paper Example

? Marketing Answer Porter’s Five Force Analysis Threat of New Entrants As it has been mentioned before due to high level of industry margins various companies are looking to enter the market. Coca Cola has already entered the market through the launch of new product called relentless. It is expected that in future a lot more companies would look to enter the market due the high level of attractiveness. However, for a brand like GSK or Red Bull the main barriers to entry would be economies of scale and strong brand loyalty. Overall the level of threat of new entrants would vary from medium to high. Threat of Substitute The food drinks mainly represent the fast moving consumer goods market and therefore the markets mainly rely on creating impulse purchase. Price sensitivity is quite low in the market; mainly marketers mainly rely on customer loyalty and brand loyalty. There are a lot of products that can provide boost and act as replacement to the energy drinks. Due to the nature of the product the target customers may switch to soft drink and carbonated drinks. Also the customers have a lot more health conscious. Therefore the customers may also look to drink lot of fluids such as herbal tea and water. Hence, there are a lot of alternative options for the customers. Overall, the level threat of substitute of products is high. Bargaining Power of Suppliers While considering the bargaining power of the buyers from the perspective the energy drink market only it can be interpreted that the bargaining power of the buyer would be quite low as there are very few players in the market. Also buyers in the market are not very price sensitive as the products are targeted towards the higher end market. The relation between the manufacturer and retailer has also evolved over the course of the market life cycle. However, the buyers should be wary of the fact that there are a lot of substitute products in the market (Williamson, Cooke and Jenkins, 2004). Bargaining power of Buyers The production process to develop the energy drinks is quite simple and bargaining power of the suppliers is quite low. The supply chain of the top players in the market is quite short. The value added in each and every stage of the production process leads to significant level of profit. The only access to the attractive market for the suppliers is through the brand owners. All in all as there are small numbers of players in the market the bargaining of the suppliers is quite low (Brown, 2009). To summarize thing it can be said that the competition level competition in market is moderate as there as few players in the market. The threat of new entrants varies between medium to high as it is likely that more and more competitors would look to enter the market due to the high level of profit. However, the economies of scale, high level of brand loyalty and the recent economic downturn would act as a major barrier to entry. The bargaining power of the suppliers and the buyers is low as there are very players in the market. However, the major threat for would be the presence of various substitute products (Kolb, 2008). Industry Rivalry The market is mainly dominated by companies like GSK and Red Bull. Lucozade is a brand of GSK. These companies have made the market saturated. The market has moved from being a niche market to mass market. It is most certainly a market for the multinational companies. Familiarity of brands would definitely play a key role to play in gaining competitive advantage. Also product dedifferentiation would play a key role. Already Lucozade has been successful in achieving product differentiation through the introduction of the caffeine versions. One of the recent entrants in the market has been the Taut, which has looked to position itself as a clean sports drink. Due to high industry margins, large of companies have looked to enter the market; but the rivalry among the brands have no lead to any kinds of adverse conditions. Although some of the smaller players have tried to imitate the strategies of Lucozade and Red Bull, but still the two top notch companies have been able to maintain high degree of brand equity. Overall the level of industry competition is moderate to high (Porter, 1980). Future of Energy Drink Industry The energy drink industry is slowly but surely going through a phase of transition. Presently there are a very few players in the market making it a niche one. However, the high level of industry profits would attract a lot more players in the market leading to an increase in the market size. Already soft drinks giant coca cola has entered the market. Also the customers have become a lot more health conscious. The customers are looking to sway away from the various carbonated drinks due to various health issues. Therefore it is expected that the players belonging to this market would get a lot more customers. Hence to sum up it can be said that the in future the energy drink industry would grow in terms of size and customers. Implication of Forces that may Impact As it has been discussed before, by far the major threat would be the presence of substitute products. There are a lot of substitute products in the market in the form of carbonated soft drinks, herbal tea and other beverages. The level of threat gets enhanced by the fact that the prices of the health drink are quite high and hence the customers may look to switch to other substitute products. Therefore the biggest challenge on the part of the industry players would be to retain the customers from switching to other substitute product. The key to this would be cashing in the USP: Health; this is of extreme importance. This would help the companies to create product differentiation leading to high degree of brand equity (Wenderoth, 2009). Potential Strategies From the point of the marketer the key to the success would depend upon two things positioning, packaging and distribution. Positioning would be important as it would help the companies to create product differentiation. One of the best ways to do so would be to position the products as a healthy energy drinks which is targeted towards people who are outgoing, sport and health conscious in nature. Such strategies are likely to pay rich dividends keeping the fact in the mind that the customers today are quite concerned about health. Also other major implications of the positioning strategy would be conveying the ingredients used to prepare the health drink. Off late there have been a lot of controversies regarding carbonated heath drinks such as Pepsi and Coke. Hence the conveying the ingredients used in the production of the drinks would help the company to build up a strong level of transparency leading to positive public relations. Also the customers like to do business with companies that provide greener products as opposed to others. Hence product packaging and promotions would also have a major role to play. Distribution in the form of convenience would a major factor. There are a lot of substitute products in the market and if the products that the customers are looking for is not available; the customers may switch to the other brands. Hence it would be important for the marketers to maintain good relationship with the retailers to ensure shelf space (Henry, 2008). Answer 3 Strategic Position of Lucozade The global organizations around the globe are trying to capitalize on the opportunities that have been created and developed due to globalization. In today’s competitive market, every business firm and industry is becoming much more competitive with several product and service differentiation. Lucozade is one of the popular sports energy drink producing organization. Several potential brands are competing within the energy and sports drink industry. The energy drink market is growing significantly in UK. The industry is gradually overcoming the effects of recession. The potential organizations within the industry are performing impressively. In the year 2003, the organization has achieved largest market share. Red Bull and other small energy drink organizations are the competitors of Lucozade within the UK energy drink industry. In the year 2010, Lucozade has become the leading organization within the industry by achieving 90% market share. During 1974 to 1978 the sales of the products of Lucozade had declined drastically. Better medical technology and living conditions had affected the sales activities of Lucozade. The owner of the brand had repositioned the brand to increase the business efficiency. The organization has positioned their brand according to the current market trend. Several sportsmen and young energetic people want an energy drink in order to boost up the energy level. Young people, college goers, office goers and sportsmen are the key target audiences of the products of Lucozade. Therefore, the organization is trying to target the people and developing their product lines according to the current market trend. Lucozade has achieved huge level of success due to effective business operation in the UK market. Identification of the competitive strategy of an organization is important enough as it will help the organization to determine potential target market accordingly. Competition is an importance aspect in this industry. Red Bull is the potential competitors of Lucozade. However, in order to achieve several competitive advantages the organization has introduced product differentiation strategy. Moreover, they have introduced drinks for the people who love to spend their live with sheer energy and confidence. Effective positioning strategy can increase the brand image of an organization. The organization has implemented cost-quality based positioning strategy. Depending upon the quality of the product the organization has implemented premium pricing strategy. Providing sponsorships to sports team and sports celebrities has increased the brand awareness of Lucozade. Capabilities of Lucozade Due to several strong capabilities Lucozade has been considered as one of leading brands within the industry. Day by day, the organization the market share of Lucozade is increasing. Effective promotion strategy, strong product differentiation strategy and effectual target marketing has increased the strength of the brand. The organization has introduced the products with different flavours. This product differentiation strategy has helped the organization to meet with the need of several customers. The organization has attained good and healthy brand reputation by offering quality products. Product Lucozade Sport was introduced in the year 1991. The organization is popular as the first introducer of isotonic sports drink in the UK competitive market. Moreover, the organization has introduced Lucozade Sport Hydro active for the Gym Goers. The organization is popular for its product differentiation strategy. They have launched Lucozade sports in several flavours. Marketing Events The organization has implemented effective promotional strategy in order to increase the brand awareness. The organization has utilized sponsorship and advertising as the effective promotional strategy. The organization has provided sponsorship to the football teams in English premier league (Stokes & Lomax, 2008). Moreover, they have sponsored several sports team in various types of sports. Lucozade has implemented digital and print media in order to promote their products. Effective TV advertising and social media promotional strategy has increased the brand awareness in the minds of young and teen age customers. The organization has reinforced their marketing position in the UK energy drink industry. Price The organization has implemented cost based pricing strategy. They have affectively reduced the business operation cost so that they can reduce the price of products. This pricing strategy has increased the brand awareness of the products (Egan, 2007). Moreover, offering quality products in low price level comparing to the other players have increased the potential target customer base within the UK competitive market. Overall Image The brand is one of the popular and leading brands within the organization. The organization is popular for providing healthy and effective energy drinks with different flavours and healthy ingredients. Lucozade has achieved huge level of success due to effective business operation in the UK market. Identification of the competitive strategy of an organization is important enough as it will help the organization to determine potential target market accordingly. This product differentiation strategy has helped the organization to meet with the need of several customers. The organization has attained good and healthy brand reputation by offering quality products. The organization has utilized sponsorship and advertising as the effective promotional strategy. The organization has provided sponsorship to the football teams in English premier league. The organization has affectively reduced the business operation cost so that they can reduce the price of products. This pricing strategy has increased the brand awareness of the products. Effective pricing and promotional strategy, significant product differentiation strategy and effective research and development team has increased the brand value of Lucozade in the competitive market of UK. Leveraging the Capabilities In today’s competitive market, every business firm and industry is becoming much more competitive with several product and service differentiation. Lucozade is one of the popular sports energy drink producing organization. Several potential brands are competing within the energy and sports drink industry. The energy drink market is growing significantly in UK. The industry is gradually overcoming the effects of recession. The organization has an effective scientific team. This team is continuously trying to develop the energy level of people by integrating several healthy elements in energy drink. They should only focus on the healthy energy elements. Moreover, they need to avoid the utilization of alcohol in order to minimize the minimum risk level. The organization is already dominating the energy drink market of UK by effective product differentiation strategy. Quality products and effective promotional strategy has increased the brand awareness and brand image of the organization. The organization should implement effective CRM strategy. Retaining existing employees and acquiring new potential employees will help the organization to increase its customer base across the globe. It is recommended that, the organization should focus on the segmentation and positioning strategy. High brand recall and effecting global expansion strategy will help the organization to maximize the profit. The organization should concentrate to expand their business in several developed economies. This strategy will make them a strong global brand. Moreover, effective positioning strategy and target marketing strategy will help the organization to increase the brand name recall in the customer’s mind. Last but not the least; it is recommended that, Lucozade should implement more differentiation strategy. They need to focus on the quality of the products. Several health issues have already affected the image of the industry. During 1970s the sales of the products of Lucozade had declined drastically. Better medical technology and living conditions had affected the sales activities of Lucozade. The owner of the brand had repositioned the brand to increase the business efficiency. The organization has positioned their brand according to the current market trend. Therefore, it is necessary for the organization to control each and every business aspect in order to be the market leader. References Brown, L. (2009). Marketing and Distribution Research. US: Ronald Press Company. Egan, J. (2007). Marketing Communications. Stamford: Cengage Learning. GRIN Verlag. Henry, A. (2008). Understanding Strategic Management. UK: Oxford University Press. Kolb, B. (2008). Marketing Research: A Practical Approach. UK: Sage. Porter, M.E. (1980). Competitive Strategy, USA: Free Press. Stokes, D., & Lomax, W. (2008). Marketing: A Brief Introduction. Stamford: Cengage Learning. Wenderoth, M. (2009). Particularities in the Marketing Mix for Service Operations. DE: Williamson, D., Cooke, P., & Jenkins, W. (2004). Strategic Management and Business. Analysis. London: Routledge. Read More