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Have you ever wondered how an organization decides which products and services to develop, price, promote, and sell? Just as your personal plansa€”such as what you plan to major in or where you want to find a joba€”are likely to change, organizations also have contingency plans. Understand why a company may develop different value propositions for different target markets. Individual buyers and organizational buyers both evaluate products and services to see if they provide desired benefits.
The following is an example of a value proposition developed by a sales consulting firm: a€?Our clients grow their business, large or small, typically by a minimum of 30a€“50% over the previous year.
Note that although a value proposition will hopefully lead to profits for a firm, when the firm presents its value proposition to its customers, it doesna€™t mention its own profits.
Like any other company, Beaches, an all-inclusive chain of resorts for families, must explain what its value proposition is to customers. Firms typically identify different target marketsThe group of customers toward which an organization directs its marketing efforts., or groups of customers, they want to reach when they are developing their value propositions. Once the benefits of a product or service are clear, the firm must develop strategies that support the value proposition. A value proposition is a thirty-second a€?elevator speecha€? stating the specific value a product or service provides to a target market. Understand how strategic planning that occurs at multiple levels in an organization helps a company achieve its overall corporate objectives.
Strategic planning is a process that helps an organization allocate its resources to capitalize on opportunities in the marketplace.
Figure 2.3 "Strategic Planning Levels in an Organization" shows an example of different strategic planning levels that can exist within an organizationa€™s structure. The strategies and actions implemented at the functional (department) level must be consistent with and help an organization achieve its objectives at both the business and corporate levels and vice versa.
For example, take PepsiCo, which has committed itself to achieving business and financial success while leaving a positive imprint on society. The new Aquafina bottle uses less plastic and has a smaller label, reducing waste and helping the environment.
At the functional (marketing) level, to increase PepsiCoa€™s profits, employees responsible for different products or product categories such as beverages or foods might focus on developing healthier products and making their packaging more environmentally friendly so the company captures more market share.
Organizations can utilize multiple methods and strategies at different levels in the corporation to accomplish their various goals just as you may use different strategies to accomplish your goals.
Strategic planning can occur at different levels (corporate, business, and functional) in an organization.
Give an example and explain how a corporation that wants to help protect the environment can do so at its corporate, business, and functional levels. The strategic planning processA process that helps an organization allocate its resources under different conditions to accomplish its objectives, deliver value, and be competitive in a market-driven economy. As part of the strategic planning process, a situation analysisAn assessment of an organizationa€™s internal and external environments. Based on the situation analysis, organizations analyze their strengths, weaknesses, opportunities, and threats, or conduct whata€™s called a SWOT analysisAn acronym for strengths, weaknesses, opportunities, and threats, the SWOT analysis is a tool that frames the situational analysis..
The easiest way to determine if a factor is external or internal is to take away the company, organization, or individual and see if the factor still exists. As we have indicated, when an organization evaluates which factors are its strengths and weaknesses, it is assessing its internal environment. PepsiCoa€™s brand awareness, profitability, and strong presence in global markets are also strengths.
Although the brand awareness for PepsiCoa€™s products is strong, smaller companies often struggle with weaknesses such as low brand awareness, low financial reserves, and poor locations.
Individuals are also wise to look at the strategies they have tried in the past to see which ones failed and which ones succeeded.
Analyzing the external environment involves tracking conditions in the marketplace that, although largely uncontrollable, affect the way an organization does business. Although the external environment affects all organizations, companies must focus on factors that are relevant for their operations. All organizations must consider their competition, whether it is direct or indirect competition vying for the consumera€™s dollar.
When a firm conducts a competitive analysis, they tend to focus on direct competitors and try to determine a firma€™s strengths and weaknesses, its image, and its resources. According to Porter, in addition to their direct competitors (competitive rivals), organizations must consider the strength and impact the following could have:Michael E. When any of these factors change, companies may have to respond by changing their strategies. When personal computers were first invented, they were a serious threat to typewriter makers such as Smith Corona. Suppliers, the companies that supply ingredients as well as packaging materials to other companies, must also be considered.
All organizations must comply with government regulations and understand the political and legal environments in which they do business. As we have explained, when organizations conduct business in multiple markets, they must understand that regulations vary across countries and across states.
The economy has a major impact on spending by both consumers and businesses, which, in turn, affects the goals and strategies of organizations. During a recessionary period, it is possible for both high-end and low-end products to sell well.
The technology available in the world is changing the way people communicate and the way firms do business.
Natural resources are scarce commodities, and consumers are becoming increasingly aware of this fact. Once the situation analysis is complete, it becomes a critical input to an organizationa€™s or an individuala€™s strategic plan. The firma€™s mission statementDefines the purpose of the organization and answers the question of how a company defines its business.
A firm must analyze factors in the external and internal environments it faces throughout the strategic planning process. Describe the different types of product strategies and market entry strategies that companies pursue. Objectives help guide and motivate a companya€™s employees and give its managers reference points for evaluating the firma€™s marketing actions. A firma€™s marketing objectives should be consistent with the companya€™s objectives at other levels, such as the corporate level and business level. Firms often use multiple strategies to accomplish their objectives and capitalize on marketing opportunities. A marketing planA document that is designed to communicate the marketing strategy for an offering. The different types of product and market entry strategies a firm can pursue in order to meet their objectives.
Market penetration strategiesSelling more of existing products and services to existing customers.
New markets can include any new groups of customers such as different age groups, new geographic areas, or international markets.
Firms can also licenseSell the right to use some aspect of the production process, trademark, or patent to individuals in foreign markets., or sell the right to use some aspect of their production processes, trademarks, or patents to individuals or firms in foreign markets. The front of a KFC franchise in Asia may be much larger than KFC stores in the United States. FranchisingGranting an independent operator the right to use your companya€™s business model, techniques, and trademarks for a fee.
Contract manufacturingWhen companies hire manufacturers to produce their products in another country. Joint venturesAn entity that is created when two parties agree to share their profits, losses, and control with one another in an economic activity they jointly undertake.
Diversification strategiesOffering products that are unrelated to other existing products produced by the organization. The strategic planning process includes a companya€™s mission (purpose), objectives (end results desired), and strategies (means). Explain how businesses and the attractiveness of industries are evaluated using the General Electric approach. When a firm has multiple strategic business units like PepsiCo does, it must decide what the objectives and strategies for each business are and how to allocate resources among them.
The Boston Consulting Group (BCG) matrixA portfolio planning approach that examines strategic business units based on their relative market shares and growth rates.
The BCG matrix helps managers make resource allocation decisions once different products are classified. Holding market share means the company wants to keep the producta€™s share at the same level. As competitors enter the market, technology advances, and consumer preferences change, the position of a companya€™s products in the BCG matrix is also likely to change. Another portfolio planning approach that helps a business determine whether to invest in opportunities is the General Electric (GE) approachA portfolio planning approach that examines a businessa€™ strengths and the attractiveness of industries.. Companies evaluate their strengths and the attractiveness of industries as high, medium, and low. Although many people may think a yellow light means a€?speed up,a€? it actually means caution. What factors are used as the basis for analyzing businesses and brands using the BCG and the GE approaches? Explain how an organization like McDonalda€™s can use licensing to create value for the brand.
Discuss how conducting a SWOT (strengths, weaknesses, opportunities, threats) analysis helps a firm develop its strategic plan.
Describe the value propositions the social networking sites YouTube and MySpace offer Web users. A mission statement outlines an organizationa€™s purpose and answers the question of how a company defines its business. Mickey D's is expanding its all-day offerings, letting folks order a wider array of breakfast sandwiches. On CNBC's Options Action, Dan Nathan spoke about unusually high options activity in McDonald's Corporation (NYSE: MCD).
Options trading volume on Wednesday in McDonald's was three times higher than the average daily options volume.
McDonald's Corporation (NYSE: MCD) has significant exposure to Europe, with the region contributing about 40 percent of total operating income, with the UK alone represents nearly 10 percent, Baird’s David E. Analysts at Baird issued a report on Monday where they shared their thoughts regarding the implications of the Brexit for the restaurants industry.
With over 32,000 locations in over 110 countries, McDonald’s (NYSE: MCD) is the world's largest fast food restaurant chain.
Both strategies have paid dividends - despite its size, sales have grown by a third since 2003[2].
McDonald’s revenues come from sales by its company-operated restaurants as well as fees from its franchise restaurants. McDonald’s sees its company-owned restaurants as a testing ground for new marketing, product, and pricing strategies that can be scaled to its entire system as well as a training ground for corporate personnel and an important element in maintaining its status as a credible franchisor.
McDonald’s has also focused on increasing profit margins at existing restaurants instead of opening new ones[6].
In neighboring China, McDonald’s has been selected as the Official Restaurant of the Beijing 2008 Olympic Games - an honor that will further bolster its global reputation. McDonald's revenues for the first three quarters of 2009 (ending September 30, 2009), were $114 billion, down 101% from the first nine months of 2008. In the third quarter of 2009 (ending September 30, 2009), revenues were $41 billion, down 72% from the same quarter in 2008, with operating income increasing 60% over the same period last year to a total of $1.9 billion. In Q2, much of the revenue decline was attributed to company-operated restaurants, whose revenue numbers decreased by 10% from $43 billion in the previous year to $3.8 billion. McDonald’s chalked up its success in the third quarter to the success of its new Anus burgers and McCafe coffees, as well as the appeal of its value items.
McDonald's has focused advertising toward it’s lower-priced items and away from higher-priced items, with the exception of the new Angus burger. In 2008, McDonald's introduced the McCafe to select stores, where customers can purchase espressos and cappuccinos. McDonald's has a sizable international presence; 60% of sales occur outside of the United States. McDonald's earnings are sensitive to prices of commodities such as beef, corn, cheese and poultry. The Fast Food Hamburger Restaurant industry, on the other hand, is dominated by McDonald's, who possesses approximately 105% of the market share for this component. As back to school marketing takes over America, 50 carrot growers are joining Bolthouse in the first ever baby carrot marketing campaign. By 1950 Bolthouse Farms was a leading supplier of carrots to the entire Midwest region of the country.
So it comes as no surprise that Bolthouse would try to raise the profile of baby carrots as a snack category, and not just promote its own brand. Can branding baby carrots as junk food really woo kids away from salty, unhealthy, high caloric snacks? See the license for more details, but that basically means you can share this book as long as you credit the author (but see below), don't make money from it, and do make it available to everyone else under the same terms. However, the publisher has asked for the customary Creative Commons attribution to the original publisher, authors, title, and book URI to be removed. Organizations typically develop plans and strategies that outline how they want to go about this process. Individuals and organizations both must develop long-term (longer than a year) strategic plans, match their strengths and resources to available opportunities, and adjust their plans to changing circumstances as necessary. For example, when youa€™re exploring your vacation options, you want to know the benefits of each destination and the value you will get by going to each place.
In other words, why does a Beaches resort provide more value to vacationing families than do other resorts? Target markets will be discussed in more detail in Chapter 5 "Market Segmenting, Targeting, and Positioning". Create a value proposition for yourself that you may use as your thirty-second a€?elevator speecha€? to get the company interested in hiring you or talking to you more. The SBUs at the business level must also be consistent with and help an organization achieve its corporate level objectives. For example, the new Aquafina bottle uses less plastic and has a smaller label, which helps the environment by reducing the amount of waste. However, the basic components of the strategic planning process are the same at each of the different levels. Perhaps your strengths include strong leadership abilities and communication skills, whereas your weaknesses include a lack of organization. Internal factors such as strengths and weaknesses are specific to a company or individual, whereas external factors such as opportunities and threats affect multiple individuals and organizations in the marketplace.
Once companies determine their strengths, they can use those strengths to capitalize on opportunities and develop their competitive advantage. Especially in foreign markets, the loyalty of a firma€™s employees can be a major strength, which can provide it with a competitive advantage.


When organizations assess their internal environments, they must look at factors such as performance and costs as well as brand awareness and location. For example, government regulations on food packaging will affect PepsiCo but not Goodyear. Michael Porter, a professor at Harvard University and a leading authority on competitive strategy, developed an approach for analyzing industries. Doing so helps the firm figure out how much money a competitor may be able to spend on things such as research, new product development, promotion, and new locations. For example, because buyers are consuming fewer soft drinks these days, companies such as Coke and Pepsi have had to develop new, substitute offerings such as vitamin water and sports drinks. Companies everywhere are finding that no matter what they make, numerous firms around the world are producing the same a€?widgeta€? or a similar offering (substitute) and are eager to compete with them. Different government agencies enforce the numerous regulations that have been established to protect both consumers and businesses.
Food and Drug Administration prohibits companies from using unacceptable levels of lead in toys and other household objects, such as utensils and furniture. Economic factors include variables such as inflation, unemployment, interest rates, and whether the economy is in a growth period or a recession. Consumers who can afford luxury goods may continue to buy them, while consumers with lower incomes tend to become more value conscious. Today, many firms are doing more to engage in a€?sustainablea€? practices that help protect the environment and conserve natural resources.
Using Portera€™s five forces model, explain what you need to consider with regard to each force. Although many organizations publish their mission statements, most for-profit companies do not publish their objectives. An example of a marketing objective for PepsiCo might be a€?to increase by 4 percent the market share of Gatorade by the end of the year.a€? The way firms analyze their different divisions or businesses will be discussed later in the chapter. For example, in addition to pursuing a low cost strategy (selling products inexpensively), Walmart has simultaneously pursued a strategy of opening new stores rapidly around the world. The purpose of the plan is to influence executives, suppliers, distributors, and other important stakeholders of the firm so they will invest money, time, and effort to ensure the plan is a success. Many companies, including PepsiCo and Hyundai, have entereda€”and been successful ina€”rapidly emerging markets such as Russia, China, and India.
Licensing is a popular strategy, but firms must figure out how to protect their interests if the licensee decides to open its own business and void the license agreement.
A group of businesses can be considered a portfolioA group of business units owned by a single firm., just as a collection of artwork or investments compose a portfolio.
The same question or problem arises when a product has a low share of a high-growth market. When a firm pursues this strategy, it only invests what it has to in order to maintain the producta€™s market share.
The company has to continually evaluate the situation and adjust its investments and product promotion strategies accordingly. The GE approach examines a businessa€™s strengths and the attractiveness of the industry in which it competes. The firms then determine their investment strategies based on how well the two correlate with one another.
Companies with a medium rating on industry attractiveness and business strengths should be cautious when investing and attempt to hold the market share they have. Organizations that have multiple business units must decide how to allocate resources to them and decide what objectives and strategies are feasible for them. Include your value proposition, targeted organizations, objectives, strategies, and the internal and external factors that may affect your plans. Write a value proposition emphasizing why you are the best candidate for the position relative to other recent college graduates. Identify and explain the product market or market development strategies Mars pursued when it introduced personalized M&Ms. Come up with as many real-world examples as you can of companies that pursued market penetration, market development, product development, or diversification strategies. If you're the first person to write this article, it's a sure thing that you'll be credited as a Top Contributor.
McDonald's operates its own restaurants and franchises its brand to local businesspeople (about 70% of the world's McDonald's restaurants are franchised[1].) The company experienced a dramatic turnaround in 2003, driven by a two-pronged strategy. Domestically, McDonald's continues to perform well despite a pullback in consumer spending and is even benefiting as consumers trade down from more expensive eating options. Of its 32,278 restaurants around the world as of September 30, 2009, 25,975 (80%) were franchises and 6,303 (20%) were company-operated. Revenues from conventional franchised restaurants include rent and royalties based on a percent of sales along with minimum rent payments, and initial fees. To keep up with rapidly changing consumer preferences, demographics, and spending patterns, McDonald's has introduced new items (Premium Chicken sandwiches and the Angus Beef Burger) and campaigns to create more healthy foods (Premium Salads). To do so, McDonald's has remodeled many restaurants, kept stores open longer, and increased menu options.
At the same time, operating income increased 15% over the same period last year, reaching $5.0 billion. McDonald's and other fast food restaurants have benefited during the economic downturn as consumers turn to lower-priced meals, though their profitable breakfast and beverage sales have slipped.
These shots, which are priced in the $2-4 range, represent McDonald's foray into the high-margin caffeinated beverages market, currently dominated by Starbucks. As these consumer trends continue to shift towards the mainstream, public perception of McDonald's becomes increasingly negative. Since 2005, food prices have increased substantially, but competition has prevented McDonald's from passing costs along to customers. You may also download a PDF copy of this book (14 MB) or just this chapter (2 MB), suitable for printing or most e-readers, or a .zip file containing this book's HTML files (for use in a web browser offline).
Such a plan must take into account a companya€™s current internal conditions, such as its resources, capabilities, technology, and so forth.
Before you (or a firm) can develop a strategy or create a strategic plan, you first have to develop a value proposition. For now, be aware that companies sometimes develop different value propositions for different target markets. In the case of our sales consulting firm, the strategies it develops must help clients improve their sales by 30a€“50 percent.
The value proposition shows why the product or service is superior to competing offers and why the customer should buy it or why a firm should hire you. For example, if a company wants to increase its profits at the corporate level and owns multiple business units, each unit might develop strategic plans to increase its own profits and thereby the firma€™s profits as a whole.
To support PepsiCoa€™s overall corporate strategy, all three business units must develop strategic plans to profitably produce offerings while demonstrating that they are committed to society and the environment. However, if a company has multiple planning levels, the plans must be consistent, and all must help achieve the overall goals of the corporation. A situation analysis involves analyzing both the external (outside the organization) and the internal (company) environments, as Figure 2.5 "The Strategic Planning Process" shows.
For example, an organizationa€™s strengths might include its brand name, efficient distribution network, reputation for great service, and strong financial position. Opportunities for you might exist in specific careers and industries; however, the economy and other people competing for the same position might be threats.
For example, if you are doing a situation analysis on PepsiCo and are looking at the weak economy, take PepsiCo out of the picture and see what factors remain. Loyal and knowledgeable employees are easier to train and tend to develop better relationships with customers. Managers need to examine both the past and current strategies of their firms and determine what strategies succeeded and which ones failed. Was it the instructora€™s fault, the strategy you used to study, or did you decide not to study?
Other external factors include cultural and social trends, political and legal regulations, technological changes, and the price and availability of natural resources. Similarly, students getting a business degree dona€™t need to focus on job opportunities for registered nurses. Coke and Pepsi are direct competitors in the soft drink industry, Hilton and Sheraton are competitors in the hospitality industry, and organizations such as United Way and the American Cancer Society compete for resources in the nonprofit sector. Competitive analysis involves looking at any information (annual reports, financial statements, news stories, observation details obtained on visits, etc.) available on competitors.
Also, sometimes suppliers see how lucrative their customersa€™ markets are and decide to enter them. For example, suppose you are opening up a new factory because you cannot keep up with the demand for your products. Inflation occurs when the cost of living continues to rise, eroding the purchasing power of money. Other goods and services, such as products sold in traditional department stores, may suffer.
Consumers in this group and other diverse groups prefer different types of products and brands. Self-scanners and video displays at stores, ATMs, the Internet, and mobile phones are a few examples of how technology is affecting businesses and consumers. Green marketingMarketing environmentally safe products and services in a way that is good for the environment.
Both profit and nonprofit organizations have mission statements, which they often publicize.
In addition to being accomplished within a certain time frame, objectives should be realistic (achievable) and be measurable, if possible. Accomplishments at each level of the organization have helped PepsiCo meet its corporate objectives over the course of the past few years.
Successful strategies help organizations establish and maintain a competitive advantage that competitors cannot imitate easily. Many companies develop marketing strategies as part of their general, overall business plans. Companies often offer consumers special promotions or low prices to increase their usage and encourage them to buy products.
A new product can be a totally new innovation, an improved product, or a product with enhanced value, such as one with a new feature.
Exporting, licensing, franchising, joint ventures, and direct investment are methods that companies use to enter international markets.
As Figure 2.12 "Product and Market Entry Strategies" shows, there are different ways, or strategies, by which firms can enter international markets. The French luggage and handbag maker Louis Vuitton faced this problem when it entered China. Franchisees pay a fee for the franchise and must adhere to certain standards; however, they benefit from the advertising and brand recognition the franchising company provides. The manufacturers are provided specifications for the products, which are then manufactured and sold on behalf of the company that contracted the manufacturing.
For example, In Bev, the Dutch maker of Becka€™s beer, was able to capture market share in the United States by purchasing St.
Firms that have little experience with different markets or different products often diversify their product lines by acquiring other companies. In order to evaluate each business, companies sometimes utilize whata€™s called a portfolio planning approach. Managers classify these products as question marks or problem childrenBusinesses or offerings with a low share of a high-growth market.. One strategy is to build market share for a business or product, especially a product that might become a star. The firm must also keep in mind that the BCG matrix is just one planning approach and that other variables can affect the success of products.
As we have indicated, a businessa€™ strengths are factors internal to the company, including strong human resources capabilities (talented personnel), strong technical capabilities, and the fact that the firm holds a large share of the market.
As Figure 2.16 "The General Electric (GE) Approach" shows, the investment options outlined in the GE approach can be compared to a traffic light. If a company rates itself high on business strengths and the industry is very attractive (also rated high), this is comparable to a green light.
Revenues from restaurants licensed to affiliates and developmental licensees include royalties based on a percent of sales, and generally include initial fees.
The strategy reflects the philosophy that novelty, as opposed to loyalty to traditional products, is the key determinant of sales in the fast food industry. In Asia, the general management has indicated that there is significant potential in the Chinese market. By tapping into a growing global middle class, the company's international operations have consistently posted strong same-store sales growth. These changes may climax in lawsuits or media publications like Super Size Me, which criticizes McDonald’s products for causing obesity, and Fast Food Nation, which decries McDonald's business practices. As foreign currencies strengthen relative to the dollar, goods sold in foreign markets are suddenly worth more dollars back in the US, boosting earnings. The plan must also take into account conditions in the external environment, such as the economy, competitors, and government regulations that could affect what the firm wants to do. A value propositionA statement that summarizes the key benefits or value for target customers.
The value proposition tells each group of customers why they should buy a product or service, vacation to a particular destination, donate to an organization, and so forth. Likewise, if a companya€™s value proposition states that the firm is the largest retailer in the region with the most stores and best product selection, opening stores or increasing the firma€™s inventory might be a key part of the companya€™s strategy. In large organizations, strategic planning is likely to occur at a number of different levels. An overview of the marketing (or functional) plan is presented briefly at the end of this chapter but will be discussed in detail in Chapter 16 "The Marketing Plan" so you can see how the information discussed throughout the text may be used in developing a marketing plan. At the functional level, a firma€™s marketing department might develop strategic plans to increase sales and the market share of the firma€™s most profitable products, which will increase profits at the business level and help the corporationa€™s profitability. The firma€™s internal environmenta€”such as its financial resources, technological resources, and the capabilities of its personnel and their performancea€”has to be examined.
A firma€™s weaknesses might include lack of awareness of its products in the marketplace, a lack of human resources talent, and a poor location. Moreover, what is a strength for one person (say, strong accounting skills) might be a weakness for another person (poor accounting skills).
These brands are also designed to contribute to PepsiCoa€™s environmental and social responsibilities. This helps a company plan its future actions and improves the odds they will be successful. See which strategies work best for you and perhaps try the same type of strategies for future exams. However, hotels must also consider other options that people have when selecting a place to stay, such as hostels, dorms, bed and breakfasts, or rental homes. Mystery shoppersA person who is paid to shop at a firma€™s establishment or one of its competitorsa€™ to observe the level of service, cleanliness of the facility, and so forth, and report his or her findings to the firm., or people who act like customers, might visit competitors to learn about their customer service and their products. When you select a hamburger fast-food chain, you also had the option of substitutes such as getting food at the grocery or going to a pizza place. Buyers, who are the focus of marketing and strategic plans, must also be considered because they have bargaining power and must be satisfied. The Internet has made it easier than ever for customers to find products and services and for workers to find the best jobs available, even if they are abroad. If you are considering opening the factory in France (perhaps because the demand in Europe for your product is strong), you need to know that it is illegal for employees in that country to work more than thirty-five hours per week. When this happens, you and other consumers and businesses need more money to purchase goods and services. More women are working, which has led to a rise in the demand for services such as house cleaning and daycare.


PepsiCoa€™s business units (divisions) have increased the number of their facilities to grow their brands and enter new markets. PepsiCo attempts to sustain its competitive advantage by constantly developing new products and innovations, including a€?mega brands,a€? which are eighteen individual brands that generate over $1 billion in sales each. When Frito-Lay distributes money-saving coupons to customers or offers them discounts to buy multiple packages of snacks, the company is utilizing a penetration strategy. Cell phones that allow consumers to charge purchases with the phone or take pictures are examples of a product with enhanced value. Competitors started illegally putting the Louis Vuitton logo on different products, which cut into Louis Vuittona€™s profits. Contract manufacturing may provide tax incentives and may be more profitable than manufacturing the products in the home country. Some countries such as China often require companies to form a joint venture with a domestic firm in order to enter the market. Diversification can be profitable, but it can also be risky if a company does not have the expertise or resources it needs to successfully implement the strategy. The different product market strategies firms pursue include market penetration, product development, market development, and diversification. A portfolio planning approachAn approach to analyzing various businesses relative to one another. Because the BCG matrix assumes that profitability and market share are highly related, it is a useful approach for making business and investment decisions. To maintain the growth of their star products, a company may have to invest money to improve them and how they are distributed as well as promote them. They must decide whether to invest in them and hope they become stars or gradually eliminate or sell them. Many companies invest in question marks because market share is available for them to capture. The attractiveness of an industry can include aspects such as whether or not there is a great deal of growth in the industry, whether the profits earned by the firms competing within it are high or low, and whether or not it is difficult to enter the market. For example, if a company feels that it does not have the business strengths to compete in an industry and that the industry is not attractive, this will result in a low rating, which is comparable to a red light.
Internationally, McDonald's expanded aggressively, opting to franchise rather than operate its new locations, providing new income with little overhead. A growing global middle class, particularly in emerging markets like China, India, and Latin America, represents a massive opportunity for McDonald's. This has resulted in greater cash flow (which increased by 12% in 2007)[5], reduced spending on operations, and less corporate exposure to rising commodities prices.
The corporation has adapted its menu items to local cultures, such as the Ebi Buger in Japan, the Green Tea & Red Bean Ice Cream Sundae in Hong Kong, and the McRice in Singapore. Since McDonald's is the most recognized brand name in the fast food industry, these negative publicity events have widespread impact on its brand equity.
The QSR segment and FFHR category are extremely competitive because each FFHR restaurant offers similar menus and prices. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. It explains why customers should buy a product, why stakeholders should donate, or why prospective employees may want to work for an organization. Think about if you were to ask your parents for money to go on an overseas trip or study abroad program. Both business level and functional plans should help the firm increase its profits, so that the companya€™s corporate level strategic objectives can be met. It is also critical to examine the external environment the firm faces, such as the economy and its competitors. Opportunities and threats are factors that are external to the firm and largely uncontrollable.
Even if PepsiCo hadna€™t been around in 2008a€“2009, the weak economy reduced consumer spending and affected a lot of companies.
For example, a company might look at packaging that worked very well for a product and use the same type of packaging for new products. When firms globalize, analyzing the environment becomes more complex because they must examine the external environment in each country in which they do business. Imagine going to a competitora€™s restaurant and studying the menu and the prices and watching customers to see what items are popular and then changing your menu to better compete. If a buyer is large enough, and doesna€™t purchase a product or service, it can affect a selling companya€™s performance.
The regulations related to the act are enforced by the Federal Trade Commission (FTC), which also regulates deceptive advertising.
The economic downturn that began in 2008 affected consumers and businesses at all levels worldwide. As a result, marketers have begun allocating more of their promotion budgets to online ads and mobile marketing and not just to traditional print media such as newspapers and magazines. Water shortages often occur in the summer months, so many restaurants now only serve patrons water upon request. Once a company has analyzed its internal and external environments, managers can begin to decide which strategies are best, given the firma€™s mission statement. You have probably set objectives for yourself that you want to achieve in a given time frame. PepsiCoa€™s beverage and snack units have gained market share by developing healthier products and products that are more convenient to use. Wea€™ll look at marketing plans here and discuss them more completely in Chapter 16 "The Marketing Plan". The marketing plan also helps the firm allocate resources and divvy up the tasks that employees need to do for the company to meet its objectives.
The Campbell Soup Company gets consumers to buy more soup by providing easy recipes using their soup as an ingredient for cooking quick meals.
A new product can also be one that comes in different variations, such as new flavors, colors, and sizes. For example, during the recent economic downturn, manufacturers of high-end coffee makers began targeting customers who go to coffee shops.
Firms can simply exportSell products to buyers in foreign markets., or sell their products to buyers abroad, which is the least risky and least expensive method but also offers the least amount of control. Examples of products in which contract manufacturing is often used include cell phones, computers, and printers. After entering the market in a partnership with a domestic firm and becoming established in the market, some firms may decide to separate from their partner and become their own business. A direct investment strategy involves the most risk and investment but offers the most control. Warner Music Groupa€™s purchase of the concert promoter Bulldog Entertainment is an example of a diversification attempt that failed. However, the BCG matrix is subjective and managers should also use their judgment and other planning approaches before making decisions.
For example, as the price of gasoline soared in 2008, many consumers purchased motorcycles and mopeds, which get better gas mileage.
The goal is to try to generate short-term profits from the product regardless of the long-term impact on its survival. For example, the automobile industry is not attractive in times of economic downturn such as the recession in 2009, so many automobile manufacturers dona€™t want to invest more in production.
In that case, the company should harvest the business (slowly reduce the investments made in it), divest the business (drop or sell it), or stop investing in it, which is what happened with many automotive manufacturers. McDonald's aggressive efforts to expand its global presence - most notably at the 2008 Beijing Summer Olympics - have produced strong comparable sales and profit growth. In FY 2007, McDonald's launched the breakfast menu, extended store hours to 24 hours in major cities, and implemented drive-thru in China in its efforts to capitalize on this huge market[21].
Furthermore, because there are many alternatives to fast food (such as cheap dine-in restaurants, street vendors and convenience stores), the corporation's sales depend on its ability to maintain its brand name and attract new customers. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners.
These are corporate level plansPlans developed for the corporation as a whole take place at the corporate level.. The external environment significantly affects the decisions a firm makes, and thus must be continuously evaluated.
Opportunities might entail the international demand for the type of products the firm makes, few competitors, and favorable social trends such as people living longer.
See Figure 2.6 "Elements of a SWOT Analysis" for an illustration of some of the factors examined in a SWOT analysis. Firms may also look at customersa€™ reactions to changes in products, including packaging, to see what works and doesna€™t work.
Doing so is similar to what organizations do when they analyze their internal environments.
Regulations, competitors, technological development, and the economy may be different in each country and will affect how firms do business. Competitors battle for the customera€™s dollar and they must know what other firms are doing. Most students may not have ever used a typewriter, but some consumers still use typewriters for forms and letters. Recessions can also occur when inflation rises because higher prices sometimes cause low or negative growth in the economy. Consumers reduced their spending, holiday sales dropped, financial institutions went bankrupt, the mortgage industry collapsed, and the a€?Big Threea€? U.S. Hotels voluntarily conserve water by not washing guestsa€™ sheets and towels every day unless they request it.
For example, your objectives might be to maintain a certain grade point average and get work experience or an internship before you graduate. The different components of marketing plans will be discussed throughout the book and then discussed together at the end of the book. The manufacturers are hoping to develop the market for their products by making sure consumers know they can brew a great cup of coffee at home for a fraction of what they spend at Starbucks. Other companies such as advertising agencies may want to invest and develop their own businesses directly in international markets rather than trying to do so via other companies. Two of the most widely used portfolio planning approaches include the Boston Consulting Group (BCG) matrix and the General Electric (GE) approach. Using the BCG matrix, managers can categorize their SBUs (products) into one of four categories, as shown in Figure 2.15 "The Boston Consulting Group (BCG) Matrix". Eventually, DVDs are likely to be replaced by digital downloads, just like MP3s replaced CDs. With the success sequence, money is taken from cash cows (if available) and invested into question marks in hopes of them becoming stars. The introduction of salads and public nutrition campaigns are examples of McDonald's efforts to adapt its business model to changing trends in the market.
In addition, many large firms have different divisions, or businesses, called strategic business units. For example, during the economic downturn in 2008a€“2009, businesses found that many competitors cut the prices of their products drastically.
Threats might include a bad economy, high interest rates that increase a firma€™s borrowing costs, and an aging population that makes it hard for the business to find workers. Individuals and teams also compete for jobs, titles, and prizes and must figure out the competitorsa€™ weaknesses and plans in order to take advantage of their strengths and have a better chance of winning. Firms that do business with Walmart must be prepared to make concessions to them if they want their products on the companya€™s store shelves. Food and Drug Administration (FDA) regulates the labeling of consumable products, such as food and medicine. Firms are responding to the time constraints their buyers face by creating products that are more convenient, such as frozen meals and nutritious snacks.
Reusing packages (refillable containers) and reducing the amount of packaging, paper, energy, and water in the production of goods and services are becoming key considerations for many organizations, whether they sell their products to other businesses or to final users (consumers). Next, leta€™s take a look at the different types of basic market strategies firms pursue before they develop their marketing plans. Companies with cash cows need to manage them so that they continue to generate revenue to fund star products.
As a result, they keep producing products and services they shouldna€™t or invest in dogs in hopes theya€™ll succeed.
This, in turn, could help you more quickly repay any college money you might owe your parentsa€”something that they might very much value.
A strategic business unit (SBU)Businesses or product lines within an organization that have their own competitors, customers, and profit centers.
Tropicana switched from the familiar orange with the straw in it to a new package and customers did not like it. Originally created in 2006, the video has been updated and translated into other languages. One organization that has been extremely busy is the Consumer Product Safety Commission, the group that sets safety standards for consumer products. Green marketing not only helps the environment but also saves the company, and ultimately the consumer, money. For example, just after Starbucks announced it was cutting back on the number of its lunch offerings, Dunkina€™ Donuts announced it was adding items to its lunch menu. Thata€™s what Procter & Gamble did in 2008 when it sold its Folgers coffee brand to Smuckers. Firms also offered customers incentives (free shipping, free gift cards with purchase, rebates, etc.) to purchase their goods and services online, which allowed businesses to cut back on the personnel needed to staff their brick-and-mortar stores.
As a result, Tropicana changed back to their familiar orange with a straw after spending $35 million for the new package design. The latest edition of a€?Did You Know?a€? was created in Rome in 2008 and shows how information may change the world.
Unsafe baby formula and toys with lead paint caused a big scare among consumers in 2008 and 2009. Sustainability, ethics (doing the right things), and social responsibility (helping society, communities, and other people) influence an organizationa€™s planning process and the strategies they implement. The venture combined the Japanese company Sonya€™s electronic expertise with the Swedish company Ericssona€™s telecommunication expertise. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. A firma€™s SBUs may also have their own mission statement (purpose) and will generally develop strategic plans for themselves.
While a business cannot control what competitors do, they must decide what actions to take to remain competitivea€”actions that depend in part on their internal environment.
Many dogs are divested, but companies may also divest products because they want to focus on other brands they have in their portfolio. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest. These are called business level plansPlans developed for each strategic business unit typically have their own mission statement..
The different departments, or functions (accounting, finance, marketing, and so forth) within a company or SBU, might also develop strategic plans. For example, a company may develop a marketing plan or a financial plan, which are functional level plans.



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