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Fentimans LTD International Market Analysis
Currently, there is growing interest of the international market due to the changing competitive structures and shift in demand characteristics in markets globally. Increased globalization of markets force companies to focus on foreign clients, competitors as well as suppliers (Cateora et al., n.d.). There is increased competition in both domestic and international markets. International marketing allows companies to apply marketing principles in the global market. However, for the companies to remain competitive they have to adapt global strategies. They need to understand the international market and come up with approaches that will enable them survive. Some of the factors that they need to consider include the business environment of the country they are investing in. For instance, the competition, political factors and social factors that may hinder their entrance in the market.
The current paper will focus on how Fentimans LTD should approach the Russian Market.
Fentimans LTD is a family owned business started in 1905. It deals with the production of ginger brewed beer. The company is located in Hexham, England, UK. The owner Thomas Fentiman uses the recipe to produce botanically brewed beer. When the company was started, the owner used a horse and cart to deliver the beer door-to-door. Currently, the company has made various changes to meets the market demand (Fentimans Ltd., 2020). For instance, instead of delivering their beer door-to-door, they sell their products online and in shops. Their beer is also sold in bars and restaurants. Initially, they sold the beer in old stone jars, however, this has been replaced by their iconic glass bottle. The company continues to produce delicious natural beverages using the multi-stage botanical method (Fentimans Ltd., 2020). They have made changes to their production process as their beverages are carbonated and pasteurized to extend shelf life. Despite the changes, the company continues to maintain great quality, craftmanship and delicious flavor. Its Products include cherry coal, dandelion and burdock among others.
Situation analysis allows companies to identify its strengths and weaknesses as they relate to external opportunities and threats. It helps management to choose a position in the said environment based on the facts gathered (Ferrel et al., 2011). When assessing external environments, a company needs to focus on macro-environment and the Micro-environment.
Macro-environment analysis focuses on forces such as social, legal, cultural, economic and technological. It includes variables are beyond an organisation’s control, however, need analysis to readjust corporate and marketing strategy to changing business environment. The aim of macro-environment analysis is to enable companies identify major growth and future implications (Ferrel et al., 2011). He particular report will focus on economic, political and social factors. PESTLE analysis will be conducted to help understand the market environment in Russia.
Soft-drink market in Russia is highly saturated as companies continue to introduce new drinks in the market. A high number of young generations prefer soft drinks especially pepsi while consumers aged between 16 and 24 prefer energy shots, juices, nectars and cold tea (SFEA, 2014). In 2018, Russia’s soft-drink market experienced a major boost due to the FIFA World Cup football tournament as well as hot summer. However, 2019 experienced slower dynamics because of cooler weather, market’s maturity as well as the change in VAT from 18% to 20%. Also, the Russian government focused on tackling health issues, hence, it cancelled preferential VAT rate of 10% for drinks containing sugar.
Fentimans LTD needs to consider Russian market. It needs to focus on the political and social environment. Other factors that it should consider include the legal and social environment. Based on research carried out by Deloitte (2019) people spend 54% of their budget on food including non-alcoholic beverages. Research shows that Russia experienced the lowest production of soft-drinks in 2013 and the highest production in 2010. Additionally, in 2017 the country marked a sharp increase in production due to change of methodology.
The micro-environment focuses on environmental constraints that include market structure, suppliers, trends, public and competition. A business may conduct micro-environment analysis to understand factors linked to the area of operation affecting how it performs and decision-making approach (Lamb et al., 2012). The factors affect how an organization operates in diverse ways. Hence, it is important for a company to understand them especially when operating in a foreign market. A company should consider its competitors in the market as the level of competition affects its profitability. Russia’s soft drink industry is highly competitive as companies introduce different drinks in the market. Some of the soft drinks in the Russian market include kvass (bread juice), Russky Dar by PepsiCo, fanta, coca-cola and Fanta (SFEA, 2014). Pepsi is the main Coca-Cola competitor in the market.
Operational environment analysis
Operational environment includes assessment of organizational environment and factors that affect a company’s operation (Lamb et al., 2012). It stands for social, economic, cultural, legislative, political and natural environment. A company needs to consider the factors when entering into a new market. It helps in ensuring that it fits in the new business environment.
Porters 5 Forces Framework Analysis
Porter’s five forces framework helps a company is assessing a company’s opportunities and threats as it expands into a new market. When a company is developing a competitive strategy, it needs to consider the industry structures and the changes that take place (Porter, 2017). The organization should recognize and manage a competitive business environment. They need to focus on the competitors directly to remain competitive. The framework differentiates five in the microenvironment that influence competition and threatens a company’s ability to make profit. The porter’s analysis has five key elements they include the threat of potential entrants, threat of substitute products, threat of bargaining power of suppliers, bargaining power of buyers and the competitive rivalry.
Threat of new entrants
New entrants into a market bring competition in a market as companies focus on gaining market share and substantial resources. They are threat to the already established companies (Porter, 2017). The threat of entry is mainly determined by the entry barriers and reaction from the existing competitors. Entry barriers are low in the soft drinks industry. There is low consumer switching cost and companies require low capital to establish their business. There are more soft drinks brands that are emerging in the market offering lower prices. Russia has a huge soft drinks market as it accounts for 10.5% of the value of European soft drinks industry. In 2009, it grew by 6% to reach a market value of US$12.98BN (Just drinks, 2010). The industry grew by 4 percent to 14.39bn litres. The company is expected to continue growing. Lebedyansky JSC is a Russian international company that deals with production of juices and soft drinks.
Threat of substitute products
Substitute products mainly affects pricing in the market. They include products that appear different but satisfy the same needs (Porter, 2017). When the switching costs are low, substitutes may influence the market. The most significant threat of substitute to Fentimans LTD is high due to other products such as Kvass or bread juice.
Rivalry among existing companies
Competition in the market can have huge impact on a company. At times it may lead to emergence of counterfeit products in the market (Porter, 2017). There are various factors that determine competition in a market. They include the growth of the industry, product differences and brand identity. The rivalry is high for Fentimans LTD especially from Coca Cola Company. It is a leading soft-drinks company in the Russian market. It accounts for 23.3% market share while PepsiCo accounted for 13.6% (Just drinks, 2010).
Bargaining Power of buyers
Buyers influence the industry by forcing down product prices, ability to bargain for better quality and effective services (Porter, 2017). An individual buyer has minimal pressure on Fentimans LTD. A buyer can purchase other products at a lower price, however, the flavour is different.
Bargaining power of suppliers
Suppliers can influence the company in case they have the ability to increase prices or affect the quality of purchased products (Porter, 2017). The main ingredients for soft drinks are carbonated water, phosphoric acid and sweetener as well as caffeine. Suppliers of the products are not concentrated in the market.
Internal analysis helps in assessing a company’s internal environment. When performing the analysis the company assesses its resources, competitive advantage and competencies (Lamb et al., 2012). It is able to identify its strengths and weaknesses.
Brief history of Fentimans LTD
Fentimans LTD is a family owned business started in 1905. It deals with the production of ginger brewed beer. The owner Thomas Fentiman acquired the recipe after aron puddler from West Yorkshire failed to pay back a loan he had taken from him. The recipe was use as a collateral. When the company was started, the owner used a horse and cart to deliver the beer door-to-door. The organization used hand-made stone jars to package the beer. The jars were known as ‘grey hens’. The jars were labelled using Thomas’ German shepherd dog (Fentimans Ltd., 2020). The company’s product became popular among the people and the business expanded by opening up different brewing and production facilities in the North of England. Currently, the company has made various changes to meets the market demand. For instance, instead of delivering their beer door-to-door, they sell their products online and in shops. Their beer is also sold in bars and restaurants. Initially, they sold the beer in old stone jars, however, this has been replaced by their iconic glass bottle. The company continues to produce delicious natural beverages using the multi-stage botanical method. They have made changes to their production process as their beverages are carbonated and pasteurized to extend shelf life. Despite the changes, the company continues to maintain great quality, craftmanship and delicious flavor.
It is important for companies to understand the need to set marketing objectives. It offers a company directs and motivates the employees to work towards its targets (Lamb et al., 2013). Another important aspect of having marketing objective is that it offers the management a rationale as well as guidelines for making important decisions. Mainly, the objectives as strategies that enable the company promote its services and products at a specified time frame. In most cases, organisations utilize the acronym S.M.A.R.T which stands for Specific, Measurable, Attainable, Realistic and Timely when developing an effective marketing plan (Oh, 2015). When setting up marketing objectives companies should start by conducting SWOT analysis. Marketing objectives are mainly are considered as quantitative commitments that are either performance standards for a certain operating period or conditions that a company should achieve.
Rational for objectives
Fentimans LTD focuses on generating profit in the soft-drink market that it operates also, its aim is to offer its clients great tasting drinks. The company has clear approaches designed to help it attain its ambition to become most dynamic, creative as well as trusted soft drink company globally (Fentimans Ltd., 2020). It focuses on generating profits in its major markets. Over the years the company has registered successful growth in its core markets. Also, its brands have continued to register positive growth in the different markets. Nevertheless, the company sees opportunities to grow its business and increase penetration. The internal analysis of the company shows that it has great capability therefore, it can expand its operations to Russia. It can continue increasing its revenue by exploring new markets. Fentimans LTD needs to adopt various strategies to meet its goals. First, it need to focus on increasing its revenue in the current market. It also needs to focus on differentiating its products from the existing soft drinks in the Russian market.
Fentimans LTD has unique strategy that has helped its brands grow in the current market. The company has well-established operations in different markets including the U.S. Nevertheless, the company sees opportunities to enhance its participation in soft drink industry and market channels (Fentimans Ltd., 2020). It ensures that its brands remain relevant in their current market. Its soft drink category in England is fast growing. Also, it has great potential to increase carbonated drink brand penetration. Another important aspect of Britvic Plc is that it embraces innovation as a major driver to growth. They introduce new products that meet their clients changing needs. Therefore, the company will focus on meeting the clients’ needs in the Russian market. Russia is currently more focused on ensuring that its citizens remain healthy. Therefore, it has put in place various measures that will help in their goal such as introducing sugar tax. The introduction of sugar tax is meant to help fight obesity in the country. Therefore, Fentimans LTD needs to focus on introducing a brand that will meet their clients’ health needs and still remain competitive in the soft drink market. Due to current changes in the Russia Fentimans LTD can introduce a soft drink that would meet the recommendations placed by the Russian government.
Marketing strategy is a plan placed by organisations to achieve marketing objective. An effective marketing strategy enables a company focus on marketing activities to attain its goals (Doole and Lowe, 2016). It is a process that permits a firm to focus on its limited resources on the greatest opportunities to increase sales and attain a sustainable competitive advantage. A marketing strategy should be based on the key concept that clients’ satisfaction is the major goal. It is important for a company to focus on fulfilling customer needs when developing the marketing strategy.
Organisations use portfolio analysis to assess their position when creating an approach that would improve their position in the market (Doole and Lowe, 2016). Business portfolio analysis is based on the idea that companies need to develop strategy as much as they manage investment portfolio. The aim of portfolio analysis include analysing existing business portfolio. Another goal is to develop development strategies.
It is important for a company investing in a foreign market to conduct country attractiveness analysis. It enables a company understand the country’s external environment to assess if its suitable for investment. The Russian soft drink market is highly attractive. Its leading soft drinks companies include PepsiCo which has the highest market share 22.1% followed by Coca Cola with 20.4% market share (Razumovskaya and Esterl, 2015).
Additionally, Russia has a huge soft drink industry. However, there have been various changes in the market due to the recession being experienced by the country. Some companies such as Coca Cola and PepsiCo are minimizing their operations in the market. Russia accounts for 10.5% of the European soft drinks market value. In 2009, it registered 6% growth to attain a market value of US$12.98bn (Just drinks, 2010). Russia has a competitive soft drink market as companies continue to invent new drinks that meet clients’ needs. The market continues to grow and offer a safe environment for new companies.
It is important to assess a company’s competitive strength when entering into an international market. Fentimans LTD has introduced a unique technique in its production system. It produces delicious natural beverages using the multi-stage botanical method (Fentimans Ltd., 2020). It has developed a strong portfolio in the two markets. Fentimans LTD has its iconic brands that include cherry coal, dandelion and burdock among others. Therefore, its competitive strength is strong as it also sells PepsiCo branded products such as Pepsi, 7UP and SoBe under exclusive agreement with the company.
Both country attractiveness and competitive strength are high. Therefore, the company should embrace direct export entry strategy when entering the Russian market. The company would sell directly into the market.
Reasons for direct exporting
First, direct exporting is a suitable entry strategy for a company that is interested in long-term growth in the foreign market (Gillespie and Hennessey, 2011). It allows a company understand the market and create distribution channels. Therefore, Britvic plc would have knowledge of the Russian market when they establish their operations in the market. Based on the situation analysis, Russia is a suitable market for Britvic to invest.
4P’s model is utilized to assess how Britvic plc can meet clients’ needs in the Russian market (Shankar and Carpenter, 2012).
Fentimans LTD has continued to thrive in both UK and U.S., providing great products. It consider clients’ needs and ensures that their products are of great quality. It differentiates its products by providing products that match the customers’ needs in the specific market and using a unique technique in its production. Therefore, it would offer soft drinks that match the customers’ requirements in the Russian market. It also uses natural products in its production process. Fentimans LTD differentiates itself from other soft drinks company through its innovation. It understands the industry and thrives to give the best.
Fentimans LTD should not make changes to its pricing strategy. Its competitive advantage is which shows that it will have an easy entry into the market. The company should ensure that its pricing strategy remains the same (Britvic plc, 2020).
Fentimans LTD would not require to make changes to its promotion strategy. Its strategy is to be most dynamic, creative and trusted soft drink organization globally. It focuses on improving its tastes to meet the customers’ needs. The organization sees opportunities to enhance its participation in soft drink sector. It embraces innovation and offers their clients new products that match their changing needs. For instance, the Russian consumers are becoming more inclined to healthy products as they aim to curb obesity cases. Therefore, their promotion strategy should focus on offering their clients healthy drinks.
The company aims at increasing its revenue as well as brand awareness. The company should open its operations in Moscow as it is the country’s economic, political and cultural center. It is the most populated country in Russia as well as Europe.
Fentimans LTD will take various steps in positioning itself in the market.
Activity Month Period
Assess the customer base
Understand their needs February 2021 4months
Organise a workshop in Russia
Create brand awareness July 2021 6months
Set up physical shops
Talk to suppliers/agents
Select a management team
Hire a sales team February 2022 8 months
Commencement date November 2022 1 month
Russian soft drink market is highly competitive as new companies continue to set up. Fentimans LTD needs to invest in Russia and take advantage of the growing market. Fentimans LTD embraces innovation as a major driver to growth. They introduce new products that meet their clients changing needs.
Porters 5 Forces Framework Analysis
Threat of new entrants
Entry barriers are low
More soft drinks brands that are emerging
Rivalry among existing companies
rivalry is high for Britvic PLC
Bargaining Power of buyers
Threat of substitute products
Switching costs are low
Bargaining power of suppliers
Suppliers of the products are not concentrated in the market
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