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Question:
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Breakfast cereal name: Crispy Fruit
Company name: Australian Fruit Pty Ltd
Length: 2000 words (please provide a word count on your cover sheet)
Format: Structured-formal format (refer below)
Context: The selected product is breakfast cereals
The purpose of the first assignment is to determine your ability to undertake a situation analysis. You are required to analyse the macro-environment for trends that will impact upon this product and any impact on your target market and marketing-mix – planned marketing strategies.
Students must address the topic and product context of breakfast cereals. Students providing a marketing essay for the first assignment and a marketing plan for the second assignment on any other topic will receive an automatic fail. Breakfast cereal is to be the topic for both assignments.
You will need to create a hypothetical company that will manufacture your product or product range in Australia and distribute the product or product range in Australia.
Approach the assignment from a theoretical perspective. The main sources of information you should use are marketing textbooks to help stimulate your own strategies. Make sure that the focus of your answer is on academic theory and not the product itself. The product should simply be used as supporting discussion to illustrate and apply your understanding of the market planning process.
The focus is an analysis of the trends and changes in the six macro-environments outside the organisation. (Refer to Kotler et al Marketing 8e Ch 5 – The Global Marketing Environment.) The 6 macro-environments are Demographic, Economic, Natural, Technological, Political and Cultural.
Using each of the 6 components of the macro-environment identify trends that will impact upon the target market for your product. This means that for every trend you identify (eg. a demographic trend towards smaller family size), you should briefly identify its relevance by specifically discussing its impact upon possible target markets, your hypothetical company, product strategy etc (eg. if the assignment topic was cars, the demographic trend towards smaller families may encourage you to alter your product strategy by manufacturing smaller cars). Perhaps, using another example, you may also wish to consider that given the growing concern with the environment, people may be looking for products that are packaged towards saving or helping the environment.
While you should use actual statistics to support your analysis (eg. accessing the Australian Bureau of Statistics website at http://www.abs.gov.au/ to help with your demographic analysis), your emphasis should be on marketing theory and illustrating your ability to uncover trends that will have a relevant and significant impact on subsequent stages in your marketing plan. You do not have to allocate equal levels of discussion to all six environments.
Format
The required format for this assignment is a structured-essay format. For this assignment your sub-headings should be:
(a) Introduction (approx 100 words). Provide a brief description of your product (e.g. where your business is located, any distinct features your business may have etc) and the purpose of the assignment.
(b) Analysis of the macro-environment with a sub-heading for each of the 6 macro-environments (approx 1700 words).
(c) Conclusion (approx 200 words).
(d) Reference List (make sure you place this on a separate page).
Answer:
Title: Analyzing Marketing Opportunities
Introduction
This situation analysis explores the marketing opportunities available for a breakfast cereal by the name Crispy Fruit. The target market of this product is the entire Australian market, and the company that makes and sells it is known as Australian Fruit Pty Ltd. This company has distribution outlets in all major cities across the country and is planning to expand its market by opening shop in key towns across the country as well.
In efforts to explore new market opportunities, there are six macro-environmental factors that need to be put into consideration, namely demographic, economic, natural, technological, political, and cultural factors. This paper analyses all these microenvironments from a theoretical point of view in efforts to assess their relevance in and influence on marketing-related decision-making for Crispy Fruit.
Demographic environment
Demography is simply the study of the nature and distribution of human populations in terms of size, location, density, race, sex, age, occupation, and many other statistics (Bloom, 2001). The demographic environment plays out a crucial role in enabling marketers maintain focus on the right market because it involves people, who definitely constitute these markets. Today, Australia has a population of 22,637,580 people (Australian Bureau of Statistics, 2009). Being a whole-family breakfast cereal, Crispy Fruit has an immense potential of emerging as a very strong brand if marketed to this high population. It is also worthwhile to note that the country’s population is growing, with projections made on 30 September 2010 by the Australian Bureau of Statistics showing that the overall population is increasing by one person every 1 minute and 37 seconds, contributed partly by a net increase in international migration.
Top executives at Australian Fruit Pty Ltd may also need to consider the fact that Australia’s population, just like in the world, is ageing in a manner that the United Nations has already described as ‘unprecedented’. In most developed nations such as Australia, the number of people aged over 60 exceeded those below the age of 15 for the first time in mankind’s history. This is a clear indication that the company’s marketers need to pay special attention to the older demographic. Such efforts would definitely pay off since the trend towards an ageing population is unlikely to change overnight.
Data from the Australian Bureau of Statistics also shows that as Australian women choose to have fewer babies, the population continues to grow older. For marketers at Australian Fruit Pty Ltd, this means that no long-term marketing efforts should be targeted at children. The company should not focus a lot on variants of the product aimed at reaching out to children. Instead, such most of the variants should be tailored to meet the dietary needs of the adult population.
One of the reasons why the Australian population is ageing is that the people who were born during the baby boom of between 1946 and 1964 are approaching old age today. This trend is also contributed by the contemporary trend towards smaller family sizes as people endeavour to improve their personal living standards (Lawn, 1999). Therefore, unlike in the past where marketers of food products used to cast the image of the ideal woman into a housewife, they now have to describe the modern woman as someone who is out there most of the time earning her share of income to help improve her family lot just like her husband.
Moreover, there is need to enhance the appeal of adverts, especially those directed at the country’s generation X (those born between 1965 and 1976), and generation Y (those born between 1977 and 1994). This is because of their sceptical approach to life, fuelled in part by their experiences and partly by their great desire to improve their quality of life by adopting a more cautious economic outlook (Agrawal, 1999). Their shared experiences derive largely from the painful events they witnessed while growing up, notably recession and corporate downsizing.
Economic environment
The economic environment encompasses factors affecting the buying power and spending patterns of consumers. Buying power is very essential for all markets. This power is dependent on many factors, including prices, current income, savings and credit (Taylor, 2000). Awareness on major income trends and spending patterns by marketers is always necessary if a company is to succeed in building a reputable, fast-selling brand (Audretsch, 1997).
Since the mid-1990s, Australia has experienced unprecedented economic growth, which has significantly affected the spending patterns and buying power of citizens. However, inequality in incomes has continued to increase, whereby a relatively small section of the population takes great pride in exceptionally high household incomes (Phipps, 1995). This affluent group is known to be very insistent on better service and high quality, owing to their ability to pay for it. For marketers of Crispy Fruit, this means that this market segment should not be ignored, its small size notwithstanding. Given their ability to pay for high quality, affluent group deserve a new brand that address their specific quality and service needs.
On the other hand, the Australians who belong to the lower end of the socioeconomic spectrum have been suffering the greatest blunt of the global economic recession that has resulted in a drop in interest rates and job losses across Australia. This has created an interesting scenario whereby an affluent minority exists side by side a lower social economic class that is struggling to cater for essential needs such as food, shelter, and clothing. In the case of the poorer section of the population, focus should be on delivering a low-cost, affordable breakfast cereal product that is rich on the essential nutrients. The company may need to establish its own distribution points, either solely or in partnership with local chain stores in order to reduce the costs of production. This would make the product become accessible to ordinary Australians at low prices.
The average Australian household spend $153 per week, with the largest broad category of expenditure being food and non-alcoholic beverages. This indicates a new trend towards consumerism, unlike a decade ago, where the largest chunk of the domestic expenditure went to medical and health expenses. This could be an indicator of both renewed consciousness on the benefits of a proper diet on human health and improvement in economic wellbeing. Either way, it appears that the key challenge for Australian Fruit Pty Ltd is to reorient its Crispy Fruit brand, such that it reflects both the demand for higher-quality food and better service for which Australians are willing to pay.
However, as Mäler (1996) points out, decision makers in every company should always be on the lookout for unforeseen negative environmental effects on macroeconomic policies. Such awareness creates the right environment for the rapid build-up of remedial measures. For instance, the economic conditions in Australia may deteriorate under the weight of the after-shocks of the recent global economic recession. While arguing from the perspective of a formal mathematical model, Mäler (1996) notes that such environmental externalities are created by a combination of macroeconomic policies (policy, market, and institutional) as well as subsidiary imperfections.
Natural environment
The natural environment covers the natural resources required by the marketers as inputs or which are affected by different marketing activities. Today, environmental concerns are on the increase, particularly the role that the corporate sector is playing in accelerating the already alarming rate of climate change. However, an issue that is of more direct impact on Australian Fruit Pty Ltd is shortage of the raw materials used to make Crispy Fruit. Key among these raw materials is energy. The earlier the company’s top executives work on plans to cut down on overreliance on non-renewable energy sources such as oil and coal, the better. This is because demand for these resources has already reached a point where it outstrips supply, leading to a rapid increase in prices and subsequent lack of sustainability.
From a theoretical perspective, Costanza (1991) states that the issue of natural environment is best tackled from the perspective of ‘ecological economics’ as opposed to neoclassical economics. Costanza (1991) faults neoclassical economists for failing to address issues involving the representation of energy sources, materials, physical structures, as well as various time-dependent processes, which are basic to the ecological approach. Moreover, neoclassical economics lacks consistency with regard to positive-feedback and physical-connectivity dynamics (Costanza, 1991).
Analysts believe that the next ten years will be the ‘Earth Decade’, whereby the main global issue facing businesses and the public will be protection of the natural environment. Already, success in today’s companies is being measured not only on account of profitability and turnover, but also compliance with sustainable environmental standards. Strategists at Australian Fruit Pty Ltd need to put in place various measures of environment-friendly practices such as packing Crispy Fruit using recyclable packets, especially those that are biodegradable. The company should be seen as part of the ‘Green movement’ that is sweeping across the corporate sector not just in Australia but also around the world.
Technological environment
Businesses that fail to adopt appropriate technology end up failing. There are many instances in the past where this has happened. New technologies have always been replacing old ones. For example, xerography hurt the carbon-paper technology. On the other hand, xerography is being hurt by laser technology. Similarly, email is replacing the traditional postal services.
Crispy Fruit marketers have no choice but to optimize the use of modern technology to reach out to new customers. They need to correspond with buyers using email. Their adverts need to be packaged using state-of-the-art graphics and calligraphic techniques so as to match, if not surpass the image created by competitors. Since technology is changing fast, the company has to put in place research and development (R&D) tools that analyse the dynamics of processing, production, and information technologies. This brings about the much-needed versatility and subsequent responsiveness to changing trends in food processing industry.
A sizeable component of the company’s grand marketing strategy should involve the use of internet marketing. If properly exploited, an online presence popularizes products can complement other multimedia platforms in building a strong brand within a short time. Moreover, the internet is a highly versatile medium that makes it easy for an overhaul of the existing approaches to be done without incurring huge expenses.
In terms of R&D spending, Australia is among the top twenty countries in the contemporary world (Kotler et al, 2009). Moreover, the country has been encouraging organizations and businesses to engage in R&D as a way of creating export earnings and countering the large trade deficits that have characterized the past decade. Australia has even funded 36% of R&D research, with Glaxo Australia being one of the main beneficiaries (Kotler et al, 2009). Glaxo has set an excellent precedent for Australian Fruit Pty Ltd. This company should consider it a part of its strategic vision to obtain funding from the Australian government in R&D efforts aimed at catapulting it to the position of an industry leader in food processing and marketing. R&D efforts greatly facilitate the process of diversification in efforts to reach out to and meet the dietary demands of all the country’s demographics.
Political environment
According to Kotler et al (2009), the product strategy of every company has to be influenced by the prevailing political environment in one way or the other. The effects manifest themselves through laws, pressure groups, and government agencies. In Australia, the government is keen to protect all consumers from unscrupulous businesses. For this reason, top executives at Australian Fruit Pty Ltd have to understand the country’s laws so their company does not face sanctions for violating laws such as the Trade Practices Act.
Cultural environment
The cultural environment encompasses institutions and forces affecting the basic values, preferences, perceptions, and behaviours of the society (Malhotra, 1998). For instance, Australians are known to love equality. This consideration is of critical importance in the company’s efforts to position its product. The product should be position in a manner that is perceived to safeguard a feeling of equality, whereby all consumers within a given demographic are given equal attention. For example, the decision to add flavours and additives should be informed by shared preferences among members of a demographic group.
Conclusion
In summary, six macroeconomic – demographic, economic, natural, technological, political, and cultural – great influence product strategy. In the case of Crispy Fruit, marketers at Australian Fruit Pty Ltd need to be aware of the Australian demographic environment, particularly factors such as age, sex, occupation, population size, and population density. With a population of more than 22 million people, Australian is an excellent place for the company to build Crispy Fruit into an excellent brand.
Regarding the economic environment, the marketers should put into consideration the buying power and spending habits of all categories of consumers. The key factors to consider when assessing this buying power and spending habits include current income, prices, and saving patterns of a given population. Considerations on the natural environment are also critical for the company, particularly issues of eco-friendly packaging materials and use of bio-fuels so as to reduce reliance on non-renewable energy sources.
Regarding technology, awareness on internet marketing is necessary, considering the fact that online presence is the latest buzzword among today’s marketing professionals. The marketers need to have an aspect of product positioning strategy that focuses on a formidable online presence in efforts to build a reputable brand. Regarding culture, equality is a highly regarded value among Australians, and they would surely love to see a reflection of this cultural attribute in their favourite breakfast cereal, the Crispy Fruit.
References
Agrawal, M. (1999) Global competitiveness in the pharmaceutical industry: the effect of national regulatory, economic, and market factors, London: Routledge.
Audretsch, D. (1997) New-firm startups, technology, and macroeconomic fluctuations, Small Business Economics, 6(6), 439-449.
Australian Bureau of Statistics (2009) Census Data, retrieved from http://www.abs.gov.au/ on June 17 2011.
Bloom, D. (2001) Economic Growth and the Demographic Transition, NBER Working Paper No. 8685.
Kotler, P. Armstrong, G. Harker, M. Brennan, R. (2009) Marketing: an introduction, New York: Prentice-Hall.
Lawn, P. (1999) Has Australia surpassed its optimal macroeconomic scale? Finding out with the aid of ‘benefit’ and ‘cost’ accounts and a sustainable net benefit index, Ecological Economics, 28(2), 213-229.
Malhotra, N. (1998) Heterogeneity of regional trading blocs and global marketing strategies: A multicultural perspective, International Marketing Review, 15(6), 476 – 506.
Phipps, A. (1995) Macroeconomic Policy and Employment Growth in Australia, Australian Economic Review, 28(1), 86–104.
Taylor, J. (2000) Low inflation, pass-through, and the pricing power of firms, European Economic Review, 44(7), 1389-1408.
