Example Of The Organic Hamper Case Study
Organic Food and Skin Care Industry in United Kingdom
The production of organic food and skin care products in the United Kingdom has been present for over 100 years. The global skin care at times referred to as cosmetic has five different segments: skin care, hair care, make-ups fragrances, and toiletries. Over the year, the industry has grown large and large as the demand for the products keeps rising. Statistics carried out by the soil association of the Great Britain indicates that the organic market in the country was worth 1.79 billion pounds as of the year 2013. (Baby Food Industry Profile: Europe, 2014, p. 20).
Statistics record an increase of five million pounds from the previous year’s one point seventy-nine billion pounds. The organic market is on the rise in both size and the revenues it generates on a yearly basis. In the organic food and skin care industry in the United Kingdom, the greatest source of revenue is the food and drinks section. Food and drinks sector pulls more than eighty percent of the overall market. According to the trade body in the country and the drink federation the market is worth more than 92 billion pounds (Baby Food Industry Profile: the 4United Kingdom, 2014, p. 15). The rise in the market for organic products and the accelerating growth of the organic products indicate that there is an increase in the total demand for the product. Most of the products that buyers prefer in the kingdom are those with the soil association logo. Most of the consumers know the manufacturers, and thus trust has grown.
The size of the industry is large enough for Karen to carry out her operations. Every region and state of the country records an increase in the demand for the organic products. Every business in the country pays taxes that act as a source of revenue for the government. The government thus collects a lot of profits from a small business; this provides Karen with the opportunity to seek help from the government that will willingly assist her. There is a variety of products from which Karen can expand to as the industry is huge, and it continues to grow every day (Baby Food Industry Profile: Europe, 2014, p. 20).The large size of the industry and the growth in demand for the organic products gives Karen’s business the luxury to enjoy significant credits from the financial institution. Financial institutions offer help when they see that they can make large returns. In the case of Karen, her business is already up and running, so she can get loans to support her business operations at any time. The increase in demand for organic products also provides Karen’s business with the opportunity to price control (Baby Food Industry Profile: Europe, 2014, p. 20). She can determine the prices she can put on her products as the economic climate is very favorable. Key trends
Skin care reached sales of 2.1 billion pounds according to the statistics carried by the soil association. Statistics also indicate that the value of sales represents an increase of 2 percent (Cravens, Piercy and Baldauf, 2009, p. 35). Consumer confidence in recent years is on the rise with a record of continued demand for the products. The increased demand is as results of favorable economic climates that the citizens of the Kingdom are enjoying.
The industry is also undergoing through revolution. Manufacturers and producer from the industry are also taking part in the competitive business environment. Advertisements from the organic food and healthcare products are now visible in towns, on giant billboards on the roads. The news column also includes adverts from the industry. Through advertisements, the products attract the attention of potential consumers from all over. An increase in demand for the products expands the market industry of organic foods and skin care products (Baby Food Industry Profile: Europe, 2014, p. 20).
Reduced prices and offers are also acting as significant trend factors of the industry. Supermarkets, hypermarkets, and drugs stores are now putting offers that consumers cannot resist at any cost. Offers in the market include; If you buy two you get one free or others such as but two and get the third one at half price are major factors that are boosting the market. Other business enterprises are holding free sample camps to let the customers know the type of products that they are going after before making the final decision. Such activities attract large crowds and increase the customers’ seller relationship that is healthy for any business organization (Baby Food Industry Profile: Europe, 2014, p. 20).
Grocery sales previously were short by 2.1 percent (Baby Food Industry Profile: Europe, 2014, p. 20). The decrease in the sale of groceries acts as a booster for organic foods. The trend will continue for a while as the values collected from the sale of groceries will continue to fall. Records show that as supermarkets sell fell the sale of organic foods and skin protection products rose 2.5 percent. At the height of biological sales back in the year 2008, revenues generated from the sale of natural products summed up to 2.1 billion pounds. However, after the recession hit the industry fell short as it slumped to 3.7 percent. Today independent retailer is leading in the industry of organic products reporting a growth worth 10 million pounds per week. Online sales also are growing fast. Ocado reported an increase of 10.4 percent in their sales. Another sector enjoying the growth is Sainsbury supermarket. It is the biggest organic retailer in the United Kingdom. The supermarket has a market share of almost 29% (Baby Food Industry Profile: Europe, 2014, p. 20). It reported an increase of seven percent in it sales of organic foods and skin care products.
There is a growth in the total number of infants in the country as statistics shows. Most of the food given to the babies is organic in nature. The increase in children is acting as a demanding force in the market for natural products. The latest research data from the MINTEL Global New Products Database (GNPD) shows that there were in excess of 200 new organic and all natural beauty products launched in the UK 2014. The record a massive 170% increase on the 78 products launched during the whole of 2012, and we are not yet half-way through the year. (Baby Food Industry Profile: Europe, 2014, p. 23)
Karen’s business deals with organic skin care products. Natural skin care products are a subsection of the industry that is on the rise. Customers are growing in their concern for what chemical compositions are in their cosmetics. These growing regarding acts as a market growth trigger that Karen’s business needs. Another factor that is a key trigger in the market for organic products is the widening availability of the products. People will go for those products that are in a variety so that they can have alternatives to choose from the rest. Karen can manipulate the market by giving her customers what they want. She can avail a number of different products in order to attract more potential clients to her stand (Baby Food Industry Profile: Europe, 2014, p. 20). The concern of consumers about the possible harmful effects of sulfates and other chemicals in skin care products is catalyzing demand for products with natural ingredients. Like Karen, she stated she entered the market after her son received treatment; she got the idea and questions of how organic products can help improve our skins. She has first-hand experience in dealing with the matter. Retail shops are the ones leading to the sale of natural products; Karen can opt to open a retail shop and expand her business in order to reach more people.
The significant trends in the organic food and skin care industry are as a result of the statistic of recent years. Prior to the data collection by the soil association the industry was recording very low income. The size of the market then was minuscule. The demand for organic food is on the rise. People with weight loss issues are all running to natural foods. There is little or no trust at all for the western medication. For anyone intending to make great achievements in the natural food industry and skin care products, hospitals, and social recreation area are the best marketing places. Most people even in hospital will ask for natural foods or drinks as they perceive that they will make them feel better.
Another market opportunity is at places such as gyms and spas (). Gyms attract people from all over; they all want to be physically fit and keep they bodies as healthier as possible. People with the perception that organic food keeps the body organs growing and keep them healthy are easy targets for organic foods and products. Another best place where there is an increase in the demand for skin care products are salons and shopping malls. The roadside only sells organic foods. In bars and restaurants, there are large populations who just need a little convincing and become products consumers. All areas that the noted above in the paper are good starting points for a young business to grow. Karen has a lot of market opportunities that she can manipulate to generate more revenues for her business. Karen can open up shops and become the supplier of chemists that sell organic products. Selling in large volumes is always profitable.
P.E.S.T Analysis of the market
A. Political environment
The political atmosphere in the United Kingdom is quite friendly. The government supports home based or domestic manufacturers. As long as all parties in the market follow the trade regulations, and they all play fair then all is good. Trade in the kingdom plays by the rules of the Rome treaty. The number of women who are entrepreneurs is rising, Karen being a woman owning her own business will receive support from most sections of the government (PESTLE ANALYSIS, 2014, p. 20). In the today world, women empowerment is a key campaign strategy that all states are implementing.
B. Economic environment
Statistics carried by the soil association indicate that the economic climate is conducive for both the buyers and the sellers. Demand for any product in the market depends on the income levels of the consumers. If the economy is on the rise, then business make more profits each trading period. Karen operates a small business; she thus only requires little-starting capital to run her business. The economic environment is good she will have no challenges to enter the market. In lecture seven some qualities of a good entrepreneur are the ability to take risks; Karen can enter the market now that it is quite without fearing that there are many players involved. She has a small employee base that she can pay well and still earn profit from her sales (The UK: In-depth PESTLE Insights. (Cover story), 2011, p. 75) The economic environment can also support her in paying rent for the warehouse of her business as well as the maintenance of the van she uses. She can also add some office equipment to make it more attractive because if she meets the demand in the market she will have enough funds.
C. Social environment
People are embracing the organic foods and skin care products industry rather well. They are all for a better future and a brighter one. There is an increase in the demand for the products from the industry, and as the economy favors them the demand is predicted to rise in the next few years. The fact that she is a woman adds a little motherly touch to the business. Everyone will want to receive attention from her; she is in a good position to know the best skin care products for her customers. The social environment as mentioned above is conducive to the women population as they get support from all segments of the society to empower them (The UK: In-depth PESTLE Insights. (Cover story, 2011, p. 77) The girl children as the organization put it has suffered enough and hence now it is time for them to flourish. The community will receive her business well and support her endeavors.
D. Technological environment
Technological advancements are rising at a very high rate. Through technological advancements comes Social Media such as Twitter, Facebook, integral, snap chat, WhatsApp, messenger and the emails (Daikin Industries, Ltd. SWOT Analysis, 2015, p. 29). All named social media routers are major marketing forces. Through the social media, consumers interact with the producers and exchange ideas. A good relationship evolves between the parties involved thus raising the market to higher levels. Technology wise the business will do well. Although she does not have many technological accessories the two computers, her office has will be enough to support her small operations. However, as she expands her operations, it will be necessary to improve her assets and upgrade her operation to new technological levels. It is a competitive environment, and technological advancement is one of the competitive advantages that her process needs.
S.W.O.T Analysis of the market
A. Strengths of the market
a. The market in the United Kingdom as much as it is tricky it has its high points. The economy is great thus production costs are at a minimum. A healthy economy supports a high demand for products in the market and thus increases business revenues collected at the end of each trading period.
b. Another important to consider is that there is support from the government for small businesses in the area
c. Karen’s business has the necessary resources to make it in the market. She has skilled workers to ensure that operations are efficient enough to satisfy her customers. There is a van for delivery of products to all her customers as well as a storage facility to keep the products safely. The size of the business, when considered, it is encouraging to say that she is prepared to enter the market. Her office has a web server that helps her get access to the internet. Through the web, she can search and read the trends in the market.
d. She can also set up a website for her company and interact with her customers at a personal level.
e. Karen also provides a variety of products in the market. Customers will always go where they do not have a limitation on their choices. She attracts potential customers through her products does increasing her client base as well as generating more revenues for her business.
f. Karen is an entrepreneur she does has the mental state of a business owner that will help her survive harsh conditions presented by the business world.
B. Weakness of the market
a. Organic food and skin care product industry is a young industry that is still growing. Winning over customers will not come easy because others still need a lot of convincing. Others are still reluctant to buy the products due to fear of the unknown.
b. Karen is a new player in the market; she does not have a client base yet. It is always a challenge for the new player to survive and make profits in the first stages of their operations.
c. Karen’s business also lacks the assets to support and meet large demands from her customers. The office is small and the storage units not large enough to keep large volumes of products.
d. There are few issues that some part of the population believe that a woman cannot be a business owner. Such negative feedbacks can discourage one from exploring the market. It is also hard convincing people to stop using other product and trusts her that what she is selling is good enough for them.
e. Her company lacks a trusted logo that attracts people to some business. Customers tend to go for what they already know and shy away from new products, as well as new market players. Lastly is the lack of technological advancement to compete favorably with other players in the market.
C. Opportunities in the market
a. There are plenty of loopholes visible in the market. Suburb areas are the best market places. Most people are selling their products in the market places. It is an opportunity for small business owners to explore the loophole and make huge revenues.
b. Personal selling is the best technique for selling a product that captures most of the customers. The other population that needs persuasion is best when sellers deal with them at a personal level
c. There are several openings in the market for Karen to explore. Her being a new player she can use it to her advantage. She can convince people that her products are better and new. She can start with fairly pricing her products in order to pull demand towards her products. The good side of having a small business operation is that one can be flexible. She can make home deliveries to her client thus winning them over.
d. She can also set up mobile shops in populated areas to sell her products to a larger population. The flexibility of her operations can allow her to move from one product to another and taste waters before she can finally pick her line of operations.
D. Threat in the market
a. The one and only competition in the market is from the western medicine. Most people still don’t believe that consumption of organic foods is not good for their health, so they prefer to take the western medication that is very expensive. Karen’s business operation faces threats from all corners.
b. The likelihood that a big business organization will swoop in and threaten to swallow her is very high. Large corporations are scared of small business that come in and take their customers away. There are monopolies in the market that will not allow any other company to set up shop in their regions of operations.
c. Her business also is under threat from fierce market conditions that keep on changing. Price can fall at any time and lower the value of the products in the market. When prices fall at times also referred to as inflation businesses suffer significant losses.
d. Karen’s business is not ready for heavy losses that will act as a discouraging factor in her operations. However all the threats the company can deal with them as long as it remains focused on its main objectives.
For any business to grow there must be a set of objectives to act as directives. The company must set its mission, vision, goals, value statements and policies to govern it. Karen should increase her sales value on a daily basis in order to generate more revenues. It is advisable that Karen expands her storage facilities to accommodate large volumes of products. Expanding the geographical location that the business will cover is another away to grow a business strategically (Piercy, 2009, p. 76).
As her consultant, I proposed the table below on how she can grow her business and improve her income
Sales 10,000 10800 12300 14100 16000
Cost of sales 2000 2100 2400 2600 3000
Gross Margin 8000 8700 9900 11500 13600
% Gross Margin 80% 80.5% 80.4% 81.5% 81.9%
Marketing 2050 2040 1980 1960 1920
Personnel 4400 5400 5520 6600 7140
Operating 700 800 900 1050 1050
Total 7250 8240 8400 9550 10110
% of Sales 72.5% 76.3% 68.3% 67.7% 60.9%
Contribution Margin 750 460 1500 950 3490
CM/Sales 7.5% 4.3% 12.1% 13.8% 21%
After considering all the factors and assessing the ability of the company to slow progress the company can increase its sells income. When growing costs incurred will increase but when balanced with the income the result should be large profits for the company (Social Business Review Section, 2014, p. 185).
Strategic direction of the business
Steve is leaving in the next three months; it is necessary that Karen finds his replacement. For the short term plan of the business, Karen must employ additional employees. The purpose of adding employees is to increase the sales. Currently the firm sales 1500 hamper per annum, Karen intends to increase the sales volume to 10000 per year. Increasing sales will need additional staff. By end year, revenues generated from the sales will buy an additional van to help transport the products to clients. In total by end year, Karen’s business plans to have three vans and four extra employees. The expansion will help the company extend up to three additional regions in the country.
The medium strategy of the firm is still on increasing the sales volume. Any business with the intention to maximize profit always cuts costs. By the end of the year, the company now will concentrate on servicing the whole country. As the industry is growing by the end of four years from now, expansions will be in place. The company intends to set up shop in every state of the country. Karen will open branches everywhere to supply the whole state. Each region will receive a set volume of the products to sale on a yearly basis. The business by then will be the leading producer of organic products in the country.
Long term plans for the business are already in place. The intention of expanding regionally is to attract the outside market. Karen intends to expand to the international level. She plans to be the leading supplier of organic products to the whole of Europe. Currently, she has a team already in the market looking for potential countries to supply. She will have branches in most or European states each with a head office to oversee operations.
The best way to move through the market is increasing the supply of products that the company is selling. In the market penetration strategy, a company can increase the volume of products their current clients receive. The company alternatively goes deep into the market and gets additional consumers.
Karen sells both organic foods and skin care products to her customers. It is best that she increase her client base by expanding into other regions. London, Manchester, Liverpool are also cities that she can expand her business.
Offers such as discounts and after sales services do well in the market business. Karen can introduce such offers in her pricing strategy in order to get a firm grip on the market. Considering the size of her staff, she will need to employ more manpower to increase efficiency. The best products service harsh market conditions if she improves the quality of her products she will penetrate the market
Market development strategy comprises of expansion of the geographical area products of a company covers. An organization that intends to grow its market can go into other countries or in the same state increase the coverage of its products.
Karen can apply the growth strategy to develop a market for her products. Cities that such as Manchester are highly populated and she can move into new markets to attract new customers. In order to develop her market, she will need to carry out market intelligence and know where there is more demand for her products.
She can also develop the market of her products by increasing the quality of her products. Market development helps her business to attract more potential customers who want high-quality products for their skins.
In the product development strategy, the company tries to introduce a new product into the market. The target market does not change. It does not change because the company targets the same customers. It is a technique used to grow a business from increased revenue sources.
Karen has a customer base at this stage of development. In order to retain her customers, she will add more products to those that she feeds her customers. Introducing a new product will help her capture more customers who will have a growing of bored if the old product. The new product will also help Karen’s business capture the attention of a new customer to her long list.
In the diversification strategy, the company tries to grow the shares of its market. It improves the market shares through the introduction of new offers in the market. The offers can be either for the same products or new products introduced in the market. Diversification is a risky strategy as it requires both market development and product development strategies.
In the diversification stage, the company is at maturity. It cannot grow anymore, but it intends to remain in the business world. Karen can increase her business shares by addition more customers to her to the product. It will necessitate her to either introduce a new product in the market or expand her area of operations. At diversification stage, her business is at risk if getting it all or losing it all. She has to take caution careful not to introduce a product that will scare her potential clients away. She also has to ensure that the new offer she put on the market does not put her business at risk liquidation.
It can be risky operating a business where expenses are higher than the revenues collected. Karen has to consider the cost of introducing a new product into the market. The business must be financially stable to support the new product in the market.
Marketing of organic food and skin care products can be very involving. Marketing is very productive if an organization puts the right channels into use. Advertising is very critical at the market stage. If the message reaches the right and potential consumers advertising can be very rewarding. The best advertising methods include promotions, personal selling and door to door selling.
After evaluating the market and assessing both the internal and external environments that can affect the business strategize. Setting the number of products that the company must produce and sell in a day is one marketing strategy. A business must consider a number of pricing models that it will use depending on the conditions in the market
The company must also consider the number of staffs it employs to reduce its expenditure. The one and only objective of any organization is profit maximization so it must consider the cost it incurs.
For the marketing strategy, Karen has to employ a good price model and put offers that no one will resist. She can set low prices for her products in order to beat off competition from other market players. Karen can put discounts on her most expensive product so that customers can buy them. She can also put offers such as free products packaged together with the expensive one to sell them quickly (Moore and Pareek, 2009, p. 35).
She can also repackage the most expensive products with other products that are in high demand in order to attract more customers. All mentioned methods are market strategies that can help Karen stay in business for a very long time.
Lastly, Karen can produce the products in large volumes that are in high demand to meet unexpected demands in the market. Mass production and mass marketing help reduce the cost incurred in the two processes.
Estimated Market Share
The estimated market share of the market, as predicted by the soil association team, will increase by 2.8 percent in the next year. The increase in the market share will in turn increase the revenues collected from the industry.
Entering the international market
The business must first analyze the outside market that it intends to entry. Assess all environmental factors that are both the internal and external environment before entering the market. The next step when entering the international market will be contacting potential buyers. Contacting of potential customers follows market intelligence.
At the international level, there are new rules that govern trade. It is best that an organization goes through all the regulation governing trade. It is also important that it goes through the article that deals with the organic foods and skin care products before entering the market. The business must understand the market, how it operates, the changes it undergoes and how to cope with competitors in the market. Going to the international means that the company is expanding it thus also has to increase the number of employees and capital investors to support the operation.
Karen believes there is potential for her products across Europe and is now thinking of trying to expand her business. She now has more orders or a regular basis than she can manage on her own. United Kingdom is part of the European nation; thus Karen will enjoy trading at an international level in European countries. Trading regulations are the same in European states so she will have no difficulties adapting (Hughes, Bon and Malshe, 2012, p. 60).
At the international level, she will gain more experience as there is competition at that level. However, Karen must upgrade her operations technology wise in order to fit in. Competition at the international level calls for efficiency and quick production to satisfy the demand. Her business can survive at the international level.
As the business grows, it demands more from all the parties involved. If the company decides to produce, more products then more stores have to be ready to accommodate large volumes. The company will also need improved technology to support changes in operations to ensure the efficiency of production. Employing new technology will help a firm have a competitive advantage on the market than all the other participants.
New technology, more warehouse, and more operational base will need additional staff to work in all those areas. The company will, therefore, need to recruit new members to be able to increase its labor force. Other staff also help a firm increase its volume of output as well as save the company a lot of production time.
Karen initially had a small working team because of the geographical area that she operates. At the international market demand will be higher, and there will be a call for high-quality products. Karen must employ additional staff that can compete on the international market.
At the international market, the environment is different. An organization has to look at the best state where its products will flourish. Those in the marketing department will have to carry out the s.w.o.t analysis of the market and assess its strengths, weakness, opportunity and the threats available in the market. Lastly, the company also has to look at the political factors of the new environment, the economic, social and technological factors. After assessing all the factors that affect the business one can then venture into the market.
European countries are more alike in nature. Karen having grown in the United Kingdom will have no difficulties operating in a new environment (Kriese, Bügl and Scholz, 2013, p. 210).
Business legal status
Each state has its rules and regulations. There are legal matters that the company must consider. Some activities might be legal in one state and illegal in another state. The business must ensure that all its operations are legal in the new environment that it decides to operate.
All the employees that the company employs in the new environment must be legal persons. They must have permits to work in the new environment as well as legal documents to support them. All business transactions and dealings must be reported and be legal according to the state laws.
What is legal in her country is legal in other European countries. She will not have to make significant changes in her operation because she will be trading on along the same lines of operations.
There are many options that can act as an exit strategy. One can decide to sell their company other parties interested. Selling works best if the company is making a lot of losses in the market and can no longer survive the competition. Worst case scenario is feeling the company to the chipper. It works if the company has poor financial performance. The method works well if the company lacks a viable market for it sell or its product. Liquidators feed on the broken pieces of the company. Lastly, the company can decide to go public. All exit strategies will depend on the performance of the company (Stucke, 2014, p. 700). For Karen, the business is her passion, selling it is not an option. The best exit strategy for Karen is leaving the business to her son whom they manage the business together.
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