International Marketing: Innocent Smoothies
1.0. Introduction
Innocent drinks have taken the soft drinks market by surprise. One of the core strength of the company in the market is its clarity of purpose (Turner 2008). Simply, Innocent drinks focuses on producing juice that is 100% sourced from fruits and with no concentrates. In addition, the company has a good track record in corporate responsibility where 10% of its proceeds are given back to the community that produces the fruits (Turner 2008). This approach to business has seen Innocent drinks dominate the market for over 10 years. Besides, the company’s focus is on venturing into other European Union countries to sell its unique brands. Further, Innocent is trying to enter into the Russian market. This report will evaluate the company’s potential and capabilities to venture into the market. This will be done by looking at the prospects of the Russian market vis-a-vis the company’s core competencies.
1.1. SWOT Analysis
The SWOT analysis shows the strengths and opportunities that will enable Innocent venture into far flung markets. In addition, it will revel the weaknesses and threats that might hinder Innocent’s success in the market.
| Strengths
Natural products Environment-friendly packaging Motivated workforce Established supply chain |
Weaknesses
Lack of experience Lack of capital |
| Opportunities
Diversification Expansion into other countries Online selling and retail shops abroad |
Threats
Fast growth Forecasting demand Economic trends technology
|
1.1.1.Strengths
Innocent drinks have an exceptional approach in the market by selling products that are 100% natural. Indeed, several factors contribute to the company’s success in the market. One key strength of Innocent Drinks is the sue of fresh fruit in their drinks. Nowadays, people are looking for healthy meals, food that are 100% natural, without additives or any concentrates (Innocent Drinks 2013). In addition, the Innocent uses an environmentally friendly packaging (Henry 2008). They have clear bottles and simple product information, which makes their brands stand out than others in retailer shelves. Moreover, the company has a strong commitment in motivating their workforce, including profit sharing schemes, a learning culture for employees and gift vouchers. Such benefits are core to employee motivation (Baker & Hart 2009).
1.1.2.Weaknesses
However, it can be noted that the managers did not have the requisite knowledge in running the business. Their approach in raising funds, although successful, was backed by giving a 20% stake to the American investor (Innocent Drinks 2013). The founders also gave up their jobs without any solid plans. Further, with many founders, it means decisions cannot be made easily as consensus is required to arrive at any meaningful conclusion. Finally, using fresh juice meant that the products will be perishable within a short time.
1.1.3.Opportunities
Innocent face numerous opportunities in the soft drinks market. Innocent has diversified into various product categories and different containers such as cartons, with smoothies for children and venturing into established supermarkets from independent retailers (Innocent Drinks 2013). They have also gone abroad as can be seen by the many trademarks the company has sought across the globe. Indeed, if all goes well for the company, then it can venture into online selling and the company can also open retail outlets or shops in these countries (Baker & Hart 2009).
1.1.4.Threats
Innocent drinks has grown fast in the last few years of its existence. However, fast growth, in a relatively short time is a threat for any company, including innocent drinks. Forecasting of demand and customer trends can be problematic for the company and Innocent drinks must keep track of forecast as accurately as possible. According to Kotler and Keller (2009) organizations require skills and knowledge in order to measure and forecast the size, growth, and profit potential (Kotler). However, external threats are also inherent in the industry (Kotler and Keller 2009). Innocent drinks should keep vigilant of the external threats posed by competition. Further economic conditions also affect the purchasing power of consumers. The current trends in the EU market can prove difficult as consumer try to cut their spending to meet other pressing needs (Kurtz 2011). Moreover, technological advancements means that Innocent should continue to upgrade its technology as well as train its workforce to keep abreast of the changing technologies.
PART 2: Value Chain Analysis
2.1.Introduction
As can be seen from this diagram, in business value chain, the activities of a company fall into two groups: primary activities and support activities. The primary activities are directly related to the production of the products, in this case, the drinks that Innocent produces. On the other hand, the support activities are critical in enhancing the competiveness of Innocent Drinks in the market (Gillespie and Hennessey 2010).
2.2.Primary Activities of Innocent Drinks
2.2.1.Inbound logistics.
Innocent’s inbound logistics involves company agents getting the ingredients, mainly fruits, from across the globe (Hitt, Ireland& Hoskisson 2009). The agents gather as much information as possible pertaining the ingredients they sources all over the world. This involves understanding how the fruit trees are grown, the challenges faced by suppliers and how the company can offer them some assistance in organizing the supply chain (Innocent Drinks 2013). Using its agents to get products from producers ensures economic of scale whose benefits are passed onto consumers. The suppliers should adhere to the company’s standards in as far as environmental and social issues are concerned. In addition, Innocent Drinks uses renewable resources in its packaging. This makes the company get good standing by embracing sustainable development activities (Gillespie and Hennessey 2010).
2.2.2.Operations
Innocent Drinks operates in several countries in the EU and the operations teams work closely with customers to understand their need in order to develop products that meet their expectations (Innocent Drinks 2010). This helps the company make forecasts so the company can determine how much fruit is required and the space required for storage. Innocent has over 10,000 retailers that carry their brand across the UK and overseas (BBC 2010).
2.2.3.Outbound Logistics:
The outbound logistics for Innocent Drinks has traditionally involved selling its products through established retail stores, without many intermediaries. By Organizing the movement of good from company stores to retailer outlets, the company does away with intermediaries, thus passing on the benefits to consumers. Just-in-time deliveries also ensure that freshness of the products is maintained at all times (Innocent Drinks 2010).
2.2.4.Marketing and Sales:
Innocent Drinks invest in the marketing and sales effort heavily. The marketing team is composed of market controllers and the communications team. The marketing and sales team carries out research and implement new products, develop the promotional strategies to be undertaken by the company (Hitt, Ireland& Hoskisson 2009). The team also monitors the activities of competition and leads cross-functional teams in managing the company brands in the market. The communication team is tasked with looking after the public voice of the company, making sure that any communication is aimed at adding new customer or keeping existing customers happy (Innocent Drinks 2010).
2.2.5.Service.
Providing superior customer service has been the core of the company’s success in the UK. The focus on customer satisfaction is based on the company’s mission statement and the need to provide healthier products for the customer (Innocent Drinks 2010, (Baines., Fill and Page 2011). The company encourages and motivates it employees to ensure customer needs are met
2.3.Support Activities:
2.3.1.Infrastructure:
Innocent Drinks infrastructure involves several activities that are performed by the managers. The general support activities that are carried out by the company include “management, planning, finance, accounting, legal support and government relations that are required to support the work of the entire value chain” (Hitt, Ireland& Hoskisson, 2009, p.87). In addition, the company’s image is boosted by partnership with Coca Cola (Klein 2010). With strong brand recognition, innocent Drinks can ride high on the power and brand image of a well established company like Coca Cola (Innocent Drinks 2010).
2.3.2.Human Resource Management
Employees from a critical component in the success of any company. For Innocent Drinks, the workforce is perceived as the most valuable resource, besides the customers (Innocent Drinks 2010). The human relations model places more emphasis on the flexibility and internal focus on improving the morale through the development of human resources. The model sees this approach s a critical aspect in achieving effectiveness in the organization (Hitt, Ireland& Hoskisson 2009). Accordingly, the company has put in place various initiatives to keep the workers happy and motivated. The company has an in-house academy for training its employees. In addition, the company has a strong work culture that revolves around learning, personal development and encouraging staff to be involved in all sustainability efforts (Hitt, Ireland& Hoskisson 2009). Employees are given gift vouchers if they sign for renewable energy in their homes. There are also scholarships for those interested in joining community initiatives at the grass root levels. These efforts build the morale of workers, thus improving the company’s performance.
2.3.3. Technology development
Innocent Drinks embraces technology for cost-saving purposes as well as supporting other departments for consistency of products. In addition, technology ensures efficient customer services and satisfaction in general (Kurtz 2011). The IT department helps employees at Innocent Drinks with the necessary tools to undertake their work (Innocent Drinks 2010). The technical team is responsible for anything electronic from phones to services. They support all innocent employees in the offices and field to deal with any emergent issue in the company’s operations.
2.3.4.Procurement
Procurement involves buying ingredients that are required in the production of the company drinks or any item that will be used in providing services across board. For Innocent Drinks, procurement would involve buying fruits from sellers and any other raw material required in the production process (Innocent Drinks 2010). In addition, purchase of fixed assets such as vans, buildings, office outlets, and machinery among others.
Part 3: Potential Market Assessment
3.1. Introduction
Innocent Drinks has an arrays of countries to consider to venture into and therefore, there is a need for the management to decide which market are more attractive (Baines., Fill and Page 2013). To identify the most attractive market to enter, the company should use the Walvoord (1980) process model (Gillespie and Hennessey 2010). The purpose of the model is to work down the different levels, filtering those markets which might look unattractive. At the end of the process, the international marketer will have identified the right market to enter.
A market analysis tries to establish how attractive a market is as well as the dynamics in the market. David Aaker (2010) identified several dimension of market analysis including; Market size, market trends, market growth rates, profitability, cost structures, distribution, and key success factors. The aim of the market analysis is to determine if the market is attractive enough for the company to enter, both now and in the future (Aaker 2010). One of the elements in the Walvoord model is market size, which measures the volume and the potential of the market (Aaker 2010). The market volume provides an overview of the realized sales volumes in the market the company wants to enter. The volume depends on the customers and their demand levels. On the other hand, the trends in the market can be upward, downward or stagnant during a given period. Further, the company should also seek information concerning the target market characteristics, competitors, opportunities in the markets and the attractiveness of the market in general (Gillespie and Hennessey 2010). Undertaking the PMA will help the management determine if the Russian market is worthy investing in at the moment or if they should put their resources elsewhere.
Part 4: Potential Market Analysis for Innocent Smoothies
4.0. Introduction
Innocent Drinks has an array of natural fruits in the smoothie manufacturing industry. The company is headquartered in London and has over 300 workers and a global network of over 10,000 retailers (Datamonitor 2013). The company’s portfolio has expanded dramatically over the years and has over 40 products in the market. The company’s success in the fruit drinks is based on the use of natural ingredients (Kurtz 2011). Further, the company has a notable aspiration in conserving the environment, thus a leader in many ways. Regarding the Walvord (1980) model, the PESTEL analysis can be used to help the company build up the best possible knowledge of the external factors that will influence the company’s decision to enter into the Russian market.
4.1.1. Political
The political culture of Russia will have a significant effect on the company. Authoritative regimes in the country have played a significant role in the politics and culture in Russia. The country has a relatively young democracy, and the government structures have not changed much. Further, the corruption index remains the highest in the world and the amounts of demands in government offices has increased over the years. Innocent Drinks will have to face the cultural and systematic political risks as corruptions remains the norm in licensing of businesses (Pride & Ferrell 2009).
4.1.2.Economic Outlook
Russia has a stable economic development. However, the reliance on energy exports has a negative impact on the future economic prospect of the country. The development of wellness and healthy foods has been hampered by slow economic growth. However, improved economic conditions will see people demand healthier foods and drinks.
4.1.3.Social
The diverse social fabric in the country and uneven income distribution my be potentially detrimental as it could lead to conflicts within the country. This diversity also adds to the operational risks as cultural differences can trickle down to political risks.
4.1.4.Environmental Issues
The environmental and political factors are closely tied together as the government continues to monitors ecological factors for political manipulation. If an investor chooses several localities, the operational and logistic costs can weigh heavily on the company’s bottom line because of the geographic span and poor infrastructure (Pride & Ferrell 2009).
4.1.5.Technological
Russian has invested heavily in technology, especially in developing military hardware. Moreover, the country has a well educated populations (Baines., Fill and Page 2013). These attributes make it easier for an investor, who is engaged in a highly technological business, to enter the market. However, the country’s legal system is not well developed and might affect the full protection of intellectual property rights.
4.1.6.Legal
Russian remains a market that has a high potential for growth for any company that promotes health and wellness of its citizens (Euromonitor International 2013). In addition, customers have a high regard for keeping a healthy lifestyle. Therefore, Innocent Drinks will have little to worry about as their products are 100% natural and cannot have any negative effect on the health of consumers (Euromonitor International 2013). Further, the Russian Government is set to pass laws that will institute tough regulations on companies in the food industry. The new requirements will require companies to indicate the nutritional composition of their products in efforts to mitigate growing cases of obesity in the country.
4.2.Market Attractiveness
The Russian market had total sales of $12.1 billion in 2012, which represented an annual growth rate of 1.7% between 2008 and 2012. Consumption of soft drinks went up by 0.6%, to reach 14.3 billion litres in 2012. According to the Datamonitor (2013), the sales volumes are expected to increase in the coming years by about 3.5% in the next 5 years. Projection indicate that the market will be worth more than $ 14 billion in 2017, which makes the prospects attractive for potential players like Innocent Drinks (Datamonitor 2013).
In order to gauge the competitive environment of an industry, Johnson et al. (2008) argue that the five forces framework can be helpful in understanding the process. By analyzing the Porter’s five forces of Innocent Drinks, the bargaining power of suppliers has been accessed to be moderate. This is because the company embraces a diversified supply chain because fruits are provided by supplier across the globe. Therefore, any possibility of concentrating suppliers will increase their power extensively. The bargaining power of buyers has been accessed to be high because of several factors. First, buyers are concentrated because of the premium priced product. Secondly, the target market is small, and finally, is the products specialization. Barriers to entry are accessed to be high because of the unpredictable economic performance and legal framework in the country. Further, the social fabric is too diversified, which might be used by the political class to increase political risks. Finally, the rivalry in the market is high because of the many players in the market (Baines., Fill and Page 2013).
4.3. Conclusions and Recommendations
Innocent should not venture into the Russian market at the moment because of the inherent risks, especially the political and legal environment. Selecting a market to enter, especially an international market, should not be undertaken casually. Therefore, the company should monitor the political and regulatory frameworks to ensure they are in sync with other countries, especially the EU. For instance, corruption in the country can mean a big hurdle for starting operations in the country. Further, without a clear regulatory framework, the company’s intellectual property rights. As the reason for not entering the market has been identified, future research should focus on the overall de4cisions framework for the selection of the Russian market. The research should attempt to identify the interrelationships between the international market selection process and the organization factors.
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