Marketing Group Work
Market Audit
The global specialty fats and oils market is projected to reach $247.78 billion by 2021 which represents a compound annual growth rate (CAGR) of 4.4% from 2016 (Markets and Markets 2017). The industry’s growth is expected to be spurred by increased adoption of strategic management practices such as the establishment of strategic partnerships, market expansion, investment, and new market launches (Markets and Markets 2015).
As one of the global market leaders in the vegetable fats and oil market, AAK Limited is focused on developing sustainable competitive advantage (MarketLine 2015). The firm has entrenched new product development as one of the strategic approaches to achieve the intended competitive advantage. The firm intends to launch a new product known as Vegan Salad Sauce. AAK Limited's success in introducing Vegan Salad Sauce within the business-to-business market segment will be determined by its effectiveness in understanding the prevailing market environment, which can be achieved by conducting an extensive market audit (Roy 2009). This section outlines an analysis of the market environment in which AAK operates with reference to Porters five forces and SWOT analysis.
Porter’s five forces
Supplier power; the industry is characterized by low supplier power, which has arisen from the presence of a large number of suppliers of the requisite raw materials both domestically and internationally. This has led to a remarkable decline in the ease with which firms can change suppliers without incurring high costs.
Buyer power; high; The industry is characterized by low switching costs arising from the large number of industry players. The large number of industry players has presented consumers with a wide range of substitutes (Hill & Jones 2009). Thus, the industry players are increasingly engaged in price wars in an effort to exploit the growing price sensitivity amongst consumers (Wiggins et al. 2015).
Competitive rivalry; high; The industry is characterized by a high degree of competitive rivalry arising from the large number of industry players. The firm’s core competitors include Bunge Limited, Archer Daniels Midland Company, and Cargill Incorporated (MarketLine 2015). The large number of suppliers has significantly led to a reduction in the cost of switching.
Threat of substitute; high; The industry players have developed a diversified product portfolio hence increasing the available substitutes (Porters 2008). Consumers encounter low costs in substituting salads and sauces.
Threat of new entrants; moderate; The industry is characterized by moderate barriers to entry. Thus, firms intending to enter the industry do not experience significant legal barriers (Corbion Purac 2013). The moderate barriers to entry mean that AAK Limited might encounter a significant increase in competitive rivalry. To deal with this challenge, AAK must continuously undertake new product development in order to remain competitive.
SWOT analysis
AAK Limited's success in achieving sustainable competitiveness in introducing Vegan Salad Sauce will be influenced by its effectiveness in exploiting its strengths and prevailing opportunities, managing its internal weaknesses and threats emanating from the external environment (Roy 2009). Below is a SWOT analysis in relation to AAK Limited.
Strengths
i. Sustainability in developing new products; AAK has developed sufficient competitiveness with regard to the development of oil and sauce products. AAK’s success in new product development arises from investment in research and development. Thus, the firm is able to introduce new products that contribute to a high level of customer satisfaction. The firm’s success in developing new products is evidenced by developing a diversified product portfolio.
ii. Market position; AAK Limited has developed a strong market position which is evidenced by its global market presence. The firm has established a market presence in the Middle East, Europe, South America, North America, and Asia Pacific (MarketLine 2015).
Weaknesses
i. Narrow market; AAK will introduce the Vegan Salad Sauce within the condiments market segment which is characterized by a relatively narrow range of cuisines.
ii. Changing lifestyle; the firm’s success in introducing the new product might be challenged by the growing level of health consciousness amongst consumers. This arises from the fact that some dressing products contain fat and sugar levels that are higher than the recommended daily consumption. Escobar (2016) asserts that consumers are increasingly considering sauces and condiments amongst other processed products to contain unhealthy additives.
iii. Short-shelf life; one of the major weaknesses of the firm is that it is characterized by a short shelf life.
Opportunities
i. Market acceptability; there is a high probability of AAK’s Vegan Salad Sauce gaining a high level of market acceptability due to the firm’s commitment to entrenching the prevailing trend with regard to healthy eating. In developing Vegan Salad Sauce, the firm has ensured that it does not contain sugars and high contents of oils and fats. The key ingredients include water, sunflower oil (20%), lemon juice, and mustard flour.
ii. Sugar tax; AAK will caution itself from incurring taxation by ensuring that Vegan Salad Sauce is sugar-free. This benefit will arise from the proposed enactment of the sugar tax in the UK that targets condiments and soft drinks. The UK’s rationale for introducing a sugar tax is to enhance the reduction of cases of obesity (BBC News 2016).
iii. New technology; the firm can benefit by employing new technologies in the development of the new product, for example, adoption of new technologies in the packaging process, hence improving the shelf life of Vegan Salad Sauce.
Threats
i. Sugar tax and healthy eating; the firm’s failure to develop the new product by entrenching the emerging healthy eating practices amongst consumers might adversely affect the effectiveness with which the new product gains market acceptability. Additionally, the firm might also incur a sugar tax hence increasing the cost of production. This will in turn lead to a significant unit price increase of Vegan Salad Sauce.
ii. Change in the legal environment; the future success of the new product might be affected by the dynamic nature of the legal environment. For example, the introduction of new taxes might lead to an increase in the price of the product hence negatively affecting the firm’s ability to maximize profit.
References
BBC News., 2016. UK pushes ahead with sugar tax. [Online].
Corbion Purac: Sauces, dressings and condiments 2013. [Online].
Escobar, M 2016, Spotlight on sauces and marinades. [Online].
Hill, C & Jones, G 2009, Strategic management theory; an integrated approach, Houghton Mifflin, Boston, MA.
MarketLine: Company Profile: AAK AB 2015. [Online].
Markets and Markets: Fats and oil market by type 2016. [Online].
Porters, M 2008, Competitive strategy; techniques for analyzing industries and competitors, Simon and Schuster, London.
Research Beam: Global sauces, dressings and condiments market; insights, market size, share, growth, trends analysis and forecast to 2021; press release 2017. [Online].
Roy, D 2009, Strategic foresight and porter’s five forces; towards synthesis, GRIN, Munchen.
Wiggin, S et al. 2015, The rising cost of a healthy diet. [Online].
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