Organization Strategy and Leadership Free Sample for Students

Question: Conduct a Five forces analyses for an Industry of your choice. Based on your analysis, you need to indicate how profitable do you think the Industry Currently is and what are the Factors driving that Profitability. Also discuss how will these Factor Change in the Future and what will be the Effect of these Changes on Industry Profitability. Answer: Introduction Sustainability is extended beyond the facilities and manufacturing process of the industry. Nevertheless, there is a rising issue in this industry of UK and that is the reduction of packaging as packets are not eco friendly and they harm environment. Maintaining reliability is the headline of the industry and so the problem is running on machines for a long time continuously. This industry of UK is fast moving and the manufacturing facilities of the FMCG come as the pressurized environment. Outline of Industry as well as trends Developments as well as trends in Fast-Moving Customer-Goods: According to Andersson and Boman (2014), the main focus of the industry is logical programmable controllers, robotics as well as automation. The operations that are lights out are the objective of the FMCG industry of UK. Sakellariou et al. (2013) explained that the demand of the industry is to make use of machines that will run automatically and where human intervention will not be needed at all. By this way, the industry is aimed to reduce workforce and the labor cost to a greater quantity. Working Opportunities in FNCG Industry: This industrys rapid growth enables a situation where a huge number of employees is needed for manufacturing. Sakellariou et al. (2013) commented that the industry is an excellent training ground where the employees get opportunities to get training, which satisfy their personal goal that matches with the professional goals. Sector Overview: Per year revenue grows to 184 Billion Euro by the year 2016 as per the report of Institute of Grocery Distribution. Sainsburys, Morrison, Asda, and Tesco are expanding at a rapid rate.45000 management is needed in this industry in 2017 as per the report of Food and Drink federation (Guides.careers.sussex.ac.uk, 2017) Porters five forces analysis As stated by Matarid et al. (2014), it is essential for an organization to incorporate competitive strategies in order to maintain market position in the market. As agreed by Akhtar and Khan (2015), analysing the level of competition by companies surely provide a competitive edge over other market leaders. Porters Five Forces is the appropriate model in order to analyse the level of competition within and industry and business process. The researcher therefore chooses this model in order to analyse the level of competition within the FMCG sector. Porters five forces model consist of 5 different aspects which are as follows Bargaining power of suppliers Bargaining power of customers Threat of new entrants Threat of substitutes Industry rivalry Figure 1: Porters five forces model (Source: Matarid et al. 2014) Researcher thus tries to analyse all 5 forces in context to FMCG industry for detailed competitive analysis. Bargaining power of suppliers As stated Ray et al. (2016), the market is usually controlled by marketers and the suppliers used to set the prices that usually rolled into the market. As agreed by Singh (2015), it quite obvious that buyers have little choice to bargain for. FMCG companies like Nestle or Unilever need to maintain the steady relationship with the suppliers which gives them the extra advance during high-cost inflation. Bargaining power of customers Due to various FMCG companies and top players like Nestle, Unilever, Proctor Gamble, they are slashing the price since consumers tend to move to those who are providing better deals. As opposed by Ray et al. (2016), such case rarely happens in this sector since a number of suppliers are limited and hence suppliers as an edge on setting prices. Threat of new entrants Nierobisch et al. (2017), opined that in FMCG industry there is always a treat for the existing players since entry process in this type of market is easier than any other industries. Moreover, due to minimum branding, they may provide a better product with much competitive prices range that often creates a serious threat to the big players. Threat of substitutes The threat of substitute products is really challenging tasks to competefor existing players. Treat of substitute products are depending upon below-mentioned factors and are as follows Buyers willingness for substitutes Price as well as performance of substitutes Cost of switching to substitutes Figure 2: Factors influencing threat for substitutes (Source: Nierobisch et al. 2017) Industry rivalry As stated by Simms and Trott (2014), among the existing players of FMCG industry there is always been an intense rivalry on maintaining the market position. These are often based on product pricing, quality, variation, and innovations. Some of the top competitors are Unilever, Nestle, and Proctor Gamble and below is their competitive analysis. Rivalry of the close competitors is as follows Top competitors Sales Market Share Unilever $66135 $124.52 B Nestle $100205 $530.57 B Proctor Gamble $83062 $825.89 B Table 1: Rivalry of the close competitors (Source: Consultancy.uk, 2017) Due to market competition, spending on marketing activities, branding and product development are gradually increasing while keeping the price competitive as much as possible. It therefore tries to reflect all the five forces of Porters model and tries to relate the same in context to FMCG market scenarios. From the above discussion, it is understood that FMCG industry faces market competition like product variation, productivity and most importantly the pricing factors from an external point of view and therefore with the help of porters five forces model, researcher successfully frames out the macro environmental factors and its impact on the FMCG industry. Industry Profitability FMCG sector has a huge growth as well as profitability margin due to increasing customer demand. As a matter of fact, minimum suppliers in this sector always keep them in the hunt to manipulate the product pricing. As opposed by Wang et al. (2015), due to the emerging of new players and substitutes they are facing serious treats in terms of industry profitability. But still whit the increase of online marketing portal, FMCG companies gained their growth in terms of profit. Products sold by big organizations like Nestle, Unilever, Proctor Gamble etc. has market demand which helps them to generate steady profit in each financial year (Consultancy.uk, 2017). With a growth at an annual rate of 5.7% between the FY2005 to FY2016, there is he increases in customer base that helps in increasing the sales volume Wang et al. (2015). This eventually accelerates the profitability growth within this sector. The annual growth in the consumption of FMKCG products among the customer are estimated as 6.7% n FY15 to 20 which surely experience rapid increase to 7.1% in FY 21 to 25 Sand (2015) A study n UK suggests that FMCG sector will not reach its saturation point yet and there is long way to go to dominate the market presence. As agreed by Walton et al. (2017), other than the top players there is always an opportunity for the new customers to be a part of that profitable business. The main reason behind such outcome is the growth necessity of such products and there is no need to promote such products extensively since customers are aware of the same. Thus it opens an opportunity to the new comers and thus increasing the revenue collection for the government Beck and Kenning (2015). Based on the researches and thorough study, it also identified that FMCG industries are looking forward further investment in various other sectors and thusthere will be an estimated growth ofindustry by 12% within upcoming years (Beck and Kenning, 2015). New entrants and other substitutes products also increase the market demand among various consumers thus providing a high demand in the market. Anselmsson and Bondesson (2015) said that increase in customer needs and supply of requirements in the market, lead to the steady growth in industries increasing the range of profitability. Based on Porters model, there are various macro factors that may hamper the scenario but still due to increasing demand and popularity helps to maintain market profitability in the upcoming financial years. Innovation and advancement in technology accelerates the customer popularity and thereby increases in achieving sales volume. As per the prediction made by various studies in upcoming financial years that is by 2020, there will be huge rise in market share and that is also by 10 to 15% of current total market share (Consultancy.uk, 2017). Factors Affecting Current Profit Long-term profitability of FMCG industry depends on the performance of the enterprises on some variables, which determines the level of business growth as well as increase of profitability. Anselmsson and Bondesson (2015) highlight the fact that controlling production cost and sales of goods are thing on which the fall or rise of the industry depends on. On the contrary, Sanchez Rodrigues and Potter (2013) think that,optimising inventory, pricing healthy mark-ups and making sales are the most important factors that leaveimpact on the industrys growth. Cost Factor: Bottom-line profits are affected by indirect and direct cost. Anselmsson and Bondesson (2015) said that when new purchases are made; shipping cost, labor cost is also calculated. The industry can reduce staff cost overall by designing many terms and conditions. Mark-ups: On products actual delivery cost, mark-ups are charged. It is the main part of the industrys strategy to stay in a competition market so as to make the profit level high. Sanchez Rodrigues and Potter (2013) put emphasis on the fact that the industry is to figure out this mar5k up amount in a way so that the current cost is well covered. The decision of setting this cost depends on the category of products, uniqueness, urgency to sell quickly and many other factors. Distribution and Inventory: The advancement of technology in online platform has between taking its rapid growth and real-time accuracy is also increasing and so Inventory cost is going to the buyers hands. The motor and brick business had experienced 5.3% increase in sales in the year of 2011 whereas FMCG industry of UK had experienced 40% increase in sales of retail products (Yourbusiness.azcentral.com, 2017) Service Strategies and Sales: Free returns and free shipping like something can be helpful in attaining customers loyalty and in increasing repeat purchases. Jung et al. (2016) thinks that value of buying increases when customers get extra benefits like these and so the future purchasing chances of customers also increases. Future implication Shoppers now have taken a policy that that is changing their allegiance to channels from the larger shops. The need of the customers is analysed by the shoppers and they think that channels will better satisfy the needs of the customers but in the future years this will be changed. Bogomolova et al. (2015) said that quality rise in convenience stores, the improvement of standards for online business and various programs of store opening of discounters together give alternatives of shopping to supermarkets. Click and Collect button of Smartphones navigation technology of stores enable the shopkeepers of large stores to get more profits. Online business is getting its most influential and profitable form as per the choice of the customers. Simms and Trott (2014) state that customers now prefer to buy foods and groceries from wherever they want. Now the busy life of people push them to invest time in more productive work and so they do not have time to buy by going to markets. Advanced online technology enables the online business to grow further. Mobile applications will also help the customers to buy within free seconds and from everywhere. In 2016, Aldi launched wine online and Special Buys (Yourbusiness.azcentral.com, 2017) Impact on Profits The prediction of the IGD is that food and grocery market of UK will rise over future five years by 9.9% to 196.9 billion Euro as the FMCG sector is aimed to resolve challenges in next few years as per the report of IGD (Yourbusiness.azcentral.com, 2017). Anselmsson and Bondesson (2015) said that the leading growing channel for shopping will be an online platform at 68% and above over future five years. Simms and Trott (2014) focus on the fact that number 3 fastest developing sector will be a convenience but while being expanded in the market, it will also face a slowdown. On another side, Andersson and Boman (2014) say that discounters by 2012 will be of 24.9 billion Euro value but than the previous periods, the growth and development of the industry will be more evaluated and measured. Hypermarkets of the UK that have experienced 16.5billion Euro growth in the year 2016, the markets will have seen 16.6% value in the year 2021 and the value will increase .2% from the year 2016 to the year 2021. The UKs supermarkets will face more like 0.8% growth from the year 2016 to the year 2021 as per the prediction of IGD. The value of supermarkets of United Kingdom will rise from 86.6 to 87.3 Billion Euros in the year 2021 as per the prediction report (Yourbusiness.azcentral.com, 2017) (refer to appendix 1). Recommendations Advertisement of offline and online business by sponsoring events: Sponsoring events is the thing by which customers can be attracted and the way by which the customers attention can be got by the shopkeepers. Digital insight is indeed helpful for getting customers attention. FMCG future events are to be organised and by sponsoring it or speaking in the events, the shoppers can attain the attention of the customers. Interaction with customers to attain loyalty for achieving constant profit: Procurement of the role is to be identified within an organisation. If there is a process of procurement in place, to be registered is important and being engaged with decision makers of the procurement process is necessary. The industry can get a huge success if they have a positive relation with procurement groups. It will help the industry to identify the process of the selection of agencies and to make clients in touch with marketing teams and brands. Conclusion Online marketing has been improving rapidly in FMCG sector and so there is a huge chance of enhancement of future success of the industry. Setting well strategy plan and good implementation in FMCG industry has given it a satisfying place in UK market. The main factor is that FMCG products are always n a huge demand. Therefore, customers always are looking for best quality under competitive price range. 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