Executive Summary
The business plan relates to FriCo Incorporation which operates in the US food industry. The firm intends to venture the US coffee market by introducing a new variety of instant coffee. The plan details a comprehensive situational analysis of the US coffee industry. This is achieved by conducting a market research and market analysis which aid in understanding the characteristics of the coffee market.
Additionally, the plan also includes an analysis of the competitive environment. The situational analysis also integrates a SWOT analysis and critical success factors. The competitive analysis evaluates the competitive nature of the industry. In order to cope with the competition, the report illustrates the competitive strategies to be used by the firm. The firm’s mission statement, marketing objectives and target market are also indicated.
Additionally, the plan also illustrates the operations and production plan to be used by the firm. In order to create market awareness, the report illustrates the marketing strategies which the firm intends to use. The plan also illustrates the firm’s financial forecasts. The conclusion illustrates the management’s position regarding the success of the venture.
Introduction
FriCo is a private limited company which intends to venture the US beverages industry. In its operation, the firm will have a human resource base of 100 employees. In an effort to meet all the market need, the firm’s management team appreciates the fact that consumers have got diverse product preferences.
In an effort to meet the market demand, the firm’s management team has integrated the concept of product diversity. Some of the products which the firm will produce include fresh brewed coffee, hot chocolate and coffee. FriCo will attain this through incorporation of the concept of product innovation. In an effort to attain its profit maximization objective, the firms’ management team has come into a consensus to undertake development of a new variety of coffee known as Frico Instant Coffee.
Market research and analysis
The global beverage industry has undergone a significant transformation over the past 2 decades. This is evidenced by the emergence of ready to drink beverages. One of the sectors which are experiencing a significant transformation is the coffee industry. For a considerable duration of time, there were numerous inconveniences within the coffee industry. However, emergence of instant coffee within beverages sector is likely lead into a significant transformation within the sector leading into a high growth rate.
A market research conducted by the firm revealed that there is a high market potential within the sector. There is an increment in demand for ready-to-drink beverages amongst the consumers. A market research conducted by the firm’s marketing department revealed that consumers are increasingly shifting to consumption of instant coffee compared to other beverage products.
Findings of the market research conducted by the firm also revealed that the market for instant coffee is undergoing a significant growth. For example, in an effort to cope with the increment in consumer demand, convenience stores such as supermarkets are increasingly carrying varieties of instant tea and coffee products in their shelves (Randy, 2002, p.6).
Additionally, instant coffee is also being incorporated in non-traditional outlets for example, gas marts. This is likely to increase the efficiency with which consumer’s access instant coffee. The US is also experiencing a change in its demographic characteristic. This is evident in the fact that the US society is increasingly becoming a cosmopolitan society.
This means that there is a high market potential for the new product to be launched. Due to the industry’s profitability potential, there is a high probability of more investors venturing into the industry. This will culminate into an increment in the degree of rivalry within the industry.
SWOT analysis
The table below illustrates an analysis of the firm’s strengths, weaknesses, opportunities and threats.
Competitive analysis
Over the past decade, a large number of investors have considered the coffee industry as a very lucrative investment sector. There are approximately 20,000 firms which deal with coffee products within the US. This indicates that the degree of industry concentration is relatively high. Despite the large number of firms in the industry, the market is controlled by only 50 top firms. These firms control approximately 70% of the total market.
The total annual market revenue is approximately $ 11 billion. As a result, most investors are increasingly venturing the sector in order to get a share of the market profit. The resultant effect has been an increment in the intensity of competition. The intensity of competition within the industry has made most firms to incorporate the concept of internationalization.
One of the markets that they have considered is the US. However, the US has a large number of instant coffee producers and distributors. Some of the players within the industry include Life via Coffee, JKS Enterprises, Organo Gold, Sam’s Donuts, and Healthy Organic Coffee.
In addition to competition from firms within the coffee sector, FriCo also faces competition from firms which deal with production of substitute products especially instant tea. An example of such a firm is Nestle which produces a wide range of instant tea products. Over the years it has been in operation, Nestle has managed to develop global market recognition. These firms have also managed to develop a high competitive advantage.
Competitive strategy
In order to cope with the increment in the intensity of competition, the firm’s management team will incorporate various competitive strategies. Michael Porter developed a number of competitive strategies that include differentiation strategy, cost leadership strategy, and focus differentiation strategy (Schermerhorn, 2010, p. 147).
In its operation, the firm will adopt the differentiation strategy. Schermerhorn (2010, p.147) asserts that the differentiation strategy is used when the product being marketed have a unique attribute. To be effective in its differentiation strategy, the firm’s management team will incorporate the concept of continuous value addition. The resultant effect is that the firm’s product will be of high quality. This will play a critical role in the firm’s effort to develop a high degree of customer loyalty.
Additionally, the firm will also adopt the concept of cost leadership. Decision to adopt this strategy arose from realization of the fact that consumers are price sensitive in their consumption patterns. In order to be effective in its cost leadership strategy, the firm will incorporate the most efficient technology. This will contribute towards reduction in the cost of production. As a result, it will be possible for the firm to implement an effective pricing strategy.
Critical Success Factors
The success of firms in different economic sector is dependent on a number of factors (Sexana, 2005, p.91). These factors are referred Critical Success Factors. When venturing into a particular market segment, firms’ management should have a comprehensive understanding of the Critical Success Factors. Consideration of the Critical success factors contributes to the effectiveness with which a firm penetrates the market. In an effort to venture the instant coffee market, FriCo has identified a number of Critical Success Factors.
One of the Critical success factors that the firm will consider is the quality of the instant coffee. In order to develop a high quality product, the firm will incorporate the concept of quality control. This arises from the fact that the quality of the firm’s product will determine the probability of the consumers attaining a high level of satisfaction. Additionally, integration of the concept of quality control will contribute towards the firm’s product meeting the set market standards.
To ensure high quality instant coffee, the firm’s management team will incorporate a comprehensive criterion in the selection of the raw material suppliers. This will play a vital role in ensuring high quality products. According to Sexana (2005), organizations should ensure that they have a sufficient amount of raw material at all time so as to avoid disruption of the production processes.
To attain this, FriCo will integrate effective inventory management. One of the inventory management techniques that the firm will use is Just-In-Time method. JIT will enable the firm to minimize costs associated with raw material running out. The firm will also eliminate costs associated with overstocking of inventory.
The success of organizations is also dependent on the effectiveness with which the firm’s workforces from different departments coordinate in executing their duties. In order to achieve this, FriCo will incorporate the concept of teamwork. In order to achieve this, the firm’s management team will incorporate the concept of teamwork. Another critical success factor that the firm will consider is market research.
FriCo will conduct continuous consumer and competitor market research. This will aid in determining the changes in the market, the resultant effect is that the firm will be able to undertake product improvement. Teamwork will contribute towards effective organizational coordination. The firm will also conduct training on its employees in order to equip them with emerging techniques.
Mission statement
In its operation, the firm is aimed at stimulating the coffee market within the US. To achieve this, FriCo will be committed at ensuring that its customers achieve a unique experience upon consumption of the product. The firm will achieve this through provision of high quality instant coffee. To ensure continued product innovation, the firm will undertake continuous product improvement.
Marketing objectives
In its operation, the firm intends to achieve the following objectives.
- To attain a sufficient level of brand recognition.
- To attain a market share of 20% within the US coffee market within a duration of 1 year after its inception.
- To attain a markup of 30% within a duration of one year.
- To attain a sales revenue of $ 1 million within a period of one year.
Target market and positioning strategy
Target market entails the specific category of customers that a firm intends to capture by supplying its products. The success with which a firm addresses the needs of its target market is determined by the effectiveness with which it undertakes a market research (Kurtz, Mackenzie& Snow, 2009, p. 79).
In establishing the venture, the firm targets both institutional and individual consumers. With regard to individual consumers, the firm targets customers of different demographic, economic, psychographic and geographical characteristics. The product will be consumed by both the young and the elderly. The product will also be distributed to customers of different economic class across different geographic sectors.
Positioning is a critical element in the success of firms in different economic sectors (Transtod, 1995, p.7). One of the benefits of positioning is that it contributes towards the firm attaining a competitive edge. In its operation, the firm will consider using effective technology and expertise in its production. This will contribute towards production of high quality instant coffee.
Operations and production plan
In its operation, the firm will be composed of a number of departments. These will include the production, marketing and sales, research and development and the finance departments. Every department will have its specific responsibilities. However, all the departments will be dependent on each other in order to achieve the desired objective.
In producing the instant coffee, the firm’s management team will ensure that a high degree of expertise is incorporated. To appeal a large number of customers, the firm’s management team will ensure that different natural aromas, tastes and colors are incorporated. This will contribute towards the product appealing a large number of customers. The firm will ensure that the coffee beans are effectively dried, roasted and grinded to produce the instant coffee.
During the roasting process, the production department will undertake an effective control. This will ensure that t important nutrients are not destroyed during the production process. In an effort to improve on the quality of the coffee, the firm will also undertake the process of blending. This will entail mixing coffee beans from different sources during the roasting and grinding process so as to improve the quality of the final product.
Marketing Mix
Integration of an effective mix is vital in the process of marketing products and services. Marketing mix results into development of a synergy between the various requirements for effective marketing.
Pricing strategy
The firm will use penetration pricing strategy considering the fact that it is a new venture. The strategy will entail setting the price of the product at a relatively lower point compared to its competitors. Considering the price conscious nature of the consumers, the firm will be able to attract a large number of consumers.
Additionally, the firm will also integrate psychological pricing strategy. This will entail setting the price of the product at a point that appeals the consumers’ emotions. For example, the price of 500mg of the firm’s specialty coffee will be set at $ 3.99. Adoption of these pricing strategy will enable the consumers perceive the pricing strategy as being fair.
Promotion strategy
Creating market awareness is a critical element in the success of a firm’s products. In its operation, the firm will incorporate both traditional and emerging marketing communication techniques. Some of the techniques that the firm will use include advertising, sales promotion, public relation and personal selling. The firm will also use emerging social communication tools such as wikis, blogs, YouTube and Face Book.
Distribution strategy
To ensure that its products access a large number of consumers, the firm will has developed a comprehensive distribution strategy. The firm will establish outlets in different parts of the local market. Additionally, the firm will incorporate retailers and wholesalers in its distribution strategy. To increase its market share, the firm will also venture into the international market by using agents.
Financial overview
Sales forecast
As a result of the high rate at which consumers are integrating coffee in their consumption, the firm’s management team projects a significant growth in its sales revenue. The table below illustrates the firm’s sales forecast for the next three years.
Expense forecast
In order for the product to be successful in the market, the firm’s management team recognizes the fact that a substantial amount of cost will be incurred. This arises from the fact that the firm will be required to undertake a comprehensive marketing process. To achieve this, the firms’ management team has allocated $1,000,000 in its marketing budget. The chart below illustrates a breakdown of how this amount will be allocated.
The chart below gives an illustration of the cost that the firm expects to incur in creating market awareness.
Conclusion
Through implementation of this plan, the firm’s management team expects that its products will penetrate the US coffee market. Through production of high quality coffee, the firm will attract a large number of consumers. The resultant effect is the firm will acquire a substantial market share hence attaining its profitability objective.
Additionally, the firm’s success will also be stimulated by incorporation of continuous product innovation and product improvement. For the plan to be successful, the firm’s management team will conduct a continuous evaluation. This will aid in determining the effectiveness of the strategies implemented. In the event that the strategies are ineffective, the firm’s management team will undertake the necessary adjustment.
Reference List
Kurtz, D.L., MacKenzie, H.F. & Snow, K. (2009). Contemporary marketing. New York: Cengage Learning.
Randy, A. (2002). Instant tea, instantly. Tea and coffee journal. Vol. 1, issue 2, pp. 1-8. New York: A D& B Company.
Schermerhorn, J. (2010). Exploring management. Hoboken, N.J: John Wiley.
Sexana, R. (2005). Marketing management. Chicago: Tata McGraw-Hill.
Transtod, R. (1995).Product positioning. Web. Web.