CREST (N) Analysis
Competitive landscape
The bottled water industry is a competitive industry (MarketLine, 2013). There are numerous companies in the industry, with the US market comprising of highly established firms such as Coca Cola and PepsiCo.
The Australian market, on the other hand, has about 1000 different brands competing in the market. Generally, the primary competitors include Dasani and Aquafina, which are the brands marketed by global giants Coca Cola and PepsiCo respectively. The companies use either tap water or rain water to package water in bottles and market it to both the domestic and international market.
Regulatory
The government mainly uses the executive, legislature, and judiciary to undertake industry regulation. The executive issues directives, while the legislature passes bills in parliament, which are transformed into laws in the country. The judiciary adjudicates on complaints that are raised by industry players, who may object to any of the executive directives or legislations passed by the parliament.
Economic factors
The global economy is still recovering from a financial credit crisis that was experienced between 2007 and 2012. Most economies are yet to fully recover, thus affecting their domestic markets’ purchasing power (Han, Pagano, & Shin, 2012).
Social trends
There has been a gradual market shift from carbonated soft drinks to bottled water. This has seen mainly young people develop their preference for bottled water as a trendy idea (Global CSDs and Bottled Water, 2004).
Technological factors
There are continuous advancements in the area of technology, especially in information technology. These technological advancements enhance business performance. This has led to high efficiency in areas such as marketing, procurement, distribution, and supplies.
Natural factors
Increased human activity has resulted in the degradation of the environment. Factories, industries, vehicles, and aircrafts are emitting too much carbon dioxide gas, which is filling the atmosphere. In turn, the gas is depleting the ozone layer that shields the ultraviolet sunrays from reaching the earth’s surface.
SWOT Analysis
Strengths
Fiji Water enjoys international market leadership in many of the foreign markets where it is operating. This gives the company a strong market position, which translates into significant capital and profits. Its distribution network in the numerous international markets is also elaborate, with the firm having partnered with Cadbury Schweppes to see to it that its products reach all corners of the market.
Weakness
The company’s focus on environmental management and efficiency has failed to be convincing, particularly to its detractors. This has opened an avenue through which more campaigns have been introduced against the company. This threatens to affect its market and reduce its profit margins as a result.
Fiji Water’s poor relations with the Fijian government have seen the firm’s activities in the country and its overall business operations affected negatively. The lack of trust between the two parties has seen the company’s future in Fiji being threatened as the relations get strained.
Opportunities
The growing concerns over health implications resulting from taking carbonated soft drinks have seen the market shift towards bottled water. This shift promises to create an upsurge in the numbers of people consuming bottled water, thus increasing revenues for the firm. The youthful population has also taken the use of bottled water to be more fashionable and trendy as opposed to the carbonated drinks.
Other global regions, such as Latin America and Africa, are increasingly experiencing an upsurge in their market demand for bottled water. This offers an opportunity for market growth for Fiji Water.
Threats
The environmental lobby groups and other stakeholders have increasingly taken it upon themselves to raise awareness amongst the members of public on the carbon footprint that is associated with bottled water. This could see many existing and potential users resort to using tap water as an environmentally friendlier alternative to the bottled water.
The bottled-water industry is highly competitive, with very many firms having positioned themselves for competition. Some of the firms include highly established soft drinks manufacturers like Coca Cola and PepsiCo. The increased competition offers limited chances for greater profit margins (Research and Markets, 2013).
Problem Statement
The main problem in the case involves the threats that Fiji Water is facing, mainly because of the concerns raised about the environmental implications. While the natural artesian water commodity extracted from Fiji is pure and contains silica, which is an anti-aging and immunity booster, the commodity’s main market is far off from the Island.
The processing and transport efforts involved cause significant environmental damages. The damages have raised concerns within the main international markets. As these concerns increase, the market is dwindling and the company is losing a considerable amount of revenue.
Alternatives
Fiji Water can shift its focus from exporting Fijian water to far-off markets, such as the USA and UK, by processing and bottling locally available water in these countries. This will limit the environmental concerns that keep haunting the firm and its products. However, the Fiji plant can remain operational but only focus its attention on the nearby markets, such as Australia. This will see the environmentalists tone down their accusations against Fiji Water, and thus allow the firm to serve its market without interference.
The second alternative could involve the idea of putting underground and sea bed pipes to facilitate the transportation of the water commodity from Fiji to the lucrative international markets, such as the US.
By pumping the water through pipes, there will be no need of relying on trucks and ships to ferry the commodity from its source to the market. The trucks and ships contribute the greatest carbon emissions. The bottling process can be carried out in the US. The significant reduction in environmental footprint because of adopting this practice will see consumers’ confidence in the commodity regained.
Another viable alternative could be to introduce and adopt practices that are 100% environmental friendly. This would involve using natural energy resources during the processing and transportation of the commodity.
Such energy resources could include use of solar power to run the trucks and the processor units in order to cut down substantially on the amount of carbon dioxide gas that is released into the atmosphere. This will increase credibility in the eyes of the consumers and stakeholders, resulting in increased consumption and acceptability.
The firm can also change its idea of packaging as an alternative to addressing environmental implications that are involved with its current practice. Instead of using bottles the commodity could be packaged in bottle-less filtered water coolers that are safe to the environment. Bottles degrade the environment through their dumping and recycling. This will ease the environmental concerns and pressures and allow consumers to use the commodity without much objection.
Evaluation
In the first alternative, survival will be the main aspect of measuring the firm’s performance. By relocating from Fiji to the US and using the locally available water as the main resource, Fiji Water will have lost a unique resource. However, like other locally based water-bottling firms such as Dasani and Aquafina, it will remain in the market despite bottling normal tap or rainwater.
The second alternative, which involves pumping the water from Fiji via pipes, could be evaluated by profits. This will see a huge amount of carbon dioxide reduced in the whole process and consumers will approve of it. Thus, there is a higher likelihood that consumers will purchase more of the commodity, and thus enable the firm to register improved profits.
The third alternative of adopting 100% natural practices, mainly by using solar power to run the machines and vehicles, can be evaluated by profit levels, as well as market share. Buyers will likely get convinced by the company’s realistic environmental control measures and mechanisms and will buy more of Fiji Water to show their support. In turn, the company will manage to register higher profits and increase its market share.
Profit levels can also be used as the appropriate measure to determine success in the fourth alternative. By changing its traditional packaging practice and adopting bottle-less filtered water coolers, buyers will be convinced that the firm is putting into consideration acceptable environmental practices. The buyers will show support to these efforts by buying more of its products, and thus increase the company’s profits.
Analysis of the Alternatives
Shifting base from Fiji to other locally available water
Pros
By shifting its base, the company will reduce its environmental impacts significantly by eliminating the need to transport the commodity from Fiji to its far-off international markets.
Cons
The water extracted from Fiji is pure and rich in silica, which has been found to boost the immune system and prevent aging. This is opposed to tap or rain water in the USA. This means the latter will not attract huge markets as has been the case with the commodity extracted from Fiji.
Pump water in pipes from Fiji
Pros
The company will reduce its operating costs significantly by cutting down on the number of workers, as well as lowering its overall carbon emissions.
Cons
Such a venture will be expensive to undertake, especially where the firm will require laying down pipes in the sea bed from Fiji to the US. Additionally, such pipes will require frequent checkups and repairs, which might be very expensive for the firm. A reduction in the number of local Fijian employees working with the firm, owing to the use of pipes, will result in complaints, especially from the Fijian authorities and neighboring communities.
Adopting 100% environmentally friendly practice
Pros
Using natural energy sources, such as solar power, will significantly reduce the firm’s expenditure on energy. It will also convince the environmentalists on the firm’s commitment to manage the environment efficiently.
Cons
Using 100% natural energy like solar is not a feasible idea. Weather changes and patterns could mean that the firm grinds to a halt in some seasons during the cold season, which would lead to losses.
Change of packaging to adopt bottle-less filtered water coolers
Pros
The traditional bottling practice is resulting in huge environmental degradation. However, switching from this practice will see the company reduce its operation costs, while also reducing the carbon footprint.
Cons
This practice would see the firm only sell its commodity in large-sized containers used with the water coolers. This will result in its market reducing mainly because individuals will not find it viable to purchase the large containers.
Recommendation
The best recommendation for Fiji Water is to relocate its base from Fiji and focus on the locally available water in its markets. This strategy will see it cut down on its operation costs and minimize the pressure from environmentalists, whose activities have seen the firm lose its market. However, production in Fiji can still be maintained, although at a reduced scale, to only focus on the Australian market that is closely located.
Action Plan
The firm should begin by publicizing its intention to shift its production base from Fiji. The company should inform the market that the move has purely been orchestrated by its total commitment to efficient environmental practice, which is difficult to achieve by maintaining operations in Fiji. This should be done in stages such that the full shift is achieved after a three-year period. During the period, the firm will be involved in relocating its processing plants in Fiji while it continues with operations to avert a total shut down.
Contingency Plan
The relocation from Fiji should not be done in totality. A section of the processing should be retained with the aim of serving the Australian market. However, the scale of its production should be increased in case the main plan of relocating to the US fails. The firm will use the remaining operation in Fiji as its fallback.
References
Global CSDs and Bottled Water. (2004). Beverage World, 123(5), 16-16.
Han, S., Pagano, M. S., & Shin, Y. S. (2012). Rating agency reputation, the global financial crisis, and the cost of debt. Financial Management, 41(4), 849-884.
MarketLine (2013). Global bottled water marketline industry profile. Bottled Water Industry Profile: Global, 1-39.
Research and Markets (2013). Research and markets adds report: Global bottled water industry. Professional Services Close – Up. Web.