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The environment is what gives organizations’ their means of survival. It is also a source of threat. Marketing is all around us and it has been globalised. The key principle is to exchange the common ideas and values. The organization has been so important in present competitive world.
1.2 Company Background
The UB Group (United Breweries) is a multi-faceted group with business interest in
Research and Development
The founder of UB Group was Thomas Leishman in 1915. At first the company started its manufacture by Beer. In August 1947; Vittal Mallya became the company's first Indian director. A year later he became the Chairman of the Group. United Breweries came into limelight by manufacturing bulk beer for the British troops, which was transported in huge barrels. In 1950s and 60s, the group expanded rapidly and made several acquisitions. McDowell was added as one of the Group subsidiaries. This helped UB Group to venture into wines and spirits business. Kingfisher, the Group's most visible and profitable brand, made its entry in the sixties
After the death of Vittal Mallya in 1983, his son Vijay Mallya assumed the group. Vijay Mallya inducted professional management and implement different methods and theories to develop the company to globalise the company.
“It is my belief that the Indian economy is still, despite its dramatic growth to a trillion dollar mark, on the taxiway - the runway is just ahead, and we then have to gather speed for the inevitable take-off. There may be a few delays caused by the contradictory pulls and pushes of populist politics; but the beauty of democracy is that ultimately the will of the people must reign supreme. And therein lays the seeds of optimism.”Vijay Mallya (Official Website)
In 1988, UB group acquired many companies and now it the world .it acquired many companies like Berger paints group with operating companies across four continents. Presently UB group is the third largest manufacturers of spirit products in the world.
1.3 Aim and Objectives
The main aim of the project is to obtain a great range of analysis in the field of management and identify the key issues involved in planning and control of goods and services.
Objectives required in achieving this aim:
Understanding the key concepts, tools and techniques of marketing.
A detailed survey on selected organisation
Review the concepts of 4PS and implementing them.
This chapter has introduced the concepts of Managing Customers and Markets. It also defines the aim and objectives and sets the scope of this project. The second chapter is focused on detailed analysis of the organisation. This work includes background information and general reports about the company. Pest and Porter’s 5 forces model are also discussed in this chapter.
Chapter Three describes about the company marketing strategy and its evaluation. Implementations of 4PS are also presented in this chapter. Finally, conclusions and recommendations for further development are presented in chapter four.
2.1 The Market Environment
What is market environment?
According to Kotler P, marketing environment is defined as “The actors and forces outside marketing that affect marketing management’s ability to develop and maintain successful relationships with its target customers”.
Figure 1: Layers of Business Environment
In general is defined as the forces that influence an organisation’s capability to undertake its business.
It consists of micro and macro environments.
MicroEnvironment: Microenvironment mainly deals with the internal environment of the organisation. Factors affecting firm’s ability to serve customers in microenvironment are shown in figure1.
Figure 2: Elements of MicroEnvironment
MacroEnvironment: It refers to general environmental factors that influence the organisation.
Elements of MacroEnvironment are: Political, Economic, Sociocultural, and Technological factors.
2.2 PEST analysis of the United Breweries:
PEST analysis helps to assess the market including competitors from the stand of a particular business.
Government campaigning against drinking - In the 1983 Indian elections, the government has regulated a ban on consumption of alcohol in the state of Andhra Pradesh. After implementing the regulations the state was referred to as “Alcohol free” state. This had an adverse effect on the % of alcohol consumed in the country and income of United Breweries.
Taxation Policy – Taxation on alcohol is almost high in every country. It is a significant contributor to government revenues. A higher rate of taxation, especially on alcohol is introduced to reduce the number of heavy drinkers in the population. This factor directly influenced the organisation.
Percapita Income – India’s per capita income is expecting to grow more than double over the last seven years. This lead to higher buying power in the Hands of the Indian consumers. United Breweries registered a high increase in its sales over the past few years.
Price Fluctuations – The cost of the products are increased due to increase in the taxations, equipment, laboured which had an impact on customers. Finally the cost factor resulted in reduction of number of consumers. Later the United Breweries reviewed their decisions on cost, by the fall in ratio of production to consumption.
Changes in life style
The social change towards alcohol consumption is changing in India.
Adaptation of Western Culture
UB Group has a unique brand name whilst people intend to consume their products as India is highly populated country.
Attracting youngsters by implementing new designs of bottle and labels.
New inventions and development
Adapting European technology cause increase in production while lowering the cost of production.
2.3 Porters Five Forces
(Wheelen &Hunger, 2006) suggests intensity of competition in an industry is determined by its underlying economic and the industry structure is shaped by five basic competitive forces:
The threat of new entrances into the industry
The bargaining power of suppliers to the industry
The threat of substitute products or services
The bargaining power of customers or buyers.
Figure 3: Model of Poters 5 Forces
Threat of new entrants
The threat for entering a new market is the critical part for a company, the present entry barriers and the reaction from the existing competitors of UB Group however UB Group has already gained the power before entering to the Indian market or the world market. These are the entry barrier is an obstruction that makes it difficult for a company like UB group to enter the market in a country.
Economies of scale
Proprietary product differences
Access to distribution
Rivalry among existing firms
UB Group has taken a competitive move against the competitors and thus has a noticeable effect on its competitors. Porter defines the following rivalry determinants among existing firms in an Industry:
Fixed (or storage) costs/value added
Concentration and balance
Diversity of competitors
Threat of Substitute Products or Services
“Substitute products are those products that appear to be different but can satisfy the same need as another product. Substitutes limit the potential returns of an industry by placing a ceiling on the prices firms in the industry can profitably charge. To the extent that switching costs are low, substitutes may have a strong effect on an industry”. (Wheelen and Hunger, 2006)
Bargaining Power of Buyers
Buyers affect an industry through their ability to force down prices, bargain for higher quality or more services, and play competitors against each other (Wheelen and Hunger, 2006).
Bargaining Power of Suppliers
Suppliers can affect and industry through their ability to raise prices or reduce the quality of purchased goods and services. The determinants of supplier powers are the following:
Differentiation of inputs
Switching costs of suppliers and firms in the industry
Presence of substitute inputs
Importance of volume to supplier
Cost relative to total purchases in the industry
Impact of inputs on cost or differentiation
Threat of forward integration relative to threat of backward integration by firms in the industry.
3.1 Marketing Strategy
It has three interdepended parts:
Segmentation: Segmentation is nothing but dividing a market into different groups that creates a market success. UB first divided its customers into alcohol consumers/non-consumers. They have then decided to know the kind of product that is dominant, and then identified multiple category customers. Beer is found to be the dominant in terms of consumption. Variety of products and the time they consume the most.
Targeting: To purchase more than one category, should be Regular purchaser, to set its customers to consume more variety of products.
Positioning: UB has a great brand value in terms of alcohol, especially in India because of its high quality of standards and products. Consider market share and market growth is an important factor in positioning.
3.2 Marketing Mix
It consists of a set of decisions that company needs to manage for achieving its objectives. The four elements of marketing mix are product, price, place, and promotion.
Figure 4: Elements of Marketing Mix
Product: UB group has an attractive and stylish appearance products UB products are introduced first of its kind offering to the customers for example Romanov Vodka.
Price: Price decisions should be in the profit margin and need to be reach the customers margin which would defend the competitors. UB group has a discount policy and financing.
Place: UB group presently is globalised with high distribution decisions, which market coverage, channel member selections, logistics and level of services.
Promotion: The alcohol industry like UB group use of labelling and packaging as a direct marketing tool in the promotion. UB has a brand image in Formula one and cricket.
3.3 Evaluation of the company’s strategies and tactics
United beverages compete on the basis of their available tangible and intangible resources and skills. The various sources are the essence in the groups of the core competences. It is difficult to manage the core competences and the strategies are to evaluate its resources and to meet the challenge of whole environment in difficult dimensions. It is in the pattern in the sequence of strategic action taken by the company. The main strategy is to build that strength and competences never diversifies far away from the company. The management has clear understanding of business as well as micro and macro environment. The knowledge and experience provides the basics of management intuition and creditability.
The main strategy is to expand globally all over the world; currently it is acting rapidly and acquiring other companies in different countries. It is essential source for top-level data and information. The company’s profile examine the company’s key business structure and operations, history and products, provides summary analysis of the key revenue lines and strategy. Through its subsidiaries, manufactures and distributes alcoholic beverages. The company’s products include alcoholic beverages, chemicals and fertilizers, leather footwear and processed foods. It also offers commercial airline services under kingfisher brand. It develops and leases commercial and residential real estate properties. The company primarily operates and headquarters in Bangalore. The company recorded revenues of $101.3 million approximately in the end of March 2008, as compared to revenues of $41.6 million in 2007. The company’s overall profit was $53.9 million in 2008 and $24.2 million in the year 2007. And the net profit is $16.1 million in 2008 as compared to the net profit of $6.8 million in 2007.
The overall company support sales activities by the understanding the customers and business better
The company proposal is to qualify prospective partners and suppliers.
Keeping fully up to date on competitor’s business structure, strategy and prospects.
It is to be obtaining most up to date information availability.
Data is to be supplemented with details like history, key executives, business description, locations and subsidiaries as a list of products and services.
Requiring the business and competition intelligence needs and statement availability.
4.1 Recommendations for future development
The just drink estimates that beer sales in India are forecast to grow at a compound annual growth rate of 17.2% to 2011. So, with the Indian beer industry seeing steady growth during the last decade, due to strong economic growth resulting in high disposable incomes, an increase in beer sales in the next two or three years expected. In addition to that increase the number of brands is expected to increase in the near future, with lot of existing players and their ranges and setup production facilities. This indicates that how the market has developed and which regions are strongest and leading brands, sales by segments and regions.
The possibility of further recommendation is the taxation structure of beer is expected to be de-linked from liquor making beer available at lower rates than existing rates. Further, the sale of beer has an exponential growth in the markets like Chandigarh, Haryana and Punjab have to be widely available for the people at cheaper rates. This is expected to the benefit for the key players in the industry.
The key factor in UB’s success is the kind of strategy they implement. UB does not have any big competitors’ because they offer high quality of standards. No frill strategy; “a low frill Strategy combines a low price and low value added, low perceived product/services benefits and a focus on a price sensitive market segment.” The strategy of the organization is to reduce the cost of its products, but maintaining the high level of quality.
The recent strategy of the company is to advertise its products in a different way, which they have been successful by entering into two biggest fields Formula F1 and Cricket. Finally, different modes of strategy helped the United Breweries to maintain a high level of standards and improve the quality and variety of products. These factors helped the UB group to be world’s third largest organization in terms of spirits.
Kotler, P., Wong,V.,Saunders, j.and g .Armstrong (2005) Principles of marketing 4th European Edition, London: Prentice Hall, Chapter 1.
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