Affect And Strategy Of Environmental Factors Marketing Essay

3803 words (15 pages) Essay

1st Jan 1970 Marketing Reference this

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STEEPLE/PESTLE originally designed as a business environmental scan, the STEEPLE or PESTLE analysis is an analysis of the external macro environment (big picture) in which a business operates. These are often factors which are beyond the control or influence of a business, however are important to be aware of when doing product development, business or strategy planning.

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Social: Délys is a chocolate based cake and a bakery Producer and as United Kingdom is one of the highest consumers of the Chocolate product, it is easily accepted by the People. It can take a speed in a market in very less time. On the other Hand as every person is busy, they prefer Baker Products which is more quick and easy to eat, every age, sex and of different geographical regions would easily adopt Délys product.

Technological: The most modern bakeries are highly automated. To track and help assure compliance with government regulation that affects bakeries, companies deploy software, such as Environmental Quality management Program. Bakery Firms may use computer system to receive order, track sales and exchange the data with large customers. Délys do not have its own distribution business and retail outlets, Sales are through the main supermarket chains such as Tesco, Sainsbury’s, Asda and Morrison’s. Some independent grocery chains also stock “Délys” products and the products also sold by Harrods and Fortnum and Mason. Which may affect the technologically in the operation of the Business.

Economical: Large economies of scale occur in production baked product, is manly of labour cost can be reduced dramatically in large bakery facilities. A big automated bakery can produce a million bread loaves a week with just 100 employees working two shifts. The size of production facilities is limited by the need to distribute a highly perishable product to a large number of customers. Usually a large baking facility can service an area within a 300-miles radius. As Délys has 60 employees it could reduce the cost of production. These may be the factor affection Economical environment of the Industry.

Environmental: Production is carried out at Délys Ltd’s own factory and by one other food manufacturer in England that is not owned by Délys Ltd. The factory must be environment friendly and should be concern about the reduction in pollutions that may effect in health of the person residing nearby. This may be the factor that may affect the operation of Délys Ltd.

Political: As the Political situation of U.K is stable and that warmly welcomes the entry of the new products inside the United kingdom market, the tax policy of United kingdom is very producer friendly and conflicts is very much less likely to occur in the production like Cakes and bakeries that may affect the operation of the Délys Ltd.

Legal: The basic understanding of the political legal environment is when the government implement’s laws and or regulations which affect the way a business operate. Legal environment in a business are as following Statutory and regulatory conditions, corporate governance, compliance, international trade regulations, competition regulation. In the case of Délys Ltd it has to be careful in food and hygiene regulation, employment policies, health and safety rules and regulation etc

Ethical: The ethical factors includes Business ethics, Consent, Client confidentiality, Official Secrets Act, Security access, terms of business/trade, Trust, Reputation. As the national press has praised the quality of the products and a number of organisations have identified some “Délys” products as being the best of their kind in taste tests. Jo Brown has found fame as a dynamic entrepreneur and is a dragon on the BBC business show “Dragons’ Den”. Jo is a hands-on managing director and would always want to be seen as such in any business she worked in. These could ethically effect the environment of the Délys Ltd.

Stake holder analysis

Internal stakeholders and their interest in the company:

(a) Employees. Employees and their representative groups are interested in information about the stability and profitability of their employers. They are also interested in information which enables them to assess the ability of the enterprise to provide remuneration, retirement benefits and employment opportunities, in the case of Délys Ltd 60 employees are the internal stakeholder of the Business.

(b) Investors. The providers of risk capital and their advisers are concerned with the risk inherent in, and return provided by, their investments. They need information to help them determine whether they should buy, hold or sell. Shareholders are also interested in information which enables them to assess the ability of the enterprise to pay dividends. (Investors are owners of the co. It can be argued that they are external stakeholders, but it’s also hard to call your owners outsiders) In the case of Délys Ltd it’s a Private Company so the investor is Délys itself.

(c) Management and those who appointed them. Financial statements also show the results of the stewardship of management, or the accountability of management for the resources entrusted to it. Those users who wish to assess the stewardship or accountability of management do so in order that they may make economic decisions; these decisions may include, for example, whether to hold or sell their investment in the enterprise or whether to reappoint or replace the management.

External Stockholder

The external stakeholders can be considered as anyone outside the implementing Organisations that could be affected by the project’s results. STAKEHOLDER INVOLVEMENT

It is not sufficient to identify the relevant groups. Named individuals need to be identified within each group and more than one person may be required for any organisation or department. The selection of these individuals will depend on the role that they are to play in the project and the requirements in terms of knowledge, authority and level of involvement that this creates. External Stockholder of Délys Ltd is Tesco, Sainsbury’s, Asda and Morrison’s. Some independent grocery chains also stock “Délys” products and the products also sold by Harrods and Fortnum and Mason.

Attitude toward the Strategy of Délys would be positive by the internal and external stakeholders, as Sales of the company’s products have currently grown by more than 15% per annum every year since the company was founded and they currently amount to £6 million annually. The net profit on sales ratio is a very healthy 10% and at this level other businesses have been attracted to Délys Ltd’s business model. The company has a balance sheet that shows there are assets of £20 million funded by a mortgage of £7 million, a long term bank loan of £2 million and retained profits over the last 10 years of £6 million. The residual amount comes from the shareholders’ equity. It employs only 60 people. Apart from one factory with attached offices, Délys Ltd owns no distribution businesses and no retail outlets.

2(a) Use appropriate tools to analyse and measure the effects and effectiveness of Délys Ltd’s current business plans.

2(b) Summarise the position of Délys Ltd’s in its current market.

2(c) Evaluate the competitive strengths and weaknesses of Délys Ltd’s current strategies.

Existing Business Strategy

Porters Five Force analysis is important when trying to understand the competitive environment facing a given industry. It involves looking at internal competition barriers to entry, the profit appropriating power of buyers and sellers, as well as substitutes to the goods produced. Applied to the bakery industries like Délys Limited it shows an average net profit that typically does not cover the cost of capital due to low barriers to entry, ease of production and ease of access to ingredients.

Internal Rivalry

There are many players in the bakery industries like Délys Limited. The top four companies are estimated to only account for 11.7 percent of the market. The industry is characterized by many small bakeries, but there’s has been the recent trend towards consolidation and economics of scale. Businesses compare on price, quality, differentiation and relationship with key suppliers.

Barrier to entry

Barrier to entry in this industry is low. Economics of scale are beneficial, but are not required for industrial success. As a result, small business can enter the industry with relatively small amount of Capital. The two main Determinant of New company successes is the leader ability acquire sufficient channels of distribution to cover an operating cost and their ability to built up Brand acquisitions and Loyalty. Distribution channels typically involve retail outlets, such as grocery stores and supermarkets and they can be easily acquired if the bakery brand is established or have market research to create one. Délys Ltd Sales are through the main supermarket chains such as Tesco, Sainsbury’s, Asda and Morrison’s. Some independent grocery chains also stock “Délys” products and the products also sold by Harrods and Fortnum and Mason.

Buyers

Buyers of the bakery industry products like Délys Ltd such as ASDA, Sainsbury’s, Morrison, Tesco are able to appreciate much of the industry profit due to large number of small bakeries that are buying to find outlets for their products. As a result Buyers are able to command Low price and volume discounts. Only a large player like have the power to level the playing field and achieve a more balanced share of the profit.

Suppliers

Suppliers do not have much negotiating power in the bakery business like Délys ltd due to the well developed market for their products and their commoditized nature of what they are saying. Cakes and pastries and child bakeries of delays ltd can be affected by price swing of the raw input, but the changes are the result of the global supply and demand determinants rather than supply negotiating power

Substitutes

Many substitutes exist for bakery products. Breakfast cereals, rice and potatoes are all viable alternatives and individual can also make all of the baked goods they want at home. Bakery relay upon price and convenience to keep individuals switching to a substitute for baking what they need at home.

Position of Délys Ltd Product in Market

Délys Ltd is a private company that makes cakes under the brand name “Délys”. It was founded in 2000 by Jo Brown who liked the chocolate based cakes and patisserie that was on sale in Paris. With £75,000 Délys Ltd was founded. It makes a variety of desserts and sweets for the premium end of the market. All the output is of chilled products. Jo Brown has found fame as a dynamic entrepreneur and is a dragon on the BBC business show “Dragons’ Den”. Jo is a hands-on managing director and would always want to be seen as such in any business she worked in.

Sales of the company’s products have currently grown by more than 15% per annum every year since the company was founded and they currently amount to £6 million annually. The net profit on sales ratio is a very healthy 10% and at this level other businesses have been attracted to Délys Ltd’s business model. The company has a balance sheet that shows there are assets of £20 million funded by a mortgage of £7 million, a long term bank loan of £2 million and retained profits over the last 10 years of £6 million. The residual amount comes from the shareholders’ equity. It employs 60 people.

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The growth in snacking and requirement for convenience foods has benefited both the biscuits and cakes and pastries sectors. Many industrially produced cakes are now available in wrapped single-portion sizes designed for snacking, while snack-sized packs of biscuits have also become more commonplace.

The European market for bakery products amounted to 30.2 million tonnes in 1999, worth an estimated £45 billion ($73 billion or i68 billion). Given its size, the bakery sector can be considered to be one of the most important sectors of the food industry as a whole. Bread remains a staple part of the diet, whilst cakes and biscuits can increasingly be regarded as regular snacking items rather than occasional treats.

Bread is by far the largest sector of the bakery market, with sales of 24.45 million tonnes in 1999, equating to 81% of total bakery volumes. Sales of biscuits totalled 3.02 million tonnes, representing 10%, and cakes and pastries for the remaining 9%, or 2.73 million tonnes.”

There are over 120,000 enterprises active in the European bread-baking sector, the vast majority of which are small craft bakers. Craft bakers are dominant in countries where there is a tradition of buying freshly baked bread every day, such as Italy, Portugal, Greece and France. This contrasts with the situation in the UK and Ireland, where some 80% of bread consumed is industrially produced.

Overall, artisanal bakers and in-store bakeries currently account for 63% of all bread consumed in Europe, although industrial bakers, which account for the remaining 37%, are becoming more significant.

Within the total European biscuits market, DANONE is market leader, with a 16% share of sales, While Sales of the Délys Company’s products have currently grown by more than 15% per annum every year since the company was founded and they currently amount to £6 million annually. Ahead of United Biscuits with 11%, Bailsmen with 8%, and Barilla with 6%; own-label accounts for an estimated 18%.

3(a) Use a range of tools and models to develop a range of strategic options for Délys Ltd

3(b) Analyse the comparative strategic position taken by competitors in the market and how it may affect the choice of future strategy by Délys Ltd

3(c) Create a range of feasible options as the basis of future organisational strategy for Délys Ltd

Despite the ongoing trend towards healthy eating, and the added pressures from the credit squeeze, demand for indulgent chilled desserts continues to grow. Market value increased by 14% between 2003 and 2007, and is expected to grow by 4% in 2008, taking sales to £1,030 million.

An internal shift within chilled pot desserts away from “every day” desserts in favour of premium lines is adding value, although overall volume growth has been subdued. Sales of other chilled desserts other than those in pots have been boosted by larger sharing formats, while a revival of family dining at the weekend has contributed to the growth of hot eating desserts.

The outlook for the market remains positive, although in order to achieve longer-term growth, manufacturers will need to further increase the participation of ABC1s and increase frequency of consumption beyond special occasions. Impulse and on-the-go snacking, as well as the consumption of desserts away from main meals all offer further potential for growth.

Mintel last examined the UK market for Chilled and Chilled Pot Desserts in March 2007 and July 2006 respectively.

Mintel forecasts on the Bakery, cakes and pastry Industry

Bread – UK – February 2007

Between 2001 and 2006, the retail sales volume of bread fell by 14% to 1.8 million tonnes. Mintel forecasts slower decline between 2006 and 2011 of approximately 9%. Between 2001 and 2006, the value market grew by 14%, or 9% in real terms. Mintel also forecast that it will grow by an estimated 11% over the next five years to reach a value of £2.4 billion at current prices, which translates to a 2% rate of growth in real terms.

• Bread & Cakes – Ireland – March 2006

Retail sales of biscuits are valued at €252.4 million in RoI and have grown by 24% since 2000. Retail sales in NI rose from £88.4 million in 2000 to £114 million in 2005, representing a growth rate of 29% over the review period.

• Cakes and Cake Bars – UK – June 2006

The UK ambient cake market comprises three main segments; whole cakes, occasion cakes and individual cakes. Sales increased by 11% from 2001 to reach a value of £1.47 billion by 2005. In order to progress, suppliers have had to develop products to deal with current eating trends that have shifted away from the role of cake as a teatime treat or celebratory indulgence.

• Morning Goods – UK – July 2007

The morning goods market comprises a broad range of bread rolls and bakery snack products. Most product categories continue to advance in value despite their maturity, while some – notably bagels, muffins, brioche and doughnuts – have been enjoying impressive rates of growth. Overall sales of morning goods increased by 11% between 2002 and 2006, to reach £1.18 billion. This compares with a 10% rise in bread sales (excluding rolls) over the same period in a market worth £2.11 billion. Growth has picked up since 2004, with morning goods sales increasing by 7.5% between 2004 and 2006, while sales of bread Increased by just 5.6%.

• Sweet Biscuits – UK – May 2007

Sales of sweet biscuits stood at £1,462 million in 2006, having achieved 2.2% growth on the previous year against a prevailing trend of healthy eating. Over the 2002-07 periods, value growth has outstripped that of volume, signalling consumers’ lighter consumption habits but willingness to trade up to more expensive and indulgent products. Greatest growth over the previous year was in healthier and special treat biscuits, both of which tend to retail at the premium end. Mintel forecasts that both value (in real terms) and volume sales of sweet biscuits will increase by around 7% at current prices over the 2007-12 month period, increasing to an estimated £1.7 billion.

• Non-sweet Biscuits – UK – October 2007

Sales of non-sweet biscuits have enjoyed slightly higher rates of growth (from a smaller starting point) due to their strong health positioning and the development of snacking variants. Snacking both at home and on the go is a key factor behind growth in sales of non-sweet biscuits. Manufacturers have already responded to this with “snack pack” and mini variants, but could do more to extend the relevance of non-sweet biscuits to the convenience-led on-the-go market.

The newly released March edition of Frozen Cakes, Pies, and Other Pastries Manufacturing Industry report is the comprehensive market research guide for the industry. It has the latest information on the industry’s key financial data, competitive landscape, cost and pricing, and trends during the current economic climate

The available options for the Délys Limited are as following:

Expanding the range of desserts and sweets it makes to include Viennese and Italian styles, Expanding the range of products to include ambient and frozen products, Producing healthier products to chime in with consumers’ changing tastes and government initiatives on healthy lifestyles, Increase the number of retailers selling the “Délys” range, Producing own label products for the supermarket chains, Expanding internationally, diversifying into other product areas such as bakery, Making products for niche markets such gluten intolerants and products for specific ethnic and religious groups who have specific dietary needs., Supplying mass-market caterers and airlines, Licensing producers to use the “Délys” name on other food lines., Opening “Délys” retail outlets in retail centres., Taking over other businesses. Two local firms with good regional reputations which might be targets are Maggie’s Farm Breads, an artisanal bakery, valued at around £1.5 million, and Chocolaterie de Groote a company that hand makes Belgian style chocolates that is worth around £1 million. , and selling out to a large food producing business. Jo believes she could probably get £25 million for Délys Ltd. and get a seat on the board with a view to moving up to be in charge of a FTSE listed company. Alternatively she could just walk away with the money and find new businesses and ideas to develop. She also knows that Ben and Jerry’s lost a lot of its carefully developed image as a hippy ice cream maker when it sold out to Unilever and she does not want to lose the market image she has built up for Délys Ltd by selling out. But she knows everything has its price.

Conclusion

At the end, studying about several criteria of the Délys Limited Production, Market and the product and looking over the diversified available strategic option we could conclude the assignment. Expending the range of desserts and sweets can be the good strategic option including ambient and frozen, as U.K person are health conscious so making the product may be the effective option for Délys Limited. As Delays Limited has no any retail outlets it’s open to open the retail outlets may also be profitable, supplying mass-market through caterers and airlines may me seasonal options. Délys limited if licence producer to use Délys name on other food may be that suitable option in a United Kingdom market as it itself developed a good image and goodwill in a market. Diversifying into other product may also help in expending the market share. And Making product for niche market such as gluten intolerants and products for specific ethnic and religion groups who have specific dietary needs may not work in United Kingdom market. When expanding into new markets credit managers need to be concerned about the new client base, specific trade laws that may apply currency considerations and political risk. The treasury department may consider working capital concerns, advance rates from their traditional credit facility and loan covenants as part of the overall strategy. Selecting which country to sell into is often dictated by the products we produce. For example, let’s say Délys Ltd. provides Cake and Pastries that are ideal for economically challenged nations. They are low cost, light weight and easily produced worldwide. Companies such as Délys Ltd may have expertise in foreign languages, laws and customs. They need a strategic partner who brings these skills to the table.

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