Pestle Analysis Political Factors Dairymaid Products Marketing Essay

1807 words (7 pages) Essay in Marketing

5/12/16 Marketing Reference this

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Dairymaid products benefit widely as it operates in a stable and sound democratic environment. Nonetheless, the Mauritian Government has laid down many laws so as to protect the end users of products, which is primordial when dealing with foodstuffs. This is why the Food Act was enacted in 1999 and amended several times to be in line with new customer expectations. In this line, the government attached 8 sections (310-318) in the Food Act 1999. Moreover, a 15% Value Added Tax is also levied on all products offered for sale. Innodis LTD should be in pace with the trading policies: Imports of all foodstuffs require a Pre-Market Approval Certificate and a Food and Drugs Permit (FDP) issued by the Ministry of Health & Quality of life.

Economic Factors

Employee rights in the Mauritius have a substantial upshot on businesses. Even though manufacturing ice cream has transformed over the years with new technology in automatic machinery, the industry is still labour intensive. Employee laws to consider are minimum wage, over time, benefits and health and safety regulations. Moreover, the economic state of our island has deteriorated with unemployment rates that have increased to ≈7.8%. This has in turn led to a decrease in consumer buying power and many tend to view the purchase of ice-creams as a luxury. Likewise a general increase in the price of items had been estimated at 4.3% in 2012. Increased prices coupled with high cost of living usually force consumers to concentrate on basic needs, which is not the case for ice-creams. However, a slight increase of 0.5% in Consumption Expenditure on food and non-alcoholic beverages has still been seen in the 3rd quarter of 2012.

Social Factors

Dairy Maid products has also been affected by social changes; there has been a big change in the lifestyle of Mauritians who now prefer to go out, buy and enjoy ice-creams at ice-cream parlours, mostly teenagers and young adults. This change has also occurred due to the emergence of ice-cream parlours in Shopping malls like “Milky Lane” at Bagatelle. Mauritians are also more concerned about their health: they prefer the preventive rather than the curative approach. This is why many Mauritians are reluctant to consume ice-creams, a product containing important amounts of fat and sugar. Another drawback faced by Dairy Maid is seasonability- demand and sales are higher in summer rather than in winter. In addition, Mauritius is confronted with an ageing population and ice cream products are usually most preferred by youngsters (70.7% of the population are between 15-64 years and 7.5% are aged 65 or more).

Technological Factors

Internet is an easy tool to get information about ant product, and many people like to have complete information on a product and the company’s goodwill before making any purchase. Even though ice cream products are usually bought impulsively, buyers do check the ingredients and other elements of the ice creams. Moreover, Innodis LTD has not kept pace with technological updates in terms of advertising as it still concentrates more on newspaper adverts, unlike Miko products which are more seen on television adverts and billboards. Nonetheless, automation has improved the manufacture of Dairy Maid products: the preparation and filling of ice creams in packages are now mechanised.

Legal Factors

The main legal mechanism affecting Ice creams and therefore Dairy Maid is the Food Act 1999, as said above. Examples are that ice cream products should comply with the microbiological standard set out in the 8th Schedule of the concerned act. An example being that the permitted level of mercury is only 0.03 ppm. The level of Gelatine, in turn, is ≤ 1.4% (section 315). Innodis also has to abide by special labelling requirements sat out in section 316 and ice creams may contain only permitted stabilisers. Only 5g/kg of calcium chloride is acceptable as stabilizers for milk products (45th Schedule of the Food Act 1999).

Environmental Factors

Mauritians and the concerned authorities put more and more emphasis on the protection of the environment. This is why businesses should now use materials which can be recycled as packages. Dairy Maid ice creams, being mostly in plastic containers are not recyclable and environmental conscious tend to be reluctant to buy from such companies. However, in line to the protection of the environment, Innodis LTD has transportation services that save energy. Moreover, the government has imposed obligatory sustainable development initiatives and stricter energy conservation measures. The emerging of eco-friendly buildings (e.g.: MCB at Saint-Jean) act as an incentive which other companies want to adopt. Such initiatives help to increase the company’s goodwill and to fulfil obligatory CSR requirements.

Critical Analysis

The Pestle Analysis has been designed for analysing the various macro-environmental factors that may affect the smooth running of a business. Such an analysis does help marketers in business and strategic planning, market planning, organisational change, business and product development and research reports. In turn, these help to identify potential risks which can affect the business’ profitability. Nonetheless, it will not be useful if the analysis is not conducted on a regular basis as these external factors change rapidly, a concrete example could be an increase in the price of milk products. The rapidity of change makes it more and more complicated to foresee developments that may influence an organisation afterwards. Moreover, Innodis LTD can also be affected by other unpredicted occurring, which may even not be part of any of the 6 factors mentioned above. Moreover, much information is based on assumptions which can even be proved as being distorted information. Therefore, marketers should not rely only on the Pestle analysis but make different external analysis to be on the safe side.

COMPETITORS’ ANALYSIS

Threat of new potential entrants

There are various reasons why many companies are reluctant to enter the ice-cream industry in Mauritius. Innodis LTD benefits from a strong barrier to entry which is its access to the main raw material, milk. Being the importer of 2 brands of milk powder, Island Dairy and Twin Cows, Innodis LTD is able to gain from Economies of Scale as its buys large stocks, both for resale and to use as raw material for its other products, including Dairy Maid ice-creams. Moreover, high, initial capital requirements and strict legal restrictions also diminish potential entrance in that industry. Even though Innodis Ltd does not have a secret recipe for the manufacture of ice-creams, new entrants need to spend considerable capital so as to get their name out and persuade consumers to start purchasing their products instead of what they previously used. Nonetheless, Dairy Maid products’ quality is not as strong compared to other rivals like Miko, Tip Top, Baskin Robbins, etc. Albeit, many Mauritians do consume Dairy Maid ice creams as it is a locally-manufactured one.

Threat of substitute products

The ice cream industry in general has faced a slight decrease in demand due to the increasing number of health conscious people. Consumers know that ice creams contain considerable amounts of fat and sugar, and this is why they now prefer healthier alternatives like smoothies and frozen fruit bars. Moreover, there is low or even no cost of switching to these alternatives which are also much in trend nowadays. However, these substitutes have not yet taken its place in the Mauritian market, they are quite rare and can only be found in ice-cream parlour or café in shopping malls (e.g.: L’Arabica in Centre Commerciale Phoenix).

Bargaining power of suppliers

Being the importer of the main raw material, Innodis LTD does not really have to bother for any possible problem for the main raw material. However, unexpected price rises by the manufacturing country could be detrimental for Dairy Maid products. If the products’ prices would have to rise due to an increase in the milk price, many customers would prefer switching to better brands like Miko’s product range as they are not too highly-priced compared to Dairy Maid ice-creams. Also, no close alternative is available for the main raw material; changing to Soya milk for example would obviously cause changes in the production process as the fat content is not same.

Bargaining power of buyers

Buyers are presented with many choices when selecting a product in the ice cream industry while distributors have the power to decide which products will be available to customers. Customers are also able to choose from a range of supply firms and they benefit as it is inexpensive to switch to rival firms whereby most products are of better taste and quality compared to Dairy Maid ice-creams. Information about the products {E.g.: price of milk} is also easily available to customers through the internet and media. Pricing information is also readily accessible to consumers and only big dissimilarity in price will change the customers’ buying behaviour. Even so, Innodis LTD is not that weak; Dairy Maid customers are usually numerous but buy only small quantities of ice-creams and hence cannot really threaten to buy the supply firms.

Degree of competitive rivalry

Innodis Ltd unfortunately faces fierce rivalry with Food & Allied ice-creams brands like Miko Selection, Carte D’or, etc. Besides, product differentiation is high; Rival products tend to be of higher quality {E.g..: Ice Dream vs. Carte D’or}. Innodis LTD in turn has not been in pace with innovative strategies and competitors’ ice-creams like Food & Allied Group has benefited with its new Strategy “Milky Lane”. Also, in its quest to reduce expenses, Innodis LTD has chosen to concentrate more on newspapers advertisements whereas its competitors who participate better in promotional strategies like Television and Billboard advertisements.

Critical Analysis

While conducting competitors’ analyse so as to identify weaknesses and strengths that a company’s competitors may have, and then use that information to improve efforts within the company, the use of Porter’s five forces Model is not sufficient. This is mainly due to the fact that the 5 factors’ rose by Porter does not really cover up all types of competition that may crop up. Moreover, Porter’s five forces Model have had many limitations: the fact that it was created in the eighties obviously mean that it is not in line with the new era of technological breakthroughs and dynamic market entrants. The model assumes that there are no changes in the industrial environment but in fact the market is very flexible. Moreover, it does not take complementary goods and innovation into account.The model of Porter’s five forces can only act as a starting point for more profound investigation. The tool also needs amendments to adjust it to today’s requirements because of the important environmental changes of the 21st century’s industries.

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