The Importance Of Environmental Scanning Marketing Essay

Marketing oriented firms mostly focus on marketing planning method through which a thorough analysis of market environment is carried out to scan opportunities within market environments, audit the skills and resources of the firm needed to maximize these opportunities, formulating marketing objectives and designing how firm offerings will be positioned among consumer segments when targeting them, and subsequently developing plans to implement and control them to sustain competitive advantage ( Dibb and Simkin, 2008).

history of Just Us! Cafes

Just Us! Cafes a coffee Roasters Cooperative was co-founded by Debbie and Jeff Moore in the year 1995 (Just Us!, 2012). The café whose headquarter is located in Grand Pre, Nova Scotia, Canada was incorporated under the Cooperative Association Act as the first company (see Appendix 1) with a fair trade coffee roaster in Canada in 1996 (Just Us!, 2012).

The vision of Just Us! Cafes is to be a market leader in fair trade business that stands for quality, fairness, professionalism and innovation while the mission of Just Us! Cafes is rooted in authenticity, cooperation, community, and justice (Just Us!, 2012).

Just us! Cafes offers products include Coffee, Tea, Chocolate, Sugar, and pastries. Just Us! has 4 Cafes in Nova Scotia, Canada located in Grand Pre, Wolfville, Halifax and Barrington Street (Just Us!,2012).

Just Us! has received many awards such as EK chamber of commerce Award as a Best “Large” firm in Kings County (2000), Ethics Award (2005), Acadia University President Award for Entrepreneur (2005) etc (Just Us!, 2012).

1.0 Critical Evaluation of the Importance of Environmental Scanning.

Environmental scanning is simply the method through which marketing environment of an organisation is been closely monitored and carefully analysed (Jobber, 2007). The importance of environmental scanning are;

Provides an understanding of Consumers Choice Criteria

Body shop (a cosmetic industry) in its environmental scanning through market research in Canada, identified that 34% of consumers use ethical behaviour of companies (in addition to quality of product) as their choice criterion upon which their buying decision is based (Strandberg consulting, 2009). In addition, the impact of firms’ activities on the ecological habitat of consumers has been another criterion employed by consumers in their buying decision as consumers in Canada tend to embrace moves that decrease Co2 footprint in their environment (Bonini and Oppenheim, 2012). Environmental scanning reveals a paradigm shift in consumers’ value, attitude and beliefs about products as ethical issues have become a yardstick in their buying decision. The need to be highly sensitive to rapidly changing specific and general business environmental factors is a pre-requisite to the survival of an organisation where a quick change in product/ service line must be matched with changing consumer requirements (Goyal, 2007; Albright,2007; Jobber;2007).

Helps in Identifying Business Trends and Opportunities

In 2008 alone, products (such as Flowers, Cocoa, Coffee, Rice, Shea butter) that were fairly traded was said to be imported from 59 countries (Eric, 2012). It takes a thorough environmental scanning of Canadian market to obtain this useful information about the fast growing fair trade business in both the food and non food segment (for example, fashion industry). With environmental scanning, Just us! Cafes and its competitors (Kicking horse, Kraft foods, StarBucks etc) were able to capitalize on the fair-trade opportunities and thus get sensitized on the drastic changing needs and expectations of their consumers. Environmental scanning offered these market players qualitative and quantitative information about the needs of their consumers, enabling them to strategise on how these needs could be met and as a result the image of these organisations were improved through a clear definition of what they stood for in Canadian fair trade wholesale and retail market (Costa, 1995). This is an evidence that environmental scanning is linked to improvement in organisational performance (Slaughter, 1999).

Provides Basis for Segmenting Consumer Markets

Part of the achievements of Cafes in Canadian markets attributed to environmental scanning is ability of these brands to segment their products and services effectively and efficiently well. For example, all brands of Cafes in Canada (Kraft foods, Just Us!, Kicking horse, StarBucks etc) have been able to adopt a behavioural segmentation in the consumer markets where fair trade is used in one way or the other to gain market share as consumers beliefs, values and perception are rooted in fair trade. Psychographic segmentation that entails the strategy by which consumers are grouped base on lifestyle and personality characteristics (Jobber,2007) has been exploited by brands where Just us! Cafes had been targeting young, well educated consumers that are willing to offer premium price for fair trade products (Ethical Consumer, 2011) while Kraft Foodservice are caught romancing college students (perceived to be part of socially and environmentally conscious customers) with its All Life 100% Colombian coffee brand (Rain Forest Alliance, 2004). Brands utilise Profile Segmentation where geographic variables like areas local names and culture (Jobber, 2007) are been used to differentiate their coffee from competitors and thus adapting their services and products to customers taste and culture, and locating their outlets in close proximity to their target consumers.

Helps an organisation to identify it shortcomings and address them

Through environmental scanning, Just Us! Cafes has been able to identify emerging issues and conditions leading the company to a “dead end”. This led management of Just Us! to develop an organisational structure where roles are allocated to employees based on their competencies and skills (e.g. the need for Juliet to handle the marketing functions of Just us! Cafes) to be able to deal with emerging issues confronting Just Us! Cafes.

Limitation of Environmental Scanning.

However, environmental scanning does not totally lead to an accurate prediction of business future and it does not guarantee effectiveness as witnessed in situation where many competitors of Just us! Cafes located in the heart of Nova Scotia had to close down their businesses when they couldn’t survive in the midst of heated competitions. But businesses should ensure frequent environment scanning so as to increase their sensitivity to environmental signals rather than relying on analysis of historical data or predicting how such data will change (Johnson et al. 2008).

1.2. Internal and External Challenges Confronting Just Us! Cafes.

Internal challenges are issues that focus on resources and competence (capabilities) of a company, revealing the strengths and weaknesses of such company while external challenges are concerned with the external environment in which the company operates, predisposing its activities to threat or presenting it with opportunities ( Hill and Joney, 2008).

SWOT analysis of Just Us! Cafes

Strengths

Just Us! Cafes brand over the years has successfully won strong customer loyalty with strong preference for its products, services, and what the business stands for in Nova Scotia (fairness, justice and quality).

The founders of Just Us! Cafes (Jeff and Debbie Moore) have a sound background experience in social and community development well aligned with their humanitarian philosophy (people before profit) enough to equip them in fulfilling their business mission (quality, fairness, and justice).

The products and services (that are fairly traded and F.L.O certified) which Just us! Cafes offer her customers are immensely differentiated from competitors and thus give Just Us! Cafes a crystal clear market advantage over all her competitors.

Just Us! Cafes management has a deep understanding of it distribution channel and an intimate relationship with wholesale and retail stores (Atlantic Superstore and Sobeys).

Just Us! Cafes is equipped with employees that are committed to delivering products and services in a manner that meets and surpasses consumer’s expectation.

Just Us! Cafes operates in favourable locations that are in close proximity with her consumers such as Grand Pre, Halifax, Wolfville and Barrington Street as well as a very strong presence in 3 key universities of Canada in Nova Scotia.

Weaknesses

Inability or lack of capability of Just Us! Cafes to expand it business to new markets within Canada.

Just Us! Cafes doesn’t have enough financial resources and competence as compared to some of its competitors tapping into the fair trade market.

Just Us! Cafes have 4 Cafes (Wolfville, Halifax, Grand-pre and Barrington Street) just in Nova Scotia province. This is limiting its ability to reach enough consumers with its fair trade products as compared to Tim Hortons and Second cup who have 170 and 360 stores respectively.

In the area of advertisement, Just Us! lacks experience and expertise. The reduction of revenue and the inability to defend and extend their core business shows lack of a good business strategy.

Just Us! is too dependent on stores like Loblaws (also Just Us! competitor) and Sobeys as its distribution channel in the retail market.

Threats

Just Us! could face scarcity of fair trade products as a result of wide swing in commodity market.

Transporting fair trade products from developing country to Canada may be stopped due to the need to lessen carbon emission to the environment. If importation of fair trade raw materials are stopped, the fair trade mission and strategy of Just Us! will be in jeopardy.

The fair trade and organic business of Just us! Cafes have become fiercely competitive as competitors struggle intensely to attract and retain consumers in order to benefit from the attractive fair trade market.

Fair trade certification is not recognised by the government of Canada and as such, no government policy has being designed for it and thus resulting in unfair practices among Just Us! competitors who portray their products as fair trade when they are not in the real sense.

Consumers preferences for Just Us! products is changing rapidly resulting in fast decline in new product life cycle.

Opportunities

Majority of consumers in Canadian market are interested in fair trade products, presenting huge opportunities for Just Us! to increase their revenue through fair trade.

Consumers are willing to offer premium price for fair trade products of Just Us! if they better informed.

There is an increasing trend in the number of fair trade farmers from developing countries and thus leads to availability of fair trade products.

There are still wide gaps or opportunities to explore by Just Us! in the fair trade market if a right strategy is put in place.

PESTEL of Just Us!

PESTEL Framework (Political, Environmental, Socio-cultural, Technological, Environmental (green) and Legal) are external factors/challenges that is common to all businesses.

Political

In Canada, though government policies contain rules and regulations for activities concerning healthy lifestyle of citizen as well as environmental protection, policy for fair trade market has not been developed by Canadian government. For example, CISO (2012) stated that “Canadian Federal and Provincial Agencies (CFPA) are guided by respective purchasing departments in their purchasing decisions. At Federal level, Public Works and Government Service Canada (PWGSC)-who have standing offers (open contract) for many goods and purchase them on behalf of other Department-, make green purchasing or recommendations to the department through their office of Greening government operations but their recommendations do not include fair trade products” Evidence of lack of attention given to fair trade in Canada is shown in the table 1.1 below.

This made it easier for Just Us! competitors who are not dedicated to fair trade (maybe due to cost associated with it) to portray their offerings to the market as fairly traded.

Country

Policy or Guideline

Specifies Certified

Fair Trade

Canada

Federal

• Policy on Green Procurement (as of April 1, 2006 for all federal departments)

• Sustainable Development Strategies (prepared by all federal departments every 3 years) and Departments’ Environmental policies and Departmental Performance Reports

• Environmental Petitions by Canadian Residents

• Department of Foreign Affairs Green Procurement checklist

• Department of Foreign Affairs Kit for Ensuring Green Conferences

• Environment Canada principles or practice on green purchasing, as well as a standard clause for product tenders and service contracts Provincial

• The Sustainable Development Act (Manitoba and Quebec) and related Sustainable Development Procurement Policies

Local

• Ethical Purchasing Policies (Vancouver, Toronto, Black Diamond)

• No

• No (for Foreign

Affairs, others

unknown)

• No

• No

• No

• No

• No

• Yes (no for Toronto)

Table 1: Examples of Relevant Guidelines and Policies that Encourage Social and Environmental Purchasing in Canadian Government Agencies (CISO,2012).

Economy

Between 2010-2011, Canada’s GDP was said to have grown by 2.8% a year (which was more than economies of other rich country, most especially U.S). However, in 2012, Canada’s economy has been discovered to have a slow GDP growth of 1.9% as a result of lower prices for Canada’s resource exports, weak demand of its goods from Europe and its strong currency (The Economist, 2012). This has led to recession presently in Canada, preventing Just Us! Cafes from implementing her expansion strategy.

Also, Recession in Canada due to decline in GDP could result in budget pressure and spending cuts leaving consumer with little or no disposable income to spend on premium fair trade products that Just Us! offers, since availability of consumers purchasing power absolutely relies on income, prices, debt and savings (Kotler and Keller, 2012).

Social-Cultural

Over the last 3 decades, the main driver of fair trade is expressed to be the highly growing trend of ethical consumerism (Burke and Berry, 1974, cited in Opal and Nicholls, 2005, page 23).Consumers values, attitude and lifestyle are rooted in high quality, ethically sourced and healthy products. The preference for these attributes has created a great opportunities for fair trade markets and thus resulted in a highly competitive fair trade market that is becoming too heated for Just Us! the early player.

Technological.

From between 2002-2008, there was no record that reveals that Just Us! Cafes integrated e-commerce into their customer service operation despite the fact that e-commerce that includes online service had been the major driver of supply chain in coffee industry in the 21st century. However, Just Us! has integrated e-commerce into their customer service operation where customers orders are received and fulfilled via e-commerce.

Environment and Legal

The current trend in Western Europe involves series of public actions (legal) to reduce Co2 emission to the environment, seeing majority of firms been taxed heavily on the basis of Co2 emission that their activities (majorly machinery) dissipate to the environment (co2gram/kilowatt/hour). However, opportunities abound for organisations that can reconcile profitability with the protection of their business environment (Kottler and Keller, 2012).

But this trend towards greener activities is partly a threat to Just Us! fair trade as the need to source for raw materials locally rather than sourcing from distant developing countries (which is the basis of fair trade) to lessen Co2 emission to the atmosphere due to transportation is becoming an emerging issue presently.

On the other hand, weather is becoming quite unpredictable and this is a threat to farm productivity. For example, the Archer Daniels Midland (ADM) the world’s largest agricultural commodities traders recently got its net profits reduced by 60% due to a sudden drought in the U.S that hampered farm productivity (Financial Times, 2012). This can also pose threats to the fair trade markets, resulting in scarcities in the commodity markets, high prices for food and high cost of raw materials.

Porters 5 forces for Just Us!.

The Porter’s 5 forces as shown in Fig 1.1 below is used by businesses to indentify how profitable a particular business is (Johnson et al. 2008).

Threat of New Entrants to Fair Trade Market

There is a high threat of new entrants to the fair trade market with a growing trend in the demand for fair products. As a result of this, small, independent and well established cafes are competing with Just Us! as a result of this.

Threat of Substitute for Just Us! products and Services

As barriers to fair trade market are getting weaker, competitors are offering a similar fair trade product as Just Us! thereby presenting consumers with opportunities to replace Just Us! products if they do not meet their expectations.

Bargaining Power of Suppliers

The number of farmers producing farm produce has been reported to be growing. In 2008 alone, 59 countries have been reported to have supplied Canada. Thus, as the growing trend increases, the bargaining power of buyers becomes higher than the farmers.

On the other hand, bargaining power is also dependent on the availability of produce. If there is scarcity of fair trade produce, then the bargaining power of farmers become higher.

Bargaining Power of Buyers

Logically, as barrier to new entrants gets weaker and threat of substitute get higher, end users may not be able to offer premium price for fair trade products of Just Us!. This gives consumers the ability to determine price.

Threat of Rivalry

Since competitors of Just Us! offer similar products to same group of consumers, competitive rivalry is certain.

1.3 Extent to which Challenges threaten the Future of Just Us!

Up to a very large extent, challenges in the form of fierce competition (which is promoted by government policies), constant change in fair trade market (occasioned by rapid change in consumers’ preferences for coffee and other products) and lack of sustainable strategy of Just Us! to address these issues will lead to lower consumer base, reduction in market share and profit and as time goes on, Just Us! fair trade business will cease to exist in Canada.

2.0. Appropriate Framework of Analysis to Analyse Competitive Strategy Adopted by Just Us!

In analyzing the competitive strategy adopted by Just Us!, marketing mix strategy (7Ps) will be adopted.

Products: Just Us! satisfied the wants and needs of consumers with fair trade and organic products like Coffee, Tea, Chocolate, Sugar, and Muffins. Just Us! adopted a distinctive product differentiation strategy through provision of fair trade and organic products to its customers that are willing to pay premium. Just Us! also have specialty products lines such as Coffee (Rwanda Café Femenino, Tarrazu Honey, Mexican Morning, Wisdom, Rainforest Rhapsody, etc), Teas (Chai Tea, Early green, Darjeeling loose, Maritime Breakfast tea etc) that meet various tastes of consumers.

Price: For all Just Us! fair trade products and added services (atmosphere adapted to consumers taste), a premium pricing strategy was adopted by Just Us! where consumers are charged for added value in form of organic and fair trade products provided to them.

Place: With respect to place, Just Us! pursued an adaptation strategy where atmosphere of different locations (Wolfville, Halifax, Grad Pre and Barrington Street) were adapted to taste, culture of consumers and making it comfortable as incubator for developing relationships among consumers within their communities.

Just Us! adopted two types of strategic alliance in a bid to make their products available to consumers and in a bid to expand. The two types of strategic alliance adopted were;

a.Logistical Alliance: where Just Us! formed alliance with wholesales and retail outlets (e.g. Loblawas, and Sobeys), health food shops, churches, universities (Saint Francis Xavier, Saint Mary University etc) that offer logistical service to ensure the availability of Just Us! products all around Canada.

b. Product and Service alliance: although this type of strategic alliance failed Just Us!, Just Us! had once partnered with a local businessman in Toronto as part of their expansion strategy into Toronto market. Just Us! also formed partnerships with Acadia Cinema Cooperative to use the cinema service as a means to sell fair trade products.

Promotion: In a bid to promote Just Us! fair trade offerings, 10% of its profit was allocated for opening fair trade coffee museum where consumers are enlightened about the advantages of fair trade. On top of this, a non-profit organisation known as JUDES (Just Us! Development and Education Society) was developed to create awareness for fair trade and societal development. Just Us! through JUDES also used documentary and educational activities to enlighten social institutions on the importance of fair trade.

Just Us! also used newspaper, magazines (student magazines and discount coupons), outdoor advertising (board in Grand Pre), point-of-purchase advertising (Valentine, Christmas and other seasonal events), internet (www.justus!cafes.com), sales promotion (reduced Christmas merchandise) and PR, events and sponsorship (during CEDIF meeting).

People: through proper recruitment and selection process, Just Us! was able to attract talented staff and committed employees which were subsequently trained to deliver finished products (e.g. Coffee and Tea) in a way that expressed quality and care.

Process: part of the process of Just Us! aimed at preserving and delivering fresh and quality coffee to her consumers includes roasting Coffee for example in small batches after which they were packaged in the plant and subsequently sent to consumers. Process of Just Us! also involves close supervision of coffee quality at every stage of the production process (from raw materials to finished products)

Physical Evidence: This is essentially environment that surrounds the fair trade products and services that are offered by Jut Us! (Richard and Gilligan, 2005). This includes; fair trade coffee museum in Grand Pre, the brown coloured logo of Just Us! that differentiated them from competitors, coffee bean manufacturing plant in Grand Pre , Just Us! theatre, gift shops and other facilities and equipment (tangibles) that communicate message concerning fair trade that Just Us! stood for.

3.0 Strategic Options Available to Just Us!

Despite the continuous growth of consumers in fair trade segments since 2008 (now around 44% of consumers in Canada), Just Us!, a distinctive fair trade food business that was incorporated under the Cooperative Act and certified by Fair Trade Labeling Organisation (FLO) has seen it growth slightly increased between 2008 to 2011 (Figure 1.1) in the midst of competitors (Kicking Horse, Tim Hortons, Second cup, Kraft, Nestle etc) that are not deeply committed and consistent to fair trade model witnessing a high revenue from the fair trade market.

For example, between 2009 to 2010, sales revenue grew by 1.72% to $7,103,981 with an increasing cost from 4,257,282 in 2009 to 4,310,222 in 2010 (Figure 1.2).

Figure 1: Revenue of Just Us! between 2002 to 2011(Just Us!, 2012)

Figure 2: The End of Year Statement of Just Us! Coffee Roasters (Just Us!,2012).

To address these problem, Just Us! can engage one of these options;

Consolidation

This is the situation where Just Us! can strategise on defending their existing fair trade products (coffee, chocolate, tea, sugar) in their existing market in the province of Nova Scotia (Wolfville, Barrington Street, Grand Pre, and Halifax) . According to Safah (2008), this non-growth strategy is aimed at maintaining the business status quo to protect a business status in its environment.

Just Us! can achieve consolidation through either;

Defending their market share:

Through Customer Relationship Management (CRM) , Just Us! can build a protective wall around its customer base (Smith and Zook, 2011) through effective management of individual consumers information in order to maximize loyalty ( Kotler and Keller,2012). Just Us! should invest in communication technology where consumers database will be housed and used effectively. For example, automated greetings should be programmed to respond to any occasions consumers are celebrating. CRM management should go beyond business transaction to personal affection and care for consumers welfare. Through this CRM, Just Us! will be able secure their consumers. Even CRM can also be done through social media where Just Us! club can be formed for the purpose of a two-way communication between Just Us! and existing consumers.

Downsizing or Divestment

In Figure 1.2 above, cost of good sold, administration and members expenses all constitute a higher cost to Just Us! Cafes. Just Us! could seek to consolidate by pruning its staff size to reduce cost of human resources or it could hold on to 20% of Just Us! products that contribute 80% of its revenue while the rest are shed off the Cafes product line. For example in Table 1.2 below, between 2004- 2007, fairly traded Tea and Sugar (though sugar is perceived to have adverse impact on health and thus fair trade honey could be a good substitute) have been observed to contribute a less margin to revenue and hence less growth to fair trade market in Canada. So Just Us! could remove these products from it portfolio while they concentrate on Coffee and Cocoa.

Growth

 

2004

2005

2006

2007

Total

market share %

market rank

Cofee

41%

56%

61%

55%

$ 9,083,836

80%

1

Cocoa

115%

96%

91%

0%

$ 1,253,849

11%

2

Sugar

139%

158%

97%

63%

$ 789,150

7%

3

Tea

54%

74%

68%

339%

$ 173,642

2%

4

Total Revenue

49%

65%

67%

50%

$ 11,300,477

100%

 

market share %

 

 

 

 

100%

 

 

market rank

 

 

 

 

 

 

 

Table 2: The growth of fair trade products in Canadian Market

Market Penetration.

Just Us! could also increase sales of their current fair trade products in the province of Nova Scotia in which they are presently operating (Halifax, Barrington Street, Wolfville and Grand Pre) through winning competitors’ consumers by planning and implementing effective promotion or distribution strategy or they could cut prices of their products

Promotion

A good promotional strategy with an appropriate channel to reach target markets will be one of the appropriate methods by which Just Us! can attract competitors’ consumers. Through integrated marketing communication, Just Us! can better coordinate its marketing tools in order to deliver its social and environmental responsibilities, quality, fairness and equity message in a clear and consistent manner to all consumers.

For example, Just Us! is the only Café business that is incorporated under the cooperative act which seeks greater fairness and poverty eradication in developing countries and on top of this, all fair trade products of Just Us! were certified by Fair Trade Labeling Organisation. Just Us! could choose to deploy it resources towards creating awareness about what it stands for and this could stimulate interest, desire and repeated purchase of its products. The landing page of Just Us! site (www.justus.com) should be decorated with prestigious awards obtained by Just Us! to affirm what they stand for and this could lead to customer conversion upon arrival to the landing page. Just Us! should also use social media to communicate their messages while using emotional adverts on Tv and Radio station to preach fairness in addition to what JUDES does for them. For example, over 4 years, Cadbury Schweppes had attributed its high revenue to high expenditure on promotional efforts.

Distribution

According to Chopra and Meindhl (2007), distribution has been expressed to be the major driver of an organisation’s overall profitability since it directly determines both supply chain cost and consumer experience. The presence of Just us! in 4 places within the province of Nova Scotia alone is not an effective means of reaching potential consumers of Just Us!. Tim Hortons (170) and Second cup (360) within Nova Scotia have been able to decentralize their shops in every nook and cranny to better reach their consumers and increase response time and convenience and through this, they have been known as a quick service restaurant in Nova Scotia. There is no point in having good quality fair trade products without reaching enough consumers.

Even if there is no fund to lease or build more cafes, Just Us! could form more partnerships (logistical or product and service alliance) with more retail and wholesale outlets in Annapolis, Pictou, Inverness, Yarmouth, Antigonish, Hants etc.

For example, Sainsbury has emerged as market leader in UK grocery market due to its ability of Sainsbury to open more convenience stores all around UK.

Pricing strategy

Just Us! could also use price to penetrate and attract competitors consumers. Just Us! involving itself in a price war won’t go too well for the Café. However, a psychological pricing strategy could be adopted to increase demands for its quality fair trade products. For example, Apple used price to penetrate the market when it launched its 3G iphone at a cheaper price ($199) as compared to its competitors that were offering $399 for 2G iphones (Jobber,2007)

Market Development

Market development is another strategic option that Just us! can explore to increase it market share by selling fair trade products to new markets beyond the shores of Nova Scotia or outside Canada.

For example, in Vancouver and Black diamond, Just Us! can seek to expand their Cafes to these provinces where there are ethical purchasing policies that favour their fair trade business model (as indicated in Table 1) unlike Nova-Scotia. Mergers or acquisition will be a fast way through which Just Us! can sell its existing products to Vancouver and Black diamond swiftly. For example, Just Us! could merge with Earth’s Choice a fair trade coffee roaster business in Vancouver or Cinnamon spoon in Black diamond .

Other