assignment on marketing management
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Carry out an external macro and external
micro environment analysis for a FMCG
product in the local market
Fazul Ansar
1/1/2010
2010Assignment on Marketing Management
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1. Introduction:
The purpose of this assignment is to:
Carry out an external macro and external micro environment analysis for a
FMCG product in the local market
Analyze the competitive forces that could affect the chosen product based on the
Porter’s five forces model and ascertain key issues that will come out of the study
Identify the possible segmenting variables and to applying those variables to
carry out market segmentation for the chosen product
From the segments, thus established, identify opportunity if any to serve an
additional segment not served at present
Study further possibilities of product differentiation
Study further possibilities to re-positioning the chosen product
The assignment presents the following:
1. About the Product
2. External Macro and External Micro Environment Analysis of the Chosen Product
3. Porter’s Five Forces Model
4. Identify the possible Segmenting Variables of Chosen Product
5. Identify the New Segment for Chosen Product
6. Product Differentiation
7. Re-Positioning
8. Reference
2. About the Product
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i. Product
The group has a selected a FMCG product which manufactures biscuit over fifty years
and experience in creating snacks which everyone loves. The Maliban Biscuit
Manufactories Limited is a legendary biscuit maker with an exciting new vision.
From the classic taste of the traditional Cream Cracker, to the new bite-sized delights
that are Maliban Chocochip Tiny Cookies, Maliban knows what makes Sri Lanka tick. Be
it a pre-schooler’s break time snack, or the accompaniment to a grandfather’s evening
tea, Maliban biscuits have been a part of the culture for over three generations.
Now, as they set out to meet the increased demands of a new era, Maliban do so with
confidence in our ability and vision – a vision to serve Sri Lanka, in this era and the next.
With many new products to bolster the traditional lineup of Maliban classics, range of
goodies is now wider, stronger and more dynamic than ever before.
Remembering what their roots, and looking to the future, Maliban steps in to this new
generation with the confidence gained from fifty years of giving Sri Lanka the very best in
biscuits.
ii. Expertise
Renowned as one of the largest biscuit making units in South Asia, the Maliban factory
at Ratmalana is spread out over 9 acres. It has a production capacity of over around
3000 Metric Tonnes per month, with over 74,000 outlets islandwide stocking its
products.
Utilizing the finest manufacturing machinery in the world, including technology from
Sasib and APV Baker, Maliban products are packaged using the latest technology
imported from SIG of Switzerland and Autowrappers of the UK. Product distribution is
carried out in Sri Lanka via a solid network of 77 exclusive distributors.
Although the Sri Lankan biscuit market is split between 36 companies at an estimated
60,000 MT of biscuits per year (Source: ACN 2006), Maliban and its main competitor
account for roughly 87% of this share.
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Maliban’s decades of commitment to quality was rewarded when the company was
given the ISO 9001:2000 accreditation as a manufacturing company. In 1996, Maliban
also received The National Quality Award, further establishing it in its position as the
industry leader in terms of standards and quality.
Never satisfied, and always striving for excellence in quality, the company thereafter
went on to achieve even higher levels of professionalism, and in the process received
the ISO 14000 and ISO 22000 certifications for its products.
iii. History
From a humble tea shop to one of Sri Lanka’s most recognised brands, Maliban has
come a long way in just over fifty years. As difficult as it may be to believe, the epitome
of Sri Lankan biscuits started off as a simple tea kiosk on First Cross Street in Colombo
Fort. In 1935, its proprietor, Mr. Angunugaha Gamage Hinni Appuhamy, who hailed from
Akmeemana in the Galle District, opened the Maliban Hotel at No. 62 Maliban Street. He
did not know at the time that it was Sri Lankan history in the making. A little over half a
century later, we see his vision dominating the biscuit industry of the entire island.
The young entrepreneur was able to boost the business, and within six months, the
demand for Maliban biscuits outstripped manufacturing capacity.
The company thereafter decided to switch on to mechanised manufacturing, and on
August 4th 1954 its first mass production facility was opened. By 1963 the demand had
expanded so much that the factory was moved to a more spacious location at
Ratmalana, where it resides to date.
The Maliban of today is headed by Chairman Mr. A. G. Ratnapala Samaraweera, son of
Mr. Hinni Appuhamy, and the torch bearer of the Maliban name. The true heirs of the
Maliban tradition however, are all the Sri Lankans who have enjoyed the taste and
quality that we have offered for decades and generations.
Maliban has an unparallel reputation for over 60 years in Sri Lanka, as a producer of
high quality Biscuits. The recent outbreak of Melamine health hazard has Created scare
among the public.
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iv.Achievements
Maliban was the first biscuit manufacturer to be awarded ISO 9001 certification in 1995 and the
National Quality Award in 1996. Its flexible manufacturing systems and compliance with
International Standards have resulted in creating a demand for private label manufacturing
opportunities from the UK and the US. Not content with this, Maliban has gone on to achieve
higher levels of excellence by securing ISO 14000 and ISO 22000 standards. In 2005, Sri
Lanka’s highly regarded business magazine LMD, in collaboration with CNielsen, conducted a
survey to select the 50 Most Respected Sri Lankan Entities. Maliban ranked number two in the
Food & Beverage Sector and was placed twentieth in the overall rankings. Also, obtained
Superbrand status.
v. Maliban Biscuit Products
CrackersCream cracker, Bran Cracker
SavouryKrisco, Cheese Bits, Chick Bits, Potato Cracker
SweetsMilk Shortcake, Glucomalt, Nice, Ginger Nut, Gold Marie, Gem
CreamsCustard Cream, Chocolate Cream, Orange Cream, Lemon Puff, Wafers
Biscuits AssortmentsBiscuit Assortment, Gift Selection, Tea Time Assortment
CookiesSeasons Assorted Cookies, Cashew Nut, Assorted Cookies
The Maliban has customized the products based on the needs of the customer. Out of the products, the group has identified the Savoury product for the assignment. The savoury product has line extension which came up with below products:
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KriscoAnother truly Sri Lankan biscuit, Krisco savouries are flavoured with real spices. With a kick in
every bite, a tin of Krisco is an excellent side serving for virtually any kind of meal.
Nutrition InformationAverage ValuesPer 100g Per Biscuit
Carbohydrate 64.5g 01.20gEnergy 464kcal 09kcalFat 19.0g 0.36gProtein 08.5g 0.16gSalt 02.0g 0.04gSugar 02.0g 0.038g
IngredientsWheat Flour, Vegetable Fat, Sugar, Spices, Salt, Vegetable Extract, Yeast, Sodium BicarbonateAvailable in
180g pack & 230g tin
Cheese Bits
The classic snack attack food, Maliban Cheesebits are an essential part of any quick meal. The
unbeatable combination of cheese and biscuit, tossed together and compacted in to bite sized
nuggets of pure flavour, the Cheesebit is a lot of punch in a tiny package.
Nutrition InformationAverage ValuesPer 100g Per Biscuit
Carbohydrate
69.7g 6.30g
Energy 410kcal 37kcalFat 09.5g 0.86gProtein 11.3g 1.03gSalt 01.3g 0.11gSugar 02.8g 0.25g
IngredientsWheat Flour, Vegetable Fat, Cheese Powder, Spices, Salt, Malt Extract, Dry Yeast, Sodium BicarbonateFlavours
Cheese FlavourColours
E-102,110Available in
90g, 180g packs & 260g tin
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Chick Bits
Chicken and biscuits, an unusual combination, but nevertheless, one that works. The veritable
pop corn biscuit, Chick Bits are best consumed quickly, and in large quantities.
Nutrition InformationAverage ValuesPer 100g Per Biscuit
Carbohydrate
59.6g 0.26g
Energy 491kcal 2.0kcalFat 23.0g 0.10gProtein 10.5g 0.04gSalt 02.5g 0.01gSugar 02.0g 0.02g
Ingredients
Wheat Flour, Vegetable Fat, Autolysed Yeast, Spices,
Salt, Vegetable Extract, Dry Yeast, Sodium Bicarbonate
Flavours
Chicken Flavour
Available in
90g pack
Potato CrackerWhile the mass market brought you potatoe chips, Maliban brought you potatoe crackers. This
unique hybrid of biscuit and potatoe goes well with a side dish of sauce or flavouring.
Nutrition Information – Not Available
IngredientsPotato Starch, Vegetable fat, Vegetable extract, Emulsifier - Lecithin, Wheat Flour, Salt, Natural spices, Sodium Bi-CarbonateFlavours
cheese & onion and chillyColours
Natural coloursAvailable in
100g pack
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1. External Macro and External Micro Environment Analysis of the
Chosen Product
i. External Macro Environment of the Maliban Savoury
Demographic environment:
Demographic environment – It includes Consumer groups like children (school
going – teens), Young adult (19-30 years), Adults (35-50 years), Senior citizens.
When considering the classes, it is cater to lower middle class, middle class, upper
middle class and upper class as well.
Economic environment:
It includes general economy; business cycle which has four phases like
growth/prosperity, recession, depression, recovery; buying power which includes the
financial sources like income, wealth; willingness to spend. If there is a big economic
downturn in the market then the customers will switch to cheaper options and will not
buy expensive biscuits.
Natural environment:
Rain fall, temperatures, effects of deforestation etc., are important criteria as they
have a bearing on consumer behaviour
Technological environment:
It includes the R&D activity, rate of technological change, technology adopted by the competitor etc.
Political and Legal environment:
Running health campaign to discourage people from eating too many fatty foods.
Governments are concerned of the obesity level in the population.
Legal includes the acts like Standard Weights and Measurement Act (1795); MRTP (1969) , Bureau of Ceylon Standards Act No. 38 of 1964 SLAS (Sri Lanka Standard Institution), FOOD ACT No.26 OF 1980. Factors like Consumer protection, State
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regulatory agencies, and Non-government regulatory agencies also influence the company.
Social and Cultural environment:
It includes factors like health consciousness, career choices, Halal certifications for Muslim community who prefers to use product made of Halal ingredients.
ii. External Micro Environment of the Maliban Savoury
Market
Graph 1: Market Share of the Key Manufactures
CBL53%
Mal-iban28%
Sun Rich0.4%
Others19%
Market Share
Source: Survey Data
Total Market : 5,900 mt per month
CBL : 53% 3,127 mt
Maliban : 28% 1,652 mt
Others : 19% 1,121 mt
Sun Rich : 0.40% 23 mt
3.54 kg per capita consumption
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Competitors Competition not only include the other firms that produce same product but also those
firms which compete for the income of the consumers the competition here among these
products may be said as desire competition as the primary task here is to fulfill the desire
of the customers. The competition that satisfies a particular category desire then it is
called generic competition.
Munchee
Cherish
Sun Rich
Maam
Lucky Land
Total number of Competitors - 28
SuppliersAn important force in the micro environment of a company is the suppliers, i.e., those
who supply the inputs like raw materials and components to the company. The
importance of reliable source/sources of supply to the smooth functioning of the business
is obvious.
The main suppliers of the company are as follows:
• Prima Agro Foods
• Serendib Floor
Customers The major task of a business is to create and sustain customers. A business existsonly because of its customers. The choice of customer segments should be made byconsidering a number of factors including the relative profitability, dependability,stability of demand, growth prospects and the extent of competition.
Marketing Intermediaries The marketing intermediaries include middlemen such as agents and merchants that help the company find customers or close sales with them. The marketing intermediaries are vital links between the company and the final consumers.
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Financiers The financiers are also important factors of internal environment. Along with financing capabilities of the company their policies and strategies, attitudes towards risk, ability to provide non-financial assistance etc. are very important.
Public Public can be said as any group that has an actual or potential interest in or on an organization’s ability to achieve its interest. Public include media and citizens. Growth of consumer public is an important development affecting business.
SWOT Analysis of the Environment
Strengths Brand building capabilities Diversified product range The depth of distribution Low and mid price range of the products Industry catering to masses
Weaknesses Dependence on retailers and grocery stores Lack of technology up gradation
Opportunities Biscuit Manufacturer Corporates estimates annual Growth of around 20% in next couple
of years. Growing demand of Sugar free cream crackers & diet biscuits. A package of fiscal incentives provided by various State governments
Threats Fluctuations in the prices of raw materials, transportation costs & distribution Entry of Foreign Products to the Market and having very good distribution channels in
to biscuit industry Emerging local bakery products
3. Porter’s Five Forces Model
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Michael Eugene Porter (1947) Five Forces Analysis helps the marketer to contrast a
competitive environment. It has similarities with other tools for environmental audit, such as
PEST analysis, but tends to focus on the single, stand alone, business or SBU (Strategic
Business Unit) rather than a single product or range of products
Figure 1: Porter’s Five Forces Model
Competitive Rivalry within an Industry
Major players dominate the SL market
High competition among the players
Unorganized sector cannot compete with major players in the case of Advertising
Heavy competition from major players
BARGAINING POWER OF SUPPLIERS
In the case of major players bargaining power of suppliers is very low as they dictate the prices
The ingredients are basic commodities such as wheat, sugar etc.,
HIGH BARGAINING POWER OF CUSTOMER
Availability of many biscuits from low, moderate prices
Availability of biscuits from non-organized sector
Loyalty of the buyers to biscuits that have brand identity makes them more
powerful in the case of new entries.
THREAT OF SUBSTITUTES
Source: http://www.vectorstudy.com/management_theories/img/porters_five_forces.png
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Substitute threat is more in the case of biscuits � Growing packaged industry and bread industry � Traditional Sri Lankan homemade snacks
Advertisement and Product Innovation
Low Pricing and Promotional activities and free offers
4. Identify the possible Segmenting Variables of Chosen Product
The key task to find variable or variables that split the market into actionable segments.
There are two types of segmentations variables:
Needs Profilers
The basic criteria for segmenting a market are customer needs. To find the needs of
customers in a market, it is necessary to undertake market research.
The profilers are the descriptive, measurable customer characteristics (Such as location,
age, nationality, gender & income) that can be used to inform a segment exercise.
The most common profilers used in customer segmentation include the following:
Geographic – Region, City, Density, Climate
Demographic – Age, Family size, Family life cycle, Gender, Income, Occupation, Education,
Religion, Race, Nationality, Social class
Psychographic – Life style, Personality, Values
Behavioral – Occasions, Benefits, User status, Usage rates, Loyalty status, Readiness stage,
Attitudes
i. Market Segmentation – Demographic
Potato Crackers – Sri Lanka’s only potato biscuit in the market. Maliban Potato Crackers
were introduced to the market in 2005, primarily targeting older kids and teenagers with a
new campaign based on ‘A Taste for New Generation’.
Chick Bits - Chicken and biscuits, is targeted for all ages. The veritable pop corn biscuit,
Chick Bits are best consumed quickly, and in large quantities.
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Krisco / Cheese Bits - savouries are flavoured with real spices and targeted for upper
middle class and also for behavioral segments where the product loyalty, those who buy one
brand for all time or most of the time are valuable customers built a strong name. Many
companies try to segment their markets into those where loyal customers can be found and
retained compared with segments where customers rarely display product loyalty.
ii. Market Segmentation - Psychographic
Non of these savoury products are segmented to certain life styles who are very health conscious. The savoury product ranges are rich with Carbohydrate, Fat and Salt therefore certain life styles will not prefer for these products.
5. Identify any New Segment for Chosen Product
Today the war in Sri Lanka is history. Hence there is new hope, new freedom to move about
all over the country. Resultantly, it is ascertained by various researches conducted by
different agencies, that there is an opportunity for local tourist where people of the different
areas would look for opportunities to travel and visit places they hitherto weren’t able to for
the last 30 years. This is about a new segment for the savory product geographically which
could be marketed in the eastern region of the country which was inaccessible due to the 30
year conflict.
6. Product Differentiation
Michael Porter’s The Three Generic Strategies on differentiation
Cost leadership Differentiation Focus
i. Cost Leadership
The companies that attempt to become the lowest-cost producers in an industry can be referred to as those following a cost leadership strategy. The company with the lowest costs would earn the highest profits in the event when the competing products are essentially undifferentiated, and selling at a standard market price.
ii. Differentiation
Porter (1980) has argued that for a company employing a differentiation strategy, there
would be extra costs that the company would have to incur. Such extra costs may include
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high advertising spending to promote a differentiated brand image for the product, which in
fact can be considered as a cost and an investment.
Differentiation has many advantages for the firm which makes use of the strategy. Some
problematic areas include the difficulty on part of the firm to estimate if the extra costs
entailed in differentiation can actually be recovered from the customer through premium
pricing. Moreover, successful differentiation strategy of a firm may attract competitors to
enter the company’s market segment and copy the differentiated product (Lynch, 2003).
iii. Focus
The company can make use of the cost leadership or differentiation approach with regard to
the focus strategy. In that, a company using the cost focus approach would aim for a cost
advantage in its target segment only. If a company is using the differentiation focus
approach, it would aim for differentiation in its target segment only, and not the overall
market.
This strategy provides the company the possibility to charge a premium price for superior
quality (differentiation focus) or by offering a low price product to a small and specialised
group of buyers (cost focus)
The focus on costs can be difficult in industries where economies of scale play an important
role. There is the evident danger that the niche may disappear over time, as the business
environment and customer preferences change over time.
iv. Stuck in the middle
According to Porter (1980), a company’s failure to make a choice between cost leadership
and differentiation essentially implies that the company is stuck in the middle. There is no
competitive advantage for a company that is stuck in the middle and the result is often poor
financial performance (Porter, 1980).
There is huge potential market for product contains Dietary Fiber / Zero Cholesterol with high nutrition facts. People’s perception on health is very concerned where it is a niche market for Sri Lanka however potential for export industry when the product is recognized in the world market. Below is the one of the Kellogg’s product, where it’s enriched with lots of
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nutrition and the information has given on the package itself. These are the trends that the recognized brands are practicing specially on the package where they print valued information in order to identify the facts.
Figure 2: Kellogg’s Saltine Crackers – Krispy Original
Source: http://www2.kelloggs.com/ProductDetail.aspx?id=1033
As mentioned by Porter (1980), there would be extra costs that the company would have to incur. Such extra costs may include high advertising spending to promote a differentiated brand image for the product, which in fact can be considered as a cost and an investment.
7. Re-Positioning
The heart of a value proposition is its positioning hence marketers must pay very special
attention to ensure positioning is handled well.
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This new product can be positioned as ‘Nutrition or Fiber Food for everyone’. The
studies shows that consumption of fiber is associated with lower body weight measures. People
who tend to search nutrient foods with low cost therefore it’s required to re-position the savoury
range with a differentiation. The adverting the product in right time is important where people are
awaiting a product which gives healthier life and it has to be positioned perfectly.
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Reference:
http://marketingteacher.com/lesson-store/lesson-five-forces.html - Accessed on 24th August 2010http://www.vectorstudy.com/management_theories/img/porters_five_forces.png - Accessed on 24th August 2010http://university-essays.tripod.com/porters_generic_strategies.htmlAccessed on 24th August 2010http://www2.kelloggs.com/ProductDetail.aspx?id=1033Accessed on 24th August 2010
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