As there are other strong players like Britannia, HUL, Knorr etc. in the market for branded packaged food, it is imperative for ITC to implement sustainable marketing and operations strategies to gain a competitive advantage and rapidly grow its business share.
In order to attract new customers and to retain existing ones a new plan is proposed for ITC’s Sunfeast to launch brown bread, as growing health concerns and WHO identifying the high level of sugar, salt and preservative found in biscuits as harmful might affect the brand in near future.
The SOSTAC (Situation, Objectives, Strategy, Tactics, Action and Control) framework will be used to understand the company’s marketing strategy. Differentiation in terms of product marketing can be useful for Sunfeast as it already has its presence in the FMCG market, a study of existing strategies of this brand in the FMCG market can help draft new marketing strategies for the future.
Identifying the strengths of ITC in utilizing its already existing market for product marketing, distribution and also its operations strategies implemented to create brand positioning is important in formulating a new strategy, to achieve its goal of sustainable growth through increased revenues and higher profitability.
Detailed understanding of the activities required for the successful implementation and their operationalisation for launching brown bread can be found in the Gantt chart.
As a marketing consultant, this report will aim to exhibit current marketing and operational strategy to implement a sustainable marketing and operations plan that enables Imperial Tobacco Company (ITC) brand of Sunfeast Biscuits to enhance value for its customer and in the process increase its revenue share and profitability
The report will demonstrate the ability of Sunfeast to launch brown bread in fast moving consumer good market (FMCG) of India to generate sustainable revenue and value for both customer and the company, by suggesting meaningful changes to its current marketing and operational strategy.
Critical evaluation of the current and revised Marketing Strategies
In detail, planning of one specific, and new, ‘sustainable’ initiative, and its marketing/operationalising, to both current and new customers
Provide detailed understanding of the activities required for the successful implementation and their ‘operationalisation’
Justify how both Marketing and Operations must integrate ‘strategically’ and drive this initiative for sustainable customer value.
The current situation
Sunfeast biscuits ITC’s brand in the FMCG segment in the ‘branded and packaged food was initiated in July 2003 with an aim to capture the biscuits market and it has been successful in expanding its foray into a range of biscuits and bakery products. According to business standard (2009) the brand has been catering to all segments of the market with variations in its products to help differentiate itself from other brands like Britannia and Parle. Among the other range of products like tobacco, cigarettes, personal care and stationary, the company has is well diversed portfolio in branded food segment that include staple food, biscuits, snack food, ready-to-eat food and confectionery with over 170 different products under 6 brands.
In 2005 Sunfeast diversified into food segment with Sunfeast yippee noodle and pasta to gain sustainable competitive advantage over its competitors like Maggie (Nestle),Knorr (Galaxo Smith Kline) Hindustan Unilever Limited (HUL), utilising a well established distribution channel that has been created by huge tobacco business.
Sunfeast’s key products are : Sunfeast Milky Magic ,Sunfeast Marie Light, Golden Bakery ,Dark Fantasy, Dream Cream, Snacky, sweet ‘n salt, Nice ,Sunfeast Benne Vita Flaxseed Biscuits ,Sunfeast Special.
(Sunfeast collection -source -itcprtal.com)
3.1.2 PEST ANALYSIS FOR SUNFEAST
Rapid development programmes, facilitation of increased FDI.
Larger centralized wholesale markets (Chengappa, 2011 p.1).
Support for competitive markets.
Tax relief for international firms, incentive to develop in India.
Strong technological focus in order to present to the global economy, India as a technology hub.
Greater liberalization in the markets (Market research, 2010 p.1).
Rising consumer spending in India, India’s income will triple over the next three decades (McKinsey Global, 2010 p.1).
Fifth largest consumer market
Predicted to be the second largest economy by 2050 in the BRICS study (Wilson and Purushothaman, 2003 p.19).
Greater infrastructure developments, allowing for a greater output of goods.
Shift from rural spending to the cities, predicted that by 2025 cities will have 62% of the country’s appending power.
Rise in supermarkets.
Desire for healthier produce.
More globalized tastes influencing the range of food produce available.
Greater product ranges, in line with consumer expectations for an increasing amount of variety.
Increased affluence is re-shaping consumer desires. Focus on international brands and goods.
Advances in technology to improve production and operations management. Links with total quality management in which a focus is created on long=term relationships in order to improve production.
Rapidly developing market, rate of change is fast and thus, technological improvements will result in a more innovative culture for the firm.
Technology facilitates greater quality control.
SWOT ANALYSIS FOR SUNFEAST
ITC is one of the world’s most reputable companies
Market capitalization to the value of $18 billion
Diversified product portfolio, which results in a spreading of strategic risk.
Sun Feast has a strong brand image, which connotes happiness and pleasure. Growth rate of 53%.
Focus on experiential marketing in which, the emotional aspects of the brand are highlighted.
Diversification within the product line, presence in all types of biscuits categories.
Strong focus on healthy products, kid friendly goods, which mothers will purchase. This is in line with the changing social environment.
Strong brand image and high levels of customer loyalty.
Successful move into the savory market. Production of noodles and pasta.
Key focus on operations management in order to ensure minimal waste and efficient production. In line with lean manufacturing.
Inherent focus on marketing, customer focus and a need to be reactive and adaptive to change.
The business continues to use its original trading name – Imperial Tobacco Company – this could result in negative connotations with the brand – and it is difficult to find a link between tobacco and Sunfeast goods.
Company is inherently dependent on its tobacco products, as such this accounts for 47% of the firm’s revenue. Thus, the company is likely to experience future criticism due to the health associations with smoking.
Lack of focus on sustainability and corporate social responsibility – this is an area which could differentiate the company in the future.
Failure to treat staff as an intangible resource (Henry, 2007 p.32).
Further expansion into the savory market
Differentiation strategies in order to gain a competitive advantage (Henry 2007 p.42).
Future strategic vision in order to discern trends in the external environment.
Internationalization of product range.
Utilise innovative strategies in order to leverage sales.
Long-term strategic vision to turn the company into India’s premier brand.
Opportunity to increase market share
Increase in both domestic and international competition.
Emerging consumer society could result in greater buyer power.
Is being a diversified conglomerate the most beneficial strategy formation?
Negative association with the parent company.
3.1.4 ANALYSIS OF SWOT AND PEST
A review of the external environment facilitates an ability of the firm to discern trends, which, can then be translated into a strategic vision. To ignore the external environment is to be unfocused, and a in a market as rapidly developing as the food retail market, this could result in a decline in profits for the firm. From a resource-based view of strategy (Wernerfelt, 1997 p.6), it can be seen that ITC are able to utilise their strengths to respond to the market. For example: the company have a strong brand image, and it is this brand image, which has supported the development of the firm’s diversification strategies. The very move into the production of biscuits has been allowed due to high levels of customer loyalty and recognition that the brand represents quality. This will in the future facilitate the firm’s diversification into other markets, such as the launch of brown bread products. Finally, consideration must be given to the huge potential, which the domestic market holds for Sunfeast. India is developing at a rapid rate, and as mentioned has gained increased attention due to the publication of the BRICs study, as such it is important for the firm to further establish themselves in their own domestic market, before tapping into the potential of international markets. Such advice is given due to an influx of international firms, who may produce a more competitive environment, which Sunfeast must be well equipped to respond to.
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3.1.5 STP ANALYSIS OF SUNFEAST
Segmentation is an adaptive strategy, and as such it consists of a separating of the market with the intention of selecting one or more market segments, which will facilitate the ability to match marketing mixes to specific market needs. Through such a strategy Sunfeast will be able to gain a competitive advantage, and this is something, which as noted by Porter (1998p. 231) ‘has a powerful effect on competitive advantage because it shapes the configuration of the value chain’. By understanding consumer needs, Sunfeast will be able to specifically meet their needs and expectations, and therefore, added value results.
Thus, at present Sunfeast can be seen to carry out large amounts of market research. This is something, which provides the firm with an ability to position themselves in the market successfully. They are able to segment their consumers based on their needs, for example: families, affluent single consumers, elderly consumers, those with dietary requirements etc. As a result, Sunfeast have several ranges, and this has resulted in them developing their market share in a steady manner (current market share 10%).
By focusing on the specific needs of the consumer, Sunfeast are able to provide higher value to their consumers. From an economic perspective, it can be seen that firms ‘create monopolistic market conditions through the utilisation of various curves of demand for a specific product category’ (Ferstman and Muller, 1993). Thus, in line with Porters five forces model, it can be seen that specific market segmentation lowers competitive forces through the creation of submarkets, and a more focused marketing approach.
With regards to positioning, Porter (1998 p.42) noted how a firm must either follow a strategy of cost leadership or differentiation. To follow both is to have an unfocused strategy, and thus it can be seen that ITC through their Sunfeast brand target the mass market through a strategy of cost leadership. By targeting the mass market the firm are able to target to the needs of a large group due to a variety of product lines. This in turn produces higher revenues and results in greater profits for the firm.
CURRENT MARKETING AND OPERATIONAL STARTEGY OF SUNFEAST
Establishing a new brand in highly competitive Indian biscuit market was not easy for Sunfeast, especially when it’s an unrelated diversified venture. In 2003, ITC forayed into this market; everybody doubted its ability to launch a successful brand in biscuit market. According to Business Standard (2008) ITC’s ability to gain competitive advantage by utilising its competences like highly organised distribution channel and brand building capabilities has helped establish itself as a serious FMCG player.
Economic times (2009) states that Sunfeast holds 9-11% share of this market. Careful brand building and heavy and innovative promotion has helped Sunfeast position itself as a dynamic and exiting brand. Being a convenience good, Biscuit industry requires constant innovation so that value can be provided and sustained for both customers and shareholders. Innovative products like orange marie and milk glucose biscuits aim to provide that extra value than can edge Sunfeast over its competitors. In 2003, Sunfeast was launched with innovative six varieties of biscuits. Primarily the product, which has been taken as a teatime snack, has encountered a wild transformation with new innovative flavors of Sunfeast. The core strategy of its products has been “new taste, something fresh” and “4 biscuits equal to 1 roti” did wonders. The excellent promotion and advertising policy like Sunfeast Open and “Hara Bano” campaigns helped the product and created awareness among people.
Market Share Breakdown -The Indian biscuit industry is dominated by brands like Parle, Britannia and Sunfeast.
The company set up and integrated food manufacturing facility in each region that gives them advantage when it comes to distribution and packaging. The company leverages its excellent distribution and supply chain management system that has made sourcing from farmers very easy, 4 lakh display rack is a by product of combining both its mark and operation network.
ITC’s Sunfeast packaged food has high quality and safety measures with its manufacturing units being accredited by third party for ‘Hazard Analysis Critical Control Points’ (HACCP) standards. Also, ITC has R&D centers with product-specific technology cells (PTCs) which cater to the business through market intelligence, product testing and ‘Product Quality Rating System’ (PQRS) services, Prototyping services through advanced pilot plants, flavor and fragrance development services, periodic audit of factory quality systems and Product Knowledge and Training Workshops. It also collaborates with national and international R&D institutions to continuously improve its R&D facilities, key processes, products, services & performance (www.itcportal.com)
TV commercials along with print media are prominent in Sunfeast’s advertisements. Celebrity endorsements, children, advertisements revolving around the theme of ‘happiness’ with a smiling sun as logo, event sponsoring like The Sunfeast Tournament for Tennis, etc. are the promotional activities that the brand engages in (Angshu, 2009). ITC has been investing 35-40% of its turnover from the biscuits segment for advertising and promotion which amounts to about Rs 115-120 crore which is much higher than the 10% investment by leading player, Britannia (rediff.com, June 28, 2006).
As mentioned, Sunfeast provides a large selection of different products in packaged food segment, in order to maintain its competitive positioning in the market Sunfeast is continuously increasing its product range. Hence there is a lot to pressure on its marketing department to be dynamic and proactive. New communication strategy is required to reach ever demanding and price wise Indian consumers. Therefore, company cannot rely on same marketing and operational strategies to stay competitive especially when huge global giants like Galaxo SmithKline (GSK) and United biscuits are ready to take on Indian market.
Growing health concerns regarding effects of packaged food on kids has not helped the company as majority of the products are targeted towards kids. World health organization (WHO) has identified the high level of sugar, salt and preservative found in biscuits as harmful for kids. Therefore, company has to come up with products that are free from artificial stuff and at the same time is health option rather than just being a snack so that value can be added and sustained for its customers and shareholders in long run.
PROPOSED MARKETING PLAN
In order to minimize level of salt, sugar and preservative and yet improve value for the customers, Sunfeast can introduce brown bread which is rich in anti-oxidants like magnesium, iron, selenium etc. Brown bread rich fibre content acts as a bowel stimulant and prevents digestive problems and constipation. Brown bread has zero calories and it is very good for health. According to (hdfc.com) there are about 75000 bread manufacturers spread all over India including some of those operating from even residential premises. South India consumes 32 percent of the total bread produced in the country followed by north which consumes about 27per cent, west 23 per cent and east 18 per cent. The total bread production in the country is estimated to be 3.75 million tonnes annually growing at a rate of about 6 per cent. Sunfeast will need to have manufacturing units in all four regions to keep quality and freshness.
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The key driver that indicates vast scope for consideration of nutrient enriched brown bread is the encouraging trend among of population of lower and middle class to consume nutrient rich bakery products. According to a survey conducted by times of India (2010) bread consumption during breakfast is finding popularity among Indians, replacing traditional Chapattis. This initiative will help Sunfeast gain 2-4 % share in first year and in the year two can company will plan to target wholesale market by supplying Kfc and McDonald direct which will help generate extra revenue and contribute to grow overall revenue of Sunfeast by 4-6% in year three.
Sunfeast has a core strategy of providing healthy products at basic price and our proposed plan is in line with overall business strategy.
3.2.1 SOSTAC FRAMEWORK
The SOSTAC framework will be used to discuss the marketing strategy for Sunfeast brown bread. This framework helps evaluate the brand’s position in the market along with identifying ways or options of how to position it in the future (Smith, 2003).
SOSTAC- a generic framework for e-marketing planning
18.104.22.168 SITUATION – where are we now
In order to analyse the current situation the TOWS matrix will be used as below:
TOWS MATRIX FOR SUNFEAST
1-Long-term trend of consumers purchasing healthier goods.
2- Expansion of diversified product ranges. The opportunity to use brand image to further the business portfolio of the group.
3- Increasing consumer spending, more affluent market.
4- Rise in supermarkets allowing for products to reach a greater mass market
1- Global economic crisis causing a strain on consumer income.
2-Rise in social concerns, linked to negative connotations with the parent company image.
3-Increased domestic and international competition. ITC must focus on the creation of submarkets and a focus on diversification strategies.
1- Trusted brand image, this is linked to higher levels of customer loyalty.
2-Strong, reputational brand in India.
3-Infrastructure development in India.
4-Strong customer focus and a development of the marketing mix.
1-Strong organisational culture, focus on innovative measures.
2-Expansion of product ranges to spread risk and target a larger mass market.
3-Rise in e-commerce, online supermarkets allowing a greater access to markets.
1-Intangible focus on staff. Greater training and development in order to ensure strong supplier relationships and consumer relationships.
2-Differentiation in order to overcome competition.
1-Confused brand image, no clear link between tobacco and biscuits.
2-Issues with quality control, returned produce.
3-A need for a clear strategic focus.
1-Clear displays of product ranges.
2-Changing the image of ITC in order to present one clear dedication to a specific product range.
1-More customer orientated relationship.
2-Focus on added value for the consumer; experiential marketing will enable a greater ability to link to consumers.
22.214.171.124 MARKETING MIX OF SUNFEAST -7PS
The marketing mix of sunfeast has helped it grow 28% in the last quarter.
Figure On next page
3.2.2 OBJECTIVES – Where do we want to go
The objective of introducing Sunfeast’s brown bread will be discussed in details below using the SMART model.
Greater focus on training programmes for their staff. This will promote the intangible nature of their staff, which in turn will contribute to a competitive advantage. This can be developed within 1-2 years.
( Continued-next page)
Focus on strong relationships with the consumer and suppliers. This will increase the quality of the goods being released and will ensure a greater reputation.
Continued development on product ranges – greater diversification.
Launch of a brown bread range.
Feedback systems can be developed to review the financial benefits associated with a greater development of strong relationships with suppliers.
Feedback systems from which consumers can give their opinions and input into new product ranges.
ITC has an established recognition as a strong and developed brand. As such it can be seen that the firm have already many provisions in place, which will ensure the achievability of the objectives.
http://www.itcportal.com/shareholder/annual-reports/itc-annual-report-2010/images/page39-1.png(The Stockholm challenge award 2006 ITC e-chaupal winner)
The firm has strong resources and capabilities. As such it is these resources, which will develop an achievability of the objectives.
The objective to build stronger relationships with both suppliers and consumers is realistic as it is in line with the culture of the firm. Furthermore, it can be seen that the development of new product ranges, is in line with the innovative culture of the firm.
Large and experienced workforce.
A detailed breakdown of time required to complete this objective can be found in appendix 1.
3.2.3 STRATEGY – How do we get there?
Strategic vision is seen as the long-term direction of the firm. A focus on a vision is needed and as such this will develop the organisational culture of the firm (Wilson, 1992 p.18). ITC have a strategy, which is customer focused, and in turn this has resulted in a development of ranges, which are specific to consumer needs. Segmentation of the market can clearly be identified as the family market, and the more affluent single market. Thus, a clear differentiation exists between milky family biscuits, and luxury chocolate biscuits. Even better understanding of market segmentation, targeting and positioning is needed for future success. The launch of a brown bread product range requires a greater understanding of the market, and thus a combination of internal, external and customer analysis will contribute to the development of a strategy which is customer focused.
3.2.4 ACTION – Who is responsible for what and when?
ITC need to conduct in-depth customer research in order to find out whether customers have a desire to eat brown bread, and whether they would purchase such a good, and if so at what price. Pricing strategies are vital, and as such it can be noted that the price point of the product must be correct. Furthermore, due to it being a new product launch, the company must ensure that quality is assured. This therefore promotes a need to focus on marketing strategies and in particular the need to promote experiential marketing (Schmitt, 1999 p.53). The product range can be tried by consumers, and can result in the development of a customer base before the official launch of the product. The company must focus on building an image, and developing an emotional link between the consumer and the product.
Table below (Source: Sustainability Report 2010, 2010, pp 30, 31) represents the stakeholder’s roles and responsibilities at ITC:
Ensure continued profitability and growth, communication and investor servicing.
Corporate website is made available to inform and serve the shareholders with a direct response email too. Also, the Chairman meets the shareholders at the Annual General Meeting to address and provide clarifications through an open dialogue.
Share needs and aspirations for products and services during customer engagement process.
Market surveys, personal contacts, customer satisfaction surveys, joint development and improvement projects, discussions of quality, cost, etc during customer engagement process.
High levels of performance to strengthen organizational efforts for competitiveness.
Through workplace interactions, talent recognition programmes and employees/Manager surveys, employees are engaged to remain globally competitive.
Form part of the value chain.
Improve quality of agri-based raw materials sourced from the farmers by partnering with them while ensuring improved productivity, assured markets and better price realization.
Have a critical role in the value chain as they have the capability to provide quality products and services.
During the supplier engagement process, supplier concerns like cost of materials, timely payments, variability in demand, capacity improvements, etc. are discussed and compliance to standards are ascertained.
Responsible for the social performance of the company as part of its vision for inclusive growth.
Community need assessment surveys in and around the operating units to provide support.
Regulatory and public policy frameworks through industry bodies.
Best-in-class practices adopted by proactively interacting with Government Regulatory authorities.
3.2.5 CONTROL – How do we keep track of progress?
Planning and control are inherently linked and are a necessary part of any marketing plan. Control is a fundamental management activity, and as such it can be seen that there is a growth in strategic management literature (Jaworski, 1988 p.23). At a strategic level it can be seen that the firm must track progress in a manner, which contributes to both the short-term objectives and long term goals of the firm. Feedback systems are vital, and as such it is important that SMART objectives must be considered in a manner, which can be controlled.
3.3 OPERATIONAL CHALLENGES AND PLANS TO OVERCOME THEM.
There are operational challenges associated with the development of a new production range. At present the firm produce largely biscuits, however, recently have made moves towards the production of pasta and noodles. Therefore, the firm has the ability to change their production lines in order to facilitate the production of brown bread. Importantly, any change to the organisation has to be linked to change management theories (Hayes, 2007 p.12). And, as such it can be seen that the work of Kotter (1996) must be followed to ensure that the change is a smooth process. Change must be communicated in a clear manner, and most importantly the firm must project that the introduction of a brown bread product range would result in greater opportunities for the firm.
3.4 STRATEGIC INTEGRATION OF MARKETING AND OPERATIONS
There is an inherent need for an integrated marketing mix. Furthermore, it is important that any marketing techniques are inherently linked to the operations of the firm. This integration will ensure that a smooth image is presented to the consumer, and such a clear brand image will link to higher levels of customer loyalty. There is a need for the two departments to work together, largely due to the fact that production will vary depending on what the marketing department dictate. The integration of the two will focus on much more than just supply and demand, and will focus on an improved organisational culture (Pickton and Broderick, 2008 p.19).
In conclusion, in relation to the SMART objectives it can be seen that the launch of a brown bread product range would be in line with changing consumer demands, and would be aligned to the projection of the future financial figures. ITC must focus on the provision of product ranges, which are targeted to the needs of the consumer. Healthier demands, and a focus from the government on healthier and outdoors activities, drive the market for healthier produce such a brown bread. By showing the consumer the benefits of the brown bread, they will be able to tap into a differentiated market and gain a competitive advantage.
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