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Saturday, August 31, 2019
Fin 516 Quiz 2
1. | Question 😠(TCO D) Which of the following factors would increase the likelihood that a company would call its outstanding bonds at this time? (a) The yield to maturity on the company's outstanding bonds increases due to a weakening of the firm's financial situation. (b) A provision in the bond indenture lowers the call price on specific dates, and yesterday was one of those dates. (c) The flotation costs associated with issuing new bonds rise. (d) The firm's CFO believes that interest rates are likely to decline in the future. e) The firm's CFO believes that corporate tax rates are likely to be increased in the future. | | | Student Answer:|  | (b) A provision in the bond indenture lowers the call price on specific dates, and yesterday was one of those dates. |  | Instructor Explanation:| Answer is: b Chapter 20, pp. 810 – 815 | | | | Points Received:| 20 of 20 | | Comments:| | | | 2. | Question 😠(TCO D) The State of Idaho issued $2,000,000 of seve n percent coupon, 20-year semiannual payment, tax-exempt bonds five years ago.The bonds had five years of call protection, but now the state can call the bonds if it chooses to do so. The call premium would be five percent of the face amount. Today 15-year, five percent, semiannual payment bonds can be sold at par, but flotation costs on this issue would be two percent. What is the net present value of the refunding? Because these are tax-exempt bonds, taxes are not relevant. (a) $278,606 (b) $292,536 (c) $307,163 (d) $322,521 (e) $338,647 | | Student Answer:|  | (a) $278,606 Cost of refunding: Call Premium = 5% (2mil) = 100,000 Floatation cost = 2% (2mil) = 40,000 Total investment outlay = 140,000 Interest on old bond = 7%/2(2mil) = 70,000 Interest on new bond = 5%/2(2mil) = 50,000 Savings = 20,000 PV of savings, 30 periods at 5%/2 = 418,606 NPV of refunding = PV of savings – cost of refunding = 278,606 |  | Instructor Explanation:| Answer is: a Chapter 20, pp. 810 – 815 Call premium: 5%                                 Old rate: 7% Flotation %: 2%                                   New rate: 5% Amount: $2,000,000                              Years: 15Cost of refunding: Call premium = 5% ($2,000,000)                       $100,000 Flotation cost = 2% ($2,000,000)                     $ 40,000 Total investment outlay:                                   $140,000 Interest on old bond per 6 months: Old rate/2 ? Amount =         $70,000 Interest on new bond per 6 months: New rate/2 ? Amount =       $50,000 Savings per six months:                                                            $20,000 PV of savings, 30 periods @ new rate/2 = $418,606 NPV of refunding = PV of savings – Cost of refunding = $278,606  | | | | Points Received:| 20 of 20 | | Comments:| | | 3. | Question 😠(TCO D) New York Waste (NYW) is considering refunding a $50,000,000, annual payment, 14 percent coupon, 30-year bond issue that was issued five years ago. It has been amortizing $3 million of flotation costs on these bonds over their 30-year life. The company could sell a new issue of 25-year bonds at an annual interest rate of 11. 67 percent in t oday's market. A call premium of 14 percent would be required to retire the old bonds, and flotation costs on the new issue would amount to $3 million. NYW's marginal tax rate is 40 percent. The new bonds would be issued when the old bonds are called.What will the after-tax annual interest savings for NYW be if the refunding takes place? (a) $664,050 (b) $699,000 (c) $768,900 (d) $845,790 (e) $930,369 | | | Student Answer:|  | (b) $699,000 Old Interest: 50,000,000(. 14)(. 60) = 4,200,000 New Interest: 50,000,000(. 1167)(. 6) = 3,501,000 Difference is 699,000 |  | Instructor Explanation:| Answer is: b Chapter 20, pp. 810 – 815 Old interest: $50,000,000(0. 14)(0. 6) =                  $4,200,000 New interest: $50,000,000(0. 1167)(0. 6) =              (3,501,000) Net annual interest savings                                    $699,000  | | | Points Received:| 20 of 20 | | Comments:| | | | 4. | Question 😠(TCO E) Financial Accounting Standards Board (FASB) Statement #13 requires that for an unqualified audit report, financial (or capital) leases must be included in the balance sheet by reporting the: (a) residual value as a fixed asset. (b) residual value as a liability. (c) present value of future lease payments as an asset and also showing this same amount as an offsetting liability. (d) undiscounted sum of future lease payments as an asset and as an offsetting liability. e) undiscounted sum of future lease payments, less the residual value, as an asset, and as an offsetting liability. | | | Student Answer:|  | (c) present value of future lease payments as an asset and also showing this same amount as an offsetting liability. |  | Instructor Explanation:| Answer is: c Chapter 18, pp. 738 – 740 | | | | Points Received:| 20 of 20 | | Comments:| | | | 5. | Question 😠(TCO E) In the lease versus buy decision, leasing is often preferable: (a) because it has no effect on the firm's ability to borrow to make other investments. b) because, generally, no down payment is required, and there are no indirect interest costs. (c) because lease obligations do not affect the firm's risk as seen by investors. (d) because the lessee owns the property at the end of the least term. (e) because the lessee may have greater flexibility in abandoning the project in which the leased property is used than if the lessee bought and owned the asset. | | | Student Answer:|  | (c) because lease obligations do not affect the firm's risk as seen by investors. |  | Instructor Explanation:| Answer is: e Chapter 18, pp. 740 – 745 | | | | Points Received:| 0 of 20 | | Comments:| | | | | |
Friday, August 30, 2019
Marketing Management Project Elements Essay
* What should Sonic’s mission statement be? -â€Å"Make technology an asset in your life and not a setback. Be the creator of your world through advanced technology. Sonic brings advanced technology to you through providing communication, information storage and exchange, organization and entertainment on mobile devices†. * In what competitive spheres (industry, products and applications, competence, market-segment, vertical, and geographic) should Sonic operate? Industry: PDA’s and smartphones for all lifestyles. Whether personal, business, or the student on the go. Products and applications: Smart devices that have numerous features and functions on a single device. Some features may include, Wi-Fi capabilities, Bluetooth technology, high definition quality videos, live movie and television streaming, music, camera, and security system all available at a competitive price. Competence: Creating and selling an original product with a wide range of features at a reasonable rate Market-Segments: Students can use the device to contact family and friends while on the go and also as multimedia device. Professionals may be more inclined to use the smart devices for business, such as scheduling appointments, emailing employees, customer transactions, and organizing contact information. Entrepreneurs and corporate users may seek to update and access critical data. Vertical: The product is manufactured and distributed throughout the U.S. markets by wholesalers and retailers. Geographic: The product is placed throughout the country. * Which of Porter’s generic competitive strategies would you recommend Sonic follow in formulating overall strategy? Sonic should look at Porter’s differentiation of focus generic strategy. One of Sonic’s strength is its clever and unique products. Since there products are innovative, it stands out from similar products that may already be on the market. Also, Sonic focuses and targets its products on a few segment markets and aims them at users for different uses. * What demographic changes are likely to affect Sonic’s targeted segments? The target segments that are likely to be affected are the professionals, students, corporate users, entrepreneurs and medical users. The demographic changes would be in age, gender, income, schooling and the kind of work a person does. All these would serve as the body of consumers or non-consumers that would buy Sonics new product. * What economic trends might influence buyer behaviour in Sonic’s targeted segments? The economy is always experiencing alternating periods of growth and decline. In this case economic trends that may influence a buyer behaviour of Sonics target segments is that technological development would have to be on the rise, allowing better ways to do certain things. Also period of growth would be and influence. Persons would spend more money during that time of economic growth. * How might the rapid pace of technological change alter Sonic’s competitive situation? The rapid pace of technological change may alter sonic competitive situation because of the large market of technology. Other companies that are in the same market that are targeting the same demographic would serve as competition. The competitors would come up with new and innovative ideas so that they may be the leaders in that market. * What surveys, focus groups, observation, behavioural data, or experiments will Sonic need to support its marketing strategy? Be specific about the questions or issues that Sonic needs to resolve its marketing problem. Sonic will need to use online surveys, small focus groups and observation to support its marketing strategy. An online survey will be ideal for Sonic as it is more beneficial to collect quantitative information in the fields of marketing from numerous consumers and the target market. A small focus group should be done on students, ranging from ages 18-25 to discern why PDA’s may or may not be popular among this age demographic. The moderator can ask questions such as, â€Å"How many persons are willing to pay more money for a newer, improved product with more features?†. The questions can then become more specific and the moderator can ask about the various brands of PDA’s, preference in brands, pricing, and factors that may persuade a consumer to purchase a certain product. Observation will also be needed to support Sonic’s marketing strategy. Company researchers can observe individuals and settings unobtrusively as they shop for products. They can also ask consumers to write down, there thought process, what they look for in a PDA, as well as how they compare pricing and perceived value amongst products. * Where can you find suitable secondary data about total demand for PDAs over the next two years? Identify at least two sources (online or off-line), describe what you plan to draw from each source, and indicate how the data would be useful for Sonic’s marketing plan. Suitable secondary data can be found online websites such as â€Å"Business.com†and â€Å"ReportLinker.com†. Using â€Å"Business.com†, information can be gathered on the latest news and trends regarding PDA’s. By using this source, we plan to draw information on the newest personal data assistants and handheld computers on the market and how they compete. How other businesses use PDAs in specific industries for specialized task and what may be on the horizon for cutting edge PDA technology. By using â€Å"ReportLinker.com†we will be able to view trends, analysis, statistics and various PDA market reports throughout the country as well as globally. * Recommend three specific marketing metrics for Sonic to apply in determining marketing effectiveness. To determine marketing effectiveness Sonic should apply these three marketing metrics: 1) Sales by market segment. 2) Brand awareness. 3) Customer Satisfaction.
Thursday, August 29, 2019
Foucault's Discipline and punish Essay Example | Topics and Well Written Essays - 500 words
Foucault's Discipline and punish - Essay Example an organic group of individuals who have supposedly internalized a set of society (or community) acknowledged norms, rules, regulations and values through other disciplinary organizations (Erlandson 21). ‘Body’ occupies a crucial part in Foucault’s social disciplinary theory. Since punishment cannot be non-corporal, the goal of modern punishment system should be to produce ‘docile body’ through continuous regulation and supervision. A ‘docile body’ is supposed to be dominated by an individual’s soul. So, modern penal system must focus on the reform of the individual’s soul. For Foucault, ‘soul’ is an individual’s psychic mechanism which regulates the actions and behaviors of the ‘body’ in response to and in accordance with the demands of the existing political power or the regime of power and knowledge (Foucault, â€Å"Power/Knowledge†, 18). Since ‘body’ is the subject of â€Å"political technology†, modern society is endowed with a penal system which helps the body or the individual to create or reprogrammed a soul which, internalizing the fear of punishment, overpowers a docile body. For Foucault, the internalized prison is much stronger than the one, built of concrete. Foucault’s â€Å"Discipline and Punishment†is, indeed, dedicated to explaining the modern penal system. Referring to the public corporal execution and punishment of the delinquents on the scaffold during ancient and medieval ages, Foucault argues that punishment was not only judicial but also political. Punishment as a political ritual was aimed to let the public body internalize the fear of the King or political authority as the authority of the individual’s body. According to him, the focus of punishment, as a more generalized form ‘Discipline’, shifted from ‘body’ to ‘soul’ during the Reform Movement in Europe. Through social disciplinary institutions, people were supposed to internalize the panoptic presence of power. During the modern age, â€Å"The
Wednesday, August 28, 2019
Race, Multiculturalism, Inclusion and Education Essay
Race, Multiculturalism, Inclusion and Education - Essay Example It is the hope of this author that such a level of analysis will allow the reader to at least briefly engage with the important means by which identity is formed and how the education or, and the educational process for that matter, can seek to integrate more fully and appropriately with these identities. One of the more nebulous of the concepts which has been discussed above is necessarily that of race. Ultimately, race has been used as means of categorizing humans by cultural, genetic, geographic, anatomical, linguistic, social, religious, or historical means. As a function of this, the very definition of race is something that sociologists and anthropologists continue to argue about. Due to the many determinants of race that exist, is oftentimes been decided that since no working and firm definition of what defines one and what defines another can readily be agreed upon, ethnicity, or the means by which an individual is defined as a result of culture and geographic origin, is a fa r better identifier of people. Broadly speaking, race, and racial definitions is something that the educator must integrate with; whether or not they are of the opinion that such a definition is ultimately helpful. Due to the fact that the educator is responsible not only for integrating directly with the society but also with explicating and defining the means by which past history has taken place and continues impact upon the stakeholders within the classroom, race is not a topic that can merely be brushed aside and deemed as a prior an unsuccessful method of grouping individuals. The fact of the matter is that even as academia and society as a whole differs upon an approach and appreciation for such a concept, it remains incumbent upon the educator, and educational process by extension, to continue to place a level and degree of focus upon the importance that race necessarily engenders. Regardless of the potentially flawed an incomplete understanding and appreciation for how race impacts upon the individual and society that the students might necessarily have, it is incumbent upon the educator to seek to distance himself/herself from any of these faulty pre-conceived and ultimately unscientific interpretations (Race, 2011). However, this must be done delicately in with a degree of understanding that encourages discourse while the same time maintaining civility and promoting individual and group rights within the student body. Within such a dynamic, it is possible for the educator to seek to broach the topic with as little intrusion and divergence into unhelpful interpretations and norms as is possible. Similarly, ethnicity, and its interpretation within modern scholarship, is something of the golden standard with respect to seeking to differentiate one individual/group from another. However, it should not be understood that such an approach is invariably on flawed. Rather than relying upon racial distinction as a means of defining one group from another, an d ethnic approach necessarily places the primary emphasis upon geographic region of origin and/or cultural influences that impact upon the individual. In much the same way, the educator might just as well as a a second-generation German immigrants who resided in Mexico for most of his formative years as Mexican. Further, from the educator’s standpoint, ethnicity, and the interpretation thereof, has become one of the primal
Tuesday, August 27, 2019
Soviet response to the Hungarian revolution of 1956 Essay
Soviet response to the Hungarian revolution of 1956 - Essay Example Only a major and relentless Soviet military incursion quickly put an end to the profound political transformations happening in Hungary, the setting up of the Soviet-ruled administration led by Janos Kadar, and launched the ruthless rebuilding of Soviet rule in the country. This paper discusses the Warsaw Pact and the roots and effects of Hungary’s withdrawal from the pact on Soviet power and alliances. Introduction The Hungarian Revolution of 1956 characterized the unparalleled confrontation to communism in East Central Europe’s postwar history and regarded as one of the most disastrous episode in the series of political reforms after the demise of Stalin and loosening Stalinist rules in the province. The revolution had three separate stages characterized by transition in leadership. Stalinists were deposed on the 28th of October and the administration of Imre Nagy proclaimed its approval of the revolution, a negotiating period was affirmed, and the Soviet army pulled out from Budapest.2 Janos Kadar declared the establishment of the Hungarian Socialist Worker’s Party, and the formation of revolutionary organizations began. On the 1st of November the Soviet heads declared the initiation of the second military intervention.3 The Warsaw Pact and Hungary’s Withdrawal The Warsaw Pact is an agreement between the Soviet Union, Romania, Poland, Hungary, East Germany, Czechoslovakia, Bulgaria, and Albania, which was ratified in 1955 and was formally named ‘The Treaty of Friendship, Co-operation and Mutual Assistance’.4 Supposedly the Warsaw Pact was a reaction to an analogous agreement formed in 1949 by Western Allies, the North Atlantic Treaty Organization (NATO), and the 1955 West Germany’s re-militarization, which raised impending risks to the Eastern nations.5 Even though it was emphasized by everybody that the Warsaw Pact was founded on absolute global equality and joint intervention in one another’s domestic issues, the agreement rapidly became a potent political instrument for the Soviet Union to control its allies and exploit their military might and influence. When Hungary attempted to pull out from the 1956 treaty, Soviet military responded to defeat the rebellion.6 There are several causes and effect of the withdrawal of Hungary from the Warsaw Pact. Hungary was the first among ex-Soviet protectorates to raise the possibility of unilaterally retreating from the Warsaw Pact. Rezso Nyers, the Hungarian Socialist Party Chairman, declared in January 1990 that the country withdrew its membership from the Eastern Bloc and that it planned to encourage better alliances with Central European countries, such as Bulgaria, Romania, Poland, Czechoslovakia, and West Germany.7 Nyers further appealed to the Soviet military to exit Hungary immediately. Afterwards, Budapest made a settlement for the total extraction of Soviet troops by the 30th of June 1991, which was ratified on the 10th of March 1 990, by the foreign representatives of Hungary and Soviet Union.8 Budapest, in 1990 and 1991, was determined in its resistance to the prolongation of the Warsaw Pact. Prime Minister Jozsef Antall proposed in June 1990 that the
Monday, August 26, 2019
Unit 2 Essay Example | Topics and Well Written Essays - 500 words - 2
Unit 2 - Essay Example (CFA, 2009) II. There is no single or correct value for a ratio. Normally, the ratio value may be too low or too high in comparison to reference value. Ratios can therefore mislead especially when they are not combined with economic need and management of the company. Therefore, one must consider the products, competitors and the vision of the company. III. It is generally hard to define the goodness- appropriateness of the ratio or its badness. Ordinarily, high cash ratio is historically classified and may be interpreted as a good sign especially when the company is growing, but could also interpreted as a sign that the company is no longer a growth company. V. The inflation also changes companys balance sheet hence affecting the profits accrued from the organization. Therefore, a ratio analysis of one company over time or a comparative analysis of companies of different ages must be scrutinized with understanding (CFA, 2009) I. Free cash flow is the amount of cash that a firm has in the bank at any given time, after all of its bills and payables are accounted for. It is determined on a daily, weekly, monthly, or yearly basis. Free cash flow is given by the total cash flow or the earnings with noncash charges added back in, minus capital spending. II. Free cash flow is important in the progress of any business because an excellent indicator of the strength of the marketplace. It normally focuses on the ability to pay bills and the remaining cash invested in growth and expansion projects. It is vital in assessing financial health of the company because it strips away all the accounting assumptions built into earnings III. Free cash flow is vital and it represents the operating cash flow after interest, the cash taxes, and normal capital expenditures. This is the cash flow that is available to a firm or a company used for dividends, debt repayment or the acquisitions of a new business. Investors use free cash flow in
Sunday, August 25, 2019
Human Resourse Manager Essay Example | Topics and Well Written Essays - 500 words
Human Resourse Manager - Essay Example Many companies manage the transition but experts conclude that they usually have it rough with when making changes thus need to make improvements. The design of the experiment is based on the transition that occurs to management in any given business. Failure to management transition may occur in an organization when scientists believe that skills for supervision are learnt through experience. Benefits expected in this experiment include description of supervision opportunity to the intended management candidate. This is very important because the supervisor understands the fact that science and supervision in any given work is not a dangerous misconception as believed by majority. The supervisor understands that when recruiting any employee in whichever field one has to consider the mix of science and supervision if it is workable. Another benefit is that, the supervisor is enlightened of the organizational needs that are constantly changing as a result of technical obsolescence setting in thus need to update his schedule to counteract or adapt these changes. The experiment also aids in considering the additional of supervisory responsibilities which inhibits scientists or engineers role. This directs one to determine whether or not that person has shown the interest in the work dedicated. For this experiment, a random sample of 30 employees will be used considering the size of the company. The samples will be drawn from all five departments - six from each function of the company. Such a sample is expected to be truly representative of the company’s population of workers. The variables or factors in this case will include age, gender, experience level, and field of work. A random sample is used since it is easy to use compared to a probabilistic sample. When conducting the experiment, non-responsiveness of respondents may hamper progress and lead to unreliable results. In addition, there may be cost constraints which may reduce the limit of the
Saturday, August 24, 2019
Question 2 Z Essay Example | Topics and Well Written Essays - 1250 words
Question 2 Z - Essay Example However, their distinct differences in terms of formation, structure and ultimate objective distinguishes them. Interest groups are encapsulated within the blanket of pressure groups, which are organizations that are formed on a voluntary basis and are private in nature operating not to form a government but aims at influencing and regulating policies that a government formulates. Pressure groups are either cause groups or Interest Groups (Kenneth 200). Pressure Groups are the groups that aim to influence the government politically, a significant distinctive feature. Interest groups are different from cause groups as they (interest groups) focus on occupational aspects that affect their members; be it issues to do with business, trading, and professional regulations among others. Its main focus revolves around the welfare of those they fight for in occupational capacities. For example, a Teacher’s Union would raise teachers’ grievances to the Ministry of Education concerning delayed salaries. Structures and hierarchical line of power that commands broad edges of issues affecting people with a belief that given a chance they can provide solutions to those problems. They aim to escalate to power and provide political governance to the people and the issues they touch on are much more general than those of interest groups, which are only about occupational issues. As referenced by Caramani (200), adapted from Huckshorns (1984:10), a political party is a group of independent individuals whose aim is to compete in nominations and run for elections in order to escalate to power and have control of the government. Arguably, political parties aim to escalate to power and capture government offices that give it a mandate for governance. According to Caramani (268), Social Movements are collections of individuals with a clearly recognized rival and are involved in a battle and share a central
If you were a legislator in the New York State Legislature, would you Essay - 1
If you were a legislator in the New York State Legislature, would you vote to uphold or repeal this latest tax increase Why - Essay Example The NY excise tax increase is now considered the highest excise tax imposed by a state on cigarettes and tobaccos (NCSL 2010 p. 2). Opponents of the tax increase argue that it is inherently regressive because it affects the ‘have-nots’ more than it does the ‘haves.’ Furthermore, these increases are said to be defeating their purpose, which is to raise revenues, because they can drive away potential customers who may altogether quit smoking or who may use backdoor sources to obtain their fix. On the other hand, proponents of the tax measure, specifically the legislators, contend that it will help keep New York sustain and maintain its health care programs (Confessore 2010). The biggest argument, however, for the measure comes from health advocates and researchers who are extolling the tax increase as a vehicle for compelling smokers to quit the habit and ultimately saving more lives. If I were a member of the New York Legislature, I too, would have supported and voted for the passage of the latest round of excise tax increases on cigarettes and tobacco because it will ultimately redound to the good and welfare of the public. First, it is good for the public health because of the possibility of reducing smoking prevalence especially of the young, who are unwilling or unable to shoulder the rising cost of the habit, and; second, if it could not compel a significant number of smokers to quit, then the government will get to achieve its purpose of raising revenues to fund its health-related programs. That smoking is deadly not only to the person smoking but also to the people around him is already an established fact. This is evinced by the 1998 Tobacco Master Settlement Agreement (MAS) where top tobacco and cigarette producers agreed to compensate, in perpetuity, billions of dollars to a considerable number of states for the costs expended by the latter in the care of individuals suffering from smoking-related illnesses (A Broken Promise to our
Friday, August 23, 2019
Information Systems Strategy Essay Example | Topics and Well Written Essays - 3000 words - 1
Information Systems Strategy - Essay Example , and so on) to other individuals for free or in exchange for another item, will safeguard the environment, as it will reduce the waste sent to landfill as well as reduce the demand for natural resources. In addition, the organization wants to support individuals and families, who are economically deprived or struggling, by offering them an online platform where they can find items for free or in exchange for other unwanted items. In any organization, organizational structure provides the framework for the founders or leaders as well as the department heads, supervisors, employees, and others to operate in a streamlined and effective manner. This is applicable to online organization such as ReuseUK, and particularly for the organizations with dual or multiple founders or leaders. As ReuseUK consist of two founders, they have a range of options to choose from including partnership, corporations, and others. â€Å"Which one is right for you depends on many factors, including how much control you want to maintain, tax and liability issues, and your business goals†(Simon 2013). In that direction, partnership appears to be the suitable organizational structure for ReuseUK to follow. The advantage with partnership based organizational structure is that it provides management flexibility, so that management decisions and other responsibilities can be allocated among the partners according to business needs a nd each partner’s strengths (Simon 2013). In that direction, while one partner has an Information Technology (IT) background, the other has social enterprise background, both of which can be utilized to manage this IT based social enterprise organization. Partner with IT background can take care of the website functioning and the related tasks, including supervision of the IT support analyst and importantly the IS strategy. Although, the partner with social enterprise qualifications can manage the content of the website, along with other key personnel of marketing
Thursday, August 22, 2019
Postal Survey Essay Example for Free
Postal Survey Essay I have decided to use postal surveys and internet questionnaires for my survey methods. Both of these are relatively inexpensive, this is one of the reasons I chose them as I would not be able to afford face to face questionnaires, focus groups or phone surveys as they would be to expensive for me to do when starting a new business. Postal Survey I have chosen to use postal surveys as even though they have to be of low depth, I will be able to find out the basic needs of my customers, on which I can base my businesses goals. For example if most of my results say that my customers would want a cheap yet elegant service, my goal would be to provide this. I also believe postal surveys will be a good idea, as I can post them around the area in which I believe my customers will be (mainly Chorley). By doing this I will be marketing my business to the customer. Another way of arranging my postal survey would be to find out where single people live, or where people live who have been buying wedding magazines (as these will be my main customers). Then I can send my postal surveys to them so I am not wasting money by sending the survey to people who will definitely not be my clients. I have also decided that when sending out these postal surveys, I will attach some kind of coupon or money redeeming voucher so that there is a reason for whom I sent the survey to, to fill it in. An example of the coupon would be 10% off organisational fees with KLH Wedding Co-ordinators. By doing this I would be getting my research done, and also attracting clients to my business. Internet Questionnaires Again this type of survey means getting back a low depth of information, however I still believe the information I gain will be useful. This form of surveying is relatively inexpensive, and it can be aimed at specific markets, in this case, people who want to get married. As with the postal surveys, I will be hoping to send my questionnaires to people who wish to get married. I could do this by buying information off websites that have peoples email addresses. This way I can send the information directly to people who I know could be interested in it. Overall I know both postal surveys and internet questionnaires are a slow way of finding information, and have a low response rate, but I believe if I send them to the right people, I will get a fairly good response, (better than the average postal or internet questionnaire survey), and seeing as I will add a coupon to both, I expect more people will return my questionnaires. I have also decided that if I decide I need more information, I will add a few open questions into the questionnaire that the reader can fill it in if they have an interest in my company. Unfortunately there is a chance that neither of these 2 survey methods would work, or that my results will be very basic. In this situation, I would hope to be able to bring together some people who have replied to my questionnaires that wish to get married. To do this I would ask on the questionnaires if they are planning a wedding or will be doing soon. From these people I will hope to be able to bring them together for a focus group, I can then find out their needs and wants from a wedding planner. I know this will not be a cheap, and I expect I will have to give them some kind of reason to do this, for which again I would offer some kind of redeemable coupon.
Wednesday, August 21, 2019
Understanding Health Food Drink Consumers
Understanding Health Food Drink Consumers Health Food Drinks I. Problem definition 1.1 Background India, the worlds largest malt-based drinks market, accounts for 22% of the worlds retail volume sales. These drinks are traditionally consumed as milk substitutes and marketed as a nutritious drink, mainly consumed by the old, the young and the sick. The Health food drinks category consists of white drinks and brown drinks. South and East India are large markets for these drinks, accounting for the largest proportion of all India sales. The total market is placed at about 90,000 ton and is estimated to be growing at about 4%. These Malt beverages, though, are still an urban phenomenon. White drinks account for almost two-thirds of the market. GSK Consumer Healthcare is the market leader in the white malt beverages category with a 60.7% overall market share. Heinzs Complan comes in second (in this segment, third overall) with a market share of 12-13%. Market leader GSK also owns other brands such as Boost, Maltova and Viva. Currently, brown drinks (which are cocoa-based) continue to grow at the expense of white drinks like Horlicks and Complan. The share of brown drinks has increased from about 32% to 35% over the last five years. Cadburys Bournvita is the leader in the brown drink segment with a market share of around 15%. Other significant players are Nestlà ©s Milo and GCMMFs Nutramul. 1.2 Problem Statement The project had been undertaken with an objective to understand the customer behaviour in the â€Å"Health Food Drink (HFD)†product category. The objective of the study also included identifying the determinant purchase factors, the customer segments and the sources of information they rely on. The existing positioning of prominent brands and the perceptions among different segments were also covered under the study. The brand loyalty and switching were also studied. The brand personality was also studied as a part of the project. II. Literature review Nutrition In India After 4 years of age, a childs energy needs per kilogram of bodyweight are decreasing but the actual amount of energy (calories) required increases, as the child gets older. From 5 years to adolescence, there is a period of slow but steady growth. Dietary intakes of some children may be less than recommended for iron, calcium, vitamins A and D and vitamin C, although in most cases -as long as the energy and protein intakes are adequate and a variety of foods, including fruit and vegetables, are eaten- deficiencies are unlikely. Regular meals and healthy snacks that include carbohydrate -rich foods, fruits and vegetables, dairy products, lean meats, fish, poultry, eggs, legumes and nuts should contribute to proper growth and development without supplying excessive energy to the diet. Children need to drink plenty of fluids, especially if it is hot or they are physically active. Water is obviously a good source of liquid and supplies fluid without calories. Variety is important in childrens diets and other sources of fluid such as milk and milk drinks, fruit juices can also be chosen to provide needed fluids. In India, each State is practically equivalent to a country with its specific socio-economic level, different ethnic groups, food habits, health infrastructures and communication facilities. Thus, the nutritional status of the population shows significant variation between states since it results from a varying combination of factors. In the last 20 years, there has been an improvement in the nutritional status of the Indian population. This improvement results from not only changes in food intake but also socio-economic factors, increased availability of potable water, lower morbidity and improvement of health facilities. In children under five years of age, the marked improvement in nutritional status is shown by the reduction of the prevalence of underweight from 63%, in the 1975-79 period to 53% in the 1988-90 period. The under-five mortality rate (U5MR), an important indicator of the socio-economic development, and health and nutritional status of a society, declined from 282% in 1962 to 115†° in 1994. However, a multitude of infectious diseases such as respiratory and intestinal infections as well as malaria remain the main cause of death in children under five, with malnutrition being an aggravating factor. Measles, tetanus, typhoid and hepatitis are also frequent causes of death during infancy and childhood. In the last 20 years, there have been no significant changes in patterns of dietary intake. Cereals remain the staple food in India providing most of the energy intake. Since the seventies the consumption of foods like pulses, roots and tubers has fallen, while those of other foods like sugar, jaggery (unrefined brown sugar), fats and oils and green leafy vegetables have slightly increased. The average Indian diet remains largely deficient in green leafy vegetables, meat, and fish, milk and milk products. Moreover, it also remains deficient in some micronutrients such as vitamin A, iodine and iron. Adolescents who are undergoing rapid growth and development are one of the nutritionally vulnerable groups who have not received the attention they deserve. In under-nourished children rapid growth during adolescence may increase the severity of under-nutrition. Early marriage and pregnancy will perpetuate both maternal and child under-nutrition. At the other end of spectrum among the affluent segment of population, adolescent obesity is increasingly becoming a problem. Pre-school children constitute the most nutritionally vulnerable segment of the population and their nutritional status is considered to be a sensitive indicator of community health and nutrition. Over the last two decades there has been some improvement in energy intake and substantial reduction in moderate and severe under- nutrition in pre- school children India has enormous under-nutrition and over-nutrition problems Asia has the largest number of malnourished children in the world. The Double Burden of Malnutrition in Asia was inspired by the massive challenge that this situation currently poses for Asia. It describes the main driving forces behind the groundswell of under-nutrition, while shedding light on the emerging double burden of co-existing underweight and overweight, and the linkages between these two different forms of malnutrition. There are two types of nutritional problems one is under-nutrition and another is over-nutrition. Emphasis should be given not only to food but also to care and health, the reason being that even if children in the age group of 0-2 years are able to get food, they may have mothers who do not have enough time to pay attention to their children. Similarly, if there is no health-guaranteeing environment, and children suffer from diarrhoeal diseases, no amount of food will help prevent malnutrition. Over-nutrition, on the other hand, means either too many calories or the wrong types of calories such as saturated fats or highly processed sugar that lead to obesity, vascular diseases, etc. Many developing countries have under-nutrition and those in Europe and North America have over- nutrition problems. There is this in-between category with countries like India that still have an enormous amount of under-nutrition and significant over-nutrition problems. In India, for instance, around 50 per cent of its children under the age of five are undernourished or malnourished. But in urban areas, the over-nutrition problem is shooting up, thanks to the change in lifestyle and food habits. As a result, health systems are under huge stress. When there is malnutrition, there is a higher level of lower birth rate. One in three babies born in India weigh significantly low because their mothers are undernourished. Some low-weight babies die and some survive and those who survive adapt to malnutrition and scarcity. That is, the biological adaptation is programmed to maximize every calorie the body gets. This adaptation that helped a malnourished baby survive suddenly turns out to be a mal-adaptation when the baby becomes an adult. The adult, who was malnourished in the past, gains extra weight even when he takes only normal amount of food because of the biological adaptation. Brand Loyalty Selling to brand loyal[1] customers is far less costly than converting new customers (Reichheld 1996, Rosenberg and Czepiel 1983)[i]. In addition, brand loyalty provides firms with tremendous competitive weapons. Brand loyal consumers are less price sensitive (Krishnamurthi and Raj 1991)[ii]. A strong consumer franchise gives manufacturers leverage with retailers (Aaker 1991) 1. And, loyalty reduces the sensitivity of consumers to marketplace offerings, which gives the firm time to respond to competitive moves (Aaker 1991) 1. In general, brand loyalty is a reflection of brand equity, which for many businesses is the largest single asset. Perhaps the most cited conceptual definition of brand loyalty comes from Jacoby and Chestnut (1978, p. 80)[iii]: â€Å"The biased, behavioral response, expressed over time, by some decision-making unit, with respect to one or more alternative brands out of a set of such brands, and is a function of psychological (decision-making, evaluative) processes.†Consistent with this definition are two broad categories of operational definitions. The first stresses the â€Å"behavioral response, expressed over time†â€â€typically a series of purchases. As Day (1979) observed[iv], however, the major limitation of behavioral measures is the failure to identify motive and the resulting confusion between brand loyalty and other forms of repeat buying. The major alternative operational definition is based on consumer attitudes, preferences, and purchase intentions. These measures stress the cognitive â€Å"bias,†and the â€Å"psychological (decision-making evaluative) proc esses†underlying loyalty. Health Related Expenses KSA TECHNOPAK has conceived an innovative product called Health Outlook 2003, which provides strategic insights to consumer shopping and buying behavior. Apart from the consumer insights, complete health profiling is also done for providing derived disease incidence and prevalence in the country. This Pan Indian research model provides large research depths by covering about 10,000 households across cities like Chandigarh, Delhi, Jaipur, Lucknow, Ludhiana, Calcutta, Patna, Bangalore, Chennai, Cochin, Hyderabad, Madurai, Ahmedabad, Indore, Mumbai, Nagpur, Pune and Surat. The rich respondent profile includes SEC A, B and C giving a good coverage for demographic types. Health Outlook shows that health enjoys about 9.4 per cent share of the wallet of Indian consumer and is on the rise for the last three years. This spend includes health supplements, health drinks, doctors and consultants fees, medicines, medical insurance, regular check ups etc. About 91 per cent of this was out-of-pocket expense and only 9 per cent came from employers and insurance. Analysis of the consumers drug purchase behaviour shows that 59 per cent use old prescriptions and 29 per cent use over-the-counter drugs, meaning 88 cent of the consumers indulged in self-medication. Consumer attitudes to health drinks are mainly influenced by quality attributes. Ethical factors are important in some cases, but they may be overstated. The relationships between consumers awareness of health drink, price and perceived quality of food were investigated by tests involving series of consumer panels and sensory evaluation. Sensory responses were also matched to instrumental analysis data. Results indicated that overall there was no relation between panelists views about health drinks and their sensory perceptions. Eighty percent of the panelists felt that organic products were too expensive, but would buy them if they were cheaper. However the study showed that most of the people would not be likely to change their preference once they had made a product choice based upon sensory attributes. This has important implications, indicating that not only price, but also sensory quality of health drink must be considered in order to maintain repeated purchases by most consume rs. It is widely accepted that consumer acceptance of drinks is mainly determined by their sensory perception, while choice is strongly influenced by the perceived value for money. Ethical factors are important in some cases, but they may be overstated. Although comparisons between organic and conventional drinks have been reported for a range of attributes, measures of the quality of health drinks as perceived by consumers using objective sensory evaluation methods, or the relevance of any preconceptions in perception have not been studied. This study aimed to investigate the relationship of objective quality measurements including sensory attributes and consumer perception of organically and conventionally produced health drink products. About two thirds of the consumers that participated in the survey believed that health drink is good for the environment, and 55% thought that it is healthier. However there was some confusion relating to the use of pesticides and chemicals in that. Few consumers distinguished health drinks by appearance or taste. Buyers of health drinks were more likely to indicate that the appearance and taste are better, but environmental protection was still the dominant perceived benefit. Buyers who believe that health drink is better also think that it is expensive (p II. Approach to the problem Objective or theoretical framework The objective of this research is to identify the factors that influence a person into making a decision to buy a certain brand of malt-based health drink. As mentioned in the Literature Review, according to industry analysts, this category has grown only on promotions and for now, except for promotions, nothing seems to be working. Therefore, ideally, this research should be able to bring to the fore, certain other factors that could lead to a growth of this segment. At the very least, the research should corroborate the existing assumptions regarding the influencing factors. It should be in a position to verify that the steps various players are taking to stimulate volumes are in the right direction, and would eventually lead to an increase in market share. Research Questions I. What are the different â€Å"Customer Segments†depending upon the preferences? II. What is the perception of people towards the leading brands of Health Food Drinks? III. What are different factors that influence the customer when He/She buys a Health Food Drink? IV. Who are the major Influencers in the purchase decision of Health Food Drinks? Identification of information needed After fixing the objective, we started an extensive reading on the topic. The very first question we needed to clear in our mind was: â€Å"What does Health Food Drinks mean?†Therefore we narrowed down to the malt-based Health drinks like Bournvita and Horlicks. The subsequent readings helped us understand the consumer patterns and perceived needs of the consumers from a health drink. Depending upon that, we listed down several factors that can influence a consumer in buying or not buying a health drink. The study on â€Å"Consumer Behaviour†throws light on the prevalent consumer purchase influencers like Price, Nourishment, Palatability, and Packaging which are included in the purchase influence factors in the questionnaire The Literature on â€Å"Indian Nourishment†shows that the Indian consumer is getting more and more health conscious and thus there is huge potential for the health drinks in the Indian market. Nowadays there can be a number of sources that influence a family in buying a Health Drink. These sources can be promotions, Doctors Advice, Peer Group talks ( word of mouth) and choice of the children themselves. Since the malt-based health-drink segment is broadly divided into 2 categories brown (cocoa-based) and white, therefore it was decided to study the leading brands available in both these categories. We visited retail outlets in different parts of South Delhi to determine the most popular brands. We have assumed that brands that are most visible and widely available are the most popular, as retailers would stock only those brands that invoke maximum sales All identified factors were discussed and screened by the research team. In this process, factors that did not convey much, did not sound authentic or did not differ much from other factors were eliminated. III. Research Design The methodology followed for analyzing the consumer behavior of health food drink customers. 3.1 Preliminary Investigation This phase involved preliminary investigation of the various factors which could possibly affect the consumers perception about the various brands and in turn influence the purchase decisions of the consumer. We primarily used three methods to identify the various factors. The Secondary data gathered was analyzed to understand the current scenario of the Health drinks segment. The analysis of the secondary data also helped us find different attributes which affect the health drinks segment. 3.2 Collection of Quantitative data Measurement and Scaling Procedures: Non-Comparative Rating scale is used in which respondents evaluate only one object at a time, and for this reason noncomparative scales are often referred to as monadic scales. Noncomparative techniques consist of continuous and itemized rating scales. We have used continuous rating scale in order to rate the choices for purchase considerations and the sources of purchase decisions. Questionnaire Design: This phase involved the design of the questionnaire on the basis of the potential factors identified as influencing the customer behavior. Research problems were listed and then the information needed was identified. The questions were then prepared in order to fulfill the information requirements as identified earlier. Survey: Different Survey methods were used for collection of data. The principle method used was Personal Interviewing of the respondents. In-Home interviews were conducted by us at various locations in Delhi. We also did Mall Intercept at popular markets like Sarojini Nagar and Malviya Nagar. Due to the shortage of time, we conducted a few telephonic interviews to maintain diversity in data. 3.3 Sampling Process Target Population: The target population is the collection of elements or objects that process the information sought by the researcher and about which inferences are to be made. Our target population involves the users, deciders and buyers of health food drinks. The users include the old and the young population. The deciders and the buyers mostly include the house wives who buy the product from the market. Sample Size: It denotes the number of elements to be included in the study. Due to time constraints the sample size chosen is very small. Sampling Technique: A mixture of quota and stratified method was used for sampling, with care being taken to get responses from customers of different age groups and different family sizes. iv. Fieldwork The survey was conducted keeping in mind the users and deciders of the health drinks. The survey was conducted in the Paschim Vihar and Ranibagh Areas of Delhi. We made several trips to the local market (Sarojini Nagar and Malviya Nagar) and the nearby households to gather information from relevant people. V. Data Interpretation and Analysis 5.1 Data Analysis Plan This chapter shows how the information needed to answer the three key research questions have been extracted via the questionnaire. Q1 explicitly asked the respondents if a health drink is used in the family or by them. The questionnaire was not administered to the respondents that answered NO to this question. Such respondents have not been included in the sample size of 60 that has been mentioned. Q2 to Q6 of the questionnaire are used to get the general details about the respondent (age, educational qualification, annual income, family size and number of children in the family. Q4 explicitly asked the respondents about the size of the family and Q6 asked about the number of children in the respondents family. Q7 explicitly asks the brand preference of the respondent about the health drink. Q8 asks the respondents to rate the importance of the following purchase considerations on a scale of 1(Very unimportant) to 5 (Very Important): a) Nourishment b) Colour c) Palatability d) Economy e) Shelf-presence f) Packaging g) Brand Image h) Promotions These attributes were decided after a thorough secondary data analysis. However some of these attributes might have similar effect on the consumer preference. Therefore we conduct a factor analysis to find out the factors to which one or more of the above variables belong. Q9 asks the respondents to rate the Sources of Information influencing the Purchase Decision. The following sources were considered: a) Advertisement b) Children c) Doctor d) Family e) Past experience f) Retailer g) Word of mouth The respondents were asked to rank the factors in order of importance. Q10 ask the respondents to score each of the brands on the various product attributes on a scale of 1 5. Five major selling brands were tested on the various product attributes mentioned. The brands included in the test were: a) Boost b) Bournvita c) Complan d) Horlicks e) Milo Q11 and Q12 are used to determine the brand loyalty of the respondent towards the health drink, thus asking the switching pattern of the users. Q13 in the Questionnaire attempts to find the Brand Personality by asking customers the perceived traits of each of the leading brands of health drinks available in the market today. It is very important to realize that these are not the attributes that the drink claims to possess, via its advertisements and other promotional activities. For e.g. Boost in its campaign claims that â€Å"Boost is the secret of my energy†, but rather the attributes the customer feels that the drink possesses. Therefore, if respondents identify spiritedness with Boost it would imply that Boost is successful in its marketing strategy. The responses to this question would also be important to other players in this segment, as they would realize that their promotions are not being effective and hence this would encourage them to redirect their marketing efforts. Apart from spiritedness, the other important traits have been identified as Modesty, Honesty, Cheerfulness, Boldness, Spiritedness, Reliabil ity, Sophistication, Toughness, and Ruggedness. 5.2 Methodology Questionnaire Checking/Editing: The questionnaire is checked for completion and interviewing quality. Editing is the review of the questionnaire with the objective of increasing accuracy and precision. Collation of Data: The data is collated in the excel sheet and prepared for statistical analysis. An SPSS view of the data was also taken for further analysis. Choice of Statistical Analysis Techniques: T-statistic: A t-test was conducted on the results of the survey in order to compare the means of the ranks for the factors or sources of information to find out the most important influencing the purchasing decision. T-test was also conducted on the various product attributes for different brands. Anova: It is carried to study the variance of the factors or product attributes that influence the most among the various demographic groups by conducting the one way Anova test on the scores of these 8 factors. Factor Analysis: The various variables that denote the product attributes that determine the purchasing decision can be actually factored using factor analysis. This factoring of the variables helps in easily studying the consumer behaviour. Cluster Analysis: The set of respondents was segmented on the basis of the demographic information namely ‘age-group, ‘income-group, ‘education, ‘family size etc using cluster analysis so as to identify the distinct clusters depending upon these demographic factors. Multi Dimensional Scaling: This analysis was performed on the overall samples as well as on the 2 segments individually so as to gauge the difference in their perceptions. The selection process depends on the fact that it is conducted on the aggregate level data, i.e. that on the two clusters formed after cluster analysis. This is due to the fact that all market strategies are typically formulated at the segment or aggregate level. 5.3 Analysis and Interpretation Sources of Information influencing the Purchase Decision h) Advertisement i) Children j) Doctor k) Family l) Past experience m) Retailer n) Word of mouth The respondents were asked to rank the factors in order of importance. A t-test was conducted on the results of the survey in order to compare the means of the ranks for the factors. The results of the test are as shown in the Exhibit 1. We can say from the results that there is a significant difference between the ranks of the factors with a 95% confidence. The two most important factors that emerge out of the tests overall are the â€Å"Family doctor†and the influence of the â€Å"Family†. This finding is an important implication for product placement. We can say that the health food drinks should appeal to the complete family rather than only a particular age group. Doctors can also be an important influencer or opinion leader and hence should be targeted in the product promotions. Some products have been promoting their products using comparative advertisements including testifications by the doctors. A second test can be conducted in the same manner taking only the cases where the people are having kids in the family. The results are shown in the Exhibit 2. We observe that the two most important factors differ from the first scenario. The two most important factors that emerge out of the test are â€Å"Family Doctor†and â€Å"Advertisement†. Thus it can be concluded that advertisements have an important influence on the families having kids or in turn the kids. This can be easily observed from the large number of advertisements directed towards the well being of kids. Product Attributes Influencing the Purchase Decision The following product attributes were identified as influencing the purchase decisions of the customers: a) Nourishment b) Colour c) Palatability d) Economy e) Shelf-presence f) Packaging g) Brand Image h) Promotions The respondents were asked to score the importance of the factors on a scale of 1 to 5, with 5 being the most important. A t-test was conducted on the scores of the factors in order to find the most important factors. The t-test shows there is a significant difference between the scores of the various factors with a 95% confidence. The results of the test are shown in Exhibit 3. We observe from the results that the two most important product attributes in making a purchase decision are the â€Å"Palatability†and the â€Å"Nourishment†perception in the minds of the customers. These factors turn out to be the same irrespective of whether there are children in the family or not. We then study the variance of these factors among various demographic groups by conducting the one way Anova test on the scores of these 8 factors. We studied the variance of the mean scores of these attributes among the various groups differentiated by the following factors:- a) Income b) Education c) Age d) Family size The results of the Anova tests which were conducted on the data are as shown in the Exhibits 4-7. We observe that there are no significant differences in the scores of the product attributes in different groups as classified by â€Å"Income†, â€Å"Education†and â€Å"Family size†within a 95% confidence interval. However there is a significant different on the â€Å"Nourishment†and â€Å"Economy†product attributes of health food drinks. As is observed from the mean scores, the â€Å"Nourishment†aspect becomes particularly important for people above the age of 60. It is also important for people who are young in age i.e. less than 20. However it does not seem to be very significant for people in the age group 33- 45. The factor analysis of these attributes is done in the following section. Factor Analysis of Purchase Considerations The factor analysis of the 8 product attributes yields the following 3 factors: Factor I: Promotion, Shelf-Presence, Packaging Economy Factor II: Palatability, Brand Factor III: Nourishment, Colour (For the output of factor analysis, refer to exhibit 8.) As factor I encompass the accessibility and affordability of the product, it can be termed as ‘Purchase Feasibility. As factor II encompass the palatability and brand value of the product, it can be termed as ‘Likeability. As factor III encompass the nutritional value and colour, an indicator of quality, of the product, it can be termed as ‘Utility. Customer Segmentation The set of respondents was segmented on the basis of the demographic information namely ‘age-group, ‘income-group, ‘education, ‘family size etc. The cluster analysis on these demographic variables yields the following 2 clusters: * Cluster 1: The members are almost uniformly distributed across all age segments except under-20 in which no member lies. However, the family size is large than 3 for all the members and a majority of members having 1-2 child in the family. The cluster size is 27 respondents. * Cluster 2: All the members in this cluster are less than the age of 32 yrs, with the majority being less than 20 yrs. Around 90% of the members were either single or couple thus suggesting that the members were either students, or bachelor/newly-married young working professionals. The cluster size is 30 respondents. * As the consumption in cluster 2 would be lower than the large families comprising kids older persons because of less health concerns and preference for alternative beverages, the price sensitivity of cluster 2 would be low while cluster 1 is concerned about economy. (For output of cluster analysis, refer to Exhibit 9). Thus, cluster 1 could be termed as ‘value-seekers while cluster 2 could be termed as ‘quality-seekers. Different Brands on Product Attributes Five major selling brands were tested on the various product attributes mentioned. The brands included in the test were: f) Boost g) Bournvita h) Complan i) Horlicks j) Milo The respondents were asked to score each of the brands on the various product attributes on a scale of 1 5. T-test was conducted on the various product attributes for different brands. The results have been shown in Exhibit 11. The number of respondents who were consuming the various brands is as shown in the pie chart. As we can observe from the graph, Bournvita is found to be the leading brand closely followed by Horlicks, while the other brands do not have a large taking from our survey. The results of the various brands on different attributes are as follows: a) Nourishment: Horlicks scores well above all the b Understanding Health Food Drink Consumers Understanding Health Food Drink Consumers Health Food Drinks I. Problem definition 1.1 Background India, the worlds largest malt-based drinks market, accounts for 22% of the worlds retail volume sales. These drinks are traditionally consumed as milk substitutes and marketed as a nutritious drink, mainly consumed by the old, the young and the sick. The Health food drinks category consists of white drinks and brown drinks. South and East India are large markets for these drinks, accounting for the largest proportion of all India sales. The total market is placed at about 90,000 ton and is estimated to be growing at about 4%. These Malt beverages, though, are still an urban phenomenon. White drinks account for almost two-thirds of the market. GSK Consumer Healthcare is the market leader in the white malt beverages category with a 60.7% overall market share. Heinzs Complan comes in second (in this segment, third overall) with a market share of 12-13%. Market leader GSK also owns other brands such as Boost, Maltova and Viva. Currently, brown drinks (which are cocoa-based) continue to grow at the expense of white drinks like Horlicks and Complan. The share of brown drinks has increased from about 32% to 35% over the last five years. Cadburys Bournvita is the leader in the brown drink segment with a market share of around 15%. Other significant players are Nestlà ©s Milo and GCMMFs Nutramul. 1.2 Problem Statement The project had been undertaken with an objective to understand the customer behaviour in the â€Å"Health Food Drink (HFD)†product category. The objective of the study also included identifying the determinant purchase factors, the customer segments and the sources of information they rely on. The existing positioning of prominent brands and the perceptions among different segments were also covered under the study. The brand loyalty and switching were also studied. The brand personality was also studied as a part of the project. II. Literature review Nutrition In India After 4 years of age, a childs energy needs per kilogram of bodyweight are decreasing but the actual amount of energy (calories) required increases, as the child gets older. From 5 years to adolescence, there is a period of slow but steady growth. Dietary intakes of some children may be less than recommended for iron, calcium, vitamins A and D and vitamin C, although in most cases -as long as the energy and protein intakes are adequate and a variety of foods, including fruit and vegetables, are eaten- deficiencies are unlikely. Regular meals and healthy snacks that include carbohydrate -rich foods, fruits and vegetables, dairy products, lean meats, fish, poultry, eggs, legumes and nuts should contribute to proper growth and development without supplying excessive energy to the diet. Children need to drink plenty of fluids, especially if it is hot or they are physically active. Water is obviously a good source of liquid and supplies fluid without calories. Variety is important in childrens diets and other sources of fluid such as milk and milk drinks, fruit juices can also be chosen to provide needed fluids. In India, each State is practically equivalent to a country with its specific socio-economic level, different ethnic groups, food habits, health infrastructures and communication facilities. Thus, the nutritional status of the population shows significant variation between states since it results from a varying combination of factors. In the last 20 years, there has been an improvement in the nutritional status of the Indian population. This improvement results from not only changes in food intake but also socio-economic factors, increased availability of potable water, lower morbidity and improvement of health facilities. In children under five years of age, the marked improvement in nutritional status is shown by the reduction of the prevalence of underweight from 63%, in the 1975-79 period to 53% in the 1988-90 period. The under-five mortality rate (U5MR), an important indicator of the socio-economic development, and health and nutritional status of a society, declined from 282% in 1962 to 115†° in 1994. However, a multitude of infectious diseases such as respiratory and intestinal infections as well as malaria remain the main cause of death in children under five, with malnutrition being an aggravating factor. Measles, tetanus, typhoid and hepatitis are also frequent causes of death during infancy and childhood. In the last 20 years, there have been no significant changes in patterns of dietary intake. Cereals remain the staple food in India providing most of the energy intake. Since the seventies the consumption of foods like pulses, roots and tubers has fallen, while those of other foods like sugar, jaggery (unrefined brown sugar), fats and oils and green leafy vegetables have slightly increased. The average Indian diet remains largely deficient in green leafy vegetables, meat, and fish, milk and milk products. Moreover, it also remains deficient in some micronutrients such as vitamin A, iodine and iron. Adolescents who are undergoing rapid growth and development are one of the nutritionally vulnerable groups who have not received the attention they deserve. In under-nourished children rapid growth during adolescence may increase the severity of under-nutrition. Early marriage and pregnancy will perpetuate both maternal and child under-nutrition. At the other end of spectrum among the affluent segment of population, adolescent obesity is increasingly becoming a problem. Pre-school children constitute the most nutritionally vulnerable segment of the population and their nutritional status is considered to be a sensitive indicator of community health and nutrition. Over the last two decades there has been some improvement in energy intake and substantial reduction in moderate and severe under- nutrition in pre- school children India has enormous under-nutrition and over-nutrition problems Asia has the largest number of malnourished children in the world. The Double Burden of Malnutrition in Asia was inspired by the massive challenge that this situation currently poses for Asia. It describes the main driving forces behind the groundswell of under-nutrition, while shedding light on the emerging double burden of co-existing underweight and overweight, and the linkages between these two different forms of malnutrition. There are two types of nutritional problems one is under-nutrition and another is over-nutrition. Emphasis should be given not only to food but also to care and health, the reason being that even if children in the age group of 0-2 years are able to get food, they may have mothers who do not have enough time to pay attention to their children. Similarly, if there is no health-guaranteeing environment, and children suffer from diarrhoeal diseases, no amount of food will help prevent malnutrition. Over-nutrition, on the other hand, means either too many calories or the wrong types of calories such as saturated fats or highly processed sugar that lead to obesity, vascular diseases, etc. Many developing countries have under-nutrition and those in Europe and North America have over- nutrition problems. There is this in-between category with countries like India that still have an enormous amount of under-nutrition and significant over-nutrition problems. In India, for instance, around 50 per cent of its children under the age of five are undernourished or malnourished. But in urban areas, the over-nutrition problem is shooting up, thanks to the change in lifestyle and food habits. As a result, health systems are under huge stress. When there is malnutrition, there is a higher level of lower birth rate. One in three babies born in India weigh significantly low because their mothers are undernourished. Some low-weight babies die and some survive and those who survive adapt to malnutrition and scarcity. That is, the biological adaptation is programmed to maximize every calorie the body gets. This adaptation that helped a malnourished baby survive suddenly turns out to be a mal-adaptation when the baby becomes an adult. The adult, who was malnourished in the past, gains extra weight even when he takes only normal amount of food because of the biological adaptation. Brand Loyalty Selling to brand loyal[1] customers is far less costly than converting new customers (Reichheld 1996, Rosenberg and Czepiel 1983)[i]. In addition, brand loyalty provides firms with tremendous competitive weapons. Brand loyal consumers are less price sensitive (Krishnamurthi and Raj 1991)[ii]. A strong consumer franchise gives manufacturers leverage with retailers (Aaker 1991) 1. And, loyalty reduces the sensitivity of consumers to marketplace offerings, which gives the firm time to respond to competitive moves (Aaker 1991) 1. In general, brand loyalty is a reflection of brand equity, which for many businesses is the largest single asset. Perhaps the most cited conceptual definition of brand loyalty comes from Jacoby and Chestnut (1978, p. 80)[iii]: â€Å"The biased, behavioral response, expressed over time, by some decision-making unit, with respect to one or more alternative brands out of a set of such brands, and is a function of psychological (decision-making, evaluative) processes.†Consistent with this definition are two broad categories of operational definitions. The first stresses the â€Å"behavioral response, expressed over time†â€â€typically a series of purchases. As Day (1979) observed[iv], however, the major limitation of behavioral measures is the failure to identify motive and the resulting confusion between brand loyalty and other forms of repeat buying. The major alternative operational definition is based on consumer attitudes, preferences, and purchase intentions. These measures stress the cognitive â€Å"bias,†and the â€Å"psychological (decision-making evaluative) proc esses†underlying loyalty. Health Related Expenses KSA TECHNOPAK has conceived an innovative product called Health Outlook 2003, which provides strategic insights to consumer shopping and buying behavior. Apart from the consumer insights, complete health profiling is also done for providing derived disease incidence and prevalence in the country. This Pan Indian research model provides large research depths by covering about 10,000 households across cities like Chandigarh, Delhi, Jaipur, Lucknow, Ludhiana, Calcutta, Patna, Bangalore, Chennai, Cochin, Hyderabad, Madurai, Ahmedabad, Indore, Mumbai, Nagpur, Pune and Surat. The rich respondent profile includes SEC A, B and C giving a good coverage for demographic types. Health Outlook shows that health enjoys about 9.4 per cent share of the wallet of Indian consumer and is on the rise for the last three years. This spend includes health supplements, health drinks, doctors and consultants fees, medicines, medical insurance, regular check ups etc. About 91 per cent of this was out-of-pocket expense and only 9 per cent came from employers and insurance. Analysis of the consumers drug purchase behaviour shows that 59 per cent use old prescriptions and 29 per cent use over-the-counter drugs, meaning 88 cent of the consumers indulged in self-medication. Consumer attitudes to health drinks are mainly influenced by quality attributes. Ethical factors are important in some cases, but they may be overstated. The relationships between consumers awareness of health drink, price and perceived quality of food were investigated by tests involving series of consumer panels and sensory evaluation. Sensory responses were also matched to instrumental analysis data. Results indicated that overall there was no relation between panelists views about health drinks and their sensory perceptions. Eighty percent of the panelists felt that organic products were too expensive, but would buy them if they were cheaper. However the study showed that most of the people would not be likely to change their preference once they had made a product choice based upon sensory attributes. This has important implications, indicating that not only price, but also sensory quality of health drink must be considered in order to maintain repeated purchases by most consume rs. It is widely accepted that consumer acceptance of drinks is mainly determined by their sensory perception, while choice is strongly influenced by the perceived value for money. Ethical factors are important in some cases, but they may be overstated. Although comparisons between organic and conventional drinks have been reported for a range of attributes, measures of the quality of health drinks as perceived by consumers using objective sensory evaluation methods, or the relevance of any preconceptions in perception have not been studied. This study aimed to investigate the relationship of objective quality measurements including sensory attributes and consumer perception of organically and conventionally produced health drink products. About two thirds of the consumers that participated in the survey believed that health drink is good for the environment, and 55% thought that it is healthier. However there was some confusion relating to the use of pesticides and chemicals in that. Few consumers distinguished health drinks by appearance or taste. Buyers of health drinks were more likely to indicate that the appearance and taste are better, but environmental protection was still the dominant perceived benefit. Buyers who believe that health drink is better also think that it is expensive (p II. Approach to the problem Objective or theoretical framework The objective of this research is to identify the factors that influence a person into making a decision to buy a certain brand of malt-based health drink. As mentioned in the Literature Review, according to industry analysts, this category has grown only on promotions and for now, except for promotions, nothing seems to be working. Therefore, ideally, this research should be able to bring to the fore, certain other factors that could lead to a growth of this segment. At the very least, the research should corroborate the existing assumptions regarding the influencing factors. It should be in a position to verify that the steps various players are taking to stimulate volumes are in the right direction, and would eventually lead to an increase in market share. Research Questions I. What are the different â€Å"Customer Segments†depending upon the preferences? II. What is the perception of people towards the leading brands of Health Food Drinks? III. What are different factors that influence the customer when He/She buys a Health Food Drink? IV. Who are the major Influencers in the purchase decision of Health Food Drinks? Identification of information needed After fixing the objective, we started an extensive reading on the topic. The very first question we needed to clear in our mind was: â€Å"What does Health Food Drinks mean?†Therefore we narrowed down to the malt-based Health drinks like Bournvita and Horlicks. The subsequent readings helped us understand the consumer patterns and perceived needs of the consumers from a health drink. Depending upon that, we listed down several factors that can influence a consumer in buying or not buying a health drink. The study on â€Å"Consumer Behaviour†throws light on the prevalent consumer purchase influencers like Price, Nourishment, Palatability, and Packaging which are included in the purchase influence factors in the questionnaire The Literature on â€Å"Indian Nourishment†shows that the Indian consumer is getting more and more health conscious and thus there is huge potential for the health drinks in the Indian market. Nowadays there can be a number of sources that influence a family in buying a Health Drink. These sources can be promotions, Doctors Advice, Peer Group talks ( word of mouth) and choice of the children themselves. Since the malt-based health-drink segment is broadly divided into 2 categories brown (cocoa-based) and white, therefore it was decided to study the leading brands available in both these categories. We visited retail outlets in different parts of South Delhi to determine the most popular brands. We have assumed that brands that are most visible and widely available are the most popular, as retailers would stock only those brands that invoke maximum sales All identified factors were discussed and screened by the research team. In this process, factors that did not convey much, did not sound authentic or did not differ much from other factors were eliminated. III. Research Design The methodology followed for analyzing the consumer behavior of health food drink customers. 3.1 Preliminary Investigation This phase involved preliminary investigation of the various factors which could possibly affect the consumers perception about the various brands and in turn influence the purchase decisions of the consumer. We primarily used three methods to identify the various factors. The Secondary data gathered was analyzed to understand the current scenario of the Health drinks segment. The analysis of the secondary data also helped us find different attributes which affect the health drinks segment. 3.2 Collection of Quantitative data Measurement and Scaling Procedures: Non-Comparative Rating scale is used in which respondents evaluate only one object at a time, and for this reason noncomparative scales are often referred to as monadic scales. Noncomparative techniques consist of continuous and itemized rating scales. We have used continuous rating scale in order to rate the choices for purchase considerations and the sources of purchase decisions. Questionnaire Design: This phase involved the design of the questionnaire on the basis of the potential factors identified as influencing the customer behavior. Research problems were listed and then the information needed was identified. The questions were then prepared in order to fulfill the information requirements as identified earlier. Survey: Different Survey methods were used for collection of data. The principle method used was Personal Interviewing of the respondents. In-Home interviews were conducted by us at various locations in Delhi. We also did Mall Intercept at popular markets like Sarojini Nagar and Malviya Nagar. Due to the shortage of time, we conducted a few telephonic interviews to maintain diversity in data. 3.3 Sampling Process Target Population: The target population is the collection of elements or objects that process the information sought by the researcher and about which inferences are to be made. Our target population involves the users, deciders and buyers of health food drinks. The users include the old and the young population. The deciders and the buyers mostly include the house wives who buy the product from the market. Sample Size: It denotes the number of elements to be included in the study. Due to time constraints the sample size chosen is very small. Sampling Technique: A mixture of quota and stratified method was used for sampling, with care being taken to get responses from customers of different age groups and different family sizes. iv. Fieldwork The survey was conducted keeping in mind the users and deciders of the health drinks. The survey was conducted in the Paschim Vihar and Ranibagh Areas of Delhi. We made several trips to the local market (Sarojini Nagar and Malviya Nagar) and the nearby households to gather information from relevant people. V. Data Interpretation and Analysis 5.1 Data Analysis Plan This chapter shows how the information needed to answer the three key research questions have been extracted via the questionnaire. Q1 explicitly asked the respondents if a health drink is used in the family or by them. The questionnaire was not administered to the respondents that answered NO to this question. Such respondents have not been included in the sample size of 60 that has been mentioned. Q2 to Q6 of the questionnaire are used to get the general details about the respondent (age, educational qualification, annual income, family size and number of children in the family. Q4 explicitly asked the respondents about the size of the family and Q6 asked about the number of children in the respondents family. Q7 explicitly asks the brand preference of the respondent about the health drink. Q8 asks the respondents to rate the importance of the following purchase considerations on a scale of 1(Very unimportant) to 5 (Very Important): a) Nourishment b) Colour c) Palatability d) Economy e) Shelf-presence f) Packaging g) Brand Image h) Promotions These attributes were decided after a thorough secondary data analysis. However some of these attributes might have similar effect on the consumer preference. Therefore we conduct a factor analysis to find out the factors to which one or more of the above variables belong. Q9 asks the respondents to rate the Sources of Information influencing the Purchase Decision. The following sources were considered: a) Advertisement b) Children c) Doctor d) Family e) Past experience f) Retailer g) Word of mouth The respondents were asked to rank the factors in order of importance. Q10 ask the respondents to score each of the brands on the various product attributes on a scale of 1 5. Five major selling brands were tested on the various product attributes mentioned. The brands included in the test were: a) Boost b) Bournvita c) Complan d) Horlicks e) Milo Q11 and Q12 are used to determine the brand loyalty of the respondent towards the health drink, thus asking the switching pattern of the users. Q13 in the Questionnaire attempts to find the Brand Personality by asking customers the perceived traits of each of the leading brands of health drinks available in the market today. It is very important to realize that these are not the attributes that the drink claims to possess, via its advertisements and other promotional activities. For e.g. Boost in its campaign claims that â€Å"Boost is the secret of my energy†, but rather the attributes the customer feels that the drink possesses. Therefore, if respondents identify spiritedness with Boost it would imply that Boost is successful in its marketing strategy. The responses to this question would also be important to other players in this segment, as they would realize that their promotions are not being effective and hence this would encourage them to redirect their marketing efforts. Apart from spiritedness, the other important traits have been identified as Modesty, Honesty, Cheerfulness, Boldness, Spiritedness, Reliabil ity, Sophistication, Toughness, and Ruggedness. 5.2 Methodology Questionnaire Checking/Editing: The questionnaire is checked for completion and interviewing quality. Editing is the review of the questionnaire with the objective of increasing accuracy and precision. Collation of Data: The data is collated in the excel sheet and prepared for statistical analysis. An SPSS view of the data was also taken for further analysis. Choice of Statistical Analysis Techniques: T-statistic: A t-test was conducted on the results of the survey in order to compare the means of the ranks for the factors or sources of information to find out the most important influencing the purchasing decision. T-test was also conducted on the various product attributes for different brands. Anova: It is carried to study the variance of the factors or product attributes that influence the most among the various demographic groups by conducting the one way Anova test on the scores of these 8 factors. Factor Analysis: The various variables that denote the product attributes that determine the purchasing decision can be actually factored using factor analysis. This factoring of the variables helps in easily studying the consumer behaviour. Cluster Analysis: The set of respondents was segmented on the basis of the demographic information namely ‘age-group, ‘income-group, ‘education, ‘family size etc using cluster analysis so as to identify the distinct clusters depending upon these demographic factors. Multi Dimensional Scaling: This analysis was performed on the overall samples as well as on the 2 segments individually so as to gauge the difference in their perceptions. The selection process depends on the fact that it is conducted on the aggregate level data, i.e. that on the two clusters formed after cluster analysis. This is due to the fact that all market strategies are typically formulated at the segment or aggregate level. 5.3 Analysis and Interpretation Sources of Information influencing the Purchase Decision h) Advertisement i) Children j) Doctor k) Family l) Past experience m) Retailer n) Word of mouth The respondents were asked to rank the factors in order of importance. A t-test was conducted on the results of the survey in order to compare the means of the ranks for the factors. The results of the test are as shown in the Exhibit 1. We can say from the results that there is a significant difference between the ranks of the factors with a 95% confidence. The two most important factors that emerge out of the tests overall are the â€Å"Family doctor†and the influence of the â€Å"Family†. This finding is an important implication for product placement. We can say that the health food drinks should appeal to the complete family rather than only a particular age group. Doctors can also be an important influencer or opinion leader and hence should be targeted in the product promotions. Some products have been promoting their products using comparative advertisements including testifications by the doctors. A second test can be conducted in the same manner taking only the cases where the people are having kids in the family. The results are shown in the Exhibit 2. We observe that the two most important factors differ from the first scenario. The two most important factors that emerge out of the test are â€Å"Family Doctor†and â€Å"Advertisement†. Thus it can be concluded that advertisements have an important influence on the families having kids or in turn the kids. This can be easily observed from the large number of advertisements directed towards the well being of kids. Product Attributes Influencing the Purchase Decision The following product attributes were identified as influencing the purchase decisions of the customers: a) Nourishment b) Colour c) Palatability d) Economy e) Shelf-presence f) Packaging g) Brand Image h) Promotions The respondents were asked to score the importance of the factors on a scale of 1 to 5, with 5 being the most important. A t-test was conducted on the scores of the factors in order to find the most important factors. The t-test shows there is a significant difference between the scores of the various factors with a 95% confidence. The results of the test are shown in Exhibit 3. We observe from the results that the two most important product attributes in making a purchase decision are the â€Å"Palatability†and the â€Å"Nourishment†perception in the minds of the customers. These factors turn out to be the same irrespective of whether there are children in the family or not. We then study the variance of these factors among various demographic groups by conducting the one way Anova test on the scores of these 8 factors. We studied the variance of the mean scores of these attributes among the various groups differentiated by the following factors:- a) Income b) Education c) Age d) Family size The results of the Anova tests which were conducted on the data are as shown in the Exhibits 4-7. We observe that there are no significant differences in the scores of the product attributes in different groups as classified by â€Å"Income†, â€Å"Education†and â€Å"Family size†within a 95% confidence interval. However there is a significant different on the â€Å"Nourishment†and â€Å"Economy†product attributes of health food drinks. As is observed from the mean scores, the â€Å"Nourishment†aspect becomes particularly important for people above the age of 60. It is also important for people who are young in age i.e. less than 20. However it does not seem to be very significant for people in the age group 33- 45. The factor analysis of these attributes is done in the following section. Factor Analysis of Purchase Considerations The factor analysis of the 8 product attributes yields the following 3 factors: Factor I: Promotion, Shelf-Presence, Packaging Economy Factor II: Palatability, Brand Factor III: Nourishment, Colour (For the output of factor analysis, refer to exhibit 8.) As factor I encompass the accessibility and affordability of the product, it can be termed as ‘Purchase Feasibility. As factor II encompass the palatability and brand value of the product, it can be termed as ‘Likeability. As factor III encompass the nutritional value and colour, an indicator of quality, of the product, it can be termed as ‘Utility. Customer Segmentation The set of respondents was segmented on the basis of the demographic information namely ‘age-group, ‘income-group, ‘education, ‘family size etc. The cluster analysis on these demographic variables yields the following 2 clusters: * Cluster 1: The members are almost uniformly distributed across all age segments except under-20 in which no member lies. However, the family size is large than 3 for all the members and a majority of members having 1-2 child in the family. The cluster size is 27 respondents. * Cluster 2: All the members in this cluster are less than the age of 32 yrs, with the majority being less than 20 yrs. Around 90% of the members were either single or couple thus suggesting that the members were either students, or bachelor/newly-married young working professionals. The cluster size is 30 respondents. * As the consumption in cluster 2 would be lower than the large families comprising kids older persons because of less health concerns and preference for alternative beverages, the price sensitivity of cluster 2 would be low while cluster 1 is concerned about economy. (For output of cluster analysis, refer to Exhibit 9). Thus, cluster 1 could be termed as ‘value-seekers while cluster 2 could be termed as ‘quality-seekers. Different Brands on Product Attributes Five major selling brands were tested on the various product attributes mentioned. The brands included in the test were: f) Boost g) Bournvita h) Complan i) Horlicks j) Milo The respondents were asked to score each of the brands on the various product attributes on a scale of 1 5. T-test was conducted on the various product attributes for different brands. The results have been shown in Exhibit 11. The number of respondents who were consuming the various brands is as shown in the pie chart. As we can observe from the graph, Bournvita is found to be the leading brand closely followed by Horlicks, while the other brands do not have a large taking from our survey. The results of the various brands on different attributes are as follows: a) Nourishment: Horlicks scores well above all the b
Tuesday, August 20, 2019
Tesco is biggest supermarket
Tesco is biggest supermarket INTRODUCTION Tesco is biggest supermarket chain in the U.K. it has more than 1700 stores in the U.K alone and has about 2318 stores in the whole world. It also sells its products through online Tesco.com. Tesco is the U.Ks largest retailers which operate through its branches under the name of Extra, Metro, superstore and Express. Political and other conditions of UK and European union has very much influence on the Tesco performance. Tesco employs a large number of students and disable people and elderly people and pays them in most cases lower wages. Consumers are getting to know about health issues and their approach in choosing the food product is increasingly changing. (Ivythesis, 2009) Tesco has serving more than 40,000 food products including non food items and clothing to its customers. The companys own products which contribute about 50% of its sales are categorized in three different types Value, normal and finest. As a convenience produce most of Tesco store have gas store and filling stations. It is becoming one of U.K biggest independent filling outlets. Tesco is operating others business as well which includes retail banking, Tesco insurance, Tesco mobile as well. (bized, 2009) The company is also the first in U.K which allows their customer to pay or cash their cheques at the tills. Tesco has been employing a large number of British people and it facilitating it by allowing the new branded product into Tesco which helps the new companies to grow and employ more people. But recently company realized to look for some other products which are not available in U.K market. Recently Tesco has been facing stiff competitions from Sainsbury and Asda food giants. The goal of Tesco management is to focus on competitive advantage by adding more value in its products like Tesco has starts giving delivery services to its customers as well. The business and organizational strategy applied by Tesco has helps the organization to make its core business which is in the UK more strong. It also helps the company to expand its business internationally. These services includes providing the financial services like offering Credit cards, loans, insurance and banking services. There is also a strategy to find the potential market to enhance the market share of the company in Asia, Europe and in United States. The strategy to explore new market has started in 1997and it has been the foundation of success of Tesco business. There has been a huge expansion in its expansion of operations with the opening of thousands of store for the past12 years has been made possible with the implementation of this strategy, they are having competitive edge over other businesses and are profitable. In fact Tesco is market leader not even in U.K but also outside the U.K as well. (tesco plc, 2009) 1) STRATEGY OF TESCO: Tesco has been doing business in the stock exchange since 1947 and it was having share price 27 pence in the beginning. It has been keeping on growing and has become a popular name on the High street of the UK. Tesco has a strategy which is describes as Pile it high and sell it cheap but with time as people attitude has been changed and there become a trend in the better interior of stores, Tesco has made huge investments in the refurbishments of its stores and make them very attractive to shop for customers. It has added many value added service and product in its operations. It has start selling petrol and customer gets discount when they buy from Tesco and then they spend money to buy petrol. It has made a huge investment on the implementing of Tesco loyalty card scheme. 1.1 STRATEGY: Tesco has done well by successfully implementing the four parts of its business strategy. A strong UK core business , Non food Retailing services International The objectives of this strategy are: To be a successful retailers in the world. To grow the core UK business. To be as strong in the non-food items as in food items. To develop retailing services- such as Tesco personal Finance, Telecoms and Tesco.com. To put the community in the heart whatever we do. Tesco has taken considerable steps to attract customer with advent of Tesco Extra, Tesco Metro, Tesco Super stores and Tesco Express at town with filling stations. These stores provide all essentials food and non food items at very competitive prices. These stores give a direct challenge to other stores like ASDA, Sainsbury etc. Tesco has introduced a loyalty club card. Customer gets points from every purchase they made and then they can get product with these points. For Tesco this thing help to get a value data about customer, what is customers buying behavior and how they respond to the sales promotions carried on in the store. Apart from the product it sells it has worked on the other services as well. It has start providing the Loans, credit cards and online sale of products. Tesco has taken to expand in other countries like India, Japan, and U.S.A and in Europe as well. It has continuing working on the improvements of services to its customers. In USA it has made a partnership with Safeway Group. (articlebase,2009) 2) ENVIRONMENTAL ANALYSIS: 2.1 PESTEL FRAMEWORK: 2.1.1 Political Factors: Tesco has stores worldwide and its main business is in UK. These countries includes many European countries. It also has stores in Taiwan, Japan and India as well. Political and other environmental factors of UK and European are having a too much influence on the Tesco performance. These legislations advise to these stores to hire people for different position in the company. These people include the students, disables and senior citizens as well. As local business in the Tesco suffers heavily because of competitions, in order to survive these local stores cuts the jobs so Tesco has hire a large number of People to accommodate them. Tesco usually pays them low wages. 2.1.2 Economical Factors: Tesco is very much concern to the economic factors because prices and demand gets affected with this. Goods and services are heavily affected if the economic conditions of people is not good and many people are unemployed and it influence the people purchasing capacity so demand for the goods and services will be affected. Tesco is heavily dependant on UK market, Although international business are growing but Tesco is still dependent on the U.K food market and if the demand for UK food market get slow down then it will badly affect the Tesco performance. 2.1.3 Social/Cultural Factors: Currently the U.K people trend shows that they prefer to go at that store from where they could get everything. There has been huge demographics changes in the UK population happened i-e ageing people, increase in the number of female workers and declining in the preparations of food in the home, which has force Tesco to sell supporting products and services as well. Customers demands of services and products are created by the change of their social and cultural changes, their beliefs. People are recognizing the hygienic problems. Tesco is adopting a product mix in order to meet the demand of organic products. It has start mentioning the product with labels on it for people who strictly want to use product which are free from animals ingredients. U.K has a diverse population from different cultural background people. Areas which are densely populated with Asian people prefer to go for their traditional foods so keep this thing in mind Tesco management have introduced mostly those products which are in demand in those areas. (321books, 2009) 2.1.4 Technological factors: Technological improvement has benefited both the company and customers. Goods are readily available in the store which has increased the customer satisfaction and it has become easier to manage the ordering system. Customers get served more quickly than before. Tesco stores are utilizing the following technologies in their outlets: Wireless devices Intelligent scale Electronic shelves labeling Self check out machine Radio frequency identification. By the use of electronic tills and fast fund transferring machine and new scanner has increased the operational activities of the Tesco which has improve the image of the Tesco further. (Finch, 2004). 2.1.5 Environmental factors: Starting from 2003, managers were under great pressure to look into society issues and adopt policy which benefits for both the society and for the company. (Lind green and Hingley, 2003). In order to prove that company care about society, they need to clearly work about environmental issues. By recognizing this trend Tesco has been working on the environmental issue to prove that it is a socially responsible organization which cares about the environment. Government has introduced new policies which aim to reduce the waste pollution and encourage the companies to take steps to reduce the pollution. Recently a new legislation has been created in which a heavy tax has been imposed on those products which are not environment friendly. This tax has been directly affecting the Tescos products and damaging the relations with suppliers and customers. 2.1.6 Legislative factors: Tesco performance has been affected by various government policies and legislation. Tesco is bound by law no to take payments from supplier to take order for goods and any such kind of activities. The existence of strong competitors has created a demand of stiff competitions in prices of branded products and a strong demand for product diversification. Government policies to control the monopoly and reduction of buyers powers can reduce the chances to enter in this sector with such controls. (Mintel Report, 2004: Myers, 2004). Tesco has been giving discount on buying the petrol to its customers based on amount it spends on the purchase of groceries at the stores. Tescos keep the prices on the promotions low while it increase the prices on other products in the store in order to compensate. 3) PORTERS FIVE FORCES FRAMEWORK: 3.1 Threats of new entrants: There is four big supermarket which are Tesco, Sainsbury, ASDA, Liddell which makes 75% of total market and Waitrose, Somerfield and Budgens makes about 10% percent of total market. The trend in people of UK has been changed to one stop shopping and they want to get everything at one place so majority of grocery stores has transformed into one stop supermarket. These big supermarkets heavily affects the surrounding butcher and food shops. These big supermarket does not let any new business to come into their area as they give very stiff competitions and starting business in those area are more difficult because of huge capital investment. In order to make a solid position in the UK market, Tesco has been spending a huge amount of money on the development of existing infrastructure. 3.2 Bargaining Power of Supplier: Suppliers power of bargaining get affected from big store as the supplier fear that if they put their own conditions of bargaining then they might lose it client and will not be able to operate their business. Tesco always negotiate with suppliers to get the best competitive prices and get a better price as compared to small food chains. The UK small food chains also threatened from this big supermarket as they get cheap goods from abroad for their promotional activities. So the relations with the suppliers can have affects on the freedom and margin of the company. (321books, 2009) 3.3 Bargaining Power of Customers: Tesco club card scheme is very successful in order to retain the customers with Tesco which has increase the profit margin of the Tesco significantly. In order to fulfill the customers needs, the customized services such as lower prices, better choices, constant flow of promotional products and availability of all the product which customers demands enables Tesco to retain its customers. In recent years a huge changes has occurred in the food chain stores due to a change of behavior of customers, So Tesco has started keeping more non food items as well in its stores. It has also provides a strategic expansion of its business into new markets such as retail banking, pharmacies, phone shops. 3.4 Threats of substitutes: A demand for a particular product can be reduce due to a general substitution because there is always a threat that customer will switch to alternatives (Porter, 1980). Substitute for needs and product for product has been observed in the grocery industry. It is more affected with the new trend. Small stores are opening up in the industry. In this case supermarket like Tesco is trying to taking over the small stores and opening up big stores in town centers. (Ritz, 2005). 3.5 Bargaining Power of Competitors: Tesco is getting lot of customer information through its loyalty club card and trying to improve its relations with the consumers. In UK food industry, because of high competitive expansions, most of these big stores are taking further steps by investing more money in the information system of the business. 4) CRITICAL SUCCESS FACTORS: By doing an evaluation of Tesco industry it has become an important to identify the success factors to consider the effectiveness of Tesco. 4.1 Branding and Reputation: The company is expanding rapidly by working hard on its packaging and spending every penny on promotions which contribute to the environment as well. Tesco is doing well in the information system applications. By introducing loyalty club card system which has helped the Tesco to get a valuable data about customers behaviors about their spending, choices and etc. 4.2 IT integration: Tesco is always step ahead in applying the new technology and it has become a necessity rather luxury in Tescos operations. A system that controls stocks, helping to serves the customers; keeping valuable record of customers transactions and ordering system is the lifeline of the Tesco. 4.3 Supplier Management: To have a competitive position in the market Tesco also get most of its products from oversee countries which are cheaper as compared to UK. Tesco has been supporting British companies for its branded products but recently it has start importing products which are not manufacturing in the UK. To keep a better communication to get its products on time Tesco has adopted a advance communication system which enables the suppliers to delivers products on time. 5) MARKET OBJECTIVES AND STRATEGIES IMPLEMENTATIONS: Tesco has plan to introduce two types of strategies, first one will going to focus to explore the market and find new customer with its new products and second one is on the diversifications of products. 5.1 Joint development and joint ventures: Tescos has a long term strategy to focus on the Japan market. In making possible Tesco is making partnerships with local business to enter into the market. By doing joint ventures Tesco will have a economy of scale and has made a good image of its brand name. (Andrew, 2009) By the entering into partnership with the local businesses in the foreign countries, Tesco will get the necessary skill in order to penetrate in the market. So in future it will be easy for Tesco to operate its operations independently. By doing joint venture with the international companies Tesco will improve its operational skills as well. 5.2 Product Diversification: UK is diverse population which comprises of different ethnic people from different countries. Tesco can do more development expansion by opening up new stores in those areas where people strictly go for their traditional food, so Tesco can add whole range of products which is in demand in these areas. 6) CRITICAL EVALUATION: Ro have a sustainable competitive advantage Tesco should apply following strategies: Firstly Tesco should adopt a strategy of cost leadership by offering goods and services to its customers at low prices in a broad market. This strategy will help the Tesco to reduce its cost, Tesco will be able to sell its products competitively and thus generate huge profit. If Tesco has to adopt another strategy then, It has to offers it products and services with a unique features which customers value it. Then Tesco has to gives some other value added services in technology, competitive price, special features and customer service improvements. Last strategy of niche is from either cost leadership strategy or product differentiation but focus on narrow market. In order to perform cost leadership strategy Tesco has to work on internal efficiencies that will help Tesco to cope with external pressure. As these both strategies are aimed at broader market, it may be possible than Tesco focus on small market or with a limited range of product. In other words, Tesco may be pursuing the strategy to be a leader in cost and keeping a huge variety in product. This can be done with a specific product in a market or by selecting a specific market for its products. The problem which many of organizations have that these organization implement all these strategies one time and most of them stuck in middle. But Tesco is very careful when it select a market, they have a clear strategy regarding it. (Wringley, 1988) 7) CONCLUSION Tesco is a very well established organization in the UK. Tesco apply different strategy in the organization to make the business grows. Its primary focus is to attract the customers and keep the loyal customers attached with the organization. In order to evaluate the customers it has apply different technology process in order to know the customers needs, their attitude and likes and dislikes. It has a specific layout which has been applied in all its branches. Tesco is investing a lot money on its information technology improvement which has helped it to improve its sales and get a competitive advantage over its competitors. 8) REFERENCES Publications from the Tesco preliminary result.2004. [online]. [Accessed on 2 December 2009]. Available from World Wide Web: . Publications from the Tesco web site. Tesco plc.2009. [online]. [Accessed 2 December 2009]. Available from World Wide Web: http://www.tescoplc.com/plc/about_us/strategy. Publications from 321books web site. Porters five forces model.2009. [online]. [Accessed 5 December 2009]. Available from World Wide Web: http://www.321books.co.uk/catalog/tesco/porters-five-forces.htm. Andrew.2007. Article base web site. [online]. [Accessed 5 December 2009]. Available from World Wide Web: http://www.articlesbase.com/sales-articles/success-of-tesco-in-great-britain-163894.html. Publications from a article from web site.2006. [online]. [Accessed 8 December 2009]. Available from World Wide Web: http://ivythesis.typepad.com/term_paper_topics/2009/08/tesco-strategic-analysis.html. WRINGLEY, N. 1988. Store choice, store location and market analysis. NY (USA). T.J press. [Accessed on 8 December 2009]. Available from World Wide Web: http://books.google.co.uk/books?id=xbYOAAAAQAAJpg=PA106dq=tesco+analysisei=xkZDS7naLqXczQTRkZDtDgcd=1#v=onepageq=tesco%20analysisf=false. PANDELETON, D. 2004. Tescos Steering Wheel Strategy. [online]. [Accessed on 9 December 2009]. Available from World Wide Web: http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy/BSTR187.htm.
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