The MegCo Company’s Strategic Marketing

Business description

MegCo is a private limited company, which was registered in 2013 in the UK. The firm intends to venture into the UK beverage industry. The firm’s management team considers leasing as the best option in its effort to ensure that the firm is strategically located. The firm will specialise in the provision of diverse non-alcoholic beverage products such as speciality coffee, teas, and energy drinks. MegCo intends to supply its beverage products to both local and international customers. In order to serve the target market, MegCo will employ 100 employees during its market entry phase. However, the number of employees will be increased as the firm expands.

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MegCo Limited is committed to attaining market leadership within the UK beverage industry. In order to achieve this vision, the firm has adopted customer-centric strategies, which emphasise on delivering value to customers. Additionally, the firm appreciates the importance of understanding the customers’ product needs in order to achieve a high level of customer satisfaction.

Product description

MegCo will ensure that its products contribute to the attainment of a high level of profit maximisation. In order to achieve this goal, MegCo will ensure that its beverage products are of high quality. One of the issues that the management team will take into account the production process is the customers’ health consciousness. Customers are increasingly changing their lifestyles in an effort to remain healthy. This trend has arisen from the increased association of various diseases with eating habits. MegCo will deal with a wide range of beverage products in an effort to address the customers’ product preferences. Some of the products that MegCo will incorporate in its product portfolio include hot chocolate, instant tea, instant coffee, energy drinks, and freshly brewed coffee.

Competitive analysis

The global beverage industry has undergone significant transformations over the past decades. The industry was adversely affected by the recent global economic recession. However, the integration of the economic stimulus package has played a fundamental role in stimulating economic growth. The emergence of new markets has emanated from the increased demand for speciality beverage products such as ready-to-drink products. Convenience stores are increasingly integrating diverse ready-to-drink products in their product portfolio.

The global non-alcoholic beverage industry is becoming competitive due to its lucrative characteristic. Well-established companies such as Coca Cola, PepsiCo, RedBull, Costa Coffee, and Starbucks Coffee, dominate the industry. These firms have attained an optimal market position in the UK beverage industry. Additionally, the firms have diversified their product portfolio in an effort to maximise their product portfolio to meet the customers’ needs. Furthermore, new firms are entering the industry in an effort to exploit the market’s potential profits, hence increasing the intensity of competition. A large number of industry players has presented consumers with a wide range of choice of the beverage product to consume. It is estimated that 99% of households enjoy different beverage products (Euromonitor International, 2013). A study conducted by Euromonitor International (2013) shows that sports and energy drink companies are venturing into the industry. Over 495 million litres and 165 million litres of energy drinks and sports drinks were consumed in 2011 (Soft Drinks Association 2013). GlaxoSmithKline is one of the major players within the sports and energy drink sector. The firm has managed to survive the UK market since its inception in 1927. The firm’s success has emanated from investment in new product development. For example, in 2012, the firm introduced a new product known as Lucozade Revive (Soft Drinks Association 2013).

The UK coffee market segment has also undergone significant growth over the past few years. In 2012, the UK coffee industry grew with a margin of 7.5% to a turnover of £ 5.8 billion. The UK coffee industry is comprised of independent coffee shops, branded coffee chains, and non-specialist operators. The branded coffee firms such as Costa Coffee, Café Nero, Starbucks Coffee, EAT, and Pret A Manger have been resilient despite the challenging nature of the UK coffee market. Consumers are increasingly shifting to products that they can trust and enjoy. The UK coffee market has doubled over the past 6 years. Currently, there are approximately 5,225 outlets in the UK. Some analysts consider the market to be saturated (Hospitality & Catering News 2013).

Target market and positioning strategy

Johnson, Scholes, and Whittington (2008, p. 79) argue that the ‘success with which a firm addresses the needs of its target market is determined by how effective it is in conducting market research’. Findings of market research aids in understanding the prevailing market potential, hence gaining insight on how to develop products and services that align with the customers’ needs and expectations.

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MegCo will target both institutional and individual customers. Some of the institutional customers that the firm will target include sports clubs, which are increasingly advocating consumption of healthy beverage products. MegCo will target customers of different demographic, geographic, behavioural, and psychographic characteristics. The firm’s products will be marketed to customers of diverse age, gender, income, social status, religion, and ethnicity. The firm will also ensure that its products are marketed to all parts of the UK before venturing into the international market. With regard to behavioural segmentation, MegCo will ensure that its products align with the customers’ sought benefits in brand loyalty. The firm made the decision to adopt a different market segmentation variable in order to maximise its sales revenue. MegCo Incorporation will take into account a number of aspects, which include product safety, high level of customer satisfaction, and product quality as its core strategies in its marketing efforts.

Marketing strategy

Product strategy

MegCo will utilise expertise in the beverage production process. One of the issues that will be taken into account entails ensuring that the value of the product is not diminished during the production phase. Additionally, the firm will adhere to the food and safety standards stipulated by the Food Standards Agency. In its quest to ensure that customers attain a high level of customer satisfaction, MegCo will invest in a substantial amount of money in research and development. The research will aim at identifying the prevailing market trends. Subsequently, the firm will undertake continuous product development.

Pricing strategy

MegCo is a new institution in the UK non-alcoholic beverage industry. Furthermore, the firm intends to enter an industry, which is dominated by well-established and recognised firms. The firm will adopt the penetration-pricing strategy by setting the price of its beverage products at a lower point as compared to its competitors. MegCo will conduct competitor-market research in order to understand the competitors’ pricing marketing strategy. For example, the price of 500 grams of instant coffee will be set at £ 10.50. MegCo’s management team is of the opinion that the adoption of a penetration pricing strategy will attract a substantial number of customers. The decision to adopt this strategy arises from the recognition of the consumers’ price-conscious characteristic.

Promotion strategy

MegCo will adopt the concept of Integrated Marketing Communication (IMC). This aspect will entail the adoption of different marketing communication methods, such as advertising, sales promotion, and public relations. Sales promotion will be adopted in the firm’s market entry phase. The firm will issue price discounts to customers who purchase its product during the sales promotion period, which will run for one month. Public relations will be undertaken by sponsoring various sporting activities such as the London Marathon.

MegCo will adopt different advertising mediums, which include print media such as newspapers, lifestyle magazines, and outdoor ads together with television and radio. Furthermore, the firm will also advertise through online mediums such as the company’s website. Furthermore, the firm will also adopt social mediums such as blogs, YouTube, Wikis, Flickr, and Face Book in its online communication.

Distribution strategy

The distribution strategy adopted by the firm influences its market penetration. MegCo will adopt intensive distribution strategy in an effort to ensure that the product penetrates the UK market successfully. The direct distribution will be conducted by establishing outlets in the different regions in the UK. The firm will enter a contract with well-established retail outlets such as shopping malls in the UK to ensure that its products are accessible to the entire UK market. Furthermore, MegCo will enter a contract with renowned international food and drinks product agents in order to ensure that its products can be accessed in the international market.

Human resource strategy

Developing an effective human resource strategy is critical in an organisation’s efforts to nurture achieve long-term survival. The quality of human resource influences the extent to which an organisation attains its goals and objectives, which culminates in the creation of an effective organisational culture.

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One of the aspects that the firm’s management team will take into account in its effort to create an effective and efficient human resource strategy is the establishment of an effective organisational structure. The firm will integrate a flat organisational structure in order to nurture a high level of collaboration and interaction amongst employees. The flat organisational structure will promote open communication between the different levels of management. The founder will head the firm and double up as the director. The director’s role will entail controlling the operations of the firm. Other positions in the top-level management will include the chief finance and operating officers.

MegCo is committed to developing a strong human capital base. In order to achieve this goal, the firm will adopt a comprehensive human resource management strategy. The strategy will entail recruiting employees from both the local and the international labour market. The decision to adopt this strategy arises from the need to attain operational efficiency. Some of the issues, which the firm will take into account in its human resource management strategy, entail employee training and implementation of a comprehensive reward management system.

MegCo will ensure that employees are adequately trained in order to equip them will skills to enable them to execute their duties effectively and efficiently. On the other hand, the reward system will ensure that employees are adequately motivated. The firm will incorporate both monetary and non-monetary rewards. The firm will ensure that employees are compensated equitably. Some of the non-monetary rewards, which will be incorporated, include employee recognition, job promotion, and health benefits.

Financial overview

MegCo Limited projects to attain a high level of profitability upon entering the UK beverage market, considering the high rate at which consumers are integrating beverage products in their consumption patterns. MegCo’s management team has projected to attain significant growth with regard to sales revenue over the next few years. The chart below illustrates MegCo’s sales revenue within the next 3 years.

2014-2015
Amount in £
2015-2016
Amount in £
2016-2017
Amount in £
Sales forecast depending on consumer category
Individual consumers Institutional customers
2,500,000

6,000,000

4,000,000

7,400,000

4,500,000

8, 000,000

Total sales 8,500,000 11,400,000 12,500,000

The MegCo’s management team is cognizant of the fact that a substantial cost will be incurred in ensuring that its products penetrate the UK market successfully. One of the major cost items in the firm’s operations relates to marketing expenses. The firm has allocated £1,000,000 in its marketing budget. This amount will be used in ensuring that the firm’s products are launched successfully in the UK market. The table below illustrates a breakdown of how the firm intends to expend this amount.

Item 2014-2015
Amount in £
2015-2016
Amount in £
2015-2016
Amount in £
Cost of creating market awareness [Advertising cost; online mediums, TV, print media, radio television] 100, 000 150,000 160,000
Sales promotion 80,000 85,000 90,000
Cost of consumer market research 25,000 26,000 45,000
Cost of competitor market research 10,000 25,000 30,000
Expected market research and promotion cost 215,000 286,000 325,000

The table below illustrates the firm’s pro-forma invoice during the first year of its operation.

Items Year 1
Amount in £
Sales 8,500,000
Direct sales cost 150,000
Other cost of sales 55,000
Sales total cost 215,000
Gross margin 8,080,000
Expenses
Cost of labour
300,000
Cost of promotion 215,000
Cost of depreciation 20,000
Rent 100,400
Office stationeries and machines 30,000
Insurance 100,000
Total operating expense 765,400
Profit before interest & tax 7,314,600

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