BMG734 Strategic Management : External Environment Analysis

Introducation:

In the last few decades, the ways of doing business has changed all across the globe. There is a change in the business environment and its effect can be noticed on the Food industry of New Zealand. It is essential that companies in the industry understands the internal and external environment present around their business. Competition is another major factor that has influenced the business of many organisations. It is crucial that companies do a competitive analysis so as to understand their strength as compared to the strength of their rivals. Hubbard Foods Ltd is a New Zealand manufacturer of Breakfast Cereals that is based in Auckland. This report evaluates the Strategic positioning of Hubbard Foods Ltd. in the FMCG sector. FMCG industry in New Zealand is of worth $28.7 billion (New Zealand Food and Grocery Council, 2018). There are many known companies like Sealord, Hubbard, Goodman Fielder as well as many other multinational firms like Coca-cola, Fonterra, Hansells, Colgate-Palmolive, cerebos and Tasti. It also analyses the internal and external environment of the company as well as evaluate the industry.

External Environment Analysis

World is becoming more connected especially in terms of various factors affecting its market. It is crucial that company does external environmental analysis so as to understand the factors that are influencing their business. External environmental analysis has greater impact on the strategy making hence it is very beneficial for the modern day organisations (Chimhundu, 2012). Some of the factors that are affecting the Hubbard external environment are:

• Political: New Zealand is having a highly stable political environment and has taken policies that favour the food Industry. Safety and Health regulations have strengthened in country which has given a boost to breakfast cereal industry. Easing of the trade routes helps the company in importing the raw materials (Hinton & Hamilton, 2013). At the same time agriculture industry has also been promoted by the New Zealand Government which is the major facilitator to the breakfast cereal industry.
• Economic: New Zealand is a developed nation hence the company may not face problems related to the economic challenges. It has lower interest rates hence the expansion is also not a big issue for the company. Company’s investment in the country is supported by economic strength that New Zealand has.
• Social: Eating habits of the people in New Zealand has changed and the breakfast industry. The per-capita income of the people is also high in the country the future of the company is also high. Health consciousness of the people is also increasing which is a great opportunity for the cited firm (Insch, Williams & Knight, 2016).
• Technology: With the advancements in the manufacturing technology Hubbard need to upgrade its technology so as to fulfil the demand as well as ensure effective utilisation of resources. It is also crucial that company has to make changes in the technology from time to time so as to achieve competitive advantage in the industry.
• Demographic: New Zealand is ageing at high speed hence such kind of food demands will increase in the years to come. With increasing health problems such kind of foods will be promoted by the public (Beck, Conlon, Kruger, Coad & Stonehouse, 2011).
• Global and physical: The global competitors in the world have reached in New Zealand. With the easing of the trade routes in New Zealand, it has become easier for the organisations to import products from other cheaper countries. In such environment achieving higher growth can be a problem for the company. With the increasing demand of reduction in the use of plastics there challenges for food industry has increased. There is also a deep concern regarding the waste management which this company will have to take care about.

The segment that has highest impact on its business is the people from the middle and upper class. The once that are working are also the major segment for the company (Chimhundu, 2018). Along with this the people that are living in family are also their major segment. In terms of demographics people of all age group are their segments.

Internal environment analysis

Along with the external analysis, internal analysis is also important for the company. Internal analysis helps the company in understanding its capability according to which they can make their strategies. It is also essential to do internal analysis as it helps the company in making the plans that would help them in achieving competitive advantage over the rivals (Whitman, Stevenson, Kachali, Seville, Vargo & Wilson, 2014). It also helps the company to understand the challenges it is facing at the same time the weaknesses it has.

The effective framework for understanding internal environment is:

• Strength: Hubbard Foods Ltd is the third largest player in the ready to eat cereal market just behind Kellogg’s and Sanitarium. Apart from this company has an innovative culture that helps them in making products as per the demand of the customers. It is having a huge product range having products for different sections of the society. The growth rate of the company is very fast which gives them higher financial strength to invest in more aspects of business (Akhtar & Khan, 2015).
• Weaknesses: Even after so many years of business, the company is not able to create a huge market base. Company has relatively lower employee strength as compared to their other rivals. They do not have enough capabilities to fight the global leaders in the industry. In 2008, company started selling itself while retaining the ownership in their hands.
• Competencies: The base of the company is in developed market which ensures its long term growth. Strong strategic support and efficient leadership is the key competencies of the firm. Apart from this advanced technology use are their major competency (Kalaiselvi, 2014).

Competitive/Industry analysis

In the changing global scenario, it is essential that any company understands the condition and growth of the industry they are working in. Industry analysis is also crucial for checking the factors that are influencing the business of the companies in the industry. This helps the companies to understand the strategies that they need to make in order to overcome their competitors.

For industry analysis, Porter’s Five Forces can be an effective tool. Analysis for the cited firm is as follows:

• Buyer’s power: New Zealand consists of many companies in the FMCG sector. This increases the power of the customers as they have many options to select from. This is a threat for company (Lewis, 2014). There are thousands of new small companies that are coming up which is further increasing the competition in the industry and hence there is strengthening of the Buyer’s power.
• Supplier’s power: Number of suppliers in the industry is also in large numbers. This has reduced the power of suppliers in the industry. Hubbard has healthy relationship with all its suppliers. With the increasing number of suppliers from the international market, the competition in the market has gone to further higher levels.
• Competitive rivalry: There are huge numbers of competitors in the FMCG sector. Both local and global competitors are present in the market which is a challenge for Hubbard. In the years to come the competition in FMCG industry is going to further increase which will somehow not be good for achieving higher growth rate of companies.
• Threat of new entrants: Since New Zealand is a developed market with huge per capita income. This provides an excellent opportunity for new companies to come into the industry. This threat is one higher for Hubbard. It is also to be noticed that entering into this sector is easier as compared to other sectors hence more investors could pond their money in new companies.
• Threat of Substitution: With other kind of breakfasts available in the market, this threat is on the higher side. There are many new firms that are also arising with innovative products which can substitute the products of Hubbard. It is also to be noticed that substitute products are available at relatively lower prices which is further adding to this threat.

The attractiveness of the industry can be understood by the fact that it has shown a constant growth. The expenditure in the industry is less but there is a huge chance that companies in the industry can gain larger profits.  

Current and future strategies

The present strategies of the company include product differentiation, new product development, cost leadership, retrenchments in many aspects of business. All these strategies have helped the company in its growth (Davis, Chelliah & Minter, 2014). Checking the environment analysis the future strategies of the company should be market expansion, market penetration, innovation, lean production and quality management strategies. Focusing on digital marketing mediums is necessary as it helps in reaching to larger numbers of customers with limited efforts. In the future company should also focus on new product development as well as on other marketing strategies.

Conclusion:

From the above based report, it can be concluded that FMCG sector is performing well in New Zealand. In this the companies like Hubbard is also performing well. The external environment is very good for the growth of the company. With such a quality resources it is easier for the Hubbard to manage its business and ensure a long term growth. The FMCG industry is having many suppliers which are reducing their power. With so many companies competing in the industry, consumers get benefitted by it. There is a strong threat of new entrants and at the same time threat of substitute is also higher. Hubbard must use strategies such as innovation, market penetration, quality management, lean production etc. In future they must give focus towards new product development. This will be highly beneficial in the competitive environment that is present in this sector. Use of digital marketing strategies could be beneficial in reaching to maximum possible customers.

Reference:

New Zealand Food and Grocery Council, (2018) The FMCG industry Retrieved from: https://www.fgc.org.nz/support-education/education/the-fmcg-industry

Hinton, M., & Hamilton, R. T. (2013) Characterizing high-growth firms in New Zealand. The International Journal of Entrepreneurship and Innovation, 14(1), 39-48.

Beck, K., Conlon, C. A., Kruger, R., Coad, J., & Stonehouse, W. (2011) Gold kiwifruit consumed with an iron-fortified breakfast cereal meal improves iron status in women with low iron stores: a 16-week randomised controlled trial. British Journal of Nutrition, 105(1), 101-109.

Whitman, Z., Stevenson, J., Kachali, H., Seville, E., Vargo, J., & Wilson, T. (2014) Organisational resilience following the Darfield earthquake of 2010. Disasters, 38(1), 148-177.

Akhtar, P., & Khan, Z. (2015) The linkages between leadership approaches and coordination effectiveness: A path analysis of selected New Zealand-UK international agri-food supply chains. British Food Journal, 117(1), 443-460.

Kalaiselvi, S. (2014) Brand Awareness and Customer Preferences for FMCG Products: An Empirical Study With Special reference to Coimbatore City. International Journal of Management and Social Science Research Review, 1(2), 225-232.

Lewis, N. (2014) Beyond the flawed narratives of a crisis of oversupply: A conceptual fix for New Zealand wine. In Social, Cultural and Economic Impacts of Wine in New Zealand. (pp. 100-116). Routledge.

Davis, D., Chelliah, J., & Minter, S. (2014) New product development processes in the Australian FMCG industry. Contemporary Management Research, 10(1).

Insch, A., Williams, S., & Knight, J. G. (2016) Managerial perceptions of country-of-origin: An empirical study of New Zealand food manufacturers. Journal of Food Products Marketing, 22(3), 304-319.

Chimhundu, R. (2012) Marketing manufacturer and retailer house brands: A study of shelf space in two product categories. International Journal of Marketing Studies, 4(6), 35-43.

Chimhundu, R. (2018) The Management of FMCG Product Categories. In Marketing Food Brands (pp. 15-48). Palgrave Macmillan, Cham.