Discuss About The Foreignness Strategic Management Journal?
Arnott’s Biscuits Limited is the largest producer of biscuits in Australia. It is also the second largest snack food supplier in the country. Arnott’s is a subsidiary of the Campbell Soup Company of the United States. The company was established in 1865 by William Arnott and operated under the family ownership until 1975. In 1997, the Campbell Soup Company acquired Arnott’s in full. Despite the American ownership of the company, which led to considerable amount of controversy, as the Australians wanted the famous company to remain in Australian hands, the products of the company have not become Americanised and the manufacturing remains in Australia. The company is now known as Snacks Brands Australia.
Arnott’s has a wide range of products under its banner and variety of productsare sold by the company in the Australian market. From biscuits, candies, toffees, cakes, to breads, to ice creams and many more types of dessert, Arnott’s virtually has existence in almost every market of every available type of dessert in Australia (Dunn 2014). Arnott’s owns the top two brands in almost every segment of crackers, sweet biscuits and chocolate biscuits.
Arnott’s is one of the biggest biscuits manufacturers in the world and is the biggest one in the country. The Arnott’s umbrella consists of many sections and is the parent company of many brands that are very famous in the Australian biscuits market. Five factors have ensured the growth and of the company and also enables it to maintain the market hold in Australia.
The company is focused on the core biscuit portfolio in the country: Arnott’s have long exited from the sector of private labels, which yielded almost negligible profit margins. The entire snack food segment of the company’s operations has been divested and the focus has been instead given to expanding other dessert food products or snacks that are healthier and organic. Peripheral operations of the company have been limited and a centralized operations management has been created so that every transaction and function of the company and as well as of the subsidiary brands can be monitored in a uniform manner (Bartrim 2017). Manufacturing has been given the highest importance in the company and the quality of the manufacturing process is hailed above all other operations of the company.
Entire restructure of the management: Stranded overhead cost is a headache for every organisation that aims to operate within any sector and derive a certain amount of profit from it. The administration process of the company has been streamlined, so that every action and step is monitored and analysed before even being implemented. Sales and other attributes that boost sales are consolidated so that further expansion within the domestic market can be achieved.
Route-to-Market warehouse system: The company deals in manufacturing and selling of such a product that has an expiry date. This requires the company to makes sure that none of its products are in consumable condition. The products becoming expired cannot be tolerated by the company and that makes them ensure that their warehouses are foolproof and no products are wasted (Hendrieet al. 2016).
Growing core brands: Arnott’s has focused all its resources to developing the core brands, as they are the original products and names that have helped the company its current position in the market. Marketing is boosted and widespread campaigns are done so that market exposure is enhanced even further. Promoting the trades of the company is another great strategy that increases transparency in the transactions and operations of the company, that creates a loyal customer base (Pulker, Scott and Pollard 2017). The packaging and merchandising of the products is done with creativity and new ways of delivering the products have helped the company to grow and maintain customer satisfaction, that in turn helps with increased sales, which, again, results in better profit margins.
Investing in a pilot plant: This is a newly formed segment of the company where innovation is used efficiently to create new products or developing on the products that are already being produced and sold by Arnott’s. Customers are at the heart of any business operations and the company understand that catering to their needs is the only way to stay ahead in the competition (Potter and Davis 2017). Constantly evolving with the changing customer needs and giving them more and new exciting flavors, textures and products is the only way to retain the loyalty of the customers. This pilot plant is where all the creative and innovative ideas are amalgamated and all the inputs are brought together to make something new to keep the excitement and sentiment of the customers alive.
The Australian biscuit market is huge and is driven by fierce competition. For years, the parent company of Arnott’s has been registering flat profit figures. After the successful implementation of the above described five strategies, it has finally managed to reach profit levels that are above the average market rates. The growing health consciousness of the Australians regarding consumption of snacks, and becoming more biased towards organic and healthy eating habits have rendered the market to experience a sudden slump in recent years (Friel, Barosh and Lawrence 2014). Sweet biscuits: the segment where Arnott’s operates the most includes plain biscuits, cream biscuits and cookies. Arnott’s has been trying to regain its market status by producing gluten-free, low sugar and low fat biscuits for the people who are serious about maintaining a good and healthy lifestyle. Arnott’s have suffered a lot in a market, which experienced an overall degradation in 2013. Even though the market has been able to recover from that momentary blow, the overall sales and profit levels have not been able to match its previous figures yet. Arnott’s have successfully reported higher profit levels than their competition. The biggest reason for this drop in sales and profit can be attributed to a rise in health and lifestyle concern among the consumers. Even if this single incident may be cited aberration, the overall sales have been experiencing a downward result for spome time now.
Tim tam has been the most successful launch of Arnott’s till date. It has a huge appeal to the children as well as the grownups, who enjoy a sweet comfort food that reminds them of their childhood and has emotional attachment to it. This single product is the only reason for the company to retain its advantageous position in a market that is currently going through a slump. To maintain and increase their sales, Arnott’s has gone beyond the simple chocolate selling business strategies and have tried to offer the customers with more products than their peers and competition. Recipes are invented by Arnott’s that use Tim Tams as an ingredient and more desserts are offered alongside the traditional candies, chocolate bars, biscuits, chocolates and cakes. Breads are also produced by the company which has given them significant existence in the bread market as well. Over the last five years Arnott’s have been experiencing a slowdown, along with the entire market sector, but Tim Tam sales itself has seen increase. This can be widely attributed to the fact that the company has invested a lot of money, time and creativity in the campaign and promotion of this product. Therefore, deciding on this product to be the product that is to be introduced to the British market, as new expansion strategy, was the obvious choice.
The United Kingdom is one of the biggest economies in the world and has a huge opportunity in the specific sector of chocolate where Arnott’s wants to penetrate. To understand the condition of the overall UK market, a PEST analysis is to be performed upon the entire country, to understand the conditions that are currently prevailing in the country and what possible strategies can be adopted by Arnott’s to ensure maximum exposure and sales.
Macro environmental analysis: The success of an organisation is determined by the factors that operate within the internal and external environments. An organisation can try to become more successful by efficiently utilizing these factors to its advantage by adapting to the environment to manipulate the factors. An organisation, which is successful in the market can not only use these factors and manipulate them, but also have certain degrees of predictability powers, which help to forecast imminent change. This ability can be of tremendous help for organisations as this can aid in preparing for the change by changing its strategies.
The macro environment refers to the outer and external environment in which the organisation operates, effectively meaning the industry and the general condition of the country, which the organisation cannot control as a single entity but have some degree of impact when it is a part of the greater industry as a whole. Micro environment comprises of the internal factors, which are directly controlled by the organisation. The internal operations, manufacturing, service providing, processing all are the factors that are controllable by the organisation.
A PEST analysis is a tool that is used by organisations to understand the prevailing macro environ mental conditions within the country it is operating. Since the economic, political and social conditions and outlooks vary for each country, each country also offers a unique condition for every industry, which is a big point of concern for the organisations that run operations across different countries. The PEST analysis is a simple take on an organisation’s political, economic, social and technological environments, within which it exists and functions. Legal and environmental factors and conditions are also part of the PEST analysis.
Political: The political framework of the country is a constitutional monarchy. A parliamentary system governs the functions of the government, which makes the country is fair and stable, having a lot of opportunities for the entities that operate within the country. The country is normally thought to be as a stable one, where the citizens have a control over its inner functioning. Being split into national and local administrations, it is easier to maintain a cohesion among all the operations of the government, as well as individuals and organisations. However, the government is not devoid of corruption, which are widely known, yet not talked about. The massive political dilemma over the decision of whether to stay in the European Union (EU) or not is taking a significant toll on almost all activities of the country. Even so, the UK is one of the most successful countries where rule of law is established.
Economic: The economic condition of the UK is also very stable and has the fifth highest Gross Domestic Product (GDP) in the world. Before the economic slump of the 2007-08, the country was registering a steady GDP growth rate. Even after the depression, the country is gradually coming out of the slow economic growth, however, most of this economic reestablishment is centered around London and the south east. The southern part of the country has traditionally offered services, while the north was more dependent on industrial sectors. This new economic outlook is reflecting the decrease in the importance in the industry sector, which may hamper economic strength in the long run. Interest rates are also regulated by the Bank of England, which also keeps the inflation rates under control. However, lower oil prices play its part and inflation rate do reach almost 4% at times, but is quickly subdued again. The country’s inflation rate has been significantly lower than the overall inflation rates of the EU. Despite all of these economic hope, the pound has still lost its value to some extent, which severely affected the economic condition and transaction of the country in the international market.
Social: The UK has very high social standards. These high standards help to keep the overall environment and circumstances in a better than average position as compared to many other first world countries. Services like the National Health Services being free of cost let the society and community to focus their time on other issues. This also helps to keep the overall health quality of the citizens to be better, ensuring more productivity in all sectors. A lot of population also means that there is an abundance of skilled labours. The country has flexible migration laws, which enrich the society in a cultural way, as well as provides with cheap labours. The country ensures a basic education for all its people, and the education system is of very high standards. Better education leads to better workforce. The standard of living in the UK is exceptionally high and has surpassed that of the United States of America recently, after almost a century. Still, the country is burdened with income disparity and faces challenges in overcoming them. Child poverty is still a major issue in the country and the government struggles to rid the country of this pressing issue.
Technology: The UK has a wide range of technology available to help the citizens live a good life and also increase the industrial production and the betterment of the services sector is also achieved. Science and IT sector has seen remarkable expansion; thagt helps in increasing quality of every aspect of life. The country has stringent and effective laws regarding intellectual property rights. The country also has high level of competition among the industries inside the country, which helps to boost growth and specialisation is ensured.
The British market offers a diverse and huge for sweet biscuits which is the primary product offered by Arnott’s. the combination of either tea or coffee is consumed by almost every British coupled with biscuits almost everyday. The market is supposed to grow almost by £5.6 billion in the next financial year. The biscuit industry, hence, looks to be pretty solid in terms of sales and overall performance. Throughout the recession, when the entire global economic conditions faced meltdowns, the British people never stopped buying biscuits, as it is their daily need. This helped the UK biscuit market to sustain itself better than most other industries of the world. Although this “ritualistic nature” to buy sweet biscuits have stayed relevant for the people of the UK, the rising health concerns here has also slowed down the industry (Fuller 2016.). However, emotions and sentiments seem to have prevailed and the biscuit sales have been steady. Iconic brands like McVities, Jacob’s, Hob Nobs all have good market shares and make sure that the industry will not be facing any immediate problem right away (LEONGet al., 2017). However, these same reasons are why Arnott’s will face a problem: The British seem to prefer their own products more than any foreign ones, and the company has to innovate and accordingly market or promote their Tim Tams that would efficiently appeal to the customers in the same way as their local products do.
Arnott’s is going to adopt a number of strategies that are currently used in the backdrop of operating in the Australian market, but may prove to be essential for the UK market. Arnott’s has focused a lot of its resources and operations towards online retailing of their products. The company is not satisfied with only supplying their original product to the market, but also aims to provide the British consumers with every product they have in their catalogue (Ng and Shukor 2016). This will no doubt take time and a lot of hard work is to be expected, but Arnott’s is sure about yielding a positive result from this.
The UK is experiencing an increase in the demand for coffee, and in recent times, there has been a remarkable growth in the number of coffee shops in the country. Arnott’s aims to exploit this aspect would expand their business in the coffee chain in the United Kingdom, in a joint venture with Coffex. This would ensure even higher sales for Arnott’s Tim Tams and new business opportunities for the company as awell. The retail chains would be supplying new flavors of coffee and would use the products of Arnott’s as ingredients. The shops would be offering the customers an enriched coffee drinking experience, which they hope would increase customer satisfaction. In a time when coffee boutiques are setting a new trend in the country, Arnott’s has high hopes about their new business venture.
The market of the UK is high and there are many companies which have been selling chocolate in the country for a long period of time. This would seem like a disadvantageous position for the company as it is a newcomer and do not have enough practical experiences of operating in the British market, which would entail a lot of new planning and strategizing on Arnott’s part (Lindberg, Nichols and Yam, 2017).
The exit of the country from the EU would pose some obvious problems regarding the tariff laws and export import policy. However, Australia hopes that this would not affect much for their foreign trade with England, as they had similar trading regulations with country before, which are now being considered to be implemented with the new trade laws between the United Kingdom and the European Union. Most of the companies in the UK use online retail shops extensively to reach their customers and increase their sales along with physical shops. Arnott’s would be investing a lot in their online retail shop creation which would enable the customers to avail their products in similar fashion in which they are already used to.
The Australian and British cultures have some obvious similarities between them, both being first world countries and somewhat of a similar way of thinking. The socio-political and economic conditions are also not very dissimilar in the two countries. This would give Arnott’s some basic advantage in planning their strategies. The citizens of both the countries enjoy their desserts and sweet biscuits are a big part of both country’s culinary traditions (Daltonet al. 2014). These aspects would help Arnott’s to use the general preference and food habits of the people of the UK to be used to their own advantage.
The company has a lot of opportunity to expand in Britain as an established brand in Australia it has means and resources to expand in the Britain market as well. The British market is a good place for the company as it has a lot of options in terms of customer segmentation, innovation in the flavor etc (Khan et al. 2015).
Tim Tam will enter the UK market and the company will directly export the product from Australia. Arnott will directly export the product via UK intermediary. These intermediaries will act as the middleman in the company. These intermediaries will also have to control the sales and interact with the client directly. Arnott will be benefited to a large extent if it chooses direct exporting via intermediaries and this will also increase the profit level of the company (Ulrich et al. 2014). It is also important for Arnott to know the customers and then choose the foreign market expansion strategy. In such a case, the customers also provide direct feedback on the product and the performance of the product in the market place which will be beneficial to the company. As the people of UK prefer bakery items to a large extent, Tim Tam will earn a huge profit and it will be preferred by a large number of customers (Marx et al.2014). The intermediaries in the UK market purchase the product from the company directly and then they sell it to the customers. The intermediaries in UK set the selling price of Tim Tam and they assure the buyers about the product. They also provide the after sales service in the UK market. Arnott is also trying to link to various global chains by outsourcing the products to UK and this will also help the business to compete in the global level (Constantinides 2014). Arnott will be in profitable stage if it chooses direct export via franchise because the intermediaries can sell the product at a much lower price and it will also help the company to compete with the other leading companies. This will also help Arnott to develop personal relationship with the customers (Hohenthal et al. 2014). Arnott will also establish a sales program and thus will help the intermediaries to represent the company in the future. The intermediaries and the company will work closely in representing the interest of the customers. The customers are regarded as the main agents of the company and thus it is important that the intermediaries are handled in a better way. The home based country of Tim Tam i.e. Australia will be in a much advantageous position and it will also reduce the risk of the company. The risk will be borne by the intermediaries when it sells its products in UK. Arnott will also be in potential risk if it operates in oversees market without nay intermediaries (Musso and Francioni 2014).
The product of Arnott i.e. Tim Tam is preferred by a large number of customers. Tin Tam is available in different flavors such as white chocolate, dark chocolate mint, dark chocolate, honeycomb and chocolate orange. The chocolate flavor of Tim Tam is preferred by a large number of customers and it is flavored by varieties of alcoholic liquors. The biscuit sandwiches of Tim Tam are manufactured in Indonesia. The cheese flavor of Tim Tam is also preferred by a large number of customers. The limited edition of Tim Tam was also launched in the Australian market in 2014 in different flavors such as choc brownie, salted caramel, raspberry white choc. The company also launched the peanut butter Tim Tam and the company has earned a large number of profits through this flavor (Zhou and Guillén 2015).
Tim Tam is available in available to the customers in an affordable rate. The company launched different flavors of Tim Tam in different sizes and they are available to the customers at an attractive price. Tim Tam is also offered at a discounted price to the customers. The product is available in Woolworths and Coles and the company is trying to resist the prices of Tim Tam and other products of Arnott from rapid price hike (Keiningham et al. 2017).
Tim Tam is available in different supermarkets as well as in retail stores. The company has chosen many distributors all over the world and it is also trying to expand in the UK market. Arnott is also trying to increase its supply chain when the other companies have increased the price of the product which is similar to Tim Tam. Arnott has set up bakeries for different products in different places in the entire Australian and the company is expanding rapidly in the global market (Sandberg 2013).
Arnott has set up partnership with different institutes such as national Breast Cancer Foundation and it has launched the limited edition of Tim Tam and thus this coincided with the pink ribbon campaign. The company is also spending a huge amount on advertising in different social media sites such as Facebook since 2012. Several campaigns were also done via YouTube and this generated a huge profit to the company. Arnott has also chosen television advertisement to reach out to the customers (Hurskainen 2016)
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