Analysis Of Nissin Noodles: Cost Structure, Distribution And Key Success Factors

This Assignment  will invite you to select a company in your industry and write a marketing plan for it. Choose an industry with this in mind.

Write report of Detailed industry analysis using a range of pertinent marketing frameworks.

Cost structure of Nissin Noodles

The industry analyzed in this paper is Nissin Noodles. It is a food processing industry founded in Japan the year 1948 by Momofuku Ando after World War 11.  Since its establishment in Japan, it has penetrated most parts of the world including United States of America, China, and many other countries (Zhang & Guansheng, 2016). The spread is linked to the preference of their products by most consumers in the world. The industry is specialized in the provision of instant healthy and nutritious products due to their high- calorie content. Some of the products offered by the sector include Cup Noodles, DemaeIccho, Nissin Foods Type Rice, FUKU, and Nupasta.

The industry operates in an oligopolistic market structure where it can make most of the decisions independently (Dunne, Klimek, Roberts and Xu, 2013). The greatest challenge for the industry is the availability of a vast number of close substitutes to their items. Substitutes create a stiff competition for the market which is full of informed buyers.  The analysis of this industry is based on the model proposed by David Aaker. The framework classifies the market into six dimensions such as the size of the market, changing dynamics on the market, the possibility of profits and the rate of growth of the market, lines of distribution adopted by the industry, cost structure, and key elements of success. In the following paragraphs, we shall be carrying an assessment of the venture concerning these factors proposed by Aaker. The dimensions above will combine the brand equity analogy brought forward by the Economist Aaker.

To begin with, a closer examination of the cost structure of Nissin Noodles reveals the status of the industry in a certain way. Cost structure, therefore, describes all the expenditures incurred by the management to operate a particular business (Kulchania, 2016, p. 983). They are classified into prime costs and overhead costs. The former refers to the value that is directly related to the output such as the cost of raw materials, fuel, human resource, electricity. On the other hand, overheads are those that do not have a direct relationship with the quantity of the output. They may include the cost of advertisement, rent, etc. The element of expenditure determines the selling price of the output that finally affects demand (Awais, Irfan, Bidal and Samin, 2012, p. 417).

Raw materials cost has skyrocketed over the last seven years especially the price of wheat flour which is the primary input. A rise in the price of raw materials causes an increase in the cost of production thus limiting the supply of the product (Tranter, Stuart-Hill & Parker, 2009). It will further necessitate an increase in the price of the final goods which might attract resistance from consumers who might opt to buy close substitutes (Abrate, Fraquelli & Viglia, 2012, p. 160). Furthermore, environmental factors such as the amount of rainfall influence the price of inputs since the industry relies on Agriculture-based supply.

Distribution channels of Nissin Noodles

The sales promotion cost is also high by the industry (Kanagal, 2013, p.1). It is in the form of advertisements through media and many other promotional techniques. Publication costs are projected to increase further due to the complexity nature of users of the products. For this industry to handle the issue of cost, it must concentrate on value-adding activities to eliminate those activities which incur unnecessary expenses.

Distribution channel refers to the route the product takes from the manufacturing point to the final user. It is a very vital tool as far as competition is concerned (Szopa and P?ka?a, 2012). An industry that is not well prepared should avoid using a channel that will make it collide head on with the rival. For instance, it should use a different channel than that of the competitor. It determines the volume of sales of the industry to a large extent (Szopa and P?ka?a, 2012). Nissin noodles have a very promising distribution network to ensure it is traversing the entire continent with its products (Saremi and Zadeh, 2014). Their chosen channels have promoted the awareness of the brand broadly. Instant Noodles are known by all groups of individuals ranging from young to old age. The wide awareness has been achieved through efficient choice of channels. One of the channels decided on is the supply chain together with information technology initiative. The industry has a good marketing department that has streamlined a superb distribution chain which has seen the industry dominate the market in various countries.

Supermarkets supply most of the products of the organization. These shops have emerged to be the most efficient ones in distribution since they are highly accessible by a large population in urban centers (Ray, 2010). They, therefore, cover 80% of the products by Nissin Noodles. However, chain stores are also essential channels used by the industry. Although they are not very conspicuous, they play a crucial role where supermarkets are not available. Another mode of distribution is through the internet where goods are aired on media to reach a large population of consumers which is usually neglected (Wheelen and Hunger, 2008).

The industry has exploited media to create a niche that makes it explore all avenues of sales. In conclusion, the industry has used various diverse retailing methods of distribution including Store-Based Retailing, grocery, and other non-grocery retailers. The management pursues all the channels in the quest of saturating the entire market where the industry carries its operations (Ray, 2010). Due to the widened scope and expansion of the business, Nissin Noodles terminated distribution alliances it had entered with some parties citing enough strength to battle it all alone.

Key success factors of Nissin Noodles

These are strengths that a business has over other organizations to catapult it to the future it intends to reach (Barney & Jay, 2011). The factors position the organization at a competitive edge where it thrives where others may not excel. Due to its long performance history as the first Company to make instant noodles in the world, Nissin continues to enjoy a significant number of trusted customers who are loyal to it. The majority have known the strong brand name for quality which has made it likable by users. Attractive packaging is another success for the industry. The packaging of products is in containers with interesting images that lead to impulse buying by customers. Furthermore, the products are strategically located on the supermarket shelves to attract the attention of buyers by far (Karuoya, 2014). Another element that has facilitated the growth of the industry is the nature of their targeted customers. The industry products are cheap, instant and convenient to low- income earners, college students and most office workers who have no time for hotel lunch (Ayala and Manzano, 2014, p. 127).

In addition to the above impetus for the growth of Nissin, active distribution channel is indispensable. It ensures that the products have widely spread on the market to increase accessibility to many potential buyers. Practical research and development have also played a vital role in the merit of the industry. Through it, the product is found to be addressing the real gaps and current trends of consumers. There has been a continuous process of product development to suit the demands of the market. The effort has made Nissin remain relevant in all business cycles since its inception.

Furthermore, the brand name has created a perception of high quality by all potential and actual consumers of the products. The image formed in the mind of clients has helped the enterprise to boost its sales through increased goodwill over a long period of time.

Besides, the business has entered into successful alliances with common-minded businesses to distribute goods. It has helped the industry to have a command of the market through negotiated prices with partners. The associations have greatly influenced the competitive edge of the organization.

Nissin has enjoyed exclusive privileges in the production sector that has helped it dominate the area for long. Rights such as patents have ensured the protection of the venture from unfair competition.

Finally, Nissin has been able to thrive due to its high human resource (Schroeder, 2013). The team of committed workers at this industry has ensured that the organization's set goals have been achieved in time (Ahmed, Ali, Hussain and Ansar, 2015). The marketing department has proved to be competent through its diverse distribution channels which have worked efficiently.

Geographical scope serviced by the industry

Under market size, the paper shall cover the geographical scope serviced by the industry under study. Currently, Nissin Noodles is experiencing high sales volume for its products. Since its establishment, Nissin Noodles has so far got a huge market share making it increase its production hence increased sales (Huang and Gale, 2009). The wealthy population has grown due to increased pay rise, increased capable labor force, increased purchasing power as well as the lack of time among busy people (Zhou, Yu, and Herzfeld, 2015, p. 27). Being the target market by the Nissin Noodles industry, there is, therefore, greater production as well as high sales volume. Nissin Noodles had a very promising future growth potential with the growing young generation and increased working population. Since the products attract the wealthy class so much due to their luxurious nature, there is a high probability that soon there will be an increased demand hence growth in market size. With the display of the products in the supermarkets and large shopping centers, they are therefore reached by so many people since these are the standard shopping points for most families.

Given the fact that the sales volume is high today, with increased marketing and introduction of new brands in the market by Nissin Noodles, the market is likely to grow big. The working population prefers Nissin Noodles since they are easily consumable at lunch breaks without much trouble or time wasting hence they highly utilize these products. Once people have realized the vital role played by these products on time management, there is a significant probability in the future growth of the market since the majority of individuals will prefer them for this similar reason. The urban population consumes most of Nissin Noodle products since they are busier and lack enough time for their meals. They easily access these products in the shopping malls, quickly prepare them and pack them in their lunch boxes ready for consumption. It is opposed to the eating behavior of those living in the rural areas that have most of the time to prepare their favorite meals.

The Nissin Noodles industry has experienced an increased market growth generally due to its swift response to consumer tastes and preferences. The market has highly grown since most people like the products due to their calm nature of handling such as easy to cook. The overall growth in the market has since altered the trend in the market since there is increased demand leading to increased production and distribution. Nissin Noodles receive high competition from rival competitors who are introducing similar products into the market. They do so by branding and blending their product in a way as the Nissin noodles do. This increased competition has changed the market trend in that some consumers tend to shift to the competitor's products to have a taste of them (Hanssens, Pauwels, Srinivasan, Vanhuele, &Yildirim, 2014, p. 540). Most competitors have even imitated the activities of Nissin Noodles such as promotion methods, branding, and packaging styles as well as other community-based activities (Kim and Ko, 2012, p. 1480).

Future growth potential of Nissin Noodles

There has been a positive change in the customer behavior in the market since most consumers are increasing their liking for Nissin Noodles products. Most clients have realized that they don't have much time to cook as well as need lesser time for their meals hence going for Nissin Noodles which is their best preference (Gustavo, 2013, p. 20). Over a short period, the majority of the customers have changed their consumption behavior pattern as they are faced with busy schedules on their daily activities. The current trend in the market is that most people are going for Nissin Noodles and this demand increases as day’s move. If this trend continues in this manner, then it's highly predictable that in future the demand will increase considerably. This positive trend is as a result of the Company being sensitive to the customer needs. The industry is shifting from fried stuff to alternative ones due to health concerns by their trusted clients who are in need of fat-free products.

Nissin Noodles is widely targeting the young generation mostly the college students as well as the high-class population who even does not have time to take their meals. The rate of growth for Nissin Noodles is high. It is due to the change in consumer preferences that there is growth in the youth segment, people's ability to buy has increased (Gaile-Sarkane and Andersone, 2013, p. 65). The working population has expanded as well leading to rising income among potential consumers, lack of adequate time to cook and fast moving manner of life. These factors have led to a high increase in the demand for Nissin noodles now that most consumers prefer Nissin Noodles to other competitive products (Kotler, Kartaya & Setiawan, 2010). The young generation which is believed to be the largest consumers of this product is also growing leading to high growth rate of the market. Nissin Noodles industry is making increased profits since it has raised high above its competitors and is holding the larger market share. The greater and regular demand for the product leads to increased sales volume hence huge profit margin (Yamakawa, Peng & Deeds, 2008, p. 60).

  Most people nowadays lack enough time to cook thus they find it convenient to buy easy-to-cook Nissin Noodles products to help them manage their time effectively. There is a bigger likelihood that the rate of growth for Nissin Noodles market will increase in future in consideration with the current data analysis of the current market. Nissin Noodles is becoming the darling of every potential consumer in the market due to their convenience nature. Comparing and contrasting the previous market data with the current market data provides a growing curve indicating the future market growth (Bloom and Van Reenen, 2007, p. 1355). With the indication of future trend increase, it's directly proportional to the future market rate for Nissin Noodles that there will be a substantial growth as well (Kapoor & Joon, 2013, p. 280).

Conclusion

As discussed, it's very crucial for Nissin Noodles to carry out market analysis to establish whether they can perform in the industry when presented with an opportunity. David Aaker outlines six dimensions in which to do a market analysis effectively. He talks about analyzing the market size as involving the consideration of sales volume of a company to be able to know the size of the market it serves. The second dimension is market trends where the behavior of customers and the performance of rival companies are analyzed. Market growth rate deals with on the prediction of the future development of the enterprise. Industry cost structure concentrates purely on identifying those activities that are of benefit to the company. In using distribution channel, the channels in place are checked to see their ability as well as bringing in new channels to help in reaching the customers. Key success factors in making good use of the benefiting factors to help improve the company and ensure its success.

Once Nissin Noodles has done the market analysis using these six dimensions, it is, therefore, possible for it to identify the opportunities as well as the strengths to enable it to penetrate into the desired market. Nissin Noodles is therefore very strategically placed since it has utilized most of the opportunities and advantages in the industry leading to increasing demand and sales hence high profits.

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