Brand’s Market Analysis Essay

except, assorted fire tick offs atomic number 18 engaging in much aggressive advertising and increasing brand awargonness, bridging the gap of perceived difference between tickS and their reapings, and offering buyers more choices, hence buyers come medium power. Supplier negociate power discolorationS sections are mainly chicken essence and a small equilibrium of caramel. Although these ingredients are relatively easy to procure, in that location is high regulation from regime restricting the number of suppliers, because of the recent 2004 avian flu which prompted authorities to step in to tighten regulations on the quality of avian yields2.Due to loyalty to ingredient supplier since 2004, and the fact that few suppliers are qualified and approved by authorities, deformityS is assured of the quality of its ingredients, but suppliers screw high bargaining power because of its quality assurance. Threat of upstart entrants There are high restore costs out-of-pocket to payoff method and machinery, and seasonal demands during critical periods such as examinations, as well as foodstuff saturation and high existing brand righteousness with other industry competitors.This pee-pees a high breastwork of entry due to high start-up capital and high economies of scale. BRANDS recent entry to the health supplement market, has heightened the scourge of new entrants (e. g. InnerShine series3), as these products do not enjoy similar consumer loyalty and new entrants undersurface imitate them. Despite extensive brand building, threat of entrants is overall medium. Threat of substitutes Substitutes of BRANDS include mainstream health supplements, which may appeal to consumers who do not like the bitter taste of BRANDS traditional products.In response, BRANDS has diversified their product line to include tablets. Moreover, BRANDS has always been active voice in research and recently discovered the link between consumer benefits to an active compound4 in its products. This is in contrast to its substitutes, especially western health supplements, who have prided themselves on a long history of research and the ability to back its products with scientific foundations. Despite this, threat of substitutes is medium as BRANDS health supplements are relatively new.Industry competition In actuality, BRANDS products have little difference with its competitors and there are fairly similar marketing target segments because BRANDS competitors are able imitate its marketing strategy5. product in demand of such products as a dissolver of increasing free-enterprise(a) surrounds has allowed competitors to gain on the high demand from a spectrum of consumers. As a result, BRANDS direct competitors price their products lower than BRANDS and appeal to price-sensitive consumers, thus leading to a relatively strong rivalry.BRANDs recent foray into the mainstream health supplements market also exposed itself to great competition because of exist ing industry players, giving it an uphill task to gain market share. As a result, industry competition is relatively intense. In conclusion, strong brand equity empowers BRANDS and reduces threats from buyers and new entrants. Overall competitive environment was medium high due to pressures from substitutes, suppliers and competitors which lead CPL to adopt the strategies below. 2. Competitive Strategies adopted in 2009 and 2010 CPL primarily uses focus differentiation strategy, coupled with some elements of cost leaders strategy, during the period 2009 to 2010, which enabled it to survive the challenging environment and gear itself towards sustainable growth in the long brave out. Fierce industry competition during the period has led to CPL macrocosm active in its brand building strategy through various channels. Some of these include engaging brand ambassadors, outr apiece on television media and organizing study camps.This brand worry strategy has resulted in perceived unique ness of their product, even though there are competitors with similar physical products. In a bid to spay consumers of its uniqueness, it has invested in research facilities to offer scientific backing to its products. The successful patent of its discovery bequeath lend further credence to its advertising and products which willing pass water it harder for its rivals to imitate its marketing strategy. Focus strategy is evident through marketing strategies targeted at students. Collaboration with schools and the organization of student events (e. . Sudoku competitions, summer camps) have enabled CPL to improve its outreach to students. This is in response to the increasingly competitive education systems in Singapore and China, where students will be inclined to take supplements that are deemed beneficial to the well-being of the mind. The global recession of 2009 and declining gross revenue forced CPL to rethink a low cost strategy, in response to more price-sensitivity amon g consumers, and rising price of ingredients. This is illustrated in its continual capacity expansion, allowing it to enjoy future economies of scale.The change magnitude in volume of production will allow it to spread its fixed costs over a larger quantity, reducing its honest unit cost of production. Furthermore, investments in specialized technology6 for the manufacturing process will likely result in higher efficiency and lower average cost in the long run. Price negotiations to mitigate upward pressure7 in ingredient prices also help to keep unit costs low. In the event of future recessions, CPL will be able to respond and translate lower prices to consumers through promotions and offers.To conclude, even though BRANDS is not a price leader in the industry, its long terminus low cost strategy in bringing down its production cost, along with improver investments in brand building to promote product uniqueness, will allow it to reap increased profits in good prison terms. Whe re times are bad, CPL can afford to lower selling prices and still get under ones skin rose-cheeked profits. 2. 3 Top Three Business Risks and Counter-measures Risk 1 Declining market shares and strong competition Strong competition from existing competitors present a threat to BRANDS standing in the market.BRANDS has lost market shares in beauty oral aid products8 and Innershine products in countries such as Malaysia while competition in other countries remains intense. In response to the competition, CPL engaged in active advertising to improve brand image and increase outreach. Campaigns directed to improve sales of specific products are also held resulting in significant effect in capturing customers attention to BRANDS products. Innovative ways to increase sales such as cubic shop retailing, blogs and increasing of sales channels to cosmetic shops9 has helped to gain a competitive advantage and modernize their image.CPL has also carried out extensive research for BRANDS to sc ientifically assure the benefits and safety consumption of their product which no other company had done so for this socio-economic class of products hence winning over customers approval and loyalty. Risk 2 Decreasing sales due to the global economic recession The global economic recession has made a declining effect on the sales number for BRANDS product. However CPL had manage to minimize the effects of the recession by investing heavily on research amp development and capacity building allowing them to stay full of life in the face of the recession.Up to date technology to transform operations to be fully automated has allowed CPL to decrease cost of production and increase product output hence maximizing profits during the recession. The investment in increasing capacity includes construction of factories costing a total of 2. 45 billion baht10 and inception of Indonesia offices. This move coupled with aggressive marketing sales strategy aims to increase their presence in th e market and improve sales in the short run while the construction of the factory aims to allow CPL to increase their competitiveness and secure a larger market share in the long run.Risk 3 Decrease consumer confidence in BRANDS products News reports of a recall of essence of chicken products in the United States spark1ed some controversy amongst consumers11. In addition, just as the business in the Peoples Republic of China (PRC) was beginning their operations, food safety concerns caused by the melamine food scare12 significantly affected consumer sentiment. above this, news of the import ban on BRANDS products spread worldwide, affecting the business segment. Fortunately, BRANDS subsequently stepped out to explain that the cause of the import ban was a result of compliance issues13.CPL also affirmed its commitment to quality assurance through various press releases to ease consumer sentiments14. 2. 4 Overview of Value Chain Activities We have place the value chain activities th at enable CPL to stay ahead of competitors, in particular, support activities such as research and development and human resource management provide BRANDS the extra edge in the industry and primary activities such as operations, advertising, brand building and service distinguish BRANDS from their rivals.CPL has affirmed its commitment to Research and ontogeny by launching the BRANDS Health Science Centre and they have discovered the active compound in their health product which is believed to enhance mental performance. lap up is still done to further understand how to maximize the uses of the compound for consumer benefits15. As a result, BRANDS product credibility in the industry will be meliorate with the backing of this scientific discovery. This discovery of this compound Probeptigen will help to distinguish BRANDS from its rivals and increase customer loyalty.Finding ways of harnessing the active compound in different ways should be the next step that CPL works towards t o, and will aid its differentiation strategy if new and innovative products can be released with its findings. Human resource management is identified as key to the organization16. This is important to the development of the next generation of leadership and talent retention and particularly relevant as a strong management team will be vital to steer the waves of future recessions. A highly efficient management team will create value for shareowners and maintain the pristine image of BRANDS products to consumers.Efforts are made to engage employees, develop leadership skills and align the right behaviors and values across the organization17. Further improvements can be made by providing quality training to service staffs with higher emphasis on after sales services. For operations, CPL has been actively expanding its manufacturing facilities, allowing them to better match its production capabilities with the growing demands. Increased output volume helps in its long-term low cost s trategy by reducing average unit production costs. compound manufacturing capabilities enable BRANDS to diversify and offer new products with special features.This allows CPL to serve various consumer needs and provide more product choices, which aid its differentiation strategy. Improvements to the manufacturing process are made through installation of latest technology to increase efficiency and reduce waste. CPL can improve its existing operations by developing new distribution channels to cope with higher output capabilities. This helps prevent bottlenecks in its supply chain. Advertising and brand building activities help to transform consumer mindsets, as well as contemporize product image.Conventionally viewed as traditional health products for medicinal purposes18, new branding strategies repositions BRANDS with brain-enhancing functions. With these activities, BRANDS can increase the cogency of its focus differentiation strategy. Increased industry competition led CPL to enhance the uniqueness of its products from its close competitors. Appealing to students and young adults via brand imaging strengthens its focus strategy. Improvements are made with research and patents to provide scientific foundations to its products.Further improvements can be by capitalizing on these scientific insights to explicitly educate consumers on the specific benefits of each product to achieve full effects of its brand building strategy. Service in the organization adds value to consumers through its customer relationship management (CRM) policies. In a saturated industry, close similarities with rivals can be mitigated with unique after sales services and quality consumer experiences. This helps BRANDS to connect with its consumers on a more personal level, and allow it to leverage on customer insights to better anticipate demands19.This is particularly important for BRANDSs focus differentiation strategy as it reduces the time BRANDS takes to rectify product errors o r push out new products by reconciling its supply side capabilities with the demand side factors such as change in consumer preferences. CRM initiatives are constantly being reviewed and improved in the organization by benchmarking its quality against service industry averages19. In addition, human resource management is important as such after sales services require quality labor inputs, which require constant retraining of employee. . 1 List of monetary proportionalitys Liquidity amp Efficiency 2008 2009 2010 Current Ratio 1. 56 1. 70 1. 69 Quick Ratio 1. 21 1. 23 1. 27 Cash Ratio 0. 65 0. 59 0. 73 Assets Turnover 1. 19 1. 20 1. 35 Fixed Assets Turnover 5. 87 4. 40 4. 37 Inventory Turnover 4. 59 4. 07 4. 60 Days to Sell 79. 52 89. 68 79. 35 Receivables Turnover 7. 81 7. 37 8. 35 Days to Collect 46. 73 49. 53 43. 70 lucreability 2008 2009 2010 Gross Profit Margin 50. 24% 49. 72% 47. 93% Net Profit Margin 11. 35% 11. 73% 12. 09% Return on Assets 13. 8% 14. 09% 16. 29% Return on F ixed Assets 66. 63% 51. 63% 52. 81% Return on Equity 23. 66% 24. 49% 28. 06% Earnings Per Share 25. 72 cents 26. 29 cents 32. 68 cents Solvency 2008 2009 2010 Debt Ratio 42. 64% 42. 35% 41. 56% Times Interest Earned (TIE) Ratio 19. 71 30. 77 49. 32 Selected business segments turnovers (in millions) 2008 2009 2010 BRANDS Liquids 403. 7 431. 0 503. 7 Eu Yan Sang (EYS) Chicken Essence21 6. 1 6. 1 8. 6 Woh Hup Sauces 159. 3 138. 3 171. 0 3. 2 Comments and Explanations of financial RatiosDebt ratios fell between 2009 and 2010, despite similar amount of borrowings reported on the balance sheet. Total assets grew as a result of capacity expansion, investment gains and increased cash holdings. In particular TIE ratios fell because borrowing rates were lowered22 in a bid to stimulate the economy. The recovery of the economy posted a hike in turnover and profits, which led to a surge in TIE ratio. As part of the chemical groups commitment to maximize shareholder wealth, ROE and EPS values rose. The decreasing debt ratios showed the Groups emphasis on monetary funding through internal growth and reduced reliance on out-of-door financing.This also indicates the Groups attitude towards shareholder value creation, in which a long term approach is employed, without leveraging on higher debts to fund short-term growth which could run the risk of financial bankruptcy. Gross Profit Margin fell from 2009 to 2010. The Group experienced upward pressures in prices of commodities, such as raw birds nest, coffee and sugar during the period23. Despite the higher dollar amount of turnover in 2010, the price pressures impacted costs of sales which outstripped the growth in turnover. This led to lower Gross Profit Margin in 2010.However, Net Profit Margin rose slightly by 0. 36%. Though there were higher expenses incurred from increased investments in branding, research and development, growth in turnover managed to keep pace with this rise. The main reason for the slight increase i n Net Profit Margin in 2010 was due to foreign exchange losses24 experienced in 2009, which arose as a result of the Groups foreign currency purchases and acquisition of foreign businesses such as Tobys Estate. Against the backdrop of the global recession, this translated to substantial foreign exchange losses, impacting Net Profit Margin in 2009.The Groups liquidity position was very weak in 2009. Despite the similarity in current ratios between 2009 and 2010, the Group held substantially lesser cash during 2009, evident from its cash ratio. Both the descent and receivables turnover ratio indicated that a large proportion of current assets were tied up in receivables and illiquid inventories. This was probably a result of lower consumer sentiment due to the effects of the financial crisis. Certain business segments, such as sauces and beverages25, suffered lower turnover. This caused inventory to pile up, and is illustrated in the huge spike in inventories in 2009.To encourage cus tomer purchases, the Group probably extended credit to customers which resulted in higher proportion of credit sales experienced. Dividend pay-outs averaged 25 cents a share26 despite slowing growth. Moreover, investments in manufacturing, research and brand building continued amidst the downturn. As a result, the Groups cash outflows outpaced inflows, which jeopardized its liquidity position of 2009. In 2010, liquidity position improved, as capacity expansion and brand building in the preceding years allowed it to capitalize on the recovering economy.Its CRM policy also allowed it to leverage on consumer feedback and enabled it to handle the surge in demand timely. Turnover for 2010 spiked as a result, which led to better operating cash inflows. The Group made heavy investments in fixed assets in 2009 and 2010, such as the launch manufacturing plants in Malaysia and Thailand, and building of offices in Indonesia. The fairly similar fixed asset ratios indicated that sales and profit s were able to keep pace with these extensive investments, an indication of effective utilization of manufacturing resources.Despite this, there is definitely room for improvement, as higher investments should warrant a multiplier effect on sales in the long run, and lead to better fixed asset ratios in future. Comparisons of the turnover in business segments show that despite stagnation in EYS chicken essence in 2009, strong brand equity in BRANDS products allowed appreciable growth in BRANDS liquids. However, this figure is not wholly representative as within the category of BRANDS liquids, relatively newer liquids such as BRANDS InnerShine do face stiff competition into its market share.Growth in BRANDS liquid is mainly attributed to the flagship product of chicken essence, highlighting the strong branding that BRANDS traditional products enjoy. Moreover, chicken essence is neither the flagship product of EYS, which explains the relatively lower turnover figures. In the sauces in dustry, the general decrease in turnover in 2009 was probably due to decrease in number of people dining out and the perception that sauces were non-essentials during the 2009 recession27.Despite the turnaround growth in 2010, Woh Hup Sauces still faces stiff competition from close rivals28. In conclusion, we believe that CPL is well positioned to make further inroads into its different business segments with the recovery of the economy. With its competitive strategies, and coupled with a prudent management team, we believe CPL will be able to thrive in the competitive environment and improve its financial position in the future.