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Industry profitability depends upon just five factors, the so-called "five forces" argues Michael Porter.

Introduction

Intensive competition among firms in the same industry tends to be one of the major characteristics of modern market-led economies caused by the pace of globalization of markets and industries as well as technological developments in areas such as information communication technologies, ( Johnson & Scholes, 2002). It is unsurprising as a result to see firms in many industries seeking to create competitive advantages in response to increasingly demanding customers and crowd markets which are a feature of their markets. Porter’s (1980) five forces framework which refers to potential entrants, buyers, suppliers, substitutes and industry competitors provides a useful means of analysing industrial environments in order to assist companies in choosing effective competitive strategies. However due to different features within various industries which can be defined as the collection of organisations with similar technologies and products with markets and customers in common it is vital to be aware of the forces forming change driven models within particular industries, (Hooley, Saunders & Piercy, 2004).There is growing interest in the study of retailing which itself has reflected the growth of the retail industry with Potter (1982) describing the academic study of retailing as ‘the Cinderella of the Social Science’. Particularly due to the features related to the fashion (and high-street clothing specifically) retail industry the rapid pace of changes tends to shape the forms of competitive strategies available to UK high-street fashion retailers such as River Island, Selfridges and Primark.

Analysis

Gilbert (1999) defines retail or retailing as any business that put its marketing efforts mainly towards satisfying the final consumer (end user) based on the organisation of selling goods and services. Bearing this in mind there is a need to be aware of the role of retailers who are situated at the end of the distribution chain. Therefore retailers set up business to trade with the general public and attempt to provide convenience-based buying channels for customers. Flexibility thus in the retailing industry is a critical element in considering and securing competitive position. In terms of fashion retailing retailers seek to satisfy customers’ need for fashion goods such as for example through the provision of the latest styles at lower prices through low-cost suppliers based in South-East Asia, (Mintel, 2005a). However the characteristics in this continuing mature industry strategy which are designed to maintain competitive positions in retailing have come under challenge. It is obvious that in a mature industry intensive competition results in lower customer loyalty or in other words buyer power in a relative fashion increases dramatically.

Industry Competitors

This intense competition is because the retail marketplace is at the mature stage of the industrial lifecycle with an accompanying slow down in growth making competition both extensive and intensive. Competition then not only comes from existing competitors but also potential entrants such as supermarkets who tend to be compatible new competitors for traditional fashion retailers when they enter and diversify product ranges from groceries into clothing as an example. Porter (1980) argues that competition in an industry will continually drive down the rate of return generating negative influences on the profitability of firms in the entire industry. Such a feature has been seen in recent years in the UK clothing retail industry with many of the major retailers experiencing significant reductions in profits, (British Council of Shopping 2004, Mintel, 2005b). Buyers in Porter’s (1980) model tend to compete with the industry by forcing down prices and bargaining for higher quality products and services at lower prices.

Power of Buyers and Suppliers

It is true to see that consumers pose a credible threat of backward integration to retailers however in order to compete effectively against the backdrop retailers as a result seek different ways of improving performance by adopting strategic schemes of work based on relationship marketing which aim to build greater customer loyalty and long-term relationships with suppliers. This new feature provides a critical perspective of fashion retailers’ behaviour in the integration process between suppliers, retailers and customers. Egan (2001) argues that closer relationships at higher levels between suppliers and retailers in terms of B2B models would seem to generate effective performance in competitive terms. However the power of brand names for retailers also has a significant influence on the balance of power between suppliers and retailers. Additionally there have been significant trends for retailers in integrating backwards namely UK high-street clothing retailers have sought to buy suppliers’ plants in order to have more control over the design and cost of production of clothing goods, (Baxter, 2004). Customers at this stage are able to benefit from lower priced products whilst fashion retailers are able to build up effective relationships with both suppliers and customers.

This is to say that in the case of high-street clothing retailers the relationship tends to be controlled by retailers in which the principle of relationship theory instead of driving forces tends to be unrealistic. Additionally in relation to buyer power in the retail industry such as fashion retailers Walters and Hanrahan (2000) and Christopher et al (1996) proposed as a response the idea of schemes seeking to enhance customer loyalty through a focus on enhancing existing relationships while aiming at winning new customers also and tying them into long term relationships with companies. This could be seen now as a typical feature in retailing where scheme and strategic methods used by clothing retailers in retaining customers through personalised data analysis by advanced computer systems aims to build customers’ knowledge of the retailer and vice versa, (Blythe, 2003). Such measures also have entailed the development of different forms of loyalty rewards such as loyalty cards which are widely used by clothing retailers, (Mintel International Group 2004).

Substitutes

The position of substitute products is a matter of searching for other products that can perform the same function as the product of the industry or player in the industry, (Porter, 1980). While clothing can generally not be substituted for other products by the majority of people the nature of the organisation supplying them and the manner in which products or services can be supplied have become highly substitutable with technological developments. Based on this the emergence of e-shopping methods is and will continuously shape traditional clothing retailer’s competitive positions in the market. Due to technological developments and wide interest in and adoption of the Internet customers have and will accept e-shopping methods more and more benefiting from the development of credit systems, improvement of issues related to security and privacy as well as changing life styles such as less time for shopping. E-shopping for clothing goods particularly deserves attention in terms of price competition among traditional retailers, (Gilbert, 1999). However traditional fashion retailers such as Next have generally integrated online shopping models in supporting their traditional operations and as such substitutes have become part of their competitive strategies. This characteristic itself causes challenges in considering Porter’s (1980) framework.

Potential Entrants

There are traditional clothing retailers in terms of department stores such as Marks & Spencer as well as the newer high street stores such as Top Shop. It is obvious that the decreasing level of customer loyalty has resulted in higher degrees of competition while threats have also come from new entrants to this industry, (Mintel, 2005b). Supermarkets for example such as ASDA and Tesco have operated successfully in introducing clothing product ranges into their operations. Porter (1980) believes that new entrants are able to bring new capacity to the industry in such a way as that long term industrial growth will be achieved. Supermarkets at this stage have attempted to exploit a sharing function in order to achieve economies of scale in relation to clothing retailing with other businesses operations in the company. However the concern for supermarkets is mainly on low cost clothing while high street clothing retailers have pursued a differentiation strategy such as that of Selfridges in terms of luxury products in order to maintain competitive position, (Baxter, 2004). In general there are various forms of new entrants for established clothing retailers and some companies have exited the industry due to decreasing profit margins and increased competition. It is fair to say that branding strategy plays a critical role in maintaining long term customer bases which itself reflects the increasing power of customers.

Conclusion

Porter’s (1980) five force framework provides a basic view towards the analysis of competitive environments for companies in particular industries. However due to the forces of change in external environments such as rapid technological development as well as changing customer interests and life styles it is necessary to be aware of these new features in applying the five forces model to one industry. Both literature and practical business operations has begun to pay significant attention to relationship marketing rather than a competitive driving force model in a way in which effectiveness is able to be generated during a cooperative process, (Egan, 2001).

References

• Baxter, J. (2004) Clothing Retailing KeyNote Marketing Report, Hampton, UK
• Blythe, J. (2003) Marketing Strategy, McGraw-Hill Education, London UK.
• British Council of Shopping, C. (2004). The shopping centre industry: its importance to the UK economy: 2004 report., BCSC, London
• Egan, J. (2001) Relationship Marketing: Exploring Relational Strategies in Marketing, FT Prentice Hall, London UK.
• Gilbert, D. (1999) Retail Marketing Management, FT Prentice Hall, London UK.
• Hooley, G., Saunders, J. & Piercy, N. (2004) Marketing Strategy and Competitive Positioning 3^rd edition, FT Prentice Hall, London UK.
• Johnson, G. & Scholes, K. (2002) Exploring Corporate Strategy: Text and Cases 6^th edition, FT Prentice Hall, London UK.
• Mintel International Group, L. (2004). Store cards, finance intelligence, October 2004., Mintel International Group Ltd, London
• Mintel International Group, L. (2005a). Clothing Retailing- UK Intelligence, July 2005., Mintel International Group Ltd, London
• Mintel International Group, L. (2005b).Retail Review: Special Report, March 2005., Mintel International Group Ltd, London
• Porter, M.E. (1980) Competitive Strategy: Techniques for Analysing Industries and Competitors, The Free Press, New York USA.
• Walters, D. & Hanrahan, J. (2000) Retail Strategy: Planning and Control, MacMillan Business, London UK.

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Advertising Of The UK Car Industry And Its Effects Upon The Buyer Behaviour Of The Consumer

Introduction

This review consists of five sections. The first section explores the marketing concept and its key components. The next section presents information on the different types of advertising which can be utilised by car manufacturers to promote their products and services. Section three investigates consumer behaviour, section four examines the attributes of marketing models and the final section provides an overview of advertising strategies in the UK car industry

Section One

1.1 Marketing

Marketing was once defined by Alderson (1957) as an exchange process between company and consumer (Cited from Brassington and Pettitt, p.5). This definition gives no reference to the aspects of marketing that occur before products or services are even produced or the post exchanged behaviour of both company and consumer or even an elementary aspect of commercial life: competition, Jobber, (2000).

Successful marketing is far from simple. Brassington and Pettitt (2003, p.3) state marketing does, in fact, cover a very wide range of absolutely essential business activities that bring you the products you do want, when you want them, but at prices you can afford, and with all the information you need to make informed and satisfying consumer choices.

In order to analyse the marketing activities of firms within an industry, it is necessary to first define and explain some of the critical marketing concepts and their importance to the organisations.

These concepts are:

• Simple Marketing System
• The Marketing Mix or 4 P’s
• 1.2 Kotler’s Simple Marketing Concept

In Kotler’s model there is a clear exchange between company and consumer. The model describes the exchange being goods and services one way and money in return (Kotler, 2000). Exchange of communication and information from buyer to seller is also an integral part of successful marketing.

Communication of the product or brand from company to consumer will be the result of a successful advertising campaign whereas information from consumer back to the company will provide the seller with an insight into the success of the product of service.

1.3 The Marketing Mix or 4 P’s

McCarthy (1960) introduced the 4 P’s into the marketing mix as an easy to remember acronym. McCarthy penned the thought that the influences that will determine the demand for the product can be placed within four groups. The marketing mix consists of four elements: Product, Price, Place and Promotion (Baker, 1999).

• Product - This area covers everything to do with the creation, development and management of products (Brassington and Pettitt, 2003, p.25). This also covers non-physical aspects of the product such as after sales service, guarantees etc.
• Price - The pricing of a product or service is an important part of the marketing mix. Price represents on a unit base what the company receives for the product or service which is being marketed (Jobber, 2001, p. 12). The price of the product or service may portray it being a quality item or a desirable one (Brassington and Pettitt, 2003, p.26). It may also be used to give a company an edge in a competitive market.
• Place - Place is concerned with distribution channels and consumer service levels (Baker, 1999). The objective of companies when dealing with this aspect of the marketing mix is to make sure that products are available in the right quantities, in the right place to the people who want it (Jobber, 2001, p. 15).
• Promotion - Promotion is concerned with how the product of service is made available to its target audience (Jobber, 2001, p. 15).

Section Two

2.1 Advertising

Advertising is a major part of the promotional side of the marketing mix. Advertising is a powerful tool which aims to influence consumer decisions and thus behaviour. One definition of advertising by Ann Burgess cited in Hart, 1990, p. 101, is the action of calling something to the attention of the public, especially by paid announcements.

Advertising enables the consumer to become an active member of the economic cycle rather than a passive agent (Burgess cited in Hart, 1990). It is this freedom of choice for the consumer that means companies’ advertising strategy must portray the correct advertising message and select the correct advertising media (Kotler & Armstrong, 2005, p. 47).

2.2 Types Of Advertising

The variety of different advertising media enables marketers to reach far and wide with their messages. The most common of these advertising media being:

Television - Below are the strengths and limitations for television as a form of advertising media.

(Source: Fill, 2002, p. 536)

In September 2005, figures produced by Ofcom stated that there were over 25 million television viewing households in the UK. Therefore, the viewing capacity for television advertising is immense.

• Press (Newspaper, magazines etc) - One major advantage of press advertising is that information can presented and then examined selectively at the consumer’s leisure (Brassington and Pettitt, 2003). The benefit of this is that because the consumer chooses what they read it will give them a feeling of control over the situation.
• Poster - Poster advertising is also a very efficient form of advertising media (Brassington and Pettitt, 2003). The location and the content of the poster are vital. The aim is simply: to provide a quick, digestible message to the passer-by (Brassington and Pettitt, 2003, p629).
• Cinema - This provides advertisers with the opportunity to benefit from the all-involving escapist environment that this medium delivers. The audio and visual capabilities of the cinema environment deliver the greatest impact available to advertisers.
• Radio - This medium provides the opportunity to contact a large percentage of the target audience within a specified geographical area at relatively low cost.

Section Three

3.1 Consumer Behaviour

Consumer behaviour is defined by Blackwell, Miniard and Angel (2001) as activities people undertake when obtaining, consuming, and disposing of products and services (p. 6). It is this behaviour, and how it can be influenced that will be analysed in this section.

The primary objective is to find out how potential customers respond to different advertising techniques. This is because, a company in order to achieve its marketing and advertising goals needs to create and promote a USP (Unique Selling Point) to its target audience. To maximum its return on marketing and advertising it must understand consumer behaviour.

A company will therefore, design their marketing strategies around the factors that will, ultimately, influence consumer behaviour. According to the model of consumer behaviour devised by Assael, 1992, the consumer’s buying decision is influenced by a number of factors i.e. the individual’s previous buying experiences, their current desires, environmental influences (e.g. culture, social class) and the impact of various marketing and advertising campaigns.

The individual consumer’s choice is determined by such things as age, occupation, demographics, personality and lifestyle. Also, brand loyalty, preconceived thoughts about the products and services and competitors also contribute to this factor. The environmental issues that may affect consumer decisions can include culture. According to Kotler culture is the most fundamental determinant of a person’s wants and behaviours (p. 124) and embodies the norms, beliefs, artefacts and customs that are learned from society and that constitute its values (Fill, 2002, p. 83).

3.2 Psychological Factors Affecting Consumer Decisions

Consumer decisions are influenced further by four psychological factors:

• Motivation - One of the most popular theories about motivation was devised by Abraham Maslow. His theory bases human motivation upon a hierarchy of needs a person faces. Ranging from basic needs such hunger, thirst and sex all the way through to self-actualisation. Maslow sought to explain why people are driven by particular needs at particular times (Kotler, 2000, p. 101).
• Perception - We define perception as the selection, organisation, and interpretation of marketing and environmental stimuli into a coherent picture (Assael, 1998, p. 205). In marketing, perceptions are more important than reality, as it is perceptions that will affect the consumer’s actual behaviour (Kotler and Keller, 2006, p. 186).
• Learning - Assael (1998) describes consumer learning as a change in behaviour occurring as a result of past experience. In other words, should a person have good experience with a certain brand/product then he or she will be more likely to purchase the same product in the future. Bad experiences lead to negative feelings towards the product or service involved.
• Attitude - Attitudes as stated by Fill (2002) are predispositions, shaped through experience, to respond in an anticipated way to an object or situation (p. 75). Attitudes are the result of the learning stated previously. They are shaped by experiences and form part of why and how we act as a result of these experiences (Fill, 2002).

Section Four

4.1 Marketing Process Models

There are many models to explain the stages a potential customer will go through from the initial awareness of the product to desire for the product (Brassington and Pettitt, 2003, p. 580). Many of these models amount to more or less the same sequence. Each potential consumer must pass through three simple stages.

The Cognitive stage - this is where the consumer will become aware of the existence of a certain product or service.

The Affective stage involves the changing of the attitude towards a product or service.

Finally the Behaviour stage involves the action that results from the change in attitude towards the product (Brassington and Pettitt, 2003, p. 580).

4.2 AIDA Model

The AIDA model developed by Edward Strong (1925) breaks down the sequence of events to

• A - Attention
• I - Interest
• D - Desire
• A - Action

These stages describe how advertising can be successful in reaching out to its audience by firstly grabbing their attention (Fill, 2002). Secondly, by interesting them with the idea of the product or service, then making the product / service desirable to the potential customer. The final stage that Strong (1925) penned was getting the consumer to take action as a result of their desire for the product (Fill, 2002).

4.3 DAGMAR Model

• D - Defining
• A - Advertising
• G - Goals
• For
• M - Measuring
• A - Advertising
• R - Results

This model was devised by Russell Colley (1961) and it offers useful approach to understanding how advertising works (Copley, 2004, p. 105). This model is used to measure the result of a specific communication task in terms of the cognitive-affective-behavioural hierarchy impact on a defined audience (Copley, 2004, p. 83). An example of this model may be:

• To make 70% of the target audience aware of the product
• To achieve a 50% understanding of the proposition
• Finally to make 20% of the target audience purchase the product / service

(Copley, 2004, p.83)

However, these models have their drawbacks. Sandra Moriarty (1983) noted that the drawbacks lay in their reliance on the concept of a linear process (Moriarty taken from Huey, 1999). Moriarty (1983) and Kristian Palda (1966) both agree that these models were oversimplifying the process. They state that the stages of AIDA do not necessarily repeat in the same sequence. Sometimes an advert will result in the product being desired, other times it will result in interest etc (Huey, 1999).

4.4 The FCB Grid

There is however, a model used by a large number of advertising agencies worldwide (Fill, 2002). The FCB (Foote, Cone and Belding) Grid presented by Richard Vaughn (1980). The FCB model classifies products into two dimensions: Level of involvement (High vs Low) and motives for purchasing (Think vs Feel) (Assael, 1998).

(Assael, 1998, p. 164; Peter and Olson, 2005, p. 444; Fill, 2002, p. 289).

Think Products (or cognitive products) are utilitarian and are related to product performance (i.e. mpg figures for fuel consumption or cost of insurance quotes) whereas Feel Products (or affective products) are more to do with fashions or image (Assael, 1998; Feel, 2002). Involvement, shown along the vertical axis of the matrix, is the level of perceived personal importance and / or interest evoked by a stimulus within a specific situation (Antil, cited from Blackwell et al, 2001, p. 91). There are various levels of involvement a consumer will have for a product whether this is high or low (Assael, 1998; Peter and Olson, 2005).

Products that require low levels of involvement will involve such things as petrol and alcohol whereas products requiring high levels of involvement tend to be more expensive, riskier products such as cars, insurance etc. This model suggested by Vaughn is a useful tool for advertising agencies and department to appreciate the consumer / product relationship and as a result can plan relevant and appropriate communication strategies (Fill, 2002). A study by Brian Ratchford (1987) concluded that this model is both reliable and valid as a tool to analyse consumer / product relationships (Ratchford, 1987).

Section Five

5.1 The UK Car Market

With almost 60 million people living in the UK, car manufacturers have a massive potential target audience for their advertising campaigns. The major players within the UK car market are Ford and Vauxhall with a market share of 14.3% and 12.7% respectively (27% total) (Keynote, UK Motor Industry, 2005). The popularity of the smaller cars such as the Ford Fiesta range and the Vauxhall Corsa consolidated their positions at the top of this list. The small style of car, like the Corsa and Fiesta, accounted for 32.7% of total UK new cars in 2004 (Keynote, 2005).

The current buoyancy of the UK economy means that the demand for cars are high (Keynote, 2005). With a base rate of 4.5% (Bank of Scotland, 2006), the UK population are borrowing more than ever. Therefore, the UK car manufacturers are taking advantage of this situation and are heavily involved in promoting their products. As a result of the booming economy, competition is very intense between the manufacturers. Such offers as 1,000 cash-back and free extra deals are the means by which these companies hope to gain a competitive advantage.

5.2 Advertising Within The UK Car Industry

In the year to September 2004, main media advertising in the UK by car manufacturers totalled 656.9m. Amongst the largest spenders were Renault with 7.7% of the total), Vauxhall (7.5%) and Fiat (6.8%). (Keynote, UK Motor Industry, 2005).

Much of the advertising expenditure was spent on television advertising campaigns. However, UK car manufacturers also advertise heavily in press advertising such as newspapers and magazines. Over recent years, advertising campaigns of car manufacturers have made the news themselves with their clever adverts or catchy themes. Among recent successes have been Honda’s Cog advertising campaign which won national acclaim winning the IPA Advertising Effectiveness Gold Award in 2004 (2004 ANDY Awards - www.adforum.com - accessed on 15/11/06) and many other accolades (Wilson, 2004).

With a booming economy, and sales of cars increasing year-on-year in the UK the need for more and more eye-catching adverts will always be at the forefront for the UK car manufacturers. Whether it is to sell more cars or change their brand image, as Honda has achieved with its marketing strategy in recent years (Wilson, 2004), the need for successful advertising is paramount for introducing new models and retaining sales in older models.

References

• 2004 ANDY Awards - http://www.adforum.com_archive/2004/AW37_ANDY/simglist.asp - Accessed 15/11/06
• Assael, H (1992), Consumer behaviour and marketing action, 4^th ed, Cincinnati, Ohio, South-Western College Pub
• Assael, H (1998), Consumer behaviour and marketing action, 6^th ed, Cincinnati, Ohio, South-Western College Pub
• Baker, M (1999), The Marketing Book, 4^th Edition, UK, Elsevier, Butterworth-Heinemann
• Blackwell, R. Miniard, P. and Engel, J (2001), Consumer Behaviour, 9^th Edition, Prentice Hall, London.
• Brassington, F. and Pettitt, S. (2003), Principles Of Marketing, 3^rd Edition, Prentice Hall, London
• Copley, P. (2002), Marketing Communications Management, UK, Elsevier Butterworth-Heinemann.
• Fill, C. (2002), Marketing Communications - Contexts, Strategies and Applications, 3^rd Edition, UK, Prentice Hall.
• Hart, N. (1990), The Practice of Advertising, 3^rd Ed, Oxford, Elsevier Butterworth-Heinemann.
• Huey, B. (1999), Advertising double Helix: A proposed new process model, Journal of Advertising Research.
• Jobber, D. (1995), Principles and Practice of Marketing, UK, McGraw-Hill.
• Jobber, D. (2000), Principles and Practice of Marketing, 3^rd Edition, UK, McGraw-Hill.
• Keynote report (2005), UK Motor Industry, 2005.
• Kotler, P. and Armstrong, G. (2000), Marketing: An Introduction, 5^th Edition, Upper Saddle River, NJ: Pearson Prentice Hall.
• Kotler, P. and Armstrong, G. (2006), Principles of Marketing, 11th Edition, Upper Saddle River, NJ: Pearson Prentice Hall.
• Kotler, P. (2006), Marketing Management, 12^th Edition, Englewood Cliffs, NJ: Prentice Hall.
• Moriarty, S. taken from Huey, B. (1999), Advertising’s double Helix: A proposed new process model, Journal of Advertising Research.
• Palda, K. (1966), The Hypothesis of a Hierarchy of Effects: A partial evaluation, Journal of Advertising Research, Vol. 3, p. 13 - 24.
• Peter, J. and Olson, J. (2005), Consumer Behaviour and Marketing Strategy, 7^th Edition, UK, McGraw-Hill.
• Ratchford, B. (1987), New Insights About The FCB Grid, Journal of Advertising Research.
• Wilson, R. (2004), Which Brand has the Best Advertising? Honda, Creative Review.

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This is an individual assignment. It should be presented in the form of a report to the Marketing Director and Chief Executive of Shepherd Neame.

Shepherd Neame is a small UK brewer of ales and lager. The lager market is one of the few major drinks categories to have enjoyed continuous volume and value growth and will be worth an estimated 11.3 billion in 2005, having risen 17% over the 2000-2005 period. Demand for premium lager has driven the price differences between premium and standard lager closer.

Shepherd Neame’s reputation has been built on traditional ales and bitters such as Spitfire and Bishop’s finger. In recent years the company has introduced a range of lagers, brewed under license for foreign brands. This range included Holstein Pilsner and Kingfisher Larger. Although Sheperd Neame has had some success with these brands, it is looking to extend its share of the lucrative larger market by developing its own larger brand. The Company is hoping to secure a defendable market niche by targeting this new brand specifically at students. The Company has collected data from a group of student selected at random from UK universities.

Part 1

Conduct a statistical analysis of the data, and using any other information that you feel is appropriate:

1. Evaluate the attractiveness of UK students as potential target market.
2. In order to inform the positioning of the new brand, develop a profile of the ‘typical’ student, based on an analysis of their lifestyle, personality, spending habits etc.
3. Identify further research that should be conducted to develop a clearer plan for the launch of the new product.

Part 2

Conduct a comparative analysis of the performance of Shepherd Neame and Scottish & Newcastle (the largest UK brewer) on the basis of their published financial reports for the past 3 years supplemented with other relevant information where available and appropriate.

Part 1: Statistical Analysis

1.0: Introduction

In this part of the report a through statistical analysis of the sample data collected on the student target market is conducted to identify the market potential for a new Lager brand targeting the student niche market by Shepherd Neame - the company under debate.

2.0: Attractiveness of UK students to alcohol

The attractiveness of the students to alcohol compared to their preferred meal (first choice meal) reveals that the students give equal value for both alcohol and first choice meal. This is clear from the significance level in the Bi-variate correlation conducted, the results of which is presented in table 1 below

Table 1: Bi-variate Correlations

From the table above it is further clear that the spending habits of the students are heavily dependent upon their eating habits, which is clear from the graph in Fig 1.

The graph not only justifies that the spending on alcohol varies depending upon the eating habits but also justifies that the alcohol spending by the students is high (in pounds) at all categories. Although the density of spending is high in the ‘Roast chicken and veg’ category, the quantity spent is consistent in all the categories thus justifying the potential for a new brand Lager in the student market.

The plot of the categories vs. the spending level on alcohol further reveals that the market demand for alcohol in the UK student market is high as well as a lucrative option for investment. This is mainly because of the fact that the students prioritize drinks as much as their preferred meal which is established in both the bi-variate correlation and the Drop line plot in graph above.

The argument of Philip Kotler and Kevin Lane (2005) that the marketing strategy is highly dependent upon the demand in the target market for its success, which is clear from the above arguments.

A linear regression analysis on the spending level of the students on alcohol against their age, and preference on food has also revealed high level of significance justifying the investment in the new brand targeting the students market.

The results of the Analysis of Variance (ANOVA) in Table 2: below provides a comprehensive interpretation of the significance level for the cases considered.

Table 2: ANOVA

• a Predictors: (Constant), Preferred meal
• b Predictors: (Constant), Preferred meal , Second choice meal
• c Predictors: (Constant), Preferred meal , Second choice meal, third choice meal
• d Predictors: (Constant), Preferred meal , Second choice meal, third choice meal, fourth choice meal
• e Predictors: (Constant), Preferred meal , Second choice meal, third choice meal, fourth choice meal, Age in years
• f Dependent Variable: Pounds spent on alcohol per month
• g Selecting only cases for which Units of alcohol per week ~= .00

An insight into the Sig column in Table 2 makes it clear that the ANOVA is significant with age and choice of preferred meal. This also justifies the arguments from the Bi-variate correlation where it was established that the students give equal priority to drinks as their preferred meal.

In order to analyze the frequency of spending on alcohol and its relativity to other items than food a two-step cluster analysis is conducted. The results are tabulated in tables 3 and 4 below.

Table 3: Two-step cluster combining age, food categorization and pounds spent.

Table 3: Two-step cluster with age and pounds spent

The results in the tables above clearly show that the students of different age groups spend more on alcohol than on the other categories of pound spent like clothes, CDs and food. A detailed tabulation on the frequency distribution and the two-step cluster analysis is presented in the SPSS section of the report.

From the above analysis it is not only clear that the spending on the students in the UK is not only relatively higher on alcohol but also increasing the demand tremendously thus justifying that a new brand Lager will succeed through targeting on students.

3.0: Typical Student Profile

The results from the analysis conducted in the previous section also provide vital information on the typical student profile. This is essential in order to identify the average customer in the market for the product only when the company can successfully enter the niche market (student market) with their new brand. This is indistinguishable to the arguments of Frances Brassington and Stephen Pettit (2003) that the knowledge upon the customer demands and profiling of the customers is essential for the success of a brand. The fact that a brand not only attributes to quality but also to emotional and sentimental elements of the customer as argued by Philip Kotler (1988) justifies the above statement.

From the analysis the profile of a typical student in the target market for drinks is presented below in Table 5.

Table 5: Typical Student profile

From the above it is clear that the typical student will try the new brand since his/her expenditure per month is more on alcohol than other categories as well as give importance to brand image. This makes it clear that the launch of the new brand lager targeting on the student market will be lucrative.

4.0: Further research

The analysis conducted for this research was using a sample data with a limited set of attributes (or variables). In order to accomplish broader research as well as achieve concrete information on the market segment it is recommended to carry out the research over a broader segment of the student community (i.e.) use a bigger sample size of target market for research.

Furthermore, it is essential to analyze the demographic elements critically in order to position the brand in the target market. This requires further analysis in within the student market itself through segmentation. It is thus recommended to sample information through collecting information on specific segments within the student market so as to identify specific segments to target the brand upon within the student community itself.

Part 2: financial Analysis

The profitability ratios for Shepherd Neame and Scottish New castle are computed. The calculations are presented in appendix 1 and the results are tabulated in tables 6 and 7

Table 6: Profitability ratios for Shepherd Neame

Table 7: Profitability Rations for Scottish and Newcastle

Peter Atrill and Eddie McLaney (2003) argue that the profitability ratios provide a clear insight on the level of success of the business through researching upon its profitability.

From the table 6 above it is clear that the company has increased its overall profitability whilst staying constant on the Return on Capital Employed, which is popularly known as Return on Investment (ROI). This stable nature of the ROI justifies that the company has a strong market base as well as established strong relations with the investors as well as the customers.

The profitability rations of Scottish and Newcastle on the other hand reveal that the company has not performed effectively in year ending December 2004 compared to that of year ending 2003.

Even though the group turn over has increased considerably, the fact that the increase in the liabilities has reduced the efficiency of the company is evident from the data presented in table 7. It is further clear that the company not only had a poor performance but the steep reduction in Gross Profit Margin since year 2003 is the signal to re-assess the company strategy and financial commitments. Comparing this to our company under debate it is clear that Shepherd and Neame has performed effectively and future investment can guarantee profits.

Furthermore the increase in Net Profit Margin clearly justifies that further investment and funding for new projects can be encouraged since the business has performed effectively through gaining higher level of profitability. The decrease in the net profit margin in Scottish and New castle compared in the year ending 2004 further makes it clear that the company under consideration in this report has an effective financial performance compared to the UK’s largest brewer.

This justifies that the Shepherd Neame can invest on a new brand to increase its market base.

Conclusion:

The statistical analysis in part one of this report has established that Shepherd and Neame can venture in to the new brand and that the potential for investment is high in the UK student market. Alongside, it is also clear from the profitability analysis in part two comparing with the UK’s largest brewer that the company’s financial performance is indeed effective and further investment in new brands wil