Porters Five Forces Analysis
Bargaining Power of Buyer
Customers are suffering from the recession and therefore are preferring to buy low-priced products that will restrict the company to keep the profit margins low. As the scenario suggests, the customers are in power and have high power to bargain that can keep the growth pace of the company at minimal. Secondly the customers will also show resistance to buying a new product in the current scenario. Therefore, the company has to keep the prices low in order to attract customers.
Bargaining Power of Suppliers
As it has been observed that the European market is becoming highly competitive and companies have to face high cost from suppliers in he industry, which indicates that suppliers are in power and their bargaining power is on a higher side. This will create difficulties for the company for covering the cost. Suppliers play a major role in making a move successful and with high power to bargain the company is under real risk with its new brand.
Threat of New Entrants
The entry barriers in the European market are not very high which is why the market is becoming highly competitive with the entry some new players. Therefore, the overall scenario suggests that the new entrants are a major threat for the company and can easily enter the market and hurt the market share of the company. On the other hand, the industry is becoming lucrative in many countries in Europe as people are becoming more health conscious. Therefore, this is another reason that new entrants are likely to enter into this industry and particularly in the segment of breakfast food.
Threat of Substitutes
The threat of substitutes in the European market for breakfast food is quite moderate as people prefer to eat many traditional foods at breakfast. The breakfast food segment is growing, and options are various in the market that needs major improvement and innovation in launching new products in this segment. Customer needs are very important to consider that the company needs to identify while launching a new product in order to sustain its market share. The threat can grow with the passage of time as new products in the same category can enter and swipe the market.
Competitive Rivalry
Competition in the market is highly intense, and many new players have entered the market to make the competition more intense. On the major hand the major competition remained between Kellog and UC, who control over 46% of the market share, which is why the company has to remain competitive in order to keep the pace with Kellog. Furthermore, the European market is also becoming highly competitive which is also a concerning factor for UC.
Financial Analysis
Financial Results
A comparison of the growth rates for the years 2007-2008 and from 2008-2009 shows that the overall performance of the company’s operations has improved in 2009. The sales growth rate has increased by 1%. The net income growth has decreased by a small percentage as compared to the rate in 2008. The company has financed its operations from debt in 2009, which is evident in the debt level in 2009 which increased by 5.2% in 2009. The company is performing well and is overcoming its weaknesses regarding cost cuttings and expense reductions as shown in exhibit 1.
Financial Ratios
Most of the ratios have remained constant over the three-year period of 2007-2009 as shown in exhibit 2.. Net profit margin, operating profit margin, return on assets, operating return on assets and long-term debt to total assets ratio have all remained constant. The total asset turnover ratio has, however, kept on improving since 2007. This shows that the company is investing in the right assets, and it is also utilized those assets efficiently to generate sales for the business. However, the return on equity has decreased from 0.74 to 0.69 over the three years. This might signal a bad message to the investors. Therefore, the company should further invest in such projects that maximize the return for the shareholders and increases their wealth.
Alternatives
Alternative 1: Launching Health Berry Crunch in France
Launching Health Berry Crunch in France is the first option on which the top managers are emphasizing. This option has many important aspects that favor the implementation of this alternative. The first advantage is the growing interest of the French consumer towards healthy products that presents and opportunity for the company to exploit. Secondly the segment is relatively new in the industry and especially in France the competition is almost minimal in this new segment. Therefore, the company can gain a first mover advantage by entering this new segment and gaining a strong hold in the French market. Another major benefit will be cost savings up to 10%-15%, which are favoring the long-term strategy of the company and will give the company leverage to settle and explore other markets as well..................................
This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution.
