Environmental Analysis: Juice and Java - Case Study Example

Environmental Analysis: Juice and Java Name: Tutor: Course: Date: Environmental analysis: Java Juice entry into New Zealand Juice & Java is a company located in Aventura, Miami Beach (Florida) that sells food, beverages and drinks. The company intends to enter the New Zealand market but after undertaking feasibility studies. The company is in the process of understanding the macro-environment of New Zealand before making reconnaissance missions and actual entry. Besides, the company is also assessing and analyzing its internal environment for its strengths and weaknesses as well as opportunities and threats from the new environment. To analyze the external environment, the paper will use the PESTLE tool while SWOT analysis will be used to analyze the company’s internal environment1. The study includes investigating the internal and external environment of Juice & Java using some of the known environmental analytic techniques. PESTLE Analysis Politico-legal environment of New Zealand New Zealand is regulated by food legislations through Acts, Regulations and Notices. Food safety responsibilities are governed by Wine Act 2003, Animal Products Act 1999 and Food Act of 19812. The New Zealand government regulates the standards and risks posed by wines in the local and domestic markets. Ministry of primary industries is currently working on improving food standards especially relating to sea food. The country embraces parliamentary democracy and respect for personal property and intellectual property rights. The US already has a working agreement called the Trans-Pacific Partnership (TPP) while withholding tax rates have been lowered to make it cheaper for businesses to operate3. Tax regulations follow the OECD model tax treaty between the US and New Zealand effected in 2011 and provides a relief on double taxation to residents of member countries. In February 2014, the New Zealand Food safety minister proposed a number of provisions in food legislations and issues affecting advertisement of food in the news. The bill before the house inquires on the ‘Whey Protein Concentrate Contamination Incident’ and is being debated by the Green party and labor party among others. It also sought the removal of sugar in baby diet by 50 percent in carbonated drinks. A new Food Act 2014 also provides provisions on recalling products and managing food safety incidences. It also affects the laws on advertising to children and over-advertising at the expense of the other players in food and beverage industry4. Elements of food and beverage ecosystem work together in the country, a reason for being trusted. Consequently, the country has generated laws and stable regulations on bio-security and sustainable production. In regulating and controlling food related risks, the government of New Zealand has proposed a national program to contain residues and contaminants in the form of Regulated Control Schemes (RCSs). The local authorities in Wellington and Auckland issues business permits to local business depending on the sector. Common legal requirements are acquisition of operating permits, payment of taxes and compliance to state regulations on the standards of education and quality5. Economic environment New Zealand has a GDP of $230 billion with leading sectors being extractive industries such as timber, gold, whaling and flax6. Human development index is about 0.91 which shows that provision and access of social amenities is unrestricted. Social and economic inequalities are also low showed by a Gini coefficient of 36.2 (medium) (Garden and Stoll, 14). Food and beverage is a high commodity earner for New Zealand with strong contribution to positive trade balance. It is the lynchpin of the economy of the country. New Zealand is a developed country with a nominal GDP of $156 billion and GDP per capita of $28,000 (similar to Italy or Slovenia)7. It is a great trading partner with Australia, Asia and Europe. Value added agricultural products are exported while steel and oil comprise major imports. According to the World Bank, New Zealand is ranked first globally in terms of investor protection and ranked forth globally on Index of Economic Freedom. As at February 2015, the unemployment rate of the country was 5.7 percent while wage inflation remains low at 2 percent in 20158. The purchasing power of consumers is improving on average. Expected jobs growth is 1 percent with job numbers expanding to 3 percent in the next one year. Despite the low wage inflation, cost of living adjustments for workers has not improved. General inflation rate dropped in December 2014 due to the big dive in global oil prices9. However, the New Zealand is impacted by the lift in world commodity prices and experiences a falling New Zealand dollar. For the last 100 years, Food and Beverage is the leading sector in the country as shown in figure 1 below; (Source: GNZ, 2013) Figure 1: New Zealand Food and Beverage exports performance (1880-2011) Figure 2: Food and Beverage exports in New Zealand (GNZ, 2013) Socio-cultural environment New Zealand is the new target market for Juice & Java. The country is adjacent to Australia but divided by a narrow water mass in the Oceania. Many people are problem solvers and industrious. The youth likes playing cricket, rugby, softball, horse racing, and netball. It has a population of 4.5 million people with young and college going youth of about 2 million which is almost half of the country’s population. Adult literacy rates are at 99% with many having college education while income per capita is at $30,00010. Both male and female population has equal access to education and work opportunities. New Zealanders are outgoing and embrace attitudes similar to those in Australia. Their lifestyles largely reflect that of the UK that involve snow sporting, mountain skiing and going on holidays. Much of cultural and belief systems are shared with Australia such as political affiliation, religion, language and culture11. The cultural distance is very small which implies that Java & Juice would have fewer challenges adjusting and matching its capabilities in the new market. Besides, the country’s education system is much developed with state-of-the art infrastructure, teaching facilities and grading system. The country is highly dependent on international trade and has fewer restrictions on its trading partners. The free trade agreement was signed with China in 2008 to allow for inter trade. The service sector, education included, is the largest sector in the economy. The size of the target market is about 1.5 million youth who have just completed high school and would want to get a diploma or degree. Population of New Zealand is about 4.4 million according to 2012 census and its growth rate is 0.86 percent. People love curling up with good books, watching TV or playing pop records. The country is getting integrated into the global society. Previously, the people embraced British cultural and social models. But now, there is fusion of European, Asian and Polynesian cultures. From Hofstede’s model, the power distance between managers and employees is small in the country indicating more closeness and working relationships. People especially middle aged population are getting more concerned of lifestyle diseases and hence investing more on training, health foods with low cholesterol and high intake of vegetables and fruits in the diet. Literacy rates are 99.9 percent12. Owing to high income and purchasing power to a greater proportion of the population, there are minimal differences in social classes and wage differentials. People co-exist peacefully despite the multi-cultural background, respects personal property and space. Meals are taken with cuisine, spices, vegetables and subtropical fruits. People take turkey or ham over Christmas follows by Christmas pudding while Sunday roast follows British traditions13. Most consumers are families and professionals who like spending on holidays along the sandy beaches of New Zealand. The country population loves taking burgers and takeaway fries on busy schedules but will settle for diner in restaurants with friends on a cozy evening. A major challenge for businesses that intend to venture in the foreign market has been cross-cultural differences. Understanding different cultures is important factor and can lead to success or failure in the international market14. National culture greatly affects business activities. Technological environment Food industry in New Zealand is a world leader in research and development in rotational grazing and dairy. It has also leveraged research in protein processing and automation, and sustainable fisheries management systems, and animal welfare systems. The country has also invested in post harvest technologies fir all food and beverage, dairy, and fruits and vegetables in Palmerston North15. Most of the business operations currently use business information systems with enhancements such as text message ordering, reservation systems, e-mail loyalty programs and wireless personal digital assistants. Technology provides comparative advantage and leading edge in many food and beverage firms in New Zealand since they can perform multiple tasks correctly and more efficiently. In addition, mobile technology is modern alongside physical infrastructure like roads, airports, railroad, and government facilities16. Sustainable and clean technologies have also been embraced in the food and beverage industry. Use of solar technology is reducing the cost of energy and consequently operational costs. Moreover, biotechnology is the core strength of the countries technology in human health, forestry and agriculture by way of scientific research. The country has open access to some of the leading food and beverage technologies17. New Zealand Food Innovation Network provides a network of resources in technology and science in supporting businesses of all sizes. Environmental concerns in New Zealand Dumping, over harvesting of seafood and land pollution are major concerns of the New Zealand government. Agriculture is the major cause of environmental problems in the country and issues that address climate change are under debate18. The government established the Department of Conservation (DOC) to protect historic heritage and natural sites. Moreover, use of fossil fuels in cars and food processing plants are creating huge air pollutants. Power is consumed by machines and equipment is used in processing industries as well as petroleum consumption in vehicles and cooking. Investment in solar technology has reduced energy use and waste while lowering the cost of energy used in warming buildings, cooking and lighting. An agency dubbed TerraNature has been instrumental in championing for greater awareness on environmental degradation and pollution in the country. Renewable water resources are used in farming (55 percent) and industries (13 percent)19. Compared to other industrialized nations, natural resources in New Zealand have suffered less due to low pressure of development. Competitor analysis Existing competitors Core products Facilitating products Strengths Weakness Value Competitor 1 Food and cuisine Food processors and farmers Low prices, faster services, superior technology Poor customer service, low switching costs Fresh and nutritive Competitor 2 Packaged Juice Fruit processors Product variety, high demand, High costs of processing, dumping and pollution Health supplement to high fat proteins Competitor 3 Wines Old and new winery Great taste and tourist appeal High cost and heavy taxation Superior taste and quality for money Emerging competitors Core products Facilitating products Strengths Weakness Value Competitor 1 Breakfast takeaways Self-service counters Serves many customers, less space and energy consumption Disposal of wrapping to environment, reduced space for spatial-sensitive customers Quantity for money Competitor 2 Vegetables and salads Natural blenders Cheap and convenient for young families Perishable, no value addition Healthy and recommended for invalids and ageing population Competitor 3 Store wines Online orders Greater reach and access, Requires an effective distribution system Quality Customer service commensurate to price SWOT analysis Strengths: Friendly and motivated staff Provides diverse food and juice variety with natural health specifications; organic foods and vegetables20 Negotiates with suppliers on price and quality Cuisine lovers find the atmosphere and servicescape laidback and relaxing Employs service technologies such as text ordering and low fat cooking technologies21 Stable revenues and profits with ‘B’ credit rating Strong brand promise with great reputation and image New product developments and brands such as Fresh coconut water and Miracle Berries Weaknesses: High priced food and cuisine beyond the ability of economy class consumers22 Poor interactivity on the social media and web Low level of advertisement gives competitors and edge Employs pioneer strategies in a highly competitive price sensitive market Slow expansion strategies makes close rivals easily win new markets Opportunities: Income tax treaty between the US and New Zealand provides for payment of import and export taxes on one end only23. Increased dependency of young population on vegetables and fruit diet apart from the ageing population Ban on high sugar foods drives demand for locally prepared juices Massive investments by government of New Zealand on Sauvignon Blanc wine category ($12 million) Strategic alliances and mergers with local companies in New Zealand will create synergies24 Low cost pastoral agriculture lowers cost of food Threats: Strong brands like Coca cola and Pepsi making inroads in natural juices Low switching costs makes easy entry for competitors New negotiations for local suppliers of food materials in New Zealand may have legal implications and costs25 Bibliography 1. Zikmund, William and Babin Barry. Exploring Marketing Research. Cengage Learning. 2006. 2. http://www.foodinnovationnetwork.co.nz/ 3. Food and Beverage Sector Taskforce (FBST). Discussion Paper on New Zealand’s Foodand Beverage Sector, Wellington. New Zealand. 2005. 4. ”. 5. http://www.juiceandjavacafe.com/about-us 6. Statistics New Zealand (SNZ). Employment size groups for geographic units. Retrieved from Statistics New Zealand.2012. 7. Weir, James. NZ unemployment rises to 5.7 percent jobs also rise. February 4, 2015. http://www.stuff.co.nz/business/industries/65759161/NZ-unemployment-rises-to-5-7-per-cent-jobs-also-rise 8. McDonald, F. & Burton, F. International Business. Cengage Learning EMEA. 2002. 9. Ministry of Primary Industries (MPI). New Zealand food regulation. 2014. http://www.foodsafety.govt.nz/policy-law/food-regulation/nz-food-legislation/ 10. Government of New Zealand (GNZ). An Investor’s Guide to the New Zealand Food & Beverage Industry 2013. May 2013. http://www.nzvca.co.nz/cms/wp-content/uploads/2014/04/food_beverage_investors_guide_2013.pdf 11. WorldTravel Guide. New Zealand food and drink. 2015. http://www.worldtravelguide.net/new-zealand/food-and-drink 12. http://www.juiceandjava.com/jj/ 13. Burke, Peter. A social history of knowledge II: From the Encyclopaedia to Wikipedia. Polity. 2012. 14. Doole, I. & Lowe, R. International Marketing Strategy: Analysis, Development and Implementation. Cengage Learning EMEA. 2008. 15. Mein Smith, Philippa A Concise History of New Zealand. Australia: Cambridge University Press. 2005.  16. Sinkovics, R.R. & Ghauri, P.N. New Challenges to International Marketing. Emerald Group Publishing. Advances in International Marketing Journal. Vol. 20 (2009)2:34-45. 17. Webb, John. Understanding and Designing Market Research. Cengage Learning EMEA. 2002. 18. Welch, L.S., Benito, G.R. & Petersen, B. Foreign Operation Methods: Theory, Analysis, Strategy. Edward Elgar Publishing. 2008. 19. Erramillii. M. K. & Rao, C.P. (1990). Choice Of market Entry modes by service firms: Role of market Knowledge, Management International Review, Vol. 30 (2): 135-150. 20. Garden, Donald and Stoll, Mark. Australia, New Zealand, and the Pacific: an environmental history. Nature and Human Societies. ABC-CLIO/Greenwood.2005. 21. Kennedy, Jeffrey. Leadership and Culture in New Zealand. In Chhokar, Jagdeep; Brodbeck, Felix; House, Robert. Culture and Leadership Across the World: The GLOBE Book of In- Depth Studies of 25 Societies. US: Psychology Press. 2007. 22. Whitelock, J. Theories of internationalization and their impact on market entry, International Marketing Review, Vol. 19(2002)4:342 – 347. Read More