Making Niche Marketing Work - Case Study Example

KI PURE GRAIN MARKETING by Student Student’s Name + Code Institution’s Name Professor’s Name Course Title + Code Town/City Date of Submission KI Pure Grain Marketing I. Executive Summary KI Pure Grain, an upscale specialty grain dealer that serves Australian and world markets with grain products. Therefore, investigating the current market is essential to the victory of the food grain services offered by the firm. Marketing is the management of client relationships via fashioning, communicating, and delivering value to clientele in a manner, which will profit the firm. KI Pure Grain will need to establish the customer requirements, generate a program to meet these needs, and communicate this program to the customers in order to be successful. The accomplishment of the new venture in the marketing perspective as well relies on the relationship with local Australian producers to ascertain the benefits of marrying grain producers with its original products. Kangaroo Island Pure Grain was established in 2009 with the charge to offer first-class returns to Kangaroo Island grain growers, offer confidence to existing grain producers to boost their grain production and to hearten others to enter the industry (Elliot et al 2010). The company owns and operates substantial grain storage infrastructure on the Island and state-of-the-art systems that enable us to get, store, categorize, marketplace and distribute grains, oil seeds, pulses and sugar to quality domestic and export markets comprising Japan, India, Egypt, Middle East and Indonesia. The firm has influential relationship with Japan via Kanematsu Corporation that has presently become a shareholder by 2012 (Kerin et al 2006). KI Pure Grain markets many crops, comprising canola, oats, wheat, barley, red lentils, linseed and sunflower seeds, with the second-biggest crop wheat, half biscuit wheat, as well as half bread wheat, followed by canola. Astonishingly its major crop is too its latest - broad beans. In 2013, the first crop experienced 10,000 tones of broad beans exported, thus, making KIPG Australia's principal broad-bean exporter of the grains. The company markets in explicit the exact premium non-GMO canola for the production of high-class grain products by Hirata Industries, as well as distributed by PAL systems. Kangaroo Island Pure Grain has a range of products including branded under the Dirt(y) brand, red nugget and red nipper lentils grown by KI farmers. Data from PIRSA does not reflect this. Agricultural Census Data for 2011 demonstrate the Fleurieu and KI as growing 276 tones of lentils (Traill 2007). II. Introduction KI Pure Grain represents a preponderance of grain farmers on the island, with 25,000-35,000 tons of grain and legumes coming from up to 70 growers and a total of 40,000 hectares. The firm operates a facility on the island that can store 50,000 tons of grain. The grain is freighted through ferry to the mainland, in a negotiated special freighting contract, with 75 per cent shipped to Japan, South East Asia and the Middle East and the rest to the local market - particularly Arnott's Tim Tams, made by Allied Mills in Adelaide, and Laucke bread flour producers (Doole & Lowe 2005). The company have invested heavily on market research within Australia and globally. Marketing research is the process whereby a company defines a market problem or opportunity, collects and analyzes data, and recommends a potential course of action. In an attempt to gain insight into the opinions of company’s customers, the company conducted surveys in 2011 and 2012. This opinion can be utilized by the business as consistent information when deciding whether to move forward with the grain production services and in the prospect to advance outcomes and gain customer share in the fine foods industry. Even though marketing research is not ideal, it attempts to reduce risk and uncertainty to improve decisions made by marketing leaders. One area of concern from these surveys is the height of customer service at the retail stores. Between 2011 and 2013 this area did not get better but worsened, remaining a major concern of KI Pure Grains’s customers. Management at KI Pure Grains should discuss strategies to improve customer service as the catering service is implemented, enabling the organization to reach all future goals. Several areas had improved over the course of the two surveys. The store atmosphere, product mix, and the customers’ perspective of the grains value showed improvement when the results of the 2010 survey were presented the company’s ability to recognize and implement change. Consequently, the same attention ought to be paid to customer service, which has been a subject of concern amongst the company’s clients (Kerin et al 2006). The market for grains in Australia has greatly increased the market demands of the company. The current situation demonstrates, nonetheless, that the price of agricultural products in general and that of food grains in particular is increasing at an alarming rate that has never been seen prior to. The price rise in food grains worsened the life of those who are already constantly food apprehensive and even those in the transitory food insecurity. The population is the hardest hit by this situation in that the very poor and marginalized rural citizens lack enough income to purchase sufficient food and consumable industrial products at the escalating market prices. It is also a paradox to observe the grain price hikes where at the same time the production (supply) is concurrently increased (Elliot et al 2010). III. Product A. Evaluation of the Product and Innovation 1. Relative Advantage The company produces high-quality products that have penetrated the international markets- Japan, India, Egypt, Middle East, Indonesia and Asia- successfully. The success has been contributed majorly by the high technologies that are used to produce the products among the farmers in Kangaroo Island. KI Pure Grain has empowered its farmers through educating them on latest methods and technologies of producing the products. The company through its research team ensures that the farmers use the modern technologies while farming, which has led to production of superior quality products. 2. Complexity KI Pure Grain faces complexity when it comes to infrastructure –roads and electricity. The company has to incur some expenses because most of the parts of the Kangaroo Island is connected to electricity and uses diesel. Therefore, most silos use diesel power to power its operations. Also, delivering produce to silos is a challenge since the majority of the roads are not well-developed leading to logistic challenges. 3. Trial Ability Since quality is important aspect in different market segments, the company ensures that their products undergo trial tests to give their products a “rock star” element, which guarantees high-quality products to the market. The trial tests are carried out before packaging of the products for export or domestic consumption in special containers. Trial tests are undertaken by the company experts to guarantee physical grain quality. 4. Observability Following the trial tests, the products are delivered to different markets and the company “observes” the product if it is accepted in the market or not. KI Pure Grain follows its products to the market to make informed changes regarding the product in the market. B. Challenges Faced by the Company The major challenge that the company faces currently is the problem of pests and diseases. The pests and diseases negatively affect the quality of the products while selling in the markets. This has complicated the company’s penetration capacity because customers will prefer products from other companies that are rivals to KI Pure Grain. The other challenge that the firm faces is the incapability of its producers to meet the growing demand. IV. Market A. Market where the Products are Sold 1. Geographic Location The main market of the company is located in Kangaroo Island, which is the prime production zone for the company. The company receives, classifies, and stores the mainstream of KI grain grown in Kangaroo, which is the domestic markets and major export markets, comprising Japan, India, Egypt, Middle East, Indonesia and Asia. Japan, India, Egypt, Middle East, Indonesia and Asia have formed important markets for the company in the last decades. Launched in 2009, KI Pure Grain is one of surfeit of food initiatives to have sprung up on the island in the last few years (Doole & Lowe 2005). Opened in late 2010 in American River, the Oyster Farm Shop sells locally farmed Pacific oysters under the Kangaroo Island (KI) Premium brand, and farmed local abalone and marron, and sustainable local fish including King George whiting, garfish, and snapper and tommy ruff. There is as well excellent barramundi, fresh or smoked; from the "farm" operated by students of the aquaculture training program at Parndana Campus KI Community School.KI Pure Grains has decided that a need exists for a fine grain service. At the present, KI Pure Grains must identify the target market that is a specific group or two of prospective customers that the organization will market the services to. The services can be customized to meet the clients’ needs once the target market has been identified. 2. Form of Transport and Communication infrastructure in the region Transport Sea Travel Trucks Air Transport Vehicles Cars Buses Communication Telephone Mobile Phones Internet Magazines and Newspapers Radio and Television 3. Consumer Buying Habits Most of the population in the island is mainly middle and low-class population that consumes most of the grains. The buying habits within the island are good giving the company a ready market in the Island and in Australia. The majority of the grain products are sold to Asia and Japan where they display excellent buying habits. This has awarded the company a powerful presence in these promising markets (Doole & Lowe 2005). 4. Distribution of the Products The company stores its produce in silos in the island, which latter is transported though contracted trucks to its contracted storage facilities in Adelaide. From this point, there are dispatched in human consumption containers through airlines and ships to various destinations. Local retail stores offer different grains based on different market segments. This has allowed the company to attract diverse customers that have different tastes and preferences for their grains (Kerin et al 2006). 5. Advertising and Promotion Promotion is a fundamental element of the marketing mix because it permits individuals to be informed of products and services a firm offers. Promotion frequently sends messages regarding other parts of the marketing mix – the product, pricing and distribution. The marketing definition for promotion is the marketing acts that make prospective consumers, partners and society conscious of and attracted to the firm’s offerings. In similar manner, there are aspects to the entire marketing mix; promotion has four primary aspects that it includes advertising, public relations, sales promotions and personal selling. These elements are all ways of communicating a message and a term that is growing in popularity to describe promotion is marketing communication (Elliot et al, 2010, pp285). Integrated marketing communications (IMC) is the bringing together of all the elements of the promotional mix; it is the coordination of promotional efforts to maximize the communication effect KI Pure Grain has largely invested in advertising its grain products, both in the local and international advertising platforms (Kerin et al 2006). The company understands that the only means to reach a large customer base that allows the company to make more sales in a given time (Doole & Lowe 2005). The management has come to realize that advertising is one of the strategies that it must use to get information get across the different market segments (Traill 2007). Promoting and managing the KI Pure Grain products is requiring a lot of attentiveness, and typically all the time is spent on daily tasks at the retail store and ensuring that the clients are satisfied and comprehend the novel concept and trust is built. The company understands the significance of promoting the product with the competition being pretty high and it is consequently fundamental that they stand out from the crowd. The promotion strategy employed by the firm allows the company to outweigh its competitors, such as Riceland Foods offering similar products and services in nearly all segments that the company operates. Adverting s the mass media technique of marketing communication and offers publicity to the biggest and most geographically disperses audience at the lowest cost per person. It is destined to notify, influence, and remind. It is good for establishing brand image, consider as impersonal, and one-way communication. 6. Pricing Strategy Thus, in order establish the appropriate pricing for the services they offer, one should make calculations of a variety of product combinations preferred by the customers. KI Pure Grain creates grain packages founded on the most popular requests of the customers. Nevertheless, when working with a higher income customers, these predetermined grain packages might not be adequate. As a result, customized options and pricing should be provided upon request. KI Pure Grain plans to use the present in store parties and cooking classes to launch its current grain. This, along with a partnership of the local organic and grain producers, will augment customer share, which will boost its customer base against its competitors. The increase in customer share alone will boost profitability; however, promotions to reach the higher revenue clients will maximize these profits. Tasteful in store promotions, providing exemplary service and the ability to network will establish to be the best ways to promote the grain services (Traill 2007). B. Competition in the Market 1. Nature of Competition KI Pure Grain does not experience much competition in the industry. Competitors constantly influence a broad range of managerial decisions related to routine business activities and to the development of an organization. If the marketplace is highly competitive, managers must ensure that the organization remains competitive and provides high quality products or services to customers at the right price. Competitors embody a noteworthy factor in designing the company’s marketing plan and embracing appropriate product development, price setting, and promotion and distribution approaches. It is imperative; consequently, that company owners and managers supervise pertinent trends in the market in relation to rivalry to secure the firm's survival and growth in an exceedingly competitive environment. Accordingly, to focus on the environmental scan, company assessments tend to gather data around four fundamental questions, which cut across different elements of the external environment: the firm has reinforced its niche marketing strategies that has enabled it to attract huge customer base as compared to its competitors. 2. Niche Marketing Niche marketing has enabled KI Pure Grain to absorb competition in the industry. The niche marketing strategy has made the grain company to be a leading grain company in Australia. The firm's success story dates back to 2009, when four dissatisfied island grain farmers, aggravated by the high costs linked to their geographic separation and at not being able to control the cargo, storage, handling ,as well as marketing of their individual produce, banded together with a mission to safeguard premium returns for local grain producers. A niche marketing strategy is paying off the KI Pure Grain producers who have experienced their produce, especially wheat into scrumptious pastries and breads. The concept behind niche marketing adopting by the company is that concentrating on a smaller “niche” market will offer more targeted consumers and less competition, accordingly fashioning a small ;however, habitual income stream. This method is then repeated with several other niche markets to generate numerous income avenues. KI Pure Grain has guaranteed its clients of health grains, through ensuring that the grains are produced by competent farmers that use “health” methods of producing the grains. The company has comprehensive training and education programs that are geared towards farmers. Farmers are educated and trained on regular basis on ways of enhancing production of grains through healthy farming practices. This has made the company to win the public trust towards the production of healthy foods that meets the established standards instituted by the government (Traill 2007). C. Government Involvement in the Market 1. Government Agencies The government has strong influence in the grain market. The Australian government has provided incentives to local farmers in the island empowering to more grains and other products to meet the growing marker demands. Through the Australian Ministry of Agriculture farmers are given incentives in form of farm inputs and loans to boost their production capacity. The ministry charged with trade in Australia assists the farmers to find markets outside Australia. 2. Regulations by the Government Furthermore, the government regulates the grain industry through established policies that govern the exportation of the products. The products should meet the quality standards established by the government, as well as international standards based on overseas markets. This will make sure that the quality of products is not compromised and that the producers are not “oppressed”. V. Pro forma financial statement and budget For the pro forma income statements, the KI Pure Grain average growth in terms of sales in the last five years was calculated and utilized as the base forecast for the following financial year. From the statistics from the last 5 years, the standard deviation was calculated and utilized to determine the optimistic, as well as pessimistic forecasts for the prospect. In addition, growth rates were held constant, which reflected a steady strategy in prospect years. All the calculations are founded on the financial statistics from the last five years and are presumed to predict company’s future growth. The data provided a valuation for the firm that is found below. KI PURE GRAIN Pro Forma Income Statement Base Forecast (In $ Millions, except EPS)   2009A 2010A 2011E 2012E 2013E 2014E Sales Growth % 24.29% 35.30% 39.98% 39.98% 39.98% 39.98% Sales 24,006 32,479 45,463 63,637 89,077 124,686 Cost of Goods Sold 15,852 21,334 29,863 41,800 58,511 81,901 Gross Profit 8,154 11,145 15,600 21,837 30,566 42,785 Total Operating Expenses 3,745 4,870 6,817 9,542 13,356 18,696 Other Income and Expense 599 620 868 1,215 1,700 2,380 EBIT 5,008 6,895 9,651 13,510 18,910 26,470 Interest Expense 0 0 0 0 0 0 Earnings Before Taxes 5,008 6,895 9,651 13,510 18,910 26,470 Income Tax Expense 1,512 2,061 2,885 4,038 5,652 7,912 Earnings After Taxes 3,496 4,834 6,766 9,471 13,258 18,558 Net Income 3,496 4,834 6,766 9,471 13,258 18,558 Shares Outstanding (000's)           Basic 864,595 881,592 881,592 881,592 881,592 881,592 Diluted 889,292 902,139 902,139 902,139 902,139 902,139 Earnings per Share ($)             Basic $4.04 $5.48 $7.68 $10.74 $15.04 $21.05 Diluted $3.93 $5.36 $7.50 $10.50 $14.70 $20.57 KI Pure GRAIN Pro Forma Income Statement Optimistic Forecast (In $ Millions, except EPS)   2009A 2010A 2011E 2012E 2013E 2014E Sales Growth % 24.29% 35.30% 56.66% 56.66% 56.66% 56.66% Sales 24,006 32,479 50,883 79,714 124,883 195,645 Cost of Goods Sold 15,852 21,334 33,422 52,361 82,030 128,510 Gross Profit 8,154 11,145 17,460 27,354 42,853 67,135 Total Operating Expenses 3,745 4,870 7,629 11,953 18,725 29,336 Other Income and Expense 599 620 971 1,522 2,384 3,735 EBIT 5,008 6,895 10,802 16,923 26,511 41,534 Interest Expense 0 0 0 0 0 0 Earnings Before Taxes 5,008 6,895 10,802 16,923 26,511 41,534 Income Tax Expense 1,512 2,061 3,229 5,058 7,925 12,415 Earnings After Taxes 3,496 4,834 7,573 11,864 18,587 29,119 Net Income 3,496 4,834 7,573 11,864 18,587 29,119 Shares Outstanding (000's)           Basic 864,595 881,592 881,592 881,592 881,592 881,592 Diluted 889,292 902,139 902,139 902,139 902,139 902,139 Earnings per Share ($)             Basic $4.04 $5.48 $8.59 $13.46 $21.08 $33.03 Diluted $3.93 $5.36 $8.39 $13.15 $20.60 $32.28 KI Pure Grain Pro Forma Income Statement Pessimistic Forecast (In $ Millions, except EPS)   2009A 2010A 2011E 2012E 2013E 2014E Sales Growth % 24.29% 35.30% 23.29% 23.29% 23.29% 23.29% Sales 24,006 32,479 40,043 49,369 60,866 75,042 Cost of Goods Sold 15,852 21,334 26,303 32,428 39,980 49,292 Gross Profit 8,154 11,145 13,741 16,941 20,886 25,750 Total Operating Expenses 3,745 4,870 6,004 7,403 9,127 11,252 Other Income and Expense 599 620 764 942 1,162 1,432 EBIT 5,008 6,895 8,501 10,481 12,921 15,931 Interest Expense 0 0 0 0 0 0 Earnings Before Taxes 5,008 6,895 8,501 10,481 12,921 15,931 Income Tax Expense 1,512 2,061 2,541 3,133 3,862 4,762 Earnings After Taxes 3,496 4,834 5,960 7,348 9,059 11,169 Net Income 3,496 4,834 5,960 7,348 9,059 11,169 Shares Outstanding (000's)           Basic 864,595 881,592 881,592 881,592 881,592 881,592 Diluted 889,292 902,139 902,139 902,139 902,139 902,139 Earnings per Share ($)             Basic $4.04 $5.48 $6.76 $8.33 $10.28 $12.67 Diluted $3.93 $5.36 $6.61 $8.14 $10.04 $12.38 VI. Resources KI Pure Grain should develop a number of resources that will help it continue being the market leader in the industry. The company needs to seek more funds to develop its infrastructure, such as the electricity and roads. At the moment, the company experiences some challenges while trying to move their products from one place to another because of infrastructural challenges, thus they are obliged to seek more funds from financial institutions or other sources to fund their infrastructure. Moreover, the company should adopt new technologies to boost the capacity to produce more products to meet the ever-increasing market demands, especially in international markets. Manpower is another important resource that KI Pure Grain should consider adopting. The company should hire more skilled and experienced manpower to blend with the existing human resources. They should adopt competitive selection and hiring process to make sure they select the best talent. VII. 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