This report discusses the analysis Hubbard Foods as a company competing in cereal industry. The main focus of the report is analyzing Hubbard’s operating environment, evaluating strategic issues or challenges and recommending strategy to overcome company’s current issues. Firstly, Hubbard’s operating environment is categorized into external and internal environments. This includes analyzing Hubbard’s strengths, weaknesses, opportunities and threats in running and managing the business.
PEST+ analysis and Porter’s five factors are methods that are used to find the external factors that impact on Hubbard’s performance. The result from this analysis shows that trade agreements, economic circumstances of New Zealand, eating habits in New Zealand society, advanced technology for Hubbard’s research and development, and globalization aspect are used to determine the opportunities for Hubbard’s strategy. Furthermore, the threats are identified through Porter’s five factors that include an intense competition, weak barrier to entry, high level substitute products and strong power of supplier.
In term of Hubbard’s internal environment are analyzed using resources, core competencies and value chain. It summarized the strengths and weaknesses of the company. The strengths include unique innovative products and the implementation of family culture as their competent management system. From core competencies it is shown that the weakness of Hubbard is that the products are not a rare product as the product is similar to other competitors. Additionally, another major weakness is research from the value chain which is lack of advertising activity.
ANALYSIS #11. COMPANY BACKGROUNDThe Home Depot Inc. was founded in 1978 and is the world's largest home improvement retailer and the second largest retailer in the United States. The sales for the fiscal year 2000 were $45.7 billion, compared to $38.4 billion in fiscal 1999. As of January 2001, the company was operating 1,134 retail stores in forty-seven states, six Canadian provinces, Puerto Rico ...
Hubbard’s current strategic issues and challenges are laid on a high cost of raw materials, lack of advertising activity and simplex distribution channel. This issues results on strategy recommendations which are to internationalize Hubbard’s products to China market via export entry mode. This will helps Hubbard to gain a bigger market and investments. In planning the exporting strategy, market research should be done in advance to gain an insight of consumers in china and also to find local partner.
Another action is to planning the budget also to find the trade agreement with China market. ? 1. Company Description Hubbard foods Ltd is one of a successful cereal company which was found by Dick Hubbard. Headquartered in Auckland, New Zealand, this private company was incorporated in mid-1988 as Winner Foods Ltd, but decided to change its name to Hubbard Foods in 1990. Began with only 4 employees, this company slowly started to develop and compete amongst the three well-known companies, Sanitarium, Uncle Toby’s and Kellogs.
Today, the company employs approximately of 130 staffs produces a wide range of different products and sells its products in New Zealand and exports to Australia, UK and Asia. Hubbard produces 36 different product ranges from mueslis, bran flakes, oat-base cereals as well as gluten free cereals; Hubbard determined their price at both the high price assortment to the low end of the cereal market. The adoption of a strong and stable management structure within the organization has benefited Hubbard to be able to compete within a highly competitive environment of FMCG industry.
Hubbard’s policy required that the management within the organization should be commence without nonsense such as no management excesses, corporate ego trips, committee decisions, inter-company memos, buck passing, back stabbing, or any other dubious management decisions allowed on these premises (Hanson, Hitt, R. Duane, & Hoskisson, 2011).
Introduction Hot breakfast cereals refer to cereal grains that had to be soaked or boiled to be softened and edible. Pre-prepared cereal that is edible on its own or in milk is also known as Ready-to-eat cereal. Within Singapore itself, breakfast cereal are generally seen as a nutritious form breakfast that appeals more to the younger generation and children who are seemingly more receptive to ...
Hubbard tends to hold an open communication culture within the company to allow all employees in giving and sharing their ideas in order to succeed the company’s strategy.
Additionally, the distinct family culture within the company has become the foundation of Hubbard in creating positive management atmosphere to achieve company’s goals. This culture is counted as a collectivism system of Hubbard. 2. Vision, Mission, Goals and Objectives The vision and mission has established within the company and is used as a foundation to give a direction in achieving company’s goals. The vision statement of “to nourish the nation” defines as to provide the nation with the food that encourages the maintaining of health care.
Furthermore, the mission states that Hubbard concerns to their customer by providing inventive ideas for growing and inspiring people (Hubbard Foods, 2011).
Company’s goals and objectives are to increase the innovation of manufacturing greater range of breakfast cereals that use natural and nutritious raw materials. As part of their objectives, the representative of “mind, body and soul” articulates the main explanation of Hubbard’s’ products in maintaining consumer’s health necessity. The “mind” depicts their positive activities and moral leadership toward the community.
The “body” illustrates the company’s commitment in producing innovative breakfast cereals that are nutritionally responsible, and reasonable price. The “soul” pictures the company’s hope and inspiration towards its stakeholders (The Independent, 2002) 3. Analysis 3. 1. External Environment Referring to appendix 1 and 2, the external environment analysis is used to determine the opportunities and threats for Hubbard’s’ strategy implementations. There are several factors that have strong influence toward cereal market. This includes political and economic factors, socio-cultural factor, technological growth and global segment.
Besides that, based on Porter’s five factors in appendix 2, other external factors such as the degree of new entrants, suppliers and buyers power, threat of substitute products and the intensity of competitions have critical effects on how Hubbard being run. Opportunities •Political-Legal factor As New Zealand is part of free trade agreement with several countries and hold CER trade policy with Australia, it provides opportunities for Hubbard to trade freely with low or no export tariffs and fewer barriers to trade. •Socio-Cultural factor
Cost-push factor inflation occurs when there is increase in cost of production of an item, which then gets translated into a higher price for that item in the market. Demand-pull factor inflation occurs when there is more money with the consumers compared to the total number of goods available in the market. With too much money chasing too few goods, prices rise because people are willing to pay ...
Cereal is one of the breakfast menu that New Zealander takes every day as part of their routine and culture. Within NZ society, cereal is considered as a light food that fit as a breakfast meal. It also consist a lot of fibre and vitamin that is good for health and metabolism, which healthy diet is a growing trend within NZ society. Thus, it is a huge opportunity for Hubbard to offer healthy cereals due to growing demand •Technological Factor The availability of advance technology such as information technology will aid Hubbard to communicate their brand and image effectively and efficiently toward consumers.
Furthermore, Hubbard’s’ R&D is meant to acquire advance technology to reinforce the production. This will help the company to increase cost efficiency and productivity, therefore able to eliminate time waste and improve products quality. •Globalization Maintain Hubbard access to overseas suppliers and also strengthen their networks with existing and new suppliers for long-term relationship. Threats •New Entrants Weak barrier to enter the industry such as low start-up and switching cost and fewer regulations by government triggers new competitors to enter the market compatibly.
New entrants such as supermarkets that bring in their home brand products are new underdog players that compete not by quality but through low price. •Supplier Power Due to Hubbard dependence on its suppliers and difficulty to switch suppliers, the existing suppliers have strong power over Hubbard in determining raw material prices. Thus, there could be a possible threat for Hubbard to spend more on their production cost in the future. Besides, Hubbard’s’ dependency on exotic raw materials such as Quinoa from Peru has strengthen their relationship with particular suppliers (Hubbard Foods, 2011).
Therefore, it involves high switching cost for Hubbard to find new suppliers that are reliable and dependable. •Competitive rivalry and substitutes products High fixed cost has infected Hubbard to compete aggressively in order to maintain its market share and its growth. Additionally, the existence of giant brand such as Kellogs and Sanitarium has diminished Hubbard space movement within the market and possibility to draw Hubbard consumer’s loyalty. These competitors also acts as substitutes threat of Hubbard, as they are more popular brands and might have lower price than Hubbard 3. . Internal Environment The extent of Hubbard’ capability and competency can be analyzed through its internal environment that categorize as strengths and weaknesses of the company. Internal environment includes resources, core competencies (VRIN), and value chain (appendix 3 and 4).
Whole Foods Market, Inc. (WFM) lives through their motto of “Whole Food, Whole People, Whole Planet.” WFM opened their first store in Austin, Texas with 19 employees in 1980. Today, WFM has 311 stores in the US, Canada and the UK, and employs more than 72,700 employees. Whole Foods Market is one of the largest natural and organic food retailers in North America. WFM has grown to its size today ...
Strengths •Resources In terms of its physical resources, Hubbard is well-known to have high quality raw materials which around 400 raw materials acquired from both domestics and overseas suppliers.
On the other hand, the HRM has become strength on how the company managed appropriately. Hubbard has a strong family culture in order to unite staff’s goals and objective, and practice open communication and low formality. Another factor of intangible resources is the company brand reputation that has position Hubbard in current market as one of the biggest cereal brands in New Zealand. The reputation itself is influenced by consumers’ perception toward the company as promising healthy cereal. •Core competencies
Hubbard has valuable capabilities through its innovative breakthrough by using fruit flavoring to bake their cereals that becomes one of their competitive advantages. Furthermore, Hubbard’s’ organizational culture is hard to be imitated as it has unique historical conditions within its management. Weaknesses •Low rare Capabilities Hubbard’s products considered not to be rare products because its products are similar to other competitors. •Lack of promotional and advertising activities The ‘social pollution’ is believed to be the main reason of a limited advertising and campaign activities of Hubbard.
It makes Hubbard vulnerable as through lack of advertising and promotion, Hubbard will found it hard to position themselves in consumers’ mind. Therefore, low advertising level will decrease their brand awareness and recognition, which makes consumers easily forget the brand and shift to other. 4. Strategic Issues, Problems and Challenges There are several strategic issues faced by Hubbard’s Foods, which include the increasing input costs, huge promotional pressure, how to become the category leader and simplex distribution channel issues.
Higher taxes should be imposed on soft drinks and junk food to encourage healthy eating. ” Many people go out and buy junk food or drink soft drinks because of how cheap it costs. Majority of the healthy foods out in the super market cost more. Even if they tried to put higher taxes on junk foods, there wouldn’t be a difference because people don’t care about the price if they really want junk ...
Hubbard’s Foods should fully consider about the solutions of those issues for the business development in the long run. •How to manage increasing input costs Nowadays, manufacturers that operate in FMCG industry has to deal with the issue of how to maintain profitable growth in the backdrop of increasing input costs. The input cost refers to the cost of raw material, transportation and labour which are invested in the production of a good or service. Without exception, Hubbard’s Foods has to manage the issue by not only increasing the product price, but also other available solutions.
Generally, the nation’s economy is the major factor leads to the growth of input costs, and it can impact hugely on both individual companies and the industry (Hanson, Hitt, R. Duane, & Hoskisson, 2011).
In the case of Hubbard’s Food, the inflation rate has a close relationship with the growth of input cost since the company imports most of its raw materials from overseas. High inflation rate in recent recession results in the price of raw material in cereal industry that led to the negative effect on the company’s performance.
Aside from the external economic factor, the labour cost is increasing as well. Labour cost can be reduced by replacing the manual labour to machinery. However, Hubbard’s Foods insists to maintain the usage of manual labour as one of the company belief. So, the expense on the labour is another significant factor that increase the input cost. Additionally, the management cost, transportation cost and other factors can result in the growth of input cost as well.
Meanwhile, however, the price war within the FMCG industry is getting intense as retailer and customer always tend to negotiate the price cuts. Therefore, increasing the product price is not an effective option to address the issue. •Lack of the promotional activity Marketing and sales is an essential part, which is used to introduce the product to target customers and induce them to actually purchase the product (Hanson, Hitt, R. Duane, & Hoskisson, 2011).
The Ansoff product-market matrix helps to understand and assess marketing or business development strategy. Any business, or part of a business can choose which strategy to employ, or which mix of strategic options to use. This is one simple way of looking at strategic development options: Each of these strategic options holds different opportunities and downsides for different organizations, so ...
The results of promotional activities have a huge influence on sales, which impact on company erformance. For instance, Kellogg’s, one of the main competitors of Hubbard’s Foods has thorough marketing plans, professional sale teams and a close relationship with different media for ensuring the brand and products can be promoted effectively to the customers. However, Dick Hubbard treats the advertising as “social pollution” and made limitations on using the advertising. Thus, the lack of promotional activity is a drawback of Hubbard’s Foods when it competes with competitors who fully use the advertising as leverage within the industry. Simplex distribution channel Currently, selling through supermarket is the only distribution channel of Hubbard’s Foods, which means customers can only buy Hubbard’s products in the supermarket. However, the volume is the key determinant of stable profitability in FMCG industry. By contrast, the distribution network built up by Kellogg’s is more effective for approaching more customers. Besides the supermarket, the customer can also buy the Kellogg’s products from the convenient store, petrol station, train station and even the sport & recreational camps.
Apparently, the simplex distribution channel restricts Hubbard’s Foods to gain more competitiveness in the market. 5. Strategy Recommendation It is very important for the Hubbard’s food to address these issues and see how they can improve their business by following good business practices and strategies. The strategy has been chosen to address the issue identified for Hubbard’s food in this paper is the international strategy. International strategy is strategy developed by a firm to sell their goods and services outside to foreign market (Hanson, Hitt, R. Duane, & Hoskisson, 2011).
International strategy could bring some advantages to Hubbard such as increased market size, higher in return on investment, greater economies of scale, and location advantages. It is recommended to create value by transferring Hubbard’s products to Asian market, beginning by China, particularly the main cities in China which include Hong Kong, Beijing, Shanghai and Guangzhou. The reason for this international expansion is because China has a huge market size but cereal market is still underdeveloped. This means we have fewer competitors and more opportunities.
Moreover, the large population in China and the increase in pace of our daily lives mean people are looking for quicker alternatives, especially the young generation and middle class people. Most of the breakfast choices in China involve the cooking of porridge or steaming buns as part of their cultural food. With Hubbard’s product expanding into China, the Chinese are able to experience a western eating lifestyle that is not only more convenient for them in the morning but it might be also a much cheaper and new experience for Chinese community.
Nowadays, Chinese market has been an attractive place for the international investment as Chinese are more capable to try new things in their daily lifestyle than used to in the past (Barboza, 2011).
According to research, by 2015 China will be the largest online advertisement in Asia –Pacific, in fact in 2011 China is the second-largest advertising market in the world that facts will be really easier for Hubbard’s food to start to be a well known business in Asia market in the near future (CBR Staff Writer, 2011).
Not only does Hubbard’s have the ability to expand in China, the sourcing of raw material can be at a fraction of the costs compared to New Zealand and labour costs will also be an advantage and that may be help Hubbard’s company to reduce their import expenses in the future . This also brings up the social character of Dick Hubbard –foreign investment entering China helps the Chinese community, by reducing the unemployment rate as China currently has a high unemployment rate of 4. 10% (Trading Economics, 2011).
Furthermore, by investing in China, the foreign company does have the advantage on the cheap labour; employee in China is paid lesser than employee in New Zealand. Foreign company like Hundred’s products can also take advantage of the exchange rate on the labour in China to employ more employees in China to increase their productivity. The choice of international entry mode of Hubbard to China is exporting. It does not require establishing operation in China, but Hubbard still has to establish marketing and distributing means of the products.
Exporting their product will involve a high transportation costs and trade tariffs also difficulty to customize products. Hubbard will have less control over marketing and distribution activities in China. Furthermore, there is economic risk in exporting to China regarding to a weak intellectual property rights law. Therefore, Hubbard should have a strong intellectual property to prevent imitation of their products. 6. Implementation The marketing research is necessary for Hubbard’s strategy which includes: products of demands; target market and retailer information.
As China has a huge population, there is a potential demand of breakfast meal, not only Chinese style breakfast. People are keen to try various but healthy breakfasts, so it is necessary to do a product demand research for Hubbard, which the main target will be foreigners who works in Shanghai; young generation, and middle class workers. Hubbard’s product sample can be used to collect feedback from consumers. Partnership with local reputable supermarkets should be achieved to help promoting the brand and communicate toward broader target market.
Due to lack advertising activities, in entering Chinese market Hubbard has to develop their advertising scheme. This is to gain awareness and recognition from targeted market. Because Chinese shows low demand of eating cereal, Hubbard should actively communicate the benefits of their product. Therefore, Hubbard should boost their budget in advertising and public relation. The source of funds came from bank loans and also investors. In addition, having local partner is important to gain familiarity of local market and legal policies.
This local partner can be well-known supermarkets or specialized retailers. Having a good relationship with big food companies in China might benefited in promoting Hubbard’s products. Big cities are the main target in marketing Hubbard, especially Shanghai that has biggest economy in the country and where western lifestyle exists strongly. As Hubbard’s entry mode is to export the product, they have less control over marketing and distributions, however Hubbard still have to hire local marketing and distribution managers to ensure it reach their target market.
Besides, Hubbard has to find experienced marketing officers from NZ to be placed in China and able to monitor and report back to Hubbard NZ. In overall, to commence the export process to China may take approximately 6-8 months before the strategy is being implemented. The first 2 months, Hubbard may research the market in China; this involves researching consumer behaviour toward western breakfast meal, price, and quality. The third month, Hubbard starts to find the local partners that compatible with Hubbard and capable to market their products.
At the fourth month, Hubbard could seek agreement from Chinese authority to enter Chinese market. After they get the license to export their product, the following month Hubbard could outsource the local managers to responsible for Hubbard’s’ marketing and distribution in local market. At the same time Hubbard may starts budgeting planning the promotion and advertising for China market. Coming to the sixth month, the Hubbard should already in the China market, then they have to spend more budgets to advertise more such as using samples and print advertisement that is part of their campaign.
This promotion and advertising campaign may last until the eighth month. At this eighth month, Hubbard should evaluate whether their strategies are implemented correctly and have achieved the objectives. Short term evaluation basically is done when the strategies has been implemented and accomplished. This includes evaluate the consumers’ awareness recognition toward the brand and consumers’ perception. In long term, evaluation is including sells, profitability, and marketing and distribution issues.