Innocent Company Analysis Table of Content Front sheet1 Table of Content2 Executive summary3 Introduction Internal analysis 1. 1 Mission, core values, and vision 1. 2Value Chain Analysis 1. 3Positioning Map 1. 4Success & Survival factors 1. 5Miles & Snow Adaptive Strategy External analysis 2. 1Segmentation Analysis 2. 2Porter’s five forces 2. 2Industry Life Cycle 2. 3PEST Analysis 2. 4Benchmarking analysis SWOT Analysis 3. 1Recommendations Executive summary: Introduction This report is an analysis about the company: Innocent Ltd.
This company started its way in 1998 by three friends Richard Reed, Adam Balon and Jon Wright and produces healthy drinks and food. Their current market share in the UK is now 78%. Internal Analysis The analysis of the company is started by the internal analysis that broadly examines the marketing practices, the values of the company, the value chain of the company, the positioning in the market, the vital success and survival factors and lastly the Miles & Snow adaptive strategy. The company’s mission is to create a healthier lifestyle of the population by their products in order to ‘live well and die old’.
This is supported by their vision that states that they want to become the earth’s favourite little food company and according to one of their values; creating a business they can be proud of. Moreover, as part of the internal analysis, a Value chain analysis has been carried out for Innocent Ltd. The value chain analysis identifies primary and support activities critical for the company’s success. Factors of the companies value chain within their primary and support activities seem very promising and are significant in the success of Innocent Ltd; their current market share of 77. 5% can support this.
Nevertheless it is crucial that the company preserves consistency throughout their activities in order for them to sustain profitability, thus maintaining competitive advantage. Based on the positioning map, Innocent found and filled a gap in the market and is free from its competitors based on quality and price. It is a premium product, however customers are willing to pay for this premium price due to its quality. In order to survive in the industry, it is vital for the company to maintain their innovative and creative marketing campaigns by taking customer preferences into account.
In order to succeed, international markets for a huge opportunity for the organization. Due to this international expansion, the company could start to make more use of economies of scale, which increases the margins. The analysis have shown that organization can be seen as a prospector, due to the fact that they have changed the industry or actually started an industry, of healthy smoothies. They are continuously pro-active rather than re-active. External Analysis To move on with the External Analysis of the company, starting with the segmentation analysis.
This shows that Innocents customers are mainly located in North-Western Europe and countries such as Austria and Switzerland. Based on the demographics, people that buy innocent are between 18 and 40 years old that are business people, mothers, on-the-go people and sports people that mostly come from the AB socio-economic group. The customers identify themselves with the brand and are as well believers and strivers. Their behaviour shows that they are enthusiastic and image seekers (because they find it cool to drink innocent).
The porters five forces analysis shows that the competitive rivalry, buyer power and threat of substitutes form the biggest threat for the company. Potential entrants and supplier power are identified as a lower threat due to the fact that it costs a lot of money in order to compete with companies such as Innocent and enough suppliers are present that offer natural fruit products. Luckily enough for Innocent Ltd, the industry is still growing and therefore it can be argued that the industry is in its growth phase, even though they had some struggles with the recession.
The PEST-Analysis is used to describe the macro environment of innocent on the subject of political/ legal, economic, social and technological aspects. The government cuts, 5 a day campaign and tax increase play an important role regarding the political issues in the macro environment. It is expected, that the economic climate as well as the smoothie market will improve in the future. The trend for healthy eating and the ethical behavioural consciousness plays a main role in this. It is also expected to have lots of innovation and communication developments regarding he technological macro environment. The benchmarking analysis in this report is applied as well in order to identify the main competitors of Innocent Ltd and to compare those companies with the organization. This analysis shows that Introduction: Richard Reed, Adam Balon and Jon Wright founded innocent in 1998. (Below) They bought ? 500 worth of fruit and set up a stall at a music festival in Parsons Green, London, selling smoothies. At the stall, the guys put up a sign asking ‘’should we give up our day jobs to make smoothies? ’ They had two bins; one labelled ‘’YES’’ and the other ‘’NO’’ and they asked people to vote using their empty bottles. By the end of the day the ‘’YES’’ bin was completely filled up. This made them decide to start Innocent as a new business. Reed stated ‘’Innocent was born from a bin test’’. (EN, the magazine for entrepreneurs, 2011) (CarMicheal, A, Photography, 2009) They worked hard to gain their capital to realize Innocent as a business; unfortunately they were refused finance from various mainstream banks.
With perseverance they managed to source their capital from Maurice Pinto, an American, London based businessman who provided them with the ? 250,000 needed capital. Pinto has since admitted to having made this decision more out of a sense of obligation than in the expectation of the kind of return he’s made on it – one of the best of his life, it turns out. (EN, the magazine for entrepreneurs, 2011) ‘’The idea was a simple one, like most good business strategies” Reed says. (EN, the magazine for entrepreneurs, 2011) Just over a decade later, Innocent now has an annual turnover of around ? 10m, has been growing by 20% year on year and currently has a around 75% share of the UK smoothies market. (BBC New- Business, 2010). The company now produces more than 30 different recipes and sells more than two million smoothies each week through 10,000 retailers in the UK and overseas. (Young, 2009) Internal Analysis 1. 1. 1Mission statement “To make natural, delicious food and drink that helps people live well and die old. ” (Innocent Ltd, 2011) With this mission statement Innocent emphasises that they produce products that are natural and good for you.
They explain that the products deliver a boost to vitality and because the products are 100% natural and healthy people will live longer by making their immune system stronger after consuming the vitamins. Ultimately their mission is that they want people to consume as much fruit and vegetable as possible in order to make society healthier. (Innocent Ltd. , 2011) 1. 1. 2Vision statement “Becoming ‘the earth’s favourite little food company. ” (Innocent Ltd. , 2011) A vision statement is something a company aspires to become it should be a projection for the future of the company and where they want to grow. Ward, S 2011) Innocent wants to become the earth’s favourite little food company. Currently they have managed to attain 78% of the smoothie market (source %) in the UK and in the past 2 years Innocent has introduced new products to their brand, which means they are working towards their vision statement. 1. 1. 3Core values Core values hold the foundation to how a company performs. The core values of a company are constant and mark the way a company interacts, produces and presents itself. (NPS, 2010) Innocent has set 5 core values to their company; each value has an individual meaning explained below:
Be natural Innocent produces products that are 100% natural, taste good and are healthy to consume. Being natural goes hand in hand with their mission statement where they aim to make society healthier. Be entrepreneurial Innocent started their company by seeing an opportunity; they first sold their smoothies at a music festival in London where they initiated their entrepreneurial approach. Innocent strives to be the best they can be and continuously incorporates creativity into their company to become better than the rest.
Be responsible Innocent finds it important to stick to their core values and principles thus they want to be responsible for what they produce and how they educate the consumer. Be commercial Innocent is a commercial business and operates that way. Ultimately the profit they generate is a profit for both them and the customer. Innocent incorporates commercial behaviour in order to be tough and fair to the competition. Be generous Lastly Innocent finds it important to be generous and give back what they can to society.
They are involved in various organizations for a good cause and have even set up their own Innocent foundation that provides sustainable farming for a secure future for farmers that produce Innocent fruit. (Innocent Foundation Ltd. 2011) Other organization they are involved are: The big knit (Age UK), innocent scholarship foundation, childcare vouchers, drinks for the homeless, buy one get one bee, taste not waste. (Innocent Ltd. 2011) 1. 2Value Chain Analysis Value Chain Analysis: ‘’The term value chain describes a way of looking at a business as a chain of activities that transform inputs into outputs that customers value.
Customer value derives from three basic sources: activities that differentiate the product, activities that lower its cost, and activities that meet the customers’ needs quickly. ’’(Mulleady, F, 2011) Businesses often used the Value Chain Analysis to understand and examine different activities within the business, which contribute to customer value, which they aim to generate to help them gain competitive advantage. Michael Porter suggested that the activities which take place within a business can be grouped under two headings, primary activities and support activities.
Primary Activities: Inbound logistics: Innocent produce their products from 100% natural goods, which adds to their overall image as a healthy food and drink label. Due to their values, Innocent do not use concentrates of any kind as they feel that they are very bad for you and hardly contain any original goodness which comes from a fruit. The majority of their products are smoothies, which are made from 100% real crushed fruit with no added ingredients or materials. Their other products such as the veg pots contain fresh vegetables, whole grains with herbs and spices.
The soundness and efficiency of raw materials is high at Innocent as they link extremely well with the overall image of the company and what they aim to deliver to their customers. Operations (Manufacturing): The company headquarters, also known as the ‘Fruit Towers’ is located in Shepherds Bush, London. This is where the company is based and where the main operations and manufacturing of the products takes place. They have 150 people working for them at the ‘Fruit Towers’ and 250 acorss 9 other offices around Europe. In these offices, the recipies are made, the products are produced and packaging is carried out.
A lot of effort is put into their packaging, here are a few examples: Excellent level of efficiency regarding productivity, quality and the layout and work flow design at operations at Innocent. Friendly working environment with an overall low staff turnover. Outbound logistics: Innocent products are sold over 10, 000 retailers, compared to 1 in 1999. Their retailers include supermarkets such as Asda, Tesco’s, Waitrose and Sainsbury’s. (Innocent Website, 2011) Due to the accuracy and effective production line, the outbound logistics, which include the delivery of the inished goods and services, are all very efficient. Marketing and sales: * Identified customer needs: Innocent identified that there in today’s society, with worth ethics increasing rapidly and people always on-the-go, that people don’t have enough time to be healthy. So they decided to offer customers healthy products to help them towards consuming their 5 a day fruit and veg. * Innovation in sales promotion and advertising: excellent level of advertising with the main ones including Posters on public transport, television adverts which are very fun and original, press adverts and billboards.
Expanding by the year. Service: * ‘Banana phone’-deals with all consumer queries, good and bad comments, which are then passed on to the ‘Peoples champion’ * Email-Website has a list of name and image of all employees and a link to email them directly! * Post * Blog/Facebook/Twitter They fulfil the significant role of giving customers full attention when it comes to after care, complains, customer inputs for product improvement, their promptness in dealing with customer complaints and quality of customer education. Support activities: General administration: They now have 36 different products compared to 3 which they has in 1999. Innocent have the ability to identify new product and market opportunities. * Seem to work well in achieving their objectives which are mainly to provide fresh and healthy products * Their co-ordination and integration amongst all of the value chain factors is good-This is evident with their current market share of 77. 5% which has come from a result of their increasing number of employees, increasing their productivity and therefore increasing their retailers from 1 to 10,000 in just over a decade.
All of this success has meant that 2 million smoothies are now sold a week which compares enormously to 20 per day sold in 1999. (Innocent Website, 2011) * Excellent Public image Human Resource management: * Generally the staff turnover seems to be low which is excellent for the company as the staff have a great level of knowledge about the company as a whole. * The working environment is very enjoyable and fulfilling for the employees. This effectively minimises absenteeism and keeps the staff turnover as a desirable level through motivation and job satisfaction.
Technology development: * Staff carry outstanding ability of creativity and innovation * Experience of technicians such as the recipe maker is very good 1. 3Positioning map The perceptual map is a geometric comparison of how competing products are perceived; the dimensions used on the two axes represent the key attributes as seen by the consumer. It is used to generate knowledge about the parity and difference between competing products. (Fill, 2009) Innocent is placed at the high quality/slightly expensive point compared to its competitors.
It could be said that Innocent has the perfect position as its closes competitor, Grove, is of lesser quality and is more expensive and not a lot of other competitors are nearby. The fact that there are not a lot of competitors in the area of Innocent shows that the company saw a clear opportunity in the market. As can be seen in the map, the position low quality/expensive is completely empty; this is probably because of the fact that low quality/expensive products in general are not that successful. (Fill, 2009) Looking at the perceptual map, it can be assumed that one of the factors that makes Innocent Ltd. arket leader is that they fill a gap in the market and had the first-mover advantage. 1. 4Survival & Survival factors Survival factors: In accordance to the report of Global Industry Analysts Inc, the global smoothies market will increase to 9. 0 billion in 2015. In order to survive in this market, it is vital for the company to keep the innovative and creative marketing campaigns alive. Although it seems to be that there is enough space for all competitors to expand, Innocent should be careful in their approach.
Taking the customers preferences into account plays a main role in this process without ignoring the financial stability of the company. Success factors: Regarding the report discussed in the previous paragraph, exploiting international markets seems to be an attractive opportunity for Innocent Ltd. This will also increase the applicability of economies of scale for the company, which could have positive effects on costs as well as revenue. Strong relationships with suppliers and distributors will be needed, even strategic alliances and collaboration forms a success factor of the company.
Well-structured and carefully composed contracts should ensure the positive effects these attributes will have on the organization, such as; higher revenues, higher margins and therefore higher profits. Maximization of revenue and minimization of costs will enhance the financial capabilities of the companies, which can be used for marketing campaigns and investments in further developed technology in order to create even more sophisticated smoothies. Another essential success factor for Innocent ltd. is to stay ahead of competition, being pro-active instead of re-active.
This should be accomplished by creative marketing campaigns and brand loyalty of the consumer. 1. 5Miles & Snow Strategy Analysis External Analysis 2. 1Market Segmentation Analysis A segmentation analysis is needed in order to identify the characteristics of the market population. The analysis is split up into four segmentation areas; geographic, demographic, psychographic and behavioural segmentation respectively. According to the geographic segmentation, Innocent is distributed in the UK, Ireland, the Netherlands, Belgium, France, Germany, Norway, Finland, Austria, Denmark and Switzerland.
However, future expansion could lead to a wider geographic area covered by the organization. In respect to the demographic segmentation, the company is aiming for hard working professionals that are interested in a healthier lifestyle, mainly between 18 and 40 years old. The income of the market is therewith above average (ABC1), due to the fact that the drinks are relatively expensive and mainly used by business people with a modern and trendy lifestyle. The people that buy innocent drinks psychographic identify themselves with the brand and feel therewith connected by the innovative and achievement focused approach of the organization.
According to Innocent drinks, one of their key approaches is “to leave things a little bit better than we find them”. Therefore users of the products are also believers and strivers by supporting this organization. The psychographic part of the market segmentation might also be that the people feel good by drinking or eating the products, due to the fact that the products are healthy and the fact that the organization has its own foundation (Innocent Ltd, 2007) Customers of Innocent definitely can be segmented by behaviour.
The marketing of innocent is making them enthusiastic about the brand and it becomes ‘cool’ as well to consume the products of Innocent. The market can therefore partly be seen as image seekers. The people that actually buy the products are young business people, mothers that buy these products as an alternative for the unhealthy sodas and fast food and people that often work out. Even though the company has the largest market share, still a lot of people don’t know the brand due to its short existing period. The group of first-time and potential users is therefore attractive for the business.
The marketing campaigns of Innocent should ensure that the brand awareness of the company increases. 2. 2. 1Market Segmentation summary: Geographic segmentation: | North-Western Europe| Demographic segmentation: | Business people + Mothers + On-the-go people + Sports people + People under 35 + AB socio-economic group| Psychographic segmentation:| Innovators, achievers, believers & strivers| Behavioural segmentation:| Enthusiastic, image seekers, first-time and large amount of potential users. | 2. 2Porters Five Forces Force| Ranking1 = no threat4 = big threat| Industry Analysis| Potential Entrants| 1| High start-up costs|
Competitive Rivalry| 4| The juice market is very big with a lot of competitors| Buyer Power| 4| A consumer can easily switch brands| Supplier Power| 2| Many suppliers available| Threat of Substitutes| 4| A lot of substitute drinks for smoothies| The Porter’s five forces model is a holistic way of looking at the industry of interest and it shows whether it is interesting or not to enter a certain industry. The model does not only look at competition in the industry, but also at the threat of substitute products and services and new entrants, and the power of suppliers and consumers. Porter, 2008) Looking at the smoothie industry, the first force “potential entrants” is ranked with a one, which means that is this force is not a big threat. Although a lot of new smoothies enter the market every year, in general these come from established producers, for example Starbucks. (Innofood, 2011) A barrier for new entrance could be the high start-up costs. The second force “competitive rivalry” is ranked with a four and therefore a threat in the industry, this means that there are a lot of companies competing in this industry.
Examples of main competitors of Innocent Ltd. are Tropicana, Grove, Ella’s Kitchen. “Buyer power”, the third force is ranked with a four, this is often the case in a highly competitive industry with a lot of different brands. Consumers can choose out of many different products, which makes it harder for companies to make them loyal to their brand. In the smoothie industry the fourth force “supplier power” is ranked with a 2 because their are many suppliers available in this industry and this makes it easy for companies to switch suppliers.
The fifth and final force “threat of substitutes” is of course a four as there are a lot of substitute drinks for smoothies, water, soft drinks etc. The smoothie industry does not look too “sexy” considering the model. High competitive rivalry, buyer power and threat of substitution make it a difficult industry to be successful and thus profitable in. Low threat of new entrants and supplier power are interesting but do not weight off the other forces. (Porter, 2008) 2. 3Industry Life Cycle An Industry life cycle shows in what stage an organization is in the cycle of their life.
An industry life cycle consists of four stages, introduction which is a stage for start-ups with a new product or within a new industry. The growth stage follows after, this is when a company expands, introduces new products and grows within the industry. The maturity phase is where a company is in consolidation it also shows a slowing in growth. Lastly the decline stage means sales are decreasing, company reached its peaks and during this stage a company could ultimately die. (Inc. 2011) Innocent ltd is currently positioned in the growth stage of their life cycle.
They started with a healthy company and within the last 13 years (since 1998) the company grew towards a market share of 78%. In the past 2 years Innocent has been exploring new grounds and introducing new products to their company such as fruit tubes for kids and microwaveable food pots for those who need a quick meal. Innocent has yet to introduce more products and thus has not reached the maturity stage yet. In recent years the smoothie industry has become more popular because people become more health aware and smoothies manage to tap into the health and convenience trend of today.
The smoothie industry has exceeded into a growth stage and according to research is growing towards a continuously expanding market size which indicated the industry will remain in the growth stage for a long period. (Lloyd, A. 2011) 2. 4PEST Analysis Political: 5 A Day Campaign: Innocent profits from the ‘5 a day’ campaign the government and the NHS support. It states that: The Government recommends an intake of at least five portions of fruit or vegetables per person per day to help reduce the risk of some cancers, heart disease and many other chronic conditions (NHS, 2011).
One Innocent Smoothie provides 2 of the daily-recommended intake of 5 portions (Innocent, 2011). Government Cuts: Due to the current recession and a deficit of 156 billion pound, the government decided to save 6. 2 billion in the financial year 2010-11. This includes for example less spending on Civil service pay and the Home Office and therefore less purchasing power for these occupational groups (BBC, 2010). This might affect Innocent sales, because consumer might switch to cheaper brands or stop purchasing Smoothies at all, as Smoothies are relatively pricey and considered to be a tread or a luxury product, not an essential (Mintel, 2011).
Corporate Tax decrease: The UK government has decided to reduce the corporate tax to 26% in 2011 and again in 2012 to 25%, compared to 28% what it used to be before (Directgov, 2010). This leads to an increase of revenue for Innocent. VAT increase: On the 4th of January the value added tax where increased to 20 per cent, former it was 17. 5% for standard-rated goods, which includes Smoothies, because they are rated as beverages(Directgov, 2011). In November 2010 Innocent unsuccessfully filed a suit against the 17. % of VAT that was charged on their products. They argued, that Smoothies are like “liquefied fruit salads”, because the raw materials for their drinks are Value added tax free (Helen and Hawkes 2011). But it was declared that a Smoothie is not an essential drink or aliment, but of luxuries, therefore a VAT of 17. 5% was applied (now 20%). This implicates a disadvantage for Innocent, because without the 20% VAT Innocent, could lower prices and increase sales or just have a 20% higher profit margin. Economical: Forecasted future growth in the Smoothie market:
The overall trend in the Smoothie market in the UK regarding to sales is ascending. It is expected that sales will increase again from a total of 143 million pound in 2011 to 179 million pound in 2016. After sales have been declining from 2007 till 2009. The expected market growth is an opportunity for Innocent to increase their sales and therefore revenue. (Mintel, 2011) Expected bettering of the economic climate: As one can see in the graph, GDP in the UK has started to increase again since the 2nd quarter of 2009.
Till the 3rd quarter of 2011 there has been a gain in GDP of about 3. 1% (Office for National Statistics, 2011). The treasury expects further growth in GDP over the next years as well as a decline in the unemployment rate. This will have positive effects on the future spending power of consumer, influence purchasing decisions and strengthens consumer confidence (HM Treasury, 2011). Premium brands such as Innocent will profit from an overall economic growth, because during recessions consumers will at first cut their spending on luxury, not essential good.
Source: HM Treasury, (2011). Forecasts for the UK economy: a comparison of independent forecasts Source: HM Treasury, (2011). Forecasts for the UK economy: a comparison of independent forecasts Social: Trend for healthy eating and convenience: In the UK society there has been a long-term trend for healthy eating and convenience food. Innocent benefits from this trend because Smoothies and Innocent have the reputation to be healthy as well as their products are an easy way to eat five portions of fruit/vegetables on a daily basis in an increasingly fast moving society (Mintel, 2011).
Awareness of ethical behaviour: Corporate Social Responsibility tends to be important to consumer, where more than three fifths of consumers believed it important that a company act ethically. Although during the recession this attitude change during the recession, where people were more concerned about their personal wealth and spending. Innocent with its core value being sustainability, profits from the consumer awareness on ethical behaviour of firms and therefore might experience an increase in its brand reputation and brand awareness (Mintel, 2011). Demographics:
Most consumer who buy Smoothies are under 35 years old and those in the AB socio-economic group. Because they are more concerned about health and diet. The Graph shows that overall the UK population is aging this will lead to an increase of the population of consumers between 25-34, which are most likely to by Innocent products. Therefore Sales are expected to increase. But on the other hand, the over 55s are a large segment and are unlikely to purchase Smoothies (Mintel, 2011). Technological: Innovation: Ethical packaging and healthy products are the two main attributes the firms in the market concentrate on.
Hence the firms focus on developing new ways of ethical and sustainable packaging, like Innocent, who introduced a bottle made of 100% recycled plastic(Mintel, 2011). Moreover the companies are trying to producer their products with as little additives as possible to bring forward the naturalness of the product. Another important factor for the firms in the market is the innovation of new recipes in order to attract new costumers, for example children or older people. Communication: “Above-the-line investment in the smoothies market rose by almost 50% in 2010, to ? 6. 1 million. Due to the fact that all the products in the smoothies market are substitutes and switching costs are low, the companies have to build a relationship with the costumer in order to keep them buying their product. Political * Government cuts * 5 a day campaign * Tax increase (VAT) * Decrease of Corporation Tax| Economic: * Expected bettering of the economic climate * Forecasted future growth in the Smoothie market| Social * Trend for healthy eating and convenience * Awareness of ethical behaviour (CSR) * Demographic| Technological * Innovation * Communication| . 4Competitive Benchmarking Analysis | Innocent(Innocent ltd, 2011)| Tropicana(Tropicana, 2011)| Ella’s Kitchen(Ella’s Kitchen ltd, 2011)| Market Share(Lloyd, A. 2011)| 78%| 3%| 2%| Target Market| Business people, mothers, sports people, on-the-go people| Only available for supermarket shoppers. Mothers (children, babies)| Competitive Advantages| 100% natural, strategic alliance with coca cola, | Internationally established| Specially for babies and small children (stages), added value less costs | Core competencies| Brand advertising and communication| World leader in fruit juice manufacturing| Wide product range (drink, food and snack)| Competitive Strategies| Differentiation| Cost leadership| Differentiation Focus| CSR activities| Big knit (Age UK), innocent scholarship foundation, the innocent foundation, childcare vouchers, drinks for the homeless, buy one get one bee, taste not waste. |
Expending carton recycling, waste reduction efforts, bottle recycling, rainforest rescue, PepsiCo sustainability. | Eco offices, terra cycle, recyclable packaging, super schools| Competitor ranking| X| 1| 2| Competitive benchmarking is a continuous process of comparing the output, performance and practice of an organization to its direct competition. The matrix gives an overview of the different aspects of Innocent and its closest competitors; Tropicana and Ella’s Kitchen. The matrix above shows that Innocent is a well established and growing company with an incredible market share of 78% in the UK smoothie market.
The close competitors only share a 5% market share, the remaining market share is either by very small brands or own brands such as Tesco and Waitrose. Looking at the target market there are some variations, Ella’s Kitchen has a narrow focus on mothers who feed their babies and small children. Tropicana is generally only available to people shopping at supermarkets and Innocent is available in numerous locations from supermarkets, vending machines to supermarkets which means its accessible to the mass public and thus has the largest target market. (Mintel, 2011)
Moreover, Innocent prides itself on it products being 100% natural and this is therefore a competitive advantage because very few competitors can state that they only use pure fruit without any processing such as pasteurization. Tropicana uses a pasteurization process in their juice, which makes it less healthy than innocent. (Tropicana, 2011) The strategic alliance with Coca-Cola can on one hand be a competitive advantage because Innocent can you the power Coca-cola has but on the other hand Coca-cola could be a bad influence and bad for their eco reputation.
Tropicana has a competitive advantage over Innocent and that is that they already are international established and far greater than innocent has. Ella’s kitchen has a competitive advantage oriented towards their target group. They are considered a solid competitor in the smoothie industry and their major customer is the mother, which means that a majority of the target group ‘mothers’ favours ella’s kitchen over the others. Now about the core competencies, innocent has a very popular and a unique brand dvertising and communication that makes them differ from the others and stand out. Tropicana is the world leader in fruit juice manufacturing which is what makes them stand out and lastly Ella’s kitchen has a very wide product range but does compete high up in the smoothie market. When we look at competitive strategies we know that Innocent has a differentiation strategy because they have a broad target and their products are differentiated from the competition. Tropicana on the other hand has a cost leadership approach because they also have a broad target but low costs.
Lastly, Ella’s Kitchen uses the strategy differentiation focus because they have a narrow target and a differentiation approach. (Institute for manufacturing, 2011) Finally when looking at the CSR activities all three companies are involved with corporate social responsibility but Innocent is definitely the leader and even has their own foundation. Overall we ranked Tropicana as a stronger competitor. SWOT Analysis All information gained from the tools is used to compose the SWOT analysis. The strengths and weaknesses of Innocent ltd. re derived from the internal analysis of this report. To start with the main strengths of the organization, the market share of 78% in the UK smoothie market is definitely a strong point of the company. Moreover, the closest competitors (Tropicana ; Ella’s Kitchen) only have three and two percent respectively. This shows the power of Innocent ltd. in the smoothie market. In addition to their power, the brand awareness and the brand image of Innocent is therefore very high. The organization focuses on charity work and wants to ‘leave things a little bit better than we found it’. Innocent ltd, 2011) They have won several business awards such as the Barclays Green Leaders Business Award and the Business Commitment in 2008. Furthermore, their premium quality of their products differentiates themselves from their competitors and forms the basis of the brand loyalty and the cause of their high market share. The Banana phone and the AGM days support the customer loyalty due to the fact that it increases the involvement of customers in the organization. Their market share, brand loyalty and close retailer relationship support another strength of the company, which is that the roducts are placed at eye-height in the supermarkets and in clear sight at other retailers such as Starbucks. Despite of the many strengths of the company, our internal analysis of the organization also showed some weaknesses. The first weakness of the company is the price inflexibility, which means that the prices of smoothies are dependant on the prices of food. Furthermore, the competition remains a weakness of the company, due to the fact that established companies such as Starbucks are now starting fruit bars as well, which could negatively affect the sales of the Innocent products.
Furthermore, the internal analysis showed that the organization is highly dependant on their smoothies sales. This is a weakness because when the sales or trend of smoothies declines, the whole revenue and profit of the company will decline as well. This is also mainly due to their narrow target market, which is the AB socio-economic group, that intensively reacts on the state of the economy. In times of recession, the smoothies are seen as luxury products, which cause a decline in sales during this time.
To go on with the opportunities and threats gained from the external analysis. According to reports used in the analysis, the international smoothie market will be worth 15 billion in 2015, which causes a major opportunity for the company to go global. In addition, the government is supporting healthier lifestyles with the 5 a day campaign and the trend is to buy and eat organic healthy food, which could benefits Innocent as a healthy business in the future. In addition to this trend, an opportunity for Innocent is to differentiate more on healthy products.
They already did with their veggie pots, however there are lot more opportunities for more healthy foods and drinks. Lastly, the strategic alliance with Coca-Cola might negatively as well as positively influence Innocent Ltd. An opportunity for the company is to make more use of strategic alliances or partnerships in the future, which for example, could benefits and support the international expansion. And lastly, the external analysis showed some threats that could affect the business negatively. Firstly, it is necessary to monitor the competition in hat they are doing and anticipate on them in order to maintain their ‘prospector’ status according to their Miles ; Snow adaptive strategy. In addition, the prospector strategy could also lead to losses due to the risk that is associated with this strategy. Another threat is the fact that Innocent’s products are highly linked to the economic climate, with fewer sales in times of recession. Furthermore, substitute products form a threat for the company, for example when other soft drinks become healthier; the consumers could decide to buy those instead of the healthy innocent drinks.
And lastly, as discussed in the opportunities paragraph, the controversial alliance with Coca-Cola could negatively influence the brand image of Innocent Ltd. Appendix … shows the overview of the SWOT analysis. Recommendations The strategic alliance with coca-cola can have a negative impact on the company, thus Innocent needs to be solid in not adapting the culture of coca-cola and stick to their own eco approach. If coca-cola influences them they might lose their CSR aspects.
Another point is that Innocent has a very narrow target market and only AB socio economic people can afford to buy the products regularly. Innocent is also highly dependant on food prices, which are linked to the economic climate. If there is a change in the economic climate prices might increase which will affect their narrow target group even more. In order to avoid such a problem Innocent needs to stick to their prices or even try to lower them and possible increase sales because the demand will become higher from a larger target group.
Lastly, many companies such as Starbucks are also starting fruit bars and or juices which can ultimately become a threat to Innocent but in order to remain market leader in the smoothie industry Innocent should stick to their 100% natural policy and due to the current health trend the healthy consumer will prefer Innocent over the others. There are very few competitors that can also incorporate the 100% natural policy, they will also add sugars, additives or pasteurization processes which makes the product become less healthy hence if Innocent remains a healthy product they will always have a competitive advantage.
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