Strategic Analysis of AgavEnergy's Entry into the UK Market
This is actually a Research Report,.
The assignment information and report format are attached, please read them carefully.
If you have any questions, please feel free to ask me, thank you!
AgavEnergy is a (fictitious) organisation based in Chicago, US specialising in the manufacture and sale of AgavEnergy, a sugar-based energy drink which makes use of the Agave plant as a unique selling position. This ingredient is widely sourced from a partner organisation in the Canary Islands. The organisation has a strong foothold in US, Canada, France, Spain, Portugal, Italy, Germany and the Netherlands and have recently opened a small UK office based in Bristol. They currently have a 0.5% UK market share of the category, gained mainly through distribution (with very little marketing). The organisation is deciding whether to invest strategically in developing the UK marketplace.
Good news, the CEO has decided to provisionally base the decision on whether to invest in the UK. However, before the final decision is made, she wants to see a detailed report which led you to the recommendation and has instructed the global strategy team to analyse your work in depth. The team are based in the Global Head office in Chicago and hence your report needs to explain how you have come to the recommendations you have reached as they do not have the knowledge of the UK market that you have now gathered. The report will differ from the presentation, as you are now preparing a detailed document which will feed into this strategy team for detailed analysis. This document will support the conclusions you have given in the presentation but will include the detail on why you came to these recommendations. Draw from academic texts, academic papers, case studies, business examples, consumer data, market data or any other reliable sources which you think are relevant. Explain any assumptions you have made and explain why you have made them (based on logic/insight/texts/etc).
Your report will be assessed against the following criteria:
The extent to which your report addresses all aspects of the brief.
The quality and range of resources used to sense and analyse the UK market place in the context of the organisation’s product.
The quality of the analysis undertaken and the use of that analysis to produce reasoned and justified evaluations and recommendations.
The selection/relevance of the analytical frameworks undertaken
Structure of the report: clarity of written English, grammar, correct referencing, general neatness of presentation
AGAVENERGY COMPANY
By (Name)
Professor's Name
Course
Date
Table of Contents
1.0 Introduction……………………………………………………………………………3
2.0 Environment Scanning ………………………………………………………………..3
2.1 PESTEL…………………………………………………………………………….….3
2.1.1 Politics…………………………………………………………………….…3
2.1.2 Economics………………………………………………………….…….….4
2.1.3 Sociocultural…………………………………………………………………6
2.1.4 Technology…………………………………………………………………..6
2.1.5 Environment………………………………………………………………....7
2.1.6 Legal…………………………………………………………………………8
2.2. Porter's five forces……………………………………………………………………9
2.2.1 Rivalry among Competitors…………………………………………………9
2.2.2 Supplier Bargaining Power ………………………………………………….9
2.2.3 Buyer Bargaining Power …………………………………………………….10
2.2.4 Threats of New Entrants……………………………………………………..10
2.2.5 Threats of Substitutes………………………………………………………..11
3.0 4PS……………………………………………………………………………………..11
3.1 Product …………………………………………………………………………11
3.2 Promotion ………………………………………………………………………12
3.3 Price……………………………………………………………………………..12
3.4 Place……………………………………………………………………………..12
4.0 Recommendations ……………………………………………………………………….12
5.0 Conclusion……………………………………………………………………………….13
6.0 References………………………………………………………………………………..14
7.0 Appendices……………………………………………………………………………….16
1.0 Introduction
The report aims to analyze the UK market and a reliable entry strategy that allows AgavEnergy to penetrate the market and increase the current 0.5%. The paper provides reliable evidence to show the possibility of market penetration. Penetrating the market requires a reliable and well-established framework and strategy based on the external and internal environment. The external environment analysis is significant to determine whether a company can overcome any challenges, such as competition. Lastly, the paper aims to recommend specific activities that AgavEnergy needs to consider to allow it to penetrate the UK market.
The key issue that the report will address is the external environment using the PESTEL framework. The framework will be based on the UK market to determine whether it is feasible for AgavEnergy's entry. The key elements to be addressed in the external environment include political, technological, economic, socio-cultural, ecological, and legal factors. Analysis of the external environment is significant since it would determine effective entry recommendations. The second discussion will be based on Porter's Five Forces to understand the level of competition in the UK's market. Besides, it will focus on specific products, including drinks, to determine the competition rate and how to handle it. Lastly, the paper will address the 4P's, including place, price, promotion, and product. Therefore, with an adequate understanding of the identified elements, it will be easy to recommend appropriate strategies for market entry.
2.0 Environment Scanning
2.1 PESTEL
2.1.1. Politics
Political factors must be considered to determine whether political issues can influence the company's entry into the UK market. Political factors are based on the government activities that determine business operations, such as political stability and the level of corruption (Yüksel, 2012). The key political factors that influence the UK and energy drinks industry include a stable government, administrative system, and political allies. The UK enjoys the stability of the government due to effective control. The government is also stable due to the low corruption rate. Corruption is a major issue that heavily impacts the stability of the government. The government has considered a better framework for addressing corruption, such as rapid prosecution, thus making it easy for business activities. Therefore, government stability will allow AgavEnergy to easily penetrate the United Kingdom without disruptions.
The second political factor is the administrative system. The United Kingdom is among the countries globally that enjoy adequate power. The government is defined as a parliamentary democracy and constitutional monarchy headed by a reliable prime minister (Export.gov., 2022). Due to a well-structured administrative system, conducting business in the country is easy and thus appropriate for AgavEnergy. The last political factor that impacts the UK's market is the seat in the UN. It allows the UK to have close and productive allies, thus establishing a reliable market. Besides, its position in the UN allows it to have adequate political significance across the globe. For instance, it has a close relationship with Canada, where the raw materials for AgavEnergy are sourced. Lastly, having close allies and associates allow the country to receive adequate marketing support, which successfully enhances its growth and development. Therefore, it is justifiable that most political factors positively impact the UK's market and create a reliable environment for market penetration.
2.1.2 Economics
Economic factors are also considered to determine market penetration. Economic factors are specific forces that determine the firm's competitive environment, such as tax rate (Matović, 2020). The key economic factors that heavily impact the United Kingdom market are inflation, unemployment, tax rate, GDP, and diverse economy. UK has a positive GDP which is a positive aspect of the company's penetration. For instance, the company would make more profits due to a positively developing GDP. Besides, a diverse economy is also a key factor that positively impacts the UK's growth. The United Kingdom has a diverse market and would make it easy for AgavEnergy to penetrate. A diverse market is also beneficial since it is easy to adjust the products and succeed without restraints.
The tax rate is also average in the United Kingdom and would create a positive environment for the company's growth. For instance, the corporate tax is at 19%, which the government works hard to reduce (International Trade Administration, 2022). Therefore, the company will find it easy to operate in the UK due to lowered tax rate. Tax is a major aspect that heavily impacts the success of any business. Whenever a tax is high, a company has difficulty penetrating the market due to reduced profits (Rose and Karran, 2018). The major problem that must be taken seriously in the United Kingdom market is the inflation rate. There is a high inflation rate in the UK market which heavily impacts energy drink prices. Therefore, it would adversely impact the marketing position of the company. The problem must adequately be addressed for constant business engagement. For instance, the current inflation is 1.94 % (International Trade Administration, 2022). It is almost the maximum of 2%, which should not be exceeded. However, the UK government takes different actions to ensure that the inflation rate is effectively addressed. The last economic factor is unemployment. A reduced unemployment rate in the United Kingdom is a key aspect of promoting a customer base. Therefore, AgavEnergy Company will have a better chance of attracting stable customers leading to growth and development.
2.1.3 Socio-cultural
Socio-cultural factors must be considered, including beliefs, lifestyles, and other factors, since AgavEnergy focuses on a drink. The major socio-cultural factors impacting the United Kingdom market and energy drinks industry include education, income level, and population. The United Kingdom is experiencing increased population growth. For instance, the total projection of the population by 2040 is 75 million (Export.gov., 2022). Therefore, a higher population would positively impact the consumer market.
The second social factor is income level which would positively determine the organizationa...