Market_Industry

|MARKET STUDY | INDUSTRY ANALYSIS THE INDUSTRY In the Philippines, small scale businesses like the food cart and kiosk businesses started in the early 1980’s. Since its fabrication, it has now evolved and grown into different styles and format which offer heterogeneous food products almost everywhere; of such are hotdog, popcorn, ice cream, dimsum, waffle, and the like, located near school campuses, train stations and even malls. Today, according to the Food Cart Association of the Philippines, with almost 10,000 food carts and kiosks proliferating in Mega Manila alone, the Philippines is now considered the Food Cart Capital of the World. Food carts and kiosks are portable and easy-to-set up sidewalk booths that offer accessible on-the-go foods to consumers. It has the capacity and facilities to cook and provide food for mobile customers. With low capital requirement and ease in management, many are encouraged to engage in this kind of business. An estimated annual sales of P1 billion manifests its success in the Philippine Food Industry. The Enterprise Itsutsu Partnership Philippines is a firm to be established by 5 proprietors. The entity name Itsutsu is a Japanese word which means five, the “five” proprietors. It exists to benefit its valued customers by providing quick and affordable snacks for everyone. It introduces OISHIKU©, translated as “delicious”, a product line of rice-stuffed meals that are Japanese-inspired cuisines. Product Description OISHIKU© offers the market with a diversified rice-stuffed meals. The products introduced vary from the type of meat used in its production. Customers have three (3) options to choose from. They can choose from chicken covered rice ball, pork covered rice ball, and beef covered rice ball. Providing the consumers with wide range of choices, that adds value to the product. It allows the consumers to choose the meat they want that suits their specific taste. Though served medium sized, it still is a heavy and complete meal because the product is already inclusive of meat, rice and vegetables. This product is directed primarily to consumers who are time-conscious and who desire easy-to-eat food. THE MARKET Target Market Educational institutions are feasible target market due to the concentration of potential customers in one specific area. University of Santo Tomas is considered as the point of preference because it is situated in the middle of different dormitories and residences. OISHIKU© primarily caters food to UST undergraduate students, with most students experiencing irregular eating habits due to irregular schedule of classes. Indeed, it opened a good opportunity for business. Survey results show that 97% of the total respondents consume meat, 35% of which prefer beef, 32% of chicken, 14% of fish, and 12% of pork. Moreover, 68% choose to eat rice meals. Since OISHIKU will offer beef-, chicken- and pork-rice ball meals, this will make this business feasible in this chosen target market. PEST Political The Philippine government has agencies that are tasked to guard and regulate business activities, particularly in the food industry. First, the Department of Science and Technology and the Bureau of Food and Drugs are in-charge of ensuring that businesses meet the required food quality and hygiene standards to protect consumer safety. The Department of Trade and Industry, along with the mayor’s office, ensure that the business established is legal and authorized. Lastly, the Bureau of Internal Revenue is responsible for preventing any tax-related offense. Failure to complete these government checks and requirements, the operations of the business may be suspended or terminated. Economic The growing competition and the existence of close substitutes for these kinds of products can cause lower profitability of the business. When there are increased players in the market, price is expected to drop leading to lower marginal revenue and total profit of the firm. However, with proper combination of marketing and management policies, this will serve as OISHIKU’s competitive advantage to its competitors. Social Modern society requires all things to be done rapidly. In order to adapt to these changes, the lifestyle of people has shifted from moderate- to fast-moving environment. Even the style of eating habits has adapted to these changes; people, including students, nowadays prefer “quick and on-the-go” foods. Technological This business will operate both under the manufacturing and the retailing industry. However, it doesn’t require any specialized machinery for its operations. Its production and operational equipments can be sourced from the various machine and equipment providers available in the market. Porter’s Five Forces Supplier Power The industry is characterized by having low supplier power as there are many sources of raw materials and supplies available. This gives advantages to the company, which must place immense consideration in choosing the suppliers of raw materials, equipment, and packaging to guarantee freshness, quality and well-timed delivery as well as to obtain competitive prices. Buyer Power Buyer power is much stronger than supplier power for the reason that wide choices are available to customers. It is important to consider how the customers perceive the products. Barriers to Entry Barriers to entry are minimal in this industry because it has relatively easy requirements, common technology and low start-up costs. It has an easy access to costumers as food cart and kiosk are ubiquitous in universities. The propagation of food cart and kiosk also give entrants cost savings in terms of cost savings in terms of analysis and evaluation, which in turn encourages easy entry to the industry. Rivalry Since low barriers to entry are present in the industry, rivalry among players is fierce. This is evident in the food cart and kiosk sector, where industry players assertively attempt to capture and sustain consumer loyalty through price and food choices. Threat of Substitutes There are many available substitutes present in the business environment creating a very high threat of substitutes in the industry. Being located in a food hub, there is a considerable number of eating places available making a highly competitive market where close substitutes are existent.  SWOT Analysis -INTERNAL- Strengths OISHIKU’s strengths lie on its offerings, wide range of innovative food choices offered in an affordable price. Employing highly qualified food technologist, nutritionist and service crew that exemplify extraordinary performance to cater the needs of the customers. The partnership also provides opportunity for employees to improve their technical and leadership skills through training and the strong affiliation of the partnership with the suppliers. Weakness OISHIKU© a novice in this competitive industry may not be familiar with the intricacies of the market. -EXTERNAL- Opportunities The food cart business in the Philippines is a fast growing industry where sales are expected to grow simultaneously. It is characterized as having an ease of set-up, low capital requirement and high rate of success, allowing Oishiku to easily enter the industry. In addition, the food industry still dominates the industry as most viable and profitable business. Opportunities still widen as more people treat eating as way of interaction with each other. Threats There are numerous competitors exist in this industry, and some are big players that already captured a large share of the market for their brand. The tendency for replication is also high due to the ease of set-up, low barriers of entry and low capital requirement present in this industry. DEMAND ANALYSIS Historical Demand Historical demand would be the basis and foundation for the many crucial business decisions and calculations for testing the feasibility of this study. Non-probability quota sampling was used to survey 66 students from the 11 Colleges of the University of Santo Tomas. These colleges include College of Commerce, College of Accountancy, Faculty of Arts and Letters, College of Nursing, Faculty of Pharmacy, College of Science, Faculty of Engineering, College of Tourism and Hotel Management, College of Education, College of Architecture and College of Fine Arts and Design. Survey results show that 91 % of the respondents are willing to try and buy OISHIKU products. Table 1.1: Total Historical Demand |Year |Total UST |Target Percent |Total Target Market |Users |Triers |Frequency | | |Population | | | | | | |2004 |23391 |73% |17075.43 |97% |91% |15539 | |2005 |26828 |73% |19584.44 |97% |91% |17822 | |2006 |30210 |73% |22053.3 |97% |91% |20069 | |2007 |33412 |73% |24390.76 |97% |91% |22196 | |2008 |36704 |73% |26793.92 |97% |91% |24382 | |2009 |39996 |73% |29197.08 |97% |91% |26569 | Shown in Table 1 is the past and present count of UST enrollees, which represent the total population of the UST community. The chosen target market comprises 73% of the total population. Triers represent the proportion of the target market that is willing to try the new product, while the frequency corresponds to the total number of students in the target market who are willing to try the product. Projected Demand With the use of historical demand as the basis, and the use of Statistical Straight Line Method, the projected demand was derived. Table 1.2: Historical Demand and Statistical Straight Line Method |Year |Y |X |XY |X2 | |2004 |15539 |-5 |-77693.2065 |25 | |2005 |17822 |-3 |-53465.5212 |9 | |2006 |20069 |-1 |-20068.503 |1 | | | |0 |0 |0 | |2007 |22196 |1 |24382.4672 |1 | |2008 |24382 |3 |79708.0284 |9 | |2009 |26569 |5 |132846.714 |25 | | |ΣY = 126576 |ΣX = 0 |ΣXY = 85709.98 |ΣX2 = 70 | A = ΣY / n B = ΣXY / ΣX2 = 126576 / 6 = 85709.98 / 70 = 21096.06438 = 1224.42827 Table 1.3: Total Projected Demand |Year |Computation |Projected Demand | |2010 |21096.06 + (1224.43*07) |29667 | |2011 |21096.06 + (1224.43*09) |32116 | |2012 |21096.06 + (1224.43*11) |34565 | |2013 |21096.06 + (1224.43*13) |37014 | |2014 |21096.06 + (1224.43*15) |39462 | SUPPLY ANALYSIS The foot traffic technique will be used to determine the supply side of the market. The process goes from monitoring the number of customers purchasing from competitors PRICE ANALYSIS COMPETITION ANALYSIS The Carpark located within UST is a very competitive business environment with the presence of many neighboring food stalls and outlets. OISHIKU’s probable competitors are Cantonese, Ricecapades, Kiss, Rice Toppings, Pasta Bowl, RBX, Hot Shots, Chubby Kitchen, Waffletime, Siomai House, some large players namely McDonald’s, KFC and Goldilocks, and other snack kiosks, which all offer snacks to consumers. FACTORS AFFECTING THE MARKET DEMAND a. Income Income defined as the flow of purchasing power per unit of time derived from the use of human or property resources is an important determinant of demand. It gives the costumers ability to purchase goods or services. It influence demand in a manner that when income increases, the demand will also increase meaning to say having more money encourages people to spend more. b. Taste and Preferences In this modern world, costumers’ tastes are shaped by the way products are advertised or by new trends. A favorable change in costumers taste for a product can make it more desirable – meaning more will be demanded at each price. c. Prices of Related Goods Either substitutes or complements can impinge on demand of a good. Substitutes enforce the good that is used in place of another good, that happens when price of one and the demand for the other move in the same direction. However, complement goods move in the opposite direction because of their relativity d. Population Defined as the total inhabitant in a specific area, population affects the total number of demand and opportunity to increase profitability. SUPPLY a. Factors beyond Price Changes in the supply of goods and services are predisposed by the factors outside the control of producers. An admirable production levels has been set by the producers, yet the market influence the supply by altering price expectations. These price expectations can lead to speculation – meaning holding, or purchasing a good that is expected to rise in the near future. b. Number of Producers A very simple factor determining the supply of a good is its’ number of producer. If the supply of the good is low and the set price is high, there is a positive response from the producers to create that good. Setting the prices on a high level even though the supply is high will entice the producers to shift production for that certain good. c. Speculations The activity of buying or selling with the motive of later reselling or rebuying for profit, also known as speculation can alter the supply of a good. Producers who feel that the value of the good will be higher in the future will tend to hold onto the good until then, this lowers the supply of the good in the short-run due to the speculative view of the higher prices in the future. On the flip side, when prices are expected to go down, producers will sell as many goods as they can, thus increasing supply to maximize their profits. MARKETING PROGRAM To guarantee that OISHIKU© grabs a reasonable market share and achieves the projected demand, suitable marketing programs must be employed. Marketing Mix The key to long-term financial sustainability is a good execution of the company’s competitive advantage. The industry is characterized by cutthroat competition and products that are easy to imitate, it is tricky to create competitive advantage through the products single-handedly. Strategies like branding and positioning are very essential. Therefore OISHIKU must devote in the branding itself and more importantly, strengthen the brand image through the right marketing mix: product, price, place and promotion. Product and Value Creation With the diverse preferences of each individual, OISHIKU© will offer the consumers with wide variety of choices that will fit to their unique taste. Since OISHIKU© aims to provide “quick” foods to UST students, it will focus on providing a dine-and-go place and on-the-go foods. It will not only offer top quality foods; in addition, customers will be assured of its fast and excellent service. Price and Value Capture For consumers to capture the value of OISHIKU’s products, meals are priced affordably. Prices are determined through a combination of cost-based pricing and competitive pricing strategy. Costs of ingredients and other operations and sales expenses make up 65% of the sales price, earning a 35% mark-up and profit. Though not affected by direct competition, indirect competition will threaten the profitability of the firm due to the existence of close food substitutes present in the business environment. And for this reason, the firm needs to consider the price-setting of their possible competitors. Place and Value Delivery Accessibility of the product whenever or wherever the consumer yearn for it is an important factor. To capture the awareness and patronage of the students, OISHIKU© will be located at the D2B Store, First floor UST Carpark. This location attracts foot traffic because it is situated beside different college buildings. As survey results reveal, 47% of the respondents usually buy their snacks at the UST Carpark. The store will make use of dine and go layout, since this type of setting is favorable for the target market. Promotion and Value Communication Since the target customers are UST students, OISHIKU’s promotion will be in the form of fliers, banners and tarpaulins to be displayed and distributed around the university. When students go and take their break within a group, word-of-mouth promotions is also feasible. OISHIKU© can also have free tasting as means of promotions in order for the targeted customer to taste and try the new product with its unique attractive appearance. To further capture the target market, OISHIKU© will also be featured in different social networking sites available. RISKS AND CHALLENGES It is a challenge for the enterprise to establish and gain market share because the market is already dominated by large players. It will be a great risk because of the uncertainties in the return of investment especially in entering this extremely competitive market.