These players are Allied Bakeries which whit four brands achieve the following portion of the market orderly ranked in terms of market share: Mothers Pride 10%, Sunblest 8%, Kingsmill 5% and Hovies 3%. The rest of the market regarding this segment is represented by a 43% of own labels, such as Famagusta, and a 23% by others.
The indirect competitors, on the other hand, are other substitute products such as cakes and morning foods which experienced between 1996 and 2000 a rapid increase in terms of market share although bread still remains the major sector. A clear example of this occurred in the year 2000 where cakes alone represented the best performing market sector with a 7% increase in value, marginally ahead of morning goods therefore important to take into consideration regarding, aswell, possible general changes in consumer trends, eating and shopping habits.
The nature of the competition is stiff, and it’s definitely increasing due to the fact that the large manufacturers previously not interested in foreign bread, such as Famagusta main specialization, major strength key in order to achieve success, are now attracted in entering this market, due to the growth that it has achieved representing the largest
consumption trend in the U.K which accounts for 654.8 million pounds (shown on the table regarding the consumption patterns).
As a result of this a great number of purchases of small specialized bakers have been made by these large manufacturers in order to better compete against own label producers such as Famagusta and cover this profitable segment of the market representing therefore an increased and tougher competition due to the fact that the budgets are certainly different. It is one thing competing against large manufacturers which aren’t specialized in your segment or against other own label specialized bakers, for example, it is totally another thing competing against a specialized baker backed up by a large manufacturer.
Competition has increased constantly over the 15 years both in the general bread industry, as well as in the more specialized and traditional bread goods. During the 1990’s there has been a consistent increase of purchasers of small, specialized bakers. Increase in competition is predicted over the next few years, as experts view a growth in value-added products, an increase for desire of healthier foods, as well as an incremented level of investment in the sector.
The implications for Famagusta being that they are still family owned aren’t that positive regarding competition due to the fact that in this segment, which is rapidly growing, a great deal of investments are being made and therefore an intensified rivalry will continue to take place, in other words the competition will get tougher and tougher therefore being that they are a niche they should majorly focus on the growth trends, patterns therefore accordingly continue to offer in conclusion more value added and health oriented products.
Market Analysis
The products that are offered by Famagusta aren’t aimed to a specific target group, as in this market it is usually the change in trends, which delineate the market outline. Furthermore we can clearly state that bread and derived goods are generally and averagely consumed at a daily rate. It is obvious that the more specialized the product, the narrower the target market; an example of this is Baklava which has a much narrower market compared to white bread. In the case of Baklava and more traditional and specialized products, the company probably targets Greek people living in the UK and people who are not afraid of trying something different (experiencers), and count on their word-of-mouth to increase product and brand awareness.
In my opinion the customers of the more traditional products are loyal to the company, as the availability of these products is narrower compared to the one concerning more general products such as white bread. The customers who buy these traditional products would most probably keep buying in the same place, as they know that there they will find what they are looking for.
We believe that price isn’t the only evaluation factor that customers take into account for the more traditional products, as the company has always tried to keep the prices at a level affordable by the average Greek consumer; it is however obvious that the customers of this product group would be ready to pay a little more for a product such as these which, to them, represents greater value.
Furthermore we would say that customers of this market are increasingly sophisticated about their buying habits and processes, as evidence is provided that there have been major changes in lifestyles and habits, including the movement to healthier eating habits, which in many cases implies the consumption of more diverse breads, including foreign ones. This consequently makes me believe that an increase in the level of advertising and other promotion mix elements could only bring positive results.
As we take a closer look at the firm we notice that we could divide the market into two segments: general products (white bread products), and traditional products (e.g. Pitta Naan breads, Greek sweets etc.). Strategies according to the segment would surely differ.
The competitive advantage of the company stands in the high-quality, value-added products that are delivered, especially concerning the more traditional and specialized goods, and the key strategy in this case would always be to try to deliver top quality at an affordable price. It is hard to differentiate general products such as white bread (the production doesn’t require any special knowledge; in this case there is no comparative advantage with respect to competitors as there is for the other product category), and in this case the competition with other companies would be price based.
Internal Environmental Analysis
Regarding the internal environmental analysis the functional areas surely work synergically in order to achieve the organizational objectives helped in addition by the fact that being that they are a family owned business communication among the different parities and therefore departments is facilitated.
The financial resources in order to compete are available although the budgets of the large manufacturers such as Allied Bakeries and British Bakeries are certainly higher. As previously explained a clear example of this is the difference between their advertising expenditures the 2.5 million pounds spent on Kingsmill and another 2 million pounds spent on other two major products by Allied Bakeries while Famagusta’s advertising expenditures account for only 12, 810 pounds as shown on their 2002 profit and loss account.
Although most of the key financial ratios aren’t expressed in the case in comparison to its competition analysing the balance sheet for the year 2000 is evident that the company is performing and competing therefore positively achieving a 10 to 20 % in sales growth from 1995 and continue increase in 1999 2,338 million pounds, in 2000 3.113 million, in 2001 3251 million pound and in 2002 4,221 million pounds therefore representing a continuous increasing trend all reflecting a constant health growth of the company.
The quality of Famagusta’s products are definitely at a desirable level due to the fact that it’s one of its major strengths (secret recipe) giving them a comparative advantage ;differentiating it from other existing own-label producers.
The organization offers a full range of products which are white bread, Rolls (plain and benissed), Benissed bread, Pitta bread (white, wholemeal and garlic), French sticks, Naan breads, Sesame sticks and in conclusion Greek sweets such as Baklava therefore as clearly evidenced their present product mix isn’t complementary, competing with it self in some sectors. An example of this is a consumer who enters in Famagusta and purchases white bread instead of rolls for instance therefore competing against the rolls bread sector.
The overall level of Famagusta’s business could be certainly increased if selected new products or service would be added obviously though if the product positioning is achieved in an effective manner therefore no products should be discontinued due also due the rapid increase in the consumer trends occurred from 1995 to 2000 therefore a good indicator for growth.
Then again the customer prices are accepted to customers. Their initial aim during the introduction phase of the PLC, was using price as an initial competitive entry strategy, therefore affordable to the Greeks consumers which trough recommendations and word of mouth did the rest. Once the company was established the prices became more competitive rather than cheaper due to the fact that an added value, quality product was being sold.
Regarding general goods such as white ,bread for example, which don’t require any advanced or specialized knowledge to produce (many people know how to make bread) ,prices are more affordable due to the fact that is a price based on competition therefore in other to keep up with their rivalry the pricing is set at competition levels.
On the other hand regarding specialized goods, such as Pitta for example, prices are set above competition due to the fact that an added value good is marketed in which they have a comparative advantage (secret recipe) emphasizing therefore on the quality of the product which differentiates them than their rivalry obviously though with moderation, pricing isn’t differentiated that much from rivalry simple because keeping up with competition is essential.
The image that the price is meant to convey is their high quality (Know how) products which as stated previously are priced certainly above competition although with moderation which is an important aspect to take into consideration, demonstrating therefore to consumers that their products are better in terms of quality and on the other hand not much more expensive than their rivalry.
The basis for segmentation according to the recent data we have are the shifts in the market and consumer trends such as the demographic changes and the rise in the number of 5 to 14 years olds most of whom require packed lunches, the increase in the number of working women who are turning to other bread and morning goods, them major changes in eating and lifestyles, the move toward more healthy eating habits favouring more diverse breads including foreign ones, the greater availability of convenience foods and the increase foreign travel and media influences heightening the consumers awareness of exotic foods therefore these aspects are key elements to take into consideration in other to blend the target market segments to the consumer trends which can only provide an effective and realistic prospective in segmenting which they can only benefit from due to their awareness.
The larger segment is the white large unlished bread which alone accounts for 494.2 million pounds while other breads, in which Pitta is included, accounting for 654.8 million pounds. The segment that has more potential is obviously the white bread to its largest but for Famagusta the other bread segment is the one that gives them higher return to too their qualification an the growing trend from 387,7 million pound in 1995 to 654.8 millions pound n 2000 representing the segment that achieved more growth over these years is certainly a positive and promising factor for them.
Their specialized segment (Pitta and other) is certainly served at maximum capacity due to the fact that their market share is at an optimum level therefore they satisfy they demand while on the other hand the general segment (white bread) due to the fact that they don’t have much market share the segment is therefore served only to the extent that their market share permits.
The total market and the company segments are growing, each segment or sector has experienced growth besides an indifferent, slight decline in the white and brown bread therefore the company’s market segments are surely large enough to support their products also due the fact the bread market is huge being that is a primary alimentation good therefore consumed every day (high rate of consumption).
In addition they could also be other segments which have been not served such as other typologies of sweets, morning goods which trends are increasing and other more specialized foreign brands, for instance. On the other hand though, we believe that the hole organization over time will be able to successfully serve these markets but at a certain point it wouldn’t be able to handle furthermore or growth due to many implications that come into play such as financial for instance.
Then again important to consider is the economical and competitive factors which might change the dynamics of the industry such as the widening of the market regarding the economical factors which provide good projections for the future and the willingness of big manufacturers of entering into their specialized segment, as stated previously, therefore a stiffer competition is enhanced.
Evaluation of mission statement
A clear and defined mission statement is not included, but as I read through the text, on page 3 we clearly recognize a phrase, which catches our attention, and could summarize the company philosophy: “His key focus (talking about Georgiou, founder of Famagusta Ltd.) was fresh quality and accessibility to customers”.
In my opinion Famagusta Bakery, even having started as a small family business, has the human and nonhuman resources in order to fulfil its objectives; we are talking about a company which, in 1996, had its own, specially designed council premises and a part/full-time workforce of 70 employees.
Evaluation of Corporate Objectives
We believe that the long and short-term objectives are well developed, and this can be noted in the fact that the company has achieved a systematic and sustained growth over time, with overall positive results. It is obvious that the bigger the company, the more difficult the communication, implementation, and co-ordination of strategies in order to meet objectives, but we believe that the communication of objectives has been effective over time, and the evidence is the constant growth of the company.
A key element is also the fact that interaction between the family members in the company has surely brought positive outcomes, as the level of belief, trust, and confidence is superior.
Swot Analysis
Strengths
- Loyal customers
- Non price oriented
- Happy employees
- Family atmosphere
- Quality ( undisclosed recipe)
- First suppliers
- Good reputation
- Modern and specialized facilities
- Production Capabilities
- Costumer oriented Policy
Weaknesses
- Little advertising insuffient promotion campaigns
- Organisational structure informal
- Distribution, three vans aren’t enough
Threats
- Stiff competition in the industry
- Traditional bakers may top into this market
- Small specialized bakers may be purchased, acquired by large manufacturers
Opportunities
Health-concentrated customers (develop products national health)
Higher demand for the products they focus on
High percentage of ethnic groups
More- well travel customers who are aware of these products.
Another feature to take into consideration is the increasing consumption of the private brands which depending on Famagusta courses of action could represent either a threat, if they remain niche players or an opportunity if the start mass producing for the large manufacturers for example.
Bibliography:
All data regarding this analysis it taken from the Famagusta Bakery Ltd case study in addition to the class notes.
