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Historical Trends and Development of the breakfast cereal market

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    1. Executive Summary

    Breakfast cereals are an important part of the British diet and a key sector of the grocery market in the UK, with over 90% household penetration. In 2000, 414,000 tonnes of breakfast cereals were sold in the UK, at a retail value of £1.1bn The breakfast cereals market is made up of two main sectors, firstly, the ready-to-eat sector, which consists of staples including corn flakes and wheat. Secondly, the hot cereals sector, which consists of cereals that require some kind of preparation, such as porridge, which, will be the main focal product for Outside The Box (OTB) cereals at the start of its operation. Since the mid-nineties, consumption of breakfast cereals has shown steady growth, although in 2008, the UK economy was hit by the recession, which saw the sale of breakfast cereals alongside other food items slowdown. However, the consumption of hot cereals, which had been in long-term decline, has risen over the past 5 years. The cold weather experienced at the beginning and end of 2010, coupled with an awareness of the cholesterol-lowering properties of oats, has helped increase their popularity. This therefore, creates a gap in the market for OTB cereals to gain a good share of this market as its cereals are low in sugar, salt and saturated fat and rich in fibre, vitamins and iron. Within the cereals market, the main growth has come from niche products, such as organic cereals and adult indulgence products, whilst growth in the hot cereals sector is being driven by `instant’, microwaveable varieties, which have attracted new users.

    Using the FRH technology, OTB hopes to gain a good percentage of this growth. Sales of organic cereals grew dramatically in 2000, as the products became more mainstream and well-known manufacturers entered the market. Weetabix, for example, launched its Nature’s Own range of wheat biscuits and malted wheat squares, while The Enjoy Organic Company, backed by RHM, introduced a range of five organic versions of mainstream cereals. Own labels have also grown in importance, with new suppliers launching better-quality cereals which, opens the door for OTB to enter the market as the precedence has been set by these manufacturers.

    The breakfast cereals market is well established and has been dominated by three main companies Kelloggs, General Mills and PepsiCo for many years as these companies are able to invest huge resources into marketing, building brands and new product development. Owing to growing health concerns however, particularly regarding child obesity levels, smaller companies such as Outside the Box have had considerable success in recent years targeting niche markets, such as organic, premium and gluten-/wheat-free products. Given its healthy image and the convenience of most products, the breakfast cereals market should continue to prosper in the long term. In percentage terms, however, it has been projected that the largest growth will come from hot cereals especially the instant varieties, which have greater potential because of their relative infancy as well as recent weather conditions. Key Note estimates that market growth in the breakfast cereals industry will increase by 15.2% in the next 5 years as consumers continue to prioritise healthy eating. 2. Brief description of OTB cereals and strategic focus of the Company OTB will be based primarily in United Kingdom at the start of its operations with its focus being mainly to market its cereal within the UK at the start. This will however, be reviewed at it grows in order to expand to different regions and outside of the UK. Outside the Box cereals will be a ready-to-eat porridge and will be positioned as the only cereal available on the market using the FRH technology, which offers unrivalled convenience for the on the go consumer.

    The cereal’s main ingredients will be oats, wheat, rice, barley and corn with optional extras of varied fruit and fat free yoghurt. The product will bring an entirely unique cereal to its consumers, who are concerned with healthy heating due to it being are low in sugar, salt and saturated fat and rich in fibre, vitamins and iron amongst others. This is an opportunity for our company as UK consumers are the biggest spenders on breakfast cereals in Europe being ahead of countries like France, Spain, Italy and Germany (Mintel Global Market Navigator, GMN, 2011). The strategic role of Outside the Box cereals will be centered on 3 main objectives: To stay at the forefront as the market leader of innovative and healthy cereals, offering different varieties through successful product launches. To strengthen and satisfy the needs of the on the go consumer through the convenience approach of the FRH technology. To become a market leader in the functional and convenience segment of cereals with increased market shares.

    3. Vision and Mission

    The vision and mission of Outside the Box is to be the healthy breakfast cereal of choice. The mission is therefore, to provide Britain with the finest healthy cereal range, by satisfying the needs of the on the go consumer, through innovation and creativity.

    4. Market Analysis

    A market analysis was compiled to find out if there is a demand for OTB’s product and also who within the market, the organisation are catering for.

    Market size: In 2010, the hot cereals sector recorded its highest annual value growth in at least four years with a 12.2% jump to £152 million . This indicated to OTB’s management that there is potential and a huge demand for hot breakfast cereals in the market, such as porridge showing the sales increased rapidly in the last four years, and has continued to grow even further. According to Datamonitor, hot cereals sales generated approximately $201.1 million in 2010, equating to about 8.7% of the markets aggregate revenues .

    Product segments: The market can be segmented into two main categories which are ready-to-eat and hot cereals, i.e. hot and cold cereals. The hot cereals include both traditional porridge and the newer “instant” varieties. Growth in hot cereals correlates with the recent winter temperatures we have been experiencing confirming that porridge sales benefit from particularly cold winters.” As the be seen from (graph 1), porridge and granola cereals have performed very well with a 58% share of cereals consumed between the 2008 and 2011 winter months.

    This helped OTB in re-enforcing its cereal concept as it indicates that hot cereals are in demand, especially during the winter months. This also indicates that OTB cereals have a good chance of becoming popular in the winter as forecasts indicates that temperatures in winter months will continue to plummet and as such, people will prefer to have something warm for breakfast in the morning especially when it’s cold. As we have already started to see signs of this growth, it is one of the main reasons why OTB’s management is confident that it h cereal has a good chance of being successful.

    Market share: A competitor recorded sales increase of 51.5% between 2008 and 2010. This shows that competitor sales have increased over the two years with a high percentage over 50%, which gives the brand a good chance of performing well if OTB targets the correct consumers. New product developments within the cereal market will continue to focus on the convenience and health content of cereal. It is expected that in the future, manufacturers will pay more and more attention to healthy cereals, as eating healthy food and living a healthy lifestyle will be pursued by many.

    This places OTB in a strong position of gaining a good market share as its cereal encompasses both quality and numerous health attributes. In percentage terms, however, the hot cereal segments are expected to have the largest growth, especially within the instant varieties. Market forecasts: Looking ahead, value sales of hot cereal are expected to remain positive. Mintel reports indicate that in the next five years, hot cereals are expected to grow by 11% to £175 million . If the market continues to grow for hot cereals, this placed OTB in a good position as it will drive sales, create the opportunity for the business to expand its product range and long term wise, expand to different counties within Europe.

    Industry structure: The three food giants in the industry are Kelloggs, General Mills and Philip Morris, which indicates an oligopoly. These main competitors demonstrate who OTB should aspire to compete against from an overall but not immediate perspective, in order to make the brand recognisable in the market. The breakfast cereals industry has managed to retain its position over the past five years despite operating in a very difficult trading climate. The UK market is one of the largest consumers of breakfast cereals in Europe and the second-largest in the world, with about 87.0% of households consuming a breakfast cereal at least once per day. While this is an encouraging trend, the industry’s operating environment has been affected by commodity price volatility, falling consumer spending and the global economic crisis, which have put pressure on prices and volumes.

    However, cereal manufacturers have been very proactive and able to respond to changing markets by releasing innovative products, extending their brand ranges as well as advertising aggressively.

    5. Competitor Analysis

    On a general scale, the breakfast cereal market is heavily saturated with numerous different competitors. The main competitors of our cereal have many products which provide these enterprises with a large percentage of the market share. OTB, however, will initially be focusing on manufacturing and distributing only in the UK and its main stockists will be high-end supermarkets such as Waitrose and Marks and Spencer whilst also trading within the UK to other luxury outlets such as Holland and Barrett. It is anticipated that on a general scale, OTB will face firm competition from internationally familiar and reputable brands such as Kellogg’s and Nestlé as well as competition from its direct and indirect competitors.

    Direct competition: OTB’s most fierce and immediate competition will be from similar products and brands such as Jordan’s, Quaker Oats and Kallo Foods cereals. These competitors manufacturer similar cereals to OTB’s intended range and their retail prices are also very similar to OTB’s. To succeed in this competitive field, research has been conducted on these main competitors and analysis drawn on how OTB is going to compete with them, and what has made those organisations so successful in commanding the market share that they currently have. Indirect competition: The identified indirect competitors are cereals that differ on price predominantly but offer a similar type of cereal to OTB’s in term of content but at a much lower quality.

    These are mainly supermarket own brands such as Tesco’s Scottish porridge oats, Asda’s Good for you porridge range and Sainsbury’s porridge oats range etc. They all sell their products at relatively low prices accepting that the quality will not be as high as products such as OTB’s, whilst retaining a similar aesthetic. From investigating the leading products sold in the breakfast cereal market, it is clear that four of the five top selling cereals belonging to Kellogg’s as indicated on (graph 2) below, which shows that they are a market leader. Graph 2 – Market share of breakfast cereals by brand

    Kellogg’s have several differ brands , one being the market leader Special K, which has never been the best tasting of breakfast cereals, but Kellogg’s have created its own brand for Special K, which targets an individual market (Women aiming to ‘drop a jean size’). This strategy for targeting a specific market is an strategy that OTB could look to adapt when marketing a new product and in doing so create a brand of its own. Kellogg’s are also represented in the top 5 selling cereals by ‘Crunchy Nut’, ‘Corn Flakes’ and ‘Coco Pops’, all of which are associated with mass target markets and families sharing a box for breakfast. It is clear that Outside the Box will look to adopt the strategies of Kellogg’s but should look to follow the ‘Special K’ route of marketing as it provides the consumer with a unique aspect of individualisation, as opposed to everyone round the table sharing the product, thus losing the appeal of the product being seen as high-end and niche. In stark contrast to Kellogg’s, Nestle are only represented in the top eight breakfast cereals by one product, which is ‘Cheerio’s’.

    This shows their lack of innovation and adventure in the breakfast cereal market over the last few years, and although they do possess other products such as ‘Shreddies’, they are yet to make it into the top 10 market leaders. Nestlé have looked to rectify this problem by building an ‘Innovation Centre’ which intends to focus on nutrition, health and wellness, in the hope that it will accelerate the company’s development of innovative and nutritious breakfast cereals’ (Marketing Magazine, 2010). Government-backed healthy-eating campaigns have helped boost sales of breakfast cereals, and particularly benefited the ‘better-for-you’ options such as porridge oats (Mintel, 2010). This is a positive initiative for OTB, as its cereal is a very healthy choice which promotes the intention of providing a healthy start and expects this will be acknowledged by the government as appropriate and a good example. A competitor who can be seen to make use of the ‘better-for-you’ policy is Weetabix with their slogan of ‘Fuel for big days for the whole family’. Combined with this policy and the recent cold winters/summers, Weetabix have discovered that consumers are looking for that warm healthy start that will ‘power them on’ throughout the day. A similar competitor to Weetabix is Quaker Oats, another porridge based producer of breakfast cereal who could be seen as Outside the Box’s main rival. In January 2011 Quaker Oats released a product similar and packaging to the one that Outside the Box is intending to market.

    The product is called Oats So Simple as indicated in (graph 3) shows and this is based on the same idea of ‘just add water/milk’. Although it does not possess the same innovation and technology as Outside the Box’s product, Oat So Simple do have the upper hand in the manner of reputation and market share, with a possession of 4% in 2010 as indicated in (graph 2). To make sure Outside the Box competes with this new Quaker Oats product, the organisation will need to show intellectual marketing to lure consumers away from the trialled and tested already successful brands such as Quaker Oats. As a high-end product it is unlikely that Outside the Box will be competing directly against the market giants such as Kellogg’s and Weetabix.

    Among the fierce competitors, are likely to be companies such as Jordan’s who offer a luxury cereal product in the form of Muesli. In a world of healthy cereal that covers such staples as muesli, granola and porridge oats, Jordan’s are trying to have a ‘point of difference’ a reason to purchase. They do this through a 10% land commitment to wildlife habitats. This seems to be their brand promise, so much so that the logo states ‘Caring for the British countryside’. Outside the Box could look to adapt this strategy and make it their own, i.e. ‘the promise of responsibly sourced ingredients’ and ‘caring enough about the environment to replace/regrow any habitats that have become diminished because of production”. Other competitors for Outside the Box could come in form of health and organic shops, such as Holland and Barrett. These shops may not provide the largest quantity of sales, but will improve the image of Outside the Box’s product as healthy and good for you, just by being sold alongside other health products.

    Among those products is Kallo Foods cereal, a gluten free organic product, a market that OTB could look to exploit if branching out into other areas of the cereal market in the future. As you can see from the graph (graph 2) own label cereals possess a market share of 21%, which shows the power that supermarkets and health stores can create in the form of their own products. From identifying and analysing all of the above competitors, it is clear to see where Outside the Box needs to go from here in order to be successful in the cereal market. OTB can learn from mistakes by some organisations, and adapt their strategies to compete with the successful products. The general consensus is that the cereal market is a fierce market to break into but with the right approach and product, the platform is there for Outside the Box to be a successful organisation for years to come. 6. Porter 5 Forces Analysis

    6.1 Threat of new entrants
    Entry into the cereal market is relatively possible either through Companies diversifying or through an entirely new venture such as OTB. In order to help the market, Government regulations have set a certain number of rules and regulations for breakfast cereal manufacturers to follow to meet the correct guidelines. For example, they require cereal packaging to display nutritional information; this is so the customers know exactly what the cereal brand contains so that consumers are not misled in anyway. It must be labelled correctly displaying what it contains and the amounts of each type and its nutritional value.

    There is also the possibility for new entrants to achieve relative success through targeting a niche segment such as health and fitness cereals however, this could be prove to be very challenging for new entrants as potential entrants would face difficulties in matching industry-specific knowledge and nutritional guidelines especially with the porridge being a luxury product. Further to this, due to cereals shelf spacing in outlets, some retailers may be reluctant to trial new brands in favour of well-known ones which, could pose a difficulty for new entrants in breaking into the market. Therefore, threat of new entrants is moderate. 6.2 Threat of substitutes

    Threat of substitution is also a very important aspect to consider as this will have a huge impact on the breakfast cereal industry. The substitutes for the breakfast cereal brands are the types of food that are consumed instead of porridge. This will include many types of traditional foods such as toast, different variety of fruit, bakery products, cereal bars, yoghurts as well would substitute porridge, because if consumers prefer eating alternative foods, then the sales of porridge will decline. An advantage to OTB’s porridge is that it is a healthy breakfast cereal which contains oats and healthy vitamins, which is beneficial for those consumers who like eating healthy and the afore mentioned substitute foods do not offer the same nutritional benefits. This is a positive aspect for Outside the Box’s breakfast cereal as it can help boost sales, especially as it is a luxury product which is very convenient and less time consuming with the technology it provides. Overall, the threat from substitutes is also moderate. 6.3 Buyer Power

    Supermarkets, hypermarkets and health food shops will be the principal stockists of Outside the Box’s breakfast cereal, and according to Datamonitor account for “77.6% of the market share” . Furthermore, breakfast cereals are one of many products sold by most retailers, which illustrates that retailers are not wholly reliant upon breakfast cereal sales and this, increases buyer power. End-consumers however, are likely to display brand loyalty, which will exert some pressure on retailers as they are forced to stock the most popular brands in order to meet end-consumer demand. This potentially decreases buyer power to an extent. Overall buyer power is moderate. 6.4 Supplier Power

    Suppliers to the breakfast cereals market include farmers and grain traders who grow and trade in wheat, oats, corn and barley crops etcetera. These are mostly independent operators with little influence over the market. However, there are a significant number of further inputs that are necessary for certain brands of cereals. Taking Kellogg’s as an example, the company lists its principal ingredients as corn, oats, rice, cocoa, soybeans, fruits, dairy products and other filling ingredients, which are obtained from a number of different sources. Again, the most common suppliers of these additional inputs are farmers. A further input is packaging which can preserve and protect cereals. Manufacturers of carton-board and plastic will be key suppliers, as these are the principal materials that Outside the Box will require for the cereal. Due to the number of potential inputs to this market, the relative influence of the supplier on the market varies. Overall, supplier power is moderate.

    6.5 Industry Rivalry
    The UK breakfast cereals market is mainly dominated by Kellogg’s, General Mills and Pepsi Co with their different brands, indicating an oligopoly. Breakfast cereals are one of their main categories however, these market players have diversified into other categories e.g. snack and cereal bars as well as geographical markets, which eases rivalry. This reduces the reliance on the breakfast cereals market to generate revenues and effectively reduces rivalry.

    Within the breakfast cereal market, product differentiation is relatively broad and furthermore, manufacturers attempt to meet changing consumer demands by distinguishing themselves by appealing to a particular niche segments e.g. Kelloggs with its Special K brand, aimed at weight loss seekers. Overall, there is a moderate degree of rivalry in the UK breakfast cereals market. 7. SWOT Analysis

    Each company has many strengths, weaknesses, opportunities and threats identified towards or within their business, however it is how these are analysed which give the company the added edge when competing in the market place. As a result of this, Outside the Box has decided to analyse the three most important, and immediate factors which will directly affect the company and product. 7.1 Strengths

    Product promotes healthy eating: It is important to acknowledge that healthy eating is an integral part of modern society today. Thus, Outside the Box believes that it is important that the product is identified as healthy would be good in order to attract the target market, and appeal to the wider general public. By using fresh and organic ingredients Outside the Box can market the product as healthy, which will make the product desirable to not only the target market, (the busy professional, who is time poor, cash rich and health conscious) but may also appeal to the general health conscious individual as well as consumers who are looking to become healthier. A report by suggests that the cereal and breakfast market has seen an increase of 35% since 2005, partly due to the slowing inflation rates in foods, but also due to cereals marking their products as healthy. This directly relates to the fact that having a healthy product, allows it to compete with the market whilst building a positive brand and company image.

    Outside the Box will also have to consider the major factors surrounding trends in eating patterns and how things have changed (see Appendix 3.2), showing how consumers improved awareness of healthy eating has resulted in a rise in the health aspect of the food market, which is where Outside the Box will aim to be in the coming years. OTB Believe that by combining the health aspect of the created product, with its innovative technology, recyclable packaging, exclusivity factor and pricing strategy will allow the product to perform against any direct competition. Product saves times appealing to busy individuals.

    The technology used in the product, Flameless Rationing Heating (FRH), , allows the consumer to save time in a way that no other competitor offers. There are other ‘time saving’ breakfast products on the market such as a crunch Kelloggs on the go cereal, and there are even other quick porridges such as Quaker Oats, however where Outside the Box differentiates is in the innovative technology.

    As a result of the product been completely ready made in a sealed foil container, it means that no other ingredients need to be added, and due to the technology even the energy is already in the packet due to the (FRH). As a result of this, the packs can be made anywhere, whether it be in the car, on the train or out visiting a site, unlike competitors the product requires no power, no electricity and has no need for any extra ingredients. As a result of these factors the target market, which is the busy person on-the-go, should see value in the product on sale. High quality product with high quality ingredients: Due to the nature of the target market, high quality ingredients and high quality packaging will both play a major role in whether or not the OTB’s cereal is purchased on a mass quantity. The general public have become a lot more health conscious in terms of both the quality and contents of foods, especially within the breakfast market. This has come under tense scrutiny from both the government and other bodies as indicated in numerous reports such as the one published The Guardian.

    Facts for the report show how high levels of sugar and salt have been discovered in many breakfast products, calling for a change to the products to encourage healthier eating. One of the strengths of OTB is that it aims to use locally sourced ingredients that are fresh and organic and of a premium quality. This will in effect mean that the ingredients are the best they can be. In addition to the quality of the oats the customizable aspect of the product and the packaging would also require a premium look and quality, in order to stay true to the concept of the product and targeted market. 7.2 Weaknesses

    Luxury product: The reasoning behind placing products in the market as both premium and luxury could be why OTB will be successful, but also could hinder its performance through aspects such as price, the marketing of the product or because it is seen as a luxury therefore only a treat; not an everyday purchase. It is important to acknowledge that the busy person on the go may be wealthy, but he/she may have friends who are not so . The article relates to the fact that even the rich restrain from buying lavish goods if their peer groups are financially stricken by the business climate, the article relating mainly to more expensive goods such as sports cars and houses however, the principle applies further down the chain. The target market will in theory be comfortable financially, and see value in the product, however somebody on a lesser income may think the product is overpriced and a waste of money, therefore potentially deterring the targeted market from purchasing the product. Company reputation unknown: The fact that the OTB has no reputation, and is unknown to the general public is a big weakness of both brand and product. Findings from research within a product management journal, show the importance of brand loyalty and the strength a well-known brand can have on a product.

    This is a problem and could be detrimental to the success of OTB cereals however; the strength and innovation of the product could help to overcome the lack of brand awareness. The afore mentioned report also suggests that the modern consumer has become more fickle and on most occasions, will change buying habits because of boredom or perceived benefits. This creates a great opportunity for OTB, as when this happens, consumers will often look for something different and new i.e. new cereal range, possibly, once such as OTB cereals. Breakfast is just for breakfast (window of opportunity): Breakfast is only a short period of time during the morning and widely considered by most to finish no later than 11 o’clock. This is an issue that the product faces due to the fact that it may only appeal to consumers for a small amount of the day. Outside the Box could however, address this in the long term by brand diversifying into areas such as the cereal bar as well as an all-day-breakfast range. These further options will offer the potential for acquiring more of a market share and this will appeal to a larger target audience whist still maintaining the quality and health benefits of the cereal range.

    7.3 Opportunities
    Ethical visibility to enhance profitability: Ethical consumerism is now practically as trendy as it was in the 1970s in many parts of the world, especially in the United Kingdom. A general awareness of environmental issues such as recycling, food miles, carbon footprints, the impact of pesticides on food and the environment amongst others are influencing shopping habits, particularly among middle and high-income consumers who are the target market. Outside the Box aims to source ingredients locally in order to support local farmers and tradespeople, thereby ensuring that all ingredients are natural and fresh, as well as organic and not harmful to the environment. Outside the Box believe this approach will appeal to the segment of consumers who have adopted a more ethical approach towards shopping, and are constantly increasing their spending on such products. This approach will be part of the advertising campaign in order to ensure that the target market and all potential consumers are aware of the organisations ethical standpoint, with the aim of gaining a good percentage of their spend on breakfast cereals.

    Emerging health consciousness will drive the demand for the Company’s products: Over the past few years, there has been profound emphasis and initiatives by the Government and other bodies such as Channel 4’s,”What’s in your breakfast” aired in October 2009 on healthier eating and in particular, about consumers opting for cereals that have reduced salt and sugar content. The high sugar and salt content of certain cereals has attracted negative attention from the press, creating negative perception among consumers in general, more especially within health conscious consumers. In a report compiled by Felicity Lawrence of The Guardian, Watchdog analysed 275 different cereals using the Food Standards Agency proposed criteria and “more than three-quarters of cereals were found to have high levels of sugar and a fifth had high levels of salt”.

    Also, due to changing lifestyles, people are becoming more and more aware of the negative effects of unhealthy eating and in some cases, are taking active steps to change this. This has led to a higher demand for more healthy breakfast options, i.e. low fat, organic, low carbohydrate and calorie foods, which the breakfast product mainly consists of. In a recent study conducted by Mintel, it was reported that “there is evidently a consumer demand for healthier cereals” and that most of the consumers studied, listed the health- related benefits of cereal as one the most important factors as well as the sugar and salt content. This creates an opportunity for us to enter the market with a strong position of taking a good market share as the breakfast cereal will be low on sugar, salt and saturated fat amongst other health benefits which, will be clearly labelled on the cereal packs. The same afore mentioned article also stated that the crispy nut four combo by Jordan’s, one of the direct competitors was the “least healthy breakfast” something which Outside the Box aim to capitalise on, and using the advertisement campaign. Differentiation through convenience and optional extras: The main differentiation strategy will be through the use of FRH technology, which is both innovative and convenient, and as an on-the-go cereal no other cereal manufacturer uses this same technology.

    Outside the Box believe that this will distinguish the product from the other competitors. The cereal will also be packaged in a ready to eat bowl, which can be prepared and eaten anywhere i.e. on the train. Another differentiation strategy will also be through offering a choice of healthy optional accompaniment extras of different types of fruit, milk or fat free yoghurt, which will be displayed next to the cereals and again, no cereal manufacturer offers this. As viral promotion will be a main strategy used, once the cereal has been launched, Outside the Box will also aim to differentiate the cereal, by offering consumers the opportunity to vote for their favourite flavours, and the chosen flavours will be based on the most popular choice. 7.4 Threats

    Intense competition and well established market: Outside the Box are entering a market that is well established and from a general perspective, dominated by Kellogg’s, PepsiCo and General Mills, who have already established their presence with their brands, and have substantial financial and marketing power. Outside the Box will therefore, not be competing with these brands for the foreseeable future and will mainly focus on its immediate competitors as identified in the direct competition analysis. As the brand will be virtually unknown compared to the above, consumers may be reluctant to purchase the cereal. Therefore, Outside the Box aim to focus a majority of attention on gaining entry by focusing on the strategy of immediate competitors such as Jordan’s, Nature Valley, Kallo Foods and Holland and Barrett, amongst others who offer healthier and more nutritious cereals.

    However, as these brands are already established compared to Outside the Box, they could threaten the acquisition of market share, through the introduction of new products, tastes, promotions and prices. Since they are already established and brands such as Kallo Foods have different product lines, should they embark on a price reduction strategy, this could have a detrimental effect on Outside the Box as the organisation may not be in a position to reduce the price to match the competitors, which may result in a loss of market share, growth element and ultimately, sustainability.

    Commodity cost fluctuations and Stringent Regulations: Outside The Box cereals depends on commodities, such as oats, grain, corn, wheat, dairy products, spices, fruit and nuts, packaging materials amongst others which, are all subject to price fluctuations. The Telegraph recently reported that “agricultural commodity prices show no sign of easing and that it looks like the situation is going to get worse” . Should this be the case, it could have an adverse on the sustainability as having to factor the cost of materials in the selling price may mean it being so high that the consumers may not be able to, or be reluctant to purchase the product.

    Of late, the Foods Standards Agency has placed a lot of emphasis on breakfast cereal being healthier, in particular, the salt and sugar content. This could mean that Outside The Box could be routinely subjected to checks, news laws and regulations from the FSA and other state and local authorities that oversee food standards as well as the processing, packaging and storage of the cereal. Should for any reason Outside the Box fail these checks, it could face fines or product recalls, which could damage the brand image, andhave an adverse effect on sales revenue and sustainability as a whole. Soft consumer spending due to current and possible re-occurring economic recession: As a business, Outside the Box is wholly dependent on consumer and supplier spending and considering that most people are still reeling from the effect of the recent economic recession, consumer spending power has reduced as most people have less disposable income to spend on highly priced cereals.

    Continuous talks of a double dip recession may result in consumers being cautious of their spending even more, and become reluctant or unable to purchase highly priced cereal. Again, this will have clear implications on Outside the Box’s turnover and profitability. George Osborne’s 2012 Budget and the changes it proposes will no doubt impact on the target market and cause consumers to be even more aware of their spending habits especially on the youthful elderly, who are the mid-term target segment. Further to this, other imperative factors such as high unemployment, the rise in petrol and other economic factors have the potential to affect Outside the Box’s business, as consumers remain relatively cautious and possibly viewing the cereal as a luxury product and opt for lesser priced cereals. 8. Marketing Objective

    As a business, Outside the Box decided upon a SMART but simple marketing objective of: aiming to achieve 20,000 sales by 12 months this objective is both realistic and achievable as the expectations of sales cannot be too high as a new business with a virtually unknown product With this objective, OTB’s Management feels that it will enable the organisation to initiate enough point of sales and exchanges to build relationships and establish re-orders, without risk of over expansion, because the product could sell exceptionally well in the first three months, thus leading to opening more depots and factories, only to see sales and interests fall dramatically. OTB’s management feel that this marketing objective can be used as a benchmark for the first year of operations, and has full confidence that the objective can be met with ease. The above target is SMART, i.e. specific, measurable, attainable, realistic and timely.

    By incorporating all these factors in deciding targets, it ensures that OTB as a business, can easily maintain analysis of the progress of its target, ensuring that additional targets are realistic for the future of the company which, also makes it easy to measure and therefore easy to check whether the company is on track to achieve them or not. With them being timely, it gives the company a chance to assess whether the business is achieving its targets within the expected time frame, and if not, assess the reasons behind it and take corrective measures. They are also specific, which is essential for a company such as OTB which is hoping to progress fairly rapidly.

    9. Segmentation
    Ready-to-eat cereals are the largest segment of the breakfast cereals market in the United Kingdom, accounting for “91.3% of the market’s total value”. The United Kingdom accounts for “28.7% of the European” breakfast cereals market value . As the product encompasses the attributes of both a ready to eat and hot cereal, Outside the Box hopes to tap into both these segments. During the process of acquiring secondary research, Outside the Box segmented the target market in four distinct categories. The first being the heavy users, who eat cereals every day of the week. This target will be the main focus, as they are the consumers from whom we will predominantly generate most of the sales revenue from. This conclusion was arrived at on the basis that this segment will mainly be young urban professionals, who will seek the health aspects that the cereal offers, as well as the convenience factor due to their busy lifestyle, and they also have the disposable income to purchase the high-end cereal. In second place, are the medium users who consume cereals four to five times a week. Thirdly, are the light users who eat cereals two to three times a week and lastly, the non-users who never eat cereal at all. This segment prefers traditional breakfast products such as toast, fruits or alternative breakfast products such as cereals bars amongst others.

    10. Targeting
    After evaluating the Porters, SWOT, primary and secondary research, OTB has clearly identified a target market under some key demographics; Cash rich time poor: This could refer to the 20-50 year old professional who has a busy working lifestyle and has little time to spend their income due to a working lifestyle that allows very little spare time. It could also refer to a family orientated target whereby both parents work and a busy family and working lifestyle leaves very little spare time for preparing a healthy breakfast. Shows research on the trends of consumer buying, and the cash rich time poor individual, and how they are generally willing to pay more for convenience. Mindful of the environment and green issues: Outside the Box expects that the target market will be of a working background and have a degree of intelligence and awareness of the news and current social trends. As a result the organisation expect that the busy individual will be an enthusiast about recycling, and look for green packaging and green manufacturing methods to be involved in a product if they are to buy them. Demand high quality: Along with cash rich and time poor and mindful of green issues, OTB expects its target consumer to also demand high quality, as that is what they will be used to.

    As a result of a good income earned by young urban professionals, OTB expects its target market to be used to spending that little bit extra in order to obtain exceptional quality in all their purchases. This will require a product of high quality ingredients, as well as an attractive appearance, and be of a price that suggests it is high quality. Fashion and health Conscious: As a result of purchasing high quality products, the consumer will always be provided with better looking products. Just as in when a car is purchased, a general rule of thumb would be the more you spend the better the car looks. This would suggest that the consumer would be fashion concuss and therefore an innovator, meaning that the use of the new technology would enable the product to be seen as fashionable. Outside the Box expect that along with fashion the consumer will strive to look good, this will mean that the healthy aspect of the product will greatly appeal to the chosen target market. 11. Positioning

    Referring to Kotler and Keller’s Marketing Management, 2012, the result of positioning is a successful creation of a customer focused value proposition. When analysing OTB’s positioning strategy, different aspects were consider as vastly crucial in developing brand positioning in terms of where OTB wishes to compete and retail its product. OTB’s competitors were analysed again in order to identify the different features that distinguishes OTB from its competitors and these are detailed as follows:

    OTB will position itself as a luxury expensive brand of premium cereal as indicated in (graph 4) and hopes to compete better than the competition in the way that customers want by offering a product that is manufactured using high quality ingredients which will make the brand stand out.

    The product will boast of its convenience factor using the FRH technology which, requires little preparation effort and can be eaten anywhere for example, consumers who may not have time to eat breakfast in the morning at home, will have the opportunity to still eat their breakfast whenever and wherever they want to.

    Also with regards to the pricing of the product, to ensure that this is similar to other competitors as indicated in (graph 4). However, with the added nutritional benefits that our OTB’s cereal offers such as a variety of fruits and fat free yoghurt, it is hoped that consumers will see the unrivalled technology as well as all the added benefits as an incentive to purchase OTB’s cereal rather than its competitors.

    Various studies and reports have indicated that of the main features taken into account when consumers choose a breakfast cereal is the fat content and calories per serving. Taking these into account, OTB has created a unique selling proposition of a high quality and luxury product with even less fat and less calories per serving compared to its rivals. Subsequently, this further differentiates the product from others available on the breakfast market.

    A perception map (graph 4) indicates where the product will be positioned in the market. The map shows that the product is positioned where it is high quality and high price. Further to being a luxury product, the differential advantage of the technology it offers, demonstrates the product is at the high-end of the market. The positioning map also indicates where its competitors are positioned. Jordan’s and Kallo foods would be just below OTB, in the high price and high quality section they offer a similar product to OTB but without the added benefits. Quaker Oats is positioned just below Jordan’s, as they are cheaper and also not as high quality as Jordan’s. The
    normal supermarket branded cereals are of low quality and price as compared to OTB and Jordan cereals, hence their positioning on the map.

    A positioning web has been created (graph 5) indicating where OTB’s cereal will be positioned on a number scale and effectively, where it will be placed in the market in terms of ranking. It shows all of the factors affecting us and where they would be ranked at. For example how much the brand is priced at, OTB have marked it at 8, as it is a luxury product to be retailed in places such as Waitrose, M&S and Holland and Barrett, which, have a standard perception of selling premium and quality products. Quality is ranked at 10 as it is a luxury product with high, quality ingredients. It shows convenience being ranked at 10 which, is justified as the FRH technology offers the opportunity of having the cereal on the go whenever it suits the consumer. Health factor being ranked at 8 as the product contains oats which are healthy and it is also low in sugar, salt and saturated fat and rich in fibre, vitamins and iron amongst others. Brand ranked at 5 as the business is just starting up and has not brand recognition however, OTB’s advertising campaign should help with this as well as its position amongst other similar brands. Innovative idea is ranked at 10 as no other competitor used anything remotely similar to the FRG technology.

    12. Marketing Mix
    12.1 Product
    Outside the Box cereals will be a ready-to-eat porridge and will be positioned as the only cereal available on the market using the FRH technology, which offers unrivalled convenience for the on the go consumer. The cereal’s main ingredients will be oats, wheat, rice, barley and corn with optional extras of varied fruit and fat free yoghurt. In ensuring that OTB creates and offers a brilliant product that will delight customers and go beyond and above their expectation, Kotler’s level of a product model was utilised to in creating the breakfast cereal. Also, the model was used as a mechanism in creating competitive advantage for OTB. Each stage was looked into in order to find out the benefits the porridge could offer and how it could meet the target consumer needs and demands. In order to do this OTB’s management raised certain questions such as; who is its cereal aimed at, who the target market is, what benefits the customers will receive from the brand and where it will be positioned in the market? The core benefits that OTB cereal aims to offer (graph 6) is that it has many health benefits which consumers seek and OTB hopes that this will attract health conscious consumers to its product. The porridge will be low in sugar, salt and will contain less saturated fat, it will be rich is fibre and contain vitamins and iron.

    This will benefit the consumers as they will want to get the most out of the breakfast cereal. The basic level features are in line with consumer expectations in that they will expect a premium quality cereal to be made with high quality ingredients filled with good health benefits, which makes it luxury. OTB aims to use locally sourced suppliers from the UK market so that the raw materials are easily available and therefore the ingredients that are being used will be fresh and organic. At the expected level, it would be normal for consumers to expect to get good nutritious value and taste for the premium price that the cereal will be charged at. OTB’s cereals will be naturally made without any artificial additives, saturated fat and will be low in fat and overall, in calorie count. Further to this, as the product is being promote as the only cereal that uses the FRH technology in offering convenience and good value for money, this will make the brand stand out as the customers will receive exactly what they are paying for and the technology does what it says. At the fourth level being the augmented stage, OTB expected to exceed the consumers expectation through encompassing all of the features of the product such as its nutritional benefits, the FRH technology, using locally sourced fresh and organic products, supporting ethical and fair trade farmers amongst others.

    Further to this, OTB cereals will also be retailed with optional extras such as a variety of fruits and different flavours fat free yoghurts as accompaniments. Last but not least, at the potential level, is the use of convenience as it can be eaten anywhere or at any time, which is especially designed for those consumers who have busy lifestyles and lack the time to eat breakfast in the morning. Preparation time requires very little effort and once the process is initiated, it can be left to prepare itself whilst the consumer focuses their time on other matters. The overall main convenience feature is the differential advantage of the technology, as with the research that has been constructed, it shows that porridge stands out from the competition, as a rare type of technology is being used to excite the product. There is more potential to transform the product in the future as well as introducing different flavours and diversifying into other brands for example, cereal bars. Furthermore, the product will be manufactured in different sizes of 375 grams, 500 grans and 750 grams in order to offer consumers a choice of purchase. For the larger packages of 750 grams, the option will be available for the capacity of 2 uses.

    The material being used for the packaging of the porridge will be recyclable as OTB aim to be an environmentally friendly Company which, is in view with its ethical standpoint on the non-use of harmful substances on its product. Particular focus will be given to the packaging of the product to ensure that it can attract attention and convey the quality that OTB stand for, describe the cereal’s features and make a favourable impression on the consumers mind in order to create the desire to purchase.

    To achieve this, a few key points will be achieved as stated below; Ensure the packaging clearly identities OTB’s brand
    That it conveys descriptive and credible information
    That it can be easily transported and is durable and well protected Assist at the home storage stage by not being very bulk
    The product innovation curve has been designed to show how OTB is going to operate. It shows the intention to target the early innovators and early adopters, and as the brand image grows OTB will aim to expand the early majority without losing the unique selling point of exclusivity, and being high quality showing the product is that of luxury (graph 7).

    12.2 Place and Placing Strategy
    In order to keep the brand and product image consistent with the target market, the product will have to be placed correctly and distributed accordingly. As the business is new and has very little brand power, Outside the Box would have to make the approach to place and distribution as practical as possible. , describes the process of positing as that of getting an initial product, and not wanting to place it in the market but creating an image of the product that relates to how it is wanted to be perceived. To OTB, this suggests it is not how you position a product but what you do to the mind of the prospect. The strategy that Outside the Box would look to adopt with the product would be similar to that of Haagen Dazs and Apple, where by the status of a premium product has been gained through exclusivity. As discuss how Haagen Dazs conscious decision to introduce an expensive line of ice-cream in their own shops, made the brand premium within the ice cream market. This conscious decision is something that would benefit the product and brand, by keeping the product exclusive to premium outlets, the brand will begin to build a reputation as being premium and high quality.

    In order for this strategy to work Outside the Box would focus the initial distribution as exclusive, and aim to stock all products in more up market retailers such as M&S Food, Waitrose supermarkets as well as Holland and Barrett and possibly local premium outlets such as organic shops. This strategy would allow the product to be placed where the target market are most likely to be at the same time as maintaining the reputation as a premium and high quality product. It will be crucial for Outside the Box to have a website both for promotion and for sales, so this could be another outlet where consumers could purchase the product. It is also important to identify the consumer channels (Appendix 2).

    This is a diagram of the distribution channels that are intended to be used, which would start by manufacturing in the UK, then send the product to a distribution deport. There are then three ways the product will reach the consumer, firstly via the main retailers M&S food, Waitrose and Holland and Barrett. Outside the Box would look to deliver directly to their outlets. The second channel would be to stock products in wholesale, however to maintain product exclusivity, Outside the Box would only allow organic shops to purchase from these outlets. The third channel being a website, and would look to sell to customers only. 12.3 Promotion

    The main and foremost promotional objective of OTB is

    To create 75% awareness within our target audience within the 1st quarter of launch in order to achieve its marketing objective of 20,000 sales by 12 months

    As OTB is a brand new and small enterprise, the business will lack the large promotional budgets that other established cereal manufacturers such as Kellogg’s and General Mills will have at their disposal. However, Outside the Box aims to use this as an advantage, rather than view it as a disadvantage, as the advancements of the internet and other technologies have somewhat levelled the playing field, by offering the choice of inexpensive ways of promoting products. To bring the product to the attention of consumers and gain their interest, Outside the Box aims to take advantage of viral promotion by utilising social networks such as Twitter, Facebook, LinkedIn and YouTube amongst others, to promote and build the customer base.

    Radio advertisements will also be another promotion tool, as these slots are mostly inexpensive, but have the power of reaching an extensive audience. Once the product has been used, another powerful form of advertising that OTB aims to capitalise on is word of mouth advertising as it is hoped that consumers will recommend the product to their friends and family. OTB will also be designing and creating a website where the product on will feature, product information, pictures, stockist as well as an online ordering facility. Where possible depending on costs, Outside the Box intends to utilise celebrity endorsements to promote the cereal.

    Another avenue Outside the Box will utilise will be mailing lists in order to reach a far greater amount of consumers that would otherwise not be available. Using the AIDA model as a framework (Appendix 3), OTB hopes to achieve its 4 stage process through:

    Awareness – utilising social networks, radio and the online advertising Interest – demonstrate advantages and benefits of product for example nutritional benefits and FRH technology. Where possible depending on budgetary allocations, utilise celebrity endorsements and promote a short video via YouTube Desire – through offering free samples at appropriate places where we are guaranteed to reach our target audience, promoting the product at food exhibitions, trade shows as well as festival Action – by offering money off coupons as well as discounts for the first 100 people to visit our website 12.4 Price

    When placing a price on a product, it can be seen as one of the most influential factors of the marketing mix, because it determines if the consumers are willing to pay the amount required. As Outside the Box’s product is of premium quality, it is relative that a premium price will be charged, but also has to be competitive to challenge other products in the market. At £1.99 per product for the 375 grams, £2.99 for the 500 grams and £4.50 for the 750 grams with the option of additional add-ons for 50p each, OTB’s management feels it warrants this price, as the ingredients are all of the highest quality and it rivals competitors prices, ranging from £1.99-£3.99 depending on the size and brand.

    It has been stated that price is the only part of the marketing mix that actually creates revenue, whereas the other three areas only incur costs. “Price is not necessarily a straightforward calculation of costs and profit margins” (Brassington and Pettit, 2007), this quote from ‘Essentials of Marketing’ demonstrating the difficulties that come with pricing a product, and reveals the complications that can occur when trying to place a price on your product without severe analysis of the market and how your product will sell at that price. If the cost of the product is too high compared to competitors it will deter potential consumers from purchasing, as they will feel they are not getting their ‘value for money’ when comparing the product to others on sale. Thus OTB will require the intense evaluation of consumers pricing, so that they can incorporate that into their strategy when creating a fair but realistic price.

    The stores that Outside the Box intend to sell at (M&S, Holland and Barrett, Waitrose) will play a major role in the pricing of the product, as these stores already sell the majority of their products at a high price, and with this high price Outside the Box will be able to push through their current pricing strategy and the idea of ‘fair trade’, something that pushes prices on UK goods up, with the idea of the consumer wanting to ‘do their bit’ and ‘eat healthier’. This strategy can be proven to be successful by analysing the way a competitor such as ‘Jordan’s’ have performed, knowing that Britain’s enjoy the natural fair trade products. When examining the pricing of a standard organisation (Appendix 4) you can see that with lower price comes high quantity of sales, and as the price fluctuates the quantity does too.

    As a premium product Outside the Box intends to retain a relative high price throughout, with the intention of quality being greater than price, deeming the appropriate pricing strategy for the product. Brassington and Pettit (2007) stated that “price can reinforce or destroy the work of other elements of the marketing mix”. This could prove imperative in the success of Outside the Box’s venture, and should look to analyse every possibility that could affect all areas of the marketing mix, to ensure the pricing reinforces the other elements, as opposed to destroying the work that has been formed. 12.5 Physical appearance

    This will mainly encompass a website which will be attractive and professionally designed, whilst ensuring that it is easy to navigate. The website will offer a guaranteed and secure method of payment to ensure that the customers are not put at risk of their information being stolen or suspect of fraud. Another aspect of this will be the production factory, which will at all times be kept clean and hazard free in ensuring that the organisation adheres to Health and Safety Regulations. 13. Implementation and Control

    According to Thomas V. Bonoma, The marketing Edge: making strategies work (New York: Free press, 1985) “Marketing implementation is the process that turns marketing plans into action assignments and ensures they accomplish the plan’s stated objectives.” With regards to Outside the Box’s plans for starting the business, it is crucial that they devise a time frame and strict guide to stick to in order to help plan and control what happens at every step of each process of the product launch. To aid this process OTB created a Gantt chart (Appendix 5).

    With the implementation of any plan the guidelines are crucial and they allow for benchmarking between the actual and what has been planned. In order to allow enough detail in the Gantt chart Outside the Box created three sections; pre-launch, which would be all aspects which relate to activities carried out before the launch of the actual product; launch, which will be all embedment related to the launch day of the product, and post-launch, which would cover all after launch elements, which would need to be monitored and controlled. The implementation and control aspects of Outside the Box’s plan would have to be constantly monitored, just as sales and production figures would too. If along the process there are delays, the chart would have to be revised, and changes would need to be made. If the resultant changes or delays are drastic it could require a potential contingency to be adopted.

    Further to this and to ensure a successful implementation, the following points have been addressed as crucial: That OTB selects target markets in which it enjoys superior advantages and avoids markets where it is intrinsically weak Ensures that all of the Company’s employees and department are customer focused and market minded with the right behaviours That there is a good working relationship between marketing, sales, research and development, customer services as well as manufacturing teams That OTB continuously builds and tracks customer satisfaction and loyalty through regular reviews That OTB builds and manages a strong partnership with its delivery and distribution partners Last but not least, that OTB continues to build its brand image and is flexible in meeting customer demands and requirements

    14. Contingency Plan
    To ensure that unexpected occurrences can be addressed effectively, a contingency plan has been put into place to evaluate the effects of OTB’s the marketing activities and programs. This allows for necessary changes and adjustments to be made where necessary. To coincide with the implementation and control, OTB has created a contingency plan that can aid the business, if any errors or complications were to arise during the process of production or distribution (Appendix 6). This contingency plan is only intended to be used as a precautionary option if any potential unseen or unrealistic problems occur, such as natural disasters, Outside the Box will be readily prepared in the event that such a disaster were to happen. The contingency plan also includes other everyday problems that a new business venture may experience such as staff illness, demand exceeds supply and an increase in competitors, among other potential issues. The plan then provides a resulting method on how to deals with these issues if they were to arise, thus demonstrating the importance of being prepared. 8. Conclusion

    From all of the research compiled in this report, it is evident that Outside the Box will need to take careful consideration when deciding upon the elements of business that will have the largest effect on the success of their product. The importance of recognising the target market and potential for growth will have to be deemed essential, as these can be the deciding factors when identifying if a new business/product makes it in the chosen industry or fails. If used correctly this report should enable OTB to carefully plan their strategy, utilising the available data to ensure the product is a success, thus further develop the brand and grow and succeed in other areas such as expanding the business into brand diversification.

    Word Count –10, 918 (excluding Bibliography)
    Word Count with Bibliography – 12,200

    Adviceguide UK, 2012. [Online] Available at: [Accessed 28 March 2012]. BBC News, 2011. [Online] Available at: [Accessed 02 April 2012]. Beckett, A., 2011. Breakfast Cereal – UK – August 2011, London: Mintel Oxygen. Black, N.J., 2002. Modelling consumer choice of distribution channels: an illustration from financial services. Research. Nottingham: International Journal of Bank Marketing. BRASSINGTON, F & PETTIT, S. (2007). Essentials of Marketing. 2nd ed. Essex, Pearson Ed. Business Insight, 2010. The Global Online Industry Outlook. Report. Business Insight. Carbon Trust, 2010. [Online] Available at: [Accessed 04 January 2012]. Datamonitor, 2011. Breakfast cereals in the United Kingdom, London: Business Source Premier. Heater Meals, 2012. [Online] Available at: [Accessed 28 March 2012]. HMRC, 2012. [Online] Available at: [Accessed 28 March 2012]. Hot Pocket Meals, 2012. [Online] Available at: [Accessed 28 March 2012]. Innovation Centre. Accessed at: Last accessed 11th April 2012. Jensen, J.M., 2006. An empirical examination of brand loyalty. Emerald. Jordans strategy. Accessed at: Last accessed 11th April 2012. Lawrence, F., 2006. Too much salt and sugar in breakfast cereals, says Watchdog, London: The Guardian. Mason, G. W. a. R., 2011. Corn prices will continue to rise, London: The Telegraph. Mintel Oxygen, 2011. Breakfast Cereals UK. Article. Mintel Oxygen. Mintel Oxygen, 2011. Budget Shopper – UK – April 2011. Mintel. Mintel Oxygen, 2011. Cereal and Snack Bars – UK. Mintel.

    Oat So Simple Design. Accessed at: Last accessed 10th April 2012. Office for National Statistic, 2010. Labour Force Survey. ONS. Ries, A.&.T.J., 2001. Positioning: How to be seen and heard in an overcrowded market. Mcgraw-Hill. Roberts, J.L., 2008. Why even the very rich are cutting back on conspicuous consumption. Luxury Shame, 152(23), pp.55-56. Smith, K.J..G.S.L..M.S.A..B.L..D.T..&.V.A.J., 2010. Skipping breakfast: Longitudinal associations with cardiometabolic risk factors in the Childhood Determinants of Adult Health Study. American Journal of Clinical Nutrition. Special K ‘Drop a Jean size’. Accessed at: Last accessed 10th April 2012. The Office of National Statistics, 2011. Households Below Average Income (HBAI). ONS. World Health organisation, 1990. Diet, Nutrition, and the Prevention of Vhronic Disease. Online. Geneva: World Health Organisation

    Appendix 1 – PESTLE Analysis
    A PESTLE analysis must consider all the important external factors impacting on the organisation, in this case a newly formed luxury breakfast cereal.
    These factors may have political, economic, social, technological, environmental or legal dimensions.

    1. Political
    1.1. Healthy Eating 5-a-day Policy
    The government’s introduction of a 5-a-day healthy eating guideline means that products in compliance with these regulations can be classed as healthy and improve their product image. Below is a table of the breakdown of the recommended daily food intake for an average adult. See appendix 3 for table of information. The importance of the 5 a day policy is ever growing, , highlighted the importance of this in regards to preventing disease and promoting healthy eating and lifestyle, on behalf of the governments research into creating the original 5-a-day policy.

    1.2. Recycling
    The government is looking to stricken recycling in the near future, with intent on reducing its carbon footprint. Therefore to avoid fines and improve product image, it would be a good idea to make the products packaging as recyclable as possible and market that as an individual strength of the product. The company and product can benefit from a new zero waste policy, which will reduce the landfill costs, reduce all carbons footprint costs, improve corporate social responsibility (CSR) and optimise revenue through directly through recycling.

    1.3. Government Encourage Breakfast
    The government is stressing the importance of both adults and children, with statistics from suggesting that the eating habits of adults are passed onto their children, in particular breakfast. He then further states that ‘breakfast has been proven to be the most important meal of the day and has been linked heavily with reducing BMI and increasing general health.’ This is an opportunity to push a breakfast product into the market that considers with the governments ideas of an ideal breakfast meal.

    2. Economic
    2.1. Unpredictable Environment
    With the current business environment seemingly unpredictable, the economy is such a significant influence to any organisation, especially one such as Outside the Box. Economic factors such as interest rates, inflation and exchange rates can determine many a market, the breakfast cereal market being one of them. For Outside the Box these factors could prove integral to the success of the company, when considering future expansion in the manner of trading over international waters with the United States of America, as well as countries in the Far East.

    2.2. Interest Rates
    As of December 2011 interest rates were kept at a record low of 0.5% which is going to effect the success of a luxury breakfast cereal as the low rate is intended to spur consumer spending. This would be deemed beneficial if the consumer looks to such products as luxury breakfast cereal, but at such times that the interest rates are that low, it is usually because the average consumer lacks money to spend, thus requiring intelligent targeting.

    2.3. Uncertainty in the Employment Market

    It is shown that unemployment rose between 2005-2010 , although it is predicted that Outside the Box can expect to witness a shrinkage of around 3% in unemployment within five years. This statistic includes a large quantity of those forecast to re-enter employment classified as self-employed which brings in turn its own uncertainties (Mintel Oxygen, 2011). This illustrates the importance of knowing who will buy the product, as no organisation will feel confident knowing their target market could become unemployed at any minute, then not able to afford the product at standard retail price.

    2.4. Consumer Lacking Confidence
    The last two years have shown a decline in the levels of consumer confidence, reaching the lowest point since 1994. An innovative product such as Outside the Box’s cereal, which incorporates new unseen technology to the standard consumer, could be seen as a risk, with the unwillingness to brave new products. The figures have been measure by the consumer confidence index 3. Social

    3.1. Consumer Holds the Power
    It is vital that an organisation fully understands what is happening socially within their chosen market. The consumer has become far more powerful in today’s market, and this has forced many organisations into changing product ranges and services to suit the demand. It is because of this consumer power that organisations are required to carry out extensive research in order to satisfy and meet consumer demands.

    3.2. Understanding Demographics

    It is essential for and organisation such as Outside the Box to understand the demographics who operate in their chosen market. This will enable the organisation to design and edit their existing product range to suit the demographics. This is not an easy task with the modern day consumer possessing unpredictable behaviour patterns, linking to such elements as fashions and celebrity endorsement.

    3.3. Increase in time spent on the Internet

    Research data has suggested that the average consumer is spending more time on the internet rather than watching television . This is something that will need to be considered when approaching the advertising and marketing area of operations, and such forms of internet based targeting through social media could be seen as applicable.

    3.4. Mature Market
    The breakfast cereal market is very mature. According to research compiled by Mintel ‘A high majority of nine in ten (88.5%) adults ate breakfast cereals in 2010, three in five of them doing so daily’. This shows the possibility for volume growth is relatively limited. But sales growth has benefited from abundant levels of innovation and a renaissance in porridge, proving a good omen for Outside the Box.

    4. Technology
    4.1. Heating Method
    A method used mainly in the services like police, fire and army as rations
    whilst on the job. The technology used is supplied by Non Magnesium Flameless Ration Heaters, which activate with a small amount of water in order to heat the meal without the need for external energy. Both and have details regarding the safety and testing of the technology meaning that Outside the Box would have to simply approach the owner of the technology and require usage.

    4.2. Use of Materials
    In order to comply with the product image, and laws and political aspects, the products will have to be packaged in ether recycled products or products that can be recycled. This will allow the products to be portrayed as green, as well as giving it the ability

    4.3. Manufacturing Methods
    How the product is manufactured will be important as the price will need to be as low as possible without compromising quality. It will also be important to chooses a production method, weather large amount of stock will be needed or if the company decided to use the just in time method in order to require less storage for completed products.

    4.4. Transportation
    Transportation around the UK will be an important technological use as it is costly and it can be a source of high carbon emissions. It may be best to hire a haulage company who can afford newer more reliable and economical methods of transport.

    5. Legal issues
    5.1. Legality of the business
    Choosing the ownership type of the business will be important in order to determine things such as trading policies, taxation methods, insurance and registration with Companies house. LTD or a partnership would be the most likely method of trading as it provides both protection and distribution of control evenly amongst the group.

    5.2. National Insurance
    The national insurance will be determined by the turnover over the business so a class and payment would be adjusted accordingly to comply with UK NI laws. Help would be provided via the advice guide website which deals directly with National Insurance issues and questions. A website in corporation with the government offers advice and laws in relation to the company.

    5.3. Income Tax
    For sole traders and partnerships, the taxation rules in the opening years are often not straight forward, especially with the timing of the tax payments. The business would have to have regular contact with HMRC in order to keep up to date with payments, and not incur additional fines. Like national insurance, guidance and laws are available on the governments provided website.

    5.4. Corporation Tax
    Any profits made by the company, after deduction of directors’ remuneration, will be subject to Corporation Tax. Corporation Tax is payable nine months after the year-end, and, unless profits are over a certain limit, are taxed at the smaller company’s rate of 19%. Corporation tax and Income tax are both dealt with by the HRMC and publishes both the laws, and updates and changes made to the laws in order for business to gain easy access and contact the support team or tax office to make changes accordingly.

    5.5. Advisers
    With all of the important legal concerns involved in starting up a business, it could be important to take into consideration seeking out some professional legal advice to ensure that you make the best decisions for your business. This would be especially important when signing contracts for rent, employment, ownership and contracts.

    5.6. Copyright and trademarks
    Copyright and trademarking will need to be taken into consideration when designing a product, which contains new technology. In regards to copyrighting the product would have to govern by the Copyright, Designs, and
    Patents Act 1988, which the organisation would have to apply to do. The trade marking aspect of the product would be to do with the logo, slogan, packaging and graphic on the actual product and in some cases the marketing campaign. Trademarks would be governed by the Trade Marks Act 1994.

    5.7. Patent
    Similar to the trademark and copyright, the Patent act 1977 will help to protect innovative aspects of the product, rather than just the product itself.

    5.8. Website laws
    Making sure that the business website complies with design IPRs and other legislation. This would include aspects such as copyrighting, collection of personal data, using data electronic marketing, use of cookies, accessibilities and other elements. 6. Environmental/Ethical

    6.1. Scrutiny over Recycling
    It would be deemed intelligent to possess considerable knowledge of any potential pressure groups that could create unwanted media attention or start hate campaigns over any potential recycling/green issues.

    6.2. Emissions Trading Policy
    This demonstrates the intentions of an organisation, and how they plan to implement a strict limit on their carbon emissions and sell the excess capacity to other organisations. Emissions trading, as set out in Article 17 of the Kyoto Protocol, ‘allows companies that have emission units to spare – emissions permitted them but not “used” – to sell this excess capacity to organisations that are over their targets.’ (UNFCC)

    6.3. Carbon Footprint Issues
    Informs all companies how they can reduce their carbon footprint by over 40%, using simple measures such as energy saving light bulbs. Outside the Box will need to consider implications their organisation can have, especially at factory level, and the affect it can have on the surrounding environments/global scale.

    6.4. Packaging
    Outside the Box will need to consider how they are going to package their product, and if it is recyclable. Most breakfast cereal companies use cardboard or plastic containers, both of which could be useful as they are recyclable materials, which is good for the environment, and will do favours for the companies’ reputation, which is always an excellent thing for a new business.

    6.5. Encourage Consumer Responsibility
    Any organisation should encourage their customers to act responsibly, and urge them to think about recycling the cereal pots after usage. Outside the Box could place a potential message somewhere on the label, politely reminding the customers to dispose of their packaging responsibly, as well as a reminder that the product is fully recyclable. If an organisation did not take their corporate responsibility seriously in relation to environmental issues it could have dire consequences for their reputation which would halt further growth.

    Appendix 2

    Appendix 3

    Appendix 4
    Standard price to quantity curve

    Appendix 5
    Implementation and Control Gantt chart

    Appendix 6
    Contingency Plan

    Natural disasters such as draught affecting crops or increases in prices of raw materials

    Consider widening our suppliers from the UK and extend this to other countries

    Factory equipment breaking

    Rent machine equipment to ensure production continues

    If product demand exceeds supply

    Identify new distribution links and networks

    Suppliers become unreliable

    Make sure there is a contract signed and there is a back-up supplier which can deliver last minute just in case

    Review current promotion channels if expected interest is not met

    Increase advertising budget and explore channels such as television etc.

    Quality reduction in health benefits

    Total quality management, checking the products at different stage

    Product performance review after 12 months – based on market objectives

    If target not achieved, we will need to re-evaluate target market and pricing strategy

    Increased competitors

    If target not achieved, we will need to re-evaluate target market and pricing strategy

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