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What are the industry structure and the industry conditions?
Indian Fast Moving Consumer Goods industry has a long history. However, the Indian FMCG industry began to take shape only the last fifty years. Even today, the Indian FMCG industry continues to suffer from a definitional dilemma as well as the exact estimation of market size. Nevertheless, more than Rs. 43,000 crores (in organized sector) fast moving consumer goods industry is a critical component of the Indian economy. The actual size of industry is phenomenal, if one adds the turnover of unorganized sector. With the average growth of Indian economy in the range of 6-8% per year will witness a consistence rise in demand and purchasing power of Indian market. Following the trend, the FMCG sector will grow by 5-6% per year in mature categories and 8-10% per year in upcoming categories. However, factors such as low rural penetration, dependence on monsoon, the price sensitivity of the consumers and increased level of competition could result in decreasing profit margins in the industry.
No. of players
Total market size
Relative share of the players
Nature of competition: Monopoly, oligopoly, Perfect competition
Differentiation practiced by various players
Barriers in the industry - Entry Barriers - Mobility
Barriers - Exit Barriers
Distribution, pricing, promotion, methods of selling, service/field support, R&D, legal tactics FMCG - reliance on carrying & forwarding agent (C&A) - Industry practice Textiles - Wholesalers - Semi wholesalers retailers + retail showrooms (few players).
Product life cycle, rate of growth, changes in buyer needs, innovations in products/ processes, entry & exit of firms, changes in regulatory environment governing the industry.
STRATEGIC GROUP ANALYSIS
To understand competitive environment, a Strategic Group is a set of business units or firms that pursue similar strategies with similar resources Units in the same strategic group - strong rivals and are similar to each other.
Structural Analysis of FMCG Industry
Typically, a consumer buys these goods at least once a month. The sector covers a wide gamut of products such as detergents, toilet soaps, toothpaste, shampoos, creams, powders, food products, confectioneries, beverages, and cigarettes. Typical characteristics of FMCG products are: -
The products often cater to 3 very distinct but usually wanted for aspects - necessity, comfort, luxury. They meet the demands of the entire cross section of population. Price and income elasticity of demand varies across products and consumers.
Individual items are of small value (small SKU's) although all FMCG products put together account for a significant part of the consumer's budget.
Brand switching is often induced by heavy advertisement, recommendation of the retailer or word of mouth.
Why has FMCG evolved to where FMCG is?
The study has been conducted with the 14 variables which are listed as follows:
1) Category of the outlet
2) Brand awareness on personal care products
3) Brand awareness on Food and Beverage outlet products
4) Brand awareness on Kitchen related products
5) Procurement of supplies
6) Rating of the supplies
7) Credit period offered
8) Packing specification
9) Lead time
10) Basis for purchase
11) Selection of Suppliers
12) Decision making authority
13) Payment methodology
14) Re-ordering procedure followed
Where is the use of the primary & secondary data and how?
Institutional marketing behavior is an implicit or explicit transactional decision making interaction and has the following steps:
Need must be felt for the product or service.
Search has to be made for suppliers and potential suppliers.
Evaluate the marketing mix.
Negotiate for other offers like terms of payment etc.
Basis for placing the order and receiving the product
Evaluate the suppliers
The primary research was exploratory in nature. Exploratory research is appropriate since it helps in identifying the opportunities present in the decision situation and it also serves as a step towards further research activity. The study aimed at identifying the functional gap between selection and utilization of FMCG products in Institutional Markets with specific reference to Hotel Industry and Flight Catering establishments and hence primary research was most appropriate for meeting the needs of the objective in view is Exploratory research.
Probability sampling method has been used in this study and all catering establishments had equal chances of being included in the sample size. Under probability sampling, Simple random sampling technique was undertaken since there was a definite sampling frame and prior information on the objects or sampling units were available before the sampling process. Simple random sample was undertaken because the population from which the sample is to be chosen is homogenous. The data was collected through questionnaire and the research was designed to employ appropriate statistical tools.
Data is unprocessed information. It is the basic factor which gives the information about the problem subject under study. The data for the study was collected through Survey.
Nature: This project work purely relies on primary data to study the objective, which was collected through a structured questionnaire from various catering establishments about their Consumption Pattern. Secondary data was collected from Federation of Hotels and Restaurants Association of India, South Indian Hotels & Restaurants Association.
Source: Purchase Managers, Stores in-charge, Individual Outlet Managers, Food & Beverage Controllers, Executive Chefs, Food and Beverage Managers and Executive Housekeepers of various catering establishments provided the necessary information.
Sample size: A subset of the population intended to be representative of the population and the information obtained about the sample was used to make inferences about the population.
Sampling Unit: Purchase Managers, Stores in-charge, Individual Outlet Managers, Food & Beverage Controllers, Executive Chefs, Food and Beverage Managers and Executive Housekeepers of various catering establishments provided the necessary information about the consumption pattern of the whole unit.
Sampling method: Simple random probability sampling was used. The study had a sample size of 110 outlets and prior information about the category of the outlet, its location, facilities offered at the outlet. All outlets in the population size represented by the recognized outlets of the FHRAI and SIHRA had equal chance of being included in the sample size taken up for study.
Multivariate data analysis:
Multivariate data analysis involves the simultaneous analysis of two or more variables.
Factor analysis: Factor analysis is a technique in which the researchers look for a small number of factors that could explain the correlation between a large numbers of variables. It allows the researcher to study the variance of a number of variables in relation to a set of underlying factors. Factor analysis is primarily used as a means of data reduction and transformation. This analysis enables identifying the basic factors that under lie these attributes. This procedure can also be used to identify the factors that are not correlated.
Factor: A factor is a variable or a construct that is not directly observable, but needs to be inferred from the input variables. A factor model has a small set of independent variables termed factors, which are hypothesized to cause or explain the dependent variable. The coefficients of factors, called factor loadings, link the factors to the variables and are used to interpret the factors.
The five factors which are expressed as dimension in the study are as follows:
Dimension 1: Brand awareness on FMCG products
Dimension 2: Payment performance and credit period
Dimension 3: Decision making of purchasers on specified needs of the product
Dimension 4: Selection of suppliers and re-ordering procedure
Dimension 5: Selection of suppliers and re-ordering procedure
What could be the possible impacts on the industry?
Rapidly developing hotel industry which is a major institution for consumption of FMCG products now a days are continually in need to place more pressure on FMCG producers to lower prices and increase service level. Customers are also becoming more critical and feel less attached to brands, whilst the current economic tide is urging customers to buy less expensive products and brands, a gap has been created between the supplier and consumer which are needed to be fulfilled by a better service and ability to respond quickly to the requirements. While FMCG brands often focus on individual products, companies must decide whether to build the brand on a specific product or on the corporate identity. Corporate identity encapsulates “a company's ethos aims and values and dynamic that can help to differentiate the organization within its competitive environment”. The importance of consumer sales promotion in the marketing mix of the FMCG category throughout the world has increased. Companies spend considerable time in planning such activities. However, in order to enhance the effectiveness of these activities, manufacturers should understand consumer and retailer interpretations of their promotional activities
The research study clearly reveals that the institutional is an attractive segment for an FMCG company. The growth rate of industry is slow but it could emerge as the future market for a company's products. The market is now filled with small players who have captured the market and the market is still to open to any established company. The professional skills of a company in the field of supply chain management and its learning curve effects in the other markets could give it a competitive advantage over the existing players. Since the study reveals that the lead time between placing the order and receiving the supplies is one day for FMCG products to institutions, the distribution network could be used to enhance operations and to increase the satisfaction levels. As majority of catering establishments have reported low cost and good quality as the main reason for selection of the suppliers, concentration should be on providing products at lower cost that competitors for the institutional markets.