My Business Ia Hl Essay Example

to achieve net profit targets:  INTAQ should apply market penetration strategies by selling its products to supermarkets groceries and directly to the consumers. INTAQ should remove or replace products that have low or negative gross profit like Vannamei PD 31/40 and Pangasius w/ broccoli product lines. INTAQ should introduce a pull, below the line promotion. Introduction Integrated Aquaculture Specialist Incorporated, INTAQ for short, is a private limited company, which started off as Ram Aquafeed Corporation in 1987. From 1988 to 1994 there have been many expansion projects including the construction of a shrimp hatchery in Liloan, Cebu and grow out farms in Barili, Cebu and in Bacolod, Negros. Eventually, in 1997 Ram Aquafeeds Corp. was renamed into Integrated Aquaculture Specialist Incorporated to better reflect a fully integrated aquaculture company.

Due to the financial crisis in 2007 and appreciation of the peso, the company decided in 2007 to open a new division, the seafood distribution for the domestic market. The products of the seafood distribution division of INTAQ include Pangasius Fish Fillet, Norwegian Salmon, various shrimps, and squid rings (all products found in appendix). Majority of the seafood products are imported, like salmon comes from Norway. Major competitors are seafood importers just like INTAQ, seafood traders and distributors, supermarkets, and wet markets.

The focus of this paper will be on the new division because the company feels that this division has good growth potential and thus is giving its support for the expansion to the food sector industry. Research question: What marketing strategy will help achieve the company its target of a 30% increase in net profit? Procedure/ Methodology Primary research consisted of a detailed interview with the

executive director of the company and with the marketing director. These interviews focused on the current strategy, market position of the firm, and internal and external factors providing many opportunities and constraints to the company.

Secondary data was also obtained from the firm’s financial data such as the balance sheets and income statements (printed copies from 2006-2010) (see appendix). This allowed me to form the conclusions and recommendations to the firm’s problems. Main results and findings The Philippines’ food market is a very competitive area of business largely because of competition from similar firms and the larger meat industry. The cost of raw materials increased because of disease that affected the farms in the supplier countries.

Yet, since many of INTAQ’s competitors did not increase their price, INTAQ could not increase their prices for fear of losing their clients to competitors even if the cost of their raw materials has gone up. INTAQ has to cope with the increase competition and overall increase costs (both direct such as raw materials and indirect such as storage).

1. Reasons for reduced net profit.
2. INTAQ’s current marketing mix Product Deals with frozen seafood products.

All products are producer goods. They are aimed at other businesses rather than at consumers. The main customers are firms related to the food industry such as restaurants, hotels and distributors. Price Price varies on the location of the customers. In the capital of the Philippines, prices of INTAQ’s products are lower than other locations. This is because the demand in the capital is more therefore the amount of competition is also a lot more. Therefore we can say; in the capital, goods are price elastic. INTAQ uses

cold storage units to keep its frozen stock which are located in Manila and Cebu.

Therefore if the customer is further away from Manila or Cebu price of the products will be greater than those in those areas. Place INTAQ either has a two level channel or three level channels. This is because INTAQ sells to restaurants and hotels, traders and distributors. Customers are charged with a higher price if dealt directly such as the restaurants and other two-level channels. Traders and distributors need to earn a profit therefore INTAQ sells their products at a lesser price. Promotion INTAQ currently does not have a set promotion mix.

The only form of promotion INTAQ utilizes is through sponsorship key events such as food shows and anniversaries of customers.  Lack of cold storage space in Philippines especially in the Philippines. High cost of electricity will INTAQ’s main strength is its experience in the seafood business as it has been in the same business since the 1980s. Since the ASEAN established free trade in January of 1992, duties have gone down to zero making imported products cheaper.

Since INTAQ receives most of its stock from foreign suppliers this is definitely a great opportunity for high profit. The current marketing mix of the firm barely incorporates any form of advertisements. A great opportunity to increase its customer base is by expanding from serving only the hotels and restaurants to include retail establishments such as supermarkets and convenient stores as well. INTAQ also does not have a proper promotion mix. Promotion is a key factor in attracting customers and will be tackled later.

In terms of liquidity INTAQ is not doing too well. From

the current ratio, we can see its current assets to current liabilities ratio is above the expected for a business in the food industry (which is around 2:1). The assets can be better spent in generating more trade and income. Idle assets that are not generating income should be used in some way to benefit the business. The extra current assets alternatively could be placed in a bank to generate interest receivable. A decrease in the ratio of current assets to total assets will result in an increase in profitability as well as risk.

Compared to the acid test ratio, the current ratio is much higher suggesting that a large percentage of the firm’s current assets are in stocks. Even after stocks have been subtracted, the ratio (2010 acid test) shows that current assets greatly exceed the current liabilities. Having excess stocks will also incur increase storage fees. In terms of operational efficiency INTAQ is not collecting money from its debtors on time. Another problem decreasing INTAQ’s current assets is the time it takes for the firm to collect money from debtors.

We can see that from 2007-2010 of December, the time it took to collect debts increased from 61 to 124 days. So aside from having too much stock, debtors are not paying on time which could cause short term liquidity problems due to the lack of cash in hand. 4. Analysis of INTAQ’s product line A complete list of products is found in appendix.

The product Vannamei HON 51/60 is “a dog” because of its low growth and market share and does not generate profits. Another marketing strategy would be to develop the products in the

“problem child” section. Taking into account that the “problem child”, it has a chance to become a star or a cash cow due to the high growth but currently has low market share. The problem of a low market share can be solved by proper marketing and promotion. The example salmon products; which is fairly new to the Philippine market and the product currently has low market share, but we can see its growth from 2008-2009 by 8% in profits.

If INTAQ can market salmon’s health benefits for example, it would have turned a “problem child” into a possible “star”. The cash cows basically are saturated markets, for example the shrimp products have deviated into many value added products due to saturation and competition. To cash cows and to some extent stars, volume of sales is what drives its higher profit margins. The best growth option for INTAQ is either Product development or market penetration. One opportunity as said from the SWOT analysis is that INTAQ’s products are mainly producer goods and not consumer goods.

If INTAQ sells its goods, not only to firms related to the food industry, but also to the general public the customer base will significantly increase and profit can be made. Penetrating into a more public market such as groceries and supermarkets will greatly increase the customer base of the firm. Product development involves developing new products to sell to existing markets. “Problem Childs” have potential growth and could be developed into a profitable product. Market development would not be a viable option because INTAQ is not large enough and does not have the capacity to expand outside of the Philippines.

To add

to that, most market segments of the food industry already have been nearly saturated and therefore INTAQ should not try to enter new markets especially those INTAQ are not familiar with. Diversification is a high-risk strategy high cost but high return growth strategy; the problem with diversification is that diversification takes time to develop new products to sell into a new market. On the topics of market development and diversification, the risks outweigh the benefits and therefore should not be perused. Conclusion/Recommendation There are many way that INTAQ can increase profits mainly by reducing cost and increasing sales.

From the 4 P’s it can be seen that INTAQ does not have a proper promotion mix. A proper promotion mix would aim to inform and persuade customers thus would potentially increase sales by volume. Products such as “Vannamei PD 31/40” has a negative gross profit of 25. 67% and should be removed as it is incurs a cost rather profit. The firm INTAQ is only supplying the food industry and not the general public. INTAQ sell producer goods therefore ignore the larger customer of the general population. INTAQ’s products are generic and branding will increase the value of the product.

Recommendations

INTAQ should apply market penetration strategies by selling its products to supermarkets groceries and directly to the consumers. * INTAQ should remove or replace products that have low or negative gross profit like Vannamei PD 31/40 and Pangasius with broccoli product lines.  INTAQ should introduce a pull, below the line promotion. Proposed Promotion mix As said earlier, INTAQ does not have any sort of proper promotional mix. Promotion can be classified in several ways. Each one is an

opportunity to find new customers and shall be discussed.

Most of the methods of above the line would not be recommended because the products of INTAQ are producer goods. Using mass media may not appeal to the right segments or potential customers therefore would not be recommended. One from ATL advertising to consider would be advertising through specific magazines (like magazines about the food industry) and/or advertise on the newspaper’s BUSINESS or FOOD/LIFESTYLE section. Focusing the advertisements on the desired segment will help inform and persuade potential customers.  Below the line (BTL) The best form of production for INTAQ should be below the line advertising.

BTL advertising is both more direct and is more cost effective than ATL method. Direct marketing would be the best way to persuade the right segment of customers since INTAQ’s products are producer goods. Direct mail would be another viable option as it targets a specific customer and fairly easy to do.  Pull promotion Using push methods like mass media would most likely not appeal to the right type of customer. The target customer base of INTAQ is a small segment and therefore pull would be inappropriate. Push promotion ITAQ should engage in a pull form of promotion. Because of the fact that INTAQ only caters to the needs of the food service industry, the pull type of promotion is more effective because the firm may choose who they want to persuade and is more cost effective unlike most push forms of promotion.