Competitive Analysis For Indofood: Strategies For Market Growth

Competitive Analysis

Strategic Management is the process of analyzing the environment in order to develop strategies. The companies develop the strategies to achieve the objective but it required to analyze the market for the effective strategies. This process helps the company to evaluate the current situation in the market. In this report, the discussion is made on the competitive analysis of the company in order to develop an effective strategy. Indofood has been taken into consideration in order to analyze the competition. Indofood is an Indonesian company which operates under the food industry. It was established in the year 1968.

This report is classified into three parts with a common purpose. In the first part, the competitive analysis will be done as per the customer and competitor analysis. In the second part, effective strategies of the company will be analyzed. SWOT Analysis will be used to identify the strength, weakness of the competitors.   

Competitive analysis is a critical part of a marketing plan which is developed to achieve the objective of the company. It helps the company to develop its product or services different from the other companies. The food industry is growing in the current days as per the high demand of the consumer. In 2019, the annual growth rate of the market is 12.3% in 2019 and it is expected that it increases with 17%. It has been seen that most of the revenue is generated in China due to the high quality of services with a large number of variety. The company is growing by entering the online market in order to deliver the services at a large number of people. The food market sales the fresh and packaged food in the market. The market segment covers the sale of fruit, snacks, sweets, soft drinks, and the other food items.

PepsiCo, Mars, Mondelez, and Hershey are the main competitors of the company. As per the statistic report, it has been seen that Hershey held a market share of about 30.6 percent of the confectionary sale. Hershey and Mars are the two competitors which compete for each other and give the high competition to the consumers.  The net revenue of Mondelez International was amounted in 25.94 billion in US dollars in the year 2018. It is one of the largest operating companies in the snack business and produces many products such as Oreo, Milka chocolate and Cadbury. The company generate the revenue every year with the amount of 100 million. As the companies have the high market shares in the same industry that is the food industry. As per the statistical report, it has been seen that the only 27% of companies are involved in the packaged industry. It reflects that the only famous companies operate and gain a high market share.

Customer Analysis

Customer Analysis is a critical process which helps to identify the customer target, demand, and satisfaction. The company targets different customers in order to sale a large number of services to earn a high profit. The company targets the customer on the basis of different factors such as age, taste, prices and many others.

Consumer segmentation divides the market into the small group that has a common profile, marketing strategies that can be adapted to target the specific type of consumers. The company analyze the market and then target a different customer. It has been seen that the consumer lifestyle is the ideal criterion for market segmentation (Berman, 2017). The company provides different types of food material that is why the target segment is also different as per the product. There are different types of segment factor in which Indofood target the customer in order to provide the services.

 The company target all age of people because the food is a necessary item for the survival of each and every people.

The company target the middle and high-class people due to the high cost of the product which cannot be afforded by poor people.

 Price is the factor by which the company targets the customer. As the price conscious consumer are not included in the target segmentation.

It mainly targets the families and the health conscious consumer as per the product delivery.

As per the statistical report, the old age of people above 65 living longer in different countries. It has been founded that the demand of the senior population is more towards the marketing campaigns of vitamin supplement. The taste of the average age of people is changing towards the health and fitness products. Nowadays, the taste of the consumer is changing with the passage of time. As per the collection of data, it is observed that healthy products have more demand in the market such as vitamin, B6, fiber, calcium, and protein.

The demand of the children and the youth is increasing towards the noodles, pasta, and many other fast foods. Different people have different taste such as old age people prefer healthy food, youth also attracting towards healthy food and the children prefer fast food. Culture is a factor which affects the preferences and taste of the consumer towards the food (Wheelen, et al. 2017).

Consumers have grown with the information, which spread the awareness towards the healthy product. The company must contend with the global population growth that will increase the demand for healthy, fast and convenient foods. The company is able to provide a healthy product to the senior age of people and the fast food for young age people. Providing the services as per the taste of the consumer satisfy the demand of consumers. The company also uses and delivers the branded products which can easily satisfy the demand of consumers. The satisfaction level of consumer is observed by the customer reviews

Market Analysis

As per the customer review, the company completely satisfy consumer needs and wants.

Consumer analysis is divided into two parts behavioral analysis and consumer demographics. It has been seen that the demand for the consumer is completely relying on the demographics area (Bonacchi & Perego, 2019). Demographic is the other factor which affects the taste of the consumer towards the goods and services. The demand of the consumers is changing with the change of demand of consumers towards the goods and services.

It has been seen that the food industry has a large number of companies which operated with a high brand image. Mars, Hershey, and Mondelez are the top competitors of the company and these companies compete with the Indofood. There is an increase in the number of competitors of Indofood on the regular basis because of increasing demand for instant food. The company is comprised of perfect completion. As per the perfect competition, other companies are compulsory to become followers in product pricing. Indofood has become quite extensive due to its market share (Vera, et al. 2016).

The numbers of competitors are pretty much. The main competitor of Indofood is companies producing Mie Sedap. The growth rate of the food industry shifts the position of the existing companies. Indofood competes with the existing companies by making use of the price wars in the form of product promotion. Mie Sedap is a famous leading instant noodle brand. The superior quality ingredients used by the company has attained widespread acceptance. The company has gained differentiation in new exciting flavors. It has even attained recognition from ISO 22000. The ground breaking good taste approach has helped to accomplish acceptance.

The companies such as Mars, Hershey, and Mondelez give competition to Indofood in the dairy products. These companies have gained wide acceptance in dairy products. These have attained huge market share on a global basis. The company needs to improve its product portfolio when it comes to compete with international players (Innofood, 2017). 

Indofood in its market analysis targets mainly to the middle class. Indofood is maintaining product lines for packaging, ice-cream, milk, instant noodle and palm oil. The expansion of the company will be funded from the capital expenditure of 9.1 trillion rupiahs. Indofood will continue to increase its market share by pushing sales and exporting in the region. The market potential is huge due to the emerging middle class. The company even exports to new and emerging countries (Indonesia Investments, 2018). The market of the company comprised of exports more than 8% of the revenue. This proportion is aimed to increase by 9-10%.

Cost Leadership Strategy

Indofood has gained 72% market share in Indonesia. It is the highest market share. The company is in the position of determining the prices of the products. The prices of the company are followed by competitors. A small hike price in the instant noodles does not decline the market share but improve the earnings.

In 2013, the company attained the highest market share due to the wide range of the product’s launch. From 2013-2019, the company went up and down, now the company has again maintained its position in the market. Although the condition of the Indofood was challenging in 2018. The rising trend of crude palm oil has impacted positive on the earnings of the company (Noe, Hollenbeck, Gerhart, & Wright, 2017). Indofood has even planned to enhance its distribution and logistics network by increasing the number of stores and outlets mainly in the rural areas.

Cost leadership strategy

Indofood can effectively compete with the competitors by making use of the cost leadership strategy. It is a method to increase efficiencies and reduce production costs. Nowadays business environment is complex and sophisticated and the customers are aware of only the choices available to them. In such a scenario, competitive pricing is the only option to differentiate itself. The organizations having the least production costs can offer the product quality compared to the competitors for a lower price (Indofood, 2016). 

The customers look to enhance their purchasing power and it is possible by purchasing more at a lower price (Phadermrod, Crowder, & Wills, 2019). The cost leadership strategy objects to utilize the scale of production by good purchasing strategy and producing standardized products. On the other side, maintaining lower prices have a role in higher profit margins.

Market leadership position: Indofood has gained a strong market leadership position in the food processing industry. It has assisted the company in the scaling success of the products rapidly.

Talent management: Indofood has a pool of skilled employees in the organization. The human resources are vital to the success of the company in the food processing industry.

Track record of innovation: There are most players in the food processing industry struggle to innovate the products. On the other side, Indofood has created a successful record of innovative products (Bull, et al. 2016).

Caters various customer segments: The extensive product offering of the company has assisted to penetrate on the various customer segments in the food processing industry. It has even helped in diversifying revenue streams.

Loyalty: The company has gained low loyalty among the suppliers. The history of Indofood is introduced with the innovations which drive down the prices in the supply chain.

Declining market share: The market share of Indofood is declining along with the increased revenues. The speed of the growth of the company is slower than the growth of the food processing industry (Salavou, 2015). 

Fewer investments into the customer-oriented services: The fewer investments by the Indofood lead to competitors gaining an advantage in the coming years. The company needs to invest more in the research and development concerning customer service oriented applications.

Gross margins and operations margins: Both gross margins and operations margins are less which puts pressure on the financial statement of the company (Chang & Taylor, 2016).

Local collaboration: Indofood can collaborate with the local players to gain opportunities for growth in the international markets. The local expertise is helpful in attaining opportunities of increasing the customer base (Sawhney, et al. 2017).

The rapid expansion of economy: the U.S is growing at an improved rate than other developed economies. It is a huge opportunity for Indofood to expand its operations in the U.S. food industry.

Online space: Indofood can embrace online services by customers. It can enable the company to offer new products on the regular basis.

The increased customer base in the lower segments: The customers migrate from un-organized operators in the industry to licensed players. It has a role in providing an opportunity to penetrate the entry level market (David, & David, 2016).

Changing demographics: The changing demographics find hard to replace their purchasing power. It leads to higher profits in the short term but leads to reduced margins in the long run. It is because people have attained less loyalty toward brands and are exposed to the experiments (Seifbarghy, Nouhi & Mahmoudi, 2015).

Growing technological expertise: Indofood is losing international public relations due to tie up with the local players. The framework such as intellectual property rights is not much strength in emerging markets like China.

Competitive pressures: The reduced new product launch cycles in the industry has put pressure on the Indofood. The company is not capable of responding quickly to the needs of the niche market (Frambach, Fiss, & Ingenbleek, 2016). 

Conclusion

Indofood is successfully conducting operations in the local as well as global economy. The company is capable of competing efficiently by its extensive product range. The company has also attained competitors in noodles and dairy segment. Indofood has a large segment of the customers mainly belonging to the middle class. The competitors of the company give the motive to maintain its position in the market. The market share is maintained on the regular basis by the company. The cost-effective strategy is capable enough to increase the number of customers. Indofood has attained more of strength and opportunities than the weakness and threats.

References

Berman, C. (2017). What Type of Segmentation Is Used by Food Companies?. Retrieved from: https://smallbusiness.chron.com/type-segmentation-used-food-companies-72664.html

Bonacchi, M., & Perego, P. (2019). Customer Accounting: Creating Value with Customer Analytics. Springer.

Bull, J. W., Jobstvogt, N., Böhnke-Henrichs, A., Mascarenhas, A., Sitas, N., Baulcomb, C.,  & Carter-Silk, E. (2016). Strengths, Weaknesses, Opportunities and Threats: A SWOT analysis of the ecosystem services framework. Ecosystem services, 17, 99-111.

Chang, W., & Taylor, S. A. (2016). The effectiveness of customer participation in new product development: A meta-analysis. Journal of Marketing, 80(1), 47-64.

David, F. R., & David, F. R. (2016). Strategic management: A competitive advantage approach, concepts and cases. Pearson.

Frambach, R. T., Fiss, P. C., & Ingenbleek, P. T. (2016). How important is customer orientation for firm performance? A fuzzy set analysis of orientations, strategies, and environments. Journal of Business Research, 69(4), 1428-1436.

Indofood. (2016). Brief History of the Company. Retrieved from: https://www.indofood.com/company/history

Indonesia Investments. (2018) Outlook on the Food Service Industry in Indonesia. Retrieved from: https://www.indonesia-investments.com/business/business-columns/outlook-on-the-food-service-industry-in-indonesia/item9001?

Innofood. (2017). Segmentation in the Food Industry. Retrieved from: https://www.innofood.es/en/segmentation-in-the-food-industry/

Noe, R. A., Hollenbeck, J. R., Gerhart, B., & Wright, P. M. (2017). Human resource management: Gaining a competitive advantage. New York, NY: McGraw-Hill Education.

Phadermrod, B., Crowder, R. M., & Wills, G. B. (2019). Importance-performance analysis based SWOT analysis. International Journal of Information Management, 44, 194-203.

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Sawhney, M., Grayson, K., Dupree, P., Hsu, C., Metzger, R., Obuchi, F., … & Wilson, K. (2017). Ontela PicDeck (B): Customer Segmentation, Targeting, and Positioning. Kellogg School of Management Cases, 1-6.

Seifbarghy, M., Nouhi, K., & Mahmoudi, A. (2015). Contract design in a supply chain considering price and quality dependent demand with customer segmentation. International Journal of Production Economics, 167, 108-118.

Vera, J., Perez, C., Puig, A. & Vicente, L. (2016). Consumer segmentation based on food-related lifestyles and analysis of rabbit meat consumption. Retrieved from: https://www.researchgate.net/publication/308696284_Consumer_segmentation_based_on_food-related_lifestyles_and_analysis_of_rabbit_meat_consumption

Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2017). Strategic management and business policy (p. 55). Boston: pearson.

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