Analysis of 5 Cs of the H2G, Australia
Discuss About The Business Models For Strategy And Innovation.
Honest to Goodness is a leading platform for customers throughout Australia to buy organic and 100% natural products. The company was founded in 2002 by entrepreneur Matt Ward in collaboration with his wife Karen. Today, sixteen years the later, the organization continues to be one of the leading brands of natural and organic products in Australia. The brand claims to sell 100% natural products with no added flavors, preservatives, colors, sweeteners, hydrogenated oils (trans-fat) or any food products that contain palm oil. Since its inception, the brand has changed the shape of Australian food industry.
The changing lifestyles of people towards healthier living has encouraged various businesses to venture into selling organic and natural products. H2G (Honest to Goodness) currently offers bulk wholefoods, organic & natural groceries as well as organic ingredients for meals. Their offerings are spread across 33 categories including confectioneries, dried fruits, flour, rice, sugars and tea & coffee etc.
H2G has introduced Australian customers to a unique product and hence continues to target a niche market of the country. Given the growth of the brand, it is evident that the firm is experiencing increasing demand and enlarging target market. This report aims to highlight upon different facets of the organization as well as the industry that it operates in. Currently the brand is serving to customers across Australia. Operational efficiency of the brand can be attributed to a strong network of suppliers and distributors of the firm. The report throws light on the 5 C analysis of the organization which helps in gaining a deeper insight about the strengths and weaknesses of the brand as well as a macro environmental scenario of the industry that it operates in. The report also recommends strategies to improve upon the brand’s marketing mix which would assist the H2G in gaining customers and establishing an improved positioning across the globe.
5 C analysis is often conducted by businesses in order to understand deeply about the company, competitors, collaborators, context as well as customers. The overall analysis would help in conducting a micro analysis on an organizational level and macro analysis on an industrial level. The 5 C analysis for Honest to Goodness in Australia is depicted as below:
The most strategic way to understand about a company is to conduct a SWOT analysis. This analysis helps in identifying strengths, weaknesses, opportunities and threats that guide the firm. The SWOT of Honest to Goodness is as below:
Company
First mover advantage: The major strength of the Honest to Goodness is the first mover advantage that the firm displayed by entering into the niche market of organic and natural products back in 2002. The industry was still in its infant stage and hence Honest to Goodness managed to be one of the early entrants in the industry. The first mover in any industry automatically gain a competitive advantage as opposed to other players (Markides & Sosa, 2013).
Strong brand name: Honest to Goodness has won the award for the “Favorite organic brand”, “Best organic wholesaler” and “Best organic online store” for three years in a row in the Organic Consumer Choice Award (OCCA) (Honest to Goodness, 2018). This reflects that the brand is trusted and resonates well with consumers. These awards are evidence of high levels of brand salience and recall value in the minds of customers.
Strong value set: Another strength of the Honest to Goodness is the strong set of values of the business. Strong ethics of any particular organization help the brand in building trust and respect in the minds of consumers (Hartman et. al., 2014). Honest to Goodness is proud of its solid value base. The organization and all its stakeholders continue to work towards creating a healthy society and spread the message of fitness. Honest to Goodness is a socially and environmentally responsible firm.
Large range of offerings: Honest to Goodness also offers a large range of offerings that includes rice, wheat, fruits, coffee, tea, flour, juices, dried fruits etc. There are 33 categories offered by the brand to customers to select from. Since no other competing firm is offering such a massive range of products, this is definitely an advantage for Honest to Goodness.
Niche market: The primary weakness faced by every organization in this industry is that the market for organic products continues to be niche and highly limited at the moment. The lifestyles of people are changing but at a slow pace. Hence until the Honest to Goodness would have to continue putting efforts in attracting more customers. Niche marketing is a lot more difficult than mainstream marketing because marketers need to create the demand and then work towards fulfilling it (Kim & Mauborgne, 2014).
Premium pricing and low profit margins: Organic and 100% natural food products are more difficult to procure and entail larger costs. In order to recover those costs, Honest to goodness has to adopt a premium pricing strategy. Premium pricing refers to the process of pricing a product higher than industry standards (Nagle & Müller, 2017). This premium pricing strategy and lower profit margins require the business to run on economies of scale (Polkinghorn, 2016). However, this becomes difficult because of the small size of the niche market.
Strengths
International expansion: The brand’s operations are limited to Australia at the moment. International expansion to other countries would provide the Honest to Goodness with an excellent opportunity to grow its target market and enhance its customer base. Planned expansion through international boundaries would help the brand in going global.
Social media marketing: With the advent of technology and increasing use of internet, social media marketing has come to play a significant role for organizations in reaching out to customers (Tuten & Solomon, 2017). Honest to Goodness is not highly active on its social media platforms and it is recommended that the brand can device effective social media marketing strategies. This would assist in reaching out a larger customer base.
Increased number of outlets: Even in Australia, Honest to Goodness products are available at various supermarkets and retail stores. However, the brand’s own stores are very few. Increasing the number of stores run under the name of “Honest to Goodness” will help in enhancing brand awareness and allow the brand to set the right positioning in the minds of its customers.
Tie up with fitness centers: Effective collaborations are pivotal to the success of any business (Majava et. al., 2013). One opportunity that Honest to Goodness can take advantage of is the increasing number of fitness centers that have entered the Australian market. The brand can effectively tie up with the centers and target the most appropriate audience for its branding.
Growing competition: The primary threat that is posed to Honest to Goodness is the increasing competition in the industry of organic products. H2G once had the first mover advantage but now the industry is getting flooded with more and more players making it a Red Ocean market. This growing competition makes it imperative for industry players to device strategies that would help them in gaining a competitive advantage over others (Campbell et. al., 2012)
Price war: The increasing competition in the industry in turn poses the threat of a price war wherein all the players fiercely compete with each other in terms of pricing. This leads to price of the product falling too low which may lead to losses for business involved (Risen, 2014).
Honest to Goodness is in the business of selling organic and 100% natural food products. These products are premium priced owing to their high cost of production and manufacture. At present the demand for such products is also relatively lower and hence it is difficult for firms in the industry to run on economies of scale. Hence in order to cover costs, Honest to Goodness has adopted a premium pricing strategy.
Weaknesses
Target market of any business comprises of the set of customers whose needs the business aims to fulfil (Lee & Carter, 2011). Therefore, predominant customers of the product are premium customers who can afford organic and natural products. These customers belong to middle and high income groups and are spread across all age groups. With the changing lifestyles and increasing awareness, target customer market of Honest to Goodness’s potential customers are increasing.
Health conscious customers are also targeted by the brand. These customers understand the importance of organic and natural products as well as the positive impact that these products have on their health. These customers are spread across different age groups, ethnicities and religions.
Owing to limited geographic expansion of Honest to Goodness, the brand’s customers are limited to Australia.
The success of any business largely depends on the network of the business and its various collaborations with different stakeholders of the firm (Lawrence & Weber, 2014). For Honest to Goodness, the predominant collaborations include the brand’s growers and suppliers. The growers include farmers who grow the organic products in a 100% natural form. The suppliers are the stakeholders who supply Honest and Goodness’s products to its customers. The growers of the products are strictly guided regarding the strategies used to grow the products in order to ensure that the products are grown in an environment friendly manner.
Another important collaboration of Honest and Goodness are its retailers. Since the brand has limited outlets running by its own brand name hence the business needs retailers who can sell the brand’s products in their own outlets. This is where the brand’s collaboration with retailers comes into the picture. These retailers’ stock products sold by Honest and Goodness and sell it to customers.
The changing lifestyle of people and the increasing number of health consciousness among consumers has led to an increase in competition in the market. There are several other players in the organic foods industry in Australia. The key players in the market include Hemp foods Australia, Sanitarium health and well-being, complete health products, Santos organics warehouse etc.
These brands are relatively new and hence do not pose a strong threat to the strong brand name of Honest and Goodness especially in the Australian market.
Australia is a constitutional monarchy under a political democracy. The political scenario is Australia is stable which provides a positive environment for businesses to begin and function. There are two main political parties which include Liberal Party of Australia and National Party of Australia. The political scenario of Australia and its stability has created a positive business environment which is directly beneficial for the brand.
Opportunities
The increasing advent of technology in the world has a direct impact on various businesses (Sako, 2012). Honest and Goodness sells organic and natural products online. This requires customers to use internet. The increasing advent of internet has made it possible for Honest and Goodness to reach out to customers through various platforms. These customers are now able to book their orders and get them delivered at their doorstep. The entire business model of H2G is the gift of growing technology and this growth has positively impacted the business.
Environment responsibility is crucial for the growth of any business. Honest to Goodness is in the business of sourcing organic and natural products and hence it is of utmost importance that the brand effectively manages waste. H2G must also ensure environment friendly packaging of its products. The growing sustainability of these products and the environment is the primary responsibility of any business (Jonoski et. al., 2015).
There are various factors that are currently impacting the business of Honest to Goodness. Understanding customer needs is pivotal to the long term sustainability of any business (Williams & Naumann, 2011). For H2G, customers need 100 % natural foods that are organic. Customers need to make sure that the products offered are grown and distributed in an environment friendly manner. It is imperative that customer needs are effectively analyzed and fulfilled by brands. In order to achieve this, Honest to Goodness must put efforts in understanding consumer buying behaviors, patterns and attitudes.
One of the most importance change observed from the industry perspective, there is an increasing competition that is being faced by Honest to Goodness. Every player in the industry tends to adopt different strategies in order to gain a competitive advantage (Madu, 2012). The number of players within the industry are consistently on a rise. Hence Honest to Goodness would have to put efforts in gaining a competitive advantage against these firms.
With the increasing competition, there is an Increasing bargaining power of collaborators. The same suppliers and retailers are now approached by different brands. This leads to an increase in the overall cost for Honest to Goodness.
The product offered in this case are predominantly organic foods which are 100% natural. The brand also sells recipes and books which attempt to guide customers on the advantages of consuming organic products. Growth of the product offering by a particular brand leads to sustainable growth of the business (Armstrong et. al., 2015).
The brand must consistently widen its product line. This can include tying up with chefs and introducing new cuisines which are healthy. They can also sell other products which are environment friendly. These can include bamboo toothbrushes, wooden pens and paper bags which eliminate the use of plastic from the market.
Threats
The pricing strategy adopted by Honest to Goodness is premium pricing. Honest and Goodness CEO mentioned that if the demand for organic products rises then the firm would be in a better position to reduce its prices and hence more people will be able to afford these products thereby enhancing the brand’s target market (Inside FMCG, 2017).
Hence in order to adopt a more competitive pricing strategy, the brand must focus on increasing awareness of the product. This in turn would increase demand. This will eventually lead to increased sales and hence improved pricing strategy by the brand.
The place where a business operates largely defines its growth in the industry (Gordon, 2012). Currently the brand is only functioning in Australia. Honest and Goodness products are distributed throughout Australia via various channels. This includes their online website, several retail stores, supermarkets and other wholesalers who are working towards distributing the product among people.
In order to improve the brand’s reach, it is recommended that Honest and Goodness breaks its geographical boundaries and caters to customers present outside of Australia. In order to achieve the same, Honest to Goodness can start exporting in other countries. Another strategy would be to enter the Asian market through a joint venture. This would help the brand in reaching out to more customers across different parts of the globe. A planned international expansion can help Honest and Goodness become a global brand.
Promotional strategies adopted by the brand help organizations in devising effective strategies to reach out to their customers (Singh, 2012). Currently the brand has resorted to traditional forms of marketing in order to target new customers. However, it is recommended that in order to fight the increasing competition in the industry, the brand must resort to digital media marketing strategies in order to reach out to technologically savvy customers.
Social media marketing strategies involve reaching out to customers through social media platforms including Facebook, Instagram and Twitter (Packer, 2011).
Besides this, digital media marketing strategies in the form of search engine optimization and search engine marketing must be adopted. SEO and SEM are conducted to ensure that customers can search for the brand easily and hence gain enhanced awareness about the same (West, 2012).
The people associated with any organization includes all the stakeholders of the business. It is the people of the business that actually form the backbone of the business. Honest to Goodness must make sure that it corresponds well with all its stakeholders. Stakeholder satisfaction is crucial for any organization and results in increased employee and customer satisfaction (Taylor & Judson, 2014). Honest and Goodness must put efforts in understanding customer needs, keeping their employees satisfied, developing long term relationships with their collaborators and establishing sustainable bonds with all the stakeholders of the business. This will lead to increased coordination among these stakeholders and hence improved business efficiency.
Conclusion
The changing lifestyles and increasing switch towards healthier alternatives in food have created the organic food industry which is consistently on a rise. A leading player of the industry in the Australian market is Honest and Goodness. The brand sells organic and 100% natural products to its customers. These products are spread across a large variety and reach out to customers through effective collaboration with growers, suppliers and retailers.
The organization has a strong brand name which is trusted among customers and is largely respected. The strong value set of the business has also further added to the trust. At present, the business is catering to Australian customers but it is strongly recommended that H2G breaks its geographic boundaries and puts efforts towards serving customers in different parts of the world.
Various improved promotional strategies including digital marketing (SEO & SEM) and social media marketing strategies have been recommended to the brand for improved ways to reach out to customers. Efforts to better understand consumer needs, keeping employees satisfied and establishing sustainable relationships with all the collaborators is sure to positively impact the business, enhance customer base and eventually lead to improved growth. Honest and Goodness is one of the early movers in the organic foods industry. The initiative is truly commendable and it is the growing number of such brands that people are becoming more responsible towards their own health as well as the environment.
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