Great Start Nutrition: SWOT, PESTEL and Porter's Five

Abstract

Great Start Nutrition is looking to expand and is exploring the opening of a new manufacturing, sales, and distribution facility in the next year. Currently, products are sold throughout the US and the European division but there is a great demand for its current product in China. The group from Mayberry Consultants has been tasked with conducting SWOT, PESTEL, and Porter’s Five Forces analysis of Great Start Nutrition for the industry. In addition to the internal and external analysis, the team was tasked with identifying four (4) major business goals that Great Start Nutrition should initially be focused on as it ventures into the infant formula industry.

INTRODUCTION:

The group from Mayberry Consultants has been tasked with conducting an internal and external analysis of the infant food industry, assessing Great Start Nutrition’s future within in the industry and developing the business strategy for Great Start Nutrition as they move forward. Using the Great Start Nutrition Company Profile the team will complete an analysis and strategies to help the organization in completing goals and objectives of the new Infant formula product.

PESTEL ANALYSIS

The aim of this analysis is to explain some of the political, economic, social, technological, environmental, and legal factors affecting Great Start Nutrition’s business plan in China.

POLITICAL FACTORS

As you know, China is an economic and political superpower. Over the years, it has implemented several significant developments of change and made spectacular improvements in many fields (Rahman, 2018). China's economic growth and reform since 1978 has improved dramatically the lives of hundreds of millions of Chinese, increased social mobility, and expanded the scope of personal freedom (Fogel, 2010, Pg. 20). Although China enjoys a secure political environment, the lack of political freedom is an area of concern (Rahman, 2018).

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On the other hand, the country has strong current account surplus and high foreign reserves. China attracts more trade due to its strategic location. China is among the top largest destination for foreign direct investment (Fogel, 2010, Pg. 20). These are factors that need to be considered when assessing the attractiveness of a potential and stability market when starting our business in China.

ECONOMIC FACTORS

Economic environment is the second element to address in the PESTEL analysis. One of the reasons why we choose to manufacture our products in China is because of the availability of affordable labor. Cheap labor is a remarkable source of aggressive benefit for China (Rahman, 2018). The standard corporate earnings tax rate is 25%; however, the Chinese authorities reduces the rate to 15% for certified corporations which operate in industries stimulated through the government. These are the advantages that the company can have in determining the prices and revenue the products.

China is the 2nd largest economy in the world by nominal GDP. The country has made a shift from a centrally planned to a market primarily based billion economy and the GDP boom has averaged almost 10 percent a year (Rahman, 2018). According to McCullough (2017), China is the second dairy market with a value of USD $55 billion. Moreover, a recent survey from consulting firm McKinsey & Co. found that over half of the 10,000 people surveyed still prefer a foreign brand for baby formula.

SOCIAL FACTORS

China represents a good number of demographic characteristics, norms, customs and values of the population within which the organization operates. The population is equivalent to 18.41% of the total world population. The most important values of Chinese culture include the: importance of the family, hierarchical structure of social life, cultivation of morality and self-restraint, and the emphasis on hard work and achievement. The Chinese Government recognizes five official religions which are Buddhism, Islam, Taoism, Catholicism, and Protestantism. China seeks to regulate religious groups and worship (Fogel, 2010, Pg. 23). These factors are especially important for us when targeting certain customers. In addition, it also says something about the local workforce and its willingness to work under certain conditions and regulations.

TECHNOLOGICAL FACTORS

According to UKE, there was a technology agreement cooperation between the U.S and China in science field. In April 2006 the Science and Technology Agreement used to be extended through a 5-year settlement was signed. China is turning to foreign robotics and smart factory technologies to enhance competitiveness as it seeks to close the gap in manufacturing (Ng, 2017). Great Start Nutrition has multiple advantages when to comes to technology. The company can bring their technology and adapt it in China in producing the new Infant formula. These factors pertain to innovations in technology that may affect the operations of the industry and the market favorably or unfavorably. These factors may also influence decisions to enter or not enter certain industries, to launch or not launch certain products or to outsource production activities.

ENVIRONMENTAL FACTORS

China’s rapid financial development has impacted on its natural surroundings severely. Water and air pollution, industrial waste, deforestation, climate change, and biodiversity loss are some of the examples of environmental challenges going through China today. However, it must be noted that the Chinese authorities has taken a quantity of initiatives to address the environmental concerns. Examples of initiatives include however not confined to decentralization of accountability to local levels, and encouraging public participation in environmental protection (Rahman, 2018). Industrialization over the past half-century has enabled China to become an undeniable manufacturing powerhouse. However, years of relaxed regulations coupled with cost-driven business practices throughout the nation have led to severe environmental issue (Rahman, 2018).

LEGAL FACTORS

Legal environment is the last element to discuss in the PESTEL analysis. There is a quantity of laws that modify enterprise and employment practices in China. Tax incentives and other facilities for the manufacturing sector are provided for in the Promotion of Investment. Great Start Nutrition Business will be categorized as Encouraged category. Agricultural machinery manufacture, and fruit and vegetable drink production are some of the industries in this category (Rahman, 2018).

The lessons learned from the melamine crisis have been brought pointedly into focus to the Chinese government. Since then, China passed a new law on additives, and beefed up government coordination on food safety, including by restructuring its agency that administers food and drug safety (Huang, 2018).

 Recommended is to have a legal advisor or attorney to help Great Start Nutrition with these kinds of things.

SWOT ANALYSIS

PORTERS FIVE FORCES ANALYSIS

1. Supply power: (low pressure) Great Start Nutrition can get enough dairy supply in China without pressure. As far as natural pharmaceutical ingredients the company can shipped its owned ingredients from New Zealand and India. Currently, the company has 7 manufacturing operations worldwide. There is no reason for suppliers to drive up prices.
2. Buyer power: (medium pressure) As mentioned from economic factors,10,000 Chinese people still prefer a foreign brand for baby formula. However, the company needs to endorse the milk product into the market. Currently, the infant milk product of Great Start Nutrition does not have reliability and credibility to the consumers. Consumers can trigger to drive down profit or prices anytime.
3. Competitive rivalry: (high pressure) Currently, the main competitor is Nestle, Enfamil, and Lebenswert which some of them are also MNC companies with multiple infant milk products. Since we are new entrant to the market we could be easily wiped out in the industry. They also have power to reduce our market attractiveness.
4. Threat of substitution: (low pressure) The infant milk product of great start nutrition is unique. There are not many infant milk products in the market that promotes organic ingredients. Also, the product is brand new and it is still in a test process.
5. Threat of new entry: (medium pressure) Entry barriers are relatively medium for the infant milk product industry. There is an increasing number of new brands appearing in the market with similar products to Great Start Nutrition.

GOALS AND OBJECTIVES

Setting SMART goals was the tools that we used to evaluate the goals we wish to set. In this topic we will identifies and discusses four (4) major goals that the company should look to attain, with explanations as to the importance of each goal and why the goals are relevant to the company’s strategy.

1. Recruit talented and skilled people in our workforce within 6 months. The more people are available to work, the faster projects can be completed or the more projects a company can take on. Conversely, a lack of adequate manpower prevents businesses from completing tasks. Great Start Nutrition should form a group of advertising team, lawyers, logistic team, and operations team. We must establish the function of the organization in order to succeed. Start training.
2. Establish the area and equipment for manufacturing operations within 1 year.  We must choose an efficient location to delivery products in time to customers and retailers and support supply chain. Then start buying manufacturing equipment and construction of the site.
3. Start importing our products to China within the next 3 months. We must establish reliability and credibility to our customers and suppliers. We must let the market know on who we are, and what we do, start advertising our products. We are an MNC company and the other 7 manufacturing countries can support our plan to make it happen. The conclusion from SWOT analysis is lack of our presence.
4. Start opening the manufacturing of Great Start Nutrition Manufacturing in China within 2 years. For this strategy, we will use the POLC approach. While drawing from a variety of academic disciplines, and to help managers respond to the challenge of creative problem solving, principles of management have long been categorized into the four major functions of planning, organizing, leading, and controlling (Boundless, 2019). Remember our plan in creating a new division in China for great demand of our new Infant milk formula. Moreover, the data from SWOT, PESTEL, and Porter’s five forces analysis are vital in achieving our goals and objectives.

 COMPETITIVE ANALYSIS

With enough assets and resources, we can compete with our major competitors. We have all the opportunities to start our new division. With enough time we can gather enough data to find more weaknesses against our rivals in the industry. It is done by identifying our competitors, then evaluating their strategies for strengths and weaknesses relative to our own. When done effectively, competitive analysis will help us understand our competitors’ capabilities, which will inform you how they go to market and what they prioritize in their operations (Boundless, 2019).

RESOURCES:

• Australian Government. (2019, January). How to set goals and objectives for your business in 2019. Retrieved from https://www.business.gov.au/news/how-to-set-goals-and-objectives-for-your-business
• Boundless. “Boundless Management.” Boundless Management | Simple Book Publishing, May 2019, courses.lumenlearning.com/boundless-management/
• Enfamil. (n.d). Products. Retrieved from https://www.enfamil.com/
• Fogel G. (2010). BUSINESS ENVIRONMENT IN CHINA:  ECONOMIC, POLITICAL, AND CULTURAL FACTORS. Retrieved from https://www.usi.edu/media/3654697/Business-Environment-China.pdf
• Great Start Nutrition. (n.d). Great Start Nutrition Company Profile. Retrieved from https://learn.umuc.edu/content/enforced/431441-001033-03-2195-ES1-E321/Great%20Start%20Nutrition%20Company%20Profile.pdf?_&d2lSessionVal=PY1vlQ3ixJQH1CrdK0m7a0VQu
• McCullough C. (2017, September). China to be largest dairy market. Retrieved from https://www.agupdate.com/agriview/markets/dairy/china-to-be-largest-dairy-market/article_51746361-c21f-5d54-be62-c0153b10ac03.html
• Mueller S. (2017, December). Doing Business in China: Eight Important Considerations When Entering the Chinese Market. Retrieved from https://medium.com/ming-labs/doing-business-in-china-eight-important-considerations-when-entering-the-chinese-market-1302b2b4e53a
• Nestle. (n.d). Products. Retrieved from https://www.nestle.com/home
• Ng E. (2017, September). China embraces smart factory technology in manufacturing arms race with Germany, Japan. Retrieved from https://www.scmp.com/business/companies/article/2112452/china-embraces-smart-factory-technology-manufacturing-arms-race
• Organic Start. (n.d). Product. Retrieved from https://organicstart.com/baby-care/
• Rahman M. (2018). China. Retrieved from https://www.howandwhat.net/pestel-analysis-china/
• UKE. (n.d). PESTEL Analysis of Chinese Economy. Retrieved from https://www.ukessays.com/essays/economics/the-chinese-economy-and-a-pestel-analysis-economics-essay.php