Macroenvironment & Consumer Behaviour Analysis
Executive Summary
An evaluation of macroenvironmental factors and consumer behavior is an integral component of strategic planning. Current and potential fluctuations in the business climate can be monitored and forecasted by new market entrants through in-depth market research of internal and external governing factors. For this purpose, the Functional Water (FW) industry in Australia has been selected for the undertaken research. Analyses have been conducted on the macroenvironment and consumer patterns in the Australian FW market. The evaluation has revealed that Australia’s stable and favorable political, social, technological and economic environment reveal bright prospects for new market entrants in the FW industry. However, strict compliance with environmental and legal policies and regulations is essential to conduct businesses successfully. The supporting trends of the Australian consumer base towards healthy, energy and sports-related drinks has been identified. These trends have been reinforced by relevant marketing and consumer behavior theories. Hence, it is recommended to invest in the FW industry and target the sports and energy drink segments to attract consumer attention and attain profitability. Utilization of the Marketing Mix (4P’s) concept and Ansoff Matrix tool is recommended for market entry, market penetration and development, and product diversification.
Introduction
Macroenvironmental and consumer behavior analysis is a fundamental component of strategic planning. For existing and emerging business organizations, profitability and growth is strongly dependent on how effectively the businesses’ respond to the macroenvironment and consumer preferences. Macroenvironmental appraisal involves the scanning the business functioning climate for potential changes in specific patterns and trends, forecasting future trends, and evaluating the impact of the current and future changes on the firm’s performance (Ginter & Duncan 1990, p. 92). For this report, the Functional Water (FW) industry in Australia is selected for macroenvironment and consumer behavior evaluation. Concurrently, the purpose of this report is to employ two real-life marketing examples, Coca Cola Amatil Limited (CCA) and Asahi Group Holdings Limited (Asahi), to investigate the macroenvironment and consumer behavior in Australia for the FW industry. A critical evaluation of these environments will follow the macroenvironment and consumer behavior analysis in light of key marketing theories. Recommendations on the viability of investing in the Australian FW industry will also be provided.
Macroenvironmental Analysis
CCA and Asahi are two of the major players in the Australian FW industry that have monitored and adjusted to the political, economic, social, technological, legal and environmental conditions in the country. The PESTLE analysis (Table 1 in the Appendices section) will help in analyzing the business climate and environment in Australia.
Political
Being a constitutional monarchy with British Royalty and the Prime Minister heading the democratic government, Australia has a stable and safe political environment for conducting businesses. According to the report published by MarketLine Industry Profiles (2019, p. 21), CCA and Asahi have faced stiff market competition from other brands such as Nestle and Coca-Cola that availed the favourable political conditions in the country and improved their 2018 market shares in the FW industry (Figure 1 in Appendices section).
Economic
As a key member of the Organization for Economic Cooperation and Development (OECD), the G20, Commonwealth of Nations, and the World Trade Organization, Australia has become an economic hub. Although the GDP growth rate is set to decline by 6.67% (Figure 2 in Appendices section) by the end of 2019-20 fiscal year (FY) due to recession and substantial financial losses incurred due to the COVID-19 pandemic, the growth rate is expected to climb to 6.11% in the 2020-21 FY (Statista 2020). The revenues generated from the Australian FW market amount to $445.6 million and are expected to grow by 3% in the period 2021-2026 (Yeoh 2020, p. 7)). Moreover, the profit increased by 1% in the period 2016-2021. Despite the market entry of imported beverages, CCA and Asahi have benefitted from the conducive economic environment and have gained market recognition in the last five years.
Social
As far as the quality of life, health, wealth and education is concerned, Australia is one of the ideal countries in the world, comprising of a relatively small yet a multicultural population. With an increased focus towards education and sports, the country educates and nurtures young talent, which is a huge benefit to the business industries. According to the report published by MarketLine Industry Profiles (2019, p. 25-30), both CCA and Asahi have availed the availability of a talented and dynamic workforce in Australia to recruit key employees for various managerial roles.
Technological
Australia is renowned for adopting the latest technologies, especially in the business industry, to meet the growing demands of the consumers. The FW industry in Australia has not faced any noticeable technological disruption over the last five years. The technological change in the FW industry has been moderate and is governed by the dynamic trends of the manufacturing sector (Yeoh 2020, p. 40). CCA’s Project Zero is a fitting example of enhancing business profitability as the company overhauled its production, improved stock accuracy and minimized loading times to attain operational efficiency, thereby maximizing its profits through technological changes.
Legal
Australia’s legal landscape ensures fair trading for consumers and businesses through compliance of fair yet strict trading laws, consumer laws and competition laws. In this regard, the Fair Work Act 2009 is the governing law that protects the rights of businesses and customers. Moreover, Modern Slavery Act 2018, Competition and Consumer Act 2010, and Food Standards Australia New Zealand Act 1991 are some of the prominent regulations through which strict adherence to beverage quality standards, protection for consumers from unfair business practices, and mitigation of risks associated with modern slavery are ensured (Yeoh 2020, p. 42). The on-going COVID-19 pandemic has also resulted in the imposition of strict operating conditions for businesses.
Environmental
Blessed with the natural beauty of beaches, forests and mountains, Australia’s increasing number of tourists and industrial growth has posed some environmental challenges. The country was severely affected by the 2019-20 bushfires as global warming as resulted in adverse climate change. Moreover, Australia is one of the driest lands continents in the world. Since plastic is a major constituent of oceanic and land pollution, the Australian FW industry has particularly been impacted by the use of non-biodegradable plastic bottles that have increased the packaging costs of business companies (Yeoh 2020, p. 29).
Moreover, the Five-Force and SWOT analyses (see Table 2 & Figure 3 in the Appendices section) also reveal key macroenvironmental findings for a potential entrant in Australia’s FW industry.
Consumer Behavior Analysis
The Australian FW industry is governed by the consumer preferences that encompass health-related benefits and sports drinks as the major drivers of industrial manufacturing and production. The increasing awareness amongst consumers regarding various health problems have driven the customer behavior and demands for functional and fermented beverages to boost immunity. Moreover, beverage products manufactured domestically have been marketed and broadly distributed to increase consumer awareness and improve the growth of domestic brands (Yeoh 2020, p. 9). Increased participation of consumers in sporting activities has also raised the demand for sports drinks. Energy drinks have caught the eye of time-poor consumers, such as students and younger consumers, which form a substantial part of the Australian education and sports industry. The COVID-19 pandemic has compelled beverage brands towards online marketing to sell their products, and this has enabled the customers to purchase these products while maintaining social distancing and lockdown measures (Yeoh 2020, p. 4). For the last five years, the demand for functional beverages has driven Australia’s FW industry and is expected to grow in the next five years. Due to aggressive advertising and marketing campaigns, consumer behaviour can be relied upon to the extent of brand loyalty. Consumer behaviour is also governed by different varieties and innovative mix of flavours. Health-conscious consumers have also employed home equipment, such as juicers, to prepare their healthy drinks, and this behaviour has posed problems to the beverage brands in Australia. Furthermore, environmentally friendly packaging has also captured the interests of consumers having environment-friendly preferences for packaged beverages (MarketLine Industry Profiles 2019, p. 15).
Critical Thinking
As far as Australia’s FW industry is concerned, segmentation, targeting and positioning is highly relevant due to the changing behaviour and preferences of the consumers. Since customers are more careful about healthy lifestyles and environment-friendly products, these preferences have transformed into needs described in the theoretical concept of Maslow’s Hierarchy of Needs (Lester 2013, p. 15). Health is a basic necessity of life which is also influenced by the environment in which people live. Therefore, targeting consumers who are aware of health and environmental risks and positioning the businesses in regions where such people reside is crucial for a new entrant in Australia’s FW industry. Moreover, the Network Theory highlights the significance of the relationships the beverage brands can form by creating product segmentation (Mullins & Rhodes 2007, p. 1). For instance, energy drinks that contain caffeine can attract students who intend to study late at night or people who have to stay awake for night shifts. Similarly, sports drinks can become popular amongst people who prefer an active lifestyle that comprises of exercises, workouts and sports-related activities.
Targeting the customers’ needs corresponds to the Marketing Orientation Theory, which enunciates that the success of businesses depends on how well they can understand and fulfil the needs of customers than their rivals (Gheysari et al. 2012, p. 544). Furthermore, the Theory of Planned Behaviour can play a pivotal role in understanding how consumers think and behave (Hoppe, Vieira & Barcellos 2013, p. 71). This can help FW businesses in predicting how consumers would react to a new product, and it would ultimately help in diversifying the product segmentation. CCA and Asahi have dominated the FW market in Australia by segmenting their products and targeting each product towards its separate consumer base. These companies have also positioned their business locations strategically by employing aggressive advertising campaigns in urban regions. Therefore, it can be affirmed that segmentation, targeting and positioning are relevant to the FW industry in Australia.
Conclusion
In a nutshell, the macroenvironmental and consumer behaviour analysis of the FW industry in Australia has revealed that CCA and Asahi are the two major players in the industry that have analyzed the discussed macroenvironmental factors to dominate the market share. Although these firms face stiff market competition, their effective research on consumer needs, interests and preferences have given them a competitive edge over their rivals in the form of diverse segmentation of their products, and better business positioning to maximize their sales. This strategy is well-supported by the discussed theories that are associated with product marketing and consumer behavior.
Recommendations
In light of the increasing trends towards health and environmental awareness of Australian consumers, together with the rising numbers of sports activities, tourism and students, it is recommended to invest in the FW industry, but target the sports and energy beverage segments to extract the maximum profit. The four P’s of the Marketing Mix (Product, Place, Price and Promotion) would be useful for entering the FW market. Once the market entrance is achieved, market penetration and development, product development and diversification can be pursued by using the Ansoff Matrix tool.
References
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Ginter PM & Duncan, WJ 1990, ‘Macroenvironmental analysis for strategic management’, Long Range Planning, 23(6), pp.91-100.
Hoppe A, Vieira LM. & Barcellos MDD 2013, ‘Consumer behaviour towards organic food in porto alegre: an application of the theory of planned behaviour’, Revista de Economia e Sociologia Rural, 51(1), pp.69-90.
Lester D 2013, ‘Measuring Maslow’s hierarchy of needs’, Psychological reports, 113(1), pp.15-17.
MarketLine Industry Profiles 2019, Packaged Water in Australia, MarketLine, viewed 10 September 2020,<https://www.marketresearch.com/MarketLine-v3883/Packaged-Water-Australia-12076549/>.
Mullins D & Rhodes ML 2007, ‘Special issue on network theory and social housing’, Housing, Theory and Society, 24(1), pp.1-13
Statista 2020, Australia: Real gross domestic product (GDP) growth rate from 2009 to 2021*, Statista, viewed 9 September 2020, <https://www.statista.com/statistics/263602/gross-domestic-product-gdp-growth-rate-in-australia/>.
Yeoh YH 2020, Functional Beverage Production in Australia, IBISWorld, viewed 11 September 2020, < https://www.ibisworld.com/au/industry/functional-beverage-production/5502/>.
