Anakku: Revitalising the Next to Nature Feeding Range

Table of Contents

1.0 Business Definition and Scope

2.0 Situation Analysis

2.1 Macro Environment

Table 1: Anakku’s Macro Environmental Forces

2.2 Micro Environment

2.2.1 Market/Industry Review

Table 2: Intensity of Rivalry among Existing Anakku’s Competitors

Table 3: Threat of New Entrants in Anakku’s Competing Industry

Table 4: Bargaining Power of Suppliers Available to Anakku

Table 5: Bargaining Power of Anakku’s Target Market

Table 6: Threat of Substitutes in Anakku’s Competing Industry

2.2.2 Competitive Review

Table 7: Competitive Review Summary for Anakku and its Competitors

2.2.3 Review of Distribution Channels and Buyers

Figure 1: The Way Distribution Channels Operate in the Malaysian Baby Products Industry

2.2.4 Customer Review

2.2.5 Supplier Review

2.3 Internal Business State

2.3.1 Gap Analysis

Figure 2: N2N Gap Analysis

2.3.2 Product Life Cycle

Figure 3: N2N Product Life Cycle

2.3.3 BCG Matrix

Figure 4: Anakku’s BCG Matrix

2.3.4 Internal Capabilities

2.3.4.1 Non-Marketing Capabilities

Table 8: Anakku’s Non-Marketing Capabilities

2.3.4.2 Marketing Capabilities

Table 9: Anakku’s Marketing Capabilities

2.4 Critical Success Factors

2.5 Summary of Situational Analysis

Table 10: Summary of Situational Analysis

3.0 Marketing Objectives

4.0 Marketing Strategies

4.1 The Product Innovation Strategy (PIS)

4.1.1 The PIS Tactics

Table 11: Tactics for Product Innovation Strategy

4.2 The Distribution Network Strategy (DNS)

4.2.1 The DNS Tactics

Table 12: Tactics for Distribution Network Strategy

4.3 The Brand Promotion Strategy (BPS)

4.3.1 The BPS Tactics

Table 13: Tactics for Brand Promotion Strategy

5.0 Financial Budget

5.1 Sales Revenue

Table 14: N2N’s Sources of Sales Revenue

5.2 Expenses

Table 15: Expenses for N2N’s Product Innovation Strategy

Table 16: Expenses for N2N’s Distribution Network Strategy

Table 17: Expenses for N2N’s Brand Promotional Strategy

Table 18: Evaluation Costs for N2N’s Strategies

Table 19: Summary of N2N’s Financial Budget

6.0 Implementation, Monitoring and Control

Table 20: Schedule of Implementation and Monitoring of Tasks

Table 21: Monitoring and Controlling of Performances

7.0 Contingency Plan

Table 22: Actions for Contingencies

Appendices

References

List of Appendices

Appendix 1 - Financial Budget Calculations

Appendix 2 - Detailed SWOT Analysis

Appendix 3 - Detailed Competitive Review

Appendix 4 - Evaluation of Distribution Outlets

Appendix 5 - Critical Success Factors

Appendix 6 - Malaysia Income and Expenditure

Appendix 7 - Malaysia Country Profile

Appendix 8 - Baby Care Malaysia

Appendix 9 - Analysis of Indicators of other Macro Economic Factors

Appendix 10 - Rivalry among Existing Competitors and Bargaining Power of Buyers

Appendix 11 - Threat of New Entrants

Appendix 12 - Sourcing for the Most Cost-Effective and Cost-Efficient Suppliers

Appendix 13 - Calculation for Premium Pricing

Appendix 14 - Baby Fairs

Appendix 15 - Anakku Monash Slides by Jasmine Chew

Appendix 16 - Interview Transcripts

Appendix 17 - Collection of Questionnaires

1.0 Business Definition and Scope

Anakku defines its mission and vision as ‘ to create opportunities for continuous brand growth and market expansion in an attempt to reassure target market customers beliefs ’ in the Anakku brand ’ (Chew, 2009a). Its product-market definition suggests a wide range supply of baby products, in which its current focus is on the new ‘Bisphenol-A (BPA) free’ feeding range - Next-to-Nature (Chew, 2009c). Product categories in this range includes: main focus - teats, pacifiers, bottles, and sub-focus - cleaning and mother care accessories (Chew, 2009b). Relationally, Anakku faces stiff competition in these product categories from Avent, Dr.Brown, Nuby, NUK, Pigeon and Pureen (Chew, 2009c). In terms of its target market, Anakku is deemed to target potential and actual mothers who have children below the age of six from all income classes. Subsequently, more than 502 outlets have been established across Malaysia to cater to their large target market (Anakku, 2007a).

2.0 Situation Analysis

The situational position of Anakku is analysed in three aspects: macro environment, micro environment and the internal business state. Subsequently, critical success factors are derived and a summary of the situational analysis is presented in the form of a SWOT analysis.

2.1 Macro Environment

The driving forces of change in Anakku’s external environment consist of five forces: economic, sociocultural, political-legal, technological and the natural environment forces.

*Kindly refer to Appendix 9 for a detailed analysis.

In the economic environment, economic indicators such as spending power, unemployment rate, gross domestic product (GDP), global business cycle trends, inflationary/deflationary trends, interest rates, tax policies and saving rates were found to have an impact on Anakku’s future operations (Geahigan, 1990). For the socio- cultural aspect, changes in birth rates, marriage age, educational levels, demographic patterns, attitudes and lifestyles of the target market may have an effect on Anakku’s customers and their purchasing behaviour (Mazanec & Zins, 1992). In terms of the political-legal force, changes in polices of regulatory agencies and political parties should be monitored as it may alter Anakku operations overnight (Chikan, 2008). Technological advancement is the focal point in the technological force as it may have a substantial impact on Anakku’s activities (Hwang, 2003). Lastly, changes in product manufacturing and supply, energy supply and costs, and government policies regarding factors such as pollution and recycling in the natural environment may impact on the production and demand aspects for Anakku (Diakaki, Grigoroudis & Stabouli, 2006). Notably, the marketers of this plan has placed an emphasis on several key indicators for each force (italic) and are further explained in Table 1 below.

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Table 1: Anakku’s Macro Environmental Forces

2.2 Micro Environment

The following analyses are undertaken in relation to Anakku’s micro environment: market/industry review, competitive review, review of distribution channels and buyers, customer review and supplier review.

2.2.1 Market/Industry Review

The information provided below is based on market research reports which were derived from time series models, causal methods, customer aggregation models, Delphi model, and market and product analysis - Appendix 8.

The industry for baby products has grown rapidly in recent years, in which it has increased 4% in current value terms in 2008, to reach a sales figure of RM185 million (Euromonitor, 2009a). Even though the current value growth in 2008 was registered slower than in 2007, the rate of growth is still predicted to increase rapidly in the near future. This is further supported by the constant increase in Anakku’s sales turnover statistics - Appendix 15 (Chew, 2009a). Supportingly, the baby products industry is expected to see a current annual growth rate (CAGR) of 1% in constant value terms over the forecasted period.

Several reasons for the current and projected increased have been identified. As mentioned above in the economic environment, the growing number of double-income households have contributed to an overall rise in disposable incomes where baby product purchasers (parents) are now more willing and able to spend on better quality baby products, as they now place a higher priority on their child ’ s wellbeing (Euromonitor, 2008; Euromonitor, 2009a). Hence, it would be safe to assume that these purchasers would likely be attracted to the new N2N BPA-free feeding range as it is able to enhance a child’s wellbeing - reduce negative effects of BPA.

Another reason identified was the increasing demand trend for more expensive products. This trend was driven mainly due to the fact that parents were trading up to premium brands or value-added products for their better perceived product quality (Euromonitor, 2008). Supportingly, the new N2N feeding range fulfils the requirement for having a value-added benefit - BPA-free. However, its relatively low price in comparison with brands of similar products, such as Avent and Dr.Brown, may pose as a derailing factor towards Anakku’s perceived quality image.

To further analyse the changes in trends and the subsequent long term attractiveness of the baby products industry, the Porter’s five forces model is employed (Porter, 1979).

A scale of 1 to 5 is presented where 1 represents very low and 5 represents very high.

Rivalry Among Existing Competitors 10 Years Before Now 10 Years Later

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Table 2: Intensity of Rivalry among Existing Anakku’s Competitors

Table 2 presented that the intensity of rivalry among existing competitors in the baby products industry is increasing as the years progresses - represented by the unfavourable high future intensity score. Typically, the intensity of investment and product differentiation is even more crucial in the coming years (O’Shaughnessy, 1996; Thurlby, 1998) as baby product companies were found to have increase their investment and have been constantly coming out with uniquely differentiated products over the years - Appendix 10. In turn, Anakku would have to focus in both developing and communicating its differentiating point to its customers.

Threat of New Entrants 10 Years Before Now 10 Years Later

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Table 3: Threat of New Entrants in Anakku’s Competing Industry

Table 3 informs that the threat of new entrants into the baby products industry is decreasing as the years progresses - the high future score is now favourable as it shows the difficulty to enter into the industry. Typically, the high capital requirement and high product differentiation factors are crucial in deterring potential new entrants in the industry (Thurlby, 1998) - Appendix 11. In turn, Anakku could well expect its position not to be threatened by potential new entrants.

Bargaining Power of Suppliers 10 Years Before Now 10 Years Later

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Table 4: Bargaining Power of Suppliers Available to Anakku

Table 4 shows that the bargaining power of suppliers for the baby products industry is decreasing as the years progresses - the low future score is favourable as it presents a stronger bargaining power for Anakku. Typically, the high number of suppliers and low switching costs to other suppliers (Fei, 2009; Higgs, 2002) allows Anakku to source for the most cost-effective and cost-efficient suppliers to produce its N2N BPA-free products - Appendix 12. In turn, it would be wise for Anakku to source for the best available alternative to maximise its return-on-investment.

Bargaining Power of Buyers 10 Years Before Now 10 Years Later

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Table 5: Bargaining Power of Anakku’s Target Market

Table 5 shows that the bargaining power of buyers in the baby products industry is increasing as the years progresses - the low future score is unfavourable as it presents a stronger bargaining power for Anakku’s target market. Typically, the increase number of available substitutes and lower buyer switching costs in the future would imply that buyers could easily switch brands (O’Shaughnessy, 1996; Simkin, 1997) - Appendix 10. In turn, it would be important for Anakku to reinforce its principle of being close to its customers to make Anakku the customers’ choice.

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Table 6: Threat of Substitutes in Anakku’s Competing Industry

Table 6 shows that the threat of substitutes for the baby products industry has been at a moderate level from the past but is projected to increase in the future. Recent studies have shown that generation X moms are working towards breastfeeding as they are increasingly exposed to the utmost benefit of it (Women’s Health, 2008). Typically, this was seen to be increasingly encouraged in the Malaysian society (WABA, 2006) - most Malays and Indians breastfeed. Although the Chinese are a minority group, the increasing exposure of the above is likely to cause the trend to pick up and increase in the near future. Thus, it is essential for Anakku to take note of this trend in its marketing mix strategies for the N2N feeding range.

2.2.2 Competitive Review

The following is the competitive review in terms of feeding products for Anakku and its main competitors in the Malaysian baby products industry.

*Kindly refer to Appendix 3 for further information.

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Table 7: Competitive Review Summary for Anakku and its Competitors

Source: Guidelines adapted from P. Reed, Strategic Marketing Planning (2nd ed.), China, Cenage Learning, 2007, and adaptation of subsequent evidences from those incorporated in Appendix 3.

2.2.3 Review of Distribution Channels and Buyers

Anakku/Competitor Warehouse Anakku/Competitor Lorry and Van Couriers Stand-alone boutiques and mall kiosks

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Figure 1: The Way Distribution Channels Operate in the Malaysian Baby Products Industry

In terms of distribution outlets, stand-alone boutiques and mall kiosks were found to be a favourable option for Anakku (Lim personal observation, September 20, 2009). Relationally, Anakku was found to have the largest distribution chain for baby products in Malaysia (Che w, 2009a), with more than 102 boutiques and 400 mall kiosks throughout Malaysia and the number is continually increasing (Anakku, 2007a). Total sales from Anakku’s distribution outlets were stated at RM96.8 million at the end of the 2005/2006 period - Appendix 4. Notably, Anakku was found to be the only baby products company which has stand-alone boutiques, leading Anakku to be a one-stop solution centre for baby products. Offerings of competitors, such as from Avent and Pureen, were not seen operating in the way Anakku has done above (Lim, Seeto, Lim & Lim personal observation, September 20, 2009).

Notably, these competitors were found to have distributed their products via Anakku’s stand-alone boutiques and inside mall kiosks. Disappointingly, it was found that its competitors had participated in baby fairs unlike Anakku’s N2N. Nevertheless, Anakku does have its own mall kiosks, typically in Parkson and Jusco (Lim personal observation, September 20, 2009). Besides that, it is deemed that products from both Anakku and its competitors are send directly from their warehouses to these outlets and kiosks via their respective lorry and van couriers.

The power in the distribution channels were found in favour of the distribution outlets. As production costs were found to be 30% of the final price for Anakku products, distribution outlets were seen to hold a stronger bargaining power in an attempt to maximise their share of profit - approximately 20% profit (Chew personal communication, August 13, 2009). However, personal observations by Lim, Seeto, Lim and Lim (September 20, 2009) suggests that distribution outlets profits were not justified as the placing and communication methods of N2N feeding range in the outlets were found to be relatively poor - Appendix 4. In addition, the N2N feeding range were less seen in Anakku ’ s mall kiosks, typically in Parkson, which might result in the loss of potential sales as customers may instead purchase similar products with similar benefits from competing brands. Furthermore, the current loyalty membership card program is inefficient as it could not accommodate recognition of members who have forgotten to bring their loyalty cards, thus creating dissatisfied customers (Tan personal communication, September 24, 2009). Typically, the poor technological support here causes the marketers to be unable to derive a more precise figure on how many loyal customers are switching from normal Anakku feeding range to the N2N feeding products, thus creates a challenge in the development of strategies. In another context, Tan (personal communication, September 24, 2009) confirmed that a large proportion of outlet sales were contributed by the sales of hampers - potential avenue to increase N2N’s sales.

2.2.4 Customer Review

The review here is a vital element of this plan in providing Anakku with an in-depth knowledge of its target market behaviour and attitudes. According to Chew (personal communication, August 17, 2009), Anakku’s N2N feeding range targets a market of children from the age of 0 months to 6 years. Typically, from the research conducted in Appendix 16 and 17, the results suggested that buying behaviour of most parents were found to change as according to their child ’ s age. Subsequently, the segments of consumers for N2N can be divided into two: children below age 1 (Segment 1) and children from age 1 to 6 (Segment 2).

In Segment 1, it was found that parents of these children were more cautious when choosing feeding products. From the focus group research (Kuay, Tay & Tan focus group, September 5, 2009), it can be concluded that price is not a factor for these parents as they were found to be non-price conscious and had an intense urge to give the best and safest product for their child. This is supported from the results of the questionnaire research whereby parents within this segment were found to be more active in searching for information through sources such as baby magazines, internet and seeking advices from professionals, experience friends and family members - Appendix 17.

In contrast, results from Segment 2 concluded that parents with children from age 1 to 6 regardless of whether they have a child below age 1 were found to be more price conscious (Kuay, Tay & Tan focus group, September 5, 2009; Appendix 16; Appendix 17). A large majority of respondents from the focus group and interviews confirmed that they would continue to seek for products with good perceived quality but were willing to opt for those at a lower price range. This is supported by the questionnaire research results as more than half of the respondents were willing to change to another brand if the prices offered for the similar product with additional benefits were less expensive. Besides that, another trend found by a research from Women’s Health (2008) is that most parents were likely to resume their job after their child has turn age 1 and thus, distribution and product placing accessibility becomes a crucial factor in their purchase decision.

In addition, research results from Appendix 16 and 17 indicated that parents from both segments were very concern about the issues related to their child ’ s health. Typically, most parents were found willing to pay more for the feeding product with additional benefits such as BPA-free feeding range even though the price is RM50 more expensive than the original bottle. In terms of design and packaging, most respondents favoured shapes which were easy to hold and printed house mascots did gain some positive response but was subjected to a requirement that the printings will not fade away. It was also found that a substantial number of respondents favoured searching for product information over the internet - Appendix 17. In turn, this may provide an avenue for Anakku to market its N2N products online. However, a disappointing result was obtained as a large majority of respondents from all researches conducted were not aware of N2N.

2.2.5 Supplier Review

The issue of industry level supply is of significant interest in this plan as there may be a likelihood of supply shortage or excess industry capacity (Reed, 2007). In the Malaysian baby products industry, although certain products like Anakku is written ‘Product of Malaysia’, the actual fact is that the supply of Anakku’s N2N and its competitors offerings were not found to be produced locally. Typically, most production processes and suppliers come from China (Chew & Tan personal communication, August 13, 2009). Fei (2009) supported the above as most baby products companies were now outsourcing their manufacturing and supply inputs to those factories and suppliers in China. In addition, Higgs (2002) found that there was an increasing trend in the number of suppliers catering for the large numbers of baby products company globally. Notably, his findings showed that not all factories were utilised as the internationalisation for baby products production is still at its growth stage. Nevertheless, the level of technology advancement is increasing very rapidly and the rate of technology adoption by these suppliers was found to be at a favourable rate (Chang, Wei & Ma, 2007). Consequently, the above puts Anakku in a situation whereby the excess industry capacity allows Anakku to potentially increase production for its N2N BPA-free products in a most technology savvy, cost-efficient and cost-effective manner. Typically, the analysis for the bargaining power of suppliers above confirms this review as future scores derived predicted a stronger bargaining power for Anakku against its suppliers. Nevertheless, safety regulations, such as compliance with those mentioned in the political-legal macro environment should be taken into account to ensure that the selling of N2N’s feeding products is of legal nature.

2.3 Internal Business State

The following sections are examined to gain an in-depth understanding of Anakku’s internal environment: gap analysis, product life cycle, BCG matrix and internal capabilities.

2.3.1 Gap Analysis

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Figure 2: N2N Gap Analysis

Figure 2 shows the gap analysis for Anakku’s N2N feeding range. Typically, Anakku’s corporate objective for the N2N strategic business unit (SBU) is targeted at 30% of their total revenue - assumption, while their forecast is only 10% which is based on their current sales (Chew personal communication, August 17, 2009). In turn, there is a profit gap for this SBU as Anakku’s current forecasted position is not in line with its corporate objective.

What possible alternatives are available to Anakku to overcome this?

- Find an alternative to increase sales via Ansoff matrix (Reed, 2007) - market penetration, new product development, market development or related diversification.
- Improve productivity.
- Reduce investment base.

2.3.2 Product Life Cycle

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Figure 3: N2N Product Life Cycle

Figure 3 presents the product life cycle for Anakku’s N2N feeding range. Typically, the products of this SBU should be moving upwards from the introduction to the growth stage. Unfortunately, personal observation from Lim, Seeto, Lim and Lim (personal observation, September 20, 2009) suggests that it is already moving downwards as early as in the introduction stage. This is confirmed by the research results in Appendix 16 and 17 as a large majority of respondents were not aware of N2N. In turn, Anakku’s N2N is now in a critical state - fast-forward to a decline stage. What potential solutions are available to Anakku to overcome this? Improve customer relations Focus on integrated marketing communication strategies.

2.3.3 BCG Matrix

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Figure 4: Anakku’s BCG Matrix

Figure 4 shows the position of N2N in the BCG matrix. This is confirmed by Chew (personal communication, August 17, 2009) as she suggested that the N2N feeding range has a relative low market share in a market where growth is intense - many baby feeding products company are coming out with new innovations. Typically, N2N has been unable to gain a strong position in the baby feeding range market. The SBU is deemed to be growing rapidly in its production efforts and thus, it is consuming large amount of cash but only generates low return on investment as represented by its low market share. In turn, this has resulted in a large net consumption. According to Chew (personal communication, August 17, 2009), there are currently 80, 000 N2N products in the warehouse unsold.

Nevertheless, N2N is a new product and has a high potential to gain a larger market share and become a Star. However, if N2N fails to do so in a targeted time frame, it has an option to degenerate into Dogs by divesting its operations to minimise further losses.

2.3.4 Internal Capabilities

2.3.4.1 Non-Marketing Capabilities

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Table 8: Anakku’s Non-Marketing Capabilities

According to Lim, Seeto, Lim and Lim (personal observation, September 20, 2009), the financial position of Anakku seems to be in a good position as they are able to operate its outlets nationwide profitably. The management and leadership were found to be well organised as suggested by Chew - Asia Brands creates a division of SBU, such as branding and retailing as separate units (personal communication, August 17, 2009). Human resources were regarded as poor as customer service were not given appropriate training which resulted in poor customer service scores (Chew, 2009a) and negative respondents feedback - Appendix 17. Research and development is moderate but a wider range of N2N could be established. Relationally, Anakku’s competitive position is deemed to be strong as its brand name is well-known and boasts the largest chain of outlets in Malaysia - creating a reputable association for N2N to associate with.

2.3.4.2 Marketing Capabilities

Ratings were given in a range from 1 to 5 with 1 representing weak and 5 representing strong.

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Table 9: Anakku’s Marketing Capabilities

According to Lim, Seeto, Lim and Lim (personal observation, September 20, 2009), the marketing management of Anakku is below the average level. Particularly, this is a result from their poor marketing strategies which led to a poor marketing performance for the N2N feeding range SBU - inability to meet the corporate objective as identified in the Gap Analysis and an unfavourable position in the product life cycle. Notably, the fact that N2N is unknown to a large majority from the respondents in research results from Appendix 16 suggests a failure in the marketing strategy to market the N2N SBU’s offerings. Subsequently, immediate attention should be placed on this identified issue.

2.4 Critical Success Factors

Typically, the analyses above suggest several critical success factors ought to be noted by Anakku in an attempt to market the N2N feeding range successfully.

1. In-depth understanding of target market
2. Good marketing communications
3. On-going and timely innovations

* Kindly refer to Appendix 5 for more information.

2.5 Summary of Situational Analysis

A summary of the above is finalised in the SWOT analysis below. *Kindly refer to Appendix 2 for detailed information.

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Table 10: Summary of Situational Analysis

3.0 Marketing Objectives

With reference to the prior situational analysis, the below marketing objectives are derived.

1. To generate N2N sales of 30% from Anakku ’ s total revenue within 2 years. From the gap analysis, the marketing planners have identified the profit gap of 20% and intend to achieve that corporate objective via this strategic plan.
2. To attain a Return on Investment (ROI) of 30% within 2 years. Typically, this plan intends to recover a ROI of 30% from the total investment made in the N2N feeding range and the cost of this marketing plan.
3. To capture a market share of 40% in the Malaysian baby products feeding range industry within 2 years. This plan attempts to turn around N2N’s current weak position and by doing so, it would be able to steal a substantial market share from its competitors, giving Anakku a larger market share in the industry.
4. To create awareness among 75% of the target market for N2N ’ s offerings within 2 years. This is a crucial goal as the results from researches in the situational analysis indicate that a large majority of the target market are unaware of N2N.
5. To instil confidence for N2N ’ s product quality in 60% of the target market within 2 years. In order to compete with its perceived premium competitors, Anakku has to generate confidence of its target market in its new N2N feeding range.
6. To induce trial for N2N ’ s feeding range in 50% of the target market within 2 years. This is essential as it influences the potential to achieve objective 1,2 and 3.
7. To induce customer repurchase for N2N ’ s feeding range in 40% of the target market within 2 years. Subsequently, this would allow Anakku to achieve its targeted sales revenue and gain a 40% market share in its competing industry.

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