Unilever Company’s Market Segmentation University Essay Example

Accessibility

This is a vital factor in segmentation. Although the broader geographic segments have been widely targeted by internet traffic, it is usually necessary to market or promote goods and services to the targeted market in the most effective way. In other words, a business enterprise requires economic marketing of its products. For example, geographic segments may be targeted by a local business (Simkin, 2008). The latter can be carried out beyond an immediate targeted market. When it comes to accessibility, the distribution of goods and services across various marketplaces may affect segmentation greatly. Therefore, accessibility can only be feasible when adequate and effective product promotions are carried out.

Needless to say, there can be no need to carry out segmentation if the targeted market is unreachable. It is essential to mention that communication planning should include the nature and the target market needs and business objectives. A business entity should not just select the channels of communication since there is a need to analyze the political, economic, social, cultural and legal environment which the market develops. This will help to structure an effective promotion strategy and consequently reach out to more customers.

Advertising

The above stands out as one of the most robust means of reaching out to the wider market and targeted consumers. Ads in magazines, newspapers, banners on websites, search engines, emails, television, radio, outdoor, airport media, posters, direct mail, gifts, alternative media, among many other existing forms of advertising can be used to improve the accessibility of products into the market. Unless the products being sold are adequately promoted, customers may equally fail to access them (Simkin, 2008) Advertising is the main tool used by Unilever to provide the marketing needs of the company. When it comes to advertising, it is almost inevitable to associate the idea to an advertising agency. Accessibility of goods and services to the market requires serious planning which should consider the nature and needs of the market at any given time. It is essential to mention that all communication planning should include the nature and target market needs and business objectives. It is not enough to just select the channels of communication to use when making sure that products are accessible to consumers. As it stands now, Unilever regularly analyzes the political, economic, social, cultural and legal environment in which it operates. This assists in restructuring an effective promotion strategy for the company (Liu, Ram, Lusch & Brusco, 2010).

Public relations involve all related activities with business stakeholders (customers, employees, media, suppliers, government, representatives and so on), conflict resolution with these groups, crisis management, and business image projection. When the latter is attained, it elevates the presence of products into the target market. Other vital tools include press relations, social responsibility actions, events, corporate communications, relationship programs with customer relationship programs with employees (Liu et al., 2010).

Personal selling is also another promotional strategy that attempts to make products accessible to the market. It refers to face to face selling involving the consumer and seller (Hassan & Craft, 2012). Unilever does not employ personal selling in most of its marketing processes. Personal selling t is one of the oldest ways of selling a product or service and covers a live relationship bearing in mind that it is immediate and interactive and allows the seller to create a lasting and productive relationship with the customer. This type of promotional strategy does not exist in the virtual buying process (Hassan & Craft, 2012). Therefore, the online marketplace for Unilever cannot benefit from face to face promotional strategy since it largely sales its products in physical stores.

Unilever also uses sales promotion in order to make its products available to the market. It refers to all actions to promote the product in the short term for the sake of driving high revenues. Some of the examples of sales promotion used by Unilever include discounts, free samples, prize draws, cultural competitions, demonstrations and tastings, among others (Liu et al., 2010).

Sales promotion is a set of incentive tools designed to stimulate buying faster or in greater quantities. It mostly takes place for the short term. This marketing tool is of key importance when it comes to holidays like Christmas. As a matter of fact, Unilever employs a number of sales promotions as part and parcel of ensuring that its products can be accessed by the wider market (Hassan & Craft, 2012).

Resources and segmentation

For the Unilever Company, the segmentation adopted is indeed appropriate according to the resources owned by the company. The objectives of the company are also in tandem with the segmentation plan in place. The company has been carrying out segmentation based on gender. For instance, the company has developed new toothpaste that specifically targets men. It is also an innovation factor for the Unilever Company to design products based on gender (Simkin, 2008).

Appropriate principles

The marketplace must be validated in line with appropriate principles of segmentation. In the case of Unilever, the company has simplified the process of segmentation, although it is robust in some cases (Simkin, 2008). When evaluated for a long time, the product segmentation process at Unilever is quite cost-effective and more flexible because it can allow changes to be executed on a regular basis. Nonetheless, the appropriateness of the segmentation process to the policies and resources of Unilever can be witnessed through the new growth opportunities put in place by the company (Hassan & Craft, 2012).

The concept of segmentation entails selecting groups of customers with similar profiles and demands. The latter is indeed in line with Unilever’s value proposition which is attractive for the business organisation. The attractiveness is related to the size of the product being segmented and profitability margin. These groups cannot be too narrow and hence makes it less worthy of investing resources in this regard. In addition, it should not be too large so as not to show its main features. This is an appropriate procedure that prevents a more focused approach (Hassan & Craft, 2012).

Segmentation structure

For each identified segment, it is necessary to establish an approach strategy. In some cases, it demands a performance through direct sales force while in others, the performance of diversified channels will be needed by Unilever. Close interaction with each of this public should also be performed in a personalized manner so that each customer understands that the proposition was developed for the stated purpose (Liu et al., 2010). In essence, the practice of segmentation in customer satisfaction is a common experience at Unilever. From the outset, Unilever concludes that it is necessary to give up some customers (Hassan & Craft, 2012).

References

Hassan, S.S. & Craft, S 2012, ‘Examining world market segmentation and brand positioning strategies’, The Journal of Consumer Marketing, vol. 29, no. 5, pp. 344-356.

Liu, Y., Ram, S., Lusch, R.F. & Brusco, M 2010, ‘Multicriterion Market Segmentation: A New Model, Implementation, and Evaluation’, Marketing Science, vol. 29, no. 5, pp. 880-960.

Simkin, L 2008, ‘Achieving market segmentation from B2B sectorisation’, The Journal of Business & Industrial Marketing, vol. 23, no. 7, pp. 464-474.

Starbucks Corporation’s Commodity Market Risk

Introduction

Starbucks is a high-end roaster, marketer, and retailer of speciality coffee globally (Starbucks Corporation, 2015). The company now operates in 65 countries since its inception in 1985 (Starbucks Corporation, 2015). Besides, it also trades at the NASDAQ Global Select Market. Starbucks purchases and roasts high-quality coffee from various parts of the world. In addition, it is also recognized for handcrafted coffee, tea alongside other beverages and a wide range of fresh food products generally in its operated retail outlets.

The company also sell different types of tea and coffee products and license its trademark to be used in other “retail outlets, including grocery, licenced stores, and national foodservice arrangements” (Starbucks Corporation, 2015, p. 2). Apart from its leading Starbucks Coffee brand, the company also sells goods and service under various brands, including Seattle’s Best Coffee, Tazo, Evolution Fresh, Teavana, Ethos, and La Boulange (Starbucks Corporation, 2015).

Currently, the company aims to maintain its position as one of the best and admired companies globally (Starbucks Corporation, 2015, p. 2).

This term project analyses a specific issue that Starbucks faces currently. It looks at strategic importance and urgency of the issue, and offers decisions, recommendations, justification, and implementation strategy.

Key Issue of Concern: Commodity Risk

Commodity market risk presents a significant challenge to Starbucks. Commodity risk represents the primary market risk brought about by buying of “dairy products, green coffee, tea and other items the company uses to create its food and beverage items” (PricewaterhouseCoopers, 2009, p. 40). These products are however faced with price volatility, in particular the green coffee. Further, the company also buys huge quantities of dairy products for its retail store line of business.

The company acknowledges that factors related to “pricing and supply or availability of these vital commodities directly affects its fiscal results and operations” (Starbucks Corporation, 2015, p. 40). In fact, specifically, coffee price is expected to affect future operations of Starbucks.

Findings

As previously mentioned, the rising costs of high-quality Arabica coffee beans and other commodities Starbucks uses in its retail stores generally affect the company operations. Besides, a decline in supplies of these commodities generally has a significant effect on financial results of the company.

It is generally acknowledged that the commodity market faces critical volatility issues. For instance, prices are notoriously subjected to sudden increment, and they may rise further because of some factors noted. First, Starbucks generally purchases the high-quality Arabica coffee. This type of coffee has always attracted premium prices. In addition, supplies and demands generally affect the price during the period of purchase, and there is a notable trend in amount of premium coffee supplied, which can differ considerably.

The pricing category of the high-quality Arabica coffee often increase. This situation leads to expensive coffee and difficulties in negotiating fixed prices under purchase agreements with various supplies. While Starbucks enters into negotiated contracts with its suppliers to determine the quality, delivery periods, quantity, and other relevant information, the supply contracts do not fix dates and prices. Instead, it is not known when the price of the commodity is fixed. Starbucks refers to these contracts as price-to-be fixed contracts (Starbucks Corporation, 2015).

Second, it has been noticed that a wide range of factors can influence prices of coffee and dairy products, which the company purchases. For instances, the major drought in Brazil in the year 2014 affected the quality and quantity of Arabica coffee. In addition, natural disasters, diseases, rising costs of farm inputs, levels of inventory, costs of production, and unstable political and economic environments, for instance, in Brazil will affect the price of these commodities significantly. Specifically, the El Niño weather system and persistent drought patterns in major coffee zones, such as Brazil, Columbia, and Indonesia, will result in rising coffee prices (Woody, 2015).

In addition, organizations, such as Fairtrade International, with stakes in coffee pricing have historically influenced green coffee pricing mainly through different agreements that aim to create export quotas or control supplies of coffee in the global markets (Fairtrade International, 2011).

Third, speculative tendencies in the global coffee market has hurt coffee pricing. Coffee beans are significant to the company’s operations. It is however recognized that Starbucks might not fully mitigate future risk associated with the pricing through its purchasing habits and hedging approaches.

As such, future increment in prices of the high-quality Arabica coffee beans will adversely affect profitability of the company. In addition, if the company is not able to buy adequate quantities of green coffee because of some of the above-mentioned factors or a global or regional shortage, it will definitely not meet its demand targets and sales, which in turn would affect its revenues and profitability.

Fourth, the company also buys large quantities of dairy products, specifically milk for its retail operations. Since the year 2014, milk prices have remained low. Experts have however pointed out that such low prices are not expected to last much longer because of declining herd size and production of milk.

At this point, milk prices are expected to rise in the year 2016 (Constable, 2015). This implies that Starbucks will have to pay more for dairy products, which will ultimately affect its costs of goods and profitability. Specifically, it is observed that consumers are most likely to pay $1.25 per pound in the later period of 2016 (Ledman, 2015). In addition, the current favorable prices for skim and butter will not last. Current inventories and imports continue to hold down prices of cheese (Ledman, 2015).

Finally, while Starbucks consider other commodities, such as cocoa, meat, team, food inputs, energy, and baking ingredients among others as less important to its operations relative to coffee, these commodities have huge significant on its profitability once their supplies decline or prices increase, particularly in the global market.

As stated above, Starbucks buy various commodities, such as dairy products, meat, tea, and coffee for its retail operations. However, the company faces constant price fluctuations that affect its overall profitability. As such, Starbucks has adopted a combination of pricing methods established within its supply contracts and financial derivatives to control risk exposure from prices. For instance, it uses price-to-be-fixed contracts and fixed-price contracts mainly to purchase green high-quality Arabica coffee.

In the fiscal year 2014, for instance, Starbucks presented the possible effect of prices on net earnings and other comprehensive incomes if commodity prices had to change. The following table presents possible cases on commodity hedges.

Table 1: Commodity Hedges.

Increase/(Decrease) to Net Earnings Increase/(Decrease) to OCI
10% Increase in

Underlying Rate

10% Decrease in

Underlying Rate

10% Increase in

Underlying Rate

10% Decrease in

Underlying Rate

Commodity hedges $ 4 million $ (4) million $ 3 million $ (3) million

Given these figures, many senior executives agree that commodity price risk is important, and it is a risk that requires immediate attention because of its impacts on financial performance. Perhaps, the company has not been able to manage commodity risk effectively.

Strategic Alternatives

It is imperative to recognize that most approaches used to manage commodity price risk generally focus on “common elements of risk transfer to a third party using various strategies” (PricewaterhouseCoopers, 2009, p. 28).

In this case, the customer is mostly affected when a company concentrates on margin management, procurement will impact the supplier while hedging will affect a financial institution involved in hedging (Erskine, Mauffette-Leenders, & Leenders, 2005). Apart from these strategies, other alternatives used to manage commodity risk price may not necessarily focus on risk transfer to third parties or risk mitigation. Instead, they focus on operational efficiency and innovation to create competitive edge.

Starbucks, however, requires approaches that are more radical to deal with commodity risk rather than the traditional approaches.

Therefore, the decisions presented focus on managing commodity risk price, but a radical approach that goes beyond margin management, procurement strategies, and hedging could be developed later.

Margin management

Starbucks is a consumer of Arabica coffee, tea, dairy products, energy, and other raw materials it uses to run its operations. The company, however, has been negatively impacted because of a rising commodity price. In this case, Starbucks cannot leverage firm sales price because of the nature of its supply contracts. In most instances, and for clear reasons, this might not be a good alternative since Starbucks will concentrate on managing margins.

The most preferred method of risk management in business is to avoid it completely by passing costs to consumers (PricewaterhouseCoopers, 2009). Any firm that can utilize this strategy effectively without any adverse impacts on its sales volumes may not experience any commodity risk challenges.

In practice though, factors related to pricing will influence market pricing. As noted above, the increasing demands for coffee, various coffee varieties available in the market, market concentrations, and availability of other alternative products such as tea, for instance, usually influence price elasticity. In the past few years after the recession, Starbucks major market, the North America, has experienced sustained growth and increased investments.

This implies marginal price increment has been effective, but not sustainable because of rising competition. Besides, Starbucks now faces declining global growth of its key target markets, such as China and Brazil. Hence, relying on margin management to manage commodity risk is becoming impossible and may not yield the desired results.

Procurement strategies

Apart from accepting commodity price risk or increasing prices of products to account for rising prices of commodities, Starbucks may also use its procurement strategies to control commodity price risk. In this case, Starbucks supply contracts concentrate on risks associated with Arabica coffee availability and reliability of supplies from its major suppliers, quality of these commodities, and the overall cost levels reserved for ‘price-to-be-fixed’ contracts against some prevailing market benchmarks. Suppliers hardly present opportunities for Starbucks to manage its commodity risk. Starbucks has adopted fixed price contracts with its suppliers to achieve this objective.

It provides the simplest and direct method of fixing fluctuating prices of Arabica coffee and dairy products. It also assists the company to reduce risks associated with operational and financial risks while promoting supplies to some extent.

However, fixed contracts may only offer simplicity while the company may not enjoy falling prices. In most cases, organizations that supply coffee often advocate for higher prices and, at the same time, they expect Starbucks to commit itself to purchasing a given quantity of coffee based on the fixed price contract. Besides, given the expected rise in coffee prices in the near future, suppliers may not opt for prices that are below market averages.

Hedging

In most instances, the preferred, flexible, and worthwhile means of controlling commodity price risk is to rely on derivative financial tools to hedge any unknown price fluctuation factors in volatile markets (PricewaterhouseCoopers, 2009, p. 29). Financial derivative instruments are generally financial contracts, which a company can either trade or negotiate with service providers. Parties to the negotiation or trade may include coffee producers, processors or even consumers, and in the recent past, the company must now deal with speculators who wish to profit from fluctuations in commodity prices or investors focusing on diversified portfolios.

In the global coffee market, financial derivative instruments have allowed many companies to manage their financial risk exposure attributed to commodity price risk effectively and efficiently. These instruments are designed to meet specific risk exposure of the buyer. While they have worked in some instances, commodity markets however have some unique characteristics. By considering highly specific requirements of Starbucks’ risk profiles against “product quality, timing of delivery and the location of delivery, commodity derivatives may not be effective in all cases” (PricewaterhouseCoopers, 2009, p. 29).

For example, if Starbucks wishes to hedge a purchase of Arabica coffee from Brazil, there might be readily available alternative derivatives to use to attain this goal at fair prices. On the other hand, if Starbucks wants to hedge a purchase of Arabica coffee from Kenya, then it may have limited options because of supply and demand factors associated with coffee, as well as the distance. The basis, which is the difference between the hedging instrument and hedged commodity, often limits the application of derivatives in most cases. Besides, derivatives are complex, and they may bear unknown risks to consumers. In fact, flawed derivatives have often affected many players, including banks.

For instance, in 2012, JP Morgan lost more than $2 billion dollars on flawed derivatives linked to credit performance (Fitzpatrick, Zuckerman, & Rappaport, 2012). The bank senior executive referred to the trading strategy as “flawed, complex, poorly conceived, poorly vetted, and poorly executed” (Fitzpatrick et al., 2012, p. 1). Given such history of massive losses associated with derivative instruments, some traders may not opt for it to manage commodity price risk.

Just like any other commercial instrument, when used poorly, derivatives can cause “massive unplanned financial losses to a company” (PricewaterhouseCoopers, 2009). Hence, it is imperative to ensure that derivative hedging arrangements should be effectively controlled and managed.

Despite some critical inherent drawbacks associated with using commodity derivatives to manage losses, Starbucks has often used it successfully to manage potential risk exposure.

Decision Implementation

Hedging is therefore the most preferred approach to managing commodity price risk that Starbucks constantly faces in its operations. The company should consider hedging strategies that cover at least every trading quarters and extend to over a year.

Justification of One Strategic Alternative Using Qualitative Analysis

The company has noted that passing such costs to consumers affects its revenues, customer loyalty and profitability. As such, hedging will offer some advantages to Starbucks. While in the last few year coffee price has declined steadily, this situation is not sustainable for producers. In 2011 when the prices of high-quality coffee steadily increased to reach unsurpassed high of about $3/pound, the company suffered some financial setbacks.

For instance, it incurred additional cost of about $200 million in the financial year 2011 and even a higher figure in the fiscal year 2012 because of a lack of effective well-monitored hedging strategies. The rising commodity costs resulted in a significant increase in costs, which later resulted in declines of operating margins in the subsequent fiscal years.

At least one year of hedging strategy will cover the company from market uncertainties. After past losses, Starbucks had adopted some fixed-price contracts and variable-price on Arabica coffee. Hedging against increasing prices of commodities will generally assist the company to secure all Arabica coffee and dairy product supplies required for a given fiscal year at slightly better prices. Hedging commodity risk strategies will therefore ensure that Starbucks has sufficient supplies of inputs and improve its operations (Krikorian, 2014).

Starbucks must however ensure that hedging strategies are well managed and executed to avoid possible losses. Besides, the period of hedging should be comparatively shorter to ensure effective management of supplies and prices in a volatile market. Hedging will assist the company to stabilize its coffee and other food items’ prices, grow sales and realize increased profitability while protecting customer base simultaneously.

Coffee Price and Staarbucks permormance

Starbucks should use its position as the global premium coffee company to leverage favored market conditions. Starbucks must realize that it has a limited market depth because of few producers of high-quality Arabica coffee. In this case, Starbucks commands a significant position in the small market of high-quality Arabica coffee. As such, it can realize significant benefits through enhanced active trading in Arabica coffee and, in some cases, take the role of a market leader and maker.

Besides, the company has intimate knowledge of coffee and dairy product commodity markets, which it should leverage for profitability. In this case, it will actively assess risks and mitigate it too. Hence, only hedging strategies supported with unique market knowledge and insights will allow Starbucks to make profits.

Conclusions

Starbucks, the premium coffee company, faces significant commodity price risk. In fact, commodity price risk management is vital for the overall profitability of the company. Starbucks, however, cannot continue to pass along high prices to its customers due to possible loss of market shares and revenues.

As such, effective approach to manage commodity price is necessary. While multiple strategies, such as procurement contracts and margin management, are available, it is noted that well managed and executed hedging strategies will assist Starbucks to manage commodity price risk. Further, the company should also move beyond the traditional approaches of cost management and focus on operational efficiency and flexibility, and innovation to develop its market share and profitability in the changing retail landscape (Bryan, 2016).

References

Bryan, B. (2016). STARBUCKS CEO: We’re witnessing a ‘seismic change’ in retail. Business Insider. Web.

Constable, S. (2015). Milk Prices Likely to Rise in 2016. Barron’s. Web.

Erskine, J. A., Mauffette-Leenders, L. A., & Leenders, M. R. (2005). Learning with Cases. London, ON: Richard Ivey School of Business.

Fairtrade International. (2011). Fairtrade Coffee Standards and Pricing. Web.

Fitzpatrick, D., Zuckerman, G., & Rappaport, L. (2012). JP Morgan’s $2 Billion Blunder. The Wall Street Journal. Web.

Krikorian, M. (2014). Must-know risks: Why Starbucks should hedge its shrubs. Web.

Ledman, M. (2015). Expect Stronger Dairy Prices in 2016. Dairy Foods. Web.

PricewaterhouseCoopers. (2009). Navigation: Managing Commodity Risk through Market Uncertainty. Web.

Starbucks Corporation. (2015). Starbucks: Fiscal 2014 Annual Report. Seattle: Starbucks.

Woody, C. (2015). El Niño-related weather conditions could endanger coffee crops around the world and drive up prices. Business Insider. Web.

Physical Exercise Effectiveness For Obese Adults

Introduction

In healthcare, practice change is a common phenomenon because medicine changes quickly, and so do social trends and tendencies. Healthcare strategies aimed at the resolution of various public health problems usually target large population groups and communities known for the inhomogeneity of their demographics. As a result, implementing a change of practice, it is critical to collect a wide range of available data in order to support the new practice with evidence and ensure its efficiency.

PICOT Question and Identified Problem

The PICOT question used for this project revolves around individuals affected by obesity aged between 40 and 60 and the effectiveness of physical exercise programs in which they enroll. The issue under discussion is the decreased efficiency of physical exercise programs for the aforementioned groups due to various socio-cultural and ecological factors. Potentially, regular physical exercise is a good and effective way that could stimulate the loss of excess weight and improve the overall quality of life of people suffering from obesity. However, the implementation of such programs is often complicated and slowed down by the lack of motivation, readiness to commit, and emotional unpreparedness among patients. As a result, the expected positive outcomes of such programs are never achieved to a full extent.

Links between the PICOT Statement, Research Articles, and the Identified Nursing Practice Problem

Two research studies focusing on the problem of the effectiveness of exercise programs for obese populations were reviewed for this project. In both of these articles, the authors found that the major problem interfering with efficiency was the lack of adherence. Verreijen et al. (2017) specified that the rate of the participants dropping out of their research project was very high. In turn, this tendency led to uneven results in the compared groups. Mama et al. (2015) noted that in their study that involved female participants of African American and Hispanic backgrounds the effectiveness of exercise programs was limited by the lack of commitment among subjects. As a result, it is possible to conclude that the rates of adherence to exercise programs among adult populations affected by obesity are the nursing practice problem that requires solutions.

Proposed Evidence-Based Practice Change

In their research, Lambert et al. (2017) found a creative solution for the problem of adherence to exercise among adult patients. The participant groups targeted by this study included individuals affected by musculoskeletal conditions. However, the research project was focused specifically on the rates of effectiveness of an exercise program administered and maintained in two different manners in the compared groups. To be more precise, the authors compared an exercise program powered by an app that was supported remotely by nurses on a regular basis with a program whose description was distributed using paper handouts (Lambert et al., 2017). The former manner of program maintenance was more effective and achieved higher rates of adherence. Consequently, the proposed practice change will include a more focused interaction with the participants of exercise programs, weekly reach-outs for better motivation, and educational sessions about the importance of exercise delivered to families and communities in order to stimulate group participation and prevent the isolation of separate participants.

Conclusion

The proposed practice change is powered by a substantial body of evidence that signifies that the participants of exercise programs fail to adhere when they are not encouraged by nursing staff and other professionals and when they lack the support of family members and communities. As a result, in order to change this flawed tendency, it is possible to propose a nurse-led and supervised approach to exercise. This strategy would provide the participants with the emotional support they require and inspire them to continue training.

References

Lambert, T., Harvey, L., Avdalis, C., Chen, L., Jeyalingam, S., Pratt, C.,… Lucas, B. (2017). An app with remote support achieves better adherence to home exercise programs than paper handouts in people with musculoskeletal conditions: A randomized trial. Journal of Physiotherapy, 63, 161–167.

Mama, S. K., McCurdy, S. A., Evans, A. E., Thompson, D. I., Diamond, P. M., & Lee, R. E. (2015). Using community insight to understand physical activity adoption in overweight and obese African American and Hispanic women: A qualitative study. Health Education & Behavior, 42(3), 321-328.

Verreijen, A. M., Engberink, M. F., Memelink, R. G., Plas, S. E., Visser, M., & Weijs, P. J. (2017). Effect of a high protein diet and/or resistance exercise on the preservation of fat free mass during weight loss in overweight and obese older adults: A randomized controlled trial. Nutrition Journal, 16(1), 2-8.

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