Assignment IITask I

Facilitator: Nguyễn Tân Thu Hiền Students:Phạm Cao Khánh Trương Bích Trâm AnhNguyễn Hoàng Bảo ChâuLê Ngọc Khánh Vân

Task I

1/ Market structure

2/ Market forces

3/ Culture

1/ Market structure

• Monopolistic competition: each producer sells same products, but slightly differentiated products. They can set its price and quantity.

• Characteristics: Many Customers and Producers on market The same prices among producers There are few barriers to entry and exit No a Producer can control over price. The good is slightly differentiated ways (advertising,

branding or local production) There is some degree of consumer loyalty

Advantages

• No significant barriers to entry->markets are relatively contestable.

• Differentiation creates diversity, choice and utility.

• They may be dynamically efficient, innovative in terms of new production processes or new products.

Disadvantages

• Some differentiation does not create utility but generates unnecessary waste, such as excess packaging.

• Advertising and Marketing may also be considered wasteful.

• Profitability -> small abnormal profits due to the high expenses

Pricing strategy

• Long-term pricing framework, which establishes the initial price for a product and the intended direction for price movements over the product life cycle.

• 3 type of pricing strategy: Price skimming, Penetration pricing and Status quo pricing.

• Penetration pricing to market product which is a way where Nestle charges a relatively low price for a product initially as a way to reach the mass market.

Choose the price strategy

• When Nestle has decided the product price, they will choose a good pricing strategy that will give them direction of price movements over the Product Life Cycle.

• Nestle are aware about higher price. Theyhave to produce a good quality of product. Besides that, the competitors also will influence the pricing strategy.

Output decisions

• For the price, Product should make a good pricing strategy. If they want to put a high price, they have to make sure that the quality and the quantity are suitable enough with the price.

• They also can do the packages which contain the chosen product in one pack and they will set the price for the pack in a moderate value. This is also known as eco pack. This pack is affordable whereas not only the high income persons but also low income are able to buy.

• -> They that Nestle are not bias and are suitable for all level of person.

2/Market forces

• Demand and Supply• Establishing pricing goals: Marketers have 2 choices

whether to use profit oriented profit maximization or satisfactory pricing. The marketers need to have an understanding of trends and changes in the market place to set a goal. If Nestle have decide to go for profit maximization objective, they must be able to afford large sum of investment. It is easy to follow competitors pricing but they may not have the best considering cost, demand and changes in Product Life Cycle. So they have to require a careful analysis before setting the price.

Estimate demand, costs and profit.

• After the pricing goals have been established, Nestle have to estimate demand, costs and profit. It is important for Nestle to know the corresponding cost for each product price. So they need to estimate the profit that they will earn, determine level of price and how much market share they will get.

PESTEL

• Analysis-is a simple and effective tool used in situation analysis to identify the key external (macro environment level) forces that might affect an organization.

Therefore, the aim of doing PEST is to:• find out the current external factors affecting an

organization;• identify the external factors that may change in the future;• to exploit the changes (opportunities) or defend against

them (threats) better than competitors would do.• The outcome of PEST is an understanding of the overall

picture surrounding the company.

Political

• The United States is a representative federal democracy driven by elections in which citizens' and lobbyists' diverse interests compete.

-> Strict quality control played a role in political factor. It means that Nestlé’s products quality will not be different with other countries. Consumers are guarantees with full satisfaction of the products all over the world.

• Nestlé’s products are always come with the seal of guarantee. By having the seal of guarantees, consumers are now more confident and trust of Nestlé’s products. Strict quality control played a role in political factor too. It means that Nestlé’s products quality will not be different with other countries. Consumers are guarantees with full satisfaction of the products all over the world.

Economy

• The United States, with an economic freedom score of 75.5, is the 12th freest economy in the 2014 Index. Its score is half a point lower than last year, primarily due to deteriorations in property rights, fiscal freedom, and business freedom. The U.S. is ranked 2nd out of three countries in the North America region, and although its score remains well above the world and regional averages, it is no longer one of the top 10 freest economies.

• GDP (by sector) : agriculture: 1.2% industry: 22.1% services: 76.7% (2011 est.)

• Corporate tax rate of 35%

->Purchasing power: Nestlé also collaborates with local government to provide technical assistance to farmers in planting and harvesting crops. The farmer will get income and Nestlé will get to purchase good and fresh raw materials to produce their food. By having own local productions, Nestlé should no longer needs to import any raw materials from other country where they will save much more money. It will also benefit the consumers whereby consumers could enjoy the local productions with low price. More consumers will use this product and therefore Nestlé will gain more profit from that.

Socio Culture

• Multicultural American has a variety of expressions due to its geographical scale and demographic diversity.

• -> A good diet and adequate food supply, the central for promoting health and well-being is the focus of every person even these days; whether people tend to value products that incorporate with them healthy benefits.

Teachnology

• Almost all of the people nowadays will get contact with Internet and Mobile Technology . Nestlé could use this advantage to benefit them by using technology to promote their products over those advanced technology.

• -> Customer could get any information from their site. Nestlé’s employees could use this internet service to connect to its industry in other country . They did research and development by using the technology to find more information to satisfy the local tastes and cultural flavours in each country market. By understanding what each country asks for, Nestlé could market difference product according to the customer demand in difference country.

Environment

• The industry environment has a more direct effect on the firm’s strategic competitiveness and to earn above-average returns. The intensity of industry competition and an industry’s profit potential are functions of five forces of competition such as the threat of new entrants, bargaining power of supplier, bargaining of power buyers, threats of substitute products, and intensity of rivalry among competitors.

->

• Porter singled out five different forces that impact competitive intensity which portrays an image of the overall attractiveness and profitability of a market. To aid in my evaluation of Nestle and its status in the industry, I will apply Porter’s Five Forces Model to the company.

Legal

• Protection of crucial business processes by copyrights and patents

• -> They have to make sure that they follow not only the laws in US but also the laws in the countries they operate

3/Culture• Spelling of name

Name of Americans own name written in the first name, then the middle name and finally is surname. Surname taken from their father and do not taken from their mother.• Way of communicating

Except for some special cases, Americans often call each other by their first name. However, there are some common principles that foreign traders should follow.

For once direct contact or by mail first, should call each other by Mr., Mrs., Miss, Ms. or Dr. and then is surname.

• Greeting

As in other places in the United States, shaking hands is a common greeting .Sometimes , man with woman or woman with woman greet each other by hugging, and even has the cheek to cheek or kiss cheek each other. Forms are usually offered only to those who are long time friends, or at least have known each other well.• Equal treatment for women• Equal treatment with the other races

Market segmentation• Market segmentation: dividing a market into

distinct groups of buyers who share the same or similar attitudes and patterns of behavior.

• Market can be segmented by:₊ Demography ₊ Geography₊ Age

• Demography:₊ Nestle ‘s demographic segmentation than they will find

that our product is for everyone. People from any area , any culture , any age , any sex , any belief and an income will use it . It is not any luxury item which is used by a specific people.

• Geography:₊ The company segments its market geographically on

divisional basis. They divide each division in different zones and every distributor is restricted to sale its products.

• Age:₊ The products for everyone , for all age , for all social.

Anyone can use the products as per need.