Report Title: outlay a Pinta Date: 13/05/02 first appearance This insure is int nullifyed to give the readers an insight into the set theories and why they be employ by firms, in the report, issues such as factors influencing the outlay of take come on from sodbusters perspectives and the battle amidst the threshold take out delivery service and supermarkets atomic public figure 18 highlighted. Also the intention the take out trade name is questi mavind and analysed.
1.0 TERMS OF REFRENCE This report is concerned with factors that influence determine decisions; the report is based upon a case psychoanalyze called Pricing a Pinta, but one is required to carry out research and present genuine information in the report.
2.0 surgical procedure In order to find the information needed to put down this report successfully, the methods that were adopted were: 2.1 Internet research 2.2 merchandise textbooks 2.3 creation to marketing case studies book 3.0 FINDINGS 3.1 Internal and out-of-door; factors touch on the value of draw for the farmers point of view.
3.1.1 Internal factors From the farmers perspectives, there argon many another(prenominal) an different(prenominal) internal as well as external factors that influence the set of draw, the internal ones include supplying viands and shelter for the cows utilize to supply the milk, during the summer menses cows consume grass, however, during the winter, farmers need to purchase food for their oxen as well as arrange a desirable shelters for the animals.
Also the cows health is important to the farmers, harmonise to the Agricultural department, a farmer pays an average £44 a year on vets fol base per cow, likewise hygiene factors must be considered by farmers adding to the variable appeals sustained by the farmers.
It is excessively price mentioning that some farmers employ workers which result also affect the court of production of milk.
The farmer has to consider the breeding cost and bargain for the cows which is a major chunk of the farmers cost, all of the mentioned factors land to high costs incurred by the farmer and therefore the farmer will need to sell the milk at a high price to arrive a profit, even if it is peanut as the farmer call for the profit to survive.
To keep the price of milk down the government offers subsidies to farmers, such subsidies can also be considered as external factors, but since they wear an nimble disturb on the cost of production, it can also be counted as an internal factor.
3.1.2 External factors There argon various the external factors that influence the price of milk from the farmers perspectives including the actual convey for milk; recent surveys show that the pauperism for milk is declining somewhat as milk is widely perceived as a boring commodity. However, The Dairy Council has been running a campaign called the smock stuff, the aim of the campaign is to boost the level of demand for milk by highlighting its benefits, and the campaign was indorsed by many celebrities including Prince Na pay heedm Hamed, George Best and Chris Eubank.
Also supermarket and dairies establish capacious negotiation and talk terms power when it comes to buying from farmers due to their economies of scale, also the laws and regulations set by the government add to the production cost.
However, the milk marque group, unites farmers for a collective talk terms power, so when marketing the milk, the group ensures that the milk is sell for the best possible price providing the farmers make a decent return.
Technological and medical changes also play a key external role, which has its influence on the price of milk, convey to better breeding and better nutrition, average milk yields pass water sum upd steadily over the years. The dairy cow of immediately produces more than than than twice the amount of milk per year than her origin did at the end of the Second World War and 1,200 litres more than a dairy cow 20 years agone and now one dairy cow produces 10,409 pints of milk in a year, enough to supply22 families with their daily milk. Such changes mean that the cost of milk a farmer sells to the dairy is relatively low as the supply per cow is ontogenesis.
3.2 Pricing scheme exercised by supermarkets when selling milk When it comes to pricing milk, supermarket use a competitive pricing strategy, one can easily see that nearly all supermarkets charge the same price for milk, if a supermarket breaks the trend, others react accordingly.
According to the case study, milk is widely used by supermarkets as a exit leader; The evil leader is a pricing strategy which involves selling products/ run at a price that will generate slight or no profit and in some cases not even cover all cogitated costs (marketing, overheads, direct costs, etc). This whitethorn sound imprudent but it is a technique that is usually used to draw nodes to their business via a bargain. These bargains will tempt customers to the business who may then purchase other products/service even if they dont buy the product that was initially reduced. This is where the business will make up for the loss, as it will be selling other items that generate high profits.
The loss leader strategy is normally used to encourage sales on those products that are in the decline stages of their life cycle (becoming un-fashionable or out-dated, etc). In which case, supermarkets may demand to cut the price of such products to sell-off billet that isnt moving well and therefore be satisfied with the emergence of breaking even with the products (or with a small loss), but an amplification in cash flow.
According to the report, supermarkets often make a figure of a close to 2p gross profit margin per pint, which is not adequate to cover the cost of storage or safekeeping the milk chilled, however the milk is used to sell other products, by strategically placing the milk section at the end of the store, customers go through shelves which contain other product which could attract customers, those products are usually sold at a high profit margin and therefore covering the losses that talent have been incurred by the milk.
Also a great good gained by supermarkets when selling the milk as a loss leader is the fact creates a reputation building for the supermarkets as a value-for-money business as volume will associate you with good quality for less money.
Also supermarkets use an aggressive pricing strategy to discourage new firms from entering the market as well as destroying competitors sales, and such action is quite clear serving its purpose as the supermarkets market deal is increasing every year causing a decline on the doorsill delivery market share.
3.3 Threats to doorstep delivery companies, steps taken to counteract the nemesiss and a what the companies could do 3.3.1 Threats From the case study given, one can clearly see that the main threat confronting the doorstep delivery companies is the obvious decline of their share of the market, according to the case study, their market share has changelessly been declining and the slumping trend mightiness continue. The decline is caused by the supermarkets dominance of the market due to their bargaining power and economies of scale; the case study suggests that the average price differential between doorsteps and supermarkets is 14p per pint. Modern day customers are cognise to be barging hunters and therefore they might prefer to buy from supermarkets to in order to save. the doorstep delivery companies employ roughly 20000 to make the deliveries, pick up the bottles and collect the money from individual households, on the other hand the supermarkets buy in bulk, deliver to branches and reduce customers to help themselves. It is clear to see that the supermarkets are more cost effective, and that is the reason behind the different prices charged.
Also the fact that supermarkets are more convenient as customers can buy milk when they wish unlike the fixed style of doorstep delivery, this is support by the statement mentioned by Mintel that claims that smaller households have more erratic consumption patterns, and thus buying from supermarkets is more convenient. Furthermore, the increase in milk life means that customers can buy a bottle that contains 6 pints of milk and it will have-to doe with less room in the fridge than the equivalent number of glass bottles would.
3.3.2 Steps to counteract To put an end to the constant decline in the market share, doorstep delivery companies on with draw stain launched a magazine called Home and Life, the magazines price was a £1 an issue and its first issue sold 350,000 copies.
However the demand for the magazine has declined rapidly and the idea was short scrapped.
Also one of the leading doorstep companies (Dale kindle render) entered an system with Lever Brothers and Kellogg to deliver bulky fmcg products to homes on the milk round and the idea was failed miserably. The milk delivering companies also tried running promotions and competitor to create consumer loyalty.
Finally, according to Dale Farm Express website, the company seems to have used the if you cant beat them then join them approach as it began on the job(p) hand in hand with supermarkets, the company claims, Express is the UKs largest supplier of fresh milk to the leading multiple retailers, delivering to around 1,200 individuals supermarkets daily. Such statement implies the link between them, and it guarantees the Dale Farm Express sales as supermarkets have buyer power.
3.3.3 Suggestions for onward motion To boost demand the doorstep delivery companies could employ the use of plastic bottles instead of the traditional glass bottles, as they are more user friendly and they take less topographic point in the fridge, also being more flexible with consumer needs could help, as that will be more convenient to customer with erratic milk consumption patterns.
The companies could also invest in organic milk, as people are becoming more health conscious and the demand for organic products is constantly rising. The doorstep delivery companies could also sell other goods such as chocolate bars and soft drinks at competitive or cheap prices, such a move will be of a convenient to consumers and it could build a relationship with the consumers.
3.4 The role of Milk Marque and what might happen if Milk Marque did not exist The Milk Marque organisation exists to protects the farmers provoke and it acts as a trade union for farmers by ensuring the farmers foil the best possible deals from dairies. The Milk Marque also aimed to increase the price of the milk sold to dairies that resulted in an increase between 8 to 11% in milk prices.
By working for farmers needs the Milk Marque helps standardise the supply quality, also by qualification farmers work to lendher for one cause, the Milk Marque allows them all to benefit instead of competing with one some other causing losses to at least one party. It gives farmers negotiation power when negotiating prices with dairies or supermarkets.
However, the Milk Marque owned a lot of the milk supply and had to be investigated by the Monopolies and Mergers boot as evidence were showing that the organisation was involved in unfair trading. Shortly after being investigated, the Milk Marque announced a plan for structural reform. It proposed to split itself into lead successor organisations controlling three different regions; The Minister of land Nick Brown, who said it was a positive move, welcomed the news in late 1999.
If Milk Marque did not exist, it would be ill news for farmers as they will all be competing with one another for the sale of milk, it would also be hard to get decent price for their milk as they will not have negotiation power. Also it would be hard for supermarkets and dairies to get their milk supply from more than one source which is bandaged to increase prices, meaning the milk might not be sold as a loss leader.
4.0 CONCLUSION Although the price of milk is cheap to some extent, there are many factors which influence it, for example factors influencing farmers will naturally have an impact on the final price of milk, factors such as the farmers costs and government subsidies allowed to farmers contribute to the price the farmers ask for from dairies.
Supermarkets and doorstep delivery companies both have different methods of pricing their milk, supermarket buy in bulk which allows them the benefits of discounts and therefore they can afford to sell the milk for cheaper prices.
Doorstep deliveries, by in large quantities but have to hire people to deliver, collect bottles and collect money from households making their prices higher due to the service they provide.
Experts predict that the market share for supermarkets is set to continue causing a decline in the doorstep deliveries market share, both styles suit different individuals, the doorstep delivery companies might have lost a great deal of market share, but as long and there is milk, there will always going be people supporting the traditional idea of milkmen.
5.0 REFERENCE To complete this report several sources were used including: 5.1 Books ·         Business Studies for A level (Stephen Danks) ·         Marketing Textbook (Brassington an Pettitt) 5.2 Case studies book 5.3 Internet Sites ·         http://www.kingshay.co.uk/ run/dairymanager/images/fullcostvar.gif ·         http://www.pbs.org/ktca/newtons/11/dairyfrm.html ·         http://test.corporateinformation.com/memberlogin.asp ·         http://www.shakey-jake.co.uk/aboutexpress/ae_factsandfigures.html ·         http://www.milk.co.uk
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