UNIVERSITY OF NAIROBI SCHOOL OF BUSINESS STUDIES – BANDARI COMPUS KIBWANA . K. MATAKA REG NO: D61/70919/2008 MASTERS IN BUSINESS ADMINISTRATION ASSIGNMENT A. IDENTIFY A FIRM OPERATING IN KENYA AND ANALYSE ITS PRODUCT MIX USING BOSTON CONSULTING GROUP MATRIX (BCG MATRIX) B. FOR THE SAME FIRM DISCUSS HOW CHANGES IN THE MARKETING ENVIRONMENTAL FORCES IN THE LAST THREE YEARS HAS AFFECTED MARKETING ACTIVITIES. C. IDENTIFY LAWS/ACTS IN KENYA AFFECTING MARKETING. WHAT IS THE PURPOSE OF LAW/ACTS. A. Identify a firm operating in Kenya and analyse its product mix using Boston Consulting Group Matrix (BCG Matrix)
In order for us to discuss the identified firm operating in Kenya and analyse its product mix using Boston Consulting Group Matrix (BCG Matrix) its important to discuss Boston Consulting Group as concepts then we apply and analyse the company identified. Boston Consulting Group Matrix which is also referred as BCG Matrix, Boston matrix, Boston Box, Boston Matrix or Boston Consulting Group analysis is a chart that has been created by Bruce Henderson for the Boston Consulting Group in 1970 to help corporations with analyzing their business unit or product lines.
Among its uses this model helps organizations to allocate resources and is used as analytical tool in branding marketing, product management, strategic management and portfolio analysis. For the purpose of our discussion we will analyze the East African Breweries Ltd (EABL) which has an annual turnover of over 30 billion and has the largest share of beer industry in the region. The group employs more than 1000 people across East Africa. We intend to skew our discussion on the Kenyan perspective of the company.
Generally, Boston Consulting Group matrix considers two criteria the native market share and marketing growth rate. Categorically it separates products into four areas namely:- * Stars * Question Marks * Cash Cows * Dogs Question Marks Under question marks products we argue that Alvaro which is a non alcoholic malt drink qualifies to be considered into this category. These products which are also referred as problem child have high growth rates but low relative market share. In the first six months in the market the company had spent over 600,000 to promote it.
Thus they are known to be growing rapidly and thus consumes large amount of cash. Alvaro has shown the potential to gain market share and become a star and eventually a cash cow when the market slows. However if the question mark does not succeed in becoming a market leader it will degenerate into a dog when the market growth declines. Question marks must be analysed carefully to determine the direction in which they are moving toward to. Stars In November 2004 EABL introduced Senator keg brand into the market.
The brand has high performance since it is providing affordable and high quantity alternatives for illicit brews. It targets the low income earners. This brand qualifies to be a star. Senator Keg is probably relatively new product in the growth phase because they have high market shares, however they may be generating sufficient growth profits to cover their investment needs. By 2008 the product had passed the mark of 3500. This products will become cash cows of the later years but it currently unlikely to be enerating a high level of revenue due to the high level of investment required to expand the product. Usually the predominant strategy is to grow then to the next stage the “cash cow” where most profits are made. To achieve this company is using the ‘Tuko Mtaani’ na senator keg promotion as the main marketing campaign. Cash Cows Tusker is the main brand for EABL with over 30% of the Kenyan beer market selling more than 700,000hectolitres per year. This brand was launched in 1923. Tusker beer has high market share in a show growing industry.
This product typically generate cash in excess of the amount needed to maintain the business. With this product the market life circle has moved to maturity and the growth is slow. They are regarded as staid and boring state. Tusker beer as a cash cow, also benefit from low production costs, reaping the advantages of experience or learning curve, plus product loyalty. Pilsner beer brand may also be categorized in this category. Dogs They are products which have little or no prospects. Some books refer them as pests. These units typically break even generating enough cash to maintain the business market share.
It may not yet be making a loss unless it is demanding disapproriate use of overheads. Hence this category and just like the problem child should be thoroughly analysed with a view of either improving it or even discontinued as soon as it becomes a burden. Whitecap beer brand falls under this category. It is one of the oldest brands which is targeting high ranking professional people. The overall goal of this ranking is to help corporate analysts decide which of their business units to fund and how much which units to sell.
The above discussed can be summarized in the table below:- StarsSenator Keg| Question marks/problem ChildAlvaro| Cash Cows * Tusker * Pilsner| DogsWhite Cap| Market Growth Rate Low High Market Growth Rate HighLow Relative Market Share B. FOR THE SAME FIRM DISCUSS HOW CHANGES IN THE MARKETING ENVIRONMENTAL FORCES IN THE LAST THREE YEARS HAS AFFECTED MARKETING ACTIVITIES. The Marketing Environmental factors for Kenya Breweries consist of the actors and forces that affect the company ability to develop and maintain successful relationship with its target customers.
In the last three years the company experienced changes in the marketing environmental forces. These marketing environmental forces may be categories either as micro environmental forces and macro environmental forces. The changes in micro environmental forces will be discussed by looking at both the internal and external environmental forces. The changes range on the following areas:- * The company * The suppliers * Marketing intermediaries * Customer markets * Competitors * Publics During the period under review the company experience a marketing change (physically) of the top management.
Recently the top management experienced a shakeup after the CEO – Mr. Gerald Mahinda, leaving the company to South Africa based company Brand house. This calls for readjustment, internal rearrangement, which affected the marketing programmes, plans and actions. More adjustments are expected since the person replacing Mr. Mahinda – Mr. Seni Setu from Ghana was working with Coca cola it is expected that he will pump in the skills gathered from the rival firm. During the electioneering period year 2007/08 the country witnessed massive violence and destruction of properties.
The most affected region is the Rift Valley and central Province. These are the regions which are known for growing barley which is the main raw material for beer processing. It is in record that farms were set ablaze and farmer displaced. This greatly affected and disrupted the supply pattern and equally affected the cost of acquiring the raw material. In a large extent this compelled the company to resort to alternative sources of raw materials. Since the traditional suppliers were no longer reliable, stock not available.
This greatly raised the production cost and hence cost shifting process was and is still being administered. This fact has been captured by the EABLS2009 half year results report which had the theame of “ growth in extraordinary times”. Changes in Marketing intermediaries such as resellers, physical distribution firms, marketing services agencies and operations of financial intermediaries has greatly affected the marketing activities of East African Breweries and the country at large. The period under review witnessed the introduction of telebanking services.
The Mpesa and Zap concepts for the safaricom and Zain mobile service providers greatly affected the marketing intermediaries. In fact some resellers are now partnering with these two services providers. This has smoothen the marketing activities and shortened transaction period. Our discussion on marketing intermediaries is not complete without looking and analyzing the aftermath of post election violence in particular. The period under review witnessed the physical redistribution of reseller, firms and the potential customers.
The resellers, firms and customers migrated away from volatile regions to neutral grounds. The company areas forced to utilize the research and development department to analyse this new trend of distribution of resellers; physical distribution firms and relocated customers. In order for East African Breweries Limited to create satisfying customer relationship it must partner with marketing intermediaries who form an important component of the company’s overall value delivery system to customers. The resellers who are at times referred to as middlemen are the main players for the company.
The company distribute their products through the wholesalers to the retailers before reaching the final customers. The wholesalers are considered as the distributors. Hence like explained earlier all these were affected by the post election violence. However still the company did a lot of the intermediaries marketing. For example 500 bars were recruited and activated, 2500 waiters trained and modules and CDS manuals provided. The East African Breweries Ltd position and strength in relation to the competition and its market share has a very important influence on company strategy.
The period under discussion saw the entrants of new players and aggressive advancement of new competitions such as Keroche Industries and Kuguru Food Products. This led the company into trying to reach out for the new products such as the new brand of customers. The introduction of non-alcoholic drink (Alvaro) which is a flanker product and meant to attract other customers. In order to the capture the market from illicit brews. The company introduced the Senator keg. This new products exposed the company to the major marketing battle with the Coca cola company.
Under competition companies usually derive their marketing strategies from the competition rather than customer orientation. According to research about 70% of Kenyans predominantly Christian populations do not drink alcohol but do socialize in bars and pubs. According to Ndirangu Maina, – the Managing Director of Kenya Market Research firm (Consumer Insight Africa) “The non alcoholic business was owned by Coca cola, its amazing that an alcoholic company would think of that before coke. ” Like explained earlier over 600,000 has been pumped for this product.
The fact that we have competitors in the market implies that Kenya breweries is not a monopoly. In fact they are at times challenged by the traditional brewers who have cheap products. This prompted the company to introduce new products such as Allsops and Senator keg into the market. Basing our next argument on the studies of Kotler by looking at the seven types of publics. For the last three years all the seven publics were affected by a number of changes. The period witnessed the formation of East African Community, this has led to the company advancing into all east African Countries including Rwanda and Burundi.
This greatly increased the size of publics for example citizens action publics include consumer organization, local publics, general publics and the internal publics have been increasing. This greatly changed the marketing strategies, plans and timings. Our second part of discussion is based on the macro environmental forces which are factors over which the organization has least control over the last three years. These factors have greatly changed hence affecting the marketing activities. Changes in social cultural environment is from two dimensions – social and cultural. Kibera F. N. and Waruingi B.
C advance an argument of the concept of “oneness” among Africans. This belief further influences distribution in that many African distributor find it unethical to expand profit base at the expense of their own. It has further been argued that consumers go for imported goods because they view them as superior. Also related to culture are norms and believes for example EABL will not concentrate on North and eastern province because of traditional norms and religions and beliefs on alcohol. However for the purpose of our discussion let us look at social factor associated with demographic patterns.
The perpetual pull of the urban centers and the push of rural centre’s have lead to concentrating the population on urban areas. This trend has now changed to pull those urban areas which have more cosmopolitan status which was as a result of post election violence. There a number of people lost their lives. This clearly shows that clenographic patterns keeps on changing with the interaction of people and the other element of cultural borrowing and sharing. Generally the urban population is characterized by the sprawling slums for the low income people.
The company resorted to introducing Senator keg campaigns of the Tuko Mitaani so s to capture this market. The fact that cultures are for people and people form the markets hence any changes in them greatly affects the marketing structure and strategies. There is negative publicity or rather attitude of the society towards bar attendants. Recently the company as a marketing venture resolved to national campaign of training the bar attendants and to a large extent sending the message to the society that there is nothing wrong with those who deal in alcohol a total of over 2500 waiters have been trained.
Further those one found sellers of their products by training them they greatly improve their image and sales. The world is currently experiencing economic crunch. Inflation is on the rise and it has passed 29. 30%. This means the cost of production is increasing, also consumers are now conscious of the prices and priority is placed on primary products. Hence EABL is witnessing a shift of customers to cheaper brands. Here the Tuko Mitaani promotion came into play. Unemployment or disguised employment is on rise. This affects the customers behavior because of absence of source of income.
Further for those who are employed due to the world economic crunch and inflation, the disposable income is mainly spent on primary goods. Hence the percentage which is normally being left for luxuries is being reduced and further consumer shift to cheaper products and local brews. The economic crunch has also affected credit availability. Here many distributors continue to carry narrow assortment of merchandise. Therefore the economies of large scale distributions are largely affected. Also affected is EABL which has to get some supplies on credit.
The company came up with Jisimamie na Kshs. 50 million credit advancement strategy targeting SME’s and giving them 50,000 for a viable business plan. Since under such circumstances consumers buy what is really necessary and the EABL is out for cost saving ventures. This greatly affect marketing exercise which are generally consume a lot of cash the marketing spending yet increased by 5% in 2009 reports, EABL has to be careful therefore with pricing policies, marketing and distribution activities. EABL in 2008 alone 2. 165 million was spent on marketing alone.
Coming up with Bambua Bambika million promotion meant to entice consumers to buy with the hope of getting out of economic crunch. The speed of change and the impact of technology has a major impact on the EABL ability to undertake the marketing activities. Technological environment is based on scientific knowledge, research, inventions and innovations. The period under review saw the introduction of major technologies. To mention a few introduction of new technology for canned beer, telebanking and widespread use of internet and world wide web.
The top achievement of the company is the coming up with a high yielding barley species. The change in technological forces has greatly influenced marketing activities of EABL. Further the company has capitalized in internet to create a web site which is interactive and calls for scanning of information across the board. The canned beer is suitably parked for takeaways. The ecological/physical environment forces are calls using of physical environmental friendly ingredients. The changes in climatic conditions for the last three years is associated with global warming.
We are witnessing harsh climatic conditions. The extremely hot conditions have forced EABL to start the programme of supplying refrigerators to wider areas so as to cool their products and making them more refreshing. Further harsh climatic conditions have affected production of barley hence raise cost. Further the company has launched the Green Goals 2010 innitiative with its six pillars such as caring for environment, enforcement of environmental standards, recycling, waste reduction and survey matters. In order to take care of pollution the company is sticking to recyclable non wasteful parking material.
All these environmental issue have led to the growth importance of green issues in marketing. Related to the physical environment forces is geographical forces. Population distribution and size indicates an absolute potential consuming public. The bulk of this discussion has been explained while presenting arguments for demographic pattern and its changes. Connectivity and general infrastructure are part of geographical forces. Regions like Bundalangi and general Western region have experienced destruction of infrastructure such as roads, bridges due to harsh climatic condition.
This greatly affect the distribution of products and raises the cost of production and distribution. Increasingly, political and legal systems can have significant effects on marketing policies and strategies. Both the government and consumer have made the task of marketing more complex. The period under review has witnessed the raise of popularly known sin taxes by over 70%. This affected the cost of production. Further the government has introduced NACADA which is all out to fight alcohol and drugs consumption. This indiscriminate advocacy against alcohol has affected marketing activities of EABL.
The highlighted legislations and anti alcohol lobbyist strict advertising laws shaped the company’s marketing process. This lead to the following strategies. We ID Campaign, Don’t’ drink and drive campaigns The legal framework is more inclined toward regulation of activities in general terms. The concept of free market economy has greatly affected the marketing of KBL products since foreign products fill the market. The period being discussed has witnessed the ever growing concern of alcoholic related advertisement.
If this law is passed then it will mean total restructuring of market process for KBL even though this law is yet to be passed yet it is causing ripples in form of lobbying and discussion farms which the company is forced to take up the responsibilities and related cost. Finally the political skirmishes related to the post election violence has greatly affected the marketing activities of EABL. A lot has been discussed about the effects post election violence in the earlier discussions. c. IDENTIFY LAWS/ACTS IN KENYA AFFECTING MARKETING. WHAT IS THE PURPOSE OF LAW/ACTS.
It must be noted that marketing does not take place in a vacuum. Among the factors which affect marketing is legal related factors. In Kenya there are a number of laws which generally affect market operations in the country. The laws regulate marketing functions right from the functions, products and even pricing. For the purpose of this discussion let us look at them one after the other. The Supplies Preventition Management Act Cap 17 of 2007 aims at establishing, inventory, improve and publish the standard of the supplies professional. The Act guides on training and relevant examinations boards.
The Acts empower the administrators of this Act register and licence all practitioner under this cadre. The Sale of Goods Act Cap 31 specializes the condition for sales of goods in Kenya. The Act specifies the formulation of a contract and the performance of a contract. The rights of unpaid sellers against the goods and action for the breach of the contract one areas which have been covered in the Act. Narcotic Drugs an Psychotropic substances Act Cap 4 of 1994 is an Act of parliament with respect to the control of the possession of trafficking in narcotic drugs and psychotropic substance an cultivation of certain plants.
To provide for forfeiture of property derived from or used in illicit or narcotic drugs and psychotropic substance and for committed purposes. The Tobacco Control Act Cap 4 of 2007, its objective and purpose is to provide a legal framework for the control of the production, manufacture, sale, labeling, advertising, promotion, sponsorship and use of tobacco products including exposure to tobacco smoke in order to protect the user, consumer, person below the age of 18 and secondary affected citizens.
The Exchange Control Act Cap 113 (Repealed) is an Act of parliament to confer panes and impose duties and utilization in relations to gold, currency payments, security, debts and the import, export, transfer and settlement of properties and for purposes committal thereof. The Act further has rules which are regarded as the Exchange Control fees. The fire Arms Act Cap 114 is an act of parliament for regulatory, licencing and for the controlling, the manufacturer, importers and exporters, sales, repairs, storage, possession and use of firearms, ammunition, arigrams and destruction devices and commented purposes.
Which its subsidiary inflation the Act has rules associated with firearms. Equally fees chargeable per fireman is specified. Another Act of Parliament charged with the responsibility to make provisions for regulatory the sale and supply of liquor and for matters incidental thereto and committed therewith is the Liquor Licencing Act Cap 121. However this act does not apply to certain areas these areas have been stipulated in the Act varying for medical purposes to sale of liquor on board of vessels.
Related to this Act is the Pharmacy and Poisons Act Cap 244 which is also an Act of parliament to make better provision for control of the profession of pharmacy and the trade in drugs and poison. Copy Right Act Cap 130 (1966) is an Act of Parliament to make provision for copyright in literacy, musical and artistic works, audio visual works, sound recording and broadcasts. Under its subsidiary legislations has regulations which are amid at explaining caption 15.
Agricultural produce marketing Act Cap 320 is an act of parliament to control and regulate the marketing of Agricultural produce, enable marketing brands to provide for the powers and fantasies of the boards and for matters committed therewith. This stipulates the establishment of marketing boards and under its miscellaneous part it stipulates the regulations, offences and other related matters. Associated with this Act we have National Cereal and Produce Board, Pyrethrum Act 340, Tea Act Cap 343, Cotton Act cap 335, Coconut Industry Act Cap 332 and Coffee Act Cap 9 among others are all agricultural marketing related Acts.
The National Cereals and Produce Board Act which is an Act of parliament that regulates and controls the marketing and processing of maize, wheat and scheduled agricultural produce to produce NCCPB and control purpose therewith. The rest of the listed Acts listed in this paragraph are to provide respective avenue for reorganization, regulation of the respective industry and the control of growing process and most importantly marketing. That respective product for both scientific and agronomic research and any other concerned purposes.
The Pest Control Product Act Cap 346 (1983) is another agricultural related Act which regulated the importation manufacture, distributors and the use of products for controls of pests, and of the organic functions for control purposes. The Restriction Board Monopolies and Price Control Act Cap 504 is and act of parliament which is geared towards encouraging competition in the economy by prohibiting restrictive trade practices continuing monopolies concentration of economic powers and prices.
However even though this Act supports competition the Foreign Investment Protection Act Cap 518 gives protection to certain approved foreign investments and matters incidental thereof. In conclusion therefore legal aspects generally influenced the marketing practices in Kenya. In fact the laws discussed are only a few. There are others and in fact all the laws of Kenya has one way or another affected marketing either directly or indirectly.