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ABSTRACT
BIOTTERY
BUS 448b
International Strategic
Management and Policy
Ana Grosu
Diana Murzac
Giorgi Toklikishvili
BIOTTERY
Table of Contents
PESTEL ANALYSIS .......................................................................................................... 2
Bulgaria ............................................................................................................................. 2
France................................................................................................................................ 3
The Netherlands ................................................................................................................ 4
The United Kingdom ......................................................................................................... 5
CAGE ANALYSIS .............................................................................................................. 6
Cultural ............................................................................................................................. 6
Administrative and Political ............................................................................................... 7
Geographical ..................................................................................................................... 7
Economic .......................................................................................................................... 8
5 FORCES ANALYSIS....................................................................................................... 8
Organic food Industry........................................................................................................ 8
Bulgaria ..................................................................................................................... 8
France ...................................................................................................................... 10
The Netherlands ....................................................................................................... 11
The United Kingdom ............................................................................................... 11
Functional foods and drinks market ................................................................................. 13
Bulgaria ................................................................................................................... 13
France ...................................................................................................................... 13
The Netherlands ....................................................................................................... 14
The United Kingdom ............................................................................................... 15
PARTS ANALYSIS .......................................................................................................... 16
Bulgaria ........................................................................................................................... 16
France ............................................................................................................................. 17
The Netherlands .............................................................................................................. 17
The United Kingdom.......................................................................................................................................................18
SWOT ANALYSIS............................................................................................................ 20
VALUE INNOVATION .................................................................................................... 21
REFFERENCES ............................................................................................................... 23
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PESTEL ANALYSIS
BULGARIA
Political. The year 2013 was one of political crisis. As the World Bank's governance
indicators illustrate, Bulgaria has some serious problems regarding the control of corruption.
There also is place for improvement concerning the application of the rule of law, government
effectiveness, and regulatory quality. All these factors hindered Bulgarias efforts to become a
member of the Schengen area.
Economic. Bulgaria is classified by the World Bank as an upper middle-income economy
and is in the group of high human development countries according to the United Nations
Human Development Index. It is the poorest member of the EU according to the GDP per
capita indicator. The economic transformation from central planning to free market capitalism
was difficult and resulted in a serious decrease in living standards. According to the World
Bank's Doing Business indicators for 2014, Bulgaria ranks 38 th, losing two positions compared
to 2013.
Social. Bulgarian population has been decreasing in the recent years. The population is
growing older at an increasing rate. Birth rates remain low. Health care and medicine are
currently in high demand with the senior population. There is a significant difference in
consumer behavior of young working people and elderly retirees. Young workers have higher
incomes which translated to a higher consumption rate. They buy better quality products, visit
restaurants, go on holiday, and engage in other extracurricular activities. In contrast, older
pensioners receive a lower income thus tend to limit their expenses to the most pressing
necessities.
Technological. The intensity of R&D in Bulgaria is one of the lowest in the EU. Research
and innovation are not well-targeted and aligned in Bulgaria. The Law on Innovation
announced in the 2013 has not been adopted and the previously envisaged National Innovation
Board has not been established. Furthermore, the National Science Fund did not distribute any
funds in 2013, thus an investigation of possible irregularities in the allocation procedure was
launched. When it comes to food technology traditional processing is the norm, especially for
dairy products.
Environmental. Environmental protection policies are insufficient, which adversely affects
the economy and Bulgarians quality of life. Poor outcomes in the waste and water management
sectors have an adverse effect on resource efficiency. According to a recent report by the
European Environment Agency, Bulgaria has the highest concentrations of PM2, CO and SO2
in the air amongst European countries, leading to external costs including healthcare and lost
working days.
Legislative. The food industry and agriculture are among the most important and dynamic
industrial sectors in Bulgaria. The legal framework of these areas is extensive and covers
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several laws and regulations, most significant of which are: the Food Act, Agricultural
Producers Assistance Act. Manufacturing, import, and distribution of food are related to
compliance with multiple regulatory requirements.
FRANCE
Political. France is a member of both the EU and NATO. It is a highly centralized country
with an elite group being dominant in the public and corporate sectors. Corruption is not cited
as an important negative factor for doing business in the country and companies operating in
France have a reputation of strong corporate social responsibility. France rejected a proposal
by the European Commission to create an EU-wide value-added tax (VAT), and increased its
standard VAT to 20 %.1
Economic. As the second largest economy in Europe2, France is part of the single market
of the EU and has harmonized trade standards. It has a strong services sector (contributing
around 82.1% of the GDP) and a well-developed infrastructure. It is the 6th biggest e-commerce
market worldwide and third in Europe. After the Eurozone debt crisis, consumers still have less
disposable income, therefore the money spent on upmarket, premium and indulgent goods will
be reduced. Despite that, sales of energy drinks have increased, indicating that the recession
has no significant impact.
Social. France has a strong performance on the Human Development Index. 3 It is one of
only two European countries that could maintain their current population based on high fertility
and birth rates. 4 Because of the issues with aging population and early retirement, the
government has introduced legislation to raise the retirement age, along with other measures.
Educated and health conscious consumers are aware of the benefits of physical activity and a
healthy diet. There are a lot of ethnocentric consumers that engage in patriotic purchasing, thus
feel loyal to French authentic products and services. French have a negative attitude towards
customer service which they associate with being a servant.5 An increasing number of people
embrace a sports oriented lifestyle.
Technological. The government has been successful in creating a favorable innovation
climate. France is politically committed to technological development and a strong support for
R&D. There is significant progress in biotechnology and sustainable packaging design.
Environmental. In March 2011, the European Commission took France to the EU Court of
Justice for its poor adherence to EU industrial emissions regulations (at least 62 factories that
have not received environmental authorization from the EU). Consumers tend to reject
synthetic and artificial ingredients and to prefer fresh, green, natural, and ecological products
and are not willing to make a compromise on product quality, health, and safety.
http://euobserver.com/news/32182
http://www.invest-in-france.org/us/why-choose-france/a-country-with-a-global-outlook.html
3 http://hdr.undp.org/sites/all/themes/hdr_theme/country-notes/FRA.pdf
4 http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Fertility_statistics
1
2
http://www.understandfrance.org/France/Questions.html
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Legal. Transparent laws and regulations for establishing companies together with the
reasonably hospitable climate for foreign investment makes for a prolific environment. While
most of the governments tax and labor reforms are met with criticism, and public protests,
France is planning to increase weekly working hours from the current 35 to 39 and abolish the
wealth tax.
THE NETHERLANDS
As the World Banks governance indicators illustrate (see Appendix 3), Netherlands is one of
the most successful nations in terms of the application of the rule of law, control of corruption,
regulatory quality, voice of accountability, and government effectiveness. The Netherlands is
member of the EU and NATO. It generally has a stable government but occasionally certain
influences can bring some disturbance in politics.
Economic. The Netherlands economy is the 8th in the EU and is one the strongest in terms
of social welfare, and standard of living. Among the EU nations, Netherlands has one of the
highest level of GDP per capita in terms of purchasing power parity. According to the World
Banks Doing Business indicators for 2014, Netherlands is the 26 th best country in the world
to do business in. In 2013 GDP growth was -0.8% and the unemployment rate has increased to
6.5% since 2008. As Netherlands will face population aging issues in the near future, healthy
related products are becoming trendy and sensitive to economic cycles. Thus, organic drinks
and foods are making their way to groceries lists.
Social. Residents of Netherlands enjoy a high standard of living. Netherlands education
and healthcare systems rank among the best in the world. Most of the people are aware of their
health. They understand and appreciate the importance of healthy products. The problem of
aging population will persist in Netherlands in the upcoming years. Due to low confidence
resulting from economic decline, growth for health and wellness beverages slowed prior to
2011. However in 2013 there were promising signs of growth as long as consumers budget
allowed to make the purchase. The trend towards natural products without additives or artificial
ingredients is growing. Consumers are interested in buying lower-priced alternatives to the
major brands, but remain hesitant about paying for premium products. This shrinks the pool of
potential consumers for Biottery.
Technology: Today the Netherlands is the worlds second largest exporter of agricultural
products, after the USA. It supplies a quarter of the vegetables that are exported from Europe.
The agri-business is one of the driving forces behind the Dutch economy. The Netherlands has
the second highest private R&D investment rate (as % of GDP) in agriculture-food in Europe.
The internet has much influence on the life of Dutch population as online reviews play a big
role in consumer decision-making, which represents a window of opportunity for Biottery.
Environmental: The environmental causes have become very important in recent years.
The Netherlands has a good record of accomplishments in achieving a number of its
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Legal. The legal system in the UK is organized, transparent, and efficient. According to the
2014 Index of Economic Freedom, the UK ranked 14th in the world and 5th in Europe. The
production, processing, distribution, retail, packaging and labelling of food goods are governed
by a mass of laws, regulations, codes of practice and guidance. The complex legal system for
the food industry is pretty restrictive when compared to other developed economies and that
creates difficulties for Biottery. 6
CAGE ANALYSIS
Comparing Bulgaria with the Netherlands, France, and the UK across 4 different dimensions
of distance.
The Netherlands
France
The UK
Different languages.
Different languages.
Different languages.
Different religions.
Different religions.
Different religions.
since 1993.
Bulgarian products.
Cultural
their
general.
country
Different cuisines and tive attitudes towards Bulconsiderably different food garians can easily transfer
patterns, to Bulgarian products.
Foods and drinks affect
separates the 2 countries.
consumption
cultural and/or
national
identity of consumers.
http://www.lordbilimoria.co.uk/interview-murnaghan-2/
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Bulgaria is according to
Bulgaria, according to a There have been de- polls the most pro-Russian
Maurice de Hond poll mands from multiple EU member state and this,
carried out on behalf of the French politicians for both he says, is a choice
of Bulgarian products.
licy
distances
countries.
Lack of common border.
the
10
The country has a central, Weak transportation and In April 2014 leading UK
Goegraphical
extensive
infrastructure
companies
http://www.bbc.co.uk/news/world-europe-11310560
https://www.gov.uk/government/speeches/hma-jonathan-allen-on-foreign-policy-in-a-less-stableneighbourhood
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design companies.
Both Bulgaria and the France's rank as the 12th Both Bulgaria and the
Netherl. are aligned with largest foreign investor in UK are aligned with the
the European standards due Bulgaria.
Economic
The Netherlands is res- the French investors to The UK ranks as the 19th
ponsible for 33% of foreign Bulgaria.
supplier of products in
investment in Bulgaria in Despite not being in the Bulgaria. 15
the past 8 months.
Eurozone, the Bulgarian Currency increases the
The Netherlands ranks currency is pegged to the economic distance.
16th as supplier of products Euro since its introduction Existence of a British in Bulgaria.
in 1999, which reduces cur- Bulgarian Chamber of
Eurostat ranks the Nethe- rency
fluctuations
and Commerce.
6th
in
the
while Bulgaria ranks as the Bulgaria is in the shadow tries in EU, while Bulgaria
poorest country in the of French business in ranks as the poorest coungroup.
Romania.
try in the group.
5 FORCES ANALYSIS
Organic food industry
BULGARIA
The Bulgarian organic food market is small but emerging, accounting for about 1% of total
food sales today. Imported organic products dominate the market with about 80% of market
share, while 90% of local organic food is exported. Motivating the price-sensitive Bulgarian
https://www.gov.uk/government/world-location-news/uk-companies-explore-bulgarian-infrastructure-opportunities-with-hrhthe-duke-of-kent
12http://www.novinite.com/articles/141294/FrenchBulgarian+Chamber+of+Commerce+Chair+Stephane+Delahaye%3A+French+Investors+Are+Yet+to+Show+Potential+in+Bulgaria
13 http://www.euromoney.com/Article/3374022/Bulgaria-Eurozone-entry-long-way-off.html
14 http://www.trud.bg/Article.asp?ArticleId=3729158
15 http://atlas.media.mit.edu/profile/country/bgr/
11
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consumer is one of the biggest challenges faced by organic producers. Organic food market is
still restrained by the overall financial difficulties and limited consumer purchasing power.
Rivalry moderate. Many small farmers grow their own organic products and sell them
without paying taxes driving the price down. Local farms producing organic products
accounted for a significantly higher sales share than multinational players. As well, limited
differentiation between organic products within each market segment and negligible switching
costs serve to drive up rivalry. Nevertheless, as the market grows, the rivalry will weaken
amongst players, as revenues could be generated without invading on other players shares of
the market.
The power of buyers high. Buyers in this market tend to be end consumers; there are a
big number and they have a weak buyer power. Even if traditionally price sensitivity is fairly
low in the organic market, as buyers expect to pay a premium for the organic production
process, Bulgaria is an exception, because its population is extremely price sensitive, making
it easy for buyers to shop elsewhere.
The power of suppliers moderate. Organic food has a close association with direct sales
to the public. Relatively large quantities of organic food are sold through farmers markets. This
is a form of forward integration, which enhances supplier power. Moreover, strict standards in
the production process are integral to the credibility of the organic industry. For example, in
Bulgaria organic certification is regulated by the Ministry of Agriculture and Food, and only
approved products can be marketed as organic, and carry the label on the package. As a result,
retailers depend heavily on the quality of their suppliers. Retailers and suppliers often have
long-term contracts, which increase supplier power. Supplier power is limited by the relatively
small size of the typical supplier. This weakness is becoming more pronounced over time as
large retailers increasingly become involved in the organic market.
The threat of substitutes strong. The main substitutes to organic foods are their markedly
cheaper non-organic equivalents. Another possible alternative to purchasing these types of
products in Bulgaria is subsistence farming; growing organic agricultural produce for ones
own consumption. However, this activity has switching costs, it is time-consuming, requires
some degree of specialist knowledge, and incurs the cost of purchasing seeds, fertilizer, and
gardening products. In addition, many people do not have the land required to make this a
viable option. Moreover, quantity and quality of end produce is not guaranteed. Even those
who can successfully produce some of their own organic food are unlikely to grow everything
they need to meet their own needs; they may still need to purchase some items from market
players.
The Threat of new entrants moderate. Being part of the EU, organic products producers
from Bulgaria have access to financing programs that support the agriculture, rural areas and
business in general. This creates opportunities for these businesses to enter the market, receive
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funds and improve their efficiency or modernize the equipment they use. As well, the strong
growth that is predicted to continue in the upcoming period is also likely to attract new entrants.
FRANCE
France accounts for 18.1% of the European organic food market value. In 2018, the French
organic food market is forecasted to have a value of $8,050.5 million, an increase of 42.9%
since 2013. (MarketLine 2014). Organic beverages occupy 15.6% of the organic food market,
which represents an encouraging share for Biottery.
Rivalry moderate. Players within this market range from small-specialized organic shops
to large supermarket chains. Limited differentiation between organic products within each
market segment and negligible switching costs serve to drive up rivalry. For large
supermarkets, organic products contribute only a small percentage of overall revenue. The
leading companies selling organic products in France are: Carrefour, Casino GuichardPerrachon, E. Leclerc, Les Mousquetaires.
The power of buyers moderate. The buyers in this market are the end consumers, who
have a negligible financial influence, weakening the buyer power. As well, price sensitivity is
fairly low in the organic market, as buyers expect to pay a premium for the organic production
process. Buyer power is however increased by negligible switching costs: although the key
segments of this market are quite diverse, there is only limited product differentiation within
each category, which might represent an opportunity for Biottery.
The power of suppliers weak. When it comes to organic food, relatively large quantities
are sold through farmers markets, which enhances supplier power, this being a form of forward
integration. Moreover, strict standards in the production process are integral to the credibility
of the organic industry which should fall under strict scrutiny of the EUs Organic Farming
Regulation. As a result, retailers depend heavily on the quality of their suppliers.
The threat of substitutes strong. The threat from non-organic equivalents is the strongest
one because they are cheaper to buy and are sold in greater volumes. In solely organic retailers,
organic products are marketed for their environmental benefits and nutritional quality, which
limits the threat of cheaper non-organic products. Exclusively organic outlets tend to be much
smaller and much less common than the large supermarket chains that stock both organic and
non-organic produce. Some of the major retailers such as supermarkets have integrated
backwards in the sense that they offer private-label versions of energy drinks. For example
Carrefour has launched its own range of energy drinks under the Carrefour Psychik brand.
Therefore, Biottery can lose French customers to the numerous un-organic energizing drinks,
powders, gels, and energy bars.
The Threat of new entrants strong. The growing consumer demand for organic food
increase the BTE. Because of the relatively tight regulation and certification requirements, as
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well as the strong historic growth that is predicted to continue in the upcoming period the new
entrants are more likely to be attracted in the industry.
THE NETHERLANDS
In the Netherlands organic farming plays only a modest role compared to its neighbouring
countries. Companies that produce organic products are subsidized by the government. The
policy for organic agriculture strives for 10% annual growth per consumer spending on organic
foods. The market share of organic products is 1.7% of total food spending. Retail Sales Value
in 2014 was approximately $946 million.
Rivalry strong. Players within the organic food market range from small farmers market
to large supermarket chains as Albert Heijn, whose market share is about 30%. Revenues
depend on each market players level of specialization. A portion of Dutch consumers are
dedicated to buying at farmers markets, however their decisions are mostly influenced by
convenience, availability, and price.
The power of buyers moderate. Although Dutch consumers express their concern about
health and wellness, an average Dutch is reluctant to pay a price premium of over 30 percent
above the price of conventional products. Moreover, Netherlands is worlds third agricultural
exporting country, and Dutch consumers are used to pay low prices for local agricultural
products. Brand recognition will be crucial for Biottery.
The power of suppliers moderate. Suppliers are usually farmers, whose influence on the
market is fairly high. Small farmers are the ones considered as producers of organic products.
Retailers depend on the quality of their suppliers, as Netherlands is increasing its production
of organic goods. Biottery might consider future cooperation with Dutch farmers after the longterm agreement with their supplier Harmonica expires.
The threat of substitutes - strong. There is a strong threat for non-organic substitutes,
which are very cheap in Netherlands. Biottery loses their market share to numerous un-organic
energy drinks, and soft drinks. In order to succeed Biottery should focus on differentiation.
The Threat of new entrants strong. On July 1, 2010, the EU introduced a compulsory
organic logo and labelling system for pre-packaged food to indicate that it has met EU Organic
Farming Regulation. Any organic food sold in Netherlands should meet with EU organic
farming regulations. As Netherlands is aiming to be organic and bio friendly in the future, a
considerable threat of new entrants for Biottery could come from Dutch market.
THE UK
The United Kingdom accounts for 8.5% of the European organic food market value. The UK
organic food market had total revenues of $2,639.3 million in 2013. The market shrank over
the period 2009-2013. Over the forecast period 2013-2018, the market is expected to continue
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to shrink, although at a slower rate than at present. Organic beverages occupy 6.0% of the
organic food market an encouraging share for Biottery.
Rivalry strong. Rivalry is heightened by the lack of product differentiation, and negligible
switching costs for buyers. Players within this market range from small specialized organic
shops to large supermarket chains. For large supermarkets, organic products contribute only a
small percentage of overall revenue. Leading companies selling organic products in the UK
are: Wm Morrison Supermarkets PLC, J. Sainsbury plc, Tesco PLC, and Wal-Mart Stores, Inc.
The power of buyers moderate. Buyers in this market tend to be end consumers. There
are a large number of them and they have a negligible financial influence. Price sensitivity is
fairly low, as buyers expect to pay a premium for the organic production process, therefore the
1.97 per shot ( 2.5) that Biottery plans to charge might raise suspicions as to whether the
drink is truly organic. Buyer power is strengthened by increasing consumer demand, as
retailers are forced to monitor new buyer behaviors in order to predict the future market
expansion. Brand recognition is really important, if Biottery manages to increase its reputation
in the UK, consumers will demand it and supermarkets will have to have it on their shelves.
Buyer power is also increased by negligible switching costs. Even though organic products are
quite diverse, there is only limited product differentiation within each category.
The power of suppliers weak. Suppliers are usually relatively small-scale farmers, whose
influence on the market is fairly limited. However, many have integrated forwards and sell
directly to end-consumers, strengthening their position. Retailers depend heavily on the quality
of their suppliers. Biottery already has a long-term agreement with a Bulgarian supplier
Harmonica.
The threat of substitutes - strong. There is a strong threat from non-organic substitutes,
which are cheaper to buy and are sold in greater volumes. Biottery competes with the numerous
un-organic energizing drinks, powders, gels, and energy bars from Red Bull to vitamin water
to Pulsin' Energy Bomb. There is also a high substitution threat from organic products
perceived as equally energizing coffee, natural juices, green tea, etc. In order to succeed, it is
paramount that Biottery focuses on differentiation and customer perceived value.
The Threat of new entrants strong. Relatively tight regulation in the organic market
might serve as high BTE. The BTE might also be enhanced by the large size of market
incumbents, although the diverse nature of leading players' revenue streams means that there
is less likelihood of retaliation. The high BTE together with the projected growth make the
market very attractive.
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Supplier power moderate. Suppliers in this market include those entities supplying
ingredients and equipment for the production of functional drinks (ex. fruit, milk, sugar,
caffeine, herbal extracts and other ingredients such as taurine, glucuronolactone, guarana,
electrolytes, aspartame, and vitamins). Packaging is another important input in this market and
some market players enter into long-term contracts with their suppliers, which strengthens
supplier power. Distributors are also a key supplier, helping company's make sure their
products hit the shelves. Other suppliers include those providing advertising services to market
players; a strong brand image is key to securing success in this market, as has been proven by
the likes of Red Bull and Monster who have closely linked their brands to extreme sports.
New entrants moderate. The functional drinks market is thriving; both in value and
volume of sales therefore new entrants are encouraged. However, there is increasing concern
about the health implications of high caffeine drinks and negative publicity could potentially
damage sales. New entrants therefore need to carefully consider the implications of entering
the energy drinks segment. The fact that the four leading players account for over 70% of the
French functional drinks market also acts as a deterrent to potential new entrants.
Threat of substitutes moderate. For the consumer, substitutes for functional drinks
include a range of products offering similar nutritional content in what are arguably less
convenient or less effective forms. (Ex. coffee; conventional soft drinks, confectionery, or fresh
fruit being partial substitutes for sports drinks).
Degree of rivalry moderate. The French functional drinks market is concentrated, with
the top four players holding 71% of the total market share. Some players in this market, such
as Red Bull, are exclusively focused on functional drinks. Strong growth, both in recent years
and forecasted up to at least 2018, alleviates rivalry to some degree.
THE NETHERLANDS
The Dutch functional drinks market has grown rapidly in recent years both in value and volume,
and it is expected to grow even faster in the next years.
Rivalry - moderate. Netherlands functional drinks market is concentrated, with top players
like Coca-Cola Company, PepsiCo, and Red Bull GmbH. Entering a market where beverage
giants already have huge share can be dangerous. There also are some Dutch players such as
Oggu, which offers a range of soft drinks with all-natural, 100% certified organic ingredients,
which is also aiming to be functional and carbon neutral.
The power of buyers moderate. Dutch people usually buy drinks at supermarkets and
hypermarkets, so switching costs are not that high. Dutch consumers are very demanding when
it comes to brands. In this case Biottery is in a disadvantageous position.
Product
differentiation is driving the market which weakens buyer power. The trend in organic eating
and drinking habits may result in increase of buyer power.
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The power of suppliers moderate. The quality of the ingredients is crucial to maintaining
confidence in the product. Because Biottery depends almost entirely on one big supplier
Harmonica, it has less bargaining power over it. Their essential ingredients are available from
several sources, but they are subject to price fluctuations. Packaging and distributors are also a
key suppliers. Here Biottery depends on Harmonica as well.
The threat of substitutes - strong. For the consumer, substitutes for functional drinks
include a range of products offering similar nutritional content. For example caffeinecontaining drinks such as coffee, conventional soft drinks, confectionery, protein bars and
protein powders, or fresh fruit, organic drinks, etc. Buyers have many offers from functional
drinks market. Consumers enjoy wide range of choice of functional drinks that are less costly
and are well branded.
The threat of new entrants strong. Growth in functional drinks market and the love
Dutch people have for soft drinks encourages new entrants. The increase in organic drinks is
due to intensification in health awareness. Entry in this market can be done either as a small
start-up company or as an existing company diversifying into the market. However, strong
brands do not require a lot of effort to diversify their products here. Market growth is expected
to continue, but innovation in the healthier production is expected in the future.
THE UK
The UK functional drinks market has grown rapidly in recent years both in value and volume
terms. It had total revenues of $3,779 million in 2013, representing a growth rate of 14.7%
between 2009 and 2013. The market is expected to grow, with an anticipated growth rate of
7.9% for the five-year period 2013-2018, which is forecasted to drive the market to a value of
$5,516.4 million by the end of 2018, an increase of 46% since 2013. Energy drinks is the largest
segment of the functional drinks market in the United Kingdom, accounting for 76.5% of the
market's total value.
Rivalry - moderate. The UK functional drinks market is concentrated, with the top four
players holding 76.2% of the total market share. Leading companies are The Coca-Cola
Company, GlaxoSmithKline Plc, Monster Beverage Corporation, and Red Bull GmbH. Some
players in this market, such as Red Bull, are exclusively focused on functional drinks; however,
they are facing increasing competition from large scale, diversified drinks manufacturers such
as Coca-Cola and pharmaceutical companies such as Abbott Laboratories.
The power of buyers moderate. The typical buyers of functional drinks in the UK are
supermarkets and hypermarkets sharing 30.4% of the total market, followed by the on-trade
channel (cafes and restaurants) with 25.7%. The significantly large size of these buyers
increases their power. Switching costs for retailers are not that high. However, consumer
demand dictates that stores need to stock functional drinks of some type and it is here that the
leading brands enjoy the advantage of greater consumer awareness. In this aspect Biottery is in
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a disadvantageous position.
The power of suppliers moderate. Suppliers in this market include those entities
supplying (1) ingredients and (2) equipment for the production of functional drinks. The quality
of the ingredients is crucial to maintaining confidence in the product. For now, Biottery
depends almost entirely on one big supplier Harmonica, it has less bargaining power over it.
The threat of substitutes - strong. For the consumer, substitutes for functional drinks
include a range of products offering similar nutritional content, arguably less convenient or less
effective: caffeine-containing drinks such as coffee, conventional soft drinks, confectionery,
protein bars and protein powders, or fresh fruit, and so on. Retail and on-trade buyers in this
market already offer these products to consumers, and from their point of view, the benefits of
functional drinks include higher margins, longer shelf life and so, less costly wastage.
The threat of new entrants strong. The healthy growth in market revenues during the
past few years should encourage new entrants. Many soft drinks manufacturers have the
capability to penetrate this market successfully. Brand building would also be a requirement if
a new company were to succeed. A strong brand is proven to be a real asset and no company
has demonstrated this more than Red Bull. The introduction of increasingly innovative,
functional drinks for example, new segments in the market such as relaxation drinks as
opposite of energy drinks is expected.
PARTS FRAMEWORK
BULGARIA
Players. Biottery could contact fitness sportsmen, such as Lazar Angelov, who is a
worldwide known fitness athlete. His appearance under the Biottery brand name could result
in better sales and marketing with the help of his social media channels (7.8 million likes of
Facebook).
Added value. The best way of increasing Biotterys added value in Bulgarian market is to
start educating Bulgarians about functional organic drinks.
Rules. As soon as Biottery gets its approval from the Bulgarian Agency for Food Safety, it
should start building its image. By putting Biottery on supermarket shelves, the company could
increase awareness about their power shot and about functional organic products as a whole.
Tactics. Biottery has a potential to shape and define functional drinks market in Bulgaria,
considering it is the first of its kind here. The company should consistently send signals and
massages about their organic functional drink, to get enough public attention and influence the
perception of other Bulgarian players.
Scope. Bulgaria is linked to the EU market. Plenty of the communication examples could
be used as inspiration in the benefit of Biottery. Possible customer segment for Biottery could
be skiers. Banski and Borovets seem perfect places for Biottery to launch a campaign in during
16 | I n t e r n a t i o n a l S t r a t e g i c M a n a g e m e n t a n d P o l i c y
BIOTTERY
winter tine, when cyclist are scarce. A lot of energy is needed to ski all day, where a shot of
Biottery can boost up energy for more fun.
FRANCE
Players. Biottery should start concentrating their marketing resources on hardcore sport
amateurs such as runners, climbers, hikers, cyclists, mountain runners, Para gliders, kayakers,
and mountain bikers these being the outdoor sports most preferred by the French people.
Afterwards they should target another niche markets such as teenagers and young adults,
considering this generation's on-the-go lifestyle and receptiveness to advertisements for these
types of products.
Added value. Mainstream consumers of organic food as well as professional athletes are
looking for quality and competence rather than for attractive prices, and attach increasingly
more value to traceability and trustworthiness. Therefore Biottery should continue innovation
and should fine-tune their potentially upcoming products by introducing complementary goods
like the during-and-post-workout organic gels, power bars, and nutritional supplements.
Rules. French people are used to see specific labels marking the quality of certain products
such as the system indicating the high quality (Label Rouge), environmental quality (organic
farming), or quality linked to origin (AOC, PDO) or provenance (PGI). Agriculture Biologique
(AB) is the logo used for organic products. The presence of the EU organic symbol (Euroleaf) on the bottle will trigger higher expectations, awareness, and perceptions and thus will
facilitate the trustworthiness of Biottery.
Tactics: Considering the early development phase the Biottery has in the organic industry
and functional drinks market, Biotery should first develop a contingency plan for the
demanding French market, and also thoroughly assess the technological and commercial
feasibility of their new product ideas. It should also make use of its philosophy, selling the
experience of living and breathing a truly healthy lifestyle [..], not simply selling the product.
Changing the scope. An interesting customer segment worth to be considered by Biottery
are the swimming practitioners. These people do not only expect their pre-workout drinks to
be easily transportable, but also to have a specific consistency enabling them an easy digestion,
which Biottery is already covering. Biottery should also start focusing on the segments of
overachievers and tech-savvy people, while finding brand ambassadors among the influencers
from the Health and Fitness Industry, French YouTube diet guru vloggers, etc. Also, France's
rapidly aging population is creating a significant demand for eldercare a Biottery advantage.
THE NETHERLANDS
Players. The key players Biottery should focus on are customers and health gurus, because
those are the ones it can work with right away. The trends that are shaping the future of Dutch
consumers are health and wellness. Biottery should target the people engaging in a healthy
lifestyle, people who like sports and want to be healthy and active. Big players have advantages
17 | I n t e r n a t i o n a l S t r a t e g i c M a n a g e m e n t a n d P o l i c y
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over Biottery; their possible diversification in organic functional drinks market could diminish
the influence of or even cut out start-up companies like Biottery.
Added value. Within the consumer mega-trends, a number of sub-trends should be taken
into consideration. The best way of increasing Biotterys value in the value network is to satisfy
as many of those sub-trends as possible, this way increasing the products perceived value. The
focus should be on increasing Biotterys added value rather than decreasing the value of others.
Rules. Dutch people trust terms like organic, because they believe in the legal
requirements of the EU. Biotterys message to Dutch customers should be as clear and
transparent as possible in terms of legal parameters, in order to reinforce that trust.
Tactics. Because of the weak position Biottery has in the organic industry and functional
drinks market, it should focus on creating certainty about their moves, rather than increasing
the fog, as they are at the stage of ensuring trust.
Changing the scope. Biottery should not focus only on customer segment of passionate
amateurs, but try to tie up relationship with health and fitness industry. Aging Dutch
population could be a great opportunity for Biottery.
THE UK
Players.
The
key
players
right.
The
retailers
and
discount stores ceded to be complementors and started to integrate vertically, bringing on the
otherwise fragmented market some big powerful substitutors for Biottery. The gigantic
dominant soft drinks brands that diversify into functional drinks industry have more power
regarding all the players in the value chain, and they have lower risks because their fixed and
sunk costs are distributed over a wide range of products.
Added value. The best way of increasing Biotterys value in the value network is to satisfy
as many of the sub-trends as possible, this way increasing the products perceived value.
Sustainability is an issue, therefore continuous innovation is necessary. Even with the formula
being patented, there is a risk that the recipe will be closely enough copied, even by end
18 | I n t e r n a t i o n a l S t r a t e g i c M a n a g e m e n t a n d P o l i c y
BIOTTERY
Mega
Sub-trends
Trend
Functional food/drinks
Health
Wellbeing
Organic
New alternatives
Ethical food (no waste,
environ-mentally
Pre-
mium
food
should
follow
the
legal
rules
and
satisfy
Food origin
food
the
friendly)
gourmet
Conve
-
Portability/ on the go
Ready to eat/drink
nience
By cooperating with startups like targetnutrition.org.uk which offers numerous health and
wellness services Biottery will increase its value added.
19 | I n t e r n a t i o n a l S t r a t e g i c M a n a g e m e n t a n d P o l i c y
BIOTTERY
SWOT ANALYSIS
Strengths
Weaknesses
channel.
product,
to be invented/produced/distributed.
therefore,
for
potential
EU
Threats
Initial lack of trust from consumers.
The sports nutrition business is highly
competitive.
Threat of vertical integration by big
retailers.
Threat of huge soft drinks producers to
diversify into organic functional drinks.
Threat of new entrants due to market
attractiveness.
Companies
constantly
entering
the
BIOTTERY
Hostile takeovers.
conscious
aging
population,
VALUE INNOVATION
Despite the many successful innovation initiatives in the food industry, recent reviews are quite
critical with respect to the overall innovation climate. The new trends are trying to move the
food industry from intensive production to product differentiation organic and functional
foods and drinks being just some of the outcomes. This change in the industry conditions
together with the focus on superior customer value, all while disregarding the competitors, sets
the ground for Biotterys blue ocean strategy into the industry.
The RBV of the company proves the weak position Biottery finds itself in at the moment. The
only unique valuable resources they have is the patented formula that added up to their unclear
competences results in almost no capabilities. But the patent is not valuable if the product is
not perceived as bringing superior customer value and has no reputation whatsoever. Given the
monopolistic competition market structure the only way Biottery can ensure sustainability of
their competitive advantage (CA) is by increasing barriers to entry.
The taxonomy of the resources in the organic functional drinks looks like this: agricultural,
chemical, pharmaceutical, and biotechnological upstream ingredient suppliers, followed by
brand owners doing also private labeling, only to end up with downstream retailers and
supermarkets. One area for CA that we have identified along this value chain is the ingredient
suppliers. First of all, this area is the most R&D oriented with new technologies and ideas
spurring continuously, and second of all, these players get a lot of attention and support from
governments and NGOs. By co-marketing and/or co-branding with some key influential
ingredient supplier Biottery gets a huge CA over its competitors, because none of the firms we
have researched so far have done that.
Breaking the dominant chain logic, another value innovation initiative Biottery could undergo
is get outside the food industry boundaries and collaborate with health and wellness industry
and fitness industry. By getting their product approved and recommended by specialized
21 | I n t e r n a t i o n a l S t r a t e g i c M a n a g e m e n t a n d P o l i c y
BIOTTERY
nutritionists, health gurus, fitness trainers, etc. Biottery can boost consumer trust in the product,
which we have proved is of extreme importance. Besides trust, this inter-industries
collaboration facilitates the spread of knowledge about the benefits of the product and the
ingredients it contains. We believe this is the single best move to increase customer perceived
value of the drink that would eventually justify the skimming price strategy and bring positive
financial results.
All being said, we believe Biottery is rushing up in expanding geographically. A single-product
brand with no reputation and very limited capabilities, competing in an monopolistic
competition market, where big players like Coca-Cola have nothing to stop them from
differentiating into organic functional drinks industry, simply cannot expand geographically
before the product was even accepted by the Bulgarian Agency for Food Safety (
). At this stage their focus should be at improving the
formula and creating a brand image through the methods we have mentioned above.
22 | I n t e r n a t i o n a l S t r a t e g i c M a n a g e m e n t a n d P o l i c y
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REFFERENCES
Agriculture and agri-food Canada. (2014, 11 19). Retrieved from Organic packaed food in
the Netherlands: http://www.ats-sea.agr.gc.ca/eur/5803-eng.htm
Boshnakova, M. (2014). Organic Food Market Update. Sofia: USDA Foreign Agricultural
Service.
Business Monitor International. (2014). United Kingdom Food and Drink Report.
Duurzamereten.
(2014,
11
19).
Retrieved
http://www.duurzamereten.nl/bedrijven/detail/biologisch
Euromonitor International. (May 2014 r.). Sports and Energy Drinks in Bulgaria. Retreived
from http://www.euromonitor.com/sports-and-energy-drinks-in-bulgaria/report
from
Biologisch:
Nutrition Foundation. (2013). Extreme Drinks moves into conservative French market.
France.
23 | I n t e r n a t i o n a l S t r a t e g i c M a n a g e m e n t a n d P o l i c y
Retreived
from
BIOTTERY
APPENDIX 1
BULGARIA
Worldwide Governance Indicators:
Estimate
Bulgaria 2013
Rank
-0.29
0.15
0.18
0.52
0.32
Control of Corruption
Governm ent Effectiveness
Political Stability and Absence of Violence/Terrorism
Regulatory Quality
Voice and Accountability
49.76
59.33
54.50
67.94
58.29
Macroeconomic Indicators:
Historical
Units
Scale
2009
2010
2011
2012
2013
2014
BGN
51.76
51.97
52.92
53.23
53.69
54.44
% change
-5.476
0.393
1.841
0.586
0.862
1.4
U.S. $
48.65
47.84
53.58
51.33
53.05
55.08
BGN
9,032.82
9,395.40
10,277.82
10,723.54
10,791.87
10,870.74
U.S. $
International $
% of GDP
6,432.50
6,374.12
7,311.80
7,048.62
7,328.49
7,648.20
14,277.91
14,622.88
15,568.00
16,039.35
16,517.69
17,115.10
20.44
21.408
22.024
20.825
22.822
23.255
2.472
3.036
3.389
2.389
0.383
-1.157
6.878
10.306
11.35
12.379
13.038
12.5
Population, millions
% change
% of total
labor force
Persons
7.564
7.505
7.327
7.282
7.238
7.202
U.S. $
-4.343
-0.707
0.054
-0.471
0.998
-0.127
Unemployment rate
Scale
BGN
% change
U.S. $
U.S. $
International $
% of GDP
% change
% of total
labor force
Persons
U.S. $
5 Year Forecast
2017
2018
58.63
60.39
3
3
64.68
69.25
12,449.46 13,170.90
9,116.90
9,809.69
2015
55.53
2
57.60
11,222.38
8,037.25
2016
56.92
2.5
60.63
11,767.53
8,502.86
17,869.22
18,754.79
19,813.42
20,944.09
22,128.43
22.508
0.704
23.049
1.789
24.063
2.2
25.136
2.2
26.072
2.2
11.89
11.28
10.67
10.06
9.45
7.166
-1.317
7.13
-1.738
7.095
-1.932
7.059
-2.189
7.024
-2.394
24 | I n t e r n a t i o n a l S t r a t e g i c M a n a g e m e n t a n d P o l i c y
2019
62.20
3
74.13
13,934.15
10,553.65
BIOTTERY
APPENDIX 2
FRANCE
Worldwide Governance Indicators:
Estimate
France 2013
Rank
1.30
1.47
0.42
1.15
1.20
Control of Corruption
Governm ent Effectiveness
Political Stability and Absence of Violence/Terrorism
Regulatory Quality
Voice and Accountability
88.04
89.47
61.61
85.17
88.63
France
Historical
Units
Scale
2009
2010
2011
2012
2013
2014
1,959.96
1,998.48
2,040.03
2,046.86
2,052.69
2,060.30
-2.941
1.966
2.079
0.334
0.285
0.371
BGN
% change
U.S. $
2,700.66
2,651.77
2,865.30
2,688.21
2,807.31
2,902.33
BGN
31,041.30
31,840.57
32,650.59
32,993.17
33,202.95
33,505.95
U.S. $
International $
% of GDP
43,234.25
42,249.06
45,430.28
42,415.14
44,098.70
45,383.63
36,297.36
37,284.25
38,657.22
39,290.87
39,813.46
40,445.40
20.008
20.637
21.501
20.584
20.698
20.684
0.103
1.733
2.291
2.218
0.992
0.7
9.092
9.275
9.2
9.792
10.258
9.972
Population, millions
% change
% of total
labor force
Persons
62.466
62.765
63.07
63.379
63.66
63.951
U.S. $
-35.016
-33.78
-48.996
-57.114
-36.858
-41.327
Unemployment rate
Scale
BGN
% change
U.S. $
U.S. $
International $
% of GDP
% change
% of total
labor force
Persons
U.S. $
5 Year Forecast
2017
2018
2,150.66
2,191.96
1.82
1.92
3,142.33
3,263.49
35,590.39 36,552.72
48,467.91 50,107.22
2015
2,079.96
0.954
2,935.36
34,008.06
45,690.90
2016
2,112.21
1.55
3,026.51
34,721.74
46,895.05
41,396.01
42,634.62
44,100.85
45,689.09
47,314.91
20.743
0.928
21.072
1
21.434
1.13
21.817
1.23
22.246
1.32
10.038
9.859
9.597
9.342
9.257
64.244
-30.719
64.538
-21.68
64.833
-13.817
65.13
-6.794
65.43
0.449
25 | I n t e r n a t i o n a l S t r a t e g i c M a n a g e m e n t a n d P o l i c y
2019
2,234.28
1.93
3,392.82
37,577.32
51,854.43
BIOTTERY
APPENDIX 3
THE NETHERLANDS
Worldwide Governance Indicators:
Estimate
Rank
2.05
1.77
1.12
1.77
1.58
Control of Corruption
Governm ent Effectiveness
Political Stability and Absence of Violence/Terrorism
Regulatory Quality
Voice and Accountability
96.17
96.65
89.57
96.65
96.68
Scale
BGN
% change
U.S. $
BGN
U.S. $
International $
% of GDP
% change
% of total
labor force
Persons
U.S. $
2009
624.83
-3.303
860.26
37,365.40
52,042.43
2010
631.51
1.069
837.95
38,008.55
50,433.31
Historical
2011
2012
642.02
631.84
1.664
-1.586
894.58
823.60
38,514.89 38,238.27
53,589.91 49,158.11
2013
627.26
-0.724
853.81
38,260.39
50,815.75
2014
631.02
0.598
880.39
38,574.44
52,248.87
44,055.10
44,839.46
46,309.04
46,223.96
46,440.04
47,365.32
25.491
0.974
27.28
0.93
28.978
2.477
28.3
2.822
28.493
2.564
27.993
0.521
3.728
4.458
4.448
5.283
6.727
7.251
16.53
41.325
16.615
57.477
16.693
75.665
16.754
73.479
16.802
87.12
16.85
86.955
Scale
BGN
% change
U.S. $
U.S. $
International $
% of GDP
% change
% of total
labor force
Persons
U.S. $
2015
640.02
1.426
891.55
39,277.08
52,769.99
5 Year Forecast
2016
2017
2018
650.02
660.75
673.12
1.564
1.651
1.872
918.09
951.25
986.37
40,055.71 41,072.92 42,219.83
54,099.09 55,934.17 57,875.80
2019
686.27
1.954
1,024.87
43,487.14
60,009.62
48,797.89
50,270.07
52,039.20
54,019.03
56,094.31
27.9
0.721
27.73
1.036
27.907
1.181
28.056
1.286
28.253
1.442
6.895
6.568
6.239
5.87
5.568
16.895
85.811
16.97
84.558
17.007
86.825
17.043
88.312
17.078
89.753
26 | I n t e r n a t i o n a l S t r a t e g i c M a n a g e m e n t a n d P o l i c y
BIOTTERY
APPENDIX 4
THE UK
Worldwide Governance Indicators:
Estimate
Rank
Control of Corruption
1.6
92.3
1.5
91.9
0.4
60.2
Regulatory Quality
1.6
94.7
1.3
92.4
Scale
2009
2010
2011
2012
2013
2014
1,461.36
1,485.62
1,502.22
1,506.39
1,532.65
1,581.78
% change
-5.17
1.66
1.117
0.278
1.744
3.205
U.S. $
2,217.43
2,296.93
2,464.64
2,470.57
2,523.22
2,847.60
22,937.58
23,860.70
24,285.96
24,462.99
25,166.18
26,350.07
U.S. $
International $
% of GDP
35,885.34
36,891.36
38,945.08
38,781.34
39,371.65
44,141.40
33,546.85
34,259.73
34,786.12
35,274.92
36,207.52
37,744.46
12.656
12.323
13.471
10.918
9.981
10.828
2.166
3.286
4.484
2.822
2.555
1.631
7.65
7.85
8.1
7.95
7.604
6.345
Employment, millions
% change
% of total
labor force
Persons
28.96
29.019
29.166
29.519
29.896
30.632
Population
Persons
61.792
62.262
63.285
63.705
64.087
64.511
U.S. $
-31.369
-61.863
-36.041
-94.575
-113.832
-120.199
Unemployment rate
Scale
% change
U.S. $
U.S. $
International $
% of GDP
% change
% of total
labor force
Persons
Persons
U.S. $
2015
1,624.68
2.712
3,002.95
27,320.19
46,243.59
5 Year Forecast
2016
2017
2018
1,664.34
1,704.09
1,745.40
2.441
2.388
2.424
3,149.15
3,321.83
3,508.50
28,269.47 29,298.94 30,407.56
48,162.17 50,464.90 52,945.57
2019
1,788.07
2.445
3,704.10
31,580.10
55,535.86
39,224.92
40,658.57
42,202.11
43,845.12
45,547.83
11.763
1.8
12.856
2
13.912
2
14.996
2
16.138
2
5.783
5.47
5.5
5.5
5.5
31.021
64.938
-113.116
n/a
65.386
-103.934
n/a
65.825
-94.687
n/a
66.266
-77.021
n/a
66.697
-52.836
27 | I n t e r n a t i o n a l S t r a t e g i c M a n a g e m e n t a n d P o l i c y