The current review is a critical evaluation of the company’s new business opportunity for selling bottled water as well as the marketing opportunity in marketing the new product through social media. Together, the process will contribute to the informed decision-making of organizational strategy. The literature by George and Desmidt (2018, p.133) highlights the criticality of collecting and exchanging information to make informed and qualitative decisions. A rational planning practice for decision-makers in whatever capacity is to inject information relevant to decision-making into the decision-making process to improve strategic decision quality. The rational model of decision-making is systemic (step-by-step) and relies on facts and informational analysis to arrive at a decision. Ultimately, the choice of a strategy depends on what the decision-maker perceives to have the most benefit as opposed to cost (Uzonwanne, 2016, p.3). Ideally, the goal for any business is to maximize the value of outcomes, while reducing the risk and inherent cost associated with the strategy.
Bottled Water Business Opportunity
The diversification strategy involves the production and distribution of bottled water in addition to its current cold drinks base. Diversification seeks to increase a company’s profitability through greater sales volumes obtained from new markets (Kannan and Saravanan, 2012, p.64). Le (2019, p.95) notes three critical reasons that would motivate a business to pursue a diversification strategy: competitiveness, risk diversification, and resource utilization. From a resource-based view, companies that utilize the diversification strategy end up achieving optimal resource management, especially if they pursue related diversity. Diversification may involve the production of products or services that require a similar production and operation base in the market, where the company already has products present (Scur and Queiroz, 2017, p.207). A “relevant diversification” approach is conducive because it gives full play to the company’s existing expertise, proprietary skills, marketing channels, and other advantages. Furthermore, the integration risk for the product into the market, as well as the overall production process, is small (Le, 2019, p.96). Companies can then develop or utilize their diversified assets to increase operations, obtain economies of scale, scope, and market influence, which enhance the company’s competitive advantage in the market (Le, 2019, p.96). Investing in different assets to form a portfolio can also help reduce risks (Chirani and Effatdoost, 2013, p.1).
Based on the information above, it would appear that the choice of a diversification strategy by the cold drinks company will contribute to better financial performance and enhance the company’s competitive leverage in the industry. It creates product diversity for the consumer, which scholars have associated with impulse buying, as it provides the consumer with greater choice categories from their preferred distributor (Moser et al., 2019, p.3). Also, the fact that the choice of product diversification is within the food and beverage industry – concentric diversification – is an added advantage for the company. It reduces the amount of effort and resources needed to integrate the new product into the company’s production process as the current infrastructure and available resources can meet the new production demands. Nonetheless, the potential benefits the company might accrue are on condition that the company conducts its diversification based on best practices, which includes proper planning. Succeeding multiple businesses can be challenging, especially because companies many rely on inappropriate strategies that have worked for other business lines with the new product or service line. The small UK cold drinks company needs to understand the market for bottled water, the consumer profiles, and competitor analysis before proceeding with the decision to invest in the new product.
There are two segments in the bottled water market – still and sparkling water. In the still bottled water market, there includes mineral water, spring water, and purified water. According to the European Federation of Bottled Waters (2020, n.p.), bottled water is the most favoured and convenient way of hydrating healthily. Packaged water holds a steady market share of 48% as compared to 38% of soft drinks. Consumers also appear to favour natural mineral water (82%), followed by spring water (15.5%) consumption. About sixty-two percent of the EU population prefer still bottled water as compared to thirty-eight percent of those who prefer sparkling water. The same trends appear to be the same for the UK market, with consumption being at 40 litres per capita, and a total of 2,681.1 million litres consumed as of 2018 statistics. Hence, the company would benefit more from producing natural mineral water as compared to other sub-segments, given that it will have a much wider consumer base.
It would appear that there is a disposition towards drinking healthily, meaning that the target consumer includes health-conscious individuals within the UK. The law clearly distinguishes natural mineral water from other drinking waters by its original purity (the absence of chemical treatment) and its favourable health properties (Carlucci et al., 2016, p.60). There is also a bigger concern about environmental issues and greater support of the home-grown brand. Hence, most people will purchase more local bottled water products. Environmental issues mostly relate to the production and packaging of bottled water. The UK releases 350,000 tonnes of carbon dioxide into the atmosphere every year, and plastic waste is a threat to our environment. Despite the majority of bottles being recyclable, plastic bottles were among the top 10 most common items collected by the Marine Conservation Society’s UK-wide shoreline Clean in 2016 (UK Government, 2020). Campaigners call for increased recycling initiatives and tax reform to reduce the impact bottling companies have on the environment.
Aside from the fact that UK consumers will promote locally manufactured and bottled water products, there is also the threat of competition from more established brands. The UK bottled water market has larger and more established brands, such as Nestle, Danone, Highland Spring, Princes Limited, Eden Springs UK Ltd (Spring and Mineral Water). These companies will make it more challenging to venture into the market as they have more competitive leverage due to the significantly higher resource base that helps them meet the consumer’s unique needs as well as their brand establishment. Hence, it would be prudent for the cold drinks company will need to implement a suitable marketing strategy to attract customers to the brand. The research by Carlucci et al. (2016, 59) notes that companies need to revise marketing strategies to counter competitive pressures within the bottled water market, evidencing the importance of the company’s marketing strategy in the industry. The Managing Director decided that the promotion of bottled water using social media would be the best way forward. The following section assesses the appropriateness of using social media as the ideal marketing tool.
Social Media Marketing Tool
The internet has had significant impact on the way people interact and perceive businesses from around the globe. The use of social media platforms has also increased interconnectedness among people in different geographical regions. People will use social media platforms such as websites, social networks, blogs, and other channels to interact with anyone without restriction on quantity or quality as long as they have an internet connection (Rugova and Prenaj, 2016, p.85). It is this aspect of the internet that has made it possible for people to share valuable information and experience regarding anything. Businesses have evolved to harness this opportunity to integrate social media as a marketing tool due to its interconnectedness potential. The phenomenon has been of high interest among marketers, with social media becoming an important source of customer information sharing, awareness, support, and empowerment (Kaplan and Haenlein, 2010, p.65). Social media provides business with a means of interacting with their target consumers, where they can actively engage them in discussions regarding their preferences and needs regarding a particular product, and retrieve constructive feedback to enhance product quality.
The question remains, however, how the company can benefit from social media marketing as it embarks on its product diversification strategy. Borrowing ideas from the new product development process, it is clear that customers play a significant role in the success of the new product in the market. The information gathered from customers helps optimize each stage of development, from idea generation and concepts, development and design, to testing and market launch. Hence, customers are not only capable of helping create appealing products that they can purchase, but also provide the know-how required during the NPD process (Liu and Kop, 2015, p.121). The benefits associated with social media in new product launches include effective and efficient information collection, the usefulness of information, and the low cost of operation due to minimized risk of product failure or recall. The factors that moderate the effectiveness of social media, in this case, is the customer’s hidden needs, lack of effective evaluation tools, challenges with large information sets, and lack of absorptive capacity (Liu and Kop, 2015, p.121). However, if the company can find a way to mitigate the possible challenges, the new product will be a success.
Various companies have reportedly used social media to market their products with successful outcomes. Companies like Sony and Dell have experienced increased volume in sales in the past owing to their strategic leverage of social media capabilities. Sony’s presence on twitter in 2012 earned the company an extra $1.6 million, while Dell’s presence on the same platform earned the company additional sales of 3 million dollars (Tsimonis and Dimitriadis, 2014, p.332). The effectiveness of social media marketing largely depends on the activities that the company will have on its brand media page. The most common activities include prize competitions, product/service announcements, consumer interactions, handling customer service issues, and providing information/advice (Tsimonis and Dimitriadis, 2014, p.328). The expected outcomes by companies using social media strategies include customer interaction/enhanced relationships, brand awareness, customer engagement, product promotion, sales increase, and acquisition of new customers (Tsimonisand Dimitriadis, 2014, p.328).
The current literature review offers a critical perspective on the company’s choice to diversify into the bottled water market and using social media marketing as the preferred product promotion tool. Based on the evidence, product/service diversification strategies have several advantages to it, including improved financial performance and market competitiveness. The company may benefit from the decision to pursue a concentric type of diversification, which builds on its current resource base and also working within the food and beverage industry with which it already operates. Hence, the company may not require to change much or utilize too many resources while allocating production space for the new product. The challenge sets in on determining what specific products to produce and how they can keep up with both market trends and competition. The primary concern for the company should be on how they can meet the customer-specific demands of the target population, which mostly revolve around health-conscious consumption and environmental concerns. The conscious consumption of the UK market will help to alleviate the existing competitive pressure in the market. The mere fact that the company sources and produces bottled water from and for the UK offers the company a competitive leverage. The use of social media to market the new bottled water product will help customize the product to the preferences of the UK target market, thus meeting the unique needs of those the company will target.
Based on the evaluation above, product diversification for the company is an ideal strategy to enhance its share and competitiveness in the market. Given the market profile of the water-drinking population in the UK, it would be prudent to prioritize manufacturing mineral water as compared to other bottled water segments. Should the company also decide to pursue a differentiation strategy, it could add spring water into its product portfolio. Nonetheless, product diversification into bottled water will help reduce cost, promote resource-efficiency, contribute to a higher-quality product with the company’s current production expertise, and promote competitiveness. Furthermore, the level of competition in an industry prompts innovativeness to help maintain a quality standard for customers. As long as the company relies on its social media activity to promote relationships with its clients, then the company will be well on its way to achieve its diversification objectives.
Final Research Question
The research questions that the company should pursue are;
- What are the alternative bottled water product segments the company should review?
- What is the company’s ideal target market for the bottled water product?
- Which social media platform would optimize customer awareness and engagement?
Carlucci, D., De Gennaro, B. and Roselli, L., 2016. What is the value of bottled water? Empirical evidence from the Italian retail market. Water Resources and Economics, 15, pp.57-66.
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European Federation of Bottled Waters (EFBW), 2020. Key Statistics. [online] Available athttps://www.efbw.org/index.php [Accessed 23 April 2020]
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Kannan, P. and Saravanan, R., 2012. Diversification-strategies for managing a business. EXCEL International Journal of Multidisciplinary Management Studies, 2(5), pp.64-73.
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Uzonwanne, F.C., 2016. Rational Model of Decision Making. Global Encyclopedia of Public Administration, Public Policy, and Governance, pp.1-6.
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