QCAA Business Repositioning a business

Answers could include:

Financial gain:

• innovation could allow Fizzology to charge premium prices to their unique, new drinks like the business' kombucha and fizzy flavoured teas. This will allow Fizzology to increase profit margins
• Fizzology could enjoy higher revenue growth if the business offered low-sugar and organic drinks. These drinks could attract health-conscious consumers and increase the business' overall sales revenue
• if Fizzology uses innovative manufacturing technologies (such as energy-efficient machinery), this could reduce costs and improve the speed of production. This would allow the business to streamline its production process and reduce operational costs, allowing higher profits to be earned.

Expansion of global market presence:

• innovation allows Fizzology to differentiate itself, creating a competitive advantage in the Australian and global market by offering unique, healthier drinks and eco-friendly packaging that meet current consumer trends and tastes. Fizzology can do this by offering their kombucha range, fizzy flavoured tea drinks and reducing sugar in their popular Fizzology flavoured drinks
• with many new products tailored to global consumer trends and tastes, Fizzology could expand its reach. Fizzology could also appeal to international customers across the globe more effectively
• brand image plus loyal clients may come from Fizzology striving to be ecologically mindful in processes and packaging. By launching items that reflect wants from consumers for health plus sustainability, Fizzology may get global praise for its sustainability, quality and uniqueness.

Increased market share:

• innovation can attract new customers, build brand loyalty and help the business compete against established global brands. Introducing low-sugar, organic drinks caters to health-conscious consumers, providing a distinct market edge with the potential to increase profit
• innovation can help Fizzology tap into new markets as well as a new customer base that prioritises sustainability, health and special product offerings. For example, launching certain kombucha drinks can attract younger, more eco-conscious consumers valuing ecological responsibility.

Answer(s) could include:

Step 1: Create urgency/create a sense of urgency – create a sense of urgency by convincing team members of the need to act immediately by demonstrating the potential risks. There needs to be a compelling case for change, so people understand why change is necessary. Fizzology needs to:

• communicate the risks of not adapting its product range. If it does not adapt its product to be healthier or show environmental consciousness in its packaging and processes, it may lose market share and fall behind competitors
• highlight the growing consumer demand for healthier and sustainable products, motivating resistant team members to recognise the necessity for change
• collate research and data on consumer trends and behaviour and link it to sales results directly impacting the success of Fizzology
• build support for the new initiatives so that the sense of urgency is shared – so much so that the team members would no longer be happy with the current state of the business.

Step 4: Communicate the vision/enlist a volunteer army – share the vision throughout the business, clearly and consistently by using multiple channels to build understanding and support for the vision. Fizzology needs to:

• win the hearts and minds of its team members in order to get everyone on board with the new vision; a business that creates drinks that are healthy and upholds environmental and sustainable processes and practices
• communicate the vision and strategy clearly to all levels of senior and middle management through staff meetings and email updates
• provide training and information sessions on the new products, so that team members have a shared understanding about the benefits of the new product range
• use clear and consistent messaging to address concerns about job security and emphasise how the innovation will benefit employees and Fizzology's future success as a business.

Answer(s) could include:

Timing:

• timing for product development is important in order to align with consumer trends and tastes. If Fizzology can launch new products that meet current market tastes for more healthy and eco-friendly beverages, it might catch consumer interest and build brand loyalty with speed. However, if Fizzology launches products too early or late, it risks missing chances. That leads to poor sales and missed opportunity
• if Fizzology does not adapt to the current trends and the tastes it may risk other competitors establishing themselves with similar products. However, rushing such process could lead to poorly developed products that fail to meet consumer expectations as well as tastes
• launching products ahead of competitors can give the advantage of being into the market first, allowing Fizzology to establish brand leadership into niche segments such as kombucha and fizzy tea drinks. However, if it delays entry to the market, established competitors might already have caught an important share of the market, making it difficult for it to compete
• timing can be impacted by government regulations and industry standards. Investing in research and development at such a time can position Fizzology ahead of compliance requirements as well as improve their sustainability credentials.

Costs:

• innovation requires substantial upfront investment, including hiring experts, acquiring technology and conducting trials
• high costs could then strain Fizzology's financial resources plus impact on profitability in the short term
• the total costs of innovation can be huge; businesses need to invest in research, prototype development, testing, and also the actual creation of new production processes. In the event Fizzology does not allocate enough budget or needs to then cut the research and the development spending due to financial constraints, the quality of innovation could possibly suffer, resulting in underdeveloped products that may fail among consumers
• innovation investments take time to gain returns financially. Fizzology may need to stop if costs are too high across a longer time frame, leading to lost opportunities. It can also damage Fizzology's reputation
• introducing newer products will usually require investment in new machinery, training for staff, as well as sourcing sustainable materials for these products
• financial forecasting and cost analysis are key to ensure the innovation and the production remains profitable for the business. If Fizzology can effectively increase production and purchase resources in bulk, the business' overall cost per unit decreases, contributing to higher profit margins.

Answers could include:

Threat of new entrants:

• this force looks at how easily new entrants can go into the market and disrupt existing businesses
• high barriers to entry, including high capital needs or strict rules, can reduce the threat, while minimal barriers can add to threats
• new competitors that enter into the market can increase the competition, driving the prices down and reducing the market share. Several barriers such as economies of scale and strong brand loyalty can help Fizzology overcome that threat
• existing big brands may deter other new entrants to the market
• new entrants that offer similar ecologically friendly and health-conscious products could now limit Fizzology's ability for establishing itself on a global scale
• Fizzology could focus on markets that have high entry barriers. Such markets have strict regulations and also important start-up costs; their new kombucha and fizzy tea products can give Fizzology a competitive edge over new entrants that are less resourceful.

Bargaining power of buyers:

• this force is to do with the influence in which customers hold over any business
• it can also relate to the number of buyers, switching costs, purchasing size and price sensitivity
• buyers gain power when they have lots of options or when switching costs are minimal, allowing buyers to demand reduced prices or superior-quality products
• consumers and retailers have increased bargaining power due to access to multiple alternatives, especially in the soft drink industry. Buyers may demand lower prices or higher quality, forcing Fizzology to continually innovate and maintain competitive pricing
• to reduce buyer power, Fizzology should emphasise the uniqueness of its kombucha and fizzy tea flavoured drinks and promote its environmental and sustainable processes through its marketing campaigns. This will improve its chance of successful expansion.

Rivalry among competitors:

• this force examines the amount and strength of competition within the industry
• high rivalry results from factors like numerous competitors, industry growth or similarity of products offered in the market
• established global brands with significant resources can intensify competition through competitive pricing, extensive marketing and product innovation. This would be prevalent in the soft drink industry with high profile brands
• Fizzology may need to allocate substantial resources to marketing and research and development to maintain relevance
• Fizzology should focus on countries where the market for sustainable and low-sugar drinks is underserved and differentiate its brand by continuously innovating and responding quickly to changing consumer trends and tastes if they are to expand successfully.

Recommendation:

• while the global market presents challenges, such as big soft drink brands being highly competitive, the rising demand for health-conscious and environmentally-sustainable products aligns with Fizzology's new focus
• expansion is feasible if the company targets countries where its unique kombucha and fizzy tea flavoured drinks can differentiate it from its competitors
• it could be argued that with high profile brands with huge resources it may not be feasible to expand globally and that Fizzology should focus on being successful in the Australian market.

Answers could include:

Rationale:

• a joint venture involves two or more businesses pooling resources with the aim of achieving a common goal, while still focusing on their core business. This type of structure is often used to access new markets and to share expertise.

Benefits:

• businesses could share financial risks and resources, reducing the burden on each party
• gaining access of knowledge to local markets, which helps to navigate through cultural and regulatory difficulties
• each partner of a joint venture brings specific skills, assets and expertise to the venture, which should help the business reach goals more efficiently
• collaboration promotes innovation through a combination of the creative and technical capabilities of multiple parties
• combining resources allows for bulk purchasing, shared production facilities, as well as reduced costs. This allows joint ventures to achieve higher economies of scale
• local partners of a joint venture can help navigate complex legal and regulatory environments, ensuring compliance and potentially avoiding delays through penalties.

Answers could include:

Rationale:

• an acquisition occurs when one business takes over another to expand its market share or acquire valuable assets. This strategy allows businesses to grow quickly and establish a presence in new or competitive markets.

Benefits:

• the ability to quickly enter new markets through an already established brand
• the potential for cost savings through economies of scale, as operations can be streamlined which could result in a potential increase in profit
• an acquisition can enable a business to enter new industries or expand its product/service offerings, reducing dependence on a single market
• acquisition of well-known brands can enhance the company's overall reputation and market appeal which could result in increased sales
• by eliminating a competitor or acquiring a complementary business, the company can strengthen its competitive position in the industry
• acquisitions allow businesses to grow much faster by leveraging the established infrastructure, customer base and operational processes of the acquired company
• acquiring a company often includes its experienced workforce, saving time and resources on recruiting and training.

Answers could include:

Product features:

• global brands could adapt product features to meet local consumer needs and cultural preferences
• adapting features ensures products stay competitive and relevant
• products may need to be adapted to local considerations such as environmental or social factors
• local laws, as well as regulations, may mandate changes to product features
• consumers within most markets demand eco-friendly products, forcing most brands to adapt.

Positioning:

• brands might adapt their positioning to align with cultural values
• adapting their position ensures the brand connects with target audiences effectively
• adapting the location can prove vital to feature some affordability or such premium quality under market expectations together with consumer perceptions
• marketing messages can be adapted so they align with linguistic and cultural subtleties, language and communication styles
• businesses can choose to shift positioning to address social issues relevant in certain markets.

Answer(s) could include:

Financial gain:

• An increase in satisfied customers can lead to an increased market share, sales and repeat customers. Innovation can also lead to creating a delay in the decline stage of the product lifecycle resulting in greater profit for Matilda.
• Product innovation occurs if Matilda sources new and/or more products to sell. This may increase interest, sales and, in turn, profit.
• Process innovation occurs if Matilda is able to improve her processes through new technology. She could see productivity gains and better customer satisfaction, resulting in increased financial gain.

Expansion of global market presence:

• Innovation can be a driver of business growth. Therefore, Matilda expanding into the European market will enhance her global market presence.
• Innovation can give Matilda a competitive edge over her foreign competitors.
• Matilda's innovation can lead to her successful expansion into Europe and ensure that she is competitive in global markets through her business being new and different.

Increased market share:

• Innovation can assist with producing more appealing/innovative products and, therefore, increase market share for Matilda when she expands into the European market.
• Innovation can create a competitive advantage. A new product can create a consumer demand for the product, resulting in more products being sold and Matilda's business' market share increasing in the European market.

Answer(s) could include:

Timing:

• Timing can have an impact the success of innovation in terms of how it relates to customer purchasing cycles.
• Matilda has just read an ecommerce report in 2020 stating that European shoppers are spending more time shopping online. This means the timing is right for her to expand to Europe.
• It would be a good idea for Matilda to innovate her product, process and service while online marketplaces in Europe are attracting significant online traffic and high visitor engagement. This should lead to increased sales, thus success at this time is likely to be high and worth her investment in the innovation.

Cost:

• Investment in innovation, whether it is product, process or service, is costly.
• Money needs to be spent on research and development and can be significant. Therefore, it requires appropriate financial resources.
• Matilda has stated that she is willing to invest money into her business operations, so she has the best opportunity to be profitable.
• Matilda has seen a surge in online sales in 2020 and 2021. Therefore, she has income available to spend on innovation.
• If Matilda spends too much money on research and development, and innovation, and does not receive increased sales through the European market, she may be at risk of business failure.
• Matilda's financial investment in innovation may be important to her standing out from competitors in the European market, and be an important contributor to her success.

Answer(s) could include:

• Marketing through social media campaigns – researching and creating social networking sites used in Europe. This will be an easy and cost-effective way for Matilda to expand into the European Market.
• Adopting faster shipping technology. This will be positive for Matilda's business as it will improve customer satisfaction due to timely delivery of orders.
• Implementing safe payment methods – around the world customers are happy and confident utilising payment methods such as PayPal. This will assist Matilda expanding into the European market.
• Applying GPS delivery tracking systems – for both the business and the customer. This ensures the customer is updated via email or SMS, making them confident regarding the delivery of their order.
• Adopting e-commerce procedures. This will enable transfer of monies between currencies and countries instantly.
• Matilda can purchase relevant and reliable hardware and software for the business' needs. She can improve her website capabilities to change the language and/or apply different currencies. This will increase the business' reach to different countries where customers can make purchasing decisions using their own currency.

Answer(s) could include:

Availability of substitutes: Matilda needs to consider:
likelihood that customers will easily switch or use a competitor's product over hers.

• Are there similar products being sold online at a similar price or lower?
• Do the competitors pose a threat to her business' success?
• Are her products new, innovative and of high quality, compared to others on the market?
• Are there better-quality products available?
• Are there products of better value?
• Can she create buyer loyalty in Europe, or will consumers easily change brands?

Bargaining power of buyers: Matilda needs to consider the bargaining power of the buyers in Europe.

• What is the bargaining position of the buyers? Can the customers drive down the price?
• What is the level of quality and service demanded by buyers in Europe?
• What are the buyer numbers in Europe? Europe has a large population, therefore a large number of potential buyers.
• Which countries in Europe will have more buying power? Many parts of Europe have a large middle class, hence the disposable income to purchase Matilda's products.

Advice:
Due to the fact that Matilda is going to be investing in innovation of her product, process and service, the huge population of Europe and the fact that more European shoppers are spending significant time shopping online, there is no reason why she should not trial an entry into the European market. Her product is unique, luxurious and of high quality, thus should negate the issue of availability of substitutes.

The e-commerce report also affirms 'online marketplaces in Europe have attracted significant traffic and seen high visitor engagement that has translated into sales'. Due to the fact that more Europeans are spending time at home and shopping online, it is worth Matilda expanding her business into the European market.

Answers could include:

• sustainability aims to meet the needs of the business while seeking to protect and preserve resources and the environment for the future. This includes finding ways to reduce waste and recycling of more resources such as water, energy and paper
• CHF can also measure their carbon footprint and investigate carbon offsets. Sustainable practices can differentiate businesses in the market and be used to promote the CHF in a positive light to build CHF's customer base
• CHF's employees will feel ethical by working in a sustainable business. Sustainable businesses have been shown to improve staff morale and increase staff productivity and reduce absenteeism
• one way that CHF can be more sustainable is for it to be efficient with resources, recycling supplies and reducing waste. CHF can promote the business more through its website and social media and not through other advertising methods such as print material.

Answers could include:

• control of quality may involve quality assurance (QA), quality improvement (QI) and quality control (QC)
• QA refers to a set of activities designed to make sure the development and maintenance process is adequate so that a system can meet its objectives, for example, CHF could use QA to prevent defects throughout the production process
• QI refers to the effort taken to increase efficiency, actions and procedures, with the purpose of achieving additional benefits for the business and its users, for example, CHF could use Total Quality Management (TQM) to improve its production process
• QC refers to the process of checking and reviewing processes at the end to determine if the requirements of the business are being met, for example, it ensures that the final product meets a defined set of quality criteria and meets the requirements of CHF's customers
• maintenance of quality is essential for CHF to maintain its brand. A brand is often associated with a particular level of quality and any lowering of quality or perception of quality would result in a loss of consumer confidence in the brand resulting in a decline in sales and profits.

Answers could include:

Profit ratio:

• shows the percentage of net sales
• in 2022, this was 12% which means for every ＄1 of sales earned, CHF had ＄0.12 profit
• in 2023, this increased to 14%, which means for every ＄1 of sales earned, CHF had ＄0.14 profit
• ratio has improved in 2023 by 2%.

Return on equity ratio:

• measures how much profit a business generates on capital invested
• in 2022, this was 8%. For every ＄1 of sales earned, CHF had invested ＄0.08 from capital
• in 2023, this increased to 11%. For every ＄1 of sales earned, CHF had invested ＄0.11 from capital
• ratio shows a 3% improvement in generating profits.

Expense ratio:

• shows the percentage of sales that is consumed by operating expenses
• in 2022, this was 60%. For every ＄1 of sales earned, CHF consumed ＄0.60 in operating expenses
• in 2023, this decreased to 55%. For every ＄1 of sales earned, CHF consumed ＄0.55 in operating expenses
• this ratio has improved by 5%, showing that CHF has reduced its expenses.

Answers could include:

Customs:

• when conducting business in another country such as Indonesia, CHF will need to consider cultural differences that may be presented
• cultural differences could include basic customs, mannerisms, and gestures. For example, if a salesperson for CHF approaches a meeting with knowledge of a customer's cultural background, then this salesperson's words, body language, and actions can all be adapted to better suit those of the customers in Indonesia
• understanding cultural differences and adapting to these differences will allow CHF to be better-liked by customers in Indonesia. This will enable CHF to grow their customer base, increase their sales and profits, and to operate successfully in Indonesia.

Business etiquette:

• the formality of address is an important consideration when dealing with colleagues and business partners from different countries. CHF can consider if team members in Indonesia prefer titles and surnames or being on a first name basis
• while it can vary across organisations, Asian countries such as Indonesia tend to use formal 'Mr/Ms Surname', while Australians and Americans tend to use first names
• CHF will need to be aware of business etiquette in the countries in which they choose to operate. This will allow CHF to operate successfully in Indonesia.

Answers could include:

Banks:

• offer a variety of deposit, investment and loan accounts to businesses
• the money collected from depositors and money earned from investments is used to fund loans to customers, such as to Tartology Ltd
• banks are presently offering all time low interest rates which Tartology Ltd could take advantage of.

Finance companies:

• provide loans for businesses
• a finance company gains its funding from banks and other financial institutions at a set interest rate and uses these funds to extend credit to customers like Tartology Ltd
• a finance company will earn profit by charging its customers a higher interest rate than what they are paying and may charge loan fees and other administrative charges
• unlike a bank, Tartology Ltd would not need to put up a deposit.

Other sources of external funding:

• Debentures – are issued by a company as a long-term loan to the debenture-holder. Debentures provide a long-term source of finance without the business losing any control. Debenture holders do not have a voting right so Tartology Ltd could raise funds without losing any control of the company.
• Share capital – the funds raised from selling shares in a limited company. This can generate a large sum of finance for the company. This is the main source of finance for limited companies. Should Tartology Ltd raise funds from selling more shares, the company would increase the number of shareholders to whom profits are distributed.
• Venture capital – investment in small to medium-sized businesses that have a strong growth potential, normally at the start of a business idea. The amount borrowed can be paid back over a number of years.

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Ethical practice means a business is operating in accordance with the rules or standards for right conduct or practice.

Minimum standards of labour by the International Labour Organisation (ILO), including the use of child labour:

• the International Labour Organisation is a United Nations agency dealing with labour issues, particularly international labour standards and decent work for all
• in sweatshops workers are paid little for their work, are forced to work unpaid overtime, with no breaks, and are punished for slow work and mistakes. Tartology Ltd must ensure they pay New Zealand workers fair pay
• an ethical approach for global businesses relying on cheap labour working in poor conditions is to collaborate with local unions – if a global business continues to exploit workers to keep its profit margin, it will not maintain long-term success due to a poor public image
• Tartology Ltd should adhere to fair wages, occupational and health regulations for long-term business success.

The role of corporate social responsibility:

• the voluntary commitment of businesses to include in their business (corporate) practices economic, social and environmental considerations which are beyond those required by legislation
• the role of CSR is for Tartology Ltd to achieve its business goals in the context of the broader system in which it operates, thus giving due consideration to the community and environment of a range of stakeholders
• a business that considers ethical and environmental issues relating to its business activity acts morally towards its stakeholders
• Tartology Ltd could create and publish an ethical code of practice
• Tartology Ltd should conduct its business ethically and legally, such as without bribery or corruption
• Tartology Ltd could consider sponsorship and providing donations to causes that target its market.

Environmental sustainability:

• sustainability aims to meet the needs of the business while seeking to protect and preserve resources and the environment for the future. This includes reducing use, waste and recycling of resources such as water, energy and paper.
  Tartology Ltd can manage this by having an e-business arm
• Tartology Ltd can measure its carbon footprint and investigating carbon offsets. Sustainable practices can differentiate businesses in the market and be used to promote the business in a positive light
• employees will feel they are contributing to society by working in a sustainable business. Sustainable businesses have been shown to improve staff morale and increase staff productivity and reduce absenteeism
• Tartology Ltd needs to be efficient with resources, recycling supplies and reducing waste.

Answers could include:

Currency fluctuations:

• the change that occurs in the dollar value of one country’s currency relative to another country’s currency
• currency fluctuations can result in Tartology Ltd losing money and this should not be a smaller risk since ‘the Australian Dollar has been on par with the New Zealand Dollar’
• Tartology Ltd will need to have greater financial/economic understanding of both local and export market financial environments, and the interactions between these two environments.

Non-payment of monies:

• these refer to not being paid for the goods or services supplied to the export market
• this can cause difficulties for Tartology Ltd to recoup monies offshore as opposed to onshore: this could include legal, time, cost, effort and the knowledge to do this
• there is less influence/assistance for institutions such as the ACCC due to jurisdiction, influence; hence greater individual business risk for Tartology Ltd
• there is greater risk in terms of Tartology Ltd having the correct legal documentation to minimise potential financial risk
• there is increased complexity of supply chain; hence Tartology Ltd’s understanding and development of systems to know/record/trace where the monies come from and go to and the point at which monies are owed and by whom.

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Economic activity:

• inflation – if a country is experiencing high inflation, interest rates are likely to increase, which may affect the consumers’ disposable income to purchase a product or service
• consumption patterns and income levels influence pricing and distribution strategies
• completing an environmental scan to scope competitor’s activity in New Zealand, e.g. research competitors’ technology/infrastructure capabilities and strategic directions
• Tartology Ltd should be aware of how many competitors are in the market, its positioning and the basis of its competition and should be aware of the consumption patterns of its target market in New Zealand.

Discretionary spending:

• there would be a need for accurate and timely market research to determine discretionary spending habits and patterns of current and developing global markets; consumer confidence levels
• consumers must have the purchasing power to make a product or service viable
• Tartology Ltd would need to identify where its target markets are with disposable income to afford its products.

Interest rates:

• this may impact spending patterns in global markets and may impact global expansion, for instance in the development of infrastructure
• when businesses have access to finance with lower interest rates in other countries, they are able to more easily manage their repayments/reduce their costs
• Tartology Ltd can increase its level of investment as ‘interest rates are at an all-time low’ enabling it to finance operations/global expansion.

Currency fluctuations:

• the change that occurs in the dollar value of one currency relative to another country’s currency – a country’s currency is an indicator of the strength of the country’s economy
• transactions in foreign currencies are affected by variations
• can have an impact on the product and/or distribution costs to consumers in the New Zealand market. This can tend to have greater impact on chocolate tarts, especially if these are deemed to be luxuries
• the probability of currency fluctuations in the short-term have been researched ‘the Australian Dollar has been relatively on par with the New Zealand Dollar’ and this should result in very little impact for Tartology Ltd.