VCAA Business Management Reviewing performance – the need for change

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:

Financial growth opportunities and/or loss minimisation:

• identifying and capitalising on new markets can lead to increased business revenue and a larger customer base
• a strong presence in multiple markets can enhance a business' financial stability and growth potential
• diversifying operations across different regions can mitigate risks associated with economic uncertainty and political instability
• an Australian business may go to a low-cost country to manufacture their products to increase their profit margin.

Consumer purchasing and spending patterns:

• consumers leverage technology and social networks to access and compare products globally
• businesses utilise technology to connect with consumers through social media and can enhance brand loyalty
• global transportation, digital product distribution and secure online payment systems create a robust platform for global business growth
• increasing consumer spending patterns or higher numbers of consumers drive businesses to expand globally, while decreasing patterns or lower numbers may slow expansion.

World Trade Organisation (WTO) regulation and sanctions:

• the WTO establishes standards for international trade and governs free trade agreements
• the WTO combats the exploitation of developing nations by multinational corporations, particularly concerning environmental and labour issues
• WTO rules require the elimination of tariffs and other trade restrictions between member countries and ensure non-discrimination against service suppliers
• the WTO sets standards for global businesses, including transparency, commitment and trade facilitation, aiming to maintain safe global trade with clear rules and dispute resolution mechanisms.

Deregulation of the financial market:

• governments worldwide have reduced barriers to the flow of money between nations through financial market deregulation
• deregulation allows Australian businesses to access market outside of Australia, which can help businesses expand their customer base
• deregulation enables businesses to be cost-effective in their global expansion, grow their international market share and facilitate the transfer of capital overseas
• Australian businesses can minimise or hedge against financial losses and increase profit if they expand into overseas markets.

Answers could include:

Changes in a domestic market:

• globalisation can result in competition to the domestic market from foreign businesses. This could encourage domestic businesses to improve their performance by becoming more efficient or innovative to combat the competition. However, to accomplish this, their costs might increase, affecting the demand for their goods/services and/or their profitability
• if saturation occurs for the products of a home country business, it could explore export opportunities in overseas markets. As well as adding another revenue stream, this reduces the business' dependency on the local market
• domestic businesses might need to reduce their prices to remain competitive with foreign businesses, resulting in reduced profits
• globalisation provides an opportunity for domestic businesses to access overseas suppliers. This could result in lower manufacturing costs, or the potential to manufacture new products to sell to customers.

International cooperation:

• Free Trade Agreements (FTAs) and strategic alliances encourage businesses to collaborate on trade and investment opportunities due to the strong ties between countries which is fostered by globalisation. This interconnectedness can lead to a more stable global market
• international cooperation in the sharing of technology and knowledge can result in research and development projects that lead to advancements in various fields globally, such as environmental sustainability
• through international cooperation, businesses can develop and implement effective solutions to challenges which benefit the global market, such as supply chain disruptions, environmental sustainability and cybersecurity threats
• globalisation encourages cultural exchange and understanding among businesses, fostering mutual respect and reducing international conflicts. Through increased interaction and communication, businesses can build stronger partnerships and work towards common goals in areas such as corporate social responsibility and ethical practices.

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.

An external operating environmental factor that could influence a business manager to initiate change is the business’s customers. A business must continually ensure that its customers’ needs are being met. It also needs to respond quickly, changing the way it operates to satisfy its customers. For example, a business that only provides instore facilities may need to change its operations and provide an online option to meet customer needs and stay competitive.