BUSM 1001

Assignment 2

Semester 1 2011/2012

Deadline: 4/01/2012

Module leader: Holly Andrews

Table of content

1. Executive summary…………………………pag.3

2. Introduction…………………………………pag.3

3. Gant chart………………………….………..pag.4

4. External environment……………….………pag.4

Social factors……………….……….pag.5

Legal factors……………….……….pag.7

Economic factors…………………..pag.7

Political factors…………………….pag.8

Technological factors……………...pag.8

5. SWOT analysis……………………………….pag.9

Strengths……………….……………pag.9

Weaknesses……………….…………pag.9

Opportunities…………….…………pag.9

Threats………………………………pag.10

6. Suggestions……………………………………pag.10

7. Conclusion…………………………………….pag.11

8. Referencing list…………………………….….pag.12

1. Executive summary
McCain Foods Limited is seen as a top leader in the food industry, with an extended production over six continents. To maintain the leadership, the company needs to be aware of the external environment changes. The changes can occur in different areas, such as social, political, legal, technological and economic. These factors are analyzed properly for a better understanding related to the McCain Company and their industry. (www.mccain.com)

2. Introduction
McCain Foods limited is a company with over 50 years of experience, being founded by Harrison and Wallace McCain in 1957. Operates in 160 countries and has various types of products especially based on potatoes. (www.mccain.com)

The information provided in the report will be extracted from reliable sources that will be referenced both in text and last page which will be dedicated for references. It will be firstly based on McCain Foods case study and Mintel reports, such as Potatoes report, Fruit and Vegetables, Influence of the Environment on Food Shopping.
There will be included data about external environment and factors related to it and an analysis of these factors.
To understand the external environment it is necessary to know that is analyzing the changes in the market, also taking into account some other factors. Those factors are related to political changes, economic changes, social and technological changes, legislative and environmental changes. (www.bussiness-plan.co.za)

Mintel (2011) report shows some issues in the market which affect the grocery market, including McCain’s food, because there are more and more competitors. Therefore the prices are increasing considerably affecting the customers.
Being a well-known company, McCain should be concerned because of the consumer switch. The consumers tend to choose cheaper brands, due to the changes in the market place, where the prices are starting to rise considerable more than it used to in previous years.
As a response to these changes, McCain’s food tries to promote by adding products of value in family bags. (Mintel, 2011)
McCain tried to change the image of its own products, which were considered unhealthy, having a poor quality and low priced with the help of NPD, a market research company (Mintel, 2011), which in the end they proved to be successful. The company included the logo with the phrase “It’s all good” which ensured their customers that the products are valuable. (www.mccain.com)
That is why the McCain Company brings more attention to these elements related to the external environment.

3. Gantt Chart

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4. External environment

The marketing environment can be divided in two main categories: External Environment, also called uncontrollable forces, in which analyses everything that happens outside the company, and Internal Environment, or controllable elements, which pays attention to the internal factors that occur inside a company/organisation. (Blythe, J. (2008) Essentials of Marketing. London, Prentice Hall)

“Businesses have a number of objectives. Typical examples include:

• winning the biggest share of the total market

• increasing sales

• satisfying customers

• making profit for shareholders.

A business’ ability to meet these objectives depends on two main groups of factors:

1. The internal strengths of the organisation – for example being able to make the right

products in an efficient way

2. Being able to identify external influences in the business environment and on its

consumers and adapt accordingly.

The external environment today is changing fast. This case study shows how McCain needs to

identify changes in the external environment. It must then rise to the challenges posed by

change. The external environment consists of everything outside the business” (www.thetimes100.co.uk)

“Before creating business plans or when evaluating existing ones it is important to 'scan' the external environment. This takes the form of a SLEPT analysis, i.e. an investigation of the Social, Legal, Economic, Political, and Technological influences on a business. In addition it is also important to be aware of the actions of your competitors. These forces are continually in a state of change.
Social factors relate to pattern of behavior, tastes, and lifestyles. A major component of this is a change in consumer behavior resulting from changes in fashions and styles. The age structure of the population also alters over time (currently we have an ageing population). An understanding of social change gives business a better feel for the future market situation” ( www.businesscasestudies.co.uk/business-theory/external-environment)

Social factors

According to the Mintel report Potatoes U.K November 2009, the trend towards cooking from scratch and cooking from frozen products has improved the image of potatoes. Due to the economic downturn consumers, has shown concerns in healthy eating and saving money so it seems the report shows increase in cheaper cuts of meal. More than half of the consumers have shown interest for cooking and trying new recipes, this suggesting a positive impact on fresh and frozen potatoes which are key ingredients in most of the recipes. Consumer behavior is changing and so companies should understand their needs and respond effectively. Frozen food has had a bad reputation and what manufactures are trying to say is that frozen food can be healthy. This chart from the Mintel report Potatoes U.K November 2009 shows how the attitudes towards frozen food have changed.

Figure 1: Trends in attitudes towards frozen foods and diet, 2004-09

Base: Adults aged 15+

| |2004 |2005 |2006 |2007 |2008 |2009 |% point change |
| |% |% |% |% |% |% |2004-09 |
| | | | | | | | |
|Frozen foods are as good for you as fresh foods |32 |31 |29 |31 |35 |39 |+7 |
| | | | | | | | |
|I should do a lot more about my health |55 |55 |55 |54 |51 |51 |-4 |
|Are you trying to lose weight (yes) |34 |35 |35 |40 |43 |45 |+11 |
|I consider my diet to be very healthy |39 |41 |43 |45 |43 |41 |+2 |
|I avoid fats |40 |42 |42 |43 |43 |40 |- |
|I avoid sugar |36 |38 |38 |39 |39 |36 |- |
|I eat diet/low calorie products |na |na |na |na |35 |36 |+1** |
|I always check the nutritional content of food |na |28 |30 |31 |29 |29 |+1* |
|I always think of the calories in what I eat |22 |23 |23 |24 |24 |24 |+2 |
|I always choose light food |19 |20 |20 |21 |20 |20 |+1 |
|I often skip meals to keep my weight down |14 |14 |15 |15 |15 |14 |- |

* percentage point change for 2005-09

** percentage point change for 2008-09

Taken from the TGI survey of around 25,000 adults

McCains philosophy „It`s all good „promoted frozen food and chips as being healthy food. In support of this position, Simon Eyles, Marketing director McCains Foods sustains: ’’It`s all good is based on a simple insight. We are good people, using good, wholesome ingredients to make good food. Therefore, it`s all good.” In my opinion the company`s philosophy is promoting a „good look” by showing that, if the employees are good people, the potatoes and other ingredients are good, the final product could not be bad, so the result seen is that chips are good.

What has more celebrities means a greater impact on consumers’ trends. Celebrity Delia Smith published a book entitled” How to Cheat at Cooking” recommending ready-made and frozen foods like frozen potatoes and named brands like McCain. As a result of this, the trend of having frozen potatoes as ingredients had been accepted. Also McCain used this as a tool of advertising, by putting”How to cheat cooking” stickers on their packs.

Legal factors
Laws are continually being updated in a wide range of areas, e.g. consumer protection legislation, environmental legislation, health & safety and employment law. Businesses need to take a pro-active approach and be ahead of these changes, rather than quickly making alterations to products and processes in a reactive way. (www.businesscasestudies.co.uk/business-theory/external-environment)

Two of the main issues in the food market are represented by health and obesity .Evidence from the article” Q&A :five-a-day campaign” from The Guardian explains the government health campaign „5 a day”campaign which was realized to persuade people to include fruits and vegetables in their meals at least five portions. The consumption of fruits and vegetables makes part of the Department of Health`s (DOH) plan to reduce deaths from cancer and coronary heart diseases. The campaign has affected the sales of potatoes as they were not included as vegetables and although fresh potatoes are healthy, when cooking, people used to add unhealthy ingredients such as butter or cheese. McCains strategy „ it’s all good” has tried to promote potatoes as a healthy product as it is low in calories and fat and it contains vitamins and minerals.

Economic factors
“Economic changes are closely related to social ones. The economy goes through a series of fluctuations associated with general booms and slumps in economic activity. In a boom nearly all businesses benefit and in a slump most lose out. Other economic changes that affect business include changes in the interest rate, wage rates, and the rate of inflation (i.e. general level of increase in prices). Businesses will be more encouraged to expand and take risks when economic conditions are right, e.g. low interest rates and rising demand” (www.businesscasestudies.co.uk/business-theory/external-environment)

Due to the recession ,frozen foods had gained advantage in the market as consumers were buying frozen meals to save money, reduce wastage and also to reduce the time spent cooking .More recent research suggested that cooking was being accepted before the recession and eating habits had changed due to the recession. According to the Mintel report Chilled and Frozen Ready Meals Uk-May 2010 when consumers were asked about the impact of the recession on their eating habits, over 47% of the consumers claimed they are eating more at home. Consumers were more probably to buy frozen foods as this category became known as „price led, low waste alternative” but also reduced the time spent in front of the stove, therefore parents can spend more time with their families. Marketers are trying to position frozen food as being as healthy as fresh food and as a way of preserving the flavor of the food with no additives. McCain`s has understood the consumers needs and came on the market with different varieties of products and also targeted the premium market.

Political factors
“Political changes relate to changes in government influence. In recent years these changes have been particularly significant because as members of the European Union we have to adopt directives and regulations created by the EU which then become part of the UK law. Political changes are closely tied up with legal changes” (www.businesscasestudies.co.uk/business-theory/external-environment).

Concerning the political factors, the U.K government has launched health campaigns like Change4Life due to the rising obesity especially the childhood obesity .It can be seen from the article Government targets obesity rates that the message of the campaign is the serious health problems that could appear due to the consumption of dangerous amounts of fats. This health campaign is aimed to influence important institutions with a significant role in the obesity issue like schools, television and fast foods. Due to the government health campaign and to the customers interest in food issues McCains is taking step by reformulating recipes and including more natural ingredients and by replacing the fats used with sunflower oil .Evidence from the article McCain supports government food education scheme with kids site shows evidence of the support of McCain for the government initiative called „The Year of Food and Farming”.Food manufactures and farmers are supposed to provide schools with informations with the purpose to educate children better about food.So for this campaign McCain has launched an interactive site which can be used as an education tool with lessons concerning nutrition and plants but also can be used by parents who can fiind useful informations about growing potatoes and recipe tips.

Technological factors

“Changes in technology have also become particularly significant in the post-millennium world. This is particularly true in terms of modern communication technologies. The creation of databases and electronic communications have enabled vast quantities of information to be shared and quickly distributed in a modern company enabling vast cost reductions, and often improvements in service. Organizations need to be aware of the latest relevant technologies for their business and to surf the wave of change” (www.businesscasestudies.co.uk/business-theory/external-environment).

McCain is one of biggest manufacturers of frozen chips and also a well-known brand on the market. As presented in the article Winner McCain Food, McCain understands the importance of a relationship with suppliers and farmers being the single largest consumer of British potatoes .The aim of the company is to put sustainability as a key element in the business and also to support the British agriculture .McCain is trying to face the changes technology is bringing in the present. The company has launched a renewable-energy project at one of the manufacturing plants resulting in the reduction of 7,500 tones of carbon dioxide. McCain also invested in the issue of food miles using only potatoes from U.K to make chips. Another measure for reducing food miles is the use of double-deckers trailers. Moreover, for the power of the lorries refrigeration units it was used the power from the solar panels. What is more, the use of double –deckers has reduced the road journeys over 20% in the last years. Due to this action McCain impressed the judges and became the winner of the title „Best consumer good or retail company”. McCains due to the eco investments has sett an example for suppliers but also aims to demonstrate that manufacturing and environment can co-exist.

5. SWOT analysis

➢ Strengths
McCain is one of the world`s largest manufacturers of frozen food and chips. The portfolio of the company includes other frozen food products like pizzas, vegetables, desserts, ready-meals and starters.
The brand is popular all over the world from Canada, where the company`s headquarters are, to other Australia, Europe, South Africa, the Middle East and Asia. The global presence allows the company to increase the access to growth pockets among different markets.

➢ Weaknesses McCain has recalled some products suggesting poor internal quality control. For example, in March 2010,in U.S was recalled the McCain All American Roaster frozen potato product due to suspicions of contamination with Salmonella. In 2009,in Australia/New Zealand another product McCain Foods Healthy Choice Apricot Chicken meals. Another case also in Australia happened in 2008 when the company recalled the McCain Stir Fry Vegetables Pasta Alfredo with Sauce. These product recalls can affect the customer loyalty and the reputation of the brand.

➢ Opportunities
McCain presents a diversity of healthy foods, low in calories and in saturated fats. The company maintains the required standards for healthy food, aiming to get at least 60% of its products to be healthy. It also has built connections with the nutrition and medical health communities as well as with their health and wellness groups. Consumers in the U.S and Canada are becoming more health conscious, therefore McCain products are likely to gain acceptance in these territories. In addition to this, McCain has the portfolio to benefit from the increased interest in healthy food.

The manufacturer relies on saving energy and on renewable resources. One of the major investments in 2007 was in the renewable energy at one of the plants concluding in the reduction of 7,500 tones of carbon dioxide. Moreover, energy consumption was reduced by 5% per unit produced .Actually 18% of McCain`s energy consumption comes from renewable resources. The company is concentrating to put sustainability as a key point in the business.

According to SURSA, McCain has made investments for increasing their capacity to serve European markets. In january 2009, McCain invested in the construction of an refrigerated warehouse in Harnes, France. The plant in Harnes will be connected through a tunnel to the warehouse while a shuttle service from Bethune, another plant located in the vicinity will also provide resources to the warehouse. The investition made will expand the company`s capacity to serve European markets.

➢ Threats
Even though the recession was declared officially over, consumers are still price conscious .The Bureau of Economy Analysis has shown that the disposable personal income and the real disposable income decreased in January 2010 suggesting that consumers will remain price conscious .The impact of recession is still seen on consumers eating out habits, as they are still less likely to eat at the restaurants. What is more, consumers are focusing on saving money even on their everyday food and grocery purchases. As a consequence of this change the demand of McCains products will decrease.

Another threat for the company is the fluctuations in raw material prices. McCain is threatened of the fluctuations in raw materials like flour and vegetable oils considered key ingredients in the frozen food industry .The prices of key ingredients reached high levels in 2008 affecting food manufactures. There are suspicions that the prices will remain high also in 2010 .To put it in another way ,if the company will not be able to pass this price increases ,exists the possibility to affect its operating margins.

6. Suggestions

From the report it is noticed the fact that consumers want something healthy and easy to cook.
A suggestion would be to make some products ready to be cooked directly from the package and afterwards eaten, like some of the rice products which are boiled directly in their own bag. (www.successrice.com) This method will provide a faster cooking for those who are always on a rush.
In the case study provided by The Times 100 Business Case studies (2007) it is shown the fact that the company was successful by changing the look of some packages. A suggestion related to this is to use the look of the new packages in campaigns and create some ads, were Jamie Oliver is included. He could be determined to do that if the company collaborates with him and show to others tips for cooking and having a healthy meal, even if consumers are staying home, going to work or school.

Because they are an international company, operating in over 160 countries, they should pay more attention to the diversity in these countries. A good reason would be that McCain Foods will gain the sympathy of the consumers, creating a special bond and loyalty in each country. It will be something different, yet still having something common, such as the potato. Each country has a different culture; therefore the market is sometimes influenced by the trend.

7. Conclusion

As a conclusion, the report shows the variety of factors which influence the industry of frozen foods and the chart which has detailed information about the research that was made.
A Gantt Chart was included, in order to show all necessary stages of the project which were completed, having some resources included and realistic timings.

The suggestions made at the end of the report are a way to help McCain Foods to keep up with the demands from the external environmental factors.

8. Referencing list

1. www.mccain.co.uk [online][accessed on 18 November 2011]

2. http://www.nma.co.uk/news/mccain-uses-web-to-promote-honest-products-to-customers/32938.article [online] [accessed 20 November 2011]

3. www.businesscasestudies.co.uk/business-theory/external-environment [online][accessed 23 November 2011]

4. www.thetimes100.co.uk [online][accessed 22 November 2011]

5. Blythe, J. (2008) Essentials of Marketing. London, Prentice Hall

6. http://www.nma.co.uk/news/mccain-supports-government-food-education-scheme-with-kids-site/35035.article [online][accessed 19 November 2011]

7. http://www.marketingmagazine.co.uk/news/login/784523 [online][accessed 24 November 2011]

8. http://www.marketingmagazine.co.uk/news/831488/McCain-chips-back-health-focus-5m-athletics-tie [online][accessed 25 November 2011]

9. DataMonitor (2008) Frozen Food in the United Kingdom December 2008 Available from DataMonitor [online][accessed 27 November 2011]

10. DataMonitor (2010) McCain Foods Limited 2010 Available from DataMonitor [online][accessed 27 November 2011]

11. DataMonitor(2011) Frozen Food in the United Kingdom 2011 Available from DataMonitor [online][accessed 28 November 2011]

12. www.brandrepublic.com/marketing [online][accessed 29 November 2011]

13. www.marketingmagazine.co.uk [online][accessed 30 November 2011]

14. www.pffc-online.com [online][accessed 1 December 2011]

15. www.foodmanufacture.co.uk [online][accessed 2 December 2011]