Chapter 2
Transcript of Chapter 2
CHAPTER 2
The Marketing Aspect
This part is considered as the most important part in conducting a
feasibility study because the success or failure of the business lies in the
results of the study in this chapter.
Objectives:
1. To find out the possible opportunities and threats of the proposed
business
2. To know the external issues that could affect the establishment of
the business
3. To determine the current demand and supply conditions in the
market
4. To analyze the demand and supply gap
5. To identify the expected buyers/consumers of the proposed product
6. To learn the proposed marketing strategy as to product, price,
place and promotion
7. To interpret the results of the survey conducted by the proponents
Industry Analysis
This part consists of the factors affecting the proposed business
which includes opportunity and threats and environmental analysis.
29
Opportunity and Threat Analysis
In starting a business, there are a lot of factors and areas that need
to be considered and analyzed because for these could affect the
operation of the business during the time of operation and in the future.
Therefore, the proponents came up with the following projected
opportunities and the threats:
Opportunities:
1. Geographic Market. The place of selling could be a place where
people usually buy the proposed product.
2. Technological Advances. There can be more advanced technology
that can be used in the business such as in the promotional and
production areas.
3. Changing Consumer lifestyles. Consumers could not be consistent
with their preferences.
4. Ineffective Competitors. The business could take advantage of the
market vacated by ineffective competitors.
5. Good Feedback from Consumers. Good feedbacks from
consumers mean good profit margins.
6. Changes in Population. Increase in population in the area of selling
could increase profit.
30
Threats:
1. Competition. The business might engage in competition with
companies in the same line of business.
2. Buying preferences of the consumers. A well-known brand could
defeat the product that the business is selling.
3. Cost of Technology Investment. Technologies that could help the
business might be expensive.
4. Price Wars. The price that competitors declare might be lower than
the business’ price making consumers patronize competitor’s
products.
5. Economic Crisis. Crisis in the economy will affect the business
status.
Environmental Analysis
This part includes the external forces that could affect the business
operations. These are the Demographic, Economic, Natural,
Technological and Political Environments.
Demographic Environment
Parañaque is composed of several shopping malls, convenience
stores, groceries, and retail stores. In addition to the population which is
around 564,247, people from other places visit Parañaque because of its
numerous commercial districts making it the perfect place for distributing
31
coffee to various retailers. Since a lot of people here are employed, coffee,
which serves as a stimulant, is suited to their lifestyle. The target
consumers of the intended business are those who are 17 years old and
above since it is not advisable for children to drink coffee.
Economic Environment
The year-on-year headline inflation rate in the Philippines jumped to
a double-digit figure of 11.4 percent in June from 9.5 percent in May. This
was the highest rate since May 1994 (11.5%).
The country has emerged as one of the rapidly growing food and
drinks industries in the Asian region over the recent past. The country is
characterized by various factors, such as its growing young affluent
population and rising consumer awareness regarding health and safety
concerns. With these factors, the demand for health food and drinks is
surging high.
Natural Environment
There is a substantial supply of raw materials needed for the
production of ginseng coffee tablets. Coffee beans and ginseng are the
main components of the product. Electricity would be required for the
grinding of coffee beans. Aside from that, the business promotes waste
reducing and recycling.
32
Political Environment
There are government policies and requirements that are essential
to establish the proposed business venture legally. These include the
registration of business name with the Securities and Exchange
Commission (SEC) as well as the clearance from the barangay within the
business location. It is also important to have a duly-notarized lease
contract if the place of the business is rented. Business taxes that will be
paid annually and business permits such as the sanitary permit for health
and sanitation purposes, and fire clearance affect the operations of the
business.
Market Analysis
This part identifies if there is a potential market for the proposed
business by measuring the demand and supply quantum.
Demand Conditions
These are the data needed in determining the demand for coffee tablet
and determine whether the majority of people will buy it.
1. The area of distribution would be in Baclaran, Parañaque City
2. Total participants would be the sample size of the area’s population
based on the Sloven’s formula which is 400, resulted to 191 male
and 209 female.
3. The respondent’s age majority is from 26 to 35 years old.
33
4. The average income or allowance is 10,000 - 20,000 pesos a
month.
5. An average of two cups was able to consume by the consumers in
one day.
6. The respondent’s average spending in coffee is below 20 pesos.
7. The consumers were willing to buy a coffee ginseng tablet in a
below 20 pesos price.
Supply Conditions
There are several factors that may affect the supply of the proposed
product. These are the following factors:
1. There should be elasticity on the supply of the proposed product.
2. There are 34 establishments or stores in the area of Baclaran
which sell other brands of coffee that can be potentially supplied by
the proposed product. These establishments are as follows:
21. Dynapharm, Inc,
22. Supermarket
23. 7-11 Convenience Store
24. Mini Stop Convenience Store
25. SM HyperMarket (Mall of Asia)
26. Mc Donald’s
27. Dunkin’ Donuts
28. Jollibee
34
29. Tropical Hut Hamburger
210. Long Chang Chinese Drug Store
211. Flores Market (No.1 Bagong Ilog St. Baclaran)
212. Bertulano Jr. Sari- Sari Store
213. Mercury Drug
214. South Star Drug
215. V&M Superette
216. Ruthland Emporium and Supermart
217. 10Q Convenience Store
218. Happiness Chinese Drug Store
219. Excel Chinese Drug Store
220. Baclaran Chinese Drug Store
221. San Miguel Food Shop
222. NC Sizzling Café
223. Heinkel Commercial (5 Taft Ave. Ext. Baclaran)
224. Niño’s Tapsi
225. Quizon Sari- Sari Store
226. Heydie Store
227. Wokking Food Haus
228. 2 Star Mami House
229. Agapito Bread House
230. Mary Jane Store
231. Ate Luz Store
35
232. Lolo Tinong’s Bakery
233. Panaderia de Madre Maria
234. Leoj Café
3. The price of the proposed product must be competitive enough
against the price of other coffee brands.
4. The supply should meet the demand of the proposed product.
5. Economic threat such as increase in food prices and inflation will
have impact on the supply of the proposed product.
6. A large competition in coffee industry may also affect the supply of
the proposed product.
Measurement of Demand and Supply Quantum
A. Annual Demand
a. Parañaque City Population: 564,247
b. Population 564,247
- 31% thereof 174,917
Net Potential Market 389,330
Potential Income per cup of coffee based on survey P 10
c. Monthly Spending on Coffee
P10 x 389,330 P 3,893,300
d. Multiply: Annual buying frequency 15
e. Annual Spending on Coffee P 58,399,500
36
f. Divide: Average price of Ginseng Coffee Tablets P 10
g. ANNUAL DEMAND FOR COFFEE
5,839,950 output of coffee
B. Annual Supply
a. Monthly sales of Coffee P 76,650
Multiply: Months in one year 12
Annual sales of Coffee P 919, 800
b. Multiply: Number of sellers of Coffee 34
in the proposed business location
c. Annual Supply of Coffee in pesos P 31,273,200
d. Divide: Average price of Coffee P8
e. ANNUAL SUPPLY OF COFFEE
3,909,150 output of coffee
C. The Demand and Supply Gap
Annual Demand - Annual Supply = Demand - Supply Gap
5,839,950 - 3,909,150 = 1,930,800
The Marketing Program
This part includes the four marketing mix components (4 P’s) that
the proponents plan based on the survey questionnaires conducted
among the respondents.
37
The Proposed Target Market
The target market for the proposed product are males and females
who are 26 to 35 years old, single or married, with hectic schedule and
who drink coffee as part of breakfast and want to be refreshed, who
belong to middle to upper-income families, and seek affordability and
healthiness in buying coffee products.
Product Strategy
The product brand name “Kingly” was conceptualized because its
special component, which is ginseng, is considered as the “king of herbal
medicine” for its health benefits and coffee as the most consumed
beverage globally.
FIGURE 2.1Product Name
The product logo signifies royalty; the crown shows supremacy
since coffee is the most popular drink and ginseng is the king of all herbal
medicines. The red color symbolizes energy derived from the drink. The
golden yellow implies good health, relaxation and enjoyment which can be
achieved while and after drinking ginseng coffee.
38
FIGURE 2.2Product Logo
The product is composed of coffee, ginseng powder, creamer and
sugar. The composition is grinded and blended thoroughly to achieve a
fine texture. The finished product is circle in shape and has a dark brown
color. To consume the product, the tablet must be dissolved in hot water.
To make iced coffee, simply add ice after dissolving the tablet in hot water.
The features of the product aside from its health benefits are:
mess-free because it is in tablet form; easy to mix, because it easily
dissolves in hot water; and handy, since its package is in a bottle and
convenient to use anywhere.
Price Strategy
In order for the proponents to easily penetrate the market, the price
of the product was set in such a way that people even in the lowest
bracket can afford to buy the product.
39
The following are the materials used in the product including their
monetary equivalent per grams:
Price of the product per tablet:
Coffee (2 grams) P 1.42
White Sugar (8.25 grams) P 0.30
Coffee Creamer (5 grams) P 0.99
Ginseng Powder (3 grams) P 2.50
Wrapper P 0.64
Total Cost per tablet P5.85
+Labor and Overhead Cost P1.09
+ 30% Markup Price P 2.08
Selling Price per Tablet P 9.02
Price of the product per bottle:
Coffee (20 grams) P 14.20
White Sugar (82.50 grams) P 3.00
Coffee Creamer (50 grams) P 9.90
Ginseng Powder (30 grams) P 25.00
Wrapper P 6.40
Bottle P 9.30
Total Cost per bottle P67.80
+Labor and Overhead Cost P10.90
+ 30% Markup Price P 23.61
MANUFACTURERBUYER
SELLER
40
Selling Price per Bottle P 102.31
Place Strategy
The manufacturing and business office will be located at 788 A.
Guarra St. Baclaran, Parañaque City. This will be easier for the
manufacturer to acquire the raw materials for production and to distribute
the product since the location is a place for market and have many
potential establishments which manufacturers can supply with the product.
The product will be offered primarily into retailers, leading
supermarkets and department stores such as SM Hypermarket, YDM
Supermarket, and alike along Baclaran area to test the market of the
product, but as soon as the market will grow and the business will have a
larger capital to distribute the product in other areas in Metro Manila and in
rural places. The manufacturer will act as a Direct Supplier to the Retailers
and Retailers will act as a direct seller to the buyers. The distribution
channel is shown in the figure below.
FIGURE 2.3Product Distribution Channel
Promotion Strategy
41
The proponents decided to promote the product with the use of
advertisement, specifically flyers and product taste sampling. Advertising
is the most effective way for the product to be recognized and patronized
by the market. The flyers will be distributed in the market areas because of
high market potential. The method is chosen because of its low cost
compared to the other advertising methods and yet as nearly efficient.
(See attached sample flyer)
The proponents also have a product taste sampling on the first
week of the operations of the business to arouse interest for consumers to
try the product. The proponents believe that if the consumers had a
firsthand experience on the product, the more interested they will be.
The proponents did not choose television, radio and newspaper
advertising due to heavy expenses. They would rather increase the
expenses in developing the physical product to improve its quality rather
than promote it in an expensive way because in the long run, the quality
will be more noted by the consumer.
Given only a mere 1 million pesos for capital, paying for a TV or
radio company to promote the product is impossible.
FIGURE 2.4SAMPLE FLYER (FRONT)
FIGURE 2.5SAMPLE FLYER (BACK)
43
The crown and shield represent an idea from the royalty in the
middle ages which basically means “quality” and “elegance”. The circular
stains in the background are actually remainders of coffee when one lifts
the coffee from a placemat or a platter. The coffee stains symbolize
abundance because no matter how much coffee you drink; there will still
be remains which are of course outside the cup. The slogan “Experience
the taste of royalty” means that the coffee that the consumer is about to
drink is a choice of a king or queen. But still, given its ROYAL quality, the
price still suits even a pauper. In short, this drink is for everyone. The two
irregular shapes on bottom edges of the flyer represent the Ginseng root
which is the main ingredient of the product.
Presentation, Analysis and Interpretation of Data
This part presents, analyzes and interprets the data gathered
based on the survey questionnaires.
TABLE 2.1Frequency Distribution of Gender
Table 2.1 shows that 191 or 47.75% of the respondents were male
and 209 or 52.25% were female.
CHOICES FREQUENCY PERCENTAGEMale 191 47.75
Female 209 52.25TOTAL 400 100.00
44
It is evident that out of 400 respondents 209 or 52.25 % of them
were females.
TABLE 2.2Frequency Distribution as to Age of Respondents
Table 2.2 shows that 129 out of 400 or 32.25% of the respondents
were in the age range of 26 to 35 years old, 119 or 29.75% were in the
range of 18 to 25 years old, 81 or 20.25% were in the range of 36 to 50
years old, 44 or 11% were below 18 years old, and 27 or 6.75% were
above 50 years old.
Based on Table 2.2, it is apparent that there is a close match
between the age range of 18-25 years old and 26-35 years old, with
frequencies of 119 and 129 respondents respectively.
CHOICES FREQUENCY PERCENTAGEBelow 18 44 11.00
18-25 119 29.7526-35 129 32.2536-50 81 20.25
Above 50 27 6.75TOTAL 400 100.00
45
TABLE 2.3Frequency Distribution as to Monthly Income
Table 2.3 shows that 120 or 30% of the respondents earned a
monthly income of below P5,000, 65 or 16% earned P5,000 – P10,000,
120 or 30% earned P10,001 - P20,000, 55 or 14% earned P20,001 -
P30,000, 26 or 6% earned P30,001 - P40,000 and 14 or 4% of the
respondents earned above P40,000.
Based on Table 2.3 it is evident that 120 or 30% of the respondents
earned a monthly income of P5, 000.
CHOICES FREQUENCY PERCENTAGEBelow P5,000 120 30.00
P5,001-P10,000 65 16.25P10,0001-P20,000 120 30.00P20,001-P30,000 55 13.75
P30,0001-P40,000 26 6.50Above P40,000 14 3.50
TOTAL 400 100.00
46
TABLE 2.4Frequency Distribution as to Occupation of Respondents
Table 2.4 illustrates the occupations of the respondents. It shows
that 175 out of 400 or 43.75% of the respondents were employees, 103 or
25.75% were students, 60 or 15% were businessmen, 42 or 10.50% were
housewives, and 20 or 5% were those who had a different line of work.
Based on Table 2.4, it is clear that 43.75% of the respondents were
employees with a frequency of 175.
CHOICES FREQUENCY PERCENTAGEBusinessman 60 15.00
Employee 175 43.75Housewife 42 10.50
Student 103 25.75Others 20 5.00TOTAL 400 100.00
47
TABLE 2.5Frequency Distribution as to Number of Cups of Coffee Drank Daily
Table 2.5 shows that 134 or 33.50% of respondents drank 1 cup of
coffee in a day, 156 or 39.00% drank 2 cups of coffee, 68 or 17.00% drank
3 cups of coffee, 18 or 4.50% drank 4 cups of coffee, 9 or 2.25% drank 5
cups of coffee, and 15 or 3.75 drank more than 5 cups of coffee.
Based on Table 2.5, it is evident that most drank 2 cups of coffee
daily having a frequency of 156 or 39.00% out of 400 respondents.
CHOICES FREQUENCY PERCENTAGE1 134 33.502 156 39.003 68 17.004 18 4.505 9 2.25
More than 5 15 3.75TOTAL 400 100.00
48
TABLE 2.6Frequency Distribution as to Package of Coffee Purchased
CHOICES FREQUENCY PERCENTAGEBottle 67 16.75Cup 55 13.75Pack 122 30.50
Sachet 155 38.75Others 1 0.25TOTAL 400 100.00
Table 2.6 shows that 67 or 16.75% of respondents chose to buy
coffee in a bottle as to package, 55 or 13.75% chose in a cup, 122 or
30.50% chose in a pack, 155 or 38.75% choose sachet, and 1 or 0.25%
chose others.
Based on Table 2.6, it is clear that the most preferred package of
coffee to buy is sachet, with a frequency of 155 or 38.75% of the total
respondents.
49
TABLE 2.7Frequency Distribution as to Consumption of Regular Coffee
Bottles in one year
Table 2.7 shows that 44 or 11% of the respondents bought 1-2
regular coffee bottles in one year, 73 or 18.25% bought 3-4 bottles of
regular coffee, 86 or 21.50% bought 5-6 bottles, 46 or 11.50% bought 7-8
bottles, 31 or 7.75% bought 9-10 bottles of coffee, and 120 or 30% bought
more than 10 bottles of regular coffee.
CHOICES FREQUENCY PERCENTAGE1-2 44 11.003-4 73 18.255-6 86 21.507-8 46 11.50
9-10 31 7.75More than 10 120 30.00
TOTAL 400 100.00
50
Based on Table 2.7, it shows that most bought more than 10
regular bottles of coffee having a frequency of 120 or 30% respondents
out of 400 total.
TABLE 2.8Frequency Distribution as to Reasons of Drinking Coffee
CHOICES FREQUENCY PERCENTAGEHealth benefits 50 12.50
Part of daily routine 176 44.00Stimulant 166 41.50
Others 8 2.00TOTAL 400 100.00
Table 2.8 shows that 50 or 12.50% of the respondents drank coffee
for health benefits, 176 or 44% drank coffee as part of daily routine, 166 or
41.50% drank coffee as a stimulant, 8 or 2% chose others.
Based on Table 2.8, it shows that most respondents drank coffee
as part of their daily routine having a frequency of 176 or 44%
respondents out of 400 in total.
51
TABLE 2.9Frequency Distribution as to Blend/Flavor of Coffee Preferred by
Respondents
Table 2.9 shows that 30 or 7.50% of respondents preferred brewed
coffee, 55 or 13.75% preferred cappuccino, 93 or 23.25% preferred
regular coffee, 55 or 13.75% preferred strong or black coffee, 161 or
40.25% preferred 3-in-1 coffee, and 6 or 1.5% prefer other blends of
coffee.
Based on Table 2.9, it shows that most people preferred 3-in-1
coffee, with a frequency of 161 or 40.25%.
CHOICES FREQUENCY PERCENTAGEBrewed 30 7.50
Cappuccino 55 13.75Regular 93 23.25
Strong/Black 55 13.753-in-1 161 40.25Others 6 1.50TOTAL 400 100.00
52
TABLE 2.10Frequency Distribution as to Money Spent for a Regular
Bottle of Coffee
Table 2.10 shows that 174 or 43.50% of respondents spent below
P20 for a regular bottle of coffee, 101 or 25.25% spent P20 – P40, 79 or
19.75% spend P41 – P60, and 46 or 11.50% spent above P60.
Based on Table 2.8, it clearly states that most people spend below
P20 for a regular bottle of coffee, with a frequency of 174 or 43.50%.
CHOICES FREQUENCY PERCENTAGEBelow P20 174 43.50P20 – P40 101 25.25P41 – P60 79 19.75Above P60 46 11.50
TOTAL 400 100.00
53
TABLE 2.11Frequency Distribution as to Place of Coffee Purchase
Choices Frequency PercentageCoffee Shops (Starbucks, Figaro, etc) 36 9.00
Convenience Stores 70 17.50Groceries/ Supermarkets 187 46.75
Sari-Sari Stores 104 26.00Others 3 00.75TOTAL 400 100.00
Table 2.11 shows that respondents usually brought in groceries
and supermarkets with 46.75%. Second to the rank are the small sari-sari
stores with a percentage of 26.00. Next, having a percentage of 17.50 are
the convenience stores. Fourth, are the coffee shops with a percentage of
9.00 and .75% of respondents who answered Others.
Table 2.11 clearly states that the places where people often bought
coffee were in groceries or supermarkets.
54
TABLE 2.12
Frequency Distribution as to Factors Considered in Buying Coffee
Choices Frequency PercentageAdvertisements 37 09.25
Brand 125 31.25Family/ Relatives 57 14.25
Friends/ Colleagues 32 08.00Packaging 15 03.75
Price 101 25.25Taste 280 70.00Others 1 00.25
Table 2.12 illustrates the respondents’ frequency and percentage of
factors considered in buying coffee, Taste was the highest in figure with a
percentage of 70.00. Next to it was the brand with a percentage of 31.25.
With 25.25%, the price is in the third rank. Next was their family and
relatives with a percentage of 14.25. Followed by Advertisements, friends
and colleagues and packaging with their percentage of 09.25, 08.00 and
03.75 respectively.
55
Based on Table 2.12, it shows that majority of the respondents
considered taste in buying coffee.
TABLE 2.13Frequency Distribution as to Willingness to buy Ginseng Coffee
Tablets
Table 2.13 shows that 328 or 82% respondents were interested in
buying ginseng coffee tablets and 72 or 18% were not.
Based on Table 2.13, majority of the respondents which is 328
(82%) were willing to buy ginseng coffee tablets.
CHOICES FREQUENCY PERCENTAGEYes 328 82.00No 72 18.00
TOTAL 400 100.00
56
TABLE 2.14Frequency Distribution as to Willingness to spend on Ginseng
Coffee Tablets
Table 2.14 shows that 120 or 50% of the respondents wanted to
buy the lowest price possible which is below 20 pesos, 102 or 31% opted
for a range of P20-P40, 52 or 16% wanted P41-P60 and 9 or 3% preferred
the above P60 price.
It is concluded that below P20 is the most preferred because
comprising half of the entire 328 respondents who were interested in
buying ginseng coffee tablets.
CHOICES FREQUENCY PERCENTAGEBelow P20 165 50.00
P20-40 102 31.00P41-60 52 16.00
Above 60 9 3.00TOTAL 328 100.00