Running head: MARKET ANALYSIS 1
MARKET ANALYSIS 2
Market Analysis Report: Biodegradable Plastic Bags
Positioning and Differentiation
Positioning involves a strategic process used by marketers in determining the market niche upon which an offering ought to fill in a particular market or a method of organizing for a product to occupy a distinctive place relative to competing for goods as regarded by target customers. Differentiation involves the process of making a product stand out from its competitors by ensuring it provides unique value to customers. Effective positioning for commodities in the market relies on the differentiating features that make such commodities better than the competitors’ in the target customers’ minds. The ultimate aim of the two is to create a market-focused value proposition.
Brief Description of the market
The market for biodegradable plastic bags has been expanding in recent years, and that has led to tremendous growth in the industry as the governments are consistent in prohibiting the use of non-biodegradable plastics while the awareness is increasing among the public concerning the adverse effects of plastic wastes. Factors such as the ability of many governments to ban single-use plastics and call for the use of biodegradable ones and the willingness of consumers to pay more for biodegradable plastic bags offer a significant boost to the industry’s market growth (Markowicz et al., 2019). JGJ Inc. wants to enter an industry that deals in biodegradable plastic bags. The market currently has a large number of players due to the increasing demand for the products. Thus it is upon the entering or existing firms to invest heavily towards producing novel, robust, and environmentally friendly products.
Analysis of the Current Positioning in the Market
Current annual sales volume in dollars and/or units sold in the market
Currently, the sales volume or the value of the biodegradable plastic market is $4.7 billion. Being a better alternative to conventional plastics, biodegradable plastic packaging will likely grow in terms of sales volume as soon as forecasted. The global markets are increasingly adopting biodegradable plastic bags as most governments issue directives, and concerned bodies create awareness of its environmentally friendly nature.
Current competitors and their offerings
Key players or competitors in this competitive market include BASF, Biome Technologies, and Mondi. Biome Technologies provides a bioplastic solution to growing coffee cup waste by designing takeaway beverage cups using plant-based sources. Through a partnership with Futamura, the company also plans compostable multilayer packaging, which, compared to oil-based packaging, offers a competitive advantage. BASF used high-quality bioplastic materials consisting of polymer eco flex and polylactic acid derived from renewable components used in making coffee capsules, organic waste bags, and aroma-tight outer packaging. The compostable plastic ecovio developed by BASF offers significant aid in production, packaging, and transport as it limits food and nutrient wastage and plastic accumulation in soil (Markowicz et al., 2019). On the other hand, Mondi produces sustainable extrusion-coated and laminated packaging materials that apply biopolymers that are purely made of renewable resources rather than PE. The materials have good sealability, gas, grease, and moisture barrier, and varied usability.
BASF is an excellent firm to work for as they support education, development, and training and have some of the many companies’ best health benefits. Therefore, this makes them very competitive in the market, which means that other companies may find it challenging to cope with such competition. The company is located in Germany and has its headquarters in Ludwigshafen. The founder was Friedrich Engelhorn, who began the company in 1865. It also has subsidiaries in more than 80 countries and operates in six integrated production sites worldwide. The company’s revenue stood at 59.32 billion Euros as of 2019, which has continued to improve over time.
On the other hand, Mondi is a British packaging paper group that has employed more than 26000 people with over 100 sites of production in more than 30 countries. The headquarters are in Addlestone, the United Kingdom, and its revenue stood at 7.268 billion Euros as of 2019. The company was founded in 1967 in South Africa. Biome Technologies is based in the UK, and it operates under three sections: Bioplastics, Radiofrequency technologies, and central costs. The company’s core objective is to build a market-leading position based on current technology and serve international customers invaluable market sectors.
Current price points of competitors
The price of biodegradable plastic bags varies per the company producing them since they use different materials, technologies, and specifications whose costs are not the same. BASF has slightly higher pricing than Biome Technologies, whose price for biodegradable plastic bags is slighter higher than that of Mondi. However, their prices are more likely to be sticky. BASF, for instance, announced elevating its prices across the world by $100 per metric ton. This shows that the company’s growth is positive, and it is expected to make more profit and gain more competition in the market. For Mondi, the prices are slightly lower, as mentioned above, but it is also fighting to attain a good market share. Competitions are critical in business, and if JGJ Inc. wishes to become the best in the market, it has to have the best strategies in place as its competitors have.
Projections for the Market
The projected overall market growth rate for the next five years
Currently, the market for biodegradable plastic bags is valued at $4.7 billion. The anticipated market value for the next five years is $12.06 billion, registering a growth rate of 17.04% during the period 2020-2025. The expected positive growth in the market is attributable to the rising environmental concerns, which drives the use of biodegradable plastic packaging, and stringent regulations by different federal agencies whose aim is to minimize plastic waste and promote the usage of biodegradable plastic packaging, thus boosting its demand in the market (Ciriminna & Pagliaro, 2020). Food packaging and compostable bags are increasingly using biodegradable products to satisfy the shift in governmental regulations and consumer preference towards eco-friendly products.
Projected changes to overall pricing in the market for the next five years
Based on the market report on biodegradable plastic bags, it is projected that the overall pricing will increase by at least 35% for the next five years. The increase in the overall pricing results from the anticipated costly materials for making biodegradable polymers compared to thermoplastic materials. Certain kinds of polymers like PET are price-competitive, and due to their scarcity, they will be very costly as projected. Due to the expected expansion of the market size coupled with rising demand for biodegradable plastic bags, the price will likely increase as projected. Due to the competitive landscape, firms are also leveraging their application of eco-friendly and sophisticated technologies, which are costly, to produce plastic packaging products from readily existing natural resources.
Recommended Position for JGJ Inc.
Recommend position and points of differentiation for the JGJ Inc. offering
Because of the biodegradable plastic industry’s competitive nature, JGJ Inc. should consider employing different strategies that will help them position the product in the customers’ minds. Customers may need the company’s product but fail to have a clear understanding of the same. Therefore, it means that the company ought to have a good plan that will enable customers to make good decisions when buying. Different marketers use the positioning strategy in identifying the other place that they want a product or service to be held in the minds of the customers and target market segment.
On the other hand, differentiation means that companies can use different processes to make a product or a service stand out from the rest in the market, and I would recommend this for JFJ Inc. The penetrative approach will enable the company to gain quick access to market share, create brand loyalty, and generate significant demand by setting an appropriate price to get more customers. The penetrative strategy is suitable as the market has little product differentiation while the need is price-elastic. Product differentiation can be done through rigorous advertising and robust sales other mechanisms to establish the superiority of goods over competitors’ competitors. The company should convince consumers that its products will provide more advantages and superior performance. The company’s recommended place or distribution strategy includes the use of physical and online stores and the use of wholesalers and retailers to reach the customers.
Buyer profile of the target customer
The key target customers for the biodegradable plastic bags include food processing and packaging firms, hotels, groceries, other eateries, and individual shoppers. Consumers from emerging economies have rising incomes and are experiencing increased growth in agriculture, horticulture, and textile industries, thus driving the demand for biodegradable plastic bags (Ivonkovic et al., 2017). Their dependence on biodegradable plastic packaging leads to increased demand.
Product development
The development of biodegradable plastic bags by JGJ Inc. as a product development process presents different specifications, characteristics, and features that differentiate it from its competitors. To start with, product development is a complete process that aims at developing a new product or improving the existing one for customers. It is the idea of bringing new products into the market to solve individuals’ problems in society and meet their needs. Product development involves different stages that include ideation, research, planning, and prototyping, sourcing, and costing (Cooper, 2019). This proposal will discuss two aspects of the market analysis as far as JGJ Inc. is concerned, which includes the key differentiating characteristics of the offering and the study of the market demand.
Critical differentiating characteristics of the offering
Creating environmentally friendly products is the objective of every organization. In this case, biodegradable bags are preferred as they are eco-friendly and able to break down quickly to harmless materials than the other standard and traditional plastic (Dilkes-Hoffman et al., 2019). Some of the characteristics that can be offered from this product and enable JGJ company to be different from competitors include the ability of these plastics to be degraded by microorganisms present in the environment after entering the microbial food chain. The product can also have information on them that advocates preserving the environment and creating awareness among the users. This refers to having branded bags with information about product recycling and reusing. Besides, allowing your product to market itself is the best strategy to achieve a competitive advantage in the market. For JGJ, creating the right quality products that are durable and presentable to customers without putting much attention into profit maximization would be one of the best strategies to remain competitive. Additionally, having a mixture of pricing strategies like competitive pricing whereby the company chooses to reduce prices while prioritizing the product quality can be another differentiating characteristic that will help it thrive in the market. It would also be good for the company to maintain the culture of creating products that are environmentally friendly in its production as this will help in building a name and a brand that is known for green production of production hence remaining competitive in its field (Ciriminna & Pagliaro, 2020).
Some of the characteristics of microorganism degradation include the ability for biodegradable plastic bags to decay quickly and decompose, after which they will benefit trees since they will produce nutrients. Having biodegradable bags made will provide an eco-friendly environment, as mentioned, and protect nature from pollution. In branding, some of the essential factors that the companies should not include consistency, uniqueness, clarity, personality, and memorability. By consistency means the organization must ensure that branding is consistent and that there is no reluctance in the process. Being unique is one of the best ways a company can compete in the market and achieve more than others. Besides, being clear on the goals that ought to be achieved through branding will also be a critical part of the organization.
Quality is an essential aspect as it will help in attracting more customers into the business. It is essential to ensure that the production process is efficient and that quality should be prioritized over profit maximization. As far as the bag size requirement by the market is concerned, I would advise JGJ Company to produce those that range from small to medium and then large with different prices. This is important for customers since they will choose other packaging materials that will fit their needs. Having different kinds of packaging bags for various purposes is also essential. For instance, it would be vital to have packaging bags for foodstuffs, garbage, and other commodities. Introducing their products to the retail market would be a great idea rather than the industry. This will help understand where there is a need for improvement and how this can be improved. My peer’s comments about edible plastic and multi-purpose bags are also a good idea incorporated by the Company in the production process. I would agree with such a strategy since it provides a mutual benefit to both the company in protecting the environment and the consuming organisms.
Analysis of demand in the market
It is essential to understand the patterns and how the best demand can be managed to demand analysis. The market fluctuates over time, and this is an essential factor for JGJ Inc. to consider. The company can test and know how fast the product will be moving in the market and find the best ways to supply them. The quantity of these biodegradable plastic products in the market is yet to reach a point whereby customers have a wide variety of choices. Therefore, this means that the company has the task of producing more products to meet customer needs. Besides, plastic bags are widely used, and this means the demand is ever-growing. The quantity currently selling in the market is yet to meet the required customer needs bearing in mind that many countries have not embraced the concept of green production. This translates to the condition of having market research and finds out countries that can have biodegradable plastics being shipped to. This research thus will help in understanding the demand patterns and provide room for increased production. With a good strategy in place, JGJ’s can achieve market growth, which is recommendable and helps solve customer requirements.
Internal and External Marketing Environments
Analysis of Key External Factors in the Market
Porter’s five forces model
Porter’s five forces involve a model that determines and analyzes five various competitive points that align every firm and assess its strengths and weaknesses. The model is used in determining the level of profitability of a market. Porter’s five forces model is used to analyze the nature of the biodegradable plastic bag industry using fives forces or factors such as competitive rivalry, threats of new entrants, the threat of substitution, supplier power, and buyer power as follows:
Competitive Rivalry
First, there is a limited number of firms in this industry, with the major players being BASF, Biome Technologies, and Mondi. The firms in this industry have limited product differentiation except for Biome Technologies and BASF, which are offering bioplastic solutions to growing coffee cup waste. Market growth is relatively high in this industry, thus making firms not strive or fight for market share. The phenomenon is taking place due to the state of the economy and the governments and state agencies’ restrictive rules that support industrial growth (Ciriminna & Pagliaro, 2020). There are low fixed costs and high switching costs, thus easing rivalry. Given these factors, it is evident that the industry is not highly competitive.
Threats of new entry
In the biodegradable plastic industry, there are severe challenges to market entry. Factors limiting this include the choice of products to be used in manufacturing the bags poses a great challenge, countries’ bureaucratic nature to put up the firms, the industry is highly innovative, and economies of scale must enter the market (Dobbs, 2014).
Threat of substitution
Usually, the price elasticity of a product is influenced by substitute products. Due to a limited number of close substitutes in this industry since the governments warn and refined the plastic producing firms, there is a minor threat of substitution (Ivonkovic et al., 2017). In the packaging industry, it is either one uses plastic or biodegradable plastic bags for shopping. Currently, there is no cost of changing to other substitutes since they are unavailable.
Supplier power
Since the raw materials to make unique products in this industry are limited, the number of suppliers is small. However small is the number, they strive to offer exceptional products, and the changing cost of suppliers is high in this case.
Buyer Power
In this industry, the number of customers is significant. The customers are independent; thus, the firm can quickly charge different prices based on production or other factors to increase profitability. The differences based on market segments are not so substantial.
Other macroenvironmental external factors
Other macroenvironmental external factors that may potentially affect JGJ Inc. include:
Political factors include different tax levels in various nations, various laws, pressure groups, and government agencies that may influence or restrict the firm from carrying out its operations. Most countries have laws covering issues like product safety regulations, environmental conservation, and competitive pricing (Markowicz et al., 2019).
Economic factors: The firm should be aware of economic factors such as market boom, different inflation rates, varying foreign exchange rates, and high unemployment rates in various areas.
Social factors: The demographics of nations vary in terms of their economic status and other factors. The firm should consider using media trends, culture, and other creative means to attract and familiarize people.
Technology: The firm should consider using creative technologies to prosper in this competitive industry and reach out to customers through media outlets like social media platforms, smartphones, tablets, and other emerging technologies.
Environmental: The firm should be aware of ecological conservation and protection regulations against natural disasters in the area.
Legal: The firm should be conversant with and adhere to existing international laws, labor laws, and national laws to survive in foreign markets.
Required Internal Resources and Competencies to Compete in the Market
The internal resources and competencies for competition in this market include an effective technological network that will enable the firm to be innovative. An excellent infrastructure to ease transportation and distribution of products to consumers, effective sales, operations, and logistics personnel who will steer sales, ensure efficiency and inventory management, and a stable financial environment to ensure smooth production, distribution, and clearance of other bills. The firm also needs a good reputation to attract and maintain customers and reliable and consistent production and distribution of products.
Required Licenses, Patents, and Rulings or Legal Requirements to Compete in the Market
The primary business operation license from the city of operation will be required, and it will illustrate the type of business operation and the products the firm will offer. The business must be issued with a federal employer identification number before engaging in the industry (Egbunike & Okerekeoti, 2018). Other requirements include a fictitious business name permit; health department permit as the firm will be producing food packaging materials, sales tax license, fire department permits as the firm will be attracting a large number of consumers.
Pricing, Promotion, And Distribution
Pricing, promotion, and distribution are essential factors of marketing that different organizations use to help in running their activities. Pricing, promotion, and distribution strategies are necessary since they have contributed to the company’s growth and development and have made the organization compete in the market. Therefore, this proposal analyzes the current models of pricing, promotional models, and distribution channels models in the market will also provide recommendations on the strategy to be used as far as pricing, promotion, and distribution are concerned to JGJ.
Analysis of the Current Pricing Model in the Environment
A Pricing model refers to a method used to determine the prices of a particular product or service. A good pricing model helps the producer achieve the best price that is affordable for potential customers. In this case, JGJ should look into several factors before coming up with a pricing model. Such factors include the size of the market, competitive landscape, and market demand. Various models available in the market for the company include fixed model, cost-plus, and competitive-based. A fixed Pricing model available in the market entails having a set price for all customers. This means that if goods are made available to the retailers, the retailer fixes one price for the item, and customers purchase it without bargaining. On the other hand, the cost-Plus Pricing Model analyses the total cost of producing a product compared to the value placed on the product for purchase. The price of a product should be higher than the cost of production to cover the expenses but not so high that the customers cannot afford it. For example, if the price of producing one biodegradable plastic bag was $3.00, then the cost for purchase should be slightly higher than the $3.00. A competitive-based model involves coming up with a price for a particular product after comparing the cost with other market prices. If your competitors charge $5.00 for a specific price, your price should be slightly below to gain a competitive advantage over other companies in the same industry. This forms some of the strategies that JGJ can implement to help market its products to the customers. Different companies use various pricing strategies that have enabled them to achieve a competitive advantage in the market. The company can therefore consider using some of the listed models above.
Analysis of Current Promotional Models in the Market
Product promotion is essential for any given organization as it increases demand for that specific service or product. For JGJ Inc., there are various promotional models available in the market that it can use to help reach a considerable number of customers. Some of these models include advertising, direct marketing, personal selling, public relations activities, and sales promotions. Advertising can involve the use of various channels that will ensure that more customers are reached. Such channels will include online platforms, use of mass media, and even the use of word mouth Advertising on Facebook, Instagram, and other platforms can be ideal places to help find more customers as well as advising them on the need to use biodegradable plastic bags with the main reason of protecting the environment. The public relations model can also promote a product or service through PR events, news releases, and media introductions. The personal selling model involves using salespeople, showrooms, tradeshows, and exhibitions to promote a particular product or service. The direct marketing model consists of using the internet, sales on display, company websites, emails, and blogging.
Analysis of the Current Distribution Models in the Market
When it comes to the distribution process, the company can use several models to help the product reach the final customer. For instance, distribution channels refer to how products flow from the producer to the consumer. (Karash & Khomenko, 2019). Various distribution models, such as the direct/exclusive distribution model, involve delivering products and services directly to the consumers by using your salespersons. JGJ can choose to provide their products to the consumers without selling them to retailers and wholesalers such as Wal-Mart. The use of an interactive distribution model, which involves the three intermediaries: the producer, wholesaler, and retailer, is also essential in the whole process of distribution. Goods can flow to the wholesalers from the company who buy them in large quantities and finally to the retailers who buy them in small potions then finally to the consumers.
Additionally, using a selective distribution model can also be effective for the company. This involves using few levels like selling your products to the retailer who sells them to the customers. This method is essential as it helps reduce extra costs that the wholesalers would have added.
Recommended Pricing Strategy for JGJ Inc.
I would recommend a competitive based pricing model to be used by JGJ Inc. to gain a competitive advantage over its competitors such as Albertsons Company, Kroger Company, and Lift Hero Company. When you come up with a price according to prices in the market, it enables you to attract numerous customers if your prices are affordable. Customers compare prices available in the market and settle on the price that is more affordable to them.
Recommended Promotional Strategy for JGJ Inc.
I would recommend using websites as a method of promoting a particular product or service in JGJ. The use of the internet has grown, and so many people browse through the internet daily, making it easier to access a particular company website. It is not costly to set up a website hence saving on costs. It is also readily available since one can access the internet at any time. Facebook is one of the platforms that businesses can use to reach a broader market through running promotions. Also, having YouTube channels that explain more about the company can help as far as promotions are concerned. The use of Instagram is also essential in building a broader customer base that will improve sales and help the company achieve a competitive advantage.
Recommended Distribution Strategy for JGJ Inc.
I would recommend a direct distribution method to be used by JGJ to facilitate products from the producer to the consumers. This model saves time used in delivering goods to the consumers since goods are delivered directly to those in need of them. It also cuts extra costs that will be added by either the retailer or the wholesaler. JGJ needs to assess different international shipping companies and find out which one suits them best and how its products will reach the market within a short period. It thus needs to understand the market environment in different parts of the world.
In conclusion, the success of the marketing of any given company depends on the pricing, promotion, and distribution strategy adopted. In this case, JGJ needs to analyze and weigh between several factors that will help develop the best plan to be implemented. The company also needs to do a market assessment to help it keep up with the changes in the market.
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