p.p1 soft drinks, hopefully leading to an increase in

p.p1 {margin: 0.0px 0.0px 0.0px 0.0px; font: 12.0px ‘Times New Roman’; color: #000000; -webkit-text-stroke: #000000} p.p2 {margin: 0.0px 0.0px 0.0px 0.0px; font: 12.0px ‘Times New Roman’; color: #000000; -webkit-text-stroke: #000000; min-height: 15.0px} span.s1 {font-kerning: none}

Vithit is a growing popular Irish owned vitamin drinks company that is currently operating in 16 markets worldwide. To analyse this industry in the most accurate, precise way, we will be adopting a PESTEL analysis and using Porter’s 5 forces framework to assess the forces driving competition in the industry. Finally, we will then be looking at Vithit’s strategy of Internationalisation. 

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

Using the PESTEL analysis, I will first be looking at the political factors.These factors, indicate the level of degree in which a government intervenes in the industry. This can include — government policy, political stability or instability in international markets, foreign trade policy, tax policy, trade restrictions, etc. In the sports drinks industry, depending on different regulations in varies countries, they define which ingredients can and cannot be used in the product, how the product is produced, where it is produced, as well as other laws concerned with the quality and health effects of the product. There are potential fines set by governments if companies do not meet a standard of laws regarding manufacturing, production, and distribution. As Lavin explained, “Each market is different and they should be treated differently”. Vithit had to comply with Nordic countries regulations as they differed from the EU. For example, Nordic countries have lower vitamin RDAs than the EU, so the product was reformulated there to contain fewer vitamins. Vithit also repackaged their drinks in South Africa into slim cans in order to appeal to local preferences. In relation to tax policy, different countries impose varies taxes depending on what you are selling. For example, in 2018 the implementation of the sugar tax in Ireland and the UK will commence. This will result in a price rise of sugary soft drinks, hopefully leading to an increase in the sales of health drinks including Vithit. 

Economic factors are important in determining how an organisation does business and also to indicate whether they are making a profit or a loss. For example, factors could include — economic growth, interest rates, exchange rates, inflation, and the disposable income of both consumers and businesses. When Lavin first founded Vithit in 2000, economic growth for this industry was very slow, as the popular health trends that exist today, were slow to arrive in Ireland at the start of the millennium. 
“Generally, trends succeed in the US before subsequently spreading to the UK, Ireland and then Europe” During the Celtic Tiger era many Irish owned companies in this industry faced closure including Vithit which was originally called Vitz at the time. This lead to a complete overhaul the company that would be ready for when the health conscious trends landed in Ireland. If interest rates are high, consumers will not be able to take out loans and will, therefore, have a less disposable income to spend on high-quality products like Vithit, and will, therefore, opt to stick to cheap products that are high in calories. Businesses in the industry will also be forced to charge higher prices if interest rates are high, leading to low sales and possible liquidation. If interest rates are low, consumers can afford to take out loans and will, therefore, have a more disposable income to pay for high-quality healthy drinks in the sports drinks industry. Businesses will also be able to afford to take out loans leading to Low affordable prices in this industry. In terms of exchange rates, if the euro is higher than other currencies, the cost of exports for these countries will be very expensive, leading to a decline in international sales for the sports drinks industry. Whereas if the euro is lower than other currencies, exports to these countries will be cheaper for the international consumers leading to an increase in international sales in the industry. If inflation is high, the cost of drinks in the sports drinks industry will become very expensive for consumers to buy leading to a decline in sales. 

Social factors are the areas that involve the shared belief and attitudes of the population. These factors include — population growth, age distribution, health consciousness, career attitudes and so on. These factors are of particular interest as they have a direct effect on how marketers understand customers and what drives them. In the sports drinks industry, depending on population growth, sales can be very high as today’s society tends to copy what other people do. In America, their high population growth has led more and more companies to become more health conscious as health trends are on the rise. I, therefore, think that this market is very important for international sellers including Vithit. In countries where population growth is small, sellers like Vithit may avoid these countries to avoid making losses. Age distribution is very important in this industry as many sports drinkers tend to be young persons. However according to Vithit, they do not focus their product on a specific target market, they focus their product on all age groups “The company did not have a specific target market”. Consumers in highly paid professions tend to be more health conscious than unemployed consumers as they try to keep their health up in order to continue their job. Unemployed people may have a more negative outlook on life and therefore will not care about their diet and will obviously spend their money on cheaper non-nutritional products like Pepsi. The older generation is also more health conscious and tends to consider nutritional factors between products. This greatly impacts the sports drinks industry. Finally, how ethical a company is and the social responsibility they undertake also affects the image of a brand. Sports drinks companies that are seen as ‘greener’ are likely to increase sales with a certain niche or consumer.

Technological factors are very important in the sports drinks industry as they affect marketing and management in terms of new ways of producing goods and services, new ways of distributing goods and services and new ways of communicating with target markets. New technology advancement in manufacturing and quality improvement concepts are improving bottling operations efficiency. For example, Vithit has outsourced their production in six different places around the world. But their main 500 ml bottle is produced in the UK. “It’s an aseptic fill which is cold fill, and it’s very technology dependent”. Many other companies in the sports drinks industry are now following this technologic method also as this type of cold filling is recommended for natural, healthy and organic beverages. Many companies in this industry use delivery vans to deliver the products to stores around the country, however, with the improvement in technology, distribution of goods are now faster and more accurate than ever before. Technology has resulted in a more efficient use of space in warehouses, as well as an improvement and increased accurate delivery. All the data and tasks can be easily managed from a central computer, while computer-controlled conveyors are also used for loading goods onto the right delivery vehicle to ensure on-time delivery to stores. Communicating with the target market has never been easier with the use of social media. Most companies in the sports drinks industry use social media to advertise their products and to keep in touch with consumers about updates and improvements on products. Celebrity endorsement is also very effective on social media platforms like Facebook and Instagram as this will entice users to try out the product. “Majority like the product and often purchase the product and put up pictures such as the Kearney brothers and Rosanna”

Environmental factors have become important due to the increasing scarcity of raw materials, pollution targets, and commencing business as an ethical and sustainable company. Vithit is affected by water accessibility. Water is necessary for sports drinks development. But should something happen, like climate change, the company may face a big dilemma? Sports drinks have to comply with environmental laws as they manufacture their products. If anything is amiss, it can affect how they distribute products — or stop production completely. Companies must produce recyclable bottles and state on their bottles the need for proper recycling of the bottle after use to prevent pollution to the environment. Manufacturing should also be carried out using renewable energy like wind and solar power. The industry must be ethically responsible and sustainably focused for future generations. 

Legal factors also need to be followed in the sports drinks industry. They include advertising standards, consumer rights, product labelling and product safety. It is important that companies need to know what is and what is not legal in order to trade successfully. If an organisation trades globally this becomes a very tricky area to get right as each country has its own set of rules and regulations. According to the Advertising standards authority for Ireland “All marketing communications should be legal, decent, honest and truthful” “All marketing communications should be prepared with a sense of responsibility both to the consumer and to society”,  And “All marketing communications should conform to the principles of fair competition as generally accepted in business”
All companies must comply with advertising standards in all countries in which they trade. In relation to consumer rights, under the consumer protection Act and The sales of goods and supply of services Act, the good must be fit for purpose, as described, of merchantable quality and any advertising used must not be misleading. Information on labels allows you to make an informed choice about what you are intending to buy. Information may include ‘best before’ or ‘use by’ date, storage instructions, ingredients, country of origin, etc. There are rules in Ireland and the EU regarding labels on products that the sports drinks industry must oblige. Finally, to protect consumers, “Health and safety, laws exist that ensure producers or importers of goods must only place safe products on the market in the European Union. S.I. no 199 of 2004 European Communities (General Product Safety) Regulations prohibits the placing of unsafe goods on the Irish market. This means that any product made available to buy, must not present any undue risk to the consumer under it.”

Using Porter’s 5 forces analysis I will now look to describe the competitive environment of the market at 5 levels: the bargaining power of suppliers and customers, the competitive rivalry, the threat of new entrants and the threat of substitute products. The bargaining power of suppliers in the sports drinks industry is very low due to the number of suppliers operating in this market supplying ingredients, bottles, and cans and packaging for the products. Suppliers are not in short supply, so it is quite easy for a company to switch suppliers when economic circumstances change.  As a result, this takes away much of the suppliers’ bargaining power. It is fairly easy to become a supplier within the industry as entry barriers are low. Companies will choose the suppliers that carry out the job most efficiently and at the best price. If another supplier does the same job but at a cheaper price, the firm can switch without much hesitation.

Customers have high bargaining power in the sports drinks industry due to low switching costs. Consumers are becoming increasingly price sensitive and can easily switch from one brand to another if the price of one brand becomes more expensive than another. The increase of similar hybrid drinks to vithit is proving to make customers bargaining power even stronger in this industry as more and more consumers are becoming more health conscious and are continuing to move away from traditional soft drinks like coca cola. For example, in the united states, customers can easily switch from Bai to Vithit and vice versa. 

Competitive rivalry in the sports drinks industry is moderate due to the fact that healthy vitamin drinks like vithit are relatively new to the market and are only seeing a surge in popularity in the last few years unlike the many decades of popularity from traditional soft drinks (coca cola, Pepsi). Therefore it can be quite realistic to enter this market once you have enough capital to endure the costs of advertising, production, warehouse, transport and labour costs, if not, this is a very strong entry barrier. Many consumers are willing to try new brands that may enter this market due to low switching costs. According to O’Rourke, Vithit’s competitors are “Anything that is low calorie and up and coming”. Competition is intensified in this industry due to different brands trying to capture as much brand loyalty as possible by adopting effective advertising and sales promotions and celebrity endorsements especially on social media where it is quick and easy to reach out to the target market. Sponsorships are also very useful proved by vithit who are growing their brand awareness through sponsoring MasterChef on TV3. All of these marketing techniques may prove a threat to other entrepreneurs trying to set up their own hybrid drink company, leading to an increase in the competitive rivalry in this industry. 

The threat of new entrants to the sports drinks industry is weak due to high fixed costs which are seen as a strong barrier to entry. In order to launch a competitive drink in this industry, one must have strong business contacts both nationally and internationally as seen by the co-founder of vithit, O’Rourke. It is also very difficult for new entrants to get shelf space in supermarkets, gas stations and canteens. Existing firms have cost and performance advantage in this industry which is seen as a big threat to new entrants. This is because existing firms have already acquired large capital expenditures and have economies of scale, which is needed in order to compete in this industry. They also have direct supply and distribution channels setup which a new entrant would find difficult to access, as the main brands already have control. A newcomer must get FDA approval to sell their product, have licenses to produce and distribute internationally, and insurance to cover accidents, faulty products or potential lawsuits. A new entrant in this industry can also expect retaliation from current brands. 

Finally, the threat of substitutes in this industry is moderate. Switching costs are low for consumers which may result in a chance that they may explore and try out a more attractive substitute. In the absence of important factors such as brand loyalty or differentiation, the choice to try out another substitute like coconut water, for example, will not be difficult for the consumer. However taste and quality may not be as good as a high-quality product like vithit or Bai. Changes in consumer preferences have changed the competitive power of substitutes. Many substitutes for healthy sports drinks are likely to contain a high percentage of sugar and calories which does not satisfy the growing health-conscious market.

Vithit’s strategy of internationalisation, in my opinion, is a very concentrated, well thought out approach. Lavin knew that in order to gain access to foreign markets, he would need to promote his product in the UK first to gain as much market exposure as possible. This proved to be a very effective strategy. “if you get a good foothold in the UK, a lot of other countries around Europe take their lead from that”. Lavin concentrated much of his efforts on large retailers to persuade them to sell their product. This proved successful in major outlets including Tesco express, boots, Sainsbury’s and Superdrug fridges, soon achieving a position of a “leading health’s drink brand in the UK”. Lavin and O’Rourke also devised a targeted strategy for European expansion, although slow, it resulted in a success by selecting countries where health trends are seen to emerge next such as South Africa, UAE, and Bahrain. “we’re growing carefully, not just firing it at every country and seeing what lands”. In order to ensure international success, vithit established once again strong distribution networks in Spain and South Africa and readjusted their products and marketing campaigns to tailor different preferences and regulations in varies countries. As a result of targeting countries with “young mindsets” and avoiding countries like France and Germany that have different preferences that do not match with what vithit offers, the company expanded to many more European countries including Spain, Norway, Finland, Sweden, Denmark, Portugal, and Iceland. 
After conquering European success, Vithit then targeted America using a conservative approach, by treating each state like a country. Again establishing strong distribution networks, Lavin and O’Rourke met with the former vice president of Pepsi Co, who is a nationwide distributor of soft drinks, soon then launching their product in Virginia on a test trial basis. This strategy ensures that not a whole lot of money can be lost if the product fails in the US rather than risking everything by launching the product on a large scale basis in several states. Fortunately, this strategy proved successful by receiving a positive market response and receiving valuable information about the different income levels in their market, leading to their product now operating in six states on the East coast.

To conclude, vithits strategy of internationalization and their foothold in the domestic and European markets is continuing to be successful and their concentrated approach to the target market is very effective as well as profitable despite economic failure at the very beginning. From analysing the sports drinks industry using a PESTEL analysis and Porter’s 5 forces framework, it is evident that this will always be a growing, profitable market with new entrants constantly trying to compete with already successful brands leading to a continuation of high buyer bargaining power and an ongoing vigorous competitive environment.