Electronic commerce generally referred to as e-commerce is the focus of this report. Different standards and systems are employed by various companies to distinguish themselves from the rest placing them an edge higher by utilizing the power of e-commerce. Management, in the current competitive business world, must strategically position the company and ensure that all driving forces for business success are within reach.
Company of choice
Mars’ Master food is well known UK company that leads in the pet food retail industry with a presence in most parts of Europe.
This report reveals that Masterfood, commonly known as Mar, is generally considered as the largest online and offline pet food distributor and it has an annual turnover of about 1billion ponds in online trade of its products. Masterfood has currently dominated the offline as well as the online pet food market and looking for other areas of expansion.
It must be appreciated that Masterfood has taken into consideration the aspects of online trading and adding value into its line of operations with very keen interest in utilizing the internet technology.
Masterfood has a strategic view of making the company grow as well as maintaining its market share that has been improving with the sales having grown by 29.2% in 2006 for online sales alone.
Currently Masterfood is diversifying its operations and increasing its product range. Mars’ Master has a number of pet food brands including: Whiskas, pedigree, Kitekat, Cesar and Sheba.
A number of challenges face Masterfood even with the fact that they own a huge share in the market. These challenges can be summarized as;
- Competitors are always one step behind the market leader.
- With all the huge pet food giants that have online delivery services as well as offline retail stores, market has been packed with opportunity and hence need for the expansion in other areas.
- Masterfood knows if there is a market share left then there must be potential for growth and expansion.
- Online sales come with challenges in terms of reducing the huge expenses while making success.
Two issues are at the core of competencies in Masterfood. These include;
According to Kotler and Keller, the staff determines the competitiveness through the internal business, whereas the customers determine the external environment which is the profitability of the company (2009).
The market in which Masterfood operates according to the BBC is pet food market. The market is a very competitive one and Masterfood holds a considerable or disproportionate amount of power.
Figures according to the BBC in 2006 were convincing that Masterfood holds over a third of the market share and even doubles the amount Nestle Purina Pet care holds- a major competitor.
Mars’ Masterfood: 45%
Nestle Purina Pet Care 32%
Therefore it may be more accurate to say that the market structure is oligopoly thus a small number of large producers operating within the industry whereas a perfect competition market would mean the characterization as being price takers dependent upon supply and demand.
The fact that Mars’ Masterfood belongs to an oligopoly market, many decisions would mainly be influenced by the ones (decisions) other similar companies make and how they respond to Masterfood’s approaches and actions that include diversification into other product ranges, integration and segmentation with other retailers or companies operating a line of business that would positively affect Masterfood’s sales and price strategies. At Mars’ Masterfood products are segmented by reference to:
- Life cycle
- Added convenience
- Lower maintenance
- Health claims
Value added techniques
Masterfood’s ultimate goal is to reduce the costs for the customers hence the deployment of a low-cost price strategy basing the prices on the competitive nature of the market.
The most value that is being created by Masterfood is the use of Internet to encourage economies of scale as well as reach many consumers. The value created by Masterfood non-food online selling to is mainly benefiting in terms of convenience.
- Online shopping has come a long way to save time and energy as well as money for Masterfood’s customers.
- Masterfood offers products on the internet and thus cuts transaction costs, labour costs and hence increasing the efficiency of the market.
- Masterfood is known for the low pricing of its products and therefore using the e-commerce option, the prices are further cut rather are cheaper and this creates more value for the customer.
- Customers can be able to select what products they want then use any of the three ways in ordering for the product: online via the website, by phone or in the selected stores at the new Masterfood Direct.
- Delivery of goods to the client’s destination. This has been promoted by the use of the more than 1,000 vans owned by Masterfood and about 9,000 pickers.
Technological drivers of change at Masterfood has been due to
- the internet penetration in the UK and hence making clear statements for new and emerging online shopping markets
- introduced the online trading portal Masterfood and it has captured the possible online pet food market share though even reaching for more was not the best approach knowing that the competitor is always a step behind.
- convenience is of increasing importance to the customer and hence offering new ways to order and a wide range of or products will ensure the popularity with the customers
- Masterfood uses new technologies in E-commerce and currently has introduced an in-store.
The scheme of the loyalty is also perceived as another form of value addition to customers. The card does not create loyalty, it can be a medium to produce the Masterfood points which when accumulated, can be exchanged for goods/money within Masterfood.
E-commerce at Masterfood
Briefly in the introductory statements, the report eludes to the fact that e-commerce involves much more that just selling and buying of goods and services through the use of the internet. Four types of information technology converge to create the discipline of e-commerce. These include:
- messaging electronically in the form of fax and e-mail;
- sharing a corporate digital library to promote collaboration work;
- electronic document interchange using EDI and electronic funds transfer (EFT); and
- lastly electronic publishing used as a marketing, advertising, sales and computer support tool
Needful to say at this point that electronic commerce involves much more than is perceived the backend processes that are carried out within an organization since the information and data got by the recipients must have been thoroughly worked upon and crafted to ensure that the end users is satisfied and willing to buy the product.
Because of the broadness of e-commerce, the various forms are analytically considered in this report. The two commonly known forms of e-commerce include;
- Business-to-Customer e-commerce
- Business-to-Business e-commerce
Firstly, with the understanding that e-commerce focuses on trading and transactional relationship between an organization’s website and an end user. This form is commonly referred to as business-to-consumer (B2C) e-commerce.
The online marketing and advertising strategy at Masterfood included email marketing and direct mail marketing to provide special offers and promotions to customers.
The model of Mars’ Masterfood in Electronic commerce is identified by a 6 step lifestyle and further dividend into target communications:
- Logged on
- Logged off
These can be seen as concepts of web 2.0 and social networking features embedded within the online stores at Masterfood. Through making web-shopping easier, Masterfood has invested in IT that ensures customers can easily and quickly access items they frequently buy, delivering an easy and enjoyable online shopping experience.
Using automated event-triggered messaging created to encourage continued purchases, Masterfood have a touch strategy for follow-up communications triggered after the very initial event intended to achieve an objective – convert visitors to customers then to regular purchases.
Components of Web 2.0 and social network
Masterfood has developed an e-commerce site that has the following features of Web 2.0
- Availability of fresh useful data being the core, customer have an update list for the ‘My Favourites’ hence can quickly and easily add their items to the cart.
- The back-end of the platform uses SQL database allowing the site management team follow up on customers order, requests and delivery of orders since manipulation by a third party exists
- Allows interactive participation with the customers
- Giving the customers chance to air views using comments or feedback and online surveys.
Method of analysis
The method used to analyze Masterfood generally will involve a closer look at a number of issues of management and operation at Masterfood. These will focus:
Position in the supply chain
Masterfood ensured that it did not change its supply chain due to its new strategy, but rather expand its capacity and workforce. The company has had online channel for food, hence it has not been difficult to extend this line and offer non-food products, such as pet care clothing and health.
Masterfood has defined customer needs and expanded the range of products it offers online hence fulfilling the needs. The expansion of the product line has therefore improved the existing supply chain without making drastic changes according to Gediminas (2007).
The position held by Masterfood presently as the largest known pet Food Company in the UK, having begun by pet food to pet clothing, has largely been encouraged do to the competitive advantage they have over the rest of pet food companies.
Masterfood has valued a cost leadership strategy with an objective of lowering costs of production in the line of business. If the achieved price of sale can at least equal the average for the market, then the lowest-cost producer will basically enjoy the best profits.
According to the figures provided earlier in the report with Masterfood holding about 45% market share in the pet food industry, this is a convincing amount that the development of internet and technologically driven strategies could be a major boost in the company’s sales.
The five forces of analysis in Michael Porters view can be used to complement techniques like SWOT analysis. At first the Degree of Rivalry being emboldened is the central force. Intensity of rivalry helps to determine the extent value created by a company will be dissipated through head on competition. Masterfood has competitors who are basically rivals hence the existence of Threat of substitutes in terms of products and the range of offerings. This will further drive prices down.
Power of Buyers also in Masterfood’s case has acted to force prices down for instance Masterfood cannot offer too expensive wet or dry pet food such as Pedigree or Whiskas and since due to buyer power, customers can move to its competitor Nestle Purina to purchase.
Supplier Power is wielded by the demand suppliers make that retailers pay a specific price for their pet food. If Masterfood cannot obey this then they do not get supply to sell. Since Masterfood is large it can dictate the prices to pay the supplier.
Barrier to Entry a force considered contributing to Masterfood’s leadership since it holds large market share and low competitive prices within an oligopoly; hence difficulty for entrants to find cheap, reliable suppliers after Masterfood has cornered the market with a specific product.
Analysis of Masterfood’s market leadership is mainly based on a few tricks and features of modeling its business including:
- The strategy developed by Masterfood is very similar to “winner-takes-all” approach. In UK’s pet food market according to Gediminas, one single company as Masterfood dominates in all areas- offline and online (2007).
- Capture of value through the introduction of loyalty programs, membership cards and special offers on the website
- The fact that people or basically customers know Masterfood as a low price online retailer, it captures value through pricing.
The following items were recommended to Masterfood and it US competitor Nestle Purina Pet care in the following categories:
Usage of Web 2.0 and social networks
Masterfood has deployed an all inclusive e-commerce platform, infrastructure and tools. These can be implemented to ensure that retailers build, host, deploy and can maintain a commerce enabled web presence. Meeting the demands of digital customers can be very complicated since they expect consistent services and easy access to information regardless of the retail channel. For instance purchases made by customers through the online application, requiring picking their products the same day.
Concerning social networking and web 2.0, Masterfood has managed to employ earlier mentioned features of web 2.0 but needs to add:
- Launch an interactive forum services where customers can communicate hence visibility of other’s interests
- Invitation of friends and colleagues to join for shopping purposes and experience the low prices
- Connecting a variety of businesses and customers hence establishing a network of credibility
Improvement of E- commerce
Mars’ Masterfood’s E-commerce Focus to Improve Customer Service
A number of features created by Masterfood to enhance online trading help customers see the whole purchasing process clearly. According to BBC, the premise of Masterfood’s business is selling directly to its customers by customers telling Masterfood exactly what they want enabling the provision of the goods directly.
The following ensure success of Masterfood’s online presence:
- Delivering an enterprise-class database engine that processes purchases at advanced speeds, hence customer orders are processed on time possibly the same day.
- Provision of power and capacity to handle huge numbers of clients doing concurrent purchases and without negative impact on the customers
- Enabling the developers to do more with the new management functions and tools.
- Ability by a customer to customize the product
- Track the progress of the orders through to delivery
- Customers can create and view their service records online. This includes product support, shipment and delivery dates.
- Each purchase comes with a service tag code that track the type of pet food bought and its feeding instructions
- The 24 hour customer service and fast response time helps Masterfood build strong customer relations crucial for Masterfood in understanding its customer needs
- Effective way of providing sales and support since costs saving measures are employed by passing on costs in the form of better offers to customers
- Efficient management of the website to enable customers have a convenient experience when shopping online building faith in Masterfood to complete a successful order and safeguard customer financial details
- Use of the website as a communication tool for news, press releases and general information to help customers, employees, prospective employees and the media find out more about the Company
Improving Business - to – Business B2B relationships
Masterfood has come a long way to develop its business-to-business links from an early Electronic data Interchange system to an online exchange, which gives suppliers access to point-of-sale data.
Masterfood as linked its suppliers of both white goods and casual pet care clothes to its online system using the EDI. IMS records that by 1995, Masterfood had encompassed about 1,300 suppliers and has since been improving the sophistication of the system to allow daily sales by group and item. With this suppliers can see a snapshot of what they were selling.
Feedback is important from the supplier and has been positive particularly due to
- General service level and fewer errors
- Speed and access to the applications
The system should give clear impression of what the retailers can do for the supplier.
- E-procurement: this refers to the development of the electronic means through which purchasing on a company to company basis can be undertaken. This is an area of opportunity since companies are able to synchronize transaction and increase profits by reducing face to face transactions (Baker, Croucher & Rushton, 2006).
Improving Business - to – Consumer B2C relationships
This relies heavily on the concepts lately developed in Technology that will aid customers to continue coming for more items. Customers would like an easy way to buy products online and a model that meets their satisfaction even if they could be IT novices. Hence the following can be implemented:
- E-fulfillment: this ensures that products purchased online are physically delivered effectively. The actual physical fulfillment of the order must be undertaken even if the internet does provide direct and instantaneous ink from the customer to the selling organization
- E-tailing: using the internet as a marketing channel. This offers businesses and customers alike a much more sophisticated approach than simply buying and selling. Companies can publish or provide details of products and services to the customers through the website hence saving time and money on printed materials.
- E-profiling consumers’ choices or preferences: allowing a customer to have what Masterfood calls ‘My favourites’. This offers shoppers a detailed list of all purchases they have made with an update after purchases ensuring that customers use the list to quickly add frequently pet food to their cart. In the process saving time.
Site evaluations: Mars’ Masterfood (Pedigree) Vs Nestle Purina
A customer visiting the two sites would be surprised to establish the following:
- Masterfood’s approach to e-commerce simulates the benefits of face-to-face contact between a buyer and the seller therefore ensuring that a staff can focus on the delivery of quality and nutritious products and provide excellent service to the customer.
- Both Masterfood and Nestle have ensured a full product range available with detailed information to help make a decision
- All customers are able to follow the simple and easy automatic instructions that pop up on the screen or on clicking the specific buttons and menus
- For Masterfood and Nestle Purina pet care the customer will be able to select the item of choice by a step by step guide to select the category of pet he/she has and the age.
- Both Masterfood and Nestle e-commerce provides a variety of options on how to pay, either directly online or via a customer service operator.
- Masterfood and Nestle through the site passes on the order automatically through the production department where the product is searched from the inventory and delivery logistics conveyed to the pickers to be able to deliver to a customer his/her pet food.
Top retail companies assessed by Westenberg and Bethlahmy for Cisco, state that, fundamental and innovative capabilities play a very big role in ensuring that these companies lead in the various industries and markets. Fundamental capabilities include research products, buy products and other basic services. These are a must have for pet food markets in meeting customer needs (2009).
The innovative capabilities include features such as personalization, loyalty programs, mobile and multichannel support and social shopping experience. The leader like Masterfood and Nestle spend significant effort on innovation.
Consumers are embracing technology faster according to Westenberg and Bethlahmy, and driving retailers to enhance their support of social shopping. This has been captured by the use of new and varied online tools to give and receive opinions about products and services. Some of these include blogs posts, reviews, post videos. Accelerated Web 2.0 capabilities is fueling a consumer-technology driven change of the retail market hence need to transform the online sales and marketing strategies by Masterfood and Nestle Purina.