Page 15 - CIMA MCS Workbook November 2018 - Day 1 Suggested Solutions

SUGGESTED SOLUTIONS

the purchasing power of the customers falling during economic downturns on which
the industry is heavily dependent. Consumers of soft drinks spent their money frugally
over the years following the 2008 recession. Cost of raw materials can also be a factor if
the economy for a material is weak. Sugar and carbonated water make up most of the
content, but there are a lot of preservatives and flavouring such as ascorbic acid, gums,
pectin, saponin, aspartame, etc. Given the move away to sugar free drinks this could be
an increasingly complex issue.

 social influences will be a concern for GRAPPLE and will include social, cultural or
demographic factors. The industry is affected by changing socio cultural trends and
people’s preferences and GRAPPLE have to adapt to these forces. Age is the most
important characteristic when evaluating consumer choice. The older generation is
more health conscious and tends to consider nutritional factors between products (diet
or zero‐calorie options).The younger generation leans towards products that are fun,
new, and fashionable.

Celebrity endorsements, attractive commercials, and sweepstakes become more
important to the younger generation in their product decision. For example, about
one‐third of Americans are considered obese and studies have speculated a link
between soft drink consumption and obesity. Dieting has become a very marketable,
popular trend which forces the soft drink industry to create new products that meet
consumer preferences. In addition, social media outlets (i.e. Facebook, Twitter,
Instagram etc.) keep consumers directly connected to the brand. Firms are able to
obtain valuable information and suggestions from consumers about potential or
current new products, providing low advertising costs with global outreach. Age
distribution in the various populations is also an important factor that companies have
to keep in mind while targeting the consumers.

There is an inextricable link between changes in social habits, spend on products and
therefore profitability. This clearly results in the need for more detailed analysis to
forecast future sales and the resultant need to participate in the rise of “big data” to
predict shifts in consumer behaviour and customer preference.

 technological influences – technology and innovation have become important
determinants of market share in this industry. The more innovative the company, the
greater the potential effect on its market share. For example, automation and new
technological advancement in manufacturing and quality improvement concepts are
improving bottling operations efficiency. High product volume requires high levels of
automation in manufacturing. Technological advances increase the utility of employees
and capital, which increases productivity.

From a marketing perspective, technological advancement helps create new brands
and product lines to meet consumer preferences. Improved logistics help products
move through distribution channels more effectively. This keeps distribution costs
down while increasing sales information to consumers. High costs for new technology
can be an entry barrier to new competitors, demonstrating that technology is now one
of the most important factors affecting the sales and profitability of the industry.

Similarly the effect of social media provides huge growth in consumer awareness, brand
value/identity, promotions, and direct‐to‐consumer communication, both on
transference and storage of images on marketing is very relevant. Online forums are
growing in importance as consumers seek advice, reviews and price comparisons

KAPLAN PUBLISHING 65