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Marketing Planning Consultancy Report for NLV Solutions Limited

 

 

 

Executive Summary

Main Report

1.Marketing plan

NLV Solutions: Corporate background and possible issues

NLV Solutions is a private company based in Bedfordshire area focusing on vending machines in the UK market under brand VEND-O-MATIC. NLV Solutions is part of the SMITH&SONS Group, which is founded by pioneer in vending machine industry, engineer Martin Smith. As a company with modest success back in the 70s and 80s, SMITHS&SON has struggled in recent years. For example, in 2010, the company only secured a sale of £15 million, which is only about 1% of the total UK vendor machine market (it is estimated that the total number of vendor machine in UK market is up to half a million units).

 

Meanwhile, the vendor machine market in UK witnessed decline both in sale revenue and install base, and this decline will continue through year 2014. At the same time, economic downturn in both UK and Europe in whole may also impact NLV Solutions’ business (Lane, Philip R. ,2012). To be more specific, some possible issues NLV Solutions (and SMITHS&SON Group) are:

-Possible issue 1: Declining vendor machine market in UK

According to Automatic Vendor Machine market report 2010 (Key Note, 2010)), the number of vending machine in use in UK market is estimated to be 468,000 in 2009.The top three sectors of the automatic vendor machine are: Refreshment, cigarettes, and tobacco machines (as shown in Figure 1). And the forecast is that both the market value and increasing rate of vendor machines to be installed in coming years will decline in the UK market (Key Note, 2012). The below chart provided by Automatic Merchandiseralso clearly illustrates the decline of sales revenue of vendor machine market: The revenue figure has been ever decreasing since 2007 (the world financial crisis). Taking into consideration that NLV Solutions (and SMITHS&SON group as a whole) only makes up a little portion of the UK vendor machine market (i.e, around 1% of total UK vendor machine market), the challenge facing NLV Solutions is clearly that a ever smaller expected sales revenue in the traditional UK automatic vendor machine market.

 

The UK Market For Vending Machines, by sector, 1997-2006

Refreshemet

Unit:   000 machines

Note:  * = forecasts

Source:   MSI analysis and AVA and Zenith International data, trade and MSI estimates and forecasts

1999

1998

1997


 

Figure 1 The UK Market for vending machines, by sectors, 1997-2006

Figure 2 Industry revenue in Billion of vendor machine market (10 year review)

 

In addition, the ongoing economic downturn (in UK, Europe and even worldwide, for example, Figure 3 illustrates UK economic growth from 2008 to 2012) and continued public spending cuts is likely to impact sales through vending machines despite the low per capita customer spend (Zona, F. ,2012). This may further reduce people’s expectation for the future and willingness for spending.

Figure 3 UK Economic situation (Retrieved from www.economicshelp.org, Source: ONS)

 

Possible issue 2: Rigorous government regulation on food and cigarettes sector

The dominant user groups for vending machines in the UK are the 16-34 age band in the C1C2 socio-demographic category. Demographic changes, population contraction in the 15-24 age groups, health concerns, changing consumer preferences are all factors that may affect market segments.Recent legislative movement in food sector in UK shows government determinationto protect citizens’health, and this surelyimposesgreat challenge to vendor machine industry. Products vended through machines have witnessed significant changes with snack foods recording sluggish sales while healthy offerings and value added products registering sales growth. For example, government is introducing restrict in the availability of HFSS food (High in Fat, Sugars, and Salts) in places such as schools and colleges, which has lead to a significant impact to the sales of vendor machines providers (Jenkinet al. 2009). In addition, as a promotional channel to children and young people besides television commercials, vending machine is treated as an important channel that can influence children and young people’s taste and thus their healthy life style (French, Lin and Guthrie 2003). As a result, refreshment vending machines in schools or colleges are receiving more and more attention from the government and public. As a result, some vending machine companies are shitting to selling low fat snacks and fruits in their vending machine, but this may lead to an increase in the item price, which may further lead to a decrease in sales revenue as children in schools usually have not too much extra money in their pocket (Frenchet al. 2001). Similar things are also happening in cigarettessector. Access to cigarettes to young adults is considered to be an important factor for underage smoking from government point of view (Leatherdale et al. 2011). As a result, government is imposing more strict regulation on cigarette and tobacco sales (e.g., show-your-ID-card policy, increasing cigarette tax, and warning message printed in the product cover). The impact to vending machine industry is the increase in cigarettes price and more disgusting (but really useful) warnings on the cigarette package that stops young people to purchase cigarettes (Henriksen, L., 2012)). 

 

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