Friday, September 29, 2017

5C analysis

In order to profitably satisfy customer needs, the firm first must understand its external and internal situation, including the customer, the market environment, and the firm's own capabilities. Furthermore, it needs to forecast trends in the dynamic environment in which it operates. 5C Analysis covers the internal, the micro-environmental, and the macro-environmental (climate) situation. It is an extension of the 3 C analysis (company, customers, and competitors).
The process of analyzing includes following steps:

·         Consumer characteristics & trends
·         Resources of the Company
·         Current and potential Competitors
·         Current and potential Collaborators
·          The Context or environmental factors

Company analyzing includes investigation of several aspects of it core activates and features like Product line, Image in the market, Technology and experience, Culture and Resources: Finances, Employees, Production, Development and Design, Research, Facilities, Marketing/Advertising. To analyze a product line firstly you should look what kind of product the company sales its dimensions:  Core benefits that it provides, actual product (styling, packaging, brand name, quality) and augmented product Installation, Warranty, after sell service and so on. Additionally, it is helpful to implement SWOT analysis to understand company’s real condition.

Competitors are very important factors who affect business’s everyday activates. So, it is an essential part of any analysis of a company to examine its competitors.   Major spheres that analysis should examine are:
Who are competitors: Actual or potential, direct or indirect what kind of market share they have, where they position their products and what kind of strength or weaknesses they have.
This specific information is needed because each of them offers different challenges and needs a different attitude.

Consumers are the other important aspect of 5C analysis. The questions that should be discussed are:
·         Market size and growth
·         Market segments
·         Benefits that consumer is seeking: tangible and intangible.
·         Motivation behind purchase; value drivers, benefits vs. costs
·         Retail channel - where does the consumer actually purchase the product?
·         Trends - how consumer needs and preferences change over time

Climate (or context) is the last but not the least sphere of 5C analysis which discusses following aspects of macro environment
·         Political & regulatory environment - governmental policies and regulations that affect the market
·         Economic environment - business cycle, inflation rate, interest rates, and other macroeconomic issues
·         Social/Cultural environment - society's trends and fashions
·         Technological environment - new knowledge that makes possible new ways of satisfying needs; the impact of technology on the demand for existing products.

I will also provide an example of 5C analysis in Armenian tea market for you to be clearer about this tool.

Antaram was established in 1989, and it produces medical herbs and herbal teas. “Անթառամ (Antaram [an-tha-ram]) is translated from Armenian as Yellow Chaste Weed or Everlasting (Lat. Helichrysum). Antaram is a unique handmade herbal tea organization, where pharmacists supervise all processes. Numerous Armenian rural families are involved in a production. During years, they have created a wide range of herbal teas, which are made from collected 50 wild and seven cultivated species of herbs. The herbs are presented separately and in various herbal bouquets. Their slogan is “Enjoy and be healthy.”
Antaram considers all Armenian population above 5 years old as its potential customers 2.6 million people[1]. The company produces more than 100 types of herbs, but its most popular and bestseller products are “Niharik” and “Thyme”. People who consume “Niharik” are basically women from young to middle age. As people may use “Thyme” on many occasions such as flu, pain in throat, digestion problem and etc, its users are people who think that health issues are better to be solved with traditional methods by using herbs. The motivation behind the purchase is that it is really not expensive and it gives really good results. Once people use it, it is highly probable that they will recommend it to others. Consumers buy “Niharik” mostly from Yerevan City supermarkets, while “Thyme” and other herbs are bought from pharmacies. Customers get information about these teas from Facebook or from their friends and colleagues. They buy “Niharik” when they see a problem of losing weight, so they find “Niharik” helpful to fix this issue, and they buy herbs like “Thyme” to drink just like regular tea or when they have some health issues that can be fixed by these herbs. According to instructions, consumers need to buy “Niharik” about 3 pockets per month. Women actually start thinking about losing weight before summer in spring, and the sales of “Niharik” usually increase during springtime and during summer.
Antaram is a functional brand, not symbolic. It is targeted to satisfy specific needs of customers. People buy its product to set basic needs. Sales are highly concentrated in Yerevan and in other big cities in the county. The overseas consumers are potential for Antaram when it decides to export its goods. People who buy Antaram’s product basically have some knowledge about herbs usefulness for health.
Armenian market of tea, within which Antaram operates, consists of both producers and importers. In Armenia, tea production volume on average equals to 190 tons (2.6mln * 66g[2]) per year and the import of tea into the country is approximately 385 tons. Within the tea market, a total number of competitors is 41 and number importers is unavailable due to lack of data.
The political environment for Antaram Company can be described as a positive. Armenian government promotes production industry and has a trading agreement with EEU which is an opportunity for Antaram to export its products to EEU countries.
           Moreover, agriculture in Armenia has pronounced as a VAT free sector and also it is free from different fees like notarial and cadastral expenses. It is estimated that due to this policy agricultural businesses can save over 8000 drams from each hectare. Consequently, Antaram also benefits, because most of its production costs are from herbs collected from agriculture.
         The government also has a special support program for small and medium-sized business which implements by governmental organization SME DNC. The scope of their activities is consultation, financial support, training, etc.
      The economic environment for Antaram is constant despite overall GDP instability. The agricultural sphere in Armenia is the only one which has had constant 7 to 11% GDP increase after an international crisis.  This is good for Antaram, because its suppliers suffer less than other spheres. Besides, as CEO of Antaram insists there is a trend to buy medical herbs as a substitute of different medications because of financial difficulties: medications have incomparable high prices. 
           From different international reports, we can see that Armenians have increased tea consumption from 0.57 to 0.66 grams in 4 years period (2011-2015)  This can be explained by the changed social attitude to healthy food and overall healthy lifestyle. In past years there is a huge amount of healthy lifestyle propaganda in Armenia through media, NGOs, etc. And also as we mentioned above not good social, financial conditions also stimulate to change medical herbs to medications.
           Nowadays technological advancement affords Antaram to use its industrial waste (tea dust) in capsule tea production, which also can attract donors from international environmental organizations.
         Antaram acts in a common legal environment for cooperatives and also as it produces medical herbs it needs the license from a special governmental body which acts within a ministry of healthcare of RA.          

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