The Viability of Investing in UK FMCG Market

The purpose of the study is to evaluate the viability of investing in the UK FMCG market. Arts Alliance needs to analyze the FMCG market in the United Kingdom as it plans to invest in Lamb Rurn brand. There are many factors that need to be taken into consideration while planning to invest in the rights of another company. One of the factors that need to be evaluated by Arts Alliance is the current and future economic condition of the United Kingdom. The other factor that will be taken into consideration is the long-term prospect of the FMCG sector in the United Kingdom. The long-term evaluation will also consider the prospect for the market and the business. In addition, the discussion will focus on the research techniques that should be adopted by Arts Alliance while making the investment decisions. The analysis of the research techniques will outline the strengths and limitation of the methodologies selected. Finally, the paper will evaluate the latest conversation in the FMCG industry. The latest conversation will evaluate the effective strategies that should be adopted by Arts Alliance to help in the achievement of its objectives. The latest conversation will also outline the consumer behavior in the FMCG market.

UK Economic Condition

            Following the European Union referendum, the economy of the UK performed well in regards to the consumer spending. However, during the first quarter of the year 2017, the growth rate was slowed down due to the moderate growth of consumer services and spending. One of the factors that affected the economic was an upsurge in the level of consumer price inflation (Ernest & Young, 2017). The CPI rose from an average of zero in the year 2015 to 2.9% in the year 2017. The CPI is an imperative indicator that should be considered by Arts Alliance since it affects the amount of goods purchased by the consumers. In addition, the Brexit vote hugely affected the inflation in the economy evidenced by increase in the prices of products (Ernest & Young, 2017). One of the economic factors that will be evaluated is the consumer spending in the UK. The spending of the consumers is one of the forces that drive the economy of the United Kingdom (Jackson, Tetlow, Bernard and Pearson 2018). In the year 2017, the growth of customers’ spending was 1.9% while in the year 2018; the consumer spending is expected to grow at a rate of 1.5%.

Long-term Prospects

Impact of the Brexit

            Since the year 2009, the Gross Domestic product has been increasing a reflection of the UK’s economic health. However, in the year 2017, the gross domestic product was slowed down due to inflation (PWC.Co.Uk, 2017).

            The growth of UK’s economy is expected to decline in the year 2018 and 2019. One of the factors that will affect the economy of the UK is the increase in the level of inflation (PWC.Co.Uk, 2017). Consumption in the FMCG sector is also expected to decline due to the upsurge in the inflation level. Therefore, the UK government needs to amend its fiscal and monetary policies to ensure that they are accommodative of the changes on the economy (OECD 2018, pp. 241). The inflation rate of 3% needs to be reduced through an effective fiscal policy. Another factor that is expected to affect the economy of the United Kingdom is the growth in consumers’ debt. The household debt has been increasing at a gradual rate and by the year 2017, the debt had reached 40% of the disposable income (OECD 2018, pp.241). The write-off rates of bank’s bad debts due to household debts have increased more than ten times over the last ten years. The other risk factor in the UK’s economy is the final outcome of the negotiations concerning Brexit. Therefore, the economic growth rate is expected to remain at 1% in the year 2018 and 2019 until the negotiations on UK’s exits from the EU are finalized. The growth rate is expected to affect the market of the FMCG products in the UK. Therefore, it would be imperative for Art Alliance to consider the economic changes in the UK as the management plans to invest in Lamb Rurn. The table below shows the changes in inflation since the year 2010 to 2017.

Source: http://www.inflation.eu/inflation-rates/great-britain/historic-inflation/cpi-inflation-great-britain.aspx

Online shopping

            Internet shopping is the other factor that Art Alliance needs to incorporate while making the investment decision. Art alliance should be willing to invest resources in the online platform since most of the customers are shifting towards online purchase. In the United Kingdom, the value of online purchases has been growing tremendously and is expected to be £17 billion by the end of year 2021 (Vasquez-Nicholson 2016, pp.7). As at the end of year 2016, online shopping for groceries in the UK was £9.3 billion. With the advancement of internet, the growth in online sales is expected to grow in future. Some of the trends that are driving online shopping include competitive pricing, convenience, and smart shopping (Vasquez-Nicholson 2016, pp.7). In addition, the online market in the United Kingdom is viewed as the most developed across the globe since most of the consumers prefer delivery of goods at their place of convenience to save time.  80% of the people who reside in the UK have access to internet and, therefore, it would be an imperative factor for Art Alliance to consider before investing in Lamb Rurn (Vasquez-Nicholson 2016, pp.7).

Logistics

            The other factor that should be considered by Art Alliance is the retail logistics in the FCMG industry. The retail logistics of the UK has undergone tremendous improvement in the last three decades (Fernie, Sparks, McKinnon 2010. pp. 894). In the UK, the retailer are the major controllers of the FCMG of the supply chain for the last thirty year. There are various improvement that Art Alliance should consider before investing in Lamb Rurn. One of the elements that the firm should seek to improve is the reduction in the amount of inventory held by the entity (Kangkang, Jack, and Hua 2017, pp. 215) Reducing the amount of stock is imperative since it enables a company to save on cost and, therefore, improve the efficiency level. In the FMCG industry, products sold have a short life span. Hence, it is critical to ensure that the goods are not stored for a long time in the business.

            One of the benefits of an effective supply chain is improved efficiency (Fernie, Sparks McKinnon 2010. pp. 910). Over the last ten years, the supply chain of UK has become efficient reducing the cost of operations in doing business. In addition, efficiency of the supply chain has reduced the time taken by the consumers to shop different products (Fernie, Sparks McKinnon 2010. pp. 910). The other benefit of an effective supply chain is improved transparency amongst the consumers, business, and suppliers. A transparent supply chain enables the stakeholders to determine the products available in the system (Fernie, Sparks McKinnon 2010. pp. 910). Transparency also leads to the reduction of products cost since there are no hidden charges in the market. Transparency in the supply chain of UK has undergone significant improvement due to technological innovations. Transparency also ensures that the suppliers of products are known to both the business and the consumers (Fernie, Sparks McKinnon 2010. pp.910). Therefore, it compels the suppliers to create a good reputation since a bad one would result to loss of business. The other benefit of an effective supply chain is enhanced flexibility in the handling of products. In addition, the supply chain is advantageous to the business since it improves sustainability. The supply chain plays a major role is ensuring that the environment is protected (Maria, Helena, and Maria 2016, pp.40). The framework should advocate for the use of packaging materials that are recyclable (Fernie, Sparks McKinnon 2010. pp.910).

One of the ways in which Art Alliance and Lamb Rurn can improve the handling of inventory is to acquire warehouses at different locations (Fernie, Sparks McKinnon 2010. pp. 895). The strategy would enable the firms to manage the movement of products from one retail center to the other. The other strategy that should be adopted by FCMG to improve its logistics is to improve the flow of products (Fernie, Sparks McKinnon 2010. pp. 896). The flow of products can only be reduced if the entity cuts the level of stock in the business. Other measures that can be utilized to improve the flow of products is minimizing the lead time which is the time difference between ordering and receipt of goods. Lead time would also ensure that the firm does not run out of stock (Fernie, Sparks McKinnon 2010. pp. 895). The consistent flow of products to the consumers increases the confidence that the consumers have regarding the operation of the entity. Creating a strong relationship between the suppliers and the business is also critical towards improving the product flow. The relationships enable the business to share information with the supplier in relation to the amount of goods required in the business (Fernie, Sparks McKinnon 2010. pp. 895).

            Another factor that should be adopted by Lamb Rurn and Art Alliance is the improvement of packaging and handling of products (Fernie, Sparks McKinnon 2010. pp. 896). The goods should be packaged in a way that allows easy transfer from one place to another. In addition, utilizing re-usable packaging materials is critical towards enhancing the logistics process (Fernie, Sparks McKinnon 2010. pp. 896). Art Alliance and Lamb Rurn should lead the other companies by using materials that conserve the environment. The other measure that should be adopted by Art Alliance and Lamb Rurn is improving the consumer response and supply chain management. The supply chain can be enhanced by creating strong ties between the business and the suppliers (Fernie, Sparks McKinnon 2010. pp. 896). In addition, Art Alliance should ensure that the acquired business has a system that allows provide the consumers with an opportunity to share their feedback (Fernie, Sparks McKinnon 2010. pp. 896). Customer’s responses are vital since they provide the business with information on the areas that should be improved (Fernie, Sparks McKinnon 2010. pp. 896). In addition, Art Alliance should ensure that Lamb Rurn has an efficient management framework that allows efficient coordination of suppliers and business activities.

Research Techniques

            One of the research techniques that should be adopted by Art Alliance in identifying the viability of investing in Lamb Rurn is survey. Survey is a research methodology that gathers data from specific sectors within a certain period of time (Walliman 2011, pp.80). The advantages of using survey include low cost, ability to select a particular audience, and able to reach the targeted consumers (Perner 2011). One of the disadvantages of using surveys is the low response rate from the respondents. The other disadvantage of surveys carried out over the phone is that is only allows limited number of questions. Another setback of the survey technique is that it can be expensive if done using the mall intercept approach (Perner 2011).

            Another method that should be used by Arts Alliance to gather information is online research. The online research enables the researcher to gather data across a wide range of sites (Walliman 2011, pp.95).The advantages of online research include fast response, wide coverage and low cost since it does not require travelling. One of the disadvantages of using online research is that it is difficult to verify the credibility of data. The other disadvantage of online research is that it is difficult for the respondent to get results for a specific sector (Perner 2011). Another technique that should be utilized by Art Alliance in gathering the industry’s information is through interviews. Interviews are imperative because they enable the researcher to obtain adequate information about a particular subject (Wallman 2010, pp.114). The other advantage of using interviews is that it enables the researcher to obtain genuine information about a particular concern. One of the demerits of using interviews is that it is expensive since the only one interview is conducted at a particular period (Perner 2011). The other disadvantage of using interviews is that it can only be applied for a small sample size. The data gathered would not be sufficient to infer the findings on to the whole population (Perner 2011). Therefore, it is difficult to generalize the information gathered from interviews. The other demerit of interviews is that it consumes much time and efforts to get the required information (Perner 2011).

            The other technique that should be adopted by Art Alliance is focus group (Wallman 2010, pp.115). The use of focus group is an effective method since it would allow Art Alliance to get the responses from the consumers of Lamb Rurn (Wallman 2010, pp.115). In addition, the focus group would be an imperative approach as it would enable the business monitor the performance of products in the market. The other advantage of the focus group is that the interviewer can alter the questions to get the desired information (Wallman 2010, pp.115).

            One of the demerits of using the focus group is the cost required to carry out the survey. The other disadvantage of the focus group technique is that it focuses on a small focus group and, therefore, the information gathered might not provide the expected results. In addition, the respondents in the focus group might be influenced by social factors and, therefore, the answers might not be independent.

Latest Conversations

Strategy

            One of the strategies that should be adopted by Lamb Rurn and Art Alliance is corporate social responsibility. CSR is vital towards the success of the business since it provide a sense of belonging to the community (Armando, Roberta and Francesco 2015, pp.218). In addition, the CSR can yield to more profitable returns for the business since consumers would be willing to purchase products from a company that gives back to the society.

Market Research

            Research indicates that suppliers in the FCMG industry are focusing on building their brand rather than focusing on price promotion (Roderick 2016). Unlike in the past where most products were sold through sales promotion, the current revenues in the FCMG market are achievable if a company has a strong brand. UK is that largest region in Europe that sell products on promotion (Roderick 2016). In the year 2016, the amount of products sold on promotion reduced by 2.6% which is a reflection that moving forward, companies will be required to market their brand (Roderick 2016). Therefore, Art Alliance and Lamb Rurn should consider on building a strong brand for the organization since it is critical for the business success. Promotion techniques are considered as short-term strategy for uplifting the sales volume. The strategy cannot be relied for the long-term growth of the business sales. The business strategy used should be advertising rather than promotion since the latter does not lead to enhanced brand recognition.

Consumer Behavior

            One of the recent trends in UK’s consumers’ behaviors is the increased response to advertising as opposed to technology (Santander 2018). Some of the factors that affect the behavior of customers in the UK include price, quality, branding, and superior product design (Roderick 2016). Analyzing the consumers’ behavior in the UK would enable Art Alliance to adopt the appropriate strategies that would attract more consumers.     

Conclusion

            The analysis indicates the investing in the UK would be beneficial to Art Alliance. Therefore, Art Alliance should invest in the rights of Lamb Rurn. Some of the factors that make the country attractive for investments are reduced level of employment, low inflation, and favorable regulations for starting up a business. Some of the strategies that should be adopted by Art Alliance and Lamb Rurn include e-marketing, e-shopping, advertising, and an effective supply chain framework.

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