Market reviewFirstly, my business is going to be making exclusive cakes for weddings, birthdays, festivals and other special occasions. According to ‘Bakeryandsnacks.com’: “UK bread and cake markets are together worth over £4.5bn. According to “Mintel”, the ambient cake market sees 3 per cent growth per year and was worth £1.47bn with particular growth in the premium goods sector last year.” – 1st February 2007. This suggests that it is a very big and competitive market and that it will be difficult to introduce a new product and survive on this market. However, this was only a general information about the market. Due to the fact that I’m unlikely to have enough money to open a new business, with branches in every part of the world, I decided to open a cake making business in Birmingham, UK. There were several reasons for my decision. Firstly, it is much easier to survive in a similar market in the UK and especially in Birmingham, because there are not as many competitors or firms making wedding cakes as there are in the international market. There are several trends in this market. To begin with, making wedding or birthday cakes would be a very good business in the UK in Birmingham, because there are people, who are prepared to pay a relatively high price, according to my research, in order to make another person a special present. Analysis of the diagrams, which shows what price my potential customers are prepared to pay for each custom made cake, is included in my price section. I have asked 200 people, 100 men and 100 women when I did my questionnaire, and the diagrams (enclosed) that I have created, according to my results, clearly identify that the customers are prepared to pay a premium price for my products. Almost anyone in the UK is likely to buy or try a cake at some point in their life, but how special will the person feel if he or she gets a personal cake, maybe designed by his/her friends. If a person wants to buy an of the shelf cake, he or she may choose to go to the supermarket like “TESCO” and buy a cake for £13.34. This will be a cheap, tasty, well made cake, but it will be an of the shelf cake. Those cakes that I’m going to introduce on the market are going to be custom made and this will be a big difference from what you can buy in the shop. This will make my products unique, for that I will expect my customers to pay a premium price.
Although my products will be positioned in a premium class and will not be cheap, the demand for is likely to be relatively elastic, due to competitors and changing economic and political patterns on the market. There are about ten competitors on the cake market in Birmingham, out of which three are the most important for my business. Conducting a PEST analysis which may help me to determine my price and marketing strategy for my products.
PEST analysis
Political- due to the fact, that currently there’s a very difficult political situation, prices of raw materials on the world market are continually increasing. This means, that prices on some of the ingredients, which I will have to buy in order to make the cakes, are likely to rise. This means, that my production costs are also likely to increase, which will affect my price. For example, the sugar prices might increase over time, which is going to increase my production costs directly, because I will have to buy sugar in order to make my cakes. Economic- there are fears that due to the current crisis on the UK property market as a side effect of the property and credit markets in the USA, UK might go into the recession. This means, that there won’t be as much money in the UK economy as there used to be, which means people’s disposable income is likely to decrease, they will have less spending power and more likely to spend their money on the necessities such as home or rent, food and clothing and they will be less likely to spend their money on luxuries such as wedding cakes. This, therefore, means that there’s a risk that my potential customers might rather prefer to save their money and maybe buy an off the shelf cake for 20 pounds if they have a birthday, rather than spending hundreds of pounds on a custom made cake, or buy a custom made cake with a very simple design. In this case, I can actually slightly diversify my business and start making cheaper and much simpler cakes to keep my prices at a low level. However, it will be relatively difficult to do, as there are already many firms who are my potential competitors, who specialize at making cheap and simple cakes, which are mass produced on the market and are very hard to compete with.
Social- there are currently some specific social trends on the cake market, which involve making cakes for the following events: -Wedding -Birthday -Christening -Christmas and Seasonal events -Hanukah and other religious events -Corporate -Anniversaries -Engagement
The cake orders for such events are increasingly becoming more popular. This means that my business has to keep with these currently changing social trends, and not rely on the weddings alone, but concentrate on some seasonal events, corporate parties, anniversaries and religious events, which are more likely to keep my business busy and supplied with plenty of orders throughout the year. If I avoid concentrating on just seasonal events such or just weddings, this is more likely to increase my sales and profits.
Technology - today the technology is developing at a such high rate, that new technologies might allow me to make cakes much quicker than ever before, using special ovens or laser printing on cakes, which significantly shorten the time it takes to make one cake and, in long term, decrease the average costs of production, which will allow me to charge lower prices and become more competitive on the cake market. Technology is not that factor, which will have negative effects on my business. Technology may develop very rapidly and people might soon have flying cars, but they will still have birthdays, festivals and weddings and they’re unlikely to stop the tradition of ordering and eating cakes for such special events completely. But even if I’m not optimistic and technology will not develop as rapidly in the future as it does now, it will make no harm to my business anyway, so my business is not very dependent on technology as it is on some other factors. 4 Marketing P’s Product Price Place Promotion
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