HI5003 Economics for Business Report Sample

HI5003 Economics for Business

Purpose:

This assignment aims to enhance students’ research and analytical ability through the application of their economics knowledge learned in the course unit to compose a company report.

Detailed Requirements of the Assignment

You are a group of advisors to the Management Board in your company with Headquarters in Australia. As advisors you are first, required to conduct research on your selected sector/industry covering the previous 5- 10 years. Second, you are required to present a company strategy to your Management Board and to the Federal Government of Australia covering the next 5 years. Third, your Management Board requires that you make a presentation of your findings and strategies, and you prepare a 3000-word market report.

Note:

i. if your company has many products and/or services, you can select a representative product/service to discuss for points (2); (3); (4); and (5).

ii. This report should provide useful information for your company’s Management Board. It should use a variety of resources, including the textbook, newspapers, industry reports, the ABS website, and other sources.

iii. Furthermore, your report should include headings and sub-headings. It needs to be properly referenced using the Holmes Institute adapted Harvard style and at least 5 references.

iv. The list below is provided from which you are to choose a sector/ industry. Invalid submission will be considered for a sector that is not included in the list below.

v. Indicate your research Sector/Industry and, the company before your table of contents.

Solution

Introduction

This report is prepared by a group of advisors who present viable company strategies to the Management Board of Brink Drinks, which is a beverage manufacturing company based in Australia. The purpose of this report is to study the economic conditions that could affect the demand and supply for our company's products. As per the MBA  Assignment Experts, A closer focus has been given to analyse both macroeconomic and microeconomic factors associated with it. In addition, research has been undertaken with regard to the overall market structure of the beverage manufacturing industry along with elasticity and recent macroeconomic trends affecting not only the industry but Australia as well.

Company background of Brink Drinks

Brink Drinks is a company that produces soft drinks. It was founded in 2006 by two entrepreneurs, Alex Brink and Kevin Doran. The company is headquartered in Bakery Hill, Victoria in Australia.  Brink Drinks has over 60 employees and its products are sold in over 5,000 outlets across Australia (Brinkdrinks.com.au, 2022). Brink Drinks was originally founded as a home-based business making soft drinks for local cafes and restaurants. The company has since grown and now supplies major retailers such as Woolworths and Coles. Brink Drinks is also exported to New Zealand, Singapore and Hong Kong. The company has won numerous awards, including the prestigious Australian Food Industry Award for Best Soft Drink in 2010 and 2011.

Brink Drinks is committed to producing high quality soft drinks using only natural ingredients. The company uses fruit juices, cane sugar and spring water in all of its products. Brink Drinks does not use any artificial flavours, colours or preservatives in any of its products. Brink Drinks' offers a variety of flavours, including cola, lemon-lime, root beer, and fruit punch (Brinkdrinks.com.au, 2022). In addition to its traditional soda products, Brink Drinks also offers energy drinks and bottled water. The company's energy drinks are marketed under the "B-Active" brand name. Brink Drinks has a strong commitment to social responsibility. The company donates a portion of its profits to charitable organisations, including the Australian Red Cross and the Salvation Army. Brink Drinks also supports environmental initiatives, such as tree planting programs.

Industry or Sector Background

Beverage manufacturing is a vital part of the Australian food and drink industry. The industry comprises companies that manufacture a range of beverage products, including soft drinks, beer, wine, spirits, and bottled water. The industry is an important contributor to the Australian economy, with revenue of $13.4 billion in 2014-15 (Ibisworld.com, 2020). The industry has undergone significant changes in recent years. declining per capita consumption of some traditional beverage products, such as beer and soft drink concentrates, has been offset by strong growth in demand for bottled water and premium alcoholic beverages. This has resulted in increased consolidation among manufacturers and reduced profitability for many Companies. The industry is forecast to grow at an annualised rate of 1.2% over the five years through 2019-20, to $13.8 billion (Ibisworld.com, 2020). This includes growth of 1.0% in 2019-20, which is slower than the 2.1% increase in 2018-19 due to declining per capita consumption of some traditional beverage products and increased competition from private label products (Hallak et al., 2022,726(6)). The industry is concentrated in New South Wales, Victoria and Queensland, which together account for an estimated 77.7% of industry revenue in 2019-20 (Ibisworld.com, 2020). These states have a large number of manufacturing companies and are home to a significant portion of the Australian population, which provides a ready market for industry products. of the Australian Beverage manufacturing sector. The non-alcoholic beverages market in Australia is estimated to be worth $14.7 billion. The soft drink sub-category is the largest within this market and is estimated to be worth $8.4 billion of the Australian Beverage manufacturing sector, the non-alcoholic beverages market in Australia is estimated to be worth $14.7 billion (Adams et al., 2022, 18(3). The soft drink sub-category is the largest within this market and is estimated to be worth $8.4 billion. 

In Australia, the manufacturing sector is a key contributor to the economy, accounting for around 10% of GDP (Ibisworld.com, 2020). The sector employs over 1 million people and is a major exporter of manufactured goods. The beverage manufacturing sector is one of the largest sub-sectors of the manufacturing industry, accounting for around 15% of total manufacturing output. The sector employs over 150,000 people and generates around $15 billion in annual revenue (Grigsby-Duffy et al., 2022, 10(2)). The beverage manufacturing sector is highly competitive, with many firms operating in both the domestic and international markets. The sector comprises a range of businesses, from large multinational companies to small family-owned businesses. The sector produces a wide variety of products, including beer, wine, spirits, soft drinks, and bottled water. The sector is also a major player in the food and beverage industry, with many companies involved in the production of food and beverage products. The Australian beverages manufacturing sector is highly regulated, with strict laws governing the production, marketing, and sale of alcoholic beverages. The sector is also subject to a range of environmental regulations. The sector is facing challenges in the current economic climate, with rising costs, falling demand, and increased competition from overseas suppliers. Despite these challenges, the sector remains an important part of the Australian economy.

The Market Structure of The Sector or Industry

Understanding the market structure is an important aspect to consider when discussing the economics of the beverage manufacturing sector of Australia. The industry is made up of a large number of small firms, with the top four companies accounting for less than 30% of total revenue (Ibisworld.com, 2020). In addition, the industry is highly fragmented, with no one company having a significant market share. This fragmented structure creates a situation where there is intense competition among the companies in the industry. This, as a result, gives an indication that the beverage sector of Australia follows a perfectly competitive market structure. The sole reason behind this revolves around the fact that just like a perfectly competitive market scenario, the industry output for this perfectly competitive market structure. particular sector seems to be highly standardised with hardly any of the firms holding a substantial share in the market accompanied by minimal freedom to entry or exit. 

The most important factor affecting demand in the industry is the per capita consumption of beverage products. declining per capita consumption of some traditional beverage products, such as beer and soft drink concentrates, has been offset by strong growth in demand for bottled water and premium alcoholic beverages. This has resulted in increased consolidation among manufacturers and reduced profitability for many companies. The most important factor affecting supply in the industry is the cost of raw materials. The prices of key raw materials, such as sugar and aluminium, have fluctuated in recent years due to changes in global demand and supply conditions. These fluctuations have had a direct impact on the profitability of industry companies. In order to remain competitive, companies in the industry need to be able to efficiently produce high-quality products at a low cost. This can be achieved through economies of scale, which allow manufacturers to reduce their per unit costs by producing large volumes of products. In addition, companies need to have efficient distribution networks in place to ensure that their products are readily available to consumers. Another important factor affecting the industry is government regulation. The Australian government has introduced a number of regulatory measures in recent years that have had an impact on the way the industry operates. These measures include the introduction of a mandatory Code of Practice for the Responsible Service of Alcohol and the introduction of plain packaging requirements for tobacco products. The industry is expected to continue to face challenges in the coming years, including declining per capita consumption of some traditional beverage products, increased regulation, and intense competition. However, strong growth in demand for bottled water and premium alcoholic beverages is expected to offset some of these challenges and support industry revenue growth over the next five years. To be more precise, the market structure of the Beverages manufacturing sector in Australia is highly fragmented with a large number of small firms. The top four companies only account for less than 30% of revenue (Ibisworld.com, 2020). The most important factor affecting demand is per capita consumption. The most important factor affecting supply is the cost of raw materials. To remain competitive, companies need to be able to efficiently produce high-quality products at a low cost. Government regulation is also an important factor that affects the industry. The industry is expected to continue to face challenges in the coming years, but strong growth in demand for bottled water and premium alcoholic beverages is expected to offset some of these challenges.

Micro-economic and Macroeconomic Factors Influencing Demand Level of Soft Drinks

Both micro and macroeconomic factors are important to consider when analysing demand for Brink Drinks of Australia’s products. These factors can have a direct or indirect impact on demand, and companies need to be aware of how these factors could affect their business in order to make strategic decisions.

Micro-economic factors

Prices of substitutes and complementary products: If there is an increase in the price of a substitute product (such as bottled water), this could lead to increased demand for Brink Drinks of Australia’s products as consumers switch to cheaper alternatives. Thus, an increase in per capita consumption of beverage products would lead to increased demand for Brink Drinks of Australia’s products.  This, thereby, signifies a direct relationship.
Change in income levels: Income levels play an important role in the demand for a good or service. When income levels rise, consumers have more money to spend and will likely purchase more of a good or service. This is known as the income effect. The demand for soft drinks may increase when income levels rise, as consumers can afford to purchase more of the product (Phuong, L.C.M., 2021, 369(3)). Thus, an increase in incomes is likely to lead to increased demand for Brink Drinks of Australia’s products as consumers would have more disposable income to spend on discretionary items. Conversely, when income levels fall, consumers have less money to spend and will likely purchase less of a good or service. This is known as the substitution effect. The demand for soft drinks may decrease when income levels fall, as consumers substitute other goods or services for the product.

Macroeconomic factors

Changes in interest rates and inflation rates: Inflation rates and interest rates can also influence demand indirectly by affecting consumers’ purchasing power and willingness to spend. If inflation rates are high, this decreases the purchasing power of consumers and they may be less likely to buy Brink Drinks of Australia’s products. Similarly, if interest rates are high, this makes borrowing more expensive and consumers may be less likely to purchase Brink Drinks of Australia’s products on credit (Mialon et al., 2021, 146(5)).

Population: The requirement for any product is determined by a country's total population. When the overall population grows, so does the demand for any goods, and vice versa. People from all corners of the globe come to Australia to study, work, and vacation. Increased immigration from overseas tends to contribute to increasing the demand level for soft drinks, which, indicates a boost in the overall profit margin of Brink Drinks in turn.  
Micro-economic and macroeconomic factors influencing demand level of soft drinks

It is important for Brink Drinks to be aware of these micro and macroeconomic factors when making decisions about their product supply. These factors can have a direct or indirect impact on the company, and it is important to be strategic about how to manage these impacts.

Micro-economic factors

Technical Progress: The totality of production volume and supply is mostly driven by actual advancements in technology. This is a crucial factor for companies like Brink Drinks that want to achieve economies of scale within their own production processes.  The more efficient the production, the higher the output at a given input. This usually leads to a decrease in marginal costs and an increase in profitability (Chowdhury et al., 2020, 10(2)). The release of a new product can have a significant impact on the market, especially if it is a revolutionary product that is much better than existing products. This would lead to an increase in demand, which would in turn lead to an increase in supply as companies scramble to meet the new demand.

Changes in the prices: It has been observed that alterations in the various factors of production can significantly affect the supply of any productions. If, for example, the price of a commodity increase, this will more than likely hamper Brink Drinks' supplies. On the contrary, if prices become cheaper, then supplying your product becomes less complicated and easier to do.  

Macroeconomic factors

Unemployment: Unemployment is one of the most significant elements that may have an impact on a firm's supplies. Unemployment has a significant influence on businesses in many ways. One of the major drawbacks of unemployment in this regard is that consumer spending primarily falls when individuals are unemployed. On the other hand, the advantage is that the firm concerned is likely to gain access to a large pool of talent. When people are unemployed, their consumer spending rates drop, thus affecting supply as well (Wittwer and Anderson, 2020, 345(4)).

General Public and Media: The supply of a firm is also influenced by the public and general media. This primarily enhances the company's reputation. Communities remain loyal to firms that give employment, pay taxes, and are thus responsible for the whole society while remaining accountable for the environment. If a firm fails to adhere to these standards, it will be blacklisted. It is also critical for businesses to preserve their corporate image.

International Trade: If the firm is engaged in international trade, its policies on international trade tends to hinder supply. When the company is unable to develop as a result of changes in foreign market rules, growth rates show a tendency to slow down. However, if free trade is implemented, it provides the company the ability to increase production thus increasing the supply level in turn. If the regulations are friendly to business, the firm can expand its operations by manufacturing beverages in greater quantity and of upgraded quality too.

Elasticity Analysis

Price elasticity of demand

It relates to the level of responsiveness of demand to changes in price. The nature of the good, the presence of close substitutes, and the extent to which the good is a necessity all affect elasticity. In general, necessities have inelastic demand because people will continue to purchase them even if prices rise. This is because people cannot go without them. On the other hand, goods with close substitutes have more elastic demand because people can switch to another product if prices rise (Macedo et al., 2021, 402(5)). 

Besides this, substitutes play an important role in determining elasticity. For example, Brink Drinks' soda has many substitutes such as Coca Cola, Pepsi, and other generic brands (Brinkdrinks.com.au, 2022). If its price of soda rises, people are likely to purchase one of its substitutes instead. This would cause the demand for Brink Drinks to be more elastic.

Income Elasticity of Demand

Income elasticity of demand (IED) measures the responsiveness of quantity demanded to changes in income. It is calculated as the percentage change in quantity demanded divided by the percentage change in income. A soft drink is a non-alcoholic beverage that typically contains carbonated water, sugar, and flavoring.

Generally, an increase in income will lead to an increase in the quantity of all goods demanded, including soft drinks. The IED for soft drinks can be positive or negative, depending on the good. A positive IED indicates that an increase in income leads to an increase in the quantity of soft drinks demanded. A negative IED indicates that an increase in income leads to a decrease in the quantity of soft drinks demanded. Brink Drinks manufactures soft drinks, which are considered necessities. This means that the company's products have an income elasticity of demand less than one. 

Moreover, individual preferences play a big role in determining demand (Samuel et al., 2019, 22048 (2)). For example, if people prefer the soda marketed by Brink Drinks over its substitutes, then the demand for it will be more inelastic and vice versa.

Recent Macroeconomic Events That Affected Brink Drinks

Covid-19 has had a significant impact on the beverage industry in Australia. Many businesses have had to shut down due to the pandemic, and those that remain open have seen a decline in sales. The industry is expected to recover slowly over the next few years as the economy gradually improves. In the meantime, firms such as Brink Drinks seems to focus on ways to cut costs and improve efficiency. Some of the major changes that have been implemented include reducing staff numbers, introducing new technology, and changing production processes (Robinson et al., 2021, 866(2)). These measures bear a greater potential to help the industry to weather the current crisis and emerge stronger in the future.

Recommendations

In order to overcome the adverse impacts faced owing to Covid-19 pandemic, the following recommendations have been provided greater investment in skill upgradation and resources: Brink Drinks can benefit from the multicultural talent pool, and it may invest in their talents, which will be a valuable resource during these turbulent times. The workforce will mostly assist in the creation of new ideas and assisting the business to flourish during difficult economic circumstances.

Review of various aspects of supply chain: The company is recommended to identify areas for possible improvement within the supply chain system and at the same time establish backup channels and keep inventory up-to-date, and. All of these efforts are likely to prove crucial in maintaining an efficient supply chain for soft drinks.

Conclusion

In a nutshell, it can be concluded that this report examines the beverage manufacturing industry in Australia from various economic perspectives to prepare valid business strategies for Brink Drinks. In order to combat the losses faced as a result of exposure to Covid-19 pandemic, the firm has been recommended to focus more on skill degradation as well as improvising its supply chain aspects.

Reference List

Adams, D., Donovan, J. and Topple, C., 2022. Sustainability in large food and beverage companies and their supply chains: An investigation into key drivers and barriers affecting sustainability strategies. Business Strategy and the Environment.

Brinkdrinks.com.au, 2022. Brink Drinks. Retrieved on 19th Aug 2022 from http://brinkdrinks.com.au/about/

Chowdhury, M., Sarkar, A., Paul, S.K. and Moktadir, M., 2020. A case study on strategies to deal with the impacts of COVID-19 pandemic in the food and beverage industry. Operations Management Research, pp.1-13.

Grigsby-Duffy, L., Cameron, A.J., Backholer, K. and Sacks, G., 2022. Food industry perspectives on potential policies targeting unhealthy food and beverage price promotions in Australian supermarkets. BMC Public Health, 22(1), pp.1-13.

Hallak, R., Onur, I. and Lee, C., 2022. Consumer demand for healthy beverages in the hospitality industry: Examining willingness to pay a premium, and barriers to purchase. PloS one, 17(5), p.e0267726.

Ibisworld.com, 2022. IBIS World. Retrieved on 19th Aug 2022 from https://www.ibisworld.com/

Macedo, A., Gouveia, S. and Rebelo, J., 2021. The Global Demand for Alcoholic Beverages, 2010–2015: Price and Expenditure Elasticities. Journal of International Food & Agribusiness Marketing, 33(4), pp.398-422.

Mialon, M., Pinsky, I. and Schmidt, L., 2021. How food and beverage companies leveraged the great recession: lessons for the COVID-19 pandemic. BMJ Global Health, 6(9), p.e007146.

Phuong, L.C.M., 2021. Food and beverage stocks responding to COVID-19. Investment Management and Financial Innovation, 18(3), pp.359-371.

Robinson, E., Blake, M.R. and Sacks, G., 2021. Benchmarking food and beverage companies on obesity prevention and nutrition policies: evaluation of the BIA-Obesity Australia Initiative, 2017-2019. International journal of health policy and management, 10(Special Issue on Political Economy of Food Systems), pp.857-870.

Samuel, A.U., Oyawale, F. and Fayomi, O.S.I., 2019, December. Effects of waste management in beverage industries: A perspective. In Journal of Physics: Conference Series (Vol. 1378, No. 2, p. 022048). IOP Publishing.

Wittwer, G. and Anderson, K., 2020. A model of global beverage markets. Journal of Wine Economics, 15(3), pp.330-354.