FACTORS WHICH IMPACT ON FOOD

PODUCT DEVELOPMENT

External &
internal factors
MARKETING PROCESS

Planning
Analyzing the market Selecting target markets

Company’s mission, goals,

Situation analysis
Market segmentation
objectives and strategies

External influences
Identification of target

Marketing objectives and

Internal influences markets
strategies

Developing the marketing mix

Managing the marketing effort

Product planning, price

Performance evaluation
structure, placement or

Recommendations to modify
distribution, promotion, etc.
FACTORS WHICH IMPACT ON FOOD PRODUCT DEVELOPMENT

 External factors (macro-environment):

 Economic factor  Analyze commercial practices in

 Political factor terms of a food company’s
 Social-cultural factor response to the macro and
 Technological factor micro environments

 Internal factors (micro-environment):

 Personnel expertise  Conduct a SWOT analysis to

 Product facilities identify strengths,
 Financial position weaknesses, opportunities
 Company image and threats
WHAT DOES “EXTERNAL” MEAN?
WHAT ARE EXTERNAL FACTORS THAT IMPACT ON FPD?

External Factors: Those factors that affect food product development and are often
beyond the manufacturer’s control. These are also referred to as the ‘macro-
environment’.

External Factors that Impact on FPD include (PEST/PESTEL analysis):

● Political
● Economic
● Social/Sociocultural
● Technological

● Ecological/Environmental
● Legal
ECONOMIC FACTORS THAT IMPACT ON FPD

The state of the economy can affect food product development.

A new product idea may work well when consumers have a high income and the
economy is successful, however, the idea may fail in tougher economic times.
All economies experience changes in the level of activity. These include:

● Recession ● Tax Rates

● Expansion ● Import and Export Tariffs
● Boom ● Wage Agreements & Salary Levels
● Contraction ● Level of Unemployment
● Changes in Inflation Rates ● Natural Disasters
● Changes in Interest Rates
● Exchange Rates
THE ECONOMIC CYCLE
CHANGES IN INFLATION RATES

 When inflation goes up, there is a decline in the purchasing power of money. For
example; if inflation rates increase by 2% then a packet of gum will increase from
$1.00 to $1.02.
 Inflation causes changes in cost of ingredients, equipment, wages and processing.

Effects:

 Manufacturers will need to pass on the cost to consumers by increasing the price
of their products.
CHANGES IN INTEREST RATES

Companies frequently need to borrow money to enable them to buy new equipment and
technology or to upgrade existing operations in other ways.

Effects:

 To cover these higher costs, the producer may raise the price of its products.
EXCHANGE RATE
Food manufacturers frequently import materials and technology from overseas. If the
VND is stronger than foreign currencies, the imported goods cost less; if VND is
weaker, the imported goods cost more.

Effects:

 Food manufacturers will either charge more or less for their products.
TAX RATE

Company taxes can change (by government). Such changes affect company profit margins
and are reflected in prices paid by consumers.

IMPORT AND EXPORT TARIFFS

Tariff: A tax imposed on imported goods.

These tariffs can affect the retail prices of food products.

WAGE AGREEMENT AND SALARY LEVELS

If a food manufacturer has to pay its employees higher wages, these costs are usually
passed on to consumers.

On the other hand, as consumers earn more, they have more disposable income and
may buy more food.
LEVEL OF UNEMPLOYMENT

Low levels of unemployment place less strain on government social services, and taxes
can remain low, so many consumers have more disposable income and may buy more
food.

NATURAL DISASTERS

Vietnam experiences floods in the middle area that lead to a decline in food production.
This decreases the availability of many foods and ingredients.

After floods, food manufacturers often import these commodities for higher prices and
therefore, charge consumers more for them.
POLITICAL FACTORS THAT IMPACT FPD

Manufacturers, producers and distributors of food are all subject to regulations made by
government

For example:

Nghị quyết số 51/2001/QH10 về An toàn thực phẩm

Similar pressure from overseas countries can also affect domestic food manufacturers.
For instance; tariff barriers, trade restrictions, and factors relating to food inspection,
quality and safety can restrict the ability of local manufacturers to trade in some export
markets.

Non-Government Organizations

Other political influences arise from non-government sources such as lobby groups.

For example: Hội Bảo vệ Nông sản Thực phẩm Việt Nam
Hội Bảo vệ Thiên nhiên Môi trường Việt Nam
Hội Khoa học và Công nghệ Thực phẩm Việt Nam
POLITICAL FACTORS THAT IMPACT FPD

Two international regulatory bodies:

1. International Standards Organization (ISO) that has published a series of directives on

quality control and management and environmental awareness
2. Codex Alimentarius Commission under the joint direction of the FAO/WHO Food
Standards Programme that has issued a series of standards of identification of foods
TECHNOLOGICAL FACTORS THAT IMPACT FPD

Changes in science and technology affect the development

of new food products.

These include Extrusion, Ultra High Treatment (UHT),

Modified Atmosphere Packaging and Genetic
Engineering.

One of the biggest technological issues in the food

industry is GM Foods. It is also the most controversial.

Food Additives as well as fat and sugar replacements

offer specific opportunities for new foods such as;
reduced energy content, better storage life and
superior quality.
TECHNOLOGICAL FACTORS THAT IMPACT FPD

New technology offers manufacturers the benefits of improved production efficiency,

expanded product range and increased market share, as well as lower costs and labour
requirements. Therefore, GREATER PROFITS!

Greater automation in the food industry may have some disadvantages such as
decreased employment opportunities and the need for staff to be retrained.
ECOLOGICAL FACTORS THAT IMPACT FPD

Today there is a concern about endangerment of species and

environmental damage because of issues such as; pollution,
land degradation and inadequate waste disposal.

These issues affect consumer attitudes to such things as

recycling, biodegradability of packaging, pollution of the
atmosphere and waterways, use of pesticides and waste
disposal.

Companies have developed a range of strategies to address

consumer concerns and enhance the marketability of their
products. These strategies include; use of recyclable and
biodegradable packaging, better air pollution control,
environmentally friendly processing and transport, more
efficient energy use and waste disposal.
WHAT ARE INTERNAL FACTORS THAT IMPACT ON FPD?

Internal Factors: Those factors that affect food product development and are often within
the manufacturer’s control. These are also referred to as the ‘microenvironment’.

Internal Factors that Impact on FPD include:

● Personnel Expertise
● Production Facilities
● Financial Position
● Company Image
PERSONNEL EXPERTISE

● The expertise of staff is crucial to the operation and development of a business.

● The personnel (staff or human resources) employed by a food company include:

➔ Production Staff
➔ Financial Staff
➔ Marketing & Sales Staff
➔ Management Staff
➔ Warehouse Staff
➔ Product Testing & Quality Assurance Staff
➔ Product Development & Research and Development Staff
➔ Maintenance and Engineering Staff
PERSONNEL EXPERTISE

 The skill levels of workers have a direct effect on what can be produced.
 These days, many workers are required to be multi-skilled  perform multiple tasks
 greater mobility within and between staff categories + greater flexibility within
company operations.

 Skills needed include:

➔ Leadership
➔ Planning and Operation
➔ Decision Making
➔ Task Management
➔ Written and Oral Communication
➔ Ability to Work Collaboratively

 Formal Training and Experience are crucial.

PRODUCTION FACILITIES

It is very difficult to produce any food product with the wrong equipment.

Production facilities vary in complexity, level of technology, output capacity and also
expense.

Larger companies often use a mixture of production technologies, while smaller ones
may depend on just one, often simple process.

The bigger the production ----> The greater the output size -------> The greater the profit

Several types of processes are used for commercial food production.

FINANCIAL POSITION

A company’s financial position is a major factor in the type of equipment it can afford
and hence its product range and new product development activities.

The financial position of any company includes the value of its assets (equipment,
property), cash flow, market share, interest rates, product range etc.

Financial position is an important factor affecting the ability of a company to compete in

the marketplace.

A strong financial position gives a company an advantage over its competitors in

marketing, advertising, product range and product development.
COMPANY IMAGE

 Public perception of a food company is a result of the company’s image, which

generally evolves over years of operation.

 Company image is reflected mainly in its market segment and consumer attitudes
towards the company.

 It may develop through some of the following factors:

➔ Consumer perceptions of product quality

➔ Form and convenience of products and packaging
➔ Market availability
➔ Labelling

 Before trying to change its image, a company should consider carefully any
possible consequences
 TOP 10 FOOD COMPANIES IN VIETNAM (2017)

http://hanoitimes.com.vn/economy/trade-service/2017/10/81e0b9df/vietnam-report-top-10-food-beverage-companies-in-vietnam-in-2017/
TOP 10 BEVERAGE COMPANIES IN VIETNAM (2017)
WHAT IS SWOT ANALYSIS?
WHAT IS SWOT USED?

SWOT analysis is the single most useful and relevant way of assessing the likely success
or failure of a new product concept.
WHAT IS SWOT USED?
COMPANY’S RESPONSE TO SWOT ANALYSIS

 A company responds to the results of a

SWOT analysis by completely abandoning
a new product concept.

 Major parts of the individual SWOT

components relate to both internal and
external factors affecting new food
product development.
SWOT ANALYSIS FOR CADBURY