Opportunity Analysis Report: Small Start Healthy Cereal in Australia

This report presents an opportunity analysis for introducing Small Start Healthy (SSH) cereal to the Australian market, targeting health-conscious consumers, especially those seeking to lower their cholesterol levels. The product utilizes sterols and stanols to reduce cholesterol absorption. The report includes a PESTEL analysis, Porter's Five Forces analysis, target market identification, key skills required, and financial analysis. It identifies the competitive landscape, potential substitutes, and the bargaining power of buyers and suppliers. The target market includes individuals needing to lower cholesterol, while excluding children and pregnant/breastfeeding women. Key skills for success include technical expertise in cereal production and ingredient extraction, money management, negotiation, and marketing. The report also touches on the importance of a stable political environment, economic factors influencing purchasing power, social trends favoring healthy foods, technological advancements in manufacturing, and environmental considerations. Desklib provides access to similar reports and solved assignments for students.

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OPPORTUNITY ANALYSIS REPORT
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Opportunity Analysis Report
Executive Summary
The report encompasses a business proposal for selling a new product, Small Start
Healthy (SSH) cereal that will be marketed in Australia. Specialists globally acknowledge the
important of breakfast as a meal of the day. Accordingly, the breakfast cereal is the most
excellent way to start a healthy day because it has low-fat, and nutrient-intense food with several
essential minerals, as well as the vitamins. SSH will be highly nutritious products with low
cholesterol level tailored to reduce cases of cardiovascular diseases and other diseases due to
cholesterol levels in food. The new product will focus on delivering a great opportunity to boost
health of the Australians. The SSH will be manufactured using sterols and stanols (also called
phytosterols) as a natural way to reduce cholesterol would be the main focus of the new product
in the market. The plant sterols and stanols that are used to produce SSH will work to reduce
cholesterol through slowing its intestinal absorption, thus, they interfere with cholesterol loading
into mixed micelles, where less cholesterol will be absorbed. The target market for the new
product is for those individuals who need to lower the levels of cholesterol. Patients on
cholesterol lowering medicine will be appropriate market for the new product. The product will
not be appropriate for children, pregnant along with breastfeeding females.

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Table of Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................5
External Environmental Analysis....................................................................................................5
PESTEL Analysis........................................................................................................................5
Political/Legal Factor...............................................................................................................5
Economic Factor.......................................................................................................................6
Social Factor.............................................................................................................................6
Technological Factor................................................................................................................7
Environmental Factor...............................................................................................................7
Industry Analysis.............................................................................................................................7
Porters’ Five Forces.....................................................................................................................7
Internal Rivalry.........................................................................................................................8
Threat of Substitutes.................................................................................................................8
The Bargaining Power of Buyers.............................................................................................8
The Bargaining Power of Suppliers.........................................................................................9
Threat of New Entrants............................................................................................................9

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Target Market...............................................................................................................................9
Key People and Skills....................................................................................................................10
Technical Skills..........................................................................................................................10
Money Management Skills........................................................................................................10
Negotiation Skills.......................................................................................................................11
Marketing Skills.........................................................................................................................11
Financial Analysis.........................................................................................................................12
Financial Option.........................................................................................................................12
Cash Flow Statement.................................................................................................................12
Conclusions....................................................................................................................................13
References......................................................................................................................................14
Appendices....................................................................................................................................16
Appendix 1: Summary of Financial Needs................................................................................16
Appendix 2: Estimated Sales Volume.......................................................................................18
Appendix 3: Fixed Costs............................................................................................................19
Appendix 4: Budgeted Balance Sheet........................................................................................20

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Introduction
There are many opportunities for breakfast cereal industry in Australia and this industry
has grown in the past few years. Many Australians have healthy issues concerned with
cholesterol and they prefer a diet that will reduce cholesterol; hence reducing cases of heart
diseases. The stable economy of Australia has greatly influenced the sales of the breakfast
cereals in Australia. However, the fluctuation of the dollar in the market affected the demand for
the breakfast cereals in the last five years in Australia. There is a high rivalry in Australia where
there are leading producers in the cereal and convenience food marketplaces. Major changes in
the snack, as well as cereal food markets are propelled primarily by changing demographics, that
is, aging baby boomers and their decreasing metabolisms, beside change of lifestyle, and dietary
behaviours necessitating quick and easy meals. The mounting purchasing power of the middle-
class in Australia and the pattern of consumption from basic staples towards more appetizing,
nourishing, as well as safe food have increased the current demand of breakfast cereals. The new
company will purchase an existing restaurant.
External Environmental Analysis
PESTEL Analysis
Political/Legal Factor
The political factors imply the manner and the quantity where the state affects the
economy plus some business. Australia has stable political environment and laws that promote
businesses. Australian producers in addition to distributors of food products are all exposed to

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laws crafted by federal, state, as well as local governments. Thus, at the federal point, the largely
well-known regulatory agency is Food Standards Australia New Zealand (FSANZ) that, in law,
coordinates plus manages food law all through Australia, as well as New Zealand (NZ) (Farmar-
bowers, Millar & Higgins, 2013, pp. 46). Local government in New South Wales works in
collaboration with NSW Food Authority on regulation of food. Other political pressures
emanates from non-government sources like interest groups; the Australian Consumers
Association (Gregory, 2012, pp. 17).
Economic Factor
The economic environment is concerned with the accessible purchasing power in the
economy. Breakfast cereal with low cholesterol has become an important breakfast meal among
Australians. The purchasing power for breakfast cereals has greatly increased in Australia where
families have disposable income that enables them to purchase the breakfast cereals for their
consumption. The revenue for breakfast cereals segment amounted to AU$508 million in middle
of 2018. The breakfast cereal market in Australia is expected to increase by 3.9 per cent on
annual basis. In global comparison, most revenue is generated in China (AU$17,737 million in
2018). The stable economy of Australia has greatly influenced the sales of the breakfast cereals
in Australia. However, the fluctuation of the dollar in the market affected the demand for the
breakfast cereals in the last five years in Australia (Panesar, Kaur, Panesar & Bera, 2009).
Social Factor
The company will be located in the main cities including Melbourne that will see high
demand for the product. The current trend where many customers have become health-conscious
that has allowed them to prefer and look for foods that have low cholesterol given the prevalence
of diseases such as cardiovascular disease among the population. Many patients have been

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recommended to consume food with low levels of cholesterol to improve their health. The
growing purchasing power of the middle-class in Australia and the pattern of consumption from
basic staples towards more appetizing, nourishing, as well as safe food have increased the current
demand of breakfast cereals (Wrigley, 2017, pp. 25).
Technological Factor
Technological advancements in the manufacture of the breakfast cereals have been
fundamental in Australia where companies are using modern technologies to manufacture
products with low cholesterol levels. The research and development (R&D) has been the
hallmark in producing SSH products where the extraction of sterols and stanols to incorporate it
as the main ingredients of SHH. The extraction process has been key in the extraction of the
ingredients. The research and development has seen an increasing efficiency in delivering
products that are acceptable to customers that have high levels of cholesterol in their bodies. The
technology that is used in the production of SSH is the ring circulation process.
Environmental Factor
Natural environment is fundamental for the production of breakfast cereal. The major
emerging trends that is lowering the environmental impact of food production systems;
considerably impacts natural, economic and cultural forces have been used in the food industry
in Australia. The process of producing breakfast cereals lies on the process that is designed to
reduce wastage of water where the process ensures that water used is very little.
Industry Analysis
Porters’ Five Forces

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Internal Rivalry
There is a high rivalry in Australia where there are leading producers in the cereal and
convenience food marketplaces. Major changes in the snack, as well as cereal food markets are
propelled primarily by changing demographics, that is, aging baby boomers and their decreasing
metabolisms, beside change of lifestyle, and dietary behaviours necessitating quick and easy
meals. Nearly 70 per cent of the revenues will be generated from the Australian market where
the company will be located in major cities. Some of the top rival companies will include Asda
and Weetabix. These are top rival companies that are well-established in the Australian market
selling breakfast cereals. However, SSH product will be unique because of the sterols and stanols
as key ingredients that will reduce cholesterol levels (Fullen, 2005, pp. 49).
Threat of Substitutes
Though breakfast cereal consumption within Australia is high, there exists an augmented
danger of substitutes from rivals in the sector. This can be attributed to new, similar, and cheaper
breakfast products penetrating the marketplace. Other food types, like fruits, bread, plus yoghurts
may be believed to be more expedient plus less costly for the average customer. The launch of
individual brand ranges would have an impact on the breakfast cereal sector as entire, as client
lifestyles plus expenditure habits have shifted radically (Heredia, Wesley& García, 2009, pp.
35).
The Bargaining Power of Buyers
The consumers of breakfast cereals comprise grocery stores beside supermarkets across
Australia. These consumers maintain the influence as the price is set based on their terms.
Consequently, the buyers bargaining power would be significantly greater if there were only a
few leading buyers in the industry and many sellers within the industry (Stutely, 2007, pp. 57).

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Though there are many buyers in Australia looking for products that will reduce the level of
cholesterol. Because of the production of breakfast cereal by supermarkets own brand cereals,
there is a higher bargaining power, like Asda.
The Bargaining Power of Suppliers
The bargaining power of suppliers in the industry is rather low. The bulkiness of raw
materials SSH needs into produce breakfast cereal are items, like grains, as well as wheat and
sterols and stanols available to the company via a huge number of large and small distributors.
In addition, packaging firms have modest influence over SHH because there are several firms
that SSH may seek to fill their packaging requirements at the smallest transfer cost if the
company’s suppliers make the decision to raise their prices (Elleuch et al., 412).
Threat of New Entrants
Brand allegiance has offered a noteworthy blockade to entry for prospective entrants.
Clients in the industry traditionally have been demonstrated to have inelastic demand for well-
known breakfast cereal brands. Kids and patients are a primary consumer of the breakfast cereal.
Clients are willing to pay premium prices for reputable brands because of the brand allegiance
developed. The initial costs needed to efficiently endorse plus launch new brand into the
marketplace is quite huge. The biggest obstacle to entrance to the marketplace is the large start-
up costs linked to establishing a new factory and developing brand distribution channels
(Brownlee, 2009, pp. 240).
Target Market
The target market for SSH that has lower cholesterol level is designed for those
individuals that need to reduce their level of cholesterol. Patients on cholesterol lowering drug

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may too consumer SSH products, but must consult their healthcare provider first. The product is
not recommended for children, pregnant and breastfeeding women. Consumers are in need of
convenient, functional food products, which are proven to lower cholesterol (Stutely, 2007, pp.
60).
Key People and Skills
Technical Skills
Technical skills are crucial during the preparation of the breakfast cereals, especially
when the ingredients needed include sterols and stanols. The employees should have skills that
will enable them to extract sterols and stanols that are key components in the production of the
breakfast cereals as they are innovative ingredients in reducing cholesterol. The chef and kitchen
staff should have skills that are entailed in the preparation of the cereals using the modern
technologies and packaging of the products to appeal to the clients. The chef and kitchen staff
should be competent on how to operate ovens, toasters and ring circulators used to product the
product (Heredia, Wesley& García, 2009, pp. 37).
Money Management Skills
Money management and planning skills will be paramount for SSH because the
accountant will be responsible for handling different transactions on everyday basis. The
accountant should be knowledgeable in accounting skills that will enable better management of
finances. The financial skills will be important towards helping the accountant make proper
planning and decision-making regarding financial aspects of the new business (Somers, Cain &
Jeffery, 2011, 72). The first five years will be crucial and will require the manager and the

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accountant to have excellent managerial and planning skills that will ensure better use of
finances for the company.
Negotiation Skills
Negotiation skills play a leading role towards ensuring that customers and suppliers are
convinced towards the success of the business. The manager should ensure that they have the
necessary negotiation skills to persuade clients to purchase the company’s products and also
negotiate with suppliers to supply the needed raw materials needed in the production of breakfast
cereal products. Suppliers are important stakeholders to the new business and the restaurant
manager should ensure that the negotiation skills are used to benefit the company by convincing
suppliers and customers towards promoting the goals through their contribution.
Marketing Skills
Marketing plays a leading role in ensuring that the business reaches the target market
through the innovative products that are produced. The market information will be through rivals
and information in the website. The manager and waiters should have outstanding marketing
skills that will be employed to explore the different markets that the company targets. The
restaurant manager is a marketing and business administration graduate (Westwood & Institute
Of Directors, 2002, pp. 29). The manager will be responsible to developing the necessary
marketing messages that will be distributed through well-designed leaflets, newspapers,
production stickers and the company’s website. This will require strong marketing skills that will
permit better designing of messages to the target market. Since the waiters do not have basic
marketing skills, they will be trained on the basics of marketing so that they market the
company’s products while they serve the customers (Kurtz & Boone, 2010, pp. 57). This kind of
training will be undertaken one month before the launch of the company towards equipping them

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with the necessary skills. In addition, after six months in business, the company will employ
sales representatives that will be responsible for marketing of the products that will entail
recruitment of graduates in marketing (Stutely, 2007, pp. 61).
Financial Analysis
The new business will require starting capital that will be used to finance the SSH
business where there are several options that will be available for the business. The following are
one option that we will considered while opening the new business:
Financial Option
The option for the business is to purchase an existing breakfast cereal restaurant. Thus,
by choosing this option it will be important because the business will not pay rent, but on the
side, this is the biggest initial capital from all the two alternatives. The purchase of the already
existing functional restaurant could also reduce costs of equipment and would need only minor
changes. The summary of the financial needs are shown in Appendix 1.
Cash Flow Statement
The estimated volume of daily menu sold in this case will be 200. The director had
recommended a volume of 350 dishes, but because SHH is a new firm at the market, this figure
was included to allow better prediction on actual demand as close as possible and avoid
overestimation of future sales. The volume of drinks will be averaged at 15 per cent of the dishes
sold over the lunch and in the evening service will be estimated at 50 per cent (Porter & Norton,
2009, pp. 12).