Market analysis of Hostess Brands' competitive position and decline

¶ … Competitor Product's Market

A short history of the organization and a description of their product

Hostess Brands, Inc. is a company set up in 1930 under the name Interstate Bakeries that later changed to Hostess Brands Inc. In November 2009. The company is located in the United States with its headquarters in Irving Texas. It has an operation centre in Kansas City, Missouri. The company works as a distributor and wholesale baker of snacks in the United States. It owns many brands such as Nature's Pride, Wonder Bread, Bakers Inn, Drake's and Dolly Madison. The company makes and sells cakes, loaves, snacks and rolls under different bakery brands (Smith, 2012).

These brands also make blue berry muffins, cheese Danishes, food cake donuts, honey buns and bear claws among others. Hostess gets revenue through selling of baked goods to mass marketers, supermarkets and stores in the U.S. The privately held bread and snack food producers also sell to consumers online and directly through their bakery outlets. The company along with its partners filed an appeal for reorganisation on January 11, 2012 in the United States bankruptcy court under chapter 11 (Smith, 2012).

Factors that affect demand, supply, and equilibrium prices in the market in which the competitor organization operates

Demand

According to data from Independent market research and Information Resources Incorporated, Hostess has experienced a significant decline in the demand for their bread products and sweet goods. Demand is the key factor in the production of any marketing product and Hostess's brands holds a significant demand. However, there have been factors in the recent times that have led to a consumer sluggish demand for their products. The company has experienced a series of bankruptcy within a decade, and it is currently facing a final liquidation. It is also struggling from a high structure cost and these factors affect its performance that in turn has an effect on consumer demand. This confluence of negative events including competitive pressures and rising commodity costs affects their demand level (Welch & Welch 2009).

Supply

Factors outside the control of individual producers affect the supply of commodities. One key factor is the cost of input of the company. This entails labour and capital. Hostess has had a series of bankruptcy, and this has a direct impact on their supply since it affects their capital. Also with the emergence of other companies producing the same products, there may be a change in consumer preference and in the price of such commodities. Competition from other companies such as Flowers Foods that just expanded its borrowing competence is another factor affecting supply (Welch & Welch 2009).

Equilibrium prices

Equilibrium prices arise when there is an imbalance between the company's supply of goods and the consumer's demand of the same commodity. According to the law of demand and supply, the price of a commodity in a competitive market will be at equilibrium depending on the available demand of that particular commodity. The fact that Hostess is on its way to liquidate has affected its equilibrium prices since this will lead to shortage of supply. Example before Hostess announced that it was going out of business, a box of Twinkies sold for a couple bucks. Currently their supply has stopped, and the price of the same box of Twinkies has increased (Welch & Welch 2009).

Definition of the market for the chosen product, including an analysis of its competitors, potential customers, or potential buyers

The U.S. cookie market has declined recently due to the increase of consumer interest in healthy eating. There is a high consumer demand for cookies that have high fibre, low fat, high protein level and low sugar varieties. To curb this increasing demand, the company has come up with cookies that will meet the consumer's needs that create a substantial opening to broaden their offerings. The high demand will enable Hostess to increase it supply and get high profits (Welch & Welch 2009).

Analysis of its competitors

Hostess will meet competition from other leading brands such as Kraft foods' Nabisco and Keebler Food Co that have emerged successful in the production of cookies. Kraft Foods Nabisco has remained the market leader with a steady of 36% of the market. Others include Pepperidge farm, which registered a raise in its market share (Welch & Welch 2009).

Potential customers

The company targets every segment of the population from young adults, parents, people who like snacking and older people. By creating a market segment, that is largely homogenous and physically good cookies, the company anticipates having a success in the market. This is a powerful factor of getting potential customers to acquire this new product (Welch & Welch 2009).

Issues or opportunities the industry faces that affect its competitiveness and long-term profitability with regard to the product

Price elasticity demand

This measures the receptiveness of consumer demand following a change in price. Various factors affect price elasticity of demand including the number of close substitutes, and the degree of necessity. If a commodity has a large quantity of substitutes, it becomes more elastic, and this will have a large impact on quantity demand. This will be a useful indicator to the company as it shows the company how a change in the product's price affects the consumer's demand. It will be crucial to know the price elasticity before changing the price (Blythe & Zimmerman, 2005).

Cost structure

This is the expenditure that a company must consider when manufacturing a product. The company can only improve its margin when it increases its sales prices or reduce its cost. Improving the cost of structure means, the company will reduce the input costs and processes through efficiencies, savings and chase the sales prices down to avoid giving their gains away. The company focus on its margin but not its capacity and volume utilisation. The company will have to consider a radical overhaul of business models, which are necessary to attain a real and constant margin development from existing product policies (McEachern, 2012).

Factors affecting variable costs, including productivity and others that change the supply of and demand for labour

Variable expenses include things such as inventory packaging, raw materials and sales commission. Sales and production are the primary factors that affect the variable expense. Other factors that affect the level of variable expense include transportation cost and changes in input cost. An increase in volume leads to an increase in the total variable cost with the costs per unit variable remaining the same. Information about variables is crucial to any company that is developing or expanding a product; as it will enable the company determine the best pricing strategies. This will enable the company endure poor financial times and will have more money that it can re-invest further growth (Blythe & Zimmerman, 2005).

Factors affecting fixed costs

Factors affecting the fixed cost include changes in technology, labour, changes in business organization and changes in the technology that the company uses. Companies have a diversity of fixed costs such as insurance, property, rent, loan repayments and salaries of the employees. A company can attempt to acquire buildings it occupies during times of high sales and profit. It can pay off outstanding loans and decrease the fixed costs, as this will bring more money for inconsistent cost and re-investment for growth (Blythe & Zimmerman, 2005).

Recommendations on how your organization can maximize their profit-making potential, and successfully compete in the new market

Every business owner wants to maximize his or her profits. They should put various things in to consideration to maximize on their profit and compete in the market. It is crucial for the company to pick a business venture that lines up with their interests and the potential market.

The company can maximize on profit through meeting the consumer's needs and demand. This means that the company should be flexible and change with the changing needs of consumers.

The company can choose the right location to expand its business and open new brands. It should also consider the closeness of the competition as this will enable it attain the equilibrium price that is essential the growth of the company as it increases the company's profit.

The company considers the use of advertisement as it is an essential way of becoming successful. Advertising will enable the company increase its businesses. Customers may give the owners good ideas concerning their products, and this is important for the company since customers determine the company's outcome.