ECONOMICS PROJECT

NISSIN FOODS COMPANY History and Development Nissin Food Products Co. Ltd of Japan, which is established by Momofuku Ando on September 4 in 1948, is the first company sold instant noodles. The aim of this company is to let people eat more efficiency and healthy as our daily habits were being streamlined for speed. In 1989, one of its product “” had already gained 70% of the cup type noodle market in US. This shows that the brand of was quickly developed and its product was accepted by consumers successfully. Nissin Foods expanded its market share by explored the overseas market and create taste cater for different local markets. Nissin Foods has established offices and factories in various countries and the company will established 15 more factories in Thailand, the Philippines, India, China, Brazil and Hong Kong in the next thirty years. Also, as people take more care of their health in recent year, Nissin Foods gave a lot of resources to improve the nutritional value of its product to ensure their consumer eat more healthily.

Ownership and Market Structure Nissin Foods is a public limited company which shares can be transacted at a stock market and have limited liability. Nissin Foods is oligopolistic. Except Nissin Foods, there are few sellers dominating the market, for example Toyo Suisan. In this oligopolistic market, both Nissin Foods and Toyo Suisan has great market power, they sell heterogeneous food. Both of them are price searcher. They use different market strategies to expand their market share, for example Nissin Foods improve the nutritional value of its product to attract some consumers who are more care about their health. Once Nissin Foods’ products have higher nutritional value than Toyo Suisan’s, it may affect Toyo Suisan. As they are in a competitive market, both price or non-price competitions are common. One changes its marketing strategies; the other may follow to maintain their market share and profits.

What to produce? How to produce? For whom to produce? Nissin foods produce different kinds of instant food to satisfy humans wants which eat more efficiency and healthy. It set up manufactured plants all over the world to decrease the cost of production. It puts a lot of resources to create taste cater for different markets to attract more consumers to buy their products. For example, it creates the cheese-favoured noodles for Americans, spicy noodles for the one who loves peppery hot, increase noodles nutritional value for the one who take more care of health

Facing the fierce competition, and focusing on each problem, Nissin Foods Company has a series of marketing process.

Firstly, it understands the marketplace and a customer needs and wants. They make research on customers and the marketplace regularly. Then, they manage marketing information and customer data.

Secondly, the company designs a customer-driven marketing strategy. It selects customers to serve: market segmentation and targeting. Then it decides on a value proposition.

Thirdly, the company constructs a marketing program that delivers superior value: We are going to explain it by 4P marketing strategies----Product, Price, Place and Promotion.

1) Product

The product can meet the taste and preference of most of the targeted customers. It provides convenient and cheap meals for them. It requires customers needs and it can satisfy customers.

There are various types of in the production of Nissin Foods Company, such as Demae Iccho, Cup Noodles, FUKU, Nupasta, Nissin Cup Type Rice Vermicelli, etc. It provides various choices for customers.

Also, the branding and packaging attract customer to buy. The history of the branding is long and it let customer think that it is trustable since the branding reflects the product quality. It helps company has basis for product’s quality story.

The eye-catching packaging makes people more willing to buy. For instance, the red packaging of Demae Iccho instant noodle becomes famous and familiar among the customers. It’s because it let customer identify the product more easily. The convenient packaging can ensure product and user safety. In short, it creates benefits such as protection, convenience and promotion.

Suggestions:

Product as what we have discussed, the products line of Nissin Foods is wide. However, as the modern people have more and more health-consciousness, they pay more attention on the nutrients of the food they intake, not only focusing on their favours.

In the instant noodle, there is the possible presence of oxidation products resulting from poor maintenance of the oil. If the cooking oil is not maintained at the proper temperature or changed as often as necessary, these oxidation products, which are suspected to pose various health risks, can be present in the foods. Proper production standards reduce the risk.

Another concern is that, it was suspected that harmful substances could seep into the soup as hot water was added to instant noodles in a cup. After a series of studies were conducted, the suspicion was eradicated.

For instance, the media confuse styrene monomer, which could be extracted from the expandable polystyrene cup in small quantity but does no harm, with styrene dimmer and styrene trimmer both of which were designated as environment hormone or endocrine disruptor. Neither styrene dimmer nor styrene trimmer is extracted from the polystyrene cup, nor therefore the charge was found to be groundless.

Undouedly, the large and wide production line brings us a lot of choices and favours, but, they are all unhealthy instant noodles which are known as junk food. The data also shows that the wide variety of choices cannot keep their sales anymore. Nissin Foods Company released a data that the net sales decreased year on year on lower sales of open-price products. Therefore, we suggested the Nissin Foods to develop a production line which has the gimmick of “healthy” and “environmentally-friendly”. For example, making not-fried noodles which are with fewer seasoning and organic ingredient. Also, they can have a change on the packages like not packing it separately.

2) Price

The cheap price can meet the pricing objectives: profit maximizing objective, market share leadership objective, competition objective, survival objective and produst quality leadership.

Company sometimes lowers the price of product for promotion. Set lower prices to boost market share since it can gain profit for long-term. The company also analyzes competitors’ costs, prices and products. Nissin Foods Company sometimes cut their price because the company considers competitors’ price, which is lower, and responses to the price change. Suggestions:

Nissin Foods Company can use the price-adjustment strategies more even. It can provide cash discount, seasonal discounts, promotional allowance and quantity discounts.

Price In order to attract more customers, the company can have some “season sale”, to decreasing the price, but it is very difficult for them to set a suitable price which can balance their costs and revenues.

Since in this big market, every individual firm is price-taker, they have to search for a price which can maximize their profit. We urge the company to do more research on the tastes and preferences of the public, and estimate their demand in order to set a suitable price.

3) Place

The NISSIN FOODS Group aspires to create and develop market-leading brands in our chosen food product categories for markets around the world. The first overseas plant was set up in Los Angeles in 1970.Over the next thirty years, 15 other manufacturing plants were established in Thailand, the Philippines, India, China, Brazil and Hong Kong.

The worldwide network helps them easily sell the instant noodle in the local market, such as easily transport to different kinds of convenient stores, supermarkets, etc.

Suggestions:

There may be horizontal conflict and vertical conflict when member cooperation. In this case I suggest that the company can set clear rules and regulations among the members and the various types of wholesalers.

Although there are many overseas branch can increase the economics of scale, it is important that to control over quality of service and goods. Nissin Foods Company should also choose the well performance and suitable intermediaries.

It can use intensive distribution in order to make the products available where and when customers want them.

4) Promotion The company are using the integrated marketing communication, it carefully integrated and coordinates its many communication channels to deliver a clear, consistent, and compelling message about organization and its brands. The promotion mix includes advertising such as television advertising and radio advertising, personal selling, public relations, direct marketing, and sales promotion. For advertising, it can reach masses of geographically dispersed buyers at a low cost per exposure. It can repeat a message many times. For personal selling, it is the most effective tool at building preferences, convictions and actions. For public relations, it is very believable and dramatizes the company. For sales promotion, it can attract consumer attention easily and offer strong incentives to buy.

Suggestions:

Promotion other than the advertisement on the television, the company can hold some drawings. Maybe putting the drawings labels on the packages, it can attract more people to buy their goods. Moreover, they can have some discounts like “buy 3 get 1 free” etc. or buying the Nissin products can have a limited edition Nissin doll keychain. These are the ways a firm can use to promote their products.

We believe that our investigation on the 4P strategy can help the Nissin Food Company to increase their profit.

Fourthly, the company builds profitable, strong relationships with chosen customers and creates customer delight. Fifthly, the company captures value from customers to create profits and customer equity. Nissin Foods Company has been successfully created satisfied, loyal customers for more than 50years. As a result it has increased share of market and share of customer.

There are many factors affecting demand or supply of the Nissin Foods Company’s instant noodle in the market. They are including The increase in substitutes’ demand, The increase in Income of consumer, The health and food safety problem, The decrease in number of manufactures and The increase in cost of raw material.

1) The increase in substitutes’ demand In the instant noodle market, there are many substitutes exiting. For the past few years, one of the main substitutes , which is the highest selling brand of noodles in Korea, is being more popular among people. It is a spicy brand of Korean instant noodles produced by Nong Shim Ltd. More people become interested in Korean culture and Korean food. Consumers started to change their taste and preference.

Also, Nong Shim Ltd promotes its product to overseas and spreads more money on advertisement. Then, Shin Ramyun is exported to over 80 different countries. As a result, the demand for Shin Ramyun increases. The price and quantity transacted both increases. So, the total revenue of the Shin Ramyun increases.

Since Nissin Foods Company’s Demae Ramen Instant Noodle and Shin Ramyun are substitutes for each other, when the demand for Shin Ramyun increases, the demand for Demae Ramen Instant Noodle will therefore decrease. The price and quantity transacted both decreases. The total revenue of the Shin Ramyun decreases in this case.

2) The increase in Income of consumer Rising living standards in Hong Kong , people’s income increases. The instant noodle is considered as inferior goods. In the economic crunch, the purchasing power of the consumers in supermarkets is greatly reduced, but instant noodles Demae Ramen Instant Noodle’s sales have increased by 20%.

Since the instant noodle is considered as inferior goods, the demand for Demae Ramen Instant Noodle will decrease as income increases. Rising affluence in Hong Kong is giving consumers a rare luxury of more leisure time to ponder issues as improving lifestyle for better health, Therefore, people’s demand for superior goods such as salad, spaghetti, etc. 3) The health and food safety problem A research study released by Consumer Council and Centre for Food Safety reveals that the amount of sodium in Nissin Foods Company’s instant noodles. The nutritionists suggest that prolonged eating of instant noodle is bad for health, such as overweight, obesity and increased risk of heart disease.

Besides, there was news about a Japanese woman ate a pack of contaminated insecticide Nissin "Cup Noodle" cup noodles and became sick. Although most of the Nissin Cup Noodles, which are sold overseas, are made in abroad industries, it discourages people to buy their products. As a result the medical research study has decreased the demand for Nissin Instant Noodles rapidly.

4) The decrease in number of manufactures At the same time, after the food safety problem came out, expecting a contraction in business, some instant noodle manufactures have started to leave the industry. Fewer firms producing instant noodle will decrease the supply.

The latest price survey conducted by the Consumer Council shows that Nissin Instant Noodles have generally become cheaper in Hong Kong. It’s because the decrease in demands is greater than the decrease in supply. As a result, the equilibrium price will decrease (from P1 to P2). The price of Nissin Instant Noodles sold in Yata department store has been decreased by 6.7% than the price at 2009.

The quantity transacted decreases (from Q1 to Q2). The total revenue will also decrease. (the shaded area)

5) The increase in cost of raw material In 2009, the rising prices of wheat and flour, which are inputs in the production of Nissin Instant Noodles, increase the cost of production. It leads to a decrease in the supply of Nissin Instant Noodles. As a result, Nissin Foods Company is set to make a attempt to hike prices.

However, the active sales promotion of Nissin Foods Company such as selling economic packs of instant noodle, television advertisement, etc. Since the increase in demand is larger than the decrease in supply, the equilibrium price will increase (from P1 to P2). The quantity transacted increases (from Q1 to Q2). The total revenue will also increase. (the shaded area) Foods Company released a data that operating income increased by 5.5% to ¥1,043 million (U.S.$13 million) despite soaring raw materials prices and higher selling expenses due to active sales promotion.

In order to earn more and money and maximize its profit, both internal expansion and external expansion take place in Nissin Food Company.

Internal Expansion Internal expansion is the expansion of a firm on its own. To do so, the firm acquires additional inputs directly from suppliers of these inputs, not indirectly from another firm. Therefore, Nissin Foods Company sets up various brands of instant noodles on it own, such as Demae Itcho(出前一丁) and Cup Noodles(合味道). It is a kind of internal horizontal expansion, which is engaged in the same production stage of the same product. ‘The same product ’here also includes substitutes, i.e. related and competing products. Demae Itcho and Cup Noodles are example of the same product as both of them are instant noodles. Either one of them can satisfy the same want of a consumer. For example, UFO Kamen Yakisoban(UFO 飛碟炒麪) was launched on May 1976.

External Expansion External expansion is the expansion of a firm by combining with another firm. By doing so, the firm can acquire additional inputs which were originally employed by another firm. Nissin Foods Company takes horizontal integration. Horizontal integration occurs when a firm expands into a business that is engaged in the same production stage of the same product. ‘The same product ’here also includes substitutes, i.e. related and competing products. In 1989, Nissin Foods Company integrates with Winner Food Products(永南食品有限公司) which is one of the biggest food manufacturers in Hong Kong. Most of the local instant noodles are produced by it. 19 April 2004, Nissin Foods Company cooperated with Hualong Company(華龍面業集團) to set up a joint venture, named Hualong Nissin Food Company(華龍日清食品有限公司). A joint venture is formed by two or more companies to develop, produce or sell products. Companies usually bring in different types of assets, technologies, knowledge and expertise.

Motives of expansion

1. Enjoy economies of scale Through horizontal expansion, Nissin Food Company can enlarge its scale of production. It may enjoy economies of scale and lower its average production coat. The expanded firm may gain from increased specialization in management, larger discounts in bulk purchases of raw materials and cost cuts in borrowing and marketing.

2. Increase market share and market power Market power is the ability to influence the market price. Through horizontal expansion, Nissin Food Company can enlarge the market share of its product. With a larger market share, the firm is more able to affect the market supply, influence the market price and maximize its profit.

3. Reduce competition A price war is a form of price competition in which competing firms cut the prices their products continuously in order to attract more customers. Through horizontal integration, competitors (i.e. Winner Food Products ) is combined into Nissin Food Company. Two firms can cooperate to charge customers higher price since they have integrated. This allows Nissin Food Company to maximize its profit. With fewer competitors, the combined firm is more able to avoid price wars. It can also cut expenditure on advertisements and offer fewer special benefits to customers, e.g. discounts and gifts.

4. Reduce duplication of facilities Competing firms producing the same product have similar facilities. After horizontal integration, Nissin Food Company can cut some duplicate resources to save on costs. Moreover, the firm may make more efficient use of some resources. Nissin Food Company can reduce duplication of resources by closing some of its manufacturing factories.

Expanding Market Global Demand for Instant Noodles

Updated on April 25, 2013 Estimated by World Instant Noodles Association (WINA)

Country / Region 2008 2009 2010 2011 2012

Total 92,110 92,690 96,370 98,740 101,420

1 China / Hong Kong 42,530 40,860 42,300 42,470 44,030

2 Indonesia 13,700 13,930 14,400 14,530 14,100

3 Japan 5,100 5,340 5,290 5,510 5,410

4 Vietnam 4,070 4,300 4,820 4,900 5,060

5 India 1,480 2,280 2,940 3,530 4,360

6 USA 4,150 4,290 4,180 4,270 4,340

7 Republic of Korea 3,340 3,480 3,410 3,590 3,520

8 Thailand 2,170 2,350 2,710 2,880 2,960

9 Philippines 2,500 2,550 2,700 2,840 2,720

10 Brazil 1,690 1,870 2,000 2,140 2,320

11 Russia 2,400 2,140 1,900 2,060 2,090

12 Nigeria 1,400 1,600 1,670 1,790 1,900

13 Malaysia 1,210 1,200 1,220 1,320 1,300

14 Taiwan 1,110 1,070 1,020 1,010 1,010

15 Mexico 860 860 830 850 890

15 Nepal 510 590 730 820 890

17 Saudi Arabia N/A N/A 560 590 580

18 Ukraine 500 520 540 540 560

19 Australia 320 330 340 340 350

20 UK 260 260 260 300 340

21 Poland N/A 300 300 300 300

21 Myanmar 210 210 240 240 300

23 Cambodia 240 240 330 260 260 Reference:

13 款即食麵含鈉量超標 ttp://www.singtao.com/archive/fullstory.asp?andor=or&year1=2010&month1=03&d ay1=16&year2=2010&month2=03&day2=16&category=all&id=20100316a08&keywo rd1=&keyword2=h

日婦食日清杯麵中毒 http://www.singtao.com/archive/fullstory.asp?andor=or&year1=2008&month1=10& day1=24&year2=2008&month2=10&day2=24&category=all&id=20081024a10&keyw ord1=&keyword2=

Global instant noodle sales will reach 100 billion packs in two years: new WINA Chairman. http://www.thefreelibrary.com/Global+instant+noodle+sales+will+reach+100+billion +packs+in+two...-a0291894205

超市老闆：緊縮下一丁麵銷量升兩成 http://news.hk.msn.com/international/%E8%B6%85%E5%B8%82%E8%80%81%E9%9 7%86%E7%B7%8A%E7%B8%AE%E4%B8%8B%E4%B8%80%E4%B8%81%E9%BA%B5% E9%8A%B7%E9%87%8F%E5%8D%87%E5%85%A9%E6%88%90 http://www.nissinfoods.com.hk/tch/ContentList?type=4#tab4

維基百科 - 日清食品 http://zh.wikipedia.org/wiki/%E6%97%A5%E6%B8%85%E9%A3%9F%E5%93%81