FIJI Water Case Analysis - 2020 PDF

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Summary

Mandatory final take home case analysis on FIJI....

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FIJI Water Case Analysis Overview

July 27th, 2020 Commerce 4SA3 – CO3 Professor: Dr. Candice Chow Student #: 400092366 Peter Zheng

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Standard Framework:

Who is the main character? (from whom’s perspective are you analyzing the issue?) The main character is the FIJI Water management team, analyzing the rise of FIJI water and its obstacles along the way as well.

What is the main problem? What are the sub-issues? The main problem of the case targets FIJI water brand’s commitment to corporate social responsibility (CSR) amid their enormous carbon footprints around the globe, and its controversial carbon negative campaign which is being accused by environmentalist groups and general public as “green-washing” Sub issues that arise from the main problems include the following: 1. FIJI Water has had a rough relationship with the Fiji government, stemming from a twenty-cents-per-litre export duty on all mineral water exports by the company, resulting in a tax bill of FJ$24 million that would severely damage the bottom line of the company. This resulted in FIJI water and other companies on the island to boycott and cease operations, resulting in reduced export earnings, job loss of local workers and overall stagnate economic growth for the small nation. The unpopular tax strategy was soon dropped and a new less aggressive “water resource tax” was implemented. 2. FIRCA accusation of FIJI Water’s transfer pricing manipulation which resulted in temporary halted exports in 2008, resulting in stiff relationship between the company and Fiji government.

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What questions do you need answers to? 

Will FIJI water continue to establish good (CSR) amid continuous challenges from environmental groups, and become a truly carbon negative company?



Based on sub issue one, would FIJI Water and the local government maintain good relations in the future as the operation proves vital for both parties? Specifically, would providing good CSR discourage further potential export tax and regulations in the future?

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What are stakeholder’s expectations for FIJI Water moving forward to dispel its criticized CSR practices?

How are you analyzing the data? Describe your approaches and the data you are using? I will first be analyzing the data using the SWOT matrix which will clearly map out the strength, weakness, opportunity, and threats facing the management team of FIJI water. A SWOT analysis in this case will provide the company’s management team with insights on how to eliminate external threats while take advantage of opportunities to better promote their brand and its carbon negative campaign.

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Strength 

Success in U.S. market expansion as





Failure to expand in the U.K. market due

second selling position among

to the large carbon footprint required to

imported still water brands while

provide the product to the market, and

being endorsed as elegant and unique

backlash from British environmentalists

drink by celebrities (success in

and conservationists

packaging and marketing) 

Weakness



Conservation groups’ dismissal of carbon

Exclusive distributorship with

negative and “every drop is green”

Cadbury Schweppes across many

campaign by FIJI water, and accused it as

international markets

“greenwashing”

Treatment and support for local Fijian employees and community involvement

Opportunities 

Potential to enter other large global

Threats 

Relationship with the Fiji government

markets not mentioned in the case

which first arose from export taxation

such as Mexico, China, and Brazil as

hike in 2008, then transfer price

they one of the top consumers in

manipulation concerns

global bottled water consumption



according to Exhibit 1

Continuous practice of corporate social responsibility



Strong competition in U.S (Nestle, Coca Cola, PepsiCo and Danone)

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Secondly, I will use PESTEL analysis to identify external forces facing FIJI water Political Factors: Important political factors for this specific case remains to be export tax policies and trade restrictions which occurred in the past. Further factors may include environmental law policies which may affect the business. Economic Factors Limited economic factors were mentioned in the case article, but exchange rates and inflation rates factors would become a minor factor in existing markets. Research on disposable income of consumers for future markets could be key due to the product’s higher price. Social Factors FIJI water has provided tremendous support for the local community in Fiji, especially for its local workers at the bottling plant by providing food, transportation, child education support, and overall established strong relationship between the workers and company. External social factors include continuous safety and health of the workers. Internationally on the consumer front, FIJI water would need to focus on its target population considering factors such as health consciousness, age distribution and lifestyle attitudes in existing and potential markets. In existing markets, FIJI water has branded taken advantage of the health and fitness conscious baby boom generation. They have also established themselves as elegant and “trendy” drink for the younger generation. In potential future markets like China and Mexico, the company would likely pursue similar markets and target certain customers. Technological Factors:

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Factors such as research and development (R&D) activities could be required for future market entry. In the example of FIJI Water’s U.K. expansion, the country possessed quality and cheap tap water that resulted in the backlash of the idea of bringing water from 10,000 miles. For future market entries, the company should be aware of the resources available that could become roadblocks to the expansion. Environmental Factors Environmental concern is the biggest topic of the case and continues to be criticized against companies with high carbon footprint. External environmental factors for FIJI Water include carbon footprint, sustainable CSR practices and consumers attitudes towards greener products and packaging. As mentioned in the case article, FIJI Water requires a staggering amount of energy and fossil fuel to transport its products across the globe. Conservationists and consumers have realized that transporting a raw material thousands of miles resulting in an unrecyclable plastic package is highly unnecessary. Even with growing plastic water bottle sales, would the company’s high carbon footprint lose them customers down the line? Legal Factors Limited legal factors were mentioned in the case article as well, but it did mention that Greenwashing is prohibited in the Commonwealth Trade Practices Act 1974 in Australia. Since FIJI Water’s carbon negative campaign has been highly criticized as it has failed to provide specific calculations on the reduction method, more consumer protection laws could arise in future and current markets.

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What are the insights? It’s in FIJI water’s best interest to continue practice CSR amid challenges. They have positioned themselves as one of the popular brands in multiple markets and will need to convince consumers and consumers of its carbon negative promises.

What options do you have? (name 3) 1. Continue to establish good relationship with the Fiji government while providing excellent corporate practices in the Fiji Islands. For a company that would have lost FJ$24 million per year in the late 2000’s due to export tax hikes, it is critical to maintain a good relationship with the local government to protect the company’s bottom line. The tax resulted in temporary worker layoffs and cease of production of one of the biggest exporters of the nation. This negatively effected both the company and government before the decision was reversed. The re-introduced tax in 2008 costed the company FJ$1.5 million a year, and another change in the tax policy would likely threaten the firm’s profitability margin.

2. Further improve and modify its carbon negative campaign Based on Exhibit 1, global bottled water market consumption is increasing, and FIJI Water will more than likely increase supply to keep up with the demand. Clearly, the company has failed to convince the general public its carbon negative campaign, but it is still critical for the company to position themselves as one of the leaders in sustainable production and supply for their products. In the case article, FIJI Water provided several ways to reduce its carbon emissions including reduction of bottle packaging, fuel efficient supply chain transports, restoration of

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bottling plant. FIJI Water should continue to practice the above and perhaps the following as well: 

Commit to 100% recycled plastic water bottles



Offset carbon outputs by investing in “green” investments

3. Diversify business plan by having other lines of water bottles from different extraction source A major sustainability concern in the case article was the carbon footprint required to transport FIJI water shipments across the global markets. As mentioned, the products are transported thousands of miles away on ships then travelled in trucks into metropolitan areas. Local U.S. companies such as Arrowhead, Poland Spring and Zephyrhills all extract water from sources in the country, thus decreasing their carbon footprints. FIJI Water could look to have more than one water source located in popular markets to decrease the company’s carbon footprint, but still offer their original product as well. This would additionally diversify operating risks for the company.

What is your recommendation and why? My recommendation would an integration of both option 1 and 2. The case article assessed the sustainability of FIJI water’s operations and deemed it a well marketed luxury good that requires an unnecessary and extensive environmental impact. Both its carbon negative campaign and treatment of the Fiji community has gained backlash and remains to be improved as the firm’s CSR practices.

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Any risks / concerns to note Risks not noted above include the sustainability of the extraction efforts in Fiji. The brand FIJI water has one product which is a raw material coming from one source. Although not mentioned in the case article, if extraction efforts are faster than the aquifer’s replenishment rate, the company may face problems of business continuity. This is part of the reason for option 3 above. Another risk would be a nation-wide ban on plastic water bottles for public purchases and consumption. In the case of the company’s failed U.K. market entry, if the government deems tap water to be more practical and cheaper, consumers in that market may ditch plastic water bottles altogether.

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