Importance Of Customer Service Marketing Essay

The service industry is the face of any organisation,be it the technical support division of a computer company or the staff of a restaurant.If a customer’s queries are not answered

by a friendly representative,he might think twice,before calling them back again.The Tech.Support representative(TSR) represents the company far more than

the CEO himself.Atleast for the customer,he is far more important.If the TSR provides efficient service,he virtually doubles up the chances of the company

acquiring future customers and retaining the exisiting ones.

One’s expectations vary largely based on his environment.Familiar environment equals comfort for most of us

and tourists are normal people in an unfamliar environment.They don’t know what will greet them in the new place,but its only human nature to hope for only the best.

For example :- A friendly salesperson smiling at a cranky child can instantly calm a hassled mom and child,making them linger longer instead of just dashing out.

Similarly a friendly server in a restaurant can make the guests feel at home.A little attention to detail,a casual suggestion from the menu,asking after

their travel plans and answering their queries about local attractions may be a good way to start.Good ambience and presentation,friendly servers,

make even regular fare taste grand.Its small things like these that make an ever-lasting impression.When a customer walks away happy,not only is likely to remember an establishment

but he is also likely to recomend it,when asked.

now a days every manager’s are concentrating in building a positive customer relationship.many organisations have proposed

that satisfying the customer is not enough and firms should aim to delight their customers.

Customer satisfaction is defined as”the individual’s perception of the performance of the product or service in relation

to his or her expectations”(schiffman and kanuk,2004).however it is noteworthy to state that the perceptions of service

quality might differ among service recipients and service provider(nightingale,1985).

Studies have identified atmosphere as a critical variable for explaining customer satisfaction among hotel guests, regardless of geographical area, nationality of guests, and type of hotel.

(Troye and Heide 1987).

Bitner quite rightly points out that atmosphere is more important for service organizations than it is for producers of tangible goods.

(Bitner 1995).

it is important to understand the customer expectations and deliver accordingly in order to satisfy customers.

now a days many organisations are moving from satisfaction to delight in an efffort to obtain loyal customers and profitable

operations.

according to patterson(1997)”customer delight involves going beyond satisfaction to delivering what can be best described

as a pleasure experience for the client”.altough joy remains an important element of delight,the study suggests that

a greater number of people are exhilarated,thrilled and to a lesser extent exuberant(kumar et al.,2001).

customer satisfaction aims in delivering according to the customer expectations but customer delight requires exceeding the

customer expectations.

people dont talk about adequate service,instead they tell anyone who will listen about really bad or delightful services.

seven deadly sins of service are:-

apathy,brush-off,coldness,condescension,robotics,rule book,runaround(karl albrecht,at america’s service)

it is difficult with services to give the customer an error free experience because of the human factor involved in service

transactions.services are not mass produced on a factory line but are delivered.

the first impression is the last impression.so it is the duty of all staff to give the guests a good experience.if the guest

experiences a good srevice he is satisfied he spreads the same experience to 10 more people by word of mouth.

since guest is staying at the hotel he is home awy from home so a good service should be provided to him so that

the guest feels comfortable and he is satisfied and it a good service makes him feel that he is taken care off.

(alastair.m.morrison,hospitality and travel marketing,fourth edition).

tourism comprices the activities ofpersi=ons traveling to and staying in places outside their usual environment for

not more than one consecutive year for leisure,business and other purposes.

there are many reasons why people travel,but the two main reasons are for pleasure and business.

from a social and cultural perspective,tuorism can have both positive and negative impact on communities.

physical needs,the desire to experience other cultures and an interest in meeting new people are some of the motives of travelers.

service is important to meet the guest’s expectations and to satisfy his needs and wants.proper training should be given to all staff about services.

if all staff members perform the services properly,the guest are pleased and the hotel gets repeat business.instead of advertising and spending lot of money,

if services are given properly to the guests,the guests advertises by word of mouth.

(john.r.walker,2008,introduction to hospitality,fifth edition).

Among all customer demands, service quality has been increasingly recognized as a critical factor in the success of any business

(Gr�nroos, 1990; Parasuraman etal., 1988).

customer satisfaction and service quality have become important aspects for the researchers.Both concepts have strong impact on business performance

and customer behaviour. Service quality leads to higher profitability (Gundersen et al., 1996).

Customer satisfaction has been a popular topic in marketing practice and academic research since initial study of customer effort, expectations and satisfaction.

(Cardozo’s,1965)

a customer is satisfied if the services experienced by him exceeds his expectations on the other hand he is dissatisfied if he experiences a poor service

or the services experienced by him do not meet to his expectations.

Studies show that customer satisfaction may have direct and indirect impact on business results.

Anderson et al. (1994), Yeung et al. (2002), and Luo and Homburg (2007) concludes that customer satisfaction positively affects business profitability.

According to the world travel n tourism council(2003)(wtc),travel n tourism is the biggest industry in the world on virtually any economic measure,including gross output,value added,capital investment,employment and tax contributions.

Meis(1992) points outs that the tourism industry involves concepts that have remained amorphous to both analysts and decision makers.

over the past few years,studies have been written on how to improve global tourism behaviour.

the research embraces work associated with the handling and management of culture and cultural differences including the nature and role of organisational cultures within a services environment.

(Hoecklin, 1996; Joynt and Warner (Eds), 1996; Cushner and Brislin (Eds), 1997; Usunier, 1993; Samli, 1995; Harris and Moran, 1979; Wilson, 1996)

the important vein of cultural analysis is found in international marketing literature , where culture and cultural differences are attributed to having an important influence in explaining customer behaviour and in helping to design effective marketing strategies and tools.

( Usinier, 1993; Keegan, 1984).

hall(1976) concludes culture as the �pattern of taken-for-granted assumptions about how a given collection of people think, act and feel as they go about their daily affairs�

customers purchases and consumes a wide range of services and based on their experiences they judge the quality and satisfaction of the services.

customers in new environments with different cultures may lack the social support system and networks which mediate service environments within their own culture so

the customers get dissatisfied and it often forms the basis for disappointment,fear and loneliness which can result in culture conflict.

(Cushner and Brislin, 1997, p. 11).

when the tourist visits a hotel it is the responsibility of the hotel staff to make him feel comfortable.

when the customer goes to other country he does’nt know the social and cultural values of that country and he even faces language barrier,so it

becomes difficult for him to communicate with the people.the staff should help the customers with transition being patient in helping them understand there local language.

The service industry is the face of any organisation,be it the technical support division of a computer company or the staff of a restaurant.If a customer’s queries are not answered

by a friendly representative,he might think twice,before calling them back again.The Tech.Support representative(TSR) represents the company far more than

the CEO himself.Atleast for the customer,he is far more important.If the TSR provides efficient service,he virtually doubles up the chances of the company

acquiring future customers and retaining the exisiting ones.

One’s expectations vary largely based on his environment.Familiar environment equals comfort for most of us

and tourists are normal people in an unfamliar environment.They don’t know what will greet them in the new place,but its only human nature to hope for only the best.

For example :- A friendly salesperson smiling at a cranky child can instantly calm a hassled mom and child,making them linger longer instead of just dashing out.

Similarly a friendly server in a restaurant can make the guests feel at home.A little attention to detail,a casual suggestion from the menu,asking after

their travel plans and answering their queries about local attractions may be a good way to start.Good ambience and presentation,friendly servers,

make even regular fare taste grand.Its small things like these that make an ever-lasting impression.When a customer walks away happy,not only is likely to remember an establishment

but he is also likely to recomend it,when asked.

now a days every manager’s are concentrating in building a positive customer relationship.many organisations have proposed

that satisfying the customer is not enough and firms should aim to delight their customers.

Customer satisfaction is defined as”the individual’s perception of the performance of the product or service in relation

to his or her expectations”(schiffman and kanuk,2004).however it is noteworthy to state that the perceptions of service

quality might differ among service recipients and service provider(nightingale,1985).

Studies have identified atmosphere as a critical variable for explaining customer satisfaction among hotel guests, regardless of geographical area, nationality of guests, and type of hotel.

(Troye and Heide 1987).

Bitner quite rightly points out that atmosphere is more important for service organizations than it is for producers of tangible goods.

(Bitner 1995).

it is important to understand the customer expectations and deliver accordingly in order to satisfy customers.

now a days many organisations are moving from satisfaction to delight in an efffort to obtain loyal customers and profitable

operations.

according to patterson(1997)”customer delight involves going beyond satisfaction to delivering what can be best described

as a pleasure experience for the client”.altough joy remains an important element of delight,the study suggests that

a greater number of people are exhilarated,thrilled and to a lesser extent exuberant(kumar et al.,2001).

customer satisfaction aims in delivering according to the customer expectations but customer delight requires exceeding the

customer expectations.

people dont talk about adequate service,instead they tell anyone who will listen about really bad or delightful services.

seven deadly sins of service are:-

apathy,brush-off,coldness,condescension,robotics,rule book,runaround(karl albrecht,at america’s service)

it is difficult with services to give the customer an error free experience because of the human factor involved in service

transactions.services are not mass produced on a factory line but are delivered.

the first impression is the last impression.so it is the duty of all staff to give the guests a good experience.if the guest

experiences a good srevice he is satisfied he spreads the same experience to 10 more people by word of mouth.

since guest is staying at the hotel he is home awy from home so a good service should be provided to him so that

the guest feels comfortable and he is satisfied and it a good service makes him feel that he is taken care off.

(alastair.m.morrison,hospitality and travel marketing,fourth edition).

tourism comprices the activities ofpersi=ons traveling to and staying in places outside their usual environment for

not more than one consecutive year for leisure,business and other purposes.

there are many reasons why people travel,but the two main reasons are for pleasure and business.

from a social and cultural perspective,tuorism can have both positive and negative impact on communities.

physical needs,the desire to experience other cultures and an interest in meeting new people are some of the motives of travelers.

service is important to meet the guest’s expectations and to satisfy his needs and wants.proper training should be given to all staff about services.

if all staff members perform the services properly,the guest are pleased and the hotel gets repeat business.instead of advertising and spending lot of money,

if services are given properly to the guests,the guests advertises by word of mouth.

(john.r.walker,2008,introduction to hospitality,fifth edition).

Among all customer demands, service quality has been increasingly recognized as a critical factor in the success of any business

(Gr�nroos, 1990; Parasuraman etal., 1988).

customer satisfaction and service quality have become important aspects for the researchers.Both concepts have strong impact on business performance

and customer behaviour. Service quality leads to higher profitability (Gundersen et al., 1996).

Customer satisfaction has been a popular topic in marketing practice and academic research since initial study of customer effort, expectations and satisfaction.

(Cardozo’s,1965)

a customer is satisfied if the services experienced by him exceeds his expectations on the other hand he is dissatisfied if he experiences a poor service

or the services experienced by him do not meet to his expectations.

Studies show that customer satisfaction may have direct and indirect impact on business results.

Anderson et al. (1994), Yeung et al. (2002), and Luo and Homburg (2007) concludes that customer satisfaction positively affects business profitability.

According to the world travel n tourism council(2003)(wtc),travel n tourism is the biggest industry in the world on virtually any economic measure,including gross output,value added,capital investment,employment and tax contributions.

Meis(1992) points outs that the tourism industry involves concepts that have remained amorphous to both analysts and decision makers.

over the past few years,studies have been written on how to improve global tourism behaviour.

the research embraces work associated with the handling and management of culture and cultural differences including the nature and role of organisational cultures within a services environment.

(Hoecklin, 1996; Joynt and Warner (Eds), 1996; Cushner and Brislin (Eds), 1997; Usunier, 1993; Samli, 1995; Harris and Moran, 1979; Wilson, 1996)

the important vein of cultural analysis is found in international marketing literature , where culture and cultural differences are attributed to having an important influence in explaining customer behaviour and in helping to design effective marketing strategies and tools.

( Usinier, 1993; Keegan, 1984).

hall(1976) concludes culture as the �pattern of taken-for-granted assumptions about how a given collection of people think, act and feel as they go about their daily affairs�

customers purchases and consumes a wide range of services and based on their experiences they judge the quality and satisfaction of the services.

customers in new environments with different cultures may lack the social support system and networks which mediate service environments within their own culture so

the customers get dissatisfied and it often forms the basis for disappointment,fear and loneliness which can result in culture conflict.

(Cushner and Brislin, 1997, p. 11).

when the tourist visits a hotel it is the responsibility of the hotel staff to make him feel comfortable.

when the customer goes to other country he does’nt know the social and cultural values of that country and he even faces language barrier,so it

becomes difficult for him to communicate with the people.the staff should help the customers with transition being patient in helping them understand there local language.

Advertising Creativity And Communications Marketing Essay

This essay will first identify the advertising benefits for the company and why companies do advertising with regard to some credible authors of marketing books. Secondly, it will investigate the strong models based on persuasion theory with the help of different examples from UK advertising market. Next, it will examine the ATRN model of Ehrenberg based on reinforcement. Finally, this essay will present a view that the companies are using different strong and weak models to attract the audience to buy their products.

In this modern era of technology many companies using tool of advertising to aware the customers about the features of their products and services. The advertising is a form of creating and sending a message to certain targeted population and hoping for their reaction towards your product. Historically the producers developed a product and then advertise it to find the market for the product but in today’s world the product is specially design with the customer interest (Wells et al, 2006). In the recent past, the marketing concept has increased dramatically. The companies are started putting huge amount of budgets into advertising to produce high profits for their organization. The advertising particularly helps to create awareness because people do not buy those products they have never heard of them before. The advertising is very important for new products to launch them into segmented market. The relationship between the customer and the company need to be build up by the help of effective advertising (Farbey, 2002). Globalization made the companies to expand their businesses into other markets around them. This fact has increased the competition among the competitors. In this competitive world, it is made compulsory for the company to advertise and protect themselves from the primary competition (Wells et al, 2006). Advertising is only as strong as the product and service because you can only sell poor product at once time but to sell it for twice you have to speak truth with your customer’s. The effective campaigns are making customers more loyal to the company. Advertising can be a strong or weak force for the company (Farbey, 2002).

The Strong theory and models are based on persuasion and on the other hand the weak theory is based on reinforcement. Persuasion is a process which includes changing of attitudes and manipulated the thoughts of customers to change their believes and habits (Health, 2007). There are two types of persuasion, Rational and Emotional persuasion. Rational persuasion is about explaining the benefits, advantages, likeness and different incentives where as emotional persuasion has the same features but it can create a strong relationship and make brand most successful. When the result come to calculate the efficiency of them then it’s very hard to evaluate the effectiveness of emotional as compare to rational persuasion (Health, 2006).

The strong school of advertising really focuses on the effectiveness of advertising. The effective advertising helps the company to grow its sales very rapidly. Short term advertising campaign is more effective then the long term. The most important feature of short term advertising is that it tells the company to go with the campaign in long run or to leave it because it will not have a further effect on the sales (Jones, 2003). Not every campaign has an effective outcome on its sales. About 70% of all the campaign raises the sales immediately and on the other hand 46% of long term campaigns have a direct impact on the sales (Jones, 1998).

Strong school of advertising models include AIDA (Attention, Interest, Desire, Action), DAGMAR (Unawareness, awareness, Comprehension, Conviction, Action), Hierarchy of effects (Awareness, Knowledge, Liking, Preference, Conviction, Purchase) and Elaboration Likelihood Model.

The AIDA model was designed by St. Elmo Lewis (1898) and Strong (1925). This model used especially for the personal dealing but later on it was adopted as a communication process between the company and its customers (Yeshin, 2006). It consists of four steps Attention, Interest, Desire and Action. It’s very important for the company to get the attention of the customer so that the other three steps should be taken by the customer. The main issue for the company is to know its own benefits and then tell the customers with different attractive words or phrases to get their attention (Johnston, 2009). Attention can built the interest and make desire for the product. By giving more and more true information of the product the interest can be generated (Brewer, 2010). The desire only be created by showing the actual picture to the customer and make him or her desire for the product. The product features can make the man go mad for the product and indulge in the step of taking quick action (Johnston, 2009).

There are many adverts these days for the customers to get their attention towards the product. Apple is a very famous company in making electronic products such as Iphones, Ipods, Macbooks and now the Ipads. The Ipad is specially made for the customers to access their emails, watch videos, downloads pictures and listen to songs. Before launching Ipad the company really wanted to grab the attention of their customers. They used their website to attract the customers for example; if anyone opens the web page then he gets a welcoming message of the new product of Apple. The picture of Ipad is shown below which was advertised on www.apple.com (Lazaris, 2010).

C:Usersfazal ranaDesktopipad.jpg

Source: APPLE WEBSITE (2010)

Figure 1: IPAD IMAGES

This is a very good example of how picture can get customer’s attention. This sort of pictures can create an interest for the customer’s. Apple gave the enough knowledge on their website to create certain interest for the customers. Java script switchers and image sliders are very famous nowadays. The image shows that you can access the email and the save pictures at a same time. Considering the example of the Ipad, the aesthetics and accessibility feature of the product should not only be provided to induce the desire of attainability but also to facilities the user and to give an even better maneuverability of the device for a comfortable and more passionate experience (Lazaris, 2010). The campaign ran very well through web page and indulges the customers to take action and buy the Ipad.

Hierarchical model only deals with the individual response and the effect resulted by the advertisement (East, 2003). The advertising process model was developed by Robert Lavidge and Gary Steiner in 1961 that has some point’s difference from AIDA model. The main implication of this model is that, if any one of all stages missed out then the desire outcome will not be achieved. The first stage is to get aware the customer about the product by the help of advertising. Secondly, he or she should provide with all the information about the product so that the process of likeness can be built on its own. The following step is to create preference of the product among the other product with same qualities. The next step is conviction which includes making decision to purchase the advertised product. If all of the steps are effectively put in by the company or the advertising agency then it’s not difficult to make customer buy for the product (Yeshin, 2006).

As can be seen from an old advert of Ariel (YouTube, 2008) which delivered an idea of Lavidge and Steiner model, this advert gives a good example of Hierarchy of effect model. By emphasizing on the problem of stain clothes the company creates awareness and gives us the problem of removing these stains which is not possible to be done by other ordinary liquids. By performing a simple experiment of comparing Ariel liquid by other liquids the company has induced a liking effect among the audience. The better results of the product would generate a preference among people whereas convincing them that if this product is selected and used it would give out better results than other product which are already available in the market. By using such a method the company leaves the audience with an inclined desire to purchase the product and try it at least for once which resulted in a number of sales for the product.

In early 1960s, Russell Colley developed a model with the name of DAGMAR (Colley’s hierarchy of effects) model. This model aimed to quantify the process of communication (Yeshin, 2006). The stages of this model are Unawareness, Awareness, Comprehension, Conviction and Action. This model emphasized a lot on creating higher number of sales by the help of awareness. The customer must be aware of the product and the company. He must have the comprehension or knowledge that what the product is about and how the product can help him (Joyce, 1998 in Jones, 1998). Thirdly, convincing the customer by telling him benefits of the product. Lastly, for the action you have to depend on the customer. However, your previous actions will have a major role to play (George, 2006). This model is mainly use to define advertising goals and measure the effectiveness of the campaign. Effective advertising can take the audience down to the way of awareness, comprehension and conviction to take the final action (East, 2003).

Indian premier league (IPL) is becoming very famous these days among all the ages who love to watch cricket. These days the third season of IPL cricket is going on. IPL has recently signed a contract with ITV for live broadcasting of every match especially for UK fans. To get aware the people the ITV is advertising on TV and Internet. Recently, on 11 March 2010 ITV king cricket website showed an advert about the watching the matches of IPL on terrestrial TV without paying any money. The targeted audience is students who can watch matches in the afternoon by sitting at their homes. As ITV is a famous channel for UK audience so there is not much need for the comprehension about the channel. The conviction has done by telling the major benefit of watching the match without paying (King Cricket, 2010).

The Elaboration Likelihood Model was developed in 1980 by Richard E Petty and John T Cacioppo. This model addresses the interest of the individuals and changing habits of individual’s behavior. The company tries to develop the positive behavior of the individual customers towards their offerings. There are two routes in this model of persuasion. The first route is the central processing route which provides the information with high level of motivation and the customer can asses to the core features of the persuasive message. This stage helps very much in making the effective decision. The other route is peripheral route which is about giving different cues to the customer and can involve personal selling as well. The outcome of attitudes forming with this method is less effective as compare to the first one (Eckert and Goldsby, 1997).

Infomercials are the best example of giving information to the customer through central processing route. As can be seen from wearable towel infomercial (YouTube, 2009), the information about the product has been given to the audience to know about the product for example, how easily you can wear it as compare to the other towels which are already available in the market. Secondly, the advert provides the advantages of wearing the towel and different ways of wearing it. The individuals do not have much time in watching the whole infomercial so it’s better for the company to use peripheral route for the advertising.

The weak theory is based on the reinforcement or repurchases habit of customer. The ATR model was proposed in 1974 by Ehrenberg which includes Awareness, Trail and Reinforcement (Hoek et al, 2000). Ehrenberg rejected the persuasion models and argues that the step of taking action in persuasion model is not supported by the empirical evidence (Yeshin, 2006). This model actually tells about the reinforcement in the customer current behavior patterns. The empirical generalization describes as the relationship between the consumer perception and beliefs about the brands and their behavior with respect to those brands (Hoek et al, 2000). In 1997 the model was refined by Barnard and Ehrenberg and they put another step of nudge after the reinforcement (Hoek et al, 2000). The first step of ATRN model is about Awareness of the product. The awareness can be done by different forms of advertising for example promotions, media adverts, word of mouth, direct marketing and so on. For the brand which is already available in the market to buy, the customer already has the knowledge of the product and its specifications. For the new products awareness is very important so that the customer should know about the product. After the awareness the customer straight make a decision of buying the product and get him in the stage of trail (Yeshin, 2006).

The ATR model specially focuses on the long term relationship of the customer with the company and the customer can only buy the product if he has believe in the product or if he tried it before. The managers are very willing to use ATR model these days to make the use of behavioral goals and to create a long term relationship (Hoek and Janet, 1999). The adverts are mostly for those people who already have the product. Majority of the people use to see and concentrate on the adverts of those brands which they are using or used it before in their lives. In new markets, the image of product and awareness has to be built but on the other hand in mature markets the adverts are mainly use to retain the customers. The customers do not have any interest in changing their brands and they are willing to stuck themselves to limited brands(East,2003).

C:Usersfazal ranaDesktopTradeAdverts_kit kat caramel.jpg

Source: GOOGLE Images (2010)

Figure 2: KitKat Adverts

This advert is especially for those customers who have already tried different flavors of KitKat. The advert is actually for the new flavor of Chunky Caramel KitKat. The packaging is a designed to aware the customer so that he can answer himself what taste is going to de inside? The company spent around 7 million pounds on the advertising campaign (Frewin, 2009). Kitkat is announced as a bestselling chocolate bar of year 2009. The reinforcement to buy the product made the huge profit for the company. The sales have risen to 13% of the last year (Laycoak, 2010).

Scholten (1996) has stated that the traditional models of hierarchy of effect paradigm have two major issues to criticize. Firstly, it cannot research about the market situation to deliver their message. Secondly, the campaign is run to a specific group of people which are targeted. The ATR model focuses on the behavior, brand awareness, trial purchase and repurchase if the customer is satisfied and willing to buy it again. On the other hand, traditional models do emphasize on the effectiveness of advertising by getting a regular response up to a particular stage in hierarchy (Scholten, 1996).

This essay has explored the difference between strong theory and weak theory with the help of different example which has taken from the UK advertising market. It has been found that the use of strong theory based on persuasion can really help the company to grow its business globally by giving information about their organization and the product. The communication process by persuasion is specially for those companies which are diverting the business line to the different countries and those who are new in different businesses so that they can aware the audience. The communication through ELM model can be very expensive for low budget advertising campaigns but on the other hand it can be very effective for big marketers to give maximum information to the individuals or give some cues by hiring celebrities. Furthermore, the ATR model can be helpful for those companies which are willing to advertise in the same market where they are performing their current businesses. However, the company should have some competitive advantages for new market openings which really help them to get successful in the stage of trail. The brands which are already well known or people are very much aware to them such as, Coca Cola, Pepsi etc usually use ATR model to reinforce the customer to buy the product again and again.

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Frewin, A. (2009) “Trade launch for KitKat Chunky Caramel by Nestle” [Online] Available at:

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Health, R. (2006) “Emotional Persuasion” pp.47-8 [Online] Available at: http://www.adliterate.com/archives/RobertHeathJuly06Admap[1].pdf [Accessed 20th march, 2010]

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Jones, J.P. (1998) “How Advertising Works”. New York: SAGE [Online] Available at: http://books.google.co.uk/books?hl=en&lr=&id=VLhLSg6GyAC&oi=fnd&pg=PA1&dq=J.P.+Jones+advertising+strong+theory&ots=guEnVOPivP&sig=8Daj0uBmHvaImqGmPksDb_jfIyY#v=onepage&q=&f=false [Accessed: 17th march, 2010]

Jones, J.P & Slater, J.S. (2003) “What’s in a name?: Advertising and concept of branding”. 2nd end. Armonk: M.E. Sharpe.

Johnston, R. (2009) “The AIDA marketing model” [Online] Available at: http://www.articlesbase.com/printing-articles/the-aida-marketing-model-825021.html [Accessed: 25 march, 2010]

Joyce, T. (1998) “The Advertising Process”. In Jones. P (Eds) (1998) How Advertising Works. New York: SAGE [Online] Available at: http://books.google.co.uk/books?hl=en&lr=&id=VLh-LSg6GyAC&oi=fnd&pg=PA1&dq=J.P.+Jones+advertising+strong+theory&ots=guEnVOPivP&sig=8Daj0uBmHvaImqGmPksDb_jfIyY#v=onepage&q=&f=false [Accessed: 15th march, 2010]

Laycock, M. (2010) “Fairtrade KitKat goes on sale across Britain” [Online] Available at: http://www.yorkpress.co.uk/news/4869073.Fairtrade_KitKat_goes_on_sale_across_Britain/#

[Accessed: 27 march, 2010]

Lazaris, L. (2010) “The AIDA model in web design” [Online] Available at: http://www.noupe.com/design/the-aida-marketing-model-in-web-design.html [Accessed: 25 march, 2010]

Scholten, M. (1996) “Lost and found: the information processing model of advertising effectiveness”. pp. 97-104 [Online] Available at: http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V7S-3VV44BC-B&_user=10&_coverDate=10/31/1996&_rdoc=1&_fmt=high&_orig=search&_sort=d&_docanchor=&view=c&_searchStrId=1271700460&_rerunOrigin=google&_acct=C000050221&_version=1&_urlVersion=0&_userid=10&md5=e8bacad0d90ce77cfb832a2aa4379b02 [Accessed: 23 march,2010]

Wells,W., Moriarty, S., Burnett, J. (2006) “Advertising”. 7th edn. New Jersey: Prentice Hall.

Yeshin, T. (2006). “Advertising”. 1st edn. London: Thomson learning.

You Tube (2008) “Ariel washing powder 1980 advert”. Available at: http://www.youtube.com/watch?v=SJ2eSKRR6Uo [Accessed: 26 march, 2010]

YouTube (2009) “Wearable towel infomercial”. Available at: http://www.youtube.com/watch?v=WjdyjL0dbG8 [Accessed: 26 march, 2010]

This essay will first identify the advertising benefits for the company and why companies do advertising with regard to some credible authors of marketing books. Secondly, it will investigate the strong models based on persuasion theory with the help of different examples from UK advertising market. Next, it will examine the ATRN model of Ehrenberg based on reinforcement. Finally, this essay will present a view that the companies are using different strong and weak models to attract the audience to buy their products.

In this modern era of technology many companies using tool of advertising to aware the customers about the features of their products and services. The advertising is a form of creating and sending a message to certain targeted population and hoping for their reaction towards your product. Historically the producers developed a product and then advertise it to find the market for the product but in today’s world the product is specially design with the customer interest (Wells et al, 2006). In the recent past, the marketing concept has increased dramatically. The companies are started putting huge amount of budgets into advertising to produce high profits for their organization. The advertising particularly helps to create awareness because people do not buy those products they have never heard of them before. The advertising is very important for new products to launch them into segmented market. The relationship between the customer and the company need to be build up by the help of effective advertising (Farbey, 2002). Globalization made the companies to expand their businesses into other markets around them. This fact has increased the competition among the competitors. In this competitive world, it is made compulsory for the company to advertise and protect themselves from the primary competition (Wells et al, 2006). Advertising is only as strong as the product and service because you can only sell poor product at once time but to sell it for twice you have to speak truth with your customer’s. The effective campaigns are making customers more loyal to the company. Advertising can be a strong or weak force for the company (Farbey, 2002).

The Strong theory and models are based on persuasion and on the other hand the weak theory is based on reinforcement. Persuasion is a process which includes changing of attitudes and manipulated the thoughts of customers to change their believes and habits (Health, 2007). There are two types of persuasion, Rational and Emotional persuasion. Rational persuasion is about explaining the benefits, advantages, likeness and different incentives where as emotional persuasion has the same features but it can create a strong relationship and make brand most successful. When the result come to calculate the efficiency of them then it’s very hard to evaluate the effectiveness of emotional as compare to rational persuasion (Health, 2006).

The strong school of advertising really focuses on the effectiveness of advertising. The effective advertising helps the company to grow its sales very rapidly. Short term advertising campaign is more effective then the long term. The most important feature of short term advertising is that it tells the company to go with the campaign in long run or to leave it because it will not have a further effect on the sales (Jones, 2003). Not every campaign has an effective outcome on its sales. About 70% of all the campaign raises the sales immediately and on the other hand 46% of long term campaigns have a direct impact on the sales (Jones, 1998).

Strong school of advertising models include AIDA (Attention, Interest, Desire, Action), DAGMAR (Unawareness, awareness, Comprehension, Conviction, Action), Hierarchy of effects (Awareness, Knowledge, Liking, Preference, Conviction, Purchase) and Elaboration Likelihood Model.

The AIDA model was designed by St. Elmo Lewis (1898) and Strong (1925). This model used especially for the personal dealing but later on it was adopted as a communication process between the company and its customers (Yeshin, 2006). It consists of four steps Attention, Interest, Desire and Action. It’s very important for the company to get the attention of the customer so that the other three steps should be taken by the customer. The main issue for the company is to know its own benefits and then tell the customers with different attractive words or phrases to get their attention (Johnston, 2009). Attention can built the interest and make desire for the product. By giving more and more true information of the product the interest can be generated (Brewer, 2010). The desire only be created by showing the actual picture to the customer and make him or her desire for the product. The product features can make the man go mad for the product and indulge in the step of taking quick action (Johnston, 2009).

There are many adverts these days for the customers to get their attention towards the product. Apple is a very famous company in making electronic products such as Iphones, Ipods, Macbooks and now the Ipads. The Ipad is specially made for the customers to access their emails, watch videos, downloads pictures and listen to songs. Before launching Ipad the company really wanted to grab the attention of their customers. They used their website to attract the customers for example; if anyone opens the web page then he gets a welcoming message of the new product of Apple. The picture of Ipad is shown below which was advertised on www.apple.com (Lazaris, 2010).

C:Usersfazal ranaDesktopipad.jpg

Source: APPLE WEBSITE (2010)

Figure 1: IPAD IMAGES

This is a very good example of how picture can get customer’s attention. This sort of pictures can create an interest for the customer’s. Apple gave the enough knowledge on their website to create certain interest for the customers. Java script switchers and image sliders are very famous nowadays. The image shows that you can access the email and the save pictures at a same time. Considering the example of the Ipad, the aesthetics and accessibility feature of the product should not only be provided to induce the desire of attainability but also to facilities the user and to give an even better maneuverability of the device for a comfortable and more passionate experience (Lazaris, 2010). The campaign ran very well through web page and indulges the customers to take action and buy the Ipad.

Hierarchical model only deals with the individual response and the effect resulted by the advertisement (East, 2003). The advertising process model was developed by Robert Lavidge and Gary Steiner in 1961 that has some point’s difference from AIDA model. The main implication of this model is that, if any one of all stages missed out then the desire outcome will not be achieved. The first stage is to get aware the customer about the product by the help of advertising. Secondly, he or she should provide with all the information about the product so that the process of likeness can be built on its own. The following step is to create preference of the product among the other product with same qualities. The next step is conviction which includes making decision to purchase the advertised product. If all of the steps are effectively put in by the company or the advertising agency then it’s not difficult to make customer buy for the product (Yeshin, 2006).

As can be seen from an old advert of Ariel (YouTube, 2008) which delivered an idea of Lavidge and Steiner model, this advert gives a good example of Hierarchy of effect model. By emphasizing on the problem of stain clothes the company creates awareness and gives us the problem of removing these stains which is not possible to be done by other ordinary liquids. By performing a simple experiment of comparing Ariel liquid by other liquids the company has induced a liking effect among the audience. The better results of the product would generate a preference among people whereas convincing them that if this product is selected and used it would give out better results than other product which are already available in the market. By using such a method the company leaves the audience with an inclined desire to purchase the product and try it at least for once which resulted in a number of sales for the product.

In early 1960s, Russell Colley developed a model with the name of DAGMAR (Colley’s hierarchy of effects) model. This model aimed to quantify the process of communication (Yeshin, 2006). The stages of this model are Unawareness, Awareness, Comprehension, Conviction and Action. This model emphasized a lot on creating higher number of sales by the help of awareness. The customer must be aware of the product and the company. He must have the comprehension or knowledge that what the product is about and how the product can help him (Joyce, 1998 in Jones, 1998). Thirdly, convincing the customer by telling him benefits of the product. Lastly, for the action you have to depend on the customer. However, your previous actions will have a major role to play (George, 2006). This model is mainly use to define advertising goals and measure the effectiveness of the campaign. Effective advertising can take the audience down to the way of awareness, comprehension and conviction to take the final action (East, 2003).

Indian premier league (IPL) is becoming very famous these days among all the ages who love to watch cricket. These days the third season of IPL cricket is going on. IPL has recently signed a contract with ITV for live broadcasting of every match especially for UK fans. To get aware the people the ITV is advertising on TV and Internet. Recently, on 11 March 2010 ITV king cricket website showed an advert about the watching the matches of IPL on terrestrial TV without paying any money. The targeted audience is students who can watch matches in the afternoon by sitting at their homes. As ITV is a famous channel for UK audience so there is not much need for the comprehension about the channel. The conviction has done by telling the major benefit of watching the match without paying (King Cricket, 2010).

The Elaboration Likelihood Model was developed in 1980 by Richard E Petty and John T Cacioppo. This model addresses the interest of the individuals and changing habits of individual’s behavior. The company tries to develop the positive behavior of the individual customers towards their offerings. There are two routes in this model of persuasion. The first route is the central processing route which provides the information with high level of motivation and the customer can asses to the core features of the persuasive message. This stage helps very much in making the effective decision. The other route is peripheral route which is about giving different cues to the customer and can involve personal selling as well. The outcome of attitudes forming with this method is less effective as compare to the first one (Eckert and Goldsby, 1997).

Infomercials are the best example of giving information to the customer through central processing route. As can be seen from wearable towel infomercial (YouTube, 2009), the information about the product has been given to the audience to know about the product for example, how easily you can wear it as compare to the other towels which are already available in the market. Secondly, the advert provides the advantages of wearing the towel and different ways of wearing it. The individuals do not have much time in watching the whole infomercial so it’s better for the company to use peripheral route for the advertising.

The weak theory is based on the reinforcement or repurchases habit of customer. The ATR model was proposed in 1974 by Ehrenberg which includes Awareness, Trail and Reinforcement (Hoek et al, 2000). Ehrenberg rejected the persuasion models and argues that the step of taking action in persuasion model is not supported by the empirical evidence (Yeshin, 2006). This model actually tells about the reinforcement in the customer current behavior patterns. The empirical generalization describes as the relationship between the consumer perception and beliefs about the brands and their behavior with respect to those brands (Hoek et al, 2000). In 1997 the model was refined by Barnard and Ehrenberg and they put another step of nudge after the reinforcement (Hoek et al, 2000). The first step of ATRN model is about Awareness of the product. The awareness can be done by different forms of advertising for example promotions, media adverts, word of mouth, direct marketing and so on. For the brand which is already available in the market to buy, the customer already has the knowledge of the product and its specifications. For the new products awareness is very important so that the customer should know about the product. After the awareness the customer straight make a decision of buying the product and get him in the stage of trail (Yeshin, 2006).

The ATR model specially focuses on the long term relationship of the customer with the company and the customer can only buy the product if he has believe in the product or if he tried it before. The managers are very willing to use ATR model these days to make the use of behavioral goals and to create a long term relationship (Hoek and Janet, 1999). The adverts are mostly for those people who already have the product. Majority of the people use to see and concentrate on the adverts of those brands which they are using or used it before in their lives. In new markets, the image of product and awareness has to be built but on the other hand in mature markets the adverts are mainly use to retain the customers. The customers do not have any interest in changing their brands and they are willing to stuck themselves to limited brands(East,2003).

C:Usersfazal ranaDesktopTradeAdverts_kit kat caramel.jpg

Source: GOOGLE Images (2010)

Figure 2: KitKat Adverts

This advert is especially for those customers who have already tried different flavors of KitKat. The advert is actually for the new flavor of Chunky Caramel KitKat. The packaging is a designed to aware the customer so that he can answer himself what taste is going to de inside? The company spent around 7 million pounds on the advertising campaign (Frewin, 2009). Kitkat is announced as a bestselling chocolate bar of year 2009. The reinforcement to buy the product made the huge profit for the company. The sales have risen to 13% of the last year (Laycoak, 2010).

Scholten (1996) has stated that the traditional models of hierarchy of effect paradigm have two major issues to criticize. Firstly, it cannot research about the market situation to deliver their message. Secondly, the campaign is run to a specific group of people which are targeted. The ATR model focuses on the behavior, brand awareness, trial purchase and repurchase if the customer is satisfied and willing to buy it again. On the other hand, traditional models do emphasize on the effectiveness of advertising by getting a regular response up to a particular stage in hierarchy (Scholten, 1996).

This essay has explored the difference between strong theory and weak theory with the help of different example which has taken from the UK advertising market. It has been found that the use of strong theory based on persuasion can really help the company to grow its business globally by giving information about their organization and the product. The communication process by persuasion is specially for those companies which are diverting the business line to the different countries and those who are new in different businesses so that they can aware the audience. The communication through ELM model can be very expensive for low budget advertising campaigns but on the other hand it can be very effective for big marketers to give maximum information to the individuals or give some cues by hiring celebrities. Furthermore, the ATR model can be helpful for those companies which are willing to advertise in the same market where they are performing their current businesses. However, the company should have some competitive advantages for new market openings which really help them to get successful in the stage of trail. The brands which are already well known or people are very much aware to them such as, Coca Cola, Pepsi etc usually use ATR model to reinforce the customer to buy the product again and again.

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Laycock, M. (2010) “Fairtrade KitKat goes on sale across Britain” [Online] Available at: http://www.yorkpress.co.uk/news/4869073.Fairtrade_KitKat_goes_on_sale_across_Britain/#

[Accessed: 27 march, 2010]

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Scholten, M. (1996) “Lost and found: the information processing model of advertising effectiveness”. pp. 97-104 [Online] Available at: http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V7S-3VV44BC-B&_user=10&_coverDate=10/31/1996&_rdoc=1&_fmt=high&_orig=search&_sort=d&_docanchor=&view=c&_searchStrId=1271700460&_rerunOrigin=google&_acct=C000050221&_version=1&_urlVersion=0&_userid=10&md5=e8bacad0d90ce77cfb832a2aa4379b02 [Accessed: 23 march,2010]

Wells,W., Moriarty, S., Burnett, J. (2006) “Advertising”. 7th edn. New Jersey: Prentice Hall.

Yeshin, T. (2006). “Advertising”. 1st edn. London: Thomson learning.

You Tube (2008) “Ariel washing powder 1980 advert”. Available at: http://www.youtube.com/watch?v=SJ2eSKRR6Uo [Accessed: 26 march, 2010]

YouTube (2009) “Wearable towel infomercial”. Available at: http://www.youtube.com/watch?v=WjdyjL0dbG8 [Accessed: 26 march, 2010]

A Case Study Of Apples Success Story Marketing Essay

This paper focuses on New Product Development processes which show a high failure rate that has compelled businesses to rethink over their modus operandi towards NPD by emphasizing on upfront marketing and commercialization. Unfortunately, there are no hard and fast rules so far discovered for successful commercialization and marketing practices in order to achieve a sustained competitive advantage. This has lead companies to adopt a more customer oriented approach where previously unheard voice of the customer is now taken into consideration. Companies should seek feasibility of their products or services first and think of commercialization later. While launching new products level and form of innovation that a particular market could absorb should be determined first and then new product or services should be launched accordingly. Once the success formula is acquired then the company can further capitalize on the existing products goodwill and launch new improvements in the form of line extensions and brand extensions. Apples frequent usage of its brand name (i) as in iPod, iMac and iPhone as well as in many other new products symbolizes the company’s intentions. It has been observed that other than costs many products fail because of a universal but largely ignored psychological prejudice, as consumer resist any distortion in their current-state-of-affairs. This occurs mainly due to nostalgic fondness or brand loyalty created over the years. The loyalty may arise due to emotional, price, incentives and monopolistic factors. However, shrewd companies like Apple devises strategies like planned obsolescence where a customer is forced to switch to the newer or improved versions of the product so as to stay cool and control of the world around him. Companies must also realize the fact that new approaches to marketing, commercialization and NPD are prerequisite for maintaining market leadership. In such a case companies must strive hard and use concurrent engineering process so as to attain first mover advantage to the market and beat the competition with speed, quality and price.

Key Words: Job based segmentation approach, Product associations, competitive advantage, first mover advantage, network externalities, and brand loyalty, line or brand extensions, Planned obsolescence, critical mass, & Voice of customer

Introduction

According to Gourville (2006) new product failures show that new products fail at a dramatic rate of between 40% and 90% depending on the product category. The commercialization and marketing stages come in the later stages of New Product Development processes; however, they play a pivotal role in the new product success. As a consequence there is greater focus on commercialization and marketing issues up front than ever realized before. That is why companies are now taking into consideration a more detailed job based segmentation approach. Because sometimes the consumer cannot precisely

express why he or she buys a certain product as they use these products for getting done various jobs in various situations. Consumers follow a six step process in order to completely adopt innovative products. However, these steps may vary and overlap each other due to level of consumers brand loyalty, transactions costs, learning costs, obsolescence costs and network externalities. Another important factor is that consumers over the years develop associations (brand loyalty) with existing products or services. Therefore they resist any change in the status quo by over valuing the old products too much. On the other hand, companies commercializing new products over estimate their innovative features, design and differentiation. This creates a complex situation where companies need to create awareness about their new products through innovative new product launching campaigns. Companies need to find out the success recipe first and then they should launch their products or services. If the success formula is attained then the company can once and for all use it by launching new and improved versions of the products. Another interesting case in point is that companies also try to

influence demand with the practice of planned obsolescence. Meaning that the product or service the company has launched would become out of date after a certain period of time as the company would launch a new improved version to the market for the purpose of repeated business.

II. PROBLEM & PURPOSE

A large number of new products fail because the innovators (suppliers) and the end-user do not see and appreciate from the same perspectives on what the product is supposed to do. There is a difference between the buyer and the seller’s thoughts and actions. A company sells their innovative products to consumers for solving a certain problem but consumer lacks awareness about the general usages of the product. Therefore voice of the customer should be taken into consideration while embarking on a new product development process. However, once the right combination of people, resources and process is attained in the launch of a really hit product and the success formula is revealed it becomes easy launch even more success stories in the form of new products or services.

RQ: To analyze the high rate of new product success on a companies like Apple vis-à-vis a higher than normal rate of failures in other firms.

The purpose of the study is to find out ways and means that would help managers in matching their products with their customers. This is in line with basic marketing principle which stresses that the wants needs and demands of the customer should be taken into consideration first and then a product or service should be commercialized so as to satisfy the consumer better than the competitors. However, in practice this is the other way around especially companies coming up really innovative products face difficulty in testing their products on the market as the demand is latent and consumer needs are not clear. The consumer needs to be educated first about the concept and how the product will revolutionalize the way consumers do things currently. Specifically, main purpose of the article is to find out the success recipe for New Product Development and how companies like Apple, Sony, Philips, and Dell make good advantage of the success recipe.

III. METHOD

Limited duration for writing a scientific article reduced many options of finding out relevant information. Therefore the author has incorporated desk data heavily. To be able to get a thorough understanding of the topic under study the researcher took into consideration many scientific journals, articles, reviews and the World Wide Web.

The article is organized as follows. Initially, the author consulted course literature and several articles for understanding the New Product Development Process. Then afterwards six other articles given in Commercialization module of our course were studied which were then incorporated in a detailed frame of reference. Then for empirical evidence Apples marketing and commercialization practices over the years were studied in relation to earlier developed frame of reference. After comparing the company’s practices with the standard practices in analysis section conclusions were drawn.

IV. LITERATURE REVIEW

According to Song and Montoya (1998) new product development is a high risk proposition for firms to start as it involves high level of risk in targeting a budding market segment where customer wants are hidden and service or product requirements are implicit. On the other hand, new products often create considerable opportunities for firms to differentiate their offering (product or service) and helps in attaining a lead from competitors through differentiation. This lead can be termed competitive advantage (ibid).

Steven, Wheelwright and Sasser (1989) proclaim that a successful new product launch creates industry wise unique standards, which may become barriers of entry for new firms trying to penetrate. It also helps in refreshing the minds of the engineering personnel; sales force and give them a sense of accomplishment. It also provides opportunity for corporate renewal and redirection to the firm for its long run planning (Steven et al. 1989).

A study of the US market conducted by John and Gourville (2006) reveals that nearly 30,000 products are introduced yearly in the packaged goods industry. Almost 70 to 90 among these percent fail to occupy store shelves for more than a year. Another study, shows that almost 47 % of the companies who enjoyed first mover advantage by commercializing before others in a particular line of business had failed, meaning that firms that introduced new product categories left pursuing those modern ideas (John & Gourville, 2006). One prime example where innovator who was out run by followers is RC Cola, a small who first commercialized cola in a can, as well as the first mover to launch diet coke. Coke and Pepsi entered the market immediately depriving RC Cola of any significant gains from its innovation (Teece, 1986). Similarly, Bowmar the inventor of pocket calculator lost market share to Texas Instruments and Hewlett Packard. Xerox office computers failed to gain any significant economic returns as market share went to Apple Macintosh which had similar features like mouse and the icons (ibid). Steven et al. (1957) makes an interesting analogy to compare a new generation of products and a journey into an uninhabited area. No one can fathom going out without a blueprint for guidance. Homewood, Illinois and Irwin (1957) calls NPD as a process of reducing uncertainty in the minds of managers. As a matter of fact the level of uncertainty associated with new product development process depends on the degree of innovativeness of the offering. This view is in conformance with the information processing theory that as the degree of unpredictability and uncertainty enhances, there is more need for information coordination. According to Bonabeau et al. (2008) companies normally view NPD as a process of total uniformity, but it can be divided into two separate stages. Pre-Launch and post launch. They refer to pre-launch stage as truth seeking stage, focusing on assessing the innovative products or services potential and removing the irrelevant or non functional parts. In the early stages the product designs are fluid and firms compete on the basis of designs until the emergence of dominant design such as Model T Ford, IBM 360 and Douglas DC-3 in automobile, computer and aircraft industries respectively (Teece, 1986) and these firms with dominant designs survive others normally disappear after this shakeout stage (Mueller, 1997).

According to the article by Christensen, (2007) most firms segment their target market by population characteristics or their product attributes and try to create differentiation with added features and functions. However, the customer simply wants to just carry out a job by hiring a specific solution in the shape of some product or service. The “job”, is an unsatisfied state of consumer need which he or she wants to satisfy by hiring a certain product and these jobs may vary from situation to situation (ibid). According to Peter Drucker cited in Clayton et al. (2007) the author proclaims, “The customer rarely buys what the business thinks it sells him.” Firms many a times find to their amusement that customers are using their products for getting done tasks other than the firm intended to serve. The basic marketing literature indicates that general stages for new product development consist of idea generation, idea screening, and concept development. Afterwards, a marketing strategy is developed leading to business analysis and test marketing before full fledge launching (Jobber, 2009). In this domain Cooper, (1993) in his identified five additional steps NPD process such as preliminary technical and business assessment, alpha tests, beta tests, final business plan and production ramp up. These stages are sequential just like a rally race; however, in a dynamic industry companies are using concurrent engineering which is similar to rugby game where the moves forth at back as many firms have more than one new product under development (Cooper, 1996) and many

companies in Japan and US have also adopted the same holistic approach as mentioned in the rugby game (Takeuchi & Nonaka, 1986). Lieberman and Montgomery (2002) states that that firms entering the market first are known as market pioneers. The competencies and skills of these pioneers mainly depend on better product or process development, marketing research and technology. With the passage of time if the firm relentlessly preserves these competencies by making them an integral part of the corporate culture, then the probability of investments in new product development activities is high and the firm would stress on major breakthrough innovations. Whereas, Henderson, (1993) argues that competitive advantage is a function of predictably predictable activities, such as capitalizing on historic research and development capabilities as in such a situation small incremental innovations would mainly take place like better or improved version of products or simply brand extensions. FRAMEWORK KE LIYE BAAT BANAO According to Schnaars (1994) late entrants can also overtake the first mover. The late comer may use superior placement, aggressive promotions, or may even engage in a price war. Therefore these late entrants stress on non-product competition, that’s why do not invest heavily in research and development and mostly comes up with imitative products mainly through the concept of reverse engineering. The model proposed by Shrivastava and Sounder, named as 7s framework was used by Johne & et al.() coupled with another framework by Griffin & Hauser and some previous research done by Cooper reveals that a company’s performance as a whole relies on the processes, organization, strategy, culture and commitment. In their research process refers to a companywide approach to new product development processes and the activities carried out under this banner. Organization means the manner in which the projects within a program are organized ranging from a cross- functional approach where personnel from functional departments like Marketing, Human resource, finance, R&D are taken in the NPD process. Strategy refers to the overall new product strategy of the company as an essential part of the total corporate strategy. Culture means the inside environment for innovation where intrapreneurship is encouraged as part of the company’s culture. Finally, commitment from top management with positive involvement in the new product development process is also a prerequisite. According to the article by Steven C. Wheelwright & W. Earl Sasser Jr (1989), p.113 managers tend to see new product launching as a golden opportunity to steal a lead from competitors. However, quite often the much anticipated success is not achieved in reality.

Some pitfalls of the NPD process as pinpointed by Steven et al, (1989) are moving target, lack of product distinctiveness, unexpected technical problems, and mismatches between functional departments. Better planning leads to efficient courses of action and the likelihood of success is increased (ibid). From a marketing orientation viewpoint, there are five competing concepts under which organizations conduct marketing activities namely, “production concept, product concept, selling concept, marketing concept, and societal marketing concept, and holistic marketing concept” (Kotler, 2000). The holistic marketing concept is emerging as new concept which takes into consideration almost all the previous concepts. However, generally majority of the businesses are driven by a product oriented strategy.

Normally organizations try to launch superior products or services and improve their quality gradually, making implicit assumption that the customer is knowledgeable and differentiates between quality and ordinary products. This is even true for companies like GM where a top notch executive once said many years ago, “How can the public know what kind of car they want until they see what is available?”

This notion was also common place in the history where phrases like “Good wine needs no bush” were used meaning that a good product does not require any promotion. This theme generated here goes in conformance with Kotler and Armstrong, (2001) where companies try to come up with a better “mousetrap” are wonderstruck to reveal that consumer are not necessarily looking for a better mousetrap but for a better solution to the mouse problem. In an ideal situation where other things remain the same, normally consumer follow steps such as seeking awareness about a product or services, then comprehending the information, afterwards they form a positive or negative attitude about the product. If they value it positively the start considering it legitimate to use the product, then the customers uses the products or services on a trial basis so as to check efficiency of the product. If the product matches expectations they adopt it (Stanton & Kotler 2000). According to (Schiffman et al. 2009) cited in (Tariq & Ghaffar, 2010) diffusion is a macro process encompassing the spread of a new innovation from its creator to the general masses. Whereas, adoption is a micro process which is concerned with the steps through which a customer passes when accepting or rejecting a new innovation. Everrett M. Rogers, (1967) has proposed a six step profile of consumer innovators stretching from innovators to laggards. Innovators are the pioneers of adopting a new technology and laggards are the last ones. These six steps as shown in the Figure (2-15) are innovators 2.5%, early adopters 13.5%, early majority 34%, late majority 34%, and at the end laggards which constitute 16% of the population (ibid). Schiffman et al. (2009), stresses that time is the backbone of diffusion process as it determines the rate of adoption of new product (s) or service (s).

Source: (adopted from Everrett M. Roger, 1967)

In the case of Apple Family consumers who purchased MP3 can be termed innovators. Afterwards early adopters bought the first iPod. Early majority purchased the second and third models of iPod. We can say that Late Majority purchase models which came after third iPod. Finally, laggards or hard core loyal would normally buy a used or cheaper version of iPod.

The relationship marketing ladder of loyalty

Source: Christopher, Payne and Balantyne (2002)

As evident from the above process the consumer behavior can also be traced by a careful examination of the customer buying and usage behavior. So to speak consumers often need to modify their behavior for new products. Mueller, (1997) states that companies are well aware that such a change is not easy as it involves learning costs, planned obsolescence, switching costs, network externalities and so on. For instance, cost of learning by changing from PC to Macintosh operating system. The planned obsolescence is a deliberate ploy such as fashion and fads (Armstrong & Kotler, 2007). Similarly, switching costs are incurred when consumers switch from compact disc to DVD players, their previous CD collection becomes obsolete. Finally, the value of mobile or a telephone service increases with the rise in number of connections and so does is the case with credit cards whose utility increases with the number of shops accepting them. These products are characterized by a phenomenon known as network externalities (Muller, 1997).

However, according to John T. Gourville (2006) there are also psychological costs associated with the change in behavior. This phenomena is termed as psychological prejudice as people tend to overestimate the advantages of products they own vis-à-vis to the new products. Whereas, companies tend to overestimate the value of their new products launched on the market. Here disharmony is created in the perspectives of the both parties. That’s why consumers first simply refuse new offer in the first choice, whereas, the company is expecting success. So this is termed as a double-edged sword. Generally, companies should think from the perspective of customers. The Commercialization Process Model developed by Dr. Randall Goldsmith and the Mid-Continent Technology Transfer Center defines the process of bringing a product from the idea stage to a full-fledged manufacturing company. The Model breaks the process down into three categories: technical, marketing, and business.. There are important steps and crucial activities within the three phases. The matrix explains in detail how these variables must work with each other for a successful new product development.

Figure: The commercialization Process Model

(Source: Mid-Continent Technology Transfer Center)

V. REAL TIME CASE: APPLE

Due to the strong marketing focus Apples has been very successful in creating a very loyal customer base that think, live and act in a different way. In the year 1998 Apple was born again when Steve Jobs launched the iMac. This new computer comes with a complete collection of software’s and new operating system called MAC OS X. It was a success. Then after Apple launched its iBook (laptop). However the home run was scored by the introduction of iPod in the year 2001 grabbing more than 70 percent of market share in the US. Furthermore, Apple made a deal with Intel to become compatible with Microsoft Windows. Since then, iPod is enjoying market leadership in the domain of competition.

Ever since its inception, Apple has remained busy with developing more than one product at a time. In retrospect we find that in the year 1984, Apple commercialized two products namely Apple C and Macintosh, in 1986 it launched Apple llgs and Macintosh Plus, 1987 it launched Macintosh II and Macintosh SE. In 1989 it commercialized three computers namely Macintosh Portable, Macintosh IIlci and Macintosh IIfx. In the year 1990 it launched another three computer models Macintosh Classic, Macintosh IIlsi and Macintosh LC. Similarly in the year 1993 Apples commercialized seven products namely Color Classic, Quadra 800, Macintosh centris, Macintosh LCIII, Power book 180c and Macintosh LC 475. In the year 2001 Apple again launched three products namely Power Macintosh Quick silver, iMac Patterns its home run product under the name of iPod first generation. In the year 2004 Apple commercialized four products namely xServe G5, iMac G5, iPod click wheel and iPod Mini and in the year 2005 again Apple launched four successful products namely, iPod shuffle, iPod Nano, Video iPod, and Mac Mini. In the year 2006 again four successful products namely iPod shuffle, iPod Nano, iMac slimmer Intel and Mac Pro. As we all know that in the year 2007 Apple scored a home run by launching its premier iPhone. By analyzing the above trends in NPD and commercialization it can easily deduce that Apple is constantly churning out new innovative products at unprecedented rate. This is mainly due to the fact that at Apple is using concurrent engineering philosophy to good effect. As earlier on stated in such a process the product under development may lie in more than one stage of development and thus we can also deduce that Apple is following a rugby approach to new product development which can go back as well as in forward direction simultaneously. These factors have enabled Apple in terms of speed, accuracy, and quality.

Similarly, referring to Lieberman and Montgomery (2002) we can interpret that Apple has invested heavily in new product development process and therefore attained the status of market pioneer. This was especially true for Apple a couple of decades ago as well as today. Because with the advent of iPod first generation in 2001, on the market it revolutionalize the electronics industry and had a major impact on competitors. Ever since, Apple has successfully launched several other line extensions of the older version with small incremental improvements. For example in the year 2003 Apple launched iPod 3rd Generation and in the subsequent year 2004 it launched two more extensions of the products namely iPod

Mini and iPod click Wheel. Again in the year 2005 Apple came up with some improved products in the form of iPod Shuffle, Nano and Video iPod. And finally in the year 2007

iPhone was launched under the same brand umbrella term (i). Therefore the view point of Henderson, (1993) who states that gaining competitive advantage is a function of predictably

predictable activities within the firm. Thus we see small incremental changes in Apple product line as well as the view point of Lieberman and Montgomery is best exemplified by

Apple launch of iPhone in the year 2007. If we consider the case of NeXT, a desktop computer developed by Steve Jobs, the legendary founder of Apple, Customers did not want the optical drive instead of the floppy drive. Because the new feature makes it difficult for end-users to switch work from a personal computer to a NeXT. The machine enjoyed other superior features like hi-fi sound; end-users never look beyond the initial resistance. Many people found it far too expensive, while engineers reckoned workstations with superior value.

Therefore, Steve Jobs has to abandon the 200 million dollars product. Here it is suggested that if Steve has listened to the customer voice he could have been successful, because in this

scenario customers were expecting an incremental innovation. However, for almost thirty long years Apple has remain the trend setter to foresee and foretell the future of the domestic

computers. The balance of probability is high that it would continue to lead the way. The success recipe came to Apple in the form of iPod, and even Apple personal computers sales started going up because of this hit product. Apple has been very clever in its ploy of planned obsolescence as it is launching iPod after iPod and that too with new improvements. The new improved product has the cool feeling assorted around it. Therefore it is compelling customers to engage in repeat purchase, which serves the long term purpose of the company. Thanks to planned obsolescence. Another very interesting case in point relating to Apple is launch and commercialization of Apple Macintosh personal computers line. The new Apple Mac customers encounter mistakes while using Mac because it doesn’t work the same way it would be expected to on a Windows computer? Simply the Windows users follow and expect everything to word the same way as in Windows. And on the other hand Macintosh users see and expect their Macs to work in its original way (Macintosh way). There are substantial commonalities between Apple and Windows operating systems, but there are some differences which I am reckoned worth mentioning. The number of mistakes lie somewhere in the neighborhood of 25 to 30. However, I am listing down the five most common mistakes of new users of Mac OS X as pointed out by Damien Barrett (2006). (1) They close an application’s windows thinking the program has quit. (2) They’ll download Firefox and then run the browser from the disk image and then not be able to throw away the disk image because the program is still running. See number (1. 3).exe files lie scattered around the desktop from aborted downloads of Flash Player or some screensaver-cursor-spyware doodad. (3) Untitled folder. Untitled folder 2. Untitled folder 3. Untitled folder 4… (4) Using Safari’s Google search field to get to hotmail.com. (5). Desktop Picture or Wallpaper is not a synonym for Screensaver. However, majority of these problems are not problems.Simply they relate to the differences in Windows way of doing things and the Mac way of doing things. Consumers can be taught by programmers so as to educate them about it. In this regard Apple should make some changes in its Mac operating systems as well as its hard ware. These issues could also be

addressed in advertising, so as to remind consumers that Macs are not going to work the way Windows computer does so that they may capitalize in totality what Apple is offering. An interesting case in point is that in the year 1985, Bill Gates was literally begging Apple CEO Steve Jobs to license his Mac operating system to Personal computer vendors. Apple did not agree and later on Bill Gates came up with a stone crushing reply and now the situation is that Apple has only 4 percent of market share in PC business. However, this time around the buzz is related to digital music, encompassing iPod music player and its iTunes made it cheaper and convenient to download songs at a rate of 99 cents only. But the irony is that Apples iPod music player only plays songs in the company’s “FairPlay” digital rights management (DRM) format and songs downloaded from iTunes play only on iPod.

For example, a customer who gets a song downloaded from Apples iTunes and wants to play it on his or her real player would be highly disappointed (www.macnewsworld.com). On the other hand an iPod owner is left limited to get music from iTunes, even though there are many other services on the Web, such as Napster and Real Networks. But the customer can’t help the situation. Apple must hear the voice of the customer otherwise the customer is unhappy which isn’t

what a company as innovative as Apple would like.

VI. CONCLUSION:

The new product development activities differ from company to company especially in stages of commercialization and marketing. Often times the companies overvalue their new product quality, features and adoptability, whereas the consumers are reluctant to switch the existing products thus showing a high level of brand loyalty. This is mainly due to the fact that switching entails costs which can take many forms. Also important is the fact that consumers develop nostalgic fondness with products therefore not ready to accept innovation. Means that consumers form associations with certain products and therefore become reluctant to other alternatives because of their habits. Then the sequential new product process is seldom followed in true letter and spirit. Because big companies like Apple are continuously developing three to four products in pipeline. This practice is also done at Apple with its concurrent engineering. Companies should bear in mind that apart from internal sources of innovation there is a much neglected and overlooked source of new product development i.e. the voice of the customer. It has to be taken into consideration. Because by design or by default it’s the basic purpose of marketing i.e. matching products with customers. It’s good to have a visionary and charismatic leader like Steve Jobs and Henry Ford. However, these leaders should not impose their own prerogatives. In Apple case it lost market share to Microsoft in past because of the rigidity of then CEO Steve Jobs. Similarly, Mr. Henry Ford was also fond of influencing the new product development process. Someone asked him in how many colors do you produce cars. He replied cars in all colors as long as the color is black. Some of the top notch companies make silly blunders as they do not do proper research before they commercialize their products. They misunderstand between needs, wants and demands. For examples a person who goes to office daily may say that I need a car so that he may reach on time. However, the person himself may not know that actually he doesn’t need a car as car is not the basic need. The basic need is transportation and car is a want in terms of marketing. So if consumer is not clear himself about the job he wants to get the product for how can companies doing marketing research for their new product development elicit the right information from consumer. So I reckon it’s better to analyze the market by a job based approach. This means figuring out the specific job which for which the consumer hires the product or service in a particular situation. Companies like Apple who struck the home run in one or two of their prod

This paper focuses on New Product Development processes which show a high failure rate that has compelled businesses to rethink over their modus operandi towards NPD by emphasizing on upfront marketing and commercialization. Unfortunately, there are no hard and fast rules so far discovered for successful commercialization and marketing practices in order to achieve a sustained competitive advantage. This has lead companies to adopt a more customer oriented approach where previously unheard voice of the customer is now taken into consideration. Companies should seek feasibility of their products or services first and think of commercialization later. While launching new products level and form of innovation that a particular market could absorb should be determined first and then new product or services should be launched accordingly. Once the success formula is acquired then the company can further capitalize on the existing products goodwill and launch new improvements in the form of line extensions and brand extensions. Apples frequent usage of its brand name (i) as in iPod, iMac and iPhone as well as in many other new products symbolizes the company’s intentions. It has been observed that other than costs many products fail because of a universal but largely ignored psychological prejudice, as consumer resist any distortion in their current-state-of-affairs. This occurs mainly due to nostalgic fondness or brand loyalty created over the years. The loyalty may arise due to emotional, price, incentives and monopolistic factors. However, shrewd companies like Apple devises strategies like planned obsolescence where a customer is forced to switch to the newer or improved versions of the product so as to stay cool and control of the world around him. Companies must also realize the fact that new approaches to marketing, commercialization and NPD are prerequisite for maintaining market leadership. In such a case companies must strive hard and use concurrent engineering process so as to attain first mover advantage to the market and beat the competition with speed, quality and price.

Key Words: Job based segmentation approach, Product associations, competitive advantage, first mover advantage, network externalities, and brand loyalty, line or brand extensions, Planned obsolescence, critical mass, & Voice of customer

Introduction

According to Gourville (2006) new product failures show that new products fail at a dramatic rate of between 40% and 90% depending on the product category. The commercialization and marketing stages come in the later stages of New Product Development processes; however, they play a pivotal role in the new product success. As a consequence there is greater focus on commercialization and marketing issues up front than ever realized before. That is why companies are now taking into consideration a more detailed job based segmentation approach. Because sometimes the consumer cannot precisely

express why he or she buys a certain product as they use these products for getting done various jobs in various situations. Consumers follow a six step process in order to completely adopt innovative products. However, these steps may vary and overlap each other due to level of consumers brand loyalty, transactions costs, learning costs, obsolescence costs and network externalities. Another important factor is that consumers over the years develop associations (brand loyalty) with existing products or services. Therefore they resist any change in the status quo by over valuing the old products too much. On the other hand, companies commercializing new products over estimate their innovative features, design and differentiation. This creates a complex situation where companies need to create awareness about their new products through innovative new product launching campaigns. Companies need to find out the success recipe first and then they should launch their products or services. If the success formula is attained then the company can once and for all use it by launching new and improved versions of the products. Another interesting case in point is that companies also try to

influence demand with the practice of planned obsolescence. Meaning that the product or service the company has launched would become out of date after a certain period of time as the company would launch a new improved version to the market for the purpose of repeated business.

II. PROBLEM & PURPOSE

A large number of new products fail because the innovators (suppliers) and the end-user do not see and appreciate from the same perspectives on what the product is supposed to do. There is a difference between the buyer and the seller’s thoughts and actions. A company sells their innovative products to consumers for solving a certain problem but consumer lacks awareness about the general usages of the product. Therefore voice of the customer should be taken into consideration while embarking on a new product development process. However, once the right combination of people, resources and process is attained in the launch of a really hit product and the success formula is revealed it becomes easy launch even more success stories in the form of new products or services.

RQ: To analyze the high rate of new product success on a companies like Apple vis-à-vis a higher than normal rate of failures in other firms.

The purpose of the study is to find out ways and means that would help managers in matching their products with their customers. This is in line with basic marketing principle which stresses that the wants needs and demands of the customer should be taken into consideration first and then a product or service should be commercialized so as to satisfy the consumer better than the competitors. However, in practice this is the other way around especially companies coming up really innovative products face difficulty in testing their products on the market as the demand is latent and consumer needs are not clear. The consumer needs to be educated first about the concept and how the product will revolutionalize the way consumers do things currently. Specifically, main purpose of the article is to find out the success recipe for New Product Development and how companies like Apple, Sony, Philips, and Dell make good advantage of the success recipe.

III. METHOD

Limited duration for writing a scientific article reduced many options of finding out relevant information. Therefore the author has incorporated desk data heavily. To be able to get a thorough understanding of the topic under study the researcher took into consideration many scientific journals, articles, reviews and the World Wide Web.

The article is organized as follows. Initially, the author consulted course literature and several articles for understanding the New Product Development Process. Then afterwards six other articles given in Commercialization module of our course were studied which were then incorporated in a detailed frame of reference. Then for empirical evidence Apples marketing and commercialization practices over the years were studied in relation to earlier developed frame of reference. After comparing the company’s practices with the standard practices in analysis section conclusions were drawn.

IV. LITERATURE REVIEW

According to Song and Montoya (1998) new product development is a high risk proposition for firms to start as it involves high level of risk in targeting a budding market segment where customer wants are hidden and service or product requirements are implicit. On the other hand, new products often create considerable opportunities for firms to differentiate their offering (product or service) and helps in attaining a lead from competitors through differentiation. This lead can be termed competitive advantage (ibid).

Steven, Wheelwright and Sasser (1989) proclaim that a successful new product launch creates industry wise unique standards, which may become barriers of entry for new firms trying to penetrate. It also helps in refreshing the minds of the engineering personnel; sales force and give them a sense of accomplishment. It also provides opportunity for corporate renewal and redirection to the firm for its long run planning (Steven et al. 1989).

A study of the US market conducted by John and Gourville (2006) reveals that nearly 30,000 products are introduced yearly in the packaged goods industry. Almost 70 to 90 among these percent fail to occupy store shelves for more than a year. Another study, shows that almost 47 % of the companies who enjoyed first mover advantage by commercializing before others in a particular line of business had failed, meaning that firms that introduced new product categories left pursuing those modern ideas (John & Gourville, 2006). One prime example where innovator who was out run by followers is RC Cola, a small who first commercialized cola in a can, as well as the first mover to launch diet coke. Coke and Pepsi entered the market immediately depriving RC Cola of any significant gains from its innovation (Teece, 1986). Similarly, Bowmar the inventor of pocket calculator lost market share to Texas Instruments and Hewlett Packard. Xerox office computers failed to gain any significant economic returns as market share went to Apple Macintosh which had similar features like mouse and the icons (ibid). Steven et al. (1957) makes an interesting analogy to compare a new generation of products and a journey into an uninhabited area. No one can fathom going out without a blueprint for guidance. Homewood, Illinois and Irwin (1957) calls NPD as a process of reducing uncertainty in the minds of managers. As a matter of fact the level of uncertainty associated with new product development process depends on the degree of innovativeness of the offering. This view is in conformance with the information processing theory that as the degree of unpredictability and uncertainty enhances, there is more need for information coordination. According to Bonabeau et al. (2008) companies normally view NPD as a process of total uniformity, but it can be divided into two separate stages. Pre-Launch and post launch. They refer to pre-launch stage as truth seeking stage, focusing on assessing the innovative products or services potential and removing the irrelevant or non functional parts. In the early stages the product designs are fluid and firms compete on the basis of designs until the emergence of dominant design such as Model T Ford, IBM 360 and Douglas DC-3 in automobile, computer and aircraft industries respectively (Teece, 1986) and these firms with dominant designs survive others normally disappear after this shakeout stage (Mueller, 1997).

According to the article by Christensen, (2007) most firms segment their target market by population characteristics or their product attributes and try to create differentiation with added features and functions. However, the customer simply wants to just carry out a job by hiring a specific solution in the shape of some product or service. The “job”, is an unsatisfied state of consumer need which he or she wants to satisfy by hiring a certain product and these jobs may vary from situation to situation (ibid). According to Peter Drucker cited in Clayton et al. (2007) the author proclaims, “The customer rarely buys what the business thinks it sells him.” Firms many a times find to their amusement that customers are using their products for getting done tasks other than the firm intended to serve. The basic marketing literature indicates that general stages for new product development consist of idea generation, idea screening, and concept development. Afterwards, a marketing strategy is developed leading to business analysis and test marketing before full fledge launching (Jobber, 2009). In this domain Cooper, (1993) in his identified five additional steps NPD process such as preliminary technical and business assessment, alpha tests, beta tests, final business plan and production ramp up. These stages are sequential just like a rally race; however, in a dynamic industry companies are using concurrent engineering which is similar to rugby game where the moves forth at back as many firms have more than one new product under development (Cooper, 1996) and many

companies in Japan and US have also adopted the same holistic approach as mentioned in the rugby game (Takeuchi & Nonaka, 1986). Lieberman and Montgomery (2002) states that that firms entering the market first are known as market pioneers. The competencies and skills of these pioneers mainly depend on better product or process development, marketing research and technology. With the passage of time if the firm relentlessly preserves these competencies by making them an integral part of the corporate culture, then the probability of investments in new product development activities is high and the firm would stress on major breakthrough innovations. Whereas, Henderson, (1993) argues that competitive advantage is a function of predictably predictable activities, such as capitalizing on historic research and development capabilities as in such a situation small incremental innovations would mainly take place like better or improved version of products or simply brand extensions. FRAMEWORK KE LIYE BAAT BANAO According to Schnaars (1994) late entrants can also overtake the first mover. The late comer may use superior placement, aggressive promotions, or may even engage in a price war. Therefore these late entrants stress on non-product competition, that’s why do not invest heavily in research and development and mostly comes up with imitative products mainly through the concept of reverse engineering. The model proposed by Shrivastava and Sounder, named as 7s framework was used by Johne & et al.() coupled with another framework by Griffin & Hauser and some previous research done by Cooper reveals that a company’s performance as a whole relies on the processes, organization, strategy, culture and commitment. In their research process refers to a companywide approach to new product development processes and the activities carried out under this banner. Organization means the manner in which the projects within a program are organized ranging from a cross- functional approach where personnel from functional departments like Marketing, Human resource, finance, R&D are taken in the NPD process. Strategy refers to the overall new product strategy of the company as an essential part of the total corporate strategy. Culture means the inside environment for innovation where intrapreneurship is encouraged as part of the company’s culture. Finally, commitment from top management with positive involvement in the new product development process is also a prerequisite. According to the article by Steven C. Wheelwright & W. Earl Sasser Jr (1989), p.113 managers tend to see new product launching as a golden opportunity to steal a lead from competitors. However, quite often the much anticipated success is not achieved in reality.

Some pitfalls of the NPD process as pinpointed by Steven et al, (1989) are moving target, lack of product distinctiveness, unexpected technical problems, and mismatches between functional departments. Better planning leads to efficient courses of action and the likelihood of success is increased (ibid). From a marketing orientation viewpoint, there are five competing concepts under which organizations conduct marketing activities namely, “production concept, product concept, selling concept, marketing concept, and societal marketing concept, and holistic marketing concept” (Kotler, 2000). The holistic marketing concept is emerging as new concept which takes into consideration almost all the previous concepts. However, generally majority of the businesses are driven by a product oriented strategy.

Normally organizations try to launch superior products or services and improve their quality gradually, making implicit assumption that the customer is knowledgeable and differentiates between quality and ordinary products. This is even true for companies like GM where a top notch executive once said many years ago, “How can the public know what kind of car they want until they see what is available?”

This notion was also common place in the history where phrases like “Good wine needs no bush” were used meaning that a good product does not require any promotion. This theme generated here goes in conformance with Kotler and Armstrong, (2001) where companies try to come up with a better “mousetrap” are wonderstruck to reveal that consumer are not necessarily looking for a better mousetrap but for a better solution to the mouse problem. In an ideal situation where other things remain the same, normally consumer follow steps such as seeking awareness about a product or services, then comprehending the information, afterwards they form a positive or negative attitude about the product. If they value it positively the start considering it legitimate to use the product, then the customers uses the products or services on a trial basis so as to check efficiency of the product. If the product matches expectations they adopt it (Stanton & Kotler 2000). According to (Schiffman et al. 2009) cited in (Tariq & Ghaffar, 2010) diffusion is a macro process encompassing the spread of a new innovation from its creator to the general masses. Whereas, adoption is a micro process which is concerned with the steps through which a customer passes when accepting or rejecting a new innovation. Everrett M. Rogers, (1967) has proposed a six step profile of consumer innovators stretching from innovators to laggards. Innovators are the pioneers of adopting a new technology and laggards are the last ones. These six steps as shown in the Figure (2-15) are innovators 2.5%, early adopters 13.5%, early majority 34%, late majority 34%, and at the end laggards which constitute 16% of the population (ibid). Schiffman et al. (2009), stresses that time is the backbone of diffusion process as it determines the rate of adoption of new product (s) or service (s).

Source: (adopted from Everrett M. Roger, 1967)

In the case of Apple Family consumers who purchased MP3 can be termed innovators. Afterwards early adopters bought the first iPod. Early majority purchased the second and third models of iPod. We can say that Late Majority purchase models which came after third iPod. Finally, laggards or hard core loyal would normally buy a used or cheaper version of iPod.

The relationship marketing ladder of loyalty

Source: Christopher, Payne and Balantyne (2002)

As evident from the above process the consumer behavior can also be traced by a careful examination of the customer buying and usage behavior. So to speak consumers often need to modify their behavior for new products. Mueller, (1997) states that companies are well aware that such a change is not easy as it involves learning costs, planned obsolescence, switching costs, network externalities and so on. For instance, cost of learning by changing from PC to Macintosh operating system. The planned obsolescence is a deliberate ploy such as fashion and fads (Armstrong & Kotler, 2007). Similarly, switching costs are incurred when consumers switch from compact disc to DVD players, their previous CD collection becomes obsolete. Finally, the value of mobile or a telephone service increases with the rise in number of connections and so does is the case with credit cards whose utility increases with the number of shops accepting them. These products are characterized by a phenomenon known as network externalities (Muller, 1997).

However, according to John T. Gourville (2006) there are also psychological costs associated with the change in behavior. This phenomena is termed as psychological prejudice as people tend to overestimate the advantages of products they own vis-à-vis to the new products. Whereas, companies tend to overestimate the value of their new products launched on the market. Here disharmony is created in the perspectives of the both parties. That’s why consumers first simply refuse new offer in the first choice, whereas, the company is expecting success. So this is termed as a double-edged sword. Generally, companies should think from the perspective of customers. The Commercialization Process Model developed by Dr. Randall Goldsmith and the Mid-Continent Technology Transfer Center defines the process of bringing a product from the idea stage to a full-fledged manufacturing company. The Model breaks the process down into three categories: technical, marketing, and business.. There are important steps and crucial activities within the three phases. The matrix explains in detail how these variables must work with each other for a successful new product development.

Figure: The commercialization Process Model

(Source: Mid-Continent Technology Transfer Center)

V. REAL TIME CASE: APPLE

Due to the strong marketing focus Apples has been very successful in creating a very loyal customer base that think, live and act in a different way. In the year 1998 Apple was born again when Steve Jobs launched the iMac. This new computer comes with a complete collection of software’s and new operating system called MAC OS X. It was a success. Then after Apple launched its iBook (laptop). However the home run was scored by the introduction of iPod in the year 2001 grabbing more than 70 percent of market share in the US. Furthermore, Apple made a deal with Intel to become compatible with Microsoft Windows. Since then, iPod is enjoying market leadership in the domain of competition.

Ever since its inception, Apple has remained busy with developing more than one product at a time. In retrospect we find that in the year 1984, Apple commercialized two products namely Apple C and Macintosh, in 1986 it launched Apple llgs and Macintosh Plus, 1987 it launched Macintosh II and Macintosh SE. In 1989 it commercialized three computers namely Macintosh Portable, Macintosh IIlci and Macintosh IIfx. In the year 1990 it launched another three computer models Macintosh Classic, Macintosh IIlsi and Macintosh LC. Similarly in the year 1993 Apples commercialized seven products namely Color Classic, Quadra 800, Macintosh centris, Macintosh LCIII, Power book 180c and Macintosh LC 475. In the year 2001 Apple again launched three products namely Power Macintosh Quick silver, iMac Patterns its home run product under the name of iPod first generation. In the year 2004 Apple commercialized four products namely xServe G5, iMac G5, iPod click wheel and iPod Mini and in the year 2005 again Apple launched four successful products namely, iPod shuffle, iPod Nano, Video iPod, and Mac Mini. In the year 2006 again four successful products namely iPod shuffle, iPod Nano, iMac slimmer Intel and Mac Pro. As we all know that in the year 2007 Apple scored a home run by launching its premier iPhone. By analyzing the above trends in NPD and commercialization it can easily deduce that Apple is constantly churning out new innovative products at unprecedented rate. This is mainly due to the fact that at Apple is using concurrent engineering philosophy to good effect. As earlier on stated in such a process the product under development may lie in more than one stage of development and thus we can also deduce that Apple is following a rugby approach to new product development which can go back as well as in forward direction simultaneously. These factors have enabled Apple in terms of speed, accuracy, and quality.

Similarly, referring to Lieberman and Montgomery (2002) we can interpret that Apple has invested heavily in new product development process and therefore attained the status of market pioneer. This was especially true for Apple a couple of decades ago as well as today. Because with the advent of iPod first generation in 2001, on the market it revolutionalize the electronics industry and had a major impact on competitors. Ever since, Apple has successfully launched several other line extensions of the older version with small incremental improvements. For example in the year 2003 Apple launched iPod 3rd Generation and in the subsequent year 2004 it launched two more extensions of the products namely iPod

Mini and iPod click Wheel. Again in the year 2005 Apple came up with some improved products in the form of iPod Shuffle, Nano and Video iPod. And finally in the year 2007

iPhone was launched under the same brand umbrella term (i). Therefore the view point of Henderson, (1993) who states that gaining competitive advantage is a function of predictably

predictable activities within the firm. Thus we see small incremental changes in Apple product line as well as the view point of Lieberman and Montgomery is best exemplified by

Apple launch of iPhone in the year 2007. If we consider the case of NeXT, a desktop computer developed by Steve Jobs, the legendary founder of Apple, Customers did not want the optical drive instead of the floppy drive. Because the new feature makes it difficult for end-users to switch work from a personal computer to a NeXT. The machine enjoyed other superior features like hi-fi sound; end-users never look beyond the initial resistance. Many people found it far too expensive, while engineers reckoned workstations with superior value.

Therefore, Steve Jobs has to abandon the 200 million dollars product. Here it is suggested that if Steve has listened to the customer voice he could have been successful, because in this

scenario customers were expecting an incremental innovation. However, for almost thirty long years Apple has remain the trend setter to foresee and foretell the future of the domestic

computers. The balance of probability is high that it would continue to lead the way. The success recipe came to Apple in the form of iPod, and even Apple personal computers sales started going up because of this hit product. Apple has been very clever in its ploy of planned obsolescence as it is launching iPod after iPod and that too with new improvements. The new improved product has the cool feeling assorted around it. Therefore it is compelling customers to engage in repeat purchase, which serves the long term purpose of the company. Thanks to planned obsolescence. Another very interesting case in point relating to Apple is launch and commercialization of Apple Macintosh personal computers line. The new Apple Mac customers encounter mistakes while using Mac because it doesn’t work the same way it would be expected to on a Windows computer? Simply the Windows users follow and expect everything to word the same way as in Windows. And on the other hand Macintosh users see and expect their Macs to work in its original way (Macintosh way). There are substantial commonalities between Apple and Windows operating systems, but there are some differences which I am reckoned worth mentioning. The number of mistakes lie somewhere in the neighborhood of 25 to 30. However, I am listing down the five most common mistakes of new users of Mac OS X as pointed out by Damien Barrett (2006). (1) They close an application’s windows thinking the program has quit. (2) They’ll download Firefox and then run the browser from the disk image and then not be able to throw away the disk image because the program is still running. See number (1. 3).exe files lie scattered around the desktop from aborted downloads of Flash Player or some screensaver-cursor-spyware doodad. (3) Untitled folder. Untitled folder 2. Untitled folder 3. Untitled folder 4… (4) Using Safari’s Google search field to get to hotmail.com. (5). Desktop Picture or Wallpaper is not a synonym for Screensaver. However, majority of these problems are not problems.Simply they relate to the differences in Windows way of doing things and the Mac way of doing things. Consumers can be taught by programmers so as to educate them about it. In this regard Apple should make some changes in its Mac operating systems as well as its hard ware. These issues could also be

addressed in advertising, so as to remind consumers that Macs are not going to work the way Windows computer does so that they may capitalize in totality what Apple is offering. An interesting case in point is that in the year 1985, Bill Gates was literally begging Apple CEO Steve Jobs to license his Mac operating system to Personal computer vendors. Apple did not agree and later on Bill Gates came up with a stone crushing reply and now the situation is that Apple has only 4 percent of market share in PC business. However, this time around the buzz is related to digital music, encompassing iPod music player and its iTunes made it cheaper and convenient to download songs at a rate of 99 cents only. But the irony is that Apples iPod music player only plays songs in the company’s “FairPlay” digital rights management (DRM) format and songs downloaded from iTunes play only on iPod.

For example, a customer who gets a song downloaded from Apples iTunes and wants to play it on his or her real player would be highly disappointed (www.macnewsworld.com). On the other hand an iPod owner is left limited to get music from iTunes, even though there are many other services on the Web, such as Napster and Real Networks. But the customer can’t help the situation. Apple must hear the voice of the customer otherwise the customer is unhappy which isn’t

what a company as innovative as Apple would like.

VI. CONCLUSION:

The new product development activities differ from company to company especially in stages of commercialization and marketing. Often times the companies overvalue their new product quality, features and adoptability, whereas the consumers are reluctant to switch the existing products thus showing a high level of brand loyalty. This is mainly due to the fact that switching entails costs which can take many forms. Also important is the fact that consumers develop nostalgic fondness with products therefore not ready to accept innovation. Means that consumers form associations with certain products and therefore become reluctant to other alternatives because of their habits. Then the sequential new product process is seldom followed in true letter and spirit. Because big companies like Apple are continuously developing three to four products in pipeline. This practice is also done at Apple with its concurrent engineering. Companies should bear in mind that apart from internal sources of innovation there is a much neglected and overlooked source of new product development i.e. the voice of the customer. It has to be taken into consideration. Because by design or by default it’s the basic purpose of marketing i.e. matching products with customers. It’s good to have a visionary and charismatic leader like Steve Jobs and Henry Ford. However, these leaders should not impose their own prerogatives. In Apple case it lost market share to Microsoft in past because of the rigidity of then CEO Steve Jobs. Similarly, Mr. Henry Ford was also fond of influencing the new product development process. Someone asked him in how many colors do you produce cars. He replied cars in all colors as long as the color is black. Some of the top notch companies make silly blunders as they do not do proper research before they commercialize their products. They misunderstand between needs, wants and demands. For examples a person who goes to office daily may say that I need a car so that he may reach on time. However, the person himself may not know that actually he doesn’t need a car as car is not the basic need. The basic need is transportation and car is a want in terms of marketing. So if consumer is not clear himself about the job he wants to get the product for how can companies doing marketing research for their new product development elicit the right information from consumer. So I reckon it’s better to analyze the market by a job based approach. This means figuring out the specific job which for which the consumer hires the product or service in a particular situation. Companies like Apple who struck the home run in one or two of their prod

Green Marketing Adoption By The Firms Marketing Essay

INTRODUCTION

The promotion of environmentally safe or beneficial products, green marketing began in Europe in the early 1980s when specific products were identified as being harmful to the earth’s atmosphere. As a result, new “green” products were introduced that were less damaging to the environment. The concept caught on in the United States and has been gaining steadily ever since.

Divergent aspects of green marketing include ecologically safer products, recyclable and biodegradable packaging, energy-efficient operations, and better pollution controls. Advances produced from green marketing include packaging made from recycled paper, phosphate-free detergents, refillable containers for cleaning products, and bottles using less plastic.

As today’s consumers become more conscious of the natural environment, businesses are beginning to modify their own thoughts and behavior in an attempt to address the concerns of consumers. Green marketing is becoming more important to businesses because of the consumer’s genuine concerns about our limited resources on the earth. By implementing green marketing measures to save the earth’s resources in production, packaging, and operations, businesses are showing consumers they too share the same concerns, boosting their credibility

DEFINITONS

Pride and Ferrell (1993) Green marketing, also alternatively known as environmental marketing and sustainable marketing, refers to an organization.s efforts at designing, promoting, pricing and distributing products that will not harm the environment

Polonsky (1994) defines green marketing as .all activities designed to generate and facilitate any exchanges intended to satisfy human needs or wants, such that the satisfaction of these needs and wants occurs, with minimal detrimental impact on the natural environment .

Elkington (1994: 93) defines green consumer as one who avoids products that are likely to endanger the health of the consumer or others; cause significant damage to the environment during manufacture, use or disposal; consume a disproportionate amount of energy; cause unnecessary waste; use materials derived from threatened species or environments; involve unnecessary use of, or cruelty to animals ;adversely affect other countries.

Positive aspects of green marketing

  • First and foremost, a good green marketing program is one that either: adds renewables that would not already be added or supports renewable projects thatmight not otherwise continue to operate. If these things are already happening and being paid for by all, then the program doesn’t meet the bottom-line test: green marketing programs must make a difference.
  • A sign of a good green marketing program is one that has strong links to localenvironmental groups and that achieves broad support among regional and national groups with an interest in promoting renewable power. Public Service of Colorado, for example, has developed a close working partnership with the Land and Water Fund and other environmental groups in the state.
  • A green marketer that is seriously interested in greening the electric system will have a program that is linked to a largervision and a strategic plan for making renewables an increasingly larger part of the generation mix. A good example of this is Central and Southwest’s recent decision to acquire a significant amount of renewables capacity, with the intent of ratebasing a good portion of it, and subscribing the rest through a green pricing program.
  • For green marketing programs to be successful in the long run, they should both improve the environment and be fair to consumers. Prices should not be excessively higher than the actual cost of the resources in the portfolio. This is particularly true for green pricing programs, which are scrutinized by regulators, and in imperfectly competitive markets, because in these cases, there is no real competition in the green market. In markets that are vibrantly competitive and in which consumers have good information, this is less of a problem since lower-cost providers can compete to displace those providers charging excessive prices.

Negative aspects of green marketing

  • Selling green power at a mark-up that would have been produced anyway with the cost shared by all. An example of this would be renewable power that is already included or would be included in a utility’s ratebase without the green program. These types of programs sell nothing as if it is something, which is worse than doing no green marketing at all, because these programs are fundamentally unfair and breed consumer cynicism. If we permit these types of programs to occur, they will undermine the market for those marketers who are actually making a difference.
  • Programs that do not in some way directly benefit the renewable generator. An example of this would be a utility that has an existing power purchase contract with a renewable generator, but does not flow any benefit through to the generator.
  • Programs that make false claims and do not adequately inform consumers about the nature of their product. For example, selling “nuclear and coal free” power when consumer dollars are sent to a nuclear- and coal-owning utility. This is a recipe for creating cynicism, once the anti-nuclear consumers find out their dollars have been channeled to the owners of plants they dislike. Electrons and dollars are fungible, so, in these kinds cases, unless the marketer can prove to the public that the consumer dollars they are collecting do not in any way support the nuclear and coal plants, and support only the resources claimed as “green,” such claims should not be made. This is not to say that portfolios necessarily need to be nuclear- and coal-free for marketers to make green claims, but marketers should not misrepresent their portfolio.
  • Collecting premiums in exchange for vague promises to build renewables in the future. Consumers should not be asked to pay for someone else’s investment when they get nothing in return, and when no tangible benefit to society results.

PROBLEMS WITH GOING GREEN

One of the main problems is that firms using green marketing must ensure that their activities are not misleading to consumers or industry, and do not breach any of the regulations or laws dealing with environmental marketing. Another problem firms face is that those who modify their products due to increased consumer concern must contend with the fact that consumers’ perceptions are sometimes not correct like in McDonald’s case where it has replaced its clam shells with plastic coated paper. When firms attempt to become socially responsible, they may face the risk that the environmentally responsible action of today will be found to be harmful in the future. This may explain why some firms, like Coca-Cola and Walt Disney World, are becoming socially responsible without publicizing the point. They may be protecting themselves from potential future negative backlash, if it is determined they made the wrong decision in the past.

Governments want to modify consumer behavior thus they need to establish a different set of regulations and sometimes may result in a proliferation of regulations and guidelines, with no one central controlling body.

Reacting to competitive pressures can cause all “followers” to make the same mistake as the “leader.” A costly example of this was the Mobil Corporation who followed the competition and introduced “biodegradable” plastic garbage bags. While technically these bags were biodegradable, the conditions under which they were disposed did not allow biodegradation to occur. Mobil was sued by several US states for using misleading advertising claims . Thus blindly following the competition can have costly ramifications.

End-of-pipe solutions may not actually reduce the waste but rather shift it around, though it may minimize its short term affects. Ultimately most waste produced will enter the waste stream, therefore to be environmentally responsible organizations should attempt to minimize their waste, rather than find “appropriate” uses for it.

GREEN MARKETING – ADOPTION BY THE FIRMS.

Green marketing has been widely adopted by the firms worldwide and the following are the possible reasons cited for this wide adoption:

1) OPPORTUNITIES

As demands change, many firms see these changes as an opportunity to be exploited and have a competitive advantage over firms marketing non-environmentally responsible alternatives. Some example of firms who have strived to become more environmentally responsible, in an attempt to better satisfy their consumer needs are:

  • McDonald’s replaced its clam shell packaging with waxed paper because of increased consumer concern relating to polystyrene production and Ozone depletion.
  • Tuna manufacturers modified their fishing techniques because of the increased concern over driftnet fishing, and the resulting death of dolphins.
  • Xerox introduced a “high quality” recycled photocopier paper in an attempt to satisfy the demands of firms for less environmentally harmful products.

2) SOCIAL RESPONSIBILITY

Many firms are beginning to realize that they are members of the wider community and therefore must behave in an environmentally responsible fashion thus resulting in environmental issues being integrated into the firm’s corporate culture.

An example of a firm that does not promote its environmental initiatives is Coca-Cola which invested large sums of money in various recycling activities, as well as having modified their packaging to minimize its environmental impact. Another firm who is very environmentally responsible but does not promote this fact, at least outside the organization, is Walt Disney World (WDW) with an extensive waste management program and infrastructure.

3) GOVERNMENTAL PRESSURE

Governmental regulations relating to environmental marketing are designed to protect consumers through regulations designed to control the amount of hazardous wastes produced by firms by issuing of various environmental licenses, thus modifying organizational behavior. In some cases governments try to “induce” final consumers to become more responsible by taxing individuals who act in an irresponsible fashion. For example in Australia there is a higher gas tax associated with leaded petrol.

4) COMPETITIVE PRESSURE

Another major force in the environmental marketing area has been firms’ desire to maintain their competitive position. In many cases firms observe competitors promoting their environmental behaviors and attempt to emulate this behavior. In some instances this competitive pressure has caused an entire industry to modify and thus reduce its detrimental environmental behavior. For example, it could be argued that Xerox’s “Revive 100% Recycled paper” was introduced a few years ago in an attempt to address the introduction of recycled photocopier paper by other manufacturers. In another example when one tuna manufacture stopped using driftnets the others followed suit.

5) COST OR PROFIT ISSUES

Disposing of environmentally harmful by-products, such as polychlorinated biphenyl (PCB) contaminated oil are becoming increasingly costly and in some cases difficult. In minimizing wastes firms often develop more effective production processes that reduces the need for some raw materials thus serving as a double cost savings. In other cases firms attempt to find end-of-pipe solutions, instead of minimizing waste by trying to find markets or uses for their waste materials, where one firm’s waste becomes another firm’s input of production.

Green Code

G eneralise with care. Consumer behaviour will not necessarily be consistent across different product types, and particular market segments may respond to certain issues on the green agenda but not others.

R emember, the validity of a piece of market research is not related to the degree to which it supports your preferred option.

E xplore the context from which market research data comes. Be clear on the nature of the sample used, the questions asked, the way in which responses were recorded and the time and place from which the responses come.

E nsure that where market research is crossing international borderlines, that the terminology and interpretation remains consistent. Terms like ‘environment’, ‘green’ and ‘conservation’ do not always translate precisely between languages.

N eutrality is important. Ensure that when you pose questions to consumers, that they can make any response without being made to feel guilty or uncomfortable, and ensure that your own preconceptions about the green agenda (such as an assumption that green products will cost extra) are not encoded within the questions.

CHOOSING THE RIGHT GREEN MARKETING STRATEGY

Green marketing has not lived up to the hopes and dreams of many managers and activists. Although public opinion polls consistently show that consumers would prefer to choose a green product over one that is less friendly to the environment when all other things are equal, those “other things” are rarely equal in the minds of consumers.And hopes for green products also have been hurt by the perception that such products are of lower quality or don’t really deliver on their environmental promises.Yet the news isn’t all bad, as the growing number of people willing to pay a premium for green products — from organic foods to energy-efficient appliances — attests.

How, then, should companies handle the dilemmas associated with green marketing? They must always keep in mind that consumers are unlikely to compromise on traditional product attributes, such as convenience, availability, price, quality and performance. Since there is no single green-marketing strategy that is right for every company experts suggest that companies should follow one of four strategies, depending on market and competitive conditions, from the relatively passive and silent “lean green” approach to the more aggressive and visible “extreme green” approach — with “defensive green” and “shaded green” in between. Managers who understand these strategies and the underlying reasoning behind them will be better prepared to help their companies benefit from an environmentally friendly approach to marketing.

CONCLUSION

Green marketing covers more than a firm’s marketing claims. While firms must bear much of the responsibility for environmental degradation, the responsibility should not be theirs alone.

Ultimately green marketing requires that consumers want a cleaner environment and are willing to “pay” for it, possibly through higher priced goods, modified individual lifestyles, or even governmental intervention. Until this occurs it will be difficult for firms alone to lead the green marketing revolution.

Having said this, it must not be forgotten that the industrial buyer also has the ability to pressure suppliers to modify their activities. Thus an environmental committed organization may not only produce goods that have reduced their detrimental impact on the environment, they may also be able to pressure their suppliers to behave in a more environmentally “responsible” fashion. Final consumers and industrial buyers also have the ability to pressure organizations to integrate the environment into their corporate culture and thus ensure all organizations minimize the detrimental environmental impact of their activities. Thus green marketing should look at minimizing environmental harm, not necessarily eliminating it.

INTRODUCTION

The promotion of environmentally safe or beneficial products, green marketing began in Europe in the early 1980s when specific products were identified as being harmful to the earth’s atmosphere. As a result, new “green” products were introduced that were less damaging to the environment. The concept caught on in the United States and has been gaining steadily ever since.

Divergent aspects of green marketing include ecologically safer products, recyclable and biodegradable packaging, energy-efficient operations, and better pollution controls. Advances produced from green marketing include packaging made from recycled paper, phosphate-free detergents, refillable containers for cleaning products, and bottles using less plastic.

As today’s consumers become more conscious of the natural environment, businesses are beginning to modify their own thoughts and behavior in an attempt to address the concerns of consumers. Green marketing is becoming more important to businesses because of the consumer’s genuine concerns about our limited resources on the earth. By implementing green marketing measures to save the earth’s resources in production, packaging, and operations, businesses are showing consumers they too share the same concerns, boosting their credibility

DEFINITONS

Pride and Ferrell (1993) Green marketing, also alternatively known as environmental marketing and sustainable marketing, refers to an organization.s efforts at designing, promoting, pricing and distributing products that will not harm the environment

Polonsky (1994) defines green marketing as .all activities designed to generate and facilitate any exchanges intended to satisfy human needs or wants, such that the satisfaction of these needs and wants occurs, with minimal detrimental impact on the natural environment .

Elkington (1994: 93) defines green consumer as one who avoids products that are likely to endanger the health of the consumer or others; cause significant damage to the environment during manufacture, use or disposal; consume a disproportionate amount of energy; cause unnecessary waste; use materials derived from threatened species or environments; involve unnecessary use of, or cruelty to animals ;adversely affect other countries.

Positive aspects of green marketing

  • First and foremost, a good green marketing program is one that either: adds renewables that would not already be added or supports renewable projects thatmight not otherwise continue to operate. If these things are already happening and being paid for by all, then the program doesn’t meet the bottom-line test: green marketing programs must make a difference.
  • A sign of a good green marketing program is one that has strong links to localenvironmental groups and that achieves broad support among regional and national groups with an interest in promoting renewable power. Public Service of Colorado, for example, has developed a close working partnership with the Land and Water Fund and other environmental groups in the state.
  • A green marketer that is seriously interested in greening the electric system will have a program that is linked to a largervision and a strategic plan for making renewables an increasingly larger part of the generation mix. A good example of this is Central and Southwest’s recent decision to acquire a significant amount of renewables capacity, with the intent of ratebasing a good portion of it, and subscribing the rest through a green pricing program.
  • For green marketing programs to be successful in the long run, they should both improve the environment and be fair to consumers. Prices should not be excessively higher than the actual cost of the resources in the portfolio. This is particularly true for green pricing programs, which are scrutinized by regulators, and in imperfectly competitive markets, because in these cases, there is no real competition in the green market. In markets that are vibrantly competitive and in which consumers have good information, this is less of a problem since lower-cost providers can compete to displace those providers charging excessive prices.

Negative aspects of green marketing

  • Selling green power at a mark-up that would have been produced anyway with the cost shared by all. An example of this would be renewable power that is already included or would be included in a utility’s ratebase without the green program. These types of programs sell nothing as if it is something, which is worse than doing no green marketing at all, because these programs are fundamentally unfair and breed consumer cynicism. If we permit these types of programs to occur, they will undermine the market for those marketers who are actually making a difference.
  • Programs that do not in some way directly benefit the renewable generator. An example of this would be a utility that has an existing power purchase contract with a renewable generator, but does not flow any benefit through to the generator.
  • Programs that make false claims and do not adequately inform consumers about the nature of their product. For example, selling “nuclear and coal free” power when consumer dollars are sent to a nuclear- and coal-owning utility. This is a recipe for creating cynicism, once the anti-nuclear consumers find out their dollars have been channeled to the owners of plants they dislike. Electrons and dollars are fungible, so, in these kinds cases, unless the marketer can prove to the public that the consumer dollars they are collecting do not in any way support the nuclear and coal plants, and support only the resources claimed as “green,” such claims should not be made. This is not to say that portfolios necessarily need to be nuclear- and coal-free for marketers to make green claims, but marketers should not misrepresent their portfolio.
  • Collecting premiums in exchange for vague promises to build renewables in the future. Consumers should not be asked to pay for someone else’s investment when they get nothing in return, and when no tangible benefit to society results.

PROBLEMS WITH GOING GREEN

One of the main problems is that firms using green marketing must ensure that their activities are not misleading to consumers or industry, and do not breach any of the regulations or laws dealing with environmental marketing. Another problem firms face is that those who modify their products due to increased consumer concern must contend with the fact that consumers’ perceptions are sometimes not correct like in McDonald’s case where it has replaced its clam shells with plastic coated paper. When firms attempt to become socially responsible, they may face the risk that the environmentally responsible action of today will be found to be harmful in the future. This may explain why some firms, like Coca-Cola and Walt Disney World, are becoming socially responsible without publicizing the point. They may be protecting themselves from potential future negative backlash, if it is determined they made the wrong decision in the past.

Governments want to modify consumer behavior thus they need to establish a different set of regulations and sometimes may result in a proliferation of regulations and guidelines, with no one central controlling body.

Reacting to competitive pressures can cause all “followers” to make the same mistake as the “leader.” A costly example of this was the Mobil Corporation who followed the competition and introduced “biodegradable” plastic garbage bags. While technically these bags were biodegradable, the conditions under which they were disposed did not allow biodegradation to occur. Mobil was sued by several US states for using misleading advertising claims . Thus blindly following the competition can have costly ramifications.

End-of-pipe solutions may not actually reduce the waste but rather shift it around, though it may minimize its short term affects. Ultimately most waste produced will enter the waste stream, therefore to be environmentally responsible organizations should attempt to minimize their waste, rather than find “appropriate” uses for it.

GREEN MARKETING – ADOPTION BY THE FIRMS.

Green marketing has been widely adopted by the firms worldwide and the following are the possible reasons cited for this wide adoption:

1) OPPORTUNITIES

As demands change, many firms see these changes as an opportunity to be exploited and have a competitive advantage over firms marketing non-environmentally responsible alternatives. Some example of firms who have strived to become more environmentally responsible, in an attempt to better satisfy their consumer needs are:

  • McDonald’s replaced its clam shell packaging with waxed paper because of increased consumer concern relating to polystyrene production and Ozone depletion.
  • Tuna manufacturers modified their fishing techniques because of the increased concern over driftnet fishing, and the resulting death of dolphins.
  • Xerox introduced a “high quality” recycled photocopier paper in an attempt to satisfy the demands of firms for less environmentally harmful products.

2) SOCIAL RESPONSIBILITY

Many firms are beginning to realize that they are members of the wider community and therefore must behave in an environmentally responsible fashion thus resulting in environmental issues being integrated into the firm’s corporate culture.

An example of a firm that does not promote its environmental initiatives is Coca-Cola which invested large sums of money in various recycling activities, as well as having modified their packaging to minimize its environmental impact. Another firm who is very environmentally responsible but does not promote this fact, at least outside the organization, is Walt Disney World (WDW) with an extensive waste management program and infrastructure.

3) GOVERNMENTAL PRESSURE

Governmental regulations relating to environmental marketing are designed to protect consumers through regulations designed to control the amount of hazardous wastes produced by firms by issuing of various environmental licenses, thus modifying organizational behavior. In some cases governments try to “induce” final consumers to become more responsible by taxing individuals who act in an irresponsible fashion. For example in Australia there is a higher gas tax associated with leaded petrol.

4) COMPETITIVE PRESSURE

Another major force in the environmental marketing area has been firms’ desire to maintain their competitive position. In many cases firms observe competitors promoting their environmental behaviors and attempt to emulate this behavior. In some instances this competitive pressure has caused an entire industry to modify and thus reduce its detrimental environmental behavior. For example, it could be argued that Xerox’s “Revive 100% Recycled paper” was introduced a few years ago in an attempt to address the introduction of recycled photocopier paper by other manufacturers. In another example when one tuna manufacture stopped using driftnets the others followed suit.

5) COST OR PROFIT ISSUES

Disposing of environmentally harmful by-products, such as polychlorinated biphenyl (PCB) contaminated oil are becoming increasingly costly and in some cases difficult. In minimizing wastes firms often develop more effective production processes that reduces the need for some raw materials thus serving as a double cost savings. In other cases firms attempt to find end-of-pipe solutions, instead of minimizing waste by trying to find markets or uses for their waste materials, where one firm’s waste becomes another firm’s input of production.

Green Code

G eneralise with care. Consumer behaviour will not necessarily be consistent across different product types, and particular market segments may respond to certain issues on the green agenda but not others.

R emember, the validity of a piece of market research is not related to the degree to which it supports your preferred option.

E xplore the context from which market research data comes. Be clear on the nature of the sample used, the questions asked, the way in which responses were recorded and the time and place from which the responses come.

E nsure that where market research is crossing international borderlines, that the terminology and interpretation remains consistent. Terms like ‘environment’, ‘green’ and ‘conservation’ do not always translate precisely between languages.

N eutrality is important. Ensure that when you pose questions to consumers, that they can make any response without being made to feel guilty or uncomfortable, and ensure that your own preconceptions about the green agenda (such as an assumption that green products will cost extra) are not encoded within the questions.

CHOOSING THE RIGHT GREEN MARKETING STRATEGY

Green marketing has not lived up to the hopes and dreams of many managers and activists. Although public opinion polls consistently show that consumers would prefer to choose a green product over one that is less friendly to the environment when all other things are equal, those “other things” are rarely equal in the minds of consumers.And hopes for green products also have been hurt by the perception that such products are of lower quality or don’t really deliver on their environmental promises.Yet the news isn’t all bad, as the growing number of people willing to pay a premium for green products — from organic foods to energy-efficient appliances — attests.

How, then, should companies handle the dilemmas associated with green marketing? They must always keep in mind that consumers are unlikely to compromise on traditional product attributes, such as convenience, availability, price, quality and performance. Since there is no single green-marketing strategy that is right for every company experts suggest that companies should follow one of four strategies, depending on market and competitive conditions, from the relatively passive and silent “lean green” approach to the more aggressive and visible “extreme green” approach — with “defensive green” and “shaded green” in between. Managers who understand these strategies and the underlying reasoning behind them will be better prepared to help their companies benefit from an environmentally friendly approach to marketing.

CONCLUSION

Green marketing covers more than a firm’s marketing claims. While firms must bear much of the responsibility for environmental degradation, the responsibility should not be theirs alone.

Ultimately green marketing requires that consumers want a cleaner environment and are willing to “pay” for it, possibly through higher priced goods, modified individual lifestyles, or even governmental intervention. Until this occurs it will be difficult for firms alone to lead the green marketing revolution.

Having said this, it must not be forgotten that the industrial buyer also has the ability to pressure suppliers to modify their activities. Thus an environmental committed organization may not only produce goods that have reduced their detrimental impact on the environment, they may also be able to pressure their suppliers to behave in a more environmentally “responsible” fashion. Final consumers and industrial buyers also have the ability to pressure organizations to integrate the environment into their corporate culture and thus ensure all organizations minimize the detrimental environmental impact of their activities. Thus green marketing should look at minimizing environmental harm, not necessarily eliminating it.

Profile Of Bombardier Incorporation In Globalization

Bombardier Incorporation is a leading company in manufacturing the equipments of the transportation. It deals with the business and commercial aircraft, rail transportation equipments and they also provide the related services. They actually deals in aerospace (BA) and rail transportation (BT).They do the designing as well as the manufacturing of the aerospace products and they also provide the services related to this through BA. Whereas Bombardier Incorporation designs and manufactures the rail equipments as well as they provide the services for maintenance, control system for the rail department and so other things. Bombardier Transport France S.A.S., Bombardier Transportation (Holdings) UK Ltd., Bombardier Aerospace Corporation and Learjet Inc. are the major business concerns of Bombardier Incorporation. Bombardier is one of the biggest railway equipment provider. Though this is a Canadian company, it is doing its business outside Canada and major parts of its revenues comes from outside Canada which is( 95% of its total revenue). The company has well control on its total business all over the world.

Globalization:

Globalization means spreading something worldwide. In case of business it is a intention to operate the business globally. This is a part of a centralized business system which intends to operate its business throughout the world. It allows viewing the world as one large market place for product, service, capital, labour and knowledge. As it concerns global operations, there may be several characteristics of a globalized business. there are some phase for a company to be “global”

1st Phase:

1. Make a decision to spared their market in other country.

2. Sell a product internationally and do work between international distributors

3. Use talented people in globally

2nd Phase:

1. Work as a borderless company

2. Increase trade from both directions – domestic and international

3. Major segment of international market share for a particular product or service.

3rd Phase:

1. They will have to be more reliable and giving their perfect service to highest level.

2. They will have to acquire communication channel internationally

3. To have a good knowledge about business market it is not preferable to rely not only domestic perspective but international one also.

An overview can be drawn while discussing the business of Bombardier Incorporates they are operating their business in 60 countries at 5 subcontinents in the world. They are associated with so many areas of business such as Aerospace, rail transportation and Bombardier capital. They spreaded their business worldwide day by day. Their first international contract was with New York City. The contract was about to supply the 825 subways for $1billion. They also spreaded their business in Europe as well.

What led Bombardier Inc. do their business internationally:

There was a huge change in global economy when the business moved internationally. It brought the whole world together under the branding and knowledge. These can be explained with the help of international trade theories and determinants of trade pattern (Zhang, 2008). International trade theory through which much more knowledge about the global business can be acquired. Those are as follows:

Mercantilism theory: Mercantilism theory was developed by Jean Baptist. According to him, the wealth of the world is fixed. So whenever a country exports more than it imports, it will be highly beneficial for them and they can enjoy the net income or revenue from the export-import process. According to this theory it should be mandatory for every country to pay interest on exporting rather than importing.

Absolute advantages: In 1776, Adam Smith developed this theory. According to this theory, under free trading, each and every nation can be benefited by having a specialized knowledge in economic activities and the knowledge of the nation having the absolute advantages. Accordingly, each and every country should be creating more products. If they export their products to other then it is absolute advantages but there is no absolute advantages if they import.

Comparative Advantages: in 1817, David Ricardo developed this theory. This is nothing but the modification of the absolute theory. Comparative advantages theory describes that two countries which are having absolute advantages, their cost to produce some opportunities will be very low. So these countries should have more interest on producing and exporting.

Factor Endowment: Heckscher-Ohlin developed this theory. They focus on most important factors of production. Which are land, labour and capital. They stated that a countries export should based on the exploitation of domestic factor endowment. Generally countries are labour intensive others are capital intensive.

Those trade theories will be very clear by drawing some examples. In case of China and Nigeria, both the countries are having absolute advantages. Nigeria is enjoying the absolute advantage in raw materials especially in oil where as china is having that in rail engineering. So if both of them come to a business deal, China can enjoy the absolute advantages by providing Nigeria engineering services to build up their Rail transport system. Whereas Nigeria can enjoy the absolute advantages by supplying oil to China so that china can boom up their economy.

Challenges of global business for Bombardier Incorporation:

While running a business globally, there might be some challenges as well as the benefits for the company. In case of Bombardier Incorporation in Nigeria it was the same. Some of benefit and challenges are discussed below-

Benefits associated with global business:

Margin of economy one of the greatest benefits for a company, running their business globally is nothing other than achieving the margin of economy. Bombardier Incorporation has stared their business in 1930 and now operating in 60 countries with pride.

Increase sales and profit of the company Bombardier Incorporation is operating their business globally in 60 countries. So they have the more opportunities to have more sales and as a result to have more profits. They turnover is increasing day by day. In case of 2008, their turnover was US $109 million whereas it was increased to US $164 million in 2009.

Expand global market share of the company is running its business in different countries of the world, there is a big opportunity for the company to acquire the market share of the different companies of the world. Bombardier Incorporation is world’s largest rail transport organization and it had captured or in other word it acquisited different companies in different countries like UK, Mexico, German etc.

Challenges associated with global business:

Political instability plays an important role in global business and it is a great challenge for a company running business globally. In case of Bombardier Incorporation, they signed a contract with Nigeria to build up modern rail transport system, but it got cancelled when the government of Nigeria is changed.

Security problem is another challenge for Bombardier incorporation. Bombardier incorporation had some security problem as well in Nigeria. The local terror may create huge impact on the global business. In case of China, while they were running their business in Nigeria, the engineers had been kidnapped by the local terror and it created a huge impact on the engineering advancement.

Market fluctuation is another challenge associated with global business. It is nothing but the fluctuation in exchange rate, interest rate, inflation. The are directly associated with the business and have great impact on global business. The company’s total revenue may get decreased. In case of Bombardier Incorporation, its revenue got decreased by 3% by the year 2010.

Analysis of Organizational Structure for Bombardier Transportation (BT):

Organizational structure is nothing but the allocation of responsibilities to different associated department for the achievement of the goal of the company. The organizational structure is associated the mission, vision, goals of the company. It is the thing which will lead the company to implement their strategy successfully and to become a successful one.

Bombardier Transportation uses common organizational structure. They are having four divisional areas of which three are product areas and five functional areas. Bombardiers strategy and operational plans depends on president and chief executive officer of Bombardier Transportation. President and CEO also got the responsibility of executing the board’s resolutions and policies and delegating long term strategic business plan. Bombardier Board of Directors having 13 directors where eight directors are independent. They are using this type of structure for the better uses of their resources. It can be shown by a graph-

Figure: Organization structure of Bombardier Inc

Source:

All the arrangements for the organizational structure of Bombardier Transportation are done very well. In 2007, Bombardier Transportation established a CSR committee. The committee supports and oversees the implementation of bombardier inc.`s CSR commitments. They got five task forces are charged with managing the following issues: energy efficiency of Bombardier transportation and products, CSR along the supply chain, human resources and stakeholder engagement, and sustainability. They got target to improve their performance in specific site and action. Like management system, environment and health and safety issue.

Corporate governance of Bombardier Transportation ensures proper management of their business, increasing sustained profitability and shareholder value. They maintain strict compliance among their governance related reporting and regulatory requirement. They also maintain highest ethical standards. For the proper operation of the business the company has three stock divisions :The American, Asia pacific and Europe.

The company is doing business in Aerospace area such as business air craft, commercial air craft, jet air solution, specialized aircraft, aircraft service and training.And the other major area is Rail Transportation-rail vehicle,boggies,rail control system and so on.And the last but not the least is Bombardier capital such as inventory, railcar etc.

Critical evaluation of contract between China Railway and Nigeria Government:

China and Nigeria had a contract between them in 2006. It was about to modernise the Nigeria rail transportation system By China to connect 36 major cities situated within 4846.6 mile. It was very important project for both the countries. Several important factors faced by China in Nigeria are discussed below-

In terms of Risk,

Political instability is one of the resistances in the way of development of Nigeria. According to the change of the government, so many corporate decisions are to be changed. As for example it can be say, China had a contract with Nigeria in 2006, but when the new government come in 2008, the ministry for transport cancelled the contract.

Security and Corruption is the hindrance for any country to be developed. In case of Nigeria, it is so bad that if any foreign investor comes to invest in Nigeria, they need to pay huge amount of bribe money which has bad impact on the contract implementation. The foreign investors feel insecure to invest in Nigeria due to the local terror kidnapping the foreign employers. For this Nigeria is lagging behind in case of development.

Cultural Aspect:

Technological impact: This contract was very effective one for Nigeria Government. For the implementation of the contract China has developed technological sites which includes communication way, media, energy etc as well as supportive industries of rail way, which greatly impact on Nigeria economy.

In terms of Financial Resources for Nigeria:

Economic development Nigeria: China got the contract with the Nigeria government for the mordernation of the rail transport system of Nigeria. This contract had a great contribution to the economic booming of the Nigeria government. The rail system connected 36 major cities of the countries, which leads their transport system to be high up. 36 trains are operating per day in different cities as well as 40 million transports per year.

Benefits of Nigeria: As Nigeria got the US $2.5 billion, they got the chance to modernise their infrastructure. It brought a huge change in Nigeria.

Economic booming in China: China was highly benefited by this contract as they got the raw materials as oil for the production of their cheap products. And it leads them to economic booming.

Financial benefits of china: The contract was made for US $2.5 billion as a loan to Nigeria by China with the interest rate 2.3%. As a result China got the financial benefit from Nigeria.

Analysis of contract with generic performance:

Ansoff Matrix

A matrix was presented by Igor Ansoff which gives focus on the company’s products and its market. It gives the idea about the existing products in existing market as well as the new products creating the new market. The matrix is shown below:

Ansoff Matrix

 

Existing Products

New Products

Existing

Markets

Market Penetration

    Product Development    

New

Markets

Market Development    

    

Diversification

Market Penetration: Whenever company wants to spread in a market, it needs to follow some penetration strategy. As penetration strategy can influence many of its resources and capacities. When a rival company reach to its capacity limits, there may be chances of growing the market shares.

However, Bombardier market has limit of penetration and whenever it gets its saturation point; the company should follow another strategy to exist in the market and to continue its growth.

Market Development: Market development means increasing the business of a company in an existing market with its products as well as to attract the new customers. The market development includes spreading the market to international level in new geographical areas to attract new customers (Lynch, 2003).

In The Bombardier Incorporate has expanded its business internationally to grow its business.

Product Development: The product development is associated to the existing customer rather than the existing products. A new product can be introduced to the market to its customers to build up its strength depending on their taste. The product is unfamiliar and the market is familiar. This is a achievable territory too.

It can be said that Bombardier always developing their product from very beginning. In 1907, they first introduce to the market by snow vehicle and then in 1937, successfully they launch B7 snowmobile and then again B12 snowmobile.

Diversification: Diversification means inclination of a company to a new business deviating from its core competencies. It may be a suicide cell for the company as it is to be introduced to the new market. It requires the market survey, market development as well as the product development. This is the most risky strategy of the company to follow. But this high risk may be diminished by the high value return to the company.

In 1986, Bombardier speared there business in Europe and in that time they was world largest rail equipment and service manufacture company but in that year they entered aerospace industry. So Bombardier company diversified in new business.

Strategic method of Bombardier Transportation to enter in Africa and South America:

Business expansion implies the increase the operation in different market. When any business are successes in present condition, then try to expand in broader area. There are several ways to expand business, which are discussed below-

1. Joint venture: Joint venture is a contractual agreement between two or more parties for operating business. In joint venture both parties equally invest their capital, time, and effort in business and both parties agreed to share profit and loss of the organization (www.investorwords.com).

2. Merger and Acquisition: A merger is a consolidation of business or combination of two businesses to form a new business. In a merger, combination between business to be equal. On the other hand, acquisition is a acquired a business or purchase by another company. In acquisition, new business is not formed (www.quickmba.com).

3. Strategic alliance: A strategic alliance is short term contractual agreement between businesses to purchase pursue particular goal, but both business are logically doing business individually. The main purpose of strategic alliance to be strong economy scale, achieve critical goal, reduce competition, etc (www.12image.com).

4. Organic growth: organic growth refers to expanding business using own resources and asset. Organic growth does not refer to expand business by merger, acquisition and other strategic way. It is natural expansion of business (www.ehow.com).

There are single strategy are not suitable to enter African and South American market. To expand business in Africa and South America, it is depend on the competition, market condition, and economic condition, accessibility of respective market. There are several strategic methods to expand Bombardier Transportation in Africa and South America are discussed below-

Strategy to enter Africa:

Bombardier Incorporation is expanding its business day by day. Whenever it wants to enter into a market, it needs to do some survey. In case of Africa, the Bombardier Company (BT) may have a bigger market to be entered. Africa’s infrastructures are not so good and well developed. So if Bombardier Transportation wants to enter in Africa specially in West Africa (like Nigeria, Ivory Coast ), the strategic plan which needs to be followed is none other than organic growth. It will be easier to enter into west Africa following organic growth as

1. The infrastructure of the West Africa is not well furnished,

2. There is no competitor for BT

3. BT can have a lot of opportunities there.

4. They will not have to follow any usual structure for the entry to West Africa.

If the BT follows the Organic Growth strategy for entry in West Africa, they can have some benefits such as they can control the business according to their business goal, there will be no cultural hazards. Moreover, they can start as a newly set up business (www.answer.com).

But in case of South Africa it is little bit tough to be entered and to start business as they will have to face competitors like SE, BEE, AA. In this case the strategy needs to be followed is Merger and Acquisition rather than organic growth. It will be quite beneficial and cost effective (www.emita.org)

Strategy to enter South America:

South America especially Brazil is a good market for BT as this is the most emerging country for future expansion among the eight countries. BT is doing its business in Brazil as a market leader till now. So for further expansion of its business in Brazil, it is preferable for BT to follow the Acquisition Strategy. As a market leader, alliance or merger will not be suitable for them. (www.theglobeandmail.com)

In case of Venezuela, Argentina and Peru, joint venture will be the sweetest strategy to be followed for the expansion of the business for BT. To enter into a new market which has the same product, it is advised to follow the joint venture strategy to acquire the market share as this will lead to some beneficiary things-

It will help to access a new strong position in a new market as well as the network distribution.

Partner will also be responsible for taking risk and cost effects

It is a easy way to get skilled staff, technology, and finance

In case of travel industry, joint venture is the most familiar to be adopted to expand the business in a new market.

So from the above discussion it is very much clear that for business expansion and adoption of the business strategy, it totally depends on the opportunities, size of the market, competitors, local rules and regulation and moreover on the company’s own strategy.

Bombardier Incorporation is a leading company in manufacturing the equipments of the transportation. It deals with the business and commercial aircraft, rail transportation equipments and they also provide the related services. They actually deals in aerospace (BA) and rail transportation (BT).They do the designing as well as the manufacturing of the aerospace products and they also provide the services related to this through BA. Whereas Bombardier Incorporation designs and manufactures the rail equipments as well as they provide the services for maintenance, control system for the rail department and so other things. Bombardier Transport France S.A.S., Bombardier Transportation (Holdings) UK Ltd., Bombardier Aerospace Corporation and Learjet Inc. are the major business concerns of Bombardier Incorporation. Bombardier is one of the biggest railway equipment provider. Though this is a Canadian company, it is doing its business outside Canada and major parts of its revenues comes from outside Canada which is( 95% of its total revenue). The company has well control on its total business all over the world.

Globalization:

Globalization means spreading something worldwide. In case of business it is a intention to operate the business globally. This is a part of a centralized business system which intends to operate its business throughout the world. It allows viewing the world as one large market place for product, service, capital, labour and knowledge. As it concerns global operations, there may be several characteristics of a globalized business. there are some phase for a company to be “global”

1st Phase:

1. Make a decision to spared their market in other country.

2. Sell a product internationally and do work between international distributors

3. Use talented people in globally

2nd Phase:

1. Work as a borderless company

2. Increase trade from both directions – domestic and international

3. Major segment of international market share for a particular product or service.

3rd Phase:

1. They will have to be more reliable and giving their perfect service to highest level.

2. They will have to acquire communication channel internationally

3. To have a good knowledge about business market it is not preferable to rely not only domestic perspective but international one also.

An overview can be drawn while discussing the business of Bombardier Incorporates they are operating their business in 60 countries at 5 subcontinents in the world. They are associated with so many areas of business such as Aerospace, rail transportation and Bombardier capital. They spreaded their business worldwide day by day. Their first international contract was with New York City. The contract was about to supply the 825 subways for $1billion. They also spreaded their business in Europe as well.

What led Bombardier Inc. do their business internationally:

There was a huge change in global economy when the business moved internationally. It brought the whole world together under the branding and knowledge. These can be explained with the help of international trade theories and determinants of trade pattern (Zhang, 2008). International trade theory through which much more knowledge about the global business can be acquired. Those are as follows:

Mercantilism theory: Mercantilism theory was developed by Jean Baptist. According to him, the wealth of the world is fixed. So whenever a country exports more than it imports, it will be highly beneficial for them and they can enjoy the net income or revenue from the export-import process. According to this theory it should be mandatory for every country to pay interest on exporting rather than importing.

Absolute advantages: In 1776, Adam Smith developed this theory. According to this theory, under free trading, each and every nation can be benefited by having a specialized knowledge in economic activities and the knowledge of the nation having the absolute advantages. Accordingly, each and every country should be creating more products. If they export their products to other then it is absolute advantages but there is no absolute advantages if they import.

Comparative Advantages: in 1817, David Ricardo developed this theory. This is nothing but the modification of the absolute theory. Comparative advantages theory describes that two countries which are having absolute advantages, their cost to produce some opportunities will be very low. So these countries should have more interest on producing and exporting.

Factor Endowment: Heckscher-Ohlin developed this theory. They focus on most important factors of production. Which are land, labour and capital. They stated that a countries export should based on the exploitation of domestic factor endowment. Generally countries are labour intensive others are capital intensive.

Those trade theories will be very clear by drawing some examples. In case of China and Nigeria, both the countries are having absolute advantages. Nigeria is enjoying the absolute advantage in raw materials especially in oil where as china is having that in rail engineering. So if both of them come to a business deal, China can enjoy the absolute advantages by providing Nigeria engineering services to build up their Rail transport system. Whereas Nigeria can enjoy the absolute advantages by supplying oil to China so that china can boom up their economy.

Challenges of global business for Bombardier Incorporation:

While running a business globally, there might be some challenges as well as the benefits for the company. In case of Bombardier Incorporation in Nigeria it was the same. Some of benefit and challenges are discussed below-

Benefits associated with global business:

Margin of economy one of the greatest benefits for a company, running their business globally is nothing other than achieving the margin of economy. Bombardier Incorporation has stared their business in 1930 and now operating in 60 countries with pride.

Increase sales and profit of the company Bombardier Incorporation is operating their business globally in 60 countries. So they have the more opportunities to have more sales and as a result to have more profits. They turnover is increasing day by day. In case of 2008, their turnover was US $109 million whereas it was increased to US $164 million in 2009.

Expand global market share of the company is running its business in different countries of the world, there is a big opportunity for the company to acquire the market share of the different companies of the world. Bombardier Incorporation is world’s largest rail transport organization and it had captured or in other word it acquisited different companies in different countries like UK, Mexico, German etc.

Challenges associated with global business:

Political instability plays an important role in global business and it is a great challenge for a company running business globally. In case of Bombardier Incorporation, they signed a contract with Nigeria to build up modern rail transport system, but it got cancelled when the government of Nigeria is changed.

Security problem is another challenge for Bombardier incorporation. Bombardier incorporation had some security problem as well in Nigeria. The local terror may create huge impact on the global business. In case of China, while they were running their business in Nigeria, the engineers had been kidnapped by the local terror and it created a huge impact on the engineering advancement.

Market fluctuation is another challenge associated with global business. It is nothing but the fluctuation in exchange rate, interest rate, inflation. The are directly associated with the business and have great impact on global business. The company’s total revenue may get decreased. In case of Bombardier Incorporation, its revenue got decreased by 3% by the year 2010.

Analysis of Organizational Structure for Bombardier Transportation (BT):

Organizational structure is nothing but the allocation of responsibilities to different associated department for the achievement of the goal of the company. The organizational structure is associated the mission, vision, goals of the company. It is the thing which will lead the company to implement their strategy successfully and to become a successful one.

Bombardier Transportation uses common organizational structure. They are having four divisional areas of which three are product areas and five functional areas. Bombardiers strategy and operational plans depends on president and chief executive officer of Bombardier Transportation. President and CEO also got the responsibility of executing the board’s resolutions and policies and delegating long term strategic business plan. Bombardier Board of Directors having 13 directors where eight directors are independent. They are using this type of structure for the better uses of their resources. It can be shown by a graph-

Figure: Organization structure of Bombardier Inc

Source:

All the arrangements for the organizational structure of Bombardier Transportation are done very well. In 2007, Bombardier Transportation established a CSR committee. The committee supports and oversees the implementation of bombardier inc.`s CSR commitments. They got five task forces are charged with managing the following issues: energy efficiency of Bombardier transportation and products, CSR along the supply chain, human resources and stakeholder engagement, and sustainability. They got target to improve their performance in specific site and action. Like management system, environment and health and safety issue.

Corporate governance of Bombardier Transportation ensures proper management of their business, increasing sustained profitability and shareholder value. They maintain strict compliance among their governance related reporting and regulatory requirement. They also maintain highest ethical standards. For the proper operation of the business the company has three stock divisions :The American, Asia pacific and Europe.

The company is doing business in Aerospace area such as business air craft, commercial air craft, jet air solution, specialized aircraft, aircraft service and training.And the other major area is Rail Transportation-rail vehicle,boggies,rail control system and so on.And the last but not the least is Bombardier capital such as inventory, railcar etc.

Critical evaluation of contract between China Railway and Nigeria Government:

China and Nigeria had a contract between them in 2006. It was about to modernise the Nigeria rail transportation system By China to connect 36 major cities situated within 4846.6 mile. It was very important project for both the countries. Several important factors faced by China in Nigeria are discussed below-

In terms of Risk,

Political instability is one of the resistances in the way of development of Nigeria. According to the change of the government, so many corporate decisions are to be changed. As for example it can be say, China had a contract with Nigeria in 2006, but when the new government come in 2008, the ministry for transport cancelled the contract.

Security and Corruption is the hindrance for any country to be developed. In case of Nigeria, it is so bad that if any foreign investor comes to invest in Nigeria, they need to pay huge amount of bribe money which has bad impact on the contract implementation. The foreign investors feel insecure to invest in Nigeria due to the local terror kidnapping the foreign employers. For this Nigeria is lagging behind in case of development.

Cultural Aspect:

Technological impact: This contract was very effective one for Nigeria Government. For the implementation of the contract China has developed technological sites which includes communication way, media, energy etc as well as supportive industries of rail way, which greatly impact on Nigeria economy.

In terms of Financial Resources for Nigeria:

Economic development Nigeria: China got the contract with the Nigeria government for the mordernation of the rail transport system of Nigeria. This contract had a great contribution to the economic booming of the Nigeria government. The rail system connected 36 major cities of the countries, which leads their transport system to be high up. 36 trains are operating per day in different cities as well as 40 million transports per year.

Benefits of Nigeria: As Nigeria got the US $2.5 billion, they got the chance to modernise their infrastructure. It brought a huge change in Nigeria.

Economic booming in China: China was highly benefited by this contract as they got the raw materials as oil for the production of their cheap products. And it leads them to economic booming.

Financial benefits of china: The contract was made for US $2.5 billion as a loan to Nigeria by China with the interest rate 2.3%. As a result China got the financial benefit from Nigeria.

Analysis of contract with generic performance:

Ansoff Matrix

A matrix was presented by Igor Ansoff which gives focus on the company’s products and its market. It gives the idea about the existing products in existing market as well as the new products creating the new market. The matrix is shown below:

Ansoff Matrix

 

Existing Products

New Products

Existing

Markets

Market Penetration

    Product Development    

New

Markets

Market Development    

    

Diversification

Market Penetration: Whenever company wants to spread in a market, it needs to follow some penetration strategy. As penetration strategy can influence many of its resources and capacities. When a rival company reach to its capacity limits, there may be chances of growing the market shares.

However, Bombardier market has limit of penetration and whenever it gets its saturation point; the company should follow another strategy to exist in the market and to continue its growth.

Market Development: Market development means increasing the business of a company in an existing market with its products as well as to attract the new customers. The market development includes spreading the market to international level in new geographical areas to attract new customers (Lynch, 2003).

In The Bombardier Incorporate has expanded its business internationally to grow its business.

Product Development: The product development is associated to the existing customer rather than the existing products. A new product can be introduced to the market to its customers to build up its strength depending on their taste. The product is unfamiliar and the market is familiar. This is a achievable territory too.

It can be said that Bombardier always developing their product from very beginning. In 1907, they first introduce to the market by snow vehicle and then in 1937, successfully they launch B7 snowmobile and then again B12 snowmobile.

Diversification: Diversification means inclination of a company to a new business deviating from its core competencies. It may be a suicide cell for the company as it is to be introduced to the new market. It requires the market survey, market development as well as the product development. This is the most risky strategy of the company to follow. But this high risk may be diminished by the high value return to the company.

In 1986, Bombardier speared there business in Europe and in that time they was world largest rail equipment and service manufacture company but in that year they entered aerospace industry. So Bombardier company diversified in new business.

Strategic method of Bombardier Transportation to enter in Africa and South America:

Business expansion implies the increase the operation in different market. When any business are successes in present condition, then try to expand in broader area. There are several ways to expand business, which are discussed below-

1. Joint venture: Joint venture is a contractual agreement between two or more parties for operating business. In joint venture both parties equally invest their capital, time, and effort in business and both parties agreed to share profit and loss of the organization (www.investorwords.com).

2. Merger and Acquisition: A merger is a consolidation of business or combination of two businesses to form a new business. In a merger, combination between business to be equal. On the other hand, acquisition is a acquired a business or purchase by another company. In acquisition, new business is not formed (www.quickmba.com).

3. Strategic alliance: A strategic alliance is short term contractual agreement between businesses to purchase pursue particular goal, but both business are logically doing business individually. The main purpose of strategic alliance to be strong economy scale, achieve critical goal, reduce competition, etc (www.12image.com).

4. Organic growth: organic growth refers to expanding business using own resources and asset. Organic growth does not refer to expand business by merger, acquisition and other strategic way. It is natural expansion of business (www.ehow.com).

There are single strategy are not suitable to enter African and South American market. To expand business in Africa and South America, it is depend on the competition, market condition, and economic condition, accessibility of respective market. There are several strategic methods to expand Bombardier Transportation in Africa and South America are discussed below-

Strategy to enter Africa:

Bombardier Incorporation is expanding its business day by day. Whenever it wants to enter into a market, it needs to do some survey. In case of Africa, the Bombardier Company (BT) may have a bigger market to be entered. Africa’s infrastructures are not so good and well developed. So if Bombardier Transportation wants to enter in Africa specially in West Africa (like Nigeria, Ivory Coast ), the strategic plan which needs to be followed is none other than organic growth. It will be easier to enter into west Africa following organic growth as

1. The infrastructure of the West Africa is not well furnished,

2. There is no competitor for BT

3. BT can have a lot of opportunities there.

4. They will not have to follow any usual structure for the entry to West Africa.

If the BT follows the Organic Growth strategy for entry in West Africa, they can have some benefits such as they can control the business according to their business goal, there will be no cultural hazards. Moreover, they can start as a newly set up business (www.answer.com).

But in case of South Africa it is little bit tough to be entered and to start business as they will have to face competitors like SE, BEE, AA. In this case the strategy needs to be followed is Merger and Acquisition rather than organic growth. It will be quite beneficial and cost effective (www.emita.org)

Strategy to enter South America:

South America especially Brazil is a good market for BT as this is the most emerging country for future expansion among the eight countries. BT is doing its business in Brazil as a market leader till now. So for further expansion of its business in Brazil, it is preferable for BT to follow the Acquisition Strategy. As a market leader, alliance or merger will not be suitable for them. (www.theglobeandmail.com)

In case of Venezuela, Argentina and Peru, joint venture will be the sweetest strategy to be followed for the expansion of the business for BT. To enter into a new market which has the same product, it is advised to follow the joint venture strategy to acquire the market share as this will lead to some beneficiary things-

It will help to access a new strong position in a new market as well as the network distribution.

Partner will also be responsible for taking risk and cost effects

It is a easy way to get skilled staff, technology, and finance

In case of travel industry, joint venture is the most familiar to be adopted to expand the business in a new market.

So from the above discussion it is very much clear that for business expansion and adoption of the business strategy, it totally depends on the opportunities, size of the market, competitors, local rules and regulation and moreover on the company’s own strategy.

Haier Taking A Chinese Company Global Marketing Essay

It has a total market share of 6 percent in the world which makes it the second largest Refrigerator manufacturing company and the third largest in the white goods revenues. It has a 30 percent share in the Chinese market of around 129 Billion white goods and is also growing the black goods sectors in China.

But in the last five years of time, the profit margin of the company dropped down to 2.6 percent from 9.4 percent. The main reason for this decline was attributed to be the entrant of several global competitors in the sector which made the company cut it’s by 10 to 15 percent. But the best part was that it was expanding globally with almost doubling its global exports from China and generated revenue of USD 1 Billion alone from US.

Haier mainly focuses on the difficult markets first. By difficult market, it means that the company’s focus in mainly on the developed market where it faces high level of competition. In the year 2004, around 70 percent of the total revenue from the international market came from the developed markets like Europe, US, etc.

Company focuses on beginning with the niche products. For The Company entered in the developed market with a complete niche in order to ejaculate the competitors out from the market. For example, the company entered in US market with refrigerators for the student of for offices. This was a new plan and was highly successful.

Company focuses on staffing the local population. Whenever company enters the international market, it believes in hiring the local people for the making the structure for the new product in the market because the local people have clear idea about the market. It follows this strategy not just to export but also to satisfy the needs of the local population.

Company always keeps in mind the environmental betterment of the country or the city in which it is having its production. This give a company a very good carbon rating in the market which makes a very good image of the company increases its future prospects.

In the Chinese environment, there were several foreign and the local entrants giving competitor to the company. Foreign brands in the countries were taking the market away from the local brands in the Chinese market. But Haier had an advantage of in build Chinese value in the products which was never tuned by the foreign entrants.

In the year 1989, in China there were 100 producers of refrigerators which dropped down to 20 in the 1996 with three major producers. In china, Haeir faced formidable competitors which were involved in one or two products only. Among its competition in the country, Haeir was always secure from the threat of the competitors because of its innovative techniques and export strategies.

Corporate structure of the company is under Partial Public Ownership. Haier is a collective company which means that the company is owned by the employees only. The ownership structure of the company is actually opaque. This clearly suggests that it is compatible for the employees or not. The problem with the corporate structure of the company is that the employees do not get any dividend and they do not know how much share they have in the company.

There is dissimilarity between the corporate structure of Haier and other organizations. Generally, other organizations of the same type do not have the same structure of owner. The ownership fundamental of the company makes it absolutely different it in corporate structure from the other companies.

IV.B Corporate Culture

The corporate culture in the company is really very innovative as it has always been created in such a way by the senior employees in the company. Innovation is considered to be the core value of the corporate culture of Haier. There is a unique culture which is carried out by the company for the past 25 years. There are certain factors on which the corporate culture of the company depends. These factors are as follows:

Creative Technologies

Innovative strategies

Efficient organization

Advanced concepts

Market orientation

These above factors have made Haier grow in a swift manner and made the company expand from China to all over the world.

The corporate culture of the company is heavily adopted by the people working in the company. Main reason behind this is that company recruits the local people where it expands the business and hence, the corporate culture of the company is considered to be very much compatible with the local environment of the company where it operates.

IV.C Corporate Resources

IV.C.1 Marketing

There are several marketing strategies followed by the company. Haeir markets its products as an innovative and niche in the market which can never be competed by the competitors. Marketing strategies mainly focus on the uniqueness of the products.

Products lines of the company are mainly refrigerators, white manufacturing goods and black manufacturing goods like television, etc.

Company is located mainly in China where the company had its inception and now it has expanded itself to various countries of the world

Haier prices of the product are generally 15-20 percent more than that of its customers but still considered to be one of the top most companies in refrigerators manufacturing

Promotion of the company is mainly based on meeting the demands o f the local customers and hence promotions are also done in the same way.

Main product marketing strategies of Haier in the international market is to follow the law of development based on the product life cycle principle (The product life cycle theory of international production and China’s Enterprise Strategy Workshop, 2008). The stages of product life cycle of Haier include its loss of 47 million because of the temporary shutdown of the small scale firms to the present status of global sales of the company of 760 Billion Yuan.

Market segmentation by Haier is mainly done on the bases of the product portfolios available with the company. These product portfolios are kitchen appliances to home comfort products. In case of the home comfort products, segmentation is further done to room ACs and dehumidifiers (Haier Group’s Strategy in the US Market).

In spite of the fact that prices of Haier products in the market is around 15 to 20 percent more expensive than the competitor product, Haier gets a better market response than its competitors especially in China.

Role of marketing manager in strategic management process is that he or she should always get certain market information which is required for the development of the product in a better and easier way so that reach ability of the product increases.

IV.C.2 Finance

Financial performance: We can see from the Appendix 1 of Revenue and Net profit of the company that from the year 2002 to 2004 there has been a constant growth in the net profit of the company and a constant growth is seen in the revenue generation of the company. This clearly indicates that the financial position of the company is really strong. There has been a constant drop in the net profit of the company 2001 to 2002 because of the entrants of more and more competitors in the market because of which company has to reduce its prices. Most of the revenue generated by the company is in the domestic region.

The Cash flow analysis of the company suggests that there has been a constant increase in the cash balance at the end of every financial year which clearly means that there is a constant increase in the net change in cash in the company which means huge assets is cumulating in the company which will increase its financial growth.

As compared to the competitors like Whirlpool and GE, the financial volume share of the company is less but is increasing at a greater speed. Ranking in the volume percentage of retail, Haier comes at the third position in the world giving a tough competition to GE at present.

Financial issues: There are some financial issues arising within the company and these issues are as follows:

Profit margin of the company is decreasing in spite the revenue of the company is constantly growing

There is a decrease in EBITDA margin and operating margin.

Main role of financial manager in strategic management process is to check all the financial issues that arise within the company and give the better solution for such issues so as to increase the financial performance of the company.

IV.C.3 Research and Development

R&D budget: Haier invest around 5 to 7 percent of the revenue in the Research and Development of the products.

R&D Strategies: Main strategy followed by the company in R&D is to come up with a niche in the market for which a complete and vast research and meaningful analysis is needed.

Main competitive advantage of the company because of its large investment in Research and Development of products is that even if the prices of the product of Haier are 20 percent more than that of the competitors, there is better market response for Haier.

Main role of R&D Manager in strategic management process is that he or she should always come up with some really exciting research which can create a niche of the company in the market. This is what has happened with Haier. R&D team of the company is really very strong which gives it huge competitive advantage.

IV.C.4 Operation and Logistics

The Operation capabilities of the company can easily be judged by the increase in the sales revenue from 2003 to 2004. There was a immediate jump from 11,688 RMB Billion to 15,299 RMB Billion

This clearly suggests that the company’s operation has really increased at a much higher level from 2003 to 2004.

Also the operation cost of the company has also increased from the same level. This means that model of operations in the company remained the same but the frequency of the operation or production in the company increased.

A compared to the competitors, it can be seen from the sales volume that company has a huge level of production.

Main role of Operation Manager in strategic management process is to increase the level of production in the company so as to increase the revenue and net profit of the company

IV.C.5 Human Resource Management

HR team of the company makes Haier a company for creating a worldwide prestige.

Main motive of the HR recruitment of the company is based on the fact that company recruits the local population more. Main reason behind this is that according to Haier, if the company wants to know about the target country, it can only be taught by the local person.

Employees in the company are satisfied with the fact that they are the only owner of the company but problem is that they do not know their ownership percentage.

Main role of HR Manager in strategic management process is to recruit the best possible employees in the company and give them every kind of benefits to make them feel better in the organization.

IV.C.6 Information Technology

Haier uses a E-Commerce system for the operations in the product sale. The performance of IT in the company is really not much but is used at a very high level. IT in the company is mainly used for the network management, marketing services and procures.

Qingdao Haier Qingda Software company is the mainly implication of IT in Haier. This company was established in the year 1998 which consist of high development of embedded systems, information software and integration of systems. Information Technology in the company is mainly used to develop LCD TV, Plasma TV, etc.

Strategic Factor

Internal Factors

Capabilities

Product

Manufacturing

Finance

Price

Promotion

Place

Personal

External Factors

Customers

Socio-cultural change

Market place

Macroeconomic change

Technological change

Legislation

Competitive position

Globalization

Recommended Strategies

Company has a strategy to focus on the difficult market is not at all questionable but the recommendation can be given that company can also think for the developing market in a simultaneous manner so that it can increase its revenue much more. Company has a very string research and development team, so company should make strategies to target middle market and reduce the cost of their products to target middle income people.

Conclusion

Haier decision to globalize its products from china was absolutely a very good strategy by the company because of the fact that it has increased the revenue of the company. Goodness of this strategy can be seen in its financial performance as well. Another reason because of which this was a good strategy was that company’s Research and Development was really very good but Chinese market was not that ready for the high technology products. Hence globalization was required. From its past performances in research and development, company has shown a real growth in the marker with its niche products. The same can be done for the white goods as well. Company Three Third Strategy was a wise approach because it took the company from China to the Global market and increased its revenue growth.

It has a total market share of 6 percent in the world which makes it the second largest Refrigerator manufacturing company and the third largest in the white goods revenues. It has a 30 percent share in the Chinese market of around 129 Billion white goods and is also growing the black goods sectors in China.

But in the last five years of time, the profit margin of the company dropped down to 2.6 percent from 9.4 percent. The main reason for this decline was attributed to be the entrant of several global competitors in the sector which made the company cut it’s by 10 to 15 percent. But the best part was that it was expanding globally with almost doubling its global exports from China and generated revenue of USD 1 Billion alone from US.

Haier mainly focuses on the difficult markets first. By difficult market, it means that the company’s focus in mainly on the developed market where it faces high level of competition. In the year 2004, around 70 percent of the total revenue from the international market came from the developed markets like Europe, US, etc.

Company focuses on beginning with the niche products. For The Company entered in the developed market with a complete niche in order to ejaculate the competitors out from the market. For example, the company entered in US market with refrigerators for the student of for offices. This was a new plan and was highly successful.

Company focuses on staffing the local population. Whenever company enters the international market, it believes in hiring the local people for the making the structure for the new product in the market because the local people have clear idea about the market. It follows this strategy not just to export but also to satisfy the needs of the local population.

Company always keeps in mind the environmental betterment of the country or the city in which it is having its production. This give a company a very good carbon rating in the market which makes a very good image of the company increases its future prospects.

In the Chinese environment, there were several foreign and the local entrants giving competitor to the company. Foreign brands in the countries were taking the market away from the local brands in the Chinese market. But Haier had an advantage of in build Chinese value in the products which was never tuned by the foreign entrants.

In the year 1989, in China there were 100 producers of refrigerators which dropped down to 20 in the 1996 with three major producers. In china, Haeir faced formidable competitors which were involved in one or two products only. Among its competition in the country, Haeir was always secure from the threat of the competitors because of its innovative techniques and export strategies.

Corporate structure of the company is under Partial Public Ownership. Haier is a collective company which means that the company is owned by the employees only. The ownership structure of the company is actually opaque. This clearly suggests that it is compatible for the employees or not. The problem with the corporate structure of the company is that the employees do not get any dividend and they do not know how much share they have in the company.

There is dissimilarity between the corporate structure of Haier and other organizations. Generally, other organizations of the same type do not have the same structure of owner. The ownership fundamental of the company makes it absolutely different it in corporate structure from the other companies.

IV.B Corporate Culture

The corporate culture in the company is really very innovative as it has always been created in such a way by the senior employees in the company. Innovation is considered to be the core value of the corporate culture of Haier. There is a unique culture which is carried out by the company for the past 25 years. There are certain factors on which the corporate culture of the company depends. These factors are as follows:

Creative Technologies

Innovative strategies

Efficient organization

Advanced concepts

Market orientation

These above factors have made Haier grow in a swift manner and made the company expand from China to all over the world.

The corporate culture of the company is heavily adopted by the people working in the company. Main reason behind this is that company recruits the local people where it expands the business and hence, the corporate culture of the company is considered to be very much compatible with the local environment of the company where it operates.

IV.C Corporate Resources

IV.C.1 Marketing

There are several marketing strategies followed by the company. Haeir markets its products as an innovative and niche in the market which can never be competed by the competitors. Marketing strategies mainly focus on the uniqueness of the products.

Products lines of the company are mainly refrigerators, white manufacturing goods and black manufacturing goods like television, etc.

Company is located mainly in China where the company had its inception and now it has expanded itself to various countries of the world

Haier prices of the product are generally 15-20 percent more than that of its customers but still considered to be one of the top most companies in refrigerators manufacturing

Promotion of the company is mainly based on meeting the demands o f the local customers and hence promotions are also done in the same way.

Main product marketing strategies of Haier in the international market is to follow the law of development based on the product life cycle principle (The product life cycle theory of international production and China’s Enterprise Strategy Workshop, 2008). The stages of product life cycle of Haier include its loss of 47 million because of the temporary shutdown of the small scale firms to the present status of global sales of the company of 760 Billion Yuan.

Market segmentation by Haier is mainly done on the bases of the product portfolios available with the company. These product portfolios are kitchen appliances to home comfort products. In case of the home comfort products, segmentation is further done to room ACs and dehumidifiers (Haier Group’s Strategy in the US Market).

In spite of the fact that prices of Haier products in the market is around 15 to 20 percent more expensive than the competitor product, Haier gets a better market response than its competitors especially in China.

Role of marketing manager in strategic management process is that he or she should always get certain market information which is required for the development of the product in a better and easier way so that reach ability of the product increases.

IV.C.2 Finance

Financial performance: We can see from the Appendix 1 of Revenue and Net profit of the company that from the year 2002 to 2004 there has been a constant growth in the net profit of the company and a constant growth is seen in the revenue generation of the company. This clearly indicates that the financial position of the company is really strong. There has been a constant drop in the net profit of the company 2001 to 2002 because of the entrants of more and more competitors in the market because of which company has to reduce its prices. Most of the revenue generated by the company is in the domestic region.

The Cash flow analysis of the company suggests that there has been a constant increase in the cash balance at the end of every financial year which clearly means that there is a constant increase in the net change in cash in the company which means huge assets is cumulating in the company which will increase its financial growth.

As compared to the competitors like Whirlpool and GE, the financial volume share of the company is less but is increasing at a greater speed. Ranking in the volume percentage of retail, Haier comes at the third position in the world giving a tough competition to GE at present.

Financial issues: There are some financial issues arising within the company and these issues are as follows:

Profit margin of the company is decreasing in spite the revenue of the company is constantly growing

There is a decrease in EBITDA margin and operating margin.

Main role of financial manager in strategic management process is to check all the financial issues that arise within the company and give the better solution for such issues so as to increase the financial performance of the company.

IV.C.3 Research and Development

R&D budget: Haier invest around 5 to 7 percent of the revenue in the Research and Development of the products.

R&D Strategies: Main strategy followed by the company in R&D is to come up with a niche in the market for which a complete and vast research and meaningful analysis is needed.

Main competitive advantage of the company because of its large investment in Research and Development of products is that even if the prices of the product of Haier are 20 percent more than that of the competitors, there is better market response for Haier.

Main role of R&D Manager in strategic management process is that he or she should always come up with some really exciting research which can create a niche of the company in the market. This is what has happened with Haier. R&D team of the company is really very strong which gives it huge competitive advantage.

IV.C.4 Operation and Logistics

The Operation capabilities of the company can easily be judged by the increase in the sales revenue from 2003 to 2004. There was a immediate jump from 11,688 RMB Billion to 15,299 RMB Billion

This clearly suggests that the company’s operation has really increased at a much higher level from 2003 to 2004.

Also the operation cost of the company has also increased from the same level. This means that model of operations in the company remained the same but the frequency of the operation or production in the company increased.

A compared to the competitors, it can be seen from the sales volume that company has a huge level of production.

Main role of Operation Manager in strategic management process is to increase the level of production in the company so as to increase the revenue and net profit of the company

IV.C.5 Human Resource Management

HR team of the company makes Haier a company for creating a worldwide prestige.

Main motive of the HR recruitment of the company is based on the fact that company recruits the local population more. Main reason behind this is that according to Haier, if the company wants to know about the target country, it can only be taught by the local person.

Employees in the company are satisfied with the fact that they are the only owner of the company but problem is that they do not know their ownership percentage.

Main role of HR Manager in strategic management process is to recruit the best possible employees in the company and give them every kind of benefits to make them feel better in the organization.

IV.C.6 Information Technology

Haier uses a E-Commerce system for the operations in the product sale. The performance of IT in the company is really not much but is used at a very high level. IT in the company is mainly used for the network management, marketing services and procures.

Qingdao Haier Qingda Software company is the mainly implication of IT in Haier. This company was established in the year 1998 which consist of high development of embedded systems, information software and integration of systems. Information Technology in the company is mainly used to develop LCD TV, Plasma TV, etc.

Strategic Factor

Internal Factors

Capabilities

Product

Manufacturing

Finance

Price

Promotion

Place

Personal

External Factors

Customers

Socio-cultural change

Market place

Macroeconomic change

Technological change

Legislation

Competitive position

Globalization

Recommended Strategies

Company has a strategy to focus on the difficult market is not at all questionable but the recommendation can be given that company can also think for the developing market in a simultaneous manner so that it can increase its revenue much more. Company has a very string research and development team, so company should make strategies to target middle market and reduce the cost of their products to target middle income people.

Conclusion

Haier decision to globalize its products from china was absolutely a very good strategy by the company because of the fact that it has increased the revenue of the company. Goodness of this strategy can be seen in its financial performance as well. Another reason because of which this was a good strategy was that company’s Research and Development was really very good but Chinese market was not that ready for the high technology products. Hence globalization was required. From its past performances in research and development, company has shown a real growth in the marker with its niche products. The same can be done for the white goods as well. Company Three Third Strategy was a wise approach because it took the company from China to the Global market and increased its revenue growth.

A Study Of Consumer Perception Towards The Brand Marketing Essay

Introduction to the Subject

Consumer Perception

Perception is defined as the process by which an individual select, organise and interprets stimuli into a meaningful and coherent picture of the world. Two individual may be exposed to the same stimuli under the same time apparent condition but how each person recognizes, selects and organizes and interprets these stimuli is highly individual process based on each persons’s own needs, values and expectations. A person do not act and react on the basis of objective reality because reality is a phenomenon based on that person’s need, want, value and personal experience. Consumer perception is basically refers to the buying perception of an individual that how a person perception change to see a particular stimuli and after that how their buying behavior also changed.. So for the marketer, perception are much more important then the knowledge of objective reality. So for the marketer it’s not more that what they shows to their target market, it’s is more important that what target market think about their showing object. So it’s necessary to understand the influencing factor of consumer perception which forces to change their buying behavior.

Industry Overview

The Indian retail market, which is the fifth largest retail destination globally, has been ranked as the most attractive emerging market for investment in the retail sector by AT Kearney’s eighth annual Global Retail Development Index (GRDI), in 2009. As per a study conducted by the Indian Council for Research on International Economic Relations (ICRIER), the retail sector is expected to contribute to 22 per cent of India’s GDP by 2010. With rising consumer demand and greater disposable income, the US$ 400 billion Indian retail sector is clocking an annual growth rate of 30 per cent. It is projected to grow to US$ 700 billion by 2010, according to a report by global consultancy Northbridge Capital. The organised business is expected to be 20 per cent of the total market by then. In 2008, the share of organised retail was 7.5 per cent or US$ 300 million of the total retail market. A McKinsey report, ‘The rise of Indian Consumer Market’, estimates that the Indian consumer market is likely to grow four times by 2025. Commercial real estate services company, CB Richard Ellis’ findings state that India’s retail market has moved up to the 39th most preferred retail destination in the world in 2009, up from 44 last year. India continues to be among the most attractive countries for global retailers. Foreign direct investment (FDI) inflows as on September 2009, in single-brand retail trading, stood at approximately US$ 47.43 million, according to the Department of Industrial Policy and Promotion (DIPP). India’s overall retail sector is expected to rise to US$ 833 billion by 2013 and to US$ 1.3 trillion by 2018, at a compound annual growth rate (CAGR) of 10 per cent. As a democratic country with high growth rates, consumer spending has risen sharply as the youth population (more than 33 percent of the country is below the age of 15) has seen a significant increase in its disposable income. Consumer spending rose an impressive 75 per cent in the past four years alone. Also, organised retail, which is pegged at around US$ 8.14 billion, is expected to grow at a CAGR of 40 per cent to touch US$ 107 billion by 2013. The organised retail sector, which currently accounts for around 5 per cent of the Indian retail market, is all set to witness maximum number of large format malls and branded retail stores in South India, followed by North, West and the East in the next two years. Tier II cities like Noida, Amritsar, Kochi and Gurgaon, are emerging as the favoured destinations for the retail sector with their huge growth potential. Further, this sector is expected to invest around US$ 503.2 million in retail technology service solutions in the current financial year. This could go further up to US$ 1.26 billion in the next four to five years, at a CAGR of 40 per cent.

(Websource:-http://www.dare.co.in/opportunities/retail-franchising/the-growth-of-private-labels.htm)

Moreover, many new apparel brands such as Zara, the fashion label owned by Inditex SA of Spain, UK garment chain Topshop, the Marc Ecko clothing line promoted by the US entrepreneur of the same name and the Japanese casual wear brand Uniqlo are preparing to open outlets in India. The India Retail Industry is the largest among all theindustries, accounting for over 10 per cent of the country’s GDP and around 8 per cent of the employment. The Retail Industry in India has come forth as one of the most dynamic and fast pacedindustries with several players entering the market. But all of them have not yet tasted success because of the heavy initial investments that are required to break even with other companies and compete with them. The India Retail Industry is gradually inching its way towards becoming the next boom industry.  The total concept and idea of shopping has undergone an attention drawing change in terms of format and consumer buying behavior, ushering in a revolution in shopping in India. Modern retailing has entered into the Retail market in India as is observed in the form of bustling shopping centers, multi-storied malls and the huge complexes that offer shopping, entertainment and food all under one roof. A large young working population with medium age of 24 years, nuclear families in urban areas, along with increasing working women population and emerging opportunities in the services sector are going to be the key factors in the growth of the organized Retail sector in India. The growth pattern in organized retailing and in the consumption made by the Indian population will follow a rising graph helping the newer businessmen to enter the India Retail Industry.  In India the vast middle class and its almost untapped retail industry are the key attractive forces for global retail giants wanting to enter into newer markets, which in turn will help the India Retail Industry to grow faster. Indian retail is expected to grow 25 per cent annually. Modern retail in India could be worth US$ 175-200 billion by 2016. The Food Retail Industry in India dominates the shopping basket. The Mobile phone Retail Industry in India is already a US$ 16.7 billion business, growing at over 20 per cent per year. The future of the India Retail Industry looks promising with the growing of the market, with the government policies becoming more favorable and the emerging technologies facilitating operations.

Current status of the Indian Retail Sector:-

Current status:-US$ 400 billion with annual growth rate of 30 per cent.

Projected to grow to US$ 700 billion by 2010

Expected: – US$ 833 billion by 2013 and to US$ 1.3 trillion by 2018 with ( (CAGR) of 10 percent 

According to Indian Council for Research on International Economic Relations (ICRIER), the retail sector is expected to contribute to 22 per cent of India’s GDP by 2010.

(Web source: – http://www.ibef.org/industry/retail.aspx)

Company overview

Bharti Enterprises is one of India’s leading business groups with interests in telecom, agri business, financial services, retail and manufacturing. Bharti Airtel, a group company, is one of Asia’s leading providers of telecommunications services with operations in India and Sri Lanka, spanning mobile services, telemedia services and enterprise services. Bharti Airtel has always been at the forefront of the telecom revolution, transforming the sector with its world-class services built on leading edge technologies. In the area of financial services, Bharti has been partnering with AXA of France to offer life insurance, general insurance and asset management services.  Bharti Retail, a wholly owned subsidiary of Bharti Enterprises operates multiple-format consumer friendly stores, while Bharti Walmart is a B2B joint venture with Walmart, for wholesale cash and carry and back-end supply chain management operations. 

Other businesses in the group are Beetel for communication and media devices, and FieldFresh Foods Private Limited, a joint venture with Del Monte Pacific Limited to offer fresh fruits and vegetables, and processed food in India as well as international markets. Bharti Retail (Pvt.) Limited, a wholly owned subsidiary of Bharti Enterprises. As part of its plans to provide a world-class retailing experience to consumers across India, the Company has planned an investment of $US 2 to 2.5 billion by 2015. Bharti Retail plans pan-India operations and is looking at approximately 10 million square feet of retail experience across all cities in India with a population of over one million. It plans to employ 60000 people, will include ex-servicemen and women and provide multi dimensional career opportunities for youth of India. Bharti Retail will launch its retail outlets in multiple consumer friendly formats, which will include Hypermarkets and Supermarkets. For the small store format, Bharti Retail is also looking at partnering with existing local store owners across India through a franchise model. Bharti Retail proposes to serve all regular shopping requirements of an average Indian household. This will include all food and grocery categories, fresh fruits and vegetables, meat and poultry, dairy products, staples, FMCG and processed foods, electronics and appliances, clothing and footwear, furniture and furnishing, and other household articles. Bharti Retail will keep adding to the product portfolio in line with consumer aspirations, references and trends in the international market. Mr. Rajan Bharti Mittal, Joint Managing Director, Bharti Enterprises said, After revolutionising the Indian telecom sector, retail will be the next big focus area for Bharti. Organised retail, which currently accounts for only 3% of the total market, has tremendous growth potential in the fast expanding Indian economy. Not only will it benefit millions of consumers but also farmers, small manufacturers and artisans. The sector will also offer enormous direct and indirect employment opportunities while attracting huge investments in building the supply chain infrastructure, adding to the economic growth of India, especially in rural areas. Bharti with its in-depth understanding of the Indian consumer, experience of running all India operations, ability to attract & grow talent and capability to deliver a great experience at affordable prices, is uniquely placed in the Indian retail sector.

Bharti Wal-Mart neighborhood supermarket opened shop under the brand name “Easy Day”. The launch was a very low profile one mainly to put-off resistance from local vendors. [Learning from Reliance and Wal-Mart’s lessons Also, Sunil Mittal promoter of Bharti group who hails from the strictly vegetarian Marwari community will face resistance from them because of stocking meat in Easy Day stores.

Product Range in Easy Day stores:

Bakery products

Food and Beverages

Home & Personal Care

Dairy Products

Frozen – Vegetarian, Non-Vegetarian[Meat] and Chilled Non-Vegetarian

Grains & Pulses

Meat and Poultry Items

All the three stores are single floor stores with cash counter and bakery section at the entrance. Each category of the product was marked separately. Products were effectively displayed with price tags. In Easy Day stores having Home & Personal Care (Toothpaste, Soap, etc] and Food & Beverages (Pepsi, Fruit Juice, Cereals) are sold at a discount between 1% to 5% only.

Need & Scope of the study:-

The scope of the study was confined to the customers in Jalandhar, Punjab state. The immediate customers for the company are the middle class. The study was emphasized on the perception of consumer regarding easyday brand. It will help easyday to target its customer more precisely because this will help easyday management to know there customer in detail. It will also help to the perception of customers regarding their competitors.

As this research is conducted on customer of Jalandhar city so it will be not more fruit full to implement the finding of this research in other city than Jalandhar city because we know that consumer behavior changes according location. So conclusion may be applicable in Jalandhar city and may not be true for the whole.

Objective of the study:-

Primary objective:-

To know the factor which influence the consumer perception for purchasing in the easy day retail

Secondary objective:-

To know the effect of branding in retail on purchasing decision of consumer.

To study the factors that can help the easyday in their growth and development.

REVIEW OF LITERATURE

Jha, (2008) has analyzed that how Reliance Company is lagging behind in the era of cutthroat competition .company is unable to make good relationship with corporate clients. Main rival Bharati easyday is trying to capture more market share with their new ideas and plan. As other retailers are concern the company should become liberal on his policies. Company should give the clients more facilities so that they may became new clients and may continue through it. The company also needs a proper marketing wing to operate well in these areas and accomplish the goal, mission and vision of the company.

Lal, (2000) has analyzed that building store loyalty through store brand, that the role of a store brand in building store loyalty through a game theoretic analysis. In a market in which a segment of consumers is sensitive to product quality and consumers’ brand choice in low-involvement packaged goods categories is characterized by inertia. The quality store brands can be an instrument for retailers to generate store differentiation, store loyalty, and store profitability, even when the store brand does not have a margin advantage over the national brand.

Wilcox, (1998) has analyzed that understanding price competition between national brands and private labels in a duopolistic channel structure, Narasimhan and find that manufacturer profits increase as national brands are more differentiated and the cross price sensitivity in private label price variations is smaller, while retailer profits increase as stores are differentiated and the cross price sensitivity in private label price variations is higher. Interestingly, we also find that total channel profit increases as the retailers become leaders (over manufacturers).

Pauwels and Shuba (2004) has analyzed that who Benefits from Store Brand Entry? find that two beneficial effects of store brand entry: high unit margins on the store brand itself and higher unit margins on the national brands. This increase in unit margins implies that the retailer strengthens its bargaining position vis-à-vis national brand manufacturers. However, store brand entry only rarely yields category expansion and does not create store traffic or revenue benefits. Second, consumers do not obtain lower prices on all national brands, only on some second-tier brands. However, they benefit from enlarged product assortment and intensified promotional activity that lowers average price paid for two out of four categories. For the manufacturers, store brand entry is typically beneficial for premium-price national brands, but not for second-tier national brands. Often, premium brands experience lower long-term price sensitivity and higher revenues, where as second-tier brands experience higher long-term price sensitivity and lower revenues.

Schutte (1969) has analyzed that Consumer willingness to purchase new store brand, find that the customer willingness to buy new store brand differs between product group. It is lowest for the product group associated with high social risk. Premium store brand are preferred for these categories. The influence of price is small and nonlinear from consumer point of view. Private brand has a large impact on customer perception due to availability of product in a one roof; less price and greater quality that shape the mind of consumer to go for private brand. So the drivers influencing customer attitude towards specific store brand depend upon the respective store brand product group.

Hoch and Montgomery(2007) has analyzed that Long term growth trends in private label market share, find that high percentage of categories private labels have exhibited substantial long-term positive growth trends. This contrasts with national brands that have grown in far fewer categories and also show negative growth in many other categories due to the leading national brand is not the same across all geographic markets or even within the same market.

Tang (1993) has analyzed that Store Choice and Shopping Behavior: How Price Format Works find that how customers view the shopping process. The utility-based framework is developed and presented from an extensive analysis of the behavior of real shoppers. One attractive feature of the framework is its parsimony. Several recent examples of successful retail practice were interpreted with respect to the model. Retail practitioners and strategists can use our framework to develop a richer understanding of the following important retailing issues: (a) the shopping utility evaluation and response sensitivities of different consumer segments, (b) how consumer segments perceive and respond to different retail price formats, (c) the relative competitive position of a store in different segments, and (d) the likely impact of a change in retail strategy on the fixed and variable shopping cost perceptions of different consumer groups

Chintagunta (2003) has analyzed that Understanding Store Brand Purchase Behavior across Categories find that important activities for the supermarket retailers are the creation and maintenance of their store brands. A well-developed private label program could not only contribute directly to retailer profitability but also have positive indirect effects such as better bargaining power with the manufacturer and building store loyalty. Given their strategic importance, it is imperative for retailers to understand the behavior of their store brand buyers.

Paraguay (2010) has analyzed that store brand and national brand promotion attitudes antecedents Universidad de Chile, Retailers compete against national manufacturers by launching store brands. National manufactures regularly use brand promotions to fight store brands back. Relating to price impact both store brand attitude and national brand promotion attitude, but the strength of some of these relationships differ. Other shopper characteristics like brand loyalty and store loyalty, have similar negative and positive effects, respectively. These slight differences suggest that promotions of national brands might be a good tool for fighting back store brands, but manufacturers need to design and target these promotions carefully in order to avoid head-to-head competition.

Vishwanathan(2008) has analyzed that low-literate consumer shopping behavior in retail settings, retailing decisions are likely to be based on implicit assumptions about literate consumer behavior, (Journal of research of consumer by Roland Gau and Madhubalan vishwanathan, (Issue on 15, 2008) told about the perception of low literate consumer that how low literate consumers perception empowered in the retail environment. The low literate consumer when find positive environmental effect in store brand, self esteem maintaince and avoidance behavior by the employee on retail store then their perception ready to purchase for a particular product.

RESEARCH METHODOLOGY

Research Design:- I am conducting descriptive research method to gather customer perception. As this data will be primary data so I have to conduct survey.

Sampling design:- As population is large so we can’t conduct census method so we have to go for sampling method. In sampling method I will prefer convenience sampling in easyday because it will reduce time and money in data collection. The customer who is coming for shopping in easyday will be eligible for research

Data collection method:- The primary data are first hand data which is generated specially for the pursueing research project. I am collecting primary data by preparing questionnaire for my research project. I will do ‘pilot study’ for testing the questionnaire. The pilot survey will help in making certain changes in the final questionnaire so that it can be more effective. A structured questionnaire will be then prepared for the respondents in order to collect the data.

Scaling technique:- I will be using likert scale, semantic scale and dichtomas in questionnaire.

.Sampling unit:- It refers to the individuals who are to be surveyed in the study and it is the customer who is consuming or who has bought products are surveyed. The consumer which is going for shopping in easyday of Model town, Rajendra nagar, Garha road in Jalandhar, (Punjab).

SAMPLE SIZE:- It refers to the number of people surveyed for this topic, in the study 150 people are surveyed and responses drawn.

Secondary data:( Exploratory research):-

The secondary data can be defined as data collected by someone else for purposes other than solving problem being investigation and previously meant for another purpose. . I have used company database, magazines, journals, paper and internet for the collection of data. It helps us to better determine our problem and formulate an appropriate research design.

ANALYSIS AND INTERPRETATION:-

STATISTICAL TOOLS USED

The main statistical tools used for the analysis and interpretations of data in this project are:

Anova.

Multidimensional scaling

To know the consumer perception towards easyday.

Frequency distribution

How many users of the brand may be characterized as brand loyal.

What percentage of market consists of heavy users, medium users, light users and non users?

How many customers are familiar with new product offering?

What is the income distribution of brand users?

LIMITATIONS OF THE STUDY:-

Total coverage of the study is limited to the few customers for buying products at Jalandhar.

Sample size of the study is restricted to 150 customers only.

Most of the respondents hesitate to give information but how ever an attempt is made to collect the data systematically.

Time is the one constraint of the survey.

Money constraint is also there.

So many biasness’ during taking the respondent response

Introduction to the Subject

Consumer Perception

Perception is defined as the process by which an individual select, organise and interprets stimuli into a meaningful and coherent picture of the world. Two individual may be exposed to the same stimuli under the same time apparent condition but how each person recognizes, selects and organizes and interprets these stimuli is highly individual process based on each persons’s own needs, values and expectations. A person do not act and react on the basis of objective reality because reality is a phenomenon based on that person’s need, want, value and personal experience. Consumer perception is basically refers to the buying perception of an individual that how a person perception change to see a particular stimuli and after that how their buying behavior also changed.. So for the marketer, perception are much more important then the knowledge of objective reality. So for the marketer it’s not more that what they shows to their target market, it’s is more important that what target market think about their showing object. So it’s necessary to understand the influencing factor of consumer perception which forces to change their buying behavior.

Industry Overview

The Indian retail market, which is the fifth largest retail destination globally, has been ranked as the most attractive emerging market for investment in the retail sector by AT Kearney’s eighth annual Global Retail Development Index (GRDI), in 2009. As per a study conducted by the Indian Council for Research on International Economic Relations (ICRIER), the retail sector is expected to contribute to 22 per cent of India’s GDP by 2010. With rising consumer demand and greater disposable income, the US$ 400 billion Indian retail sector is clocking an annual growth rate of 30 per cent. It is projected to grow to US$ 700 billion by 2010, according to a report by global consultancy Northbridge Capital. The organised business is expected to be 20 per cent of the total market by then. In 2008, the share of organised retail was 7.5 per cent or US$ 300 million of the total retail market. A McKinsey report, ‘The rise of Indian Consumer Market’, estimates that the Indian consumer market is likely to grow four times by 2025. Commercial real estate services company, CB Richard Ellis’ findings state that India’s retail market has moved up to the 39th most preferred retail destination in the world in 2009, up from 44 last year. India continues to be among the most attractive countries for global retailers. Foreign direct investment (FDI) inflows as on September 2009, in single-brand retail trading, stood at approximately US$ 47.43 million, according to the Department of Industrial Policy and Promotion (DIPP). India’s overall retail sector is expected to rise to US$ 833 billion by 2013 and to US$ 1.3 trillion by 2018, at a compound annual growth rate (CAGR) of 10 per cent. As a democratic country with high growth rates, consumer spending has risen sharply as the youth population (more than 33 percent of the country is below the age of 15) has seen a significant increase in its disposable income. Consumer spending rose an impressive 75 per cent in the past four years alone. Also, organised retail, which is pegged at around US$ 8.14 billion, is expected to grow at a CAGR of 40 per cent to touch US$ 107 billion by 2013. The organised retail sector, which currently accounts for around 5 per cent of the Indian retail market, is all set to witness maximum number of large format malls and branded retail stores in South India, followed by North, West and the East in the next two years. Tier II cities like Noida, Amritsar, Kochi and Gurgaon, are emerging as the favoured destinations for the retail sector with their huge growth potential. Further, this sector is expected to invest around US$ 503.2 million in retail technology service solutions in the current financial year. This could go further up to US$ 1.26 billion in the next four to five years, at a CAGR of 40 per cent.

(Websource:-http://www.dare.co.in/opportunities/retail-franchising/the-growth-of-private-labels.htm)

Moreover, many new apparel brands such as Zara, the fashion label owned by Inditex SA of Spain, UK garment chain Topshop, the Marc Ecko clothing line promoted by the US entrepreneur of the same name and the Japanese casual wear brand Uniqlo are preparing to open outlets in India. The India Retail Industry is the largest among all theindustries, accounting for over 10 per cent of the country’s GDP and around 8 per cent of the employment. The Retail Industry in India has come forth as one of the most dynamic and fast pacedindustries with several players entering the market. But all of them have not yet tasted success because of the heavy initial investments that are required to break even with other companies and compete with them. The India Retail Industry is gradually inching its way towards becoming the next boom industry.  The total concept and idea of shopping has undergone an attention drawing change in terms of format and consumer buying behavior, ushering in a revolution in shopping in India. Modern retailing has entered into the Retail market in India as is observed in the form of bustling shopping centers, multi-storied malls and the huge complexes that offer shopping, entertainment and food all under one roof. A large young working population with medium age of 24 years, nuclear families in urban areas, along with increasing working women population and emerging opportunities in the services sector are going to be the key factors in the growth of the organized Retail sector in India. The growth pattern in organized retailing and in the consumption made by the Indian population will follow a rising graph helping the newer businessmen to enter the India Retail Industry.  In India the vast middle class and its almost untapped retail industry are the key attractive forces for global retail giants wanting to enter into newer markets, which in turn will help the India Retail Industry to grow faster. Indian retail is expected to grow 25 per cent annually. Modern retail in India could be worth US$ 175-200 billion by 2016. The Food Retail Industry in India dominates the shopping basket. The Mobile phone Retail Industry in India is already a US$ 16.7 billion business, growing at over 20 per cent per year. The future of the India Retail Industry looks promising with the growing of the market, with the government policies becoming more favorable and the emerging technologies facilitating operations.

Current status of the Indian Retail Sector:-

Current status:-US$ 400 billion with annual growth rate of 30 per cent.

Projected to grow to US$ 700 billion by 2010

Expected: – US$ 833 billion by 2013 and to US$ 1.3 trillion by 2018 with ( (CAGR) of 10 percent 

According to Indian Council for Research on International Economic Relations (ICRIER), the retail sector is expected to contribute to 22 per cent of India’s GDP by 2010.

(Web source: – http://www.ibef.org/industry/retail.aspx)

Company overview

Bharti Enterprises is one of India’s leading business groups with interests in telecom, agri business, financial services, retail and manufacturing. Bharti Airtel, a group company, is one of Asia’s leading providers of telecommunications services with operations in India and Sri Lanka, spanning mobile services, telemedia services and enterprise services. Bharti Airtel has always been at the forefront of the telecom revolution, transforming the sector with its world-class services built on leading edge technologies. In the area of financial services, Bharti has been partnering with AXA of France to offer life insurance, general insurance and asset management services.  Bharti Retail, a wholly owned subsidiary of Bharti Enterprises operates multiple-format consumer friendly stores, while Bharti Walmart is a B2B joint venture with Walmart, for wholesale cash and carry and back-end supply chain management operations. 

Other businesses in the group are Beetel for communication and media devices, and FieldFresh Foods Private Limited, a joint venture with Del Monte Pacific Limited to offer fresh fruits and vegetables, and processed food in India as well as international markets. Bharti Retail (Pvt.) Limited, a wholly owned subsidiary of Bharti Enterprises. As part of its plans to provide a world-class retailing experience to consumers across India, the Company has planned an investment of $US 2 to 2.5 billion by 2015. Bharti Retail plans pan-India operations and is looking at approximately 10 million square feet of retail experience across all cities in India with a population of over one million. It plans to employ 60000 people, will include ex-servicemen and women and provide multi dimensional career opportunities for youth of India. Bharti Retail will launch its retail outlets in multiple consumer friendly formats, which will include Hypermarkets and Supermarkets. For the small store format, Bharti Retail is also looking at partnering with existing local store owners across India through a franchise model. Bharti Retail proposes to serve all regular shopping requirements of an average Indian household. This will include all food and grocery categories, fresh fruits and vegetables, meat and poultry, dairy products, staples, FMCG and processed foods, electronics and appliances, clothing and footwear, furniture and furnishing, and other household articles. Bharti Retail will keep adding to the product portfolio in line with consumer aspirations, references and trends in the international market. Mr. Rajan Bharti Mittal, Joint Managing Director, Bharti Enterprises said, After revolutionising the Indian telecom sector, retail will be the next big focus area for Bharti. Organised retail, which currently accounts for only 3% of the total market, has tremendous growth potential in the fast expanding Indian economy. Not only will it benefit millions of consumers but also farmers, small manufacturers and artisans. The sector will also offer enormous direct and indirect employment opportunities while attracting huge investments in building the supply chain infrastructure, adding to the economic growth of India, especially in rural areas. Bharti with its in-depth understanding of the Indian consumer, experience of running all India operations, ability to attract & grow talent and capability to deliver a great experience at affordable prices, is uniquely placed in the Indian retail sector.

Bharti Wal-Mart neighborhood supermarket opened shop under the brand name “Easy Day”. The launch was a very low profile one mainly to put-off resistance from local vendors. [Learning from Reliance and Wal-Mart’s lessons Also, Sunil Mittal promoter of Bharti group who hails from the strictly vegetarian Marwari community will face resistance from them because of stocking meat in Easy Day stores.

Product Range in Easy Day stores:

Bakery products

Food and Beverages

Home & Personal Care

Dairy Products

Frozen – Vegetarian, Non-Vegetarian[Meat] and Chilled Non-Vegetarian

Grains & Pulses

Meat and Poultry Items

All the three stores are single floor stores with cash counter and bakery section at the entrance. Each category of the product was marked separately. Products were effectively displayed with price tags. In Easy Day stores having Home & Personal Care (Toothpaste, Soap, etc] and Food & Beverages (Pepsi, Fruit Juice, Cereals) are sold at a discount between 1% to 5% only.

Need & Scope of the study:-

The scope of the study was confined to the customers in Jalandhar, Punjab state. The immediate customers for the company are the middle class. The study was emphasized on the perception of consumer regarding easyday brand. It will help easyday to target its customer more precisely because this will help easyday management to know there customer in detail. It will also help to the perception of customers regarding their competitors.

As this research is conducted on customer of Jalandhar city so it will be not more fruit full to implement the finding of this research in other city than Jalandhar city because we know that consumer behavior changes according location. So conclusion may be applicable in Jalandhar city and may not be true for the whole.

Objective of the study:-

Primary objective:-

To know the factor which influence the consumer perception for purchasing in the easy day retail

Secondary objective:-

To know the effect of branding in retail on purchasing decision of consumer.

To study the factors that can help the easyday in their growth and development.

REVIEW OF LITERATURE

Jha, (2008) has analyzed that how Reliance Company is lagging behind in the era of cutthroat competition .company is unable to make good relationship with corporate clients. Main rival Bharati easyday is trying to capture more market share with their new ideas and plan. As other retailers are concern the company should become liberal on his policies. Company should give the clients more facilities so that they may became new clients and may continue through it. The company also needs a proper marketing wing to operate well in these areas and accomplish the goal, mission and vision of the company.

Lal, (2000) has analyzed that building store loyalty through store brand, that the role of a store brand in building store loyalty through a game theoretic analysis. In a market in which a segment of consumers is sensitive to product quality and consumers’ brand choice in low-involvement packaged goods categories is characterized by inertia. The quality store brands can be an instrument for retailers to generate store differentiation, store loyalty, and store profitability, even when the store brand does not have a margin advantage over the national brand.

Wilcox, (1998) has analyzed that understanding price competition between national brands and private labels in a duopolistic channel structure, Narasimhan and find that manufacturer profits increase as national brands are more differentiated and the cross price sensitivity in private label price variations is smaller, while retailer profits increase as stores are differentiated and the cross price sensitivity in private label price variations is higher. Interestingly, we also find that total channel profit increases as the retailers become leaders (over manufacturers).

Pauwels and Shuba (2004) has analyzed that who Benefits from Store Brand Entry? find that two beneficial effects of store brand entry: high unit margins on the store brand itself and higher unit margins on the national brands. This increase in unit margins implies that the retailer strengthens its bargaining position vis-à-vis national brand manufacturers. However, store brand entry only rarely yields category expansion and does not create store traffic or revenue benefits. Second, consumers do not obtain lower prices on all national brands, only on some second-tier brands. However, they benefit from enlarged product assortment and intensified promotional activity that lowers average price paid for two out of four categories. For the manufacturers, store brand entry is typically beneficial for premium-price national brands, but not for second-tier national brands. Often, premium brands experience lower long-term price sensitivity and higher revenues, where as second-tier brands experience higher long-term price sensitivity and lower revenues.

Schutte (1969) has analyzed that Consumer willingness to purchase new store brand, find that the customer willingness to buy new store brand differs between product group. It is lowest for the product group associated with high social risk. Premium store brand are preferred for these categories. The influence of price is small and nonlinear from consumer point of view. Private brand has a large impact on customer perception due to availability of product in a one roof; less price and greater quality that shape the mind of consumer to go for private brand. So the drivers influencing customer attitude towards specific store brand depend upon the respective store brand product group.

Hoch and Montgomery(2007) has analyzed that Long term growth trends in private label market share, find that high percentage of categories private labels have exhibited substantial long-term positive growth trends. This contrasts with national brands that have grown in far fewer categories and also show negative growth in many other categories due to the leading national brand is not the same across all geographic markets or even within the same market.

Tang (1993) has analyzed that Store Choice and Shopping Behavior: How Price Format Works find that how customers view the shopping process. The utility-based framework is developed and presented from an extensive analysis of the behavior of real shoppers. One attractive feature of the framework is its parsimony. Several recent examples of successful retail practice were interpreted with respect to the model. Retail practitioners and strategists can use our framework to develop a richer understanding of the following important retailing issues: (a) the shopping utility evaluation and response sensitivities of different consumer segments, (b) how consumer segments perceive and respond to different retail price formats, (c) the relative competitive position of a store in different segments, and (d) the likely impact of a change in retail strategy on the fixed and variable shopping cost perceptions of different consumer groups

Chintagunta (2003) has analyzed that Understanding Store Brand Purchase Behavior across Categories find that important activities for the supermarket retailers are the creation and maintenance of their store brands. A well-developed private label program could not only contribute directly to retailer profitability but also have positive indirect effects such as better bargaining power with the manufacturer and building store loyalty. Given their strategic importance, it is imperative for retailers to understand the behavior of their store brand buyers.

Paraguay (2010) has analyzed that store brand and national brand promotion attitudes antecedents Universidad de Chile, Retailers compete against national manufacturers by launching store brands. National manufactures regularly use brand promotions to fight store brands back. Relating to price impact both store brand attitude and national brand promotion attitude, but the strength of some of these relationships differ. Other shopper characteristics like brand loyalty and store loyalty, have similar negative and positive effects, respectively. These slight differences suggest that promotions of national brands might be a good tool for fighting back store brands, but manufacturers need to design and target these promotions carefully in order to avoid head-to-head competition.

Vishwanathan(2008) has analyzed that low-literate consumer shopping behavior in retail settings, retailing decisions are likely to be based on implicit assumptions about literate consumer behavior, (Journal of research of consumer by Roland Gau and Madhubalan vishwanathan, (Issue on 15, 2008) told about the perception of low literate consumer that how low literate consumers perception empowered in the retail environment. The low literate consumer when find positive environmental effect in store brand, self esteem maintaince and avoidance behavior by the employee on retail store then their perception ready to purchase for a particular product.

RESEARCH METHODOLOGY

Research Design:- I am conducting descriptive research method to gather customer perception. As this data will be primary data so I have to conduct survey.

Sampling design:- As population is large so we can’t conduct census method so we have to go for sampling method. In sampling method I will prefer convenience sampling in easyday because it will reduce time and money in data collection. The customer who is coming for shopping in easyday will be eligible for research

Data collection method:- The primary data are first hand data which is generated specially for the pursueing research project. I am collecting primary data by preparing questionnaire for my research project. I will do ‘pilot study’ for testing the questionnaire. The pilot survey will help in making certain changes in the final questionnaire so that it can be more effective. A structured questionnaire will be then prepared for the respondents in order to collect the data.

Scaling technique:- I will be using likert scale, semantic scale and dichtomas in questionnaire.

.Sampling unit:- It refers to the individuals who are to be surveyed in the study and it is the customer who is consuming or who has bought products are surveyed. The consumer which is going for shopping in easyday of Model town, Rajendra nagar, Garha road in Jalandhar, (Punjab).

SAMPLE SIZE:- It refers to the number of people surveyed for this topic, in the study 150 people are surveyed and responses drawn.

Secondary data:( Exploratory research):-

The secondary data can be defined as data collected by someone else for purposes other than solving problem being investigation and previously meant for another purpose. . I have used company database, magazines, journals, paper and internet for the collection of data. It helps us to better determine our problem and formulate an appropriate research design.

ANALYSIS AND INTERPRETATION:-

STATISTICAL TOOLS USED

The main statistical tools used for the analysis and interpretations of data in this project are:

Anova.

Multidimensional scaling

To know the consumer perception towards easyday.

Frequency distribution

How many users of the brand may be characterized as brand loyal.

What percentage of market consists of heavy users, medium users, light users and non users?

How many customers are familiar with new product offering?

What is the income distribution of brand users?

LIMITATIONS OF THE STUDY:-

Total coverage of the study is limited to the few customers for buying products at Jalandhar.

Sample size of the study is restricted to 150 customers only.

Most of the respondents hesitate to give information but how ever an attempt is made to collect the data systematically.

Time is the one constraint of the survey.

Money constraint is also there.

So many biasness’ during taking the respondent response

Analysis Of Lifestyle Furniture Company Marketing Essay

Introduction

According to Chandler, “strategy is the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals” (Campbell, Stonehouse, & Houston, 2002). In other words, it is the plan of action adopted by an organization to achieve its goals and objectives.

Company Profile:

Lifestyle furniture is a company which supplies high quality home furniture. We offer our customers an exquisite collection of beds, dining tables, sofas and coffee tables. We deliver well designed furniture made of solid wood and metal alloy. The company operates in a highly competitive environment and our goal is to become the world class leader by providing the best quality products to our customers.

Our mission is to provide our customers with world-class products at smart prices. We aim to deliver our customers with a wide collection of exclusive products and satisfy them with our best services, and to provide our employees’ equal opportunity and motivate them to work efficiently. We also ensure a competitive environment in which our staffs learn something new every day.

A vision statement is concerned with what the organisation aspires to be (Johnson, Scholes, & Whittington, Fundamentals of Strategy, 2009). Our vision statement is “Aspires to build a dream house for a luxurious living”.

Current strategic position:

The current strategic position of the company is analysed in terms of internal and external factors (Appendix 1).

Internal Factors

Internal factors identify the quantity and quality of the company’s resources and capabilities and ways of building unique skills and company specific or distinctive competencies (Hill & Jones, 2007). The strategic capability is defined as the capability of an enterprise to successfully undertake action that is intended to affect its long term growth and development (Lenz, 1980). (Appendix 2)

The Lifestyle furniture resources

The company’s resources can be grouped into four categories:

Human resources: The research on the staff satisfaction under the management of J. Lawley from period 2- period 5 is satisfactory with the average achieved value of 42.83% with the minimal value of 30% however it falls behind the norm value: 65%. The change in the management to D. Wickham during the period 6 has resulted in the declining of the staff loyalty as per the Business Score Card (Appendix 12). During the period 7 it has fallen below the minimal value to 27.01%. Also the education level of the employees and the salary has had major impact on the satisfaction value (Appendix 12)

Physical Resources: The Company does not maintain a warehouse hence there is no additional warehouse maintenance costs. However, this also raises the issue of transportation costs, which is £14 per unit and also with the current large inventory of the company it also has to take care of the inventory costs.

Intellectual resource: The intellectual resource includes the brand image, patents, customer database and is a major asset in a knowledge based economy. The brand image of Lifestyle Furniture has been consistently at a impressive average value of 71.07% which is above the norm value (70%). (Appendix 3) this is mainly due to the high quality products provided by the Lifestyle furniture. Also the client database and the innovative products provided by Lifestyle products are unique resource to the company.

VRIN factors

Barney (1991) suggests that for a firm to achieve sustainable competitive advantage must have four main attributes:

Valuable i.e. it exploits opportunities and/ or neutralizes threats in the firms environment

Rare among the firm’s current and competitive environment

Imperfectly imitable

No equivalent substitute for the resource

Careful research and analysis indicates that the competitive advantage of the company is its market shares (Appendix 3) and also the innovative products and the well trained and educated staff. However the large amount of inventory poses problem for the company to take advantage of the “economies of scale”. With right planning for marketing the products and also proper staff management the company will be able to fulfil the “V-R-I-N” criterion.

Core Competences

According to Prahalad & Hamel (1994) core competencies represent the collective learning in the organisation, especially how to co-ordinate diverse production skills and integrate multiple streams of technologies. The organisations must consider themselves as portfolio of core competencies as they are focussed on growing the opportunity of the organization.

From the Lifestyle Furniture perspective, the innovative products (Appendix 12), well trained staff, market share can considered. Based on the portfolio model suggested by Hinterhuber et al., the Lifestyle Furniture can be placed in competence gap in the portfolio grid (Appendix 4). However, the strategic idea to focus on core competences is indispensably connected to the concentration of one s own strengths against competitors’ weaknesses (Snyder & Ebeling, 1992)

External factors affecting the Company strategy:

There are a number of different external factors that take place in the macro environment that affect a company’s business. Tax changes, new laws, trade barriers, demographic change and government policy changes are all examples of macro change (Gillespie, 2007).

PESTLE

Political:

Lifestyle Furniture is currently in a state of economic failure irrespective of its enormous inventory that the company withholds. It has been facing a heavy competition from the competitors and the lack of income has left the company in a state of dilemma. But nevertheless the current political policy passed by the government ensures loan facilities and investment opportunities to the business personals (Peston, 2011) this will give Lifestyle Furniture a chance to bounce back.

Economical:

Economic conditions affect how easy or how difficult it is to be successful and profitable at any time because they affect both capital availability and cost, and demand (Thompson J. , 2002) for the product. The rise in the inflation rates has inversely affected the price of goods (UK inflation rate rises to 4% in January, 2011). This sudden increase forced the company to lower the price of products which in turn reduced the profitability margin of the company. (Appendix 3).

Social:

The socio- cultural environment encapsulates demand and tastes which vary with fashion, disposable income, and general changes, can again provide both opportunities and threats for particular companies. (Thompson J. , 2002) (Pearson & Robinson, Strategic Management, 2005). The furniture industries throughout the country faced a transportation threat in the 4thstage of the game as there was an employee’s strike in the transportation sector. This resulted in the delay in deliver of the ordered furniture. But nevertheless, the sudden strikes didn’t have a strong impact on the Lifestyle Furniture as the company already had excess of inventory in hand. This helped the company in making additional sales in that particular period and also overcome the loss that it incurred due to inflation. The overall market share of the company has always been high throughout the game.

Technological:

The advancement in technology such as the Digital Marketing has enabled the company to reaching out to the customer in a more rapid manner.

Legal:

Lifestyle Furniture has always been able to keep up the laws and legal requirements of the British Furniture Confederation and the Anti Copy in Design- an organisation that ensures the intellectual property right (Confederation, 2011) .

Environmental:

According to Pearson and Robinson, there are five principle environmental factors that affect a company’s business. They are the competitors; creditors, suppliers, customers and the labour market (Pearson & Robinson, Strategic Management, 2002). Lifestyle Furniture mainly has four competitors: LEAF Furnishings, Green Furnishings, Spark Furniture and Enge. As explained in Ellis’s article Fast Company, there are six strategies to apply in strategy implementation and one of which is to understand the competitor’s weaknesses and exploiting it (Ellis, 2002). The competitive advantage that our company maintains over the other companies is the ability to deliver high quality products to our customers at low prices. This helps our company in retaining the customers and suppliers.

Porter’s Five Force Analysis:

According to Porter, the likelihood of firms making profit in a given industry depends on the five factors (Porter M. , 1980)

Threats of potential entrants

Bargaining power of buyers

Threats of substitutes

Competitive rivalry

Power of suppliers

Porter’s five forces can be broadly categorised as two: horizontal competition and vertical competition. Horizontal competition includes the threats from the substitute products, established rivals and the new entrants and the vertical competition takes place between the bargaining power of the suppliers and the customers (Matt, Five Forces Analysis – Porter’s 5 forces , 2009). In the case of Lifestyle Furniture, it faces a neutral risk from the new entrants as the chances of their entry are low but can also be possible with the new political policies favouring new investments in business but still the threats from the substitute products remains low.( Appendix 5)

SWOT

SWOT analysis helps in finding a relation between the organisational capabilities and opportunities in the competitive environment (Samar, 2009). According to Porter, three generic strategies are generated when applying the strengths: Cost Leadership, Differentiation and Focus (Porter M. , 1980). It is a choice that the company makes while deciding whether to keep its prices lower than the competitors or differentiate the offering to provide higher value while comparing it to the competitors (Samar, 2009).

Lifestyle Furniture initially followed a cost leadership strategy where standard, no-frills and exclusive products where supplied at the lowest price possible. But however, the income started declining and it reached a state where income growth was stagnant. At this stage, Lifestyle furniture revised its strategy and implemented it to differentiation this helped the company in gaining income. But however, with excess of inventory in hand, maintaining such a strategy was considered to be ineffective. After a series of trial and error methods, the company finally revised its strategy back to cost leadership. This has helped in improved the situation of the company from -17.70% to 8.97%.

Again, the company had the opportunity to utilise the economy during the 4th year when the crisis took place but was not able to sustain it due to the lack of income. Financial constraints and the lack of a proper HRM manager was the main weakness of the company that lead it to a state of bankruptcy (Appendix 6).

Corporate and Competitive Strategy for Lifestyle Furniture

Strategy is the link between what the organization wants to achieve- its objectives- and the policies adopted to guide its activities. It is defined as the match an organization makes between its own resources and the threats or risks and opportunities created by the external environment in which it operates (Bowman & Asch, 1987).

Strategies exist at a number of levels in an organization namely corporate level, business level and operational level.

Corporate Level Strategy

According to Andrews (1971 as cited in Lynch, 2000), corporate strategy is the pattern of major objectives, purposes or goals and essential policies or plans for achieving those goals, stated in such a way as to define what business the company is in or is to be in and the kind of company it is or is to be.

Corporate strategy links the organization’s internal resources and its external relationships with its customers, suppliers, competitors and economic and social environment in which it exists (Lynch, 2000).

According to Ansoff (1988) matrix (Appendix 7), Market Penetration is the most ideal strategy for Lifestyle Furniture. Our company focuses on selling existing products into existing markets by finding new and potential customers. This strategy helps us maintain and secure increased dominance in our market compared to the other competitors as we focus on the market and products that we are good at. To attain a large market share, our firm had to set low prices for our products.

Business Level Strategy

Business strategy is concerned with how an operating unit within the corporate whole can compete in a particular market. The strategies of Strategic Business Units (SBUs) can be regarded as the parts which require and define the organizational whole (Bowman & Asch, 1987).

There are four types of generic competitive strategies ( Appendix 8) namely:

Cost Leadership

Differentiation

Focus

Stuck in the middle

In the initial periods, we chose cost leadership as our generic strategy. According to the competitive strategy principle, the competitive power of cost leadership is greatest when rivals products are essentially identical, price competition dominates, most buyers use the product similarly and want similar features, buyer switching costs are low and large customers shop aggressively for the best price (Thompson S. , 1993).

Our company offers better value for the customer’s money by providing them with high quality products at lowest possible price. To achieve goal of offering the low cost range of products our company makes trade with the supplier by buying in large amounts so that overall cost of purchase is reduced. Although there involves little differentiation in the products the main emphasis is made on selling products with the price that is acceptable among majority of the customers. The main goal is to provide selected number of high quality products at acceptable price to attract large stable set of customers that provides economies of scale to reduce costs.

In subsequent periods we changed our strategy to Differentiation as the competitive power of differentiation strategy is greatest when buyer needs are diverse, there are many ways to differentiate that have value to buyers, few rivals choose the same approach, and the firm’s product cannot be quickly or cheaply imitated (Thompson S. , 1993).

We followed both cost leadership and differentiation in different periods of simulation in response to the changes in the market situations.

The Strategy Clock

According to Bowman model a firm can differentiate between Differentiation strategies, Low Price Strategies and Risk Strategies (Appendix 9).

A low-price strategy seeks to achieve a lower price than competitors whilst trying to maintain similar perceived product or service benefits to those offered by competitors (Scholes, Johnson, & Whittington, 2005). So our Company follows a low price strategy compared to our competitors. We believe in maintaining a low cost base through our various cost reduction activities such as the low cost logistics, efficient store operation methods such as accepting low margins in return for high volume of purchase, following a customized product method etc. and above all we have been able to maintain a cost reduction by keeping up our competitive advantage in the market. We achieve this by developing new products and services that satisfy and delight our customers in the market and through this we restructure and improve our business processes to improve quality and reduce cost, which in turn adds value to our product. We follow the total quality management system to sustain our market and customers and this has helped us improve our product value, quality, productivity that is it has helped reduce waste and increase customer satisfaction.

BCG Matrix

From the BCG Matrix (Appendix 10) of our products, we can see how our products changed from ‘Question mark’ in Year 3 to ‘Star’ in Year 5. Question marks are businesses that operate in high growth markets but have low relative market shares. It requires a lot of cash. The products that come under star are considered as market leader in a high growth market. If question mark business is successful, it becomes a star. Therefore, it can be concluded that the business level strategies of cost leadership and differentiation adopted is beneficial for our company.

Sustainability

Sustainable competitive advantage is said to be the heart of a corporate strategy. It enables the maintenance and enhancement of a company’s cut-throat position in the market (Barney, 1991). The sustainable competitive advantage of a company can be categorised as Sustainable Price based Advantage and Sustaining Differentiation – based Advantage (Johnson, Scholes, & Whittington, Exploring Corporate Strategy :Texts and Cases, 2008)

Lifestyle Furniture follows a price based sustainable strategy. With the excess of inventory in hand, the company aims at increasing the sales of its products by reducing the price and making it attractive to the customers. Lifestyle Furniture aims at market segments where low price is valued by the customers. This has helped the company gain more customers and reduce the competition for a longer period of time (Appendix 11).

Conclusion

The theories of strategic management are put into practice in the game of business simulation. After a thorough analysis of the strategies adopted by Lifestyle Furniture, we came to a conclusion that Cost Leadership was the best option for our company to sustain in the market. As we changed our strategy from cost leadership to differentiation, we lost our market share and went into losses. At the end of Period 5, Lifestyle Furniture entered into the stage of decline. The best solution to overcome this situation is to adopt any of the two alternative strategies, namely Harvest or Quick Divestment.

Works Cited

Barney, J. (1991). Firm resources and Sustained Competitive Advantage. Journal of Management , 17 (1), 99-120.

Bowman, C., & Asch, D. (1987). Strategic Management. Macmillan Education Ltd.

Campbell, D., Stonehouse, G., & Houston, B. (2002). Business Strategy. Butterworth Heinemann.

Confederation, T. B. (2011). ACID links up with BFC. North Yorkshire: The British Furniture Confederation.

Ellis, J. (2002, October 31). Strategy. Retrieved March 9, 2011, from Fast Company: http://www.fastcompany.com/magazine/64/jellis.html

Gillespie. (2007). Foundation of Economics. Oxford University Press.

Hill, C. W., & Jones, G. R. (2007). Strategic Management: An integrated approach (7 ed.). Houghton Mifflin Company.

Hinterhuber, H. H., Friedrich, S. A., Handlbauer, G., & Stuhec, U. (1996). The Company as a cognitive system of core competences and strategic business units. Strategic Change , 5, 223-238.

Johnson, G., Scholes, K., & Whittington, R. (2008). Exploring Corporate Strategy :Texts and Cases (8 ed.). Pearson Education Limited.

Johnson, G., Scholes, R., & Whittington, R. (2009). Fundamentals of Strategy. Pearson Education Limited.

Lenz, R. T. (1980). Strategic Capability: A concept and framework foe Analysis. Academy of Management Review , 5, 225-234.

Lynch, R. (2000). Corporate Strategy. Pearson Education Limited.

Matt. (2009, April 24). Competitive Advantage – Michael Porter. Retrieved March 12, 2011, from All About Economics: http://www.sayeconomy.com/competitive-advantage-michael-porter/

Matt. (2009, February 8). Five Forces Analysis – Porter’s 5 forces . Retrieved March 08, 2011, from All About Economics on the Web: http://www.sayeconomy.com/five-forces-analysis-porters-5-forces/

Options for a competitive strategy. (2008). Retrieved March 14, 2011, from Provience proven experience: http://www.provience.co.uk/change/tools_bowmans_clock.html

Pearson, J., & Robinson, R. (2002). Strategic Management. Boston: McGraw-Hilsl.

Pearson, J., & Robinson, R. (2005). Strategic Management (9 ed.). New York: Mc Graw.

Peston, R. (2011, March 16). Turner: Regulation must be Trotskyite. Retrieved March 2011, 16, from BBC News: http://www.bbc.co.uk/blogs/thereporters/robertpeston/2011/03/turner_regulation_must_be_trot.html

Porter, M. E. (1985). Competitive Advantage: Creating and sustaining superior performance. The Free Press.

Porter, M. (1980). The Competitive Strategy. New York: The Free Press.

Pro-sim Advanced. (2011). Retrieved 2011, from Business game shop: http://www.businessgameshop.co.uk/about-our-company

Samar, S. H. (2009, July 19). Implementing Strategic Management in Construction. Construction Management Guide , 8.

Scholes, K., Johnson, G., & Whittington, R. (2005). Exploring Corporate Strategy. Pearson Education Limited.

Snyder, A. V., & Ebeling, J. W. (1992). Targeting a companies real core competencies. Journal of Business startegy , 13 (6), 26-32.

Thompson, J. (2002). Strategic Management (4 ed.). London: Thomson.

Thompson, S. (1993). Strategic Management: Concepts and Cases. Richard D. Irwin, Inc.

Thomson, N., & Baden-Fuller, C. (2010). Basic Strategy in Context: European Text and Cases. Antony Rowe Ltd.

UK inflation rate rises to 4% in January. (2011, February 15). Retrieved March 8, 2011, from BBC News Business: http://www.bbc.co.uk/news/business-12462901

Appendices

Appendix 1

The resource based model and the model for industry attractiveness

Source: Barney, 1991

Appendix 2

Strategic Capability and Competitive Advantage

Source: Johnson, Scholes & Whittington, R.,2010

Appendix 3

Market Share

Appendix 4

Portfolio of competences

Competence Standards

Competences within this category have low customer value and relatively low competence strength hence it does not create a competitive advantage.

Competence Potential

The company is superior to its competitors but does not have high value for customer demand.

Competence Gaps

In this category, customers attribute high significance to competences in this field. Yet the competence strength of the company is rather poor compared with that of its competitors. Thus there are competence gaps between what the market demands (competence requirement) and what the enterprise is able to do (existing in-house competence).

Core Competences

Real competences that determine the corporate profile exist only in the following cases:

– If the competence strength of a company is high in relation to that of its competitors.

– If the competences can be attributed a high present and future customer value.

Source: Friedrich, Handlbauer, Hinterhuber, & Stuhec, 1996

Appendix 5

Porters 5 forces

Threats of potential entrants:

Threat of new entrants in the furniture industry is minimal as the initial cost to set up the company is high. It is also difficult for new companies to compete with the existing big companies in the market as they already have a reputation and close customer – supplier relationship which the new entrants lack.

Bargaining power of buyers:

Bargaining power of buyers is low as there are very few substitutes of the products we offer and there are few big sellers in the market offering the same product range.

Threats of substitutes:

Our company offers furniture made with wood and white alloy metal. However, there are other companies that offer products that are produced using similar raw materials and are in the market for a much cheaper price. This serves as a substitute for our products and it leaves the company with high threat of substitutes.

Competitive rivalry:

Our company has a competitive edge over our competitors as we provide best quality products at affordable prices. However, larger organisations with the capability to provide wide variety of products with different price range prove to be a threat to the company. Also the advancement in technology has made competition more tougher with the customers being able to compare the price between the various companies.

Appendix 6

SWOT-analysis

Strength

• High quality and diverse product line

• A well trained and experienced management team

• Motivates the employees even if there is no turnover

• Ability to provide products at affordable price even after the increase in Value Added Tax

• Reducing the gap between the Company and the suppliers by establishing strong buyer-seller relationship through trade commitments.

• Digital marketing has helped the company to gain loyal group of customers.

Weaknesses

Limited quantity to showcase as it mainly develops the products according to customer need.

Lack of access to key distribution channel as the key players in the market are linked to them.

Inefficient HRM Manager

Excess of Inventory in hand

Opportunities

Lifestyle furniture aims to moving into new market segments that offer improved profits

We try to occupy untapped market and markets vacated by ineffective competitor. This is mainly made effective in times of strikes when inventories are unavailable to the competitors.

Threats

• No proper up-to-date analysis of the market

• Current government policies such as Value Added Tax and Inflations have a great impact on the rise in price of goods. In order to attract the customers, the products have been made available at lower rates but this may project items as lower quality.

• Several well established stores co-exist in the market

• Shift of customer tastes from the company’s product to the competitors

• New regulations imposed by the government

• Emergence of substitutes for our product

Appendix 7

Ansoff Matrix

It is the most commonly used model to analyse the possible strategic directions that an organization can follow. It has four alternatives:

Market penetration: In this strategy, existing products are sold in existing markets to increase the market share.

Market development: According to this strategy, companies sell existing products in new market segments. It requires development of new competencies that serve particular need of customers in the new market segments.

Product development: In this strategy, new products are sold in existing markets to attract new customers, retain existing ones and to increase market share.

Diversification: It is the strategy in which new products are sold in new markets. It is an appropriate option when current markets are saturated or when products reach the end of their life cycle.

(Campbell, Stonehouse, & Houston, 2002)

New

Markets

Existing

Existing

New

Products

Products

New

Existing

Existing

Markets

Products

New

Products

Existing

Products

New

Existing

Existing

Products

New

Existing

Markets

Products

New

Existing

Existing

New

Source: (Campbell, Stonehouse, & Houston, 2002)

Appendix 8

Generic Competitive Strategies:

Every company’s aim is to attain competitive advantage and achieving it requires the company to take a decision. It has to choose what type of competitive advantage it wants to attain and also the scope within which it wants to attain it. There are four types of generic competitive strategies:

Cost Leadership: In this strategy, the company decides to become the low cost producer by finding and exploiting all sources of cost advantage. The companies minimize the cost of their products in areas such as overheads, R&D and overall cost of production.

Differentiation: In this strategy, a company tries to differentiate its products from its competitors using some dimensions that are considered important from buyer’s perspective.

Focus: In this strategy, a company selects a market segment or a group of segments and completely focuses on that group by achieving competitive advantage over its competitors.

Stuck in the middle: As the name suggests, stuck in the middle strategy is adopted when a company has the need to follow more than one generic strategy at the same time. It means that a company can follow cost leadership for some of its products and differentiation for rest of the products as and when the market requires.

(Porter M. E., 1985)

Appendix 9

The Strategy Clock

A Strategy clock represents different positions in the market where customers have different requirements in terms of value-for-money and also a set of generic strategies for achieving competitive advantage (Scholes, Johnson, & Whittington, 2005).

Bowmans Clock.jpg

Source: (Options for a competitive strategy, 2008)

According to the Bowman model of strategy clock, there are three types of strategies, Differentiation strategies, Low price strategies and Risk strategies (or strategies destined for ultimate failure) which can be further divided as follows:

Differentiation Strategies-

Hybrid- Low cost of production and reinvestment in differentiation

Differentiation- The customers perceive an added value of the product

Focussed differentiation- Added value to the customers allowing the price to be much higher than the competitor’s price.

Low Price Strategies-

No frills- Low cost and low prices in a specific market segment. Only basic requirements of customers are satisfied.

Low price- Companies are cost leaders to be competitive in the market. Risk of price wars and low margins is high.

Risk Strategies-

Increased price/low value- It is possible only in a monopoly market and customers have to pay a high price.

Increased price/standard value- Higher margins are possible if competitors do not follow.

Standard price/low value- Loss of market share for the companies.

(Thomson & Baden-Fuller, 2010)

Appendix 10

BCG Matrix:

year3.ashx

BCG Matrix for Year 3 of Simulation

year5.ashx

BCG Matrix for Year 5 of Simulation

Source: Business Game Simulation- Market Analysis

Appendix 11

Sustainable Competitive Advantage

A firm is said to have a sustainable competitive advantage when a firm implements a value creating strategy not simultaneously being implemented by any other current or potential competitor and when the other firms are unable to duplicate the benefits of this strategy

(Barney, 1991)

Sustaining Price – based Advantage

Sustaining price based advantage is a competitive advantage through which lower price is maintained in a number

Introduction

According to Chandler, “strategy is the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals” (Campbell, Stonehouse, & Houston, 2002). In other words, it is the plan of action adopted by an organization to achieve its goals and objectives.

Company Profile:

Lifestyle furniture is a company which supplies high quality home furniture. We offer our customers an exquisite collection of beds, dining tables, sofas and coffee tables. We deliver well designed furniture made of solid wood and metal alloy. The company operates in a highly competitive environment and our goal is to become the world class leader by providing the best quality products to our customers.

Our mission is to provide our customers with world-class products at smart prices. We aim to deliver our customers with a wide collection of exclusive products and satisfy them with our best services, and to provide our employees’ equal opportunity and motivate them to work efficiently. We also ensure a competitive environment in which our staffs learn something new every day.

A vision statement is concerned with what the organisation aspires to be (Johnson, Scholes, & Whittington, Fundamentals of Strategy, 2009). Our vision statement is “Aspires to build a dream house for a luxurious living”.

Current strategic position:

The current strategic position of the company is analysed in terms of internal and external factors (Appendix 1).

Internal Factors

Internal factors identify the quantity and quality of the company’s resources and capabilities and ways of building unique skills and company specific or distinctive competencies (Hill & Jones, 2007). The strategic capability is defined as the capability of an enterprise to successfully undertake action that is intended to affect its long term growth and development (Lenz, 1980). (Appendix 2)

The Lifestyle furniture resources

The company’s resources can be grouped into four categories:

Human resources: The research on the staff satisfaction under the management of J. Lawley from period 2- period 5 is satisfactory with the average achieved value of 42.83% with the minimal value of 30% however it falls behind the norm value: 65%. The change in the management to D. Wickham during the period 6 has resulted in the declining of the staff loyalty as per the Business Score Card (Appendix 12). During the period 7 it has fallen below the minimal value to 27.01%. Also the education level of the employees and the salary has had major impact on the satisfaction value (Appendix 12)

Physical Resources: The Company does not maintain a warehouse hence there is no additional warehouse maintenance costs. However, this also raises the issue of transportation costs, which is £14 per unit and also with the current large inventory of the company it also has to take care of the inventory costs.

Intellectual resource: The intellectual resource includes the brand image, patents, customer database and is a major asset in a knowledge based economy. The brand image of Lifestyle Furniture has been consistently at a impressive average value of 71.07% which is above the norm value (70%). (Appendix 3) this is mainly due to the high quality products provided by the Lifestyle furniture. Also the client database and the innovative products provided by Lifestyle products are unique resource to the company.

VRIN factors

Barney (1991) suggests that for a firm to achieve sustainable competitive advantage must have four main attributes:

Valuable i.e. it exploits opportunities and/ or neutralizes threats in the firms environment

Rare among the firm’s current and competitive environment

Imperfectly imitable

No equivalent substitute for the resource

Careful research and analysis indicates that the competitive advantage of the company is its market shares (Appendix 3) and also the innovative products and the well trained and educated staff. However the large amount of inventory poses problem for the company to take advantage of the “economies of scale”. With right planning for marketing the products and also proper staff management the company will be able to fulfil the “V-R-I-N” criterion.

Core Competences

According to Prahalad & Hamel (1994) core competencies represent the collective learning in the organisation, especially how to co-ordinate diverse production skills and integrate multiple streams of technologies. The organisations must consider themselves as portfolio of core competencies as they are focussed on growing the opportunity of the organization.

From the Lifestyle Furniture perspective, the innovative products (Appendix 12), well trained staff, market share can considered. Based on the portfolio model suggested by Hinterhuber et al., the Lifestyle Furniture can be placed in competence gap in the portfolio grid (Appendix 4). However, the strategic idea to focus on core competences is indispensably connected to the concentration of one s own strengths against competitors’ weaknesses (Snyder & Ebeling, 1992)

External factors affecting the Company strategy:

There are a number of different external factors that take place in the macro environment that affect a company’s business. Tax changes, new laws, trade barriers, demographic change and government policy changes are all examples of macro change (Gillespie, 2007).

PESTLE

Political:

Lifestyle Furniture is currently in a state of economic failure irrespective of its enormous inventory that the company withholds. It has been facing a heavy competition from the competitors and the lack of income has left the company in a state of dilemma. But nevertheless the current political policy passed by the government ensures loan facilities and investment opportunities to the business personals (Peston, 2011) this will give Lifestyle Furniture a chance to bounce back.

Economical:

Economic conditions affect how easy or how difficult it is to be successful and profitable at any time because they affect both capital availability and cost, and demand (Thompson J. , 2002) for the product. The rise in the inflation rates has inversely affected the price of goods (UK inflation rate rises to 4% in January, 2011). This sudden increase forced the company to lower the price of products which in turn reduced the profitability margin of the company. (Appendix 3).

Social:

The socio- cultural environment encapsulates demand and tastes which vary with fashion, disposable income, and general changes, can again provide both opportunities and threats for particular companies. (Thompson J. , 2002) (Pearson & Robinson, Strategic Management, 2005). The furniture industries throughout the country faced a transportation threat in the 4thstage of the game as there was an employee’s strike in the transportation sector. This resulted in the delay in deliver of the ordered furniture. But nevertheless, the sudden strikes didn’t have a strong impact on the Lifestyle Furniture as the company already had excess of inventory in hand. This helped the company in making additional sales in that particular period and also overcome the loss that it incurred due to inflation. The overall market share of the company has always been high throughout the game.

Technological:

The advancement in technology such as the Digital Marketing has enabled the company to reaching out to the customer in a more rapid manner.

Legal:

Lifestyle Furniture has always been able to keep up the laws and legal requirements of the British Furniture Confederation and the Anti Copy in Design- an organisation that ensures the intellectual property right (Confederation, 2011) .

Environmental:

According to Pearson and Robinson, there are five principle environmental factors that affect a company’s business. They are the competitors; creditors, suppliers, customers and the labour market (Pearson & Robinson, Strategic Management, 2002). Lifestyle Furniture mainly has four competitors: LEAF Furnishings, Green Furnishings, Spark Furniture and Enge. As explained in Ellis’s article Fast Company, there are six strategies to apply in strategy implementation and one of which is to understand the competitor’s weaknesses and exploiting it (Ellis, 2002). The competitive advantage that our company maintains over the other companies is the ability to deliver high quality products to our customers at low prices. This helps our company in retaining the customers and suppliers.

Porter’s Five Force Analysis:

According to Porter, the likelihood of firms making profit in a given industry depends on the five factors (Porter M. , 1980)

Threats of potential entrants

Bargaining power of buyers

Threats of substitutes

Competitive rivalry

Power of suppliers

Porter’s five forces can be broadly categorised as two: horizontal competition and vertical competition. Horizontal competition includes the threats from the substitute products, established rivals and the new entrants and the vertical competition takes place between the bargaining power of the suppliers and the customers (Matt, Five Forces Analysis – Porter’s 5 forces , 2009). In the case of Lifestyle Furniture, it faces a neutral risk from the new entrants as the chances of their entry are low but can also be possible with the new political policies favouring new investments in business but still the threats from the substitute products remains low.( Appendix 5)

SWOT

SWOT analysis helps in finding a relation between the organisational capabilities and opportunities in the competitive environment (Samar, 2009). According to Porter, three generic strategies are generated when applying the strengths: Cost Leadership, Differentiation and Focus (Porter M. , 1980). It is a choice that the company makes while deciding whether to keep its prices lower than the competitors or differentiate the offering to provide higher value while comparing it to the competitors (Samar, 2009).

Lifestyle Furniture initially followed a cost leadership strategy where standard, no-frills and exclusive products where supplied at the lowest price possible. But however, the income started declining and it reached a state where income growth was stagnant. At this stage, Lifestyle furniture revised its strategy and implemented it to differentiation this helped the company in gaining income. But however, with excess of inventory in hand, maintaining such a strategy was considered to be ineffective. After a series of trial and error methods, the company finally revised its strategy back to cost leadership. This has helped in improved the situation of the company from -17.70% to 8.97%.

Again, the company had the opportunity to utilise the economy during the 4th year when the crisis took place but was not able to sustain it due to the lack of income. Financial constraints and the lack of a proper HRM manager was the main weakness of the company that lead it to a state of bankruptcy (Appendix 6).

Corporate and Competitive Strategy for Lifestyle Furniture

Strategy is the link between what the organization wants to achieve- its objectives- and the policies adopted to guide its activities. It is defined as the match an organization makes between its own resources and the threats or risks and opportunities created by the external environment in which it operates (Bowman & Asch, 1987).

Strategies exist at a number of levels in an organization namely corporate level, business level and operational level.

Corporate Level Strategy

According to Andrews (1971 as cited in Lynch, 2000), corporate strategy is the pattern of major objectives, purposes or goals and essential policies or plans for achieving those goals, stated in such a way as to define what business the company is in or is to be in and the kind of company it is or is to be.

Corporate strategy links the organization’s internal resources and its external relationships with its customers, suppliers, competitors and economic and social environment in which it exists (Lynch, 2000).

According to Ansoff (1988) matrix (Appendix 7), Market Penetration is the most ideal strategy for Lifestyle Furniture. Our company focuses on selling existing products into existing markets by finding new and potential customers. This strategy helps us maintain and secure increased dominance in our market compared to the other competitors as we focus on the market and products that we are good at. To attain a large market share, our firm had to set low prices for our products.

Business Level Strategy

Business strategy is concerned with how an operating unit within the corporate whole can compete in a particular market. The strategies of Strategic Business Units (SBUs) can be regarded as the parts which require and define the organizational whole (Bowman & Asch, 1987).

There are four types of generic competitive strategies ( Appendix 8) namely:

Cost Leadership

Differentiation

Focus

Stuck in the middle

In the initial periods, we chose cost leadership as our generic strategy. According to the competitive strategy principle, the competitive power of cost leadership is greatest when rivals products are essentially identical, price competition dominates, most buyers use the product similarly and want similar features, buyer switching costs are low and large customers shop aggressively for the best price (Thompson S. , 1993).

Our company offers better value for the customer’s money by providing them with high quality products at lowest possible price. To achieve goal of offering the low cost range of products our company makes trade with the supplier by buying in large amounts so that overall cost of purchase is reduced. Although there involves little differentiation in the products the main emphasis is made on selling products with the price that is acceptable among majority of the customers. The main goal is to provide selected number of high quality products at acceptable price to attract large stable set of customers that provides economies of scale to reduce costs.

In subsequent periods we changed our strategy to Differentiation as the competitive power of differentiation strategy is greatest when buyer needs are diverse, there are many ways to differentiate that have value to buyers, few rivals choose the same approach, and the firm’s product cannot be quickly or cheaply imitated (Thompson S. , 1993).

We followed both cost leadership and differentiation in different periods of simulation in response to the changes in the market situations.

The Strategy Clock

According to Bowman model a firm can differentiate between Differentiation strategies, Low Price Strategies and Risk Strategies (Appendix 9).

A low-price strategy seeks to achieve a lower price than competitors whilst trying to maintain similar perceived product or service benefits to those offered by competitors (Scholes, Johnson, & Whittington, 2005). So our Company follows a low price strategy compared to our competitors. We believe in maintaining a low cost base through our various cost reduction activities such as the low cost logistics, efficient store operation methods such as accepting low margins in return for high volume of purchase, following a customized product method etc. and above all we have been able to maintain a cost reduction by keeping up our competitive advantage in the market. We achieve this by developing new products and services that satisfy and delight our customers in the market and through this we restructure and improve our business processes to improve quality and reduce cost, which in turn adds value to our product. We follow the total quality management system to sustain our market and customers and this has helped us improve our product value, quality, productivity that is it has helped reduce waste and increase customer satisfaction.

BCG Matrix

From the BCG Matrix (Appendix 10) of our products, we can see how our products changed from ‘Question mark’ in Year 3 to ‘Star’ in Year 5. Question marks are businesses that operate in high growth markets but have low relative market shares. It requires a lot of cash. The products that come under star are considered as market leader in a high growth market. If question mark business is successful, it becomes a star. Therefore, it can be concluded that the business level strategies of cost leadership and differentiation adopted is beneficial for our company.

Sustainability

Sustainable competitive advantage is said to be the heart of a corporate strategy. It enables the maintenance and enhancement of a company’s cut-throat position in the market (Barney, 1991). The sustainable competitive advantage of a company can be categorised as Sustainable Price based Advantage and Sustaining Differentiation – based Advantage (Johnson, Scholes, & Whittington, Exploring Corporate Strategy :Texts and Cases, 2008)

Lifestyle Furniture follows a price based sustainable strategy. With the excess of inventory in hand, the company aims at increasing the sales of its products by reducing the price and making it attractive to the customers. Lifestyle Furniture aims at market segments where low price is valued by the customers. This has helped the company gain more customers and reduce the competition for a longer period of time (Appendix 11).

Conclusion

The theories of strategic management are put into practice in the game of business simulation. After a thorough analysis of the strategies adopted by Lifestyle Furniture, we came to a conclusion that Cost Leadership was the best option for our company to sustain in the market. As we changed our strategy from cost leadership to differentiation, we lost our market share and went into losses. At the end of Period 5, Lifestyle Furniture entered into the stage of decline. The best solution to overcome this situation is to adopt any of the two alternative strategies, namely Harvest or Quick Divestment.

Works Cited

Barney, J. (1991). Firm resources and Sustained Competitive Advantage. Journal of Management , 17 (1), 99-120.

Bowman, C., & Asch, D. (1987). Strategic Management. Macmillan Education Ltd.

Campbell, D., Stonehouse, G., & Houston, B. (2002). Business Strategy. Butterworth Heinemann.

Confederation, T. B. (2011). ACID links up with BFC. North Yorkshire: The British Furniture Confederation.

Ellis, J. (2002, October 31). Strategy. Retrieved March 9, 2011, from Fast Company: http://www.fastcompany.com/magazine/64/jellis.html

Gillespie. (2007). Foundation of Economics. Oxford University Press.

Hill, C. W., & Jones, G. R. (2007). Strategic Management: An integrated approach (7 ed.). Houghton Mifflin Company.

Hinterhuber, H. H., Friedrich, S. A., Handlbauer, G., & Stuhec, U. (1996). The Company as a cognitive system of core competences and strategic business units. Strategic Change , 5, 223-238.

Johnson, G., Scholes, K., & Whittington, R. (2008). Exploring Corporate Strategy :Texts and Cases (8 ed.). Pearson Education Limited.

Johnson, G., Scholes, R., & Whittington, R. (2009). Fundamentals of Strategy. Pearson Education Limited.

Lenz, R. T. (1980). Strategic Capability: A concept and framework foe Analysis. Academy of Management Review , 5, 225-234.

Lynch, R. (2000). Corporate Strategy. Pearson Education Limited.

Matt. (2009, April 24). Competitive Advantage – Michael Porter. Retrieved March 12, 2011, from All About Economics: http://www.sayeconomy.com/competitive-advantage-michael-porter/

Matt. (2009, February 8). Five Forces Analysis – Porter’s 5 forces . Retrieved March 08, 2011, from All About Economics on the Web: http://www.sayeconomy.com/five-forces-analysis-porters-5-forces/

Options for a competitive strategy. (2008). Retrieved March 14, 2011, from Provience proven experience: http://www.provience.co.uk/change/tools_bowmans_clock.html

Pearson, J., & Robinson, R. (2002). Strategic Management. Boston: McGraw-Hilsl.

Pearson, J., & Robinson, R. (2005). Strategic Management (9 ed.). New York: Mc Graw.

Peston, R. (2011, March 16). Turner: Regulation must be Trotskyite. Retrieved March 2011, 16, from BBC News: http://www.bbc.co.uk/blogs/thereporters/robertpeston/2011/03/turner_regulation_must_be_trot.html

Porter, M. E. (1985). Competitive Advantage: Creating and sustaining superior performance. The Free Press.

Porter, M. (1980). The Competitive Strategy. New York: The Free Press.

Pro-sim Advanced. (2011). Retrieved 2011, from Business game shop: http://www.businessgameshop.co.uk/about-our-company

Samar, S. H. (2009, July 19). Implementing Strategic Management in Construction. Construction Management Guide , 8.

Scholes, K., Johnson, G., & Whittington, R. (2005). Exploring Corporate Strategy. Pearson Education Limited.

Snyder, A. V., & Ebeling, J. W. (1992). Targeting a companies real core competencies. Journal of Business startegy , 13 (6), 26-32.

Thompson, J. (2002). Strategic Management (4 ed.). London: Thomson.

Thompson, S. (1993). Strategic Management: Concepts and Cases. Richard D. Irwin, Inc.

Thomson, N., & Baden-Fuller, C. (2010). Basic Strategy in Context: European Text and Cases. Antony Rowe Ltd.

UK inflation rate rises to 4% in January. (2011, February 15). Retrieved March 8, 2011, from BBC News Business: http://www.bbc.co.uk/news/business-12462901

Appendices

Appendix 1

The resource based model and the model for industry attractiveness

Source: Barney, 1991

Appendix 2

Strategic Capability and Competitive Advantage

Source: Johnson, Scholes & Whittington, R.,2010

Appendix 3

Market Share

Appendix 4

Portfolio of competences

Competence Standards

Competences within this category have low customer value and relatively low competence strength hence it does not create a competitive advantage.

Competence Potential

The company is superior to its competitors but does not have high value for customer demand.

Competence Gaps

In this category, customers attribute high significance to competences in this field. Yet the competence strength of the company is rather poor compared with that of its competitors. Thus there are competence gaps between what the market demands (competence requirement) and what the enterprise is able to do (existing in-house competence).

Core Competences

Real competences that determine the corporate profile exist only in the following cases:

– If the competence strength of a company is high in relation to that of its competitors.

– If the competences can be attributed a high present and future customer value.

Source: Friedrich, Handlbauer, Hinterhuber, & Stuhec, 1996

Appendix 5

Porters 5 forces

Threats of potential entrants:

Threat of new entrants in the furniture industry is minimal as the initial cost to set up the company is high. It is also difficult for new companies to compete with the existing big companies in the market as they already have a reputation and close customer – supplier relationship which the new entrants lack.

Bargaining power of buyers:

Bargaining power of buyers is low as there are very few substitutes of the products we offer and there are few big sellers in the market offering the same product range.

Threats of substitutes:

Our company offers furniture made with wood and white alloy metal. However, there are other companies that offer products that are produced using similar raw materials and are in the market for a much cheaper price. This serves as a substitute for our products and it leaves the company with high threat of substitutes.

Competitive rivalry:

Our company has a competitive edge over our competitors as we provide best quality products at affordable prices. However, larger organisations with the capability to provide wide variety of products with different price range prove to be a threat to the company. Also the advancement in technology has made competition more tougher with the customers being able to compare the price between the various companies.

Appendix 6

SWOT-analysis

Strength

• High quality and diverse product line

• A well trained and experienced management team

• Motivates the employees even if there is no turnover

• Ability to provide products at affordable price even after the increase in Value Added Tax

• Reducing the gap between the Company and the suppliers by establishing strong buyer-seller relationship through trade commitments.

• Digital marketing has helped the company to gain loyal group of customers.

Weaknesses

Limited quantity to showcase as it mainly develops the products according to customer need.

Lack of access to key distribution channel as the key players in the market are linked to them.

Inefficient HRM Manager

Excess of Inventory in hand

Opportunities

Lifestyle furniture aims to moving into new market segments that offer improved profits

We try to occupy untapped market and markets vacated by ineffective competitor. This is mainly made effective in times of strikes when inventories are unavailable to the competitors.

Threats

• No proper up-to-date analysis of the market

• Current government policies such as Value Added Tax and Inflations have a great impact on the rise in price of goods. In order to attract the customers, the products have been made available at lower rates but this may project items as lower quality.

• Several well established stores co-exist in the market

• Shift of customer tastes from the company’s product to the competitors

• New regulations imposed by the government

• Emergence of substitutes for our product

Appendix 7

Ansoff Matrix

It is the most commonly used model to analyse the possible strategic directions that an organization can follow. It has four alternatives:

Market penetration: In this strategy, existing products are sold in existing markets to increase the market share.

Market development: According to this strategy, companies sell existing products in new market segments. It requires development of new competencies that serve particular need of customers in the new market segments.

Product development: In this strategy, new products are sold in existing markets to attract new customers, retain existing ones and to increase market share.

Diversification: It is the strategy in which new products are sold in new markets. It is an appropriate option when current markets are saturated or when products reach the end of their life cycle.

(Campbell, Stonehouse, & Houston, 2002)

New

Markets

Existing

Existing

New

Products

Products

New

Existing

Existing

Markets

Products

New

Products

Existing

Products

New

Existing

Existing

Products

New

Existing

Markets

Products

New

Existing

Existing

New

Source: (Campbell, Stonehouse, & Houston, 2002)

Appendix 8

Generic Competitive Strategies:

Every company’s aim is to attain competitive advantage and achieving it requires the company to take a decision. It has to choose what type of competitive advantage it wants to attain and also the scope within which it wants to attain it. There are four types of generic competitive strategies:

Cost Leadership: In this strategy, the company decides to become the low cost producer by finding and exploiting all sources of cost advantage. The companies minimize the cost of their products in areas such as overheads, R&D and overall cost of production.

Differentiation: In this strategy, a company tries to differentiate its products from its competitors using some dimensions that are considered important from buyer’s perspective.

Focus: In this strategy, a company selects a market segment or a group of segments and completely focuses on that group by achieving competitive advantage over its competitors.

Stuck in the middle: As the name suggests, stuck in the middle strategy is adopted when a company has the need to follow more than one generic strategy at the same time. It means that a company can follow cost leadership for some of its products and differentiation for rest of the products as and when the market requires.

(Porter M. E., 1985)

Appendix 9

The Strategy Clock

A Strategy clock represents different positions in the market where customers have different requirements in terms of value-for-money and also a set of generic strategies for achieving competitive advantage (Scholes, Johnson, & Whittington, 2005).

Bowmans Clock.jpg

Source: (Options for a competitive strategy, 2008)

According to the Bowman model of strategy clock, there are three types of strategies, Differentiation strategies, Low price strategies and Risk strategies (or strategies destined for ultimate failure) which can be further divided as follows:

Differentiation Strategies-

Hybrid- Low cost of production and reinvestment in differentiation

Differentiation- The customers perceive an added value of the product

Focussed differentiation- Added value to the customers allowing the price to be much higher than the competitor’s price.

Low Price Strategies-

No frills- Low cost and low prices in a specific market segment. Only basic requirements of customers are satisfied.

Low price- Companies are cost leaders to be competitive in the market. Risk of price wars and low margins is high.

Risk Strategies-

Increased price/low value- It is possible only in a monopoly market and customers have to pay a high price.

Increased price/standard value- Higher margins are possible if competitors do not follow.

Standard price/low value- Loss of market share for the companies.

(Thomson & Baden-Fuller, 2010)

Appendix 10

BCG Matrix:

year3.ashx

BCG Matrix for Year 3 of Simulation

year5.ashx

BCG Matrix for Year 5 of Simulation

Source: Business Game Simulation- Market Analysis

Appendix 11

Sustainable Competitive Advantage

A firm is said to have a sustainable competitive advantage when a firm implements a value creating strategy not simultaneously being implemented by any other current or potential competitor and when the other firms are unable to duplicate the benefits of this strategy

(Barney, 1991)

Sustaining Price – based Advantage

Sustaining price based advantage is a competitive advantage through which lower price is maintained in a number

Growth And Evolution Of Automobile Industry In India Marketing Essay

Automobile industry contributes 4 of the national GDP and accounts for 5 of the industrial output in India. It is moreover, a major employment generator in the country. The Indian automobile industry provides employment to around 13 million people directly or indirectly at present, a number that is likely to double by 2016.

The liberalization policies of government have been one of the biggest factors behind the industry’s rapid growth. Supportive policy measures like relaxation of foreign exchange and equity regulations, reduction tariffs on imports, and banking liberalization leading to a boom in financing driven purchases and convenient EMIs have contributed to the present success of the Indian automobile industry.

With a number of foreign brands joining ranks with the domestic manufacturers, the Indian consumer is now flooded with choice. An average Indian can now select from a wide range of Indian and foreign products. Some of the major Indian players are Maruti Udyog, Tata Motors, Mahindra, Ashok Leyland, Hero Honda and Bajaj. Toyota, GM Honda, Daimler Chrysler, Ford, Volvo and Hyundai Suzuki are the key international players in the Indian Automobile market. However, despite the presence of foreign brands, the domestic companies are still the biggest players. Maruti Udyog and Tata vehicles share the top honours for passenger and commercial vehicles respectively.

The ICRA analysis of the Indian market projects heavy growth for competitively priced sports-utility-vehicles or SUVs and two wheelers. A number of major global brands like Honda, Suzuki, General Motors and Hyundai have launched their products in the SUV segment of the Indian automobile market. An average of 11.5% growth in the two-wheelers sales in 2004-2007 has kept a number of global companies interested in this segment as well. The market has been moreover bolstered by a healthy rise in the sales of heavy commercial vehicles, and the presence of a strong auto component industry that now ranks 2nd in the world.

One of the best things to happen for the Indian automobile market in the recent years was its telling improvement in the export sector. There was a 56% growth in exports from 2003 to 2004. Although economy cars continue to hold the lion’s share of the export market, vehicles worth more than USD 1 billion were also exported in 2004, for the first time in history.

This increasing demand for Indian cars on the foreign shores has helped the country’s automobile industry in two significant ways. First, it has decidedly contributed to the economic growth of the industry. Secondly, it has helped to improve the image of the Indian manufacturing infrastructure at a global level. This increased confidence has resulted in more and more foreign brands opening manufacturing units in India, directly contributing to economy and employment.

The Indian automobile industry is now riding high on success, and the bright picture does tend to obscure the problems and challenges that lay on the track of its growth. Poor road conditions, heavy pollution and large scale traffic related accidents are serious impediments in the way of the industry’s growth. However, steps are being initiated by the government to address these problems at various levels, and solutions are being worked out at a steady pace

Evolution of the Indian automobile industry

The Indian automobile industry has evolved into a massive market with lots of potential over the last decade. All the car manufacturing kingpins have come to India and invested in the Indian market. There’s obviously a reason behind it, the Indian automobile industry is booming. And all the international car giants are trying their level best to get a strong hold of the Indian market. A little more than a decade ago the Indian consumer interested in buying a car had just about a handful of options to choose from, today the choices are vast and mind boggling. It is impossible to come to a decision as to which would be the perfect car for you. The likes of Honda, Skoda, Volkswagen, Chevrolet, Nissan, Hyundai and Renault have all entered the Indian market. And these just add to the already existing local players like Maruti Suzuki, Tata and Mahindra who for years prior to this rapid development had shared and enjoyed market dominance.

All these international car manufacturers have set up factories and plants across the country in order to produce their cars within the country to make for cheaper cars.

All these big brands have realized the potential the Indian market has, and this potential is only increasing with time. Companies like Toyota, Honda and Chevrolet produce cars specifically for the Indian market, these cars aren’t manufactured in other parts of the world as they are designed keeping in mind the Indian traffic and road scenario. The market today has such a wide variety of cars to choose from. Every segment has multiple cars. The hatchback segment which is by far the most selling type of cars has so many cars and car makers battling it out to gain supremacy and dominance. Within the hatchback segment there are top end and lower end cars. The top end hatchbacks would include the Skoda fabia, Volkswagen Polo and the top variant of the Maruti Swift. These are considered to be premium hatchbacks. The lower level hatchbacks would be cars like the Maruti Alto, wagonr, and the Hyundai Eon. These are aimed at the common man, who’s looking for a low maintenance car which gives good fuel economy. The sedan segment has the same bifurcation where the premium sedans include the Honda Civic and Toyota Corolla, and the lower level sedans would include the Maruti Sx4 and the Volkswagen Vento.

Such a surge in the industry shows the potential the Indian market has and hence global players are trying everything in their power to capture a share of the Indian market. Even high end premium brands like Rolls Royce Aston Martin and Porche have opened showrooms across cities in India. Ten years ago one wouldn’t have even imagined walking into a Rolls Royce showroom in India or having the liberty of test driving a Jaguar in our own city. Keeping all this in mind it’s a real mystery in judging which would be the best family car in India

Wagonr is considered amongst the best family car which is a low maintenance car and gives great fuel economy as well.

PRODUCT PROFILE

In Automobile industries there are two types of products. One is Passenger vehicle & another is commercial vehicle. There are many manufacturers of vehicle makes both types of product. Like TATA, Maruti Suzuki, Renault, Ashok Leyland, Mahindra & Mahindra, etc.

Products and Services

The primary activities of this industry are:

Motor cars manufacturing

Motor vehicle engine manufacturing

The major products and services in this industry are:

Passenger motor vehicle manufacturing segment (Passenger Cars, Utility Vehicles & Multi Purpose Vehicles)

Commercial Vehicles  (Medium & Heavy and Light Commercial Vehicles)

Two Wheelers

Three Wheelers

Passenger Vehicles

Mahindra & Mahindra jeep

Maruti 800

Hyundai Santro

Zen Estillo

Ford Fiesta

Tata Nano

Tata safari

Mahindra Scorpio

Honda city

Toyota Etios

Toyota Tavera

Mercedes Benz B Class

Mercedes Benz C Class

Mercedes Benz E Class

Volkswagen Polo

Volkswagen Vento

Skoda Fabia

Skoda Laura

Commercial Vehicles

Truck

Semi truck (articulated lorry)

Van

Coach

Bus

Taxicab

Trailers

Box truck

DEMAND DETERMINATION OF THE INDUSTRY

The automotive sector is one of the core industries of the Indian economy. Indian Government’s impetus to the industry by allowing continuous economic liberalization since 1991 has made India one of the sought after destination for many global automotive players. The automotive sector in India is growing at around 18 per cent per annum.

Indian Auto industry has seen a phenomenal growth in the last 20 years. This is due to the convergence of a lot of positive factors. This article aims to examine at some of these to understand the situation better.

The sales trajectory of automobiles has witnessed a sharp increase since 1990s till 2000. Automobile industry has greatly benefitted from a sharp increase in demand and has added extra capacity, better research and development facilities and technological advancement and distribution setup across the country.

Factors Determining Demand of Automotives Indian Auto Sector

The convergences of government policies, economy’s growth, and people’s purchasing power have all contributed to the phenomenal growth of Indian Auto industry. Some of the important growth drivers are explained below.

Demand Determinants

Determinants of demand for this industry include vehicle prices (which are determined largely by wage, material and equipment costs) and exchange rates, preferences, the running cost of a vehicle (mainly determined by the price of petrol), income, interest rates, scrapping rates, and product innovation.

Exchange Rate:

Movement in the value of Rupee determines the attractiveness of Indian products overseas and the price of import for domestic consumption.  

Affordability:

 Movement in income and interest rates determine the affordability of new motor vehicles. Allowing unrestricted Foreign Direct Investment (FDI) led to increase in competition in the domestic market hence, making better vehicles available at affordable prices.

Product Innovation is an important determinant as it allows better models to be available each year and also encourages manufacturing of environmental friendly cars.

Demographics: It is evident that high population of India has been one of the major reasons for large size of automobile industry in India. Factors that may be augment demand include rising population and an increasing proportion of young persons in the population that will be more inclined to use and replace cars. Also, increase in people with lesser dependency on traditional single family income structure is likely to add value to vehicle demand.

Infrastructure: Longer-term determinants of demand include development in Indian’s infrastructure.  India’s banking giant State Bank of India and Australia’s Macquarie Group has launched an infrastructure fund to rise up to USD 3 billion for infrastructure improvements.  India needs about $500 billion to repair its infrastructure such as ports, roads, and power units. These investments are been made with an aim to generate long-term cash flow from automobile, power, and telecom industries. (Source: Silicon India)

Price of Petrol:

Movement in oil prices also have an impact on demand for large cars in India. During periods of high fuel cost as experienced in 2007 and first -half of 2008, demand for large cars declined in favour of smaller, more fuel efficient vehicles. The changing patterns in customer preferences for smaller more fuel efficient vehicles led to the launch of Tata Motor’s Nano – one of world’s smallest and cheapest cars. 

Players in the Automobile Industry

Audi

BMW

Chevrolet

Fiat

Force

Ford

General

Hindustan

Honda

Lamborghini

Maruti

Mahindra & Mahindra

Mercedes

Mitsubishi

Nissan Motors

Tata Motors

Top players in India Automobile industry

Some of the important companies and their details include:

Hindustan Motors:

One of the oldest car manufacturing companies in India, it has produced cars like Ambassador and Contessa. Having collaborated with foreign companies like Mitsubishi, and General Motors Corporation of USA, it has made an irrefutable mark in the manufacturing cars like the Lancer. Apart from this, the company has impressive manufacturing statistics in the field of passenger Cars, utility vehicles, and earthmoving equipment.

Mahindra and Mahindra:

Established in the year 1945, this company has given a cutting-edge dimension to the Indian automobile industry. It began as a general-purpose utility vehicle manufacturing unit and expanded its business to automative, tractor, MSL and inter trade. Presently, the largest company in the private sector, this company boasts of an advanced technological infrastructure and manpower.

Maruti Udyog Limited:

The first ever Indian company to manufacture low cost cars, in collaboration with Suzuki of Japan, Maruti is considered to be the largest automobile company in India. The company is known for producing high quality, fuel-efficient cars with Japanese technology, but adaptive to Indian roads. The company has attained the annual production mark of 3, 20,000, which is a trend setter for any Indian company. Among the cars it has manufactured are the Maruti 800, Zen, Maruti Omni, Wagon R, Baleno and the like.

Tata Motors:

India’s biggest manufacturer of commercial vehicles, the company boasts of an annual turnover of Rs 101.3 billion. It is counted among the top ten vehicle manufacturing companies of the world in 5-15 tonnes segment. Among its chief productions are light commercial vehicles, commercial vehicles, multi-utility vehicles, and passenger cars.

TELCO has launched numerous car brands in collaboration with foreign companies like Cummins Engine Company, USA, Daimler Benz A.G. and Holset Engineering Company, U.K. Using technology that not only cuts out on the pollution but also the cost, the company has manufactured vehicles like Tata Safari, Tata Sierra, Tata Estate, and Tata Mobile.

Presently, the company has a market share of 6.4 % in the luxury car section and 31.2% in the manufacturing segment of multi-utility cars.

Swaraj Mazda:

Swaraj Mazda is a joint venture of Swaraj Enterprise and Mazda of Swaraj symbolises best Indian technology and engineering, and Mazda has R&D and innovation edge on global scale. The company produces vehicles for goods and passenger applications, such as Bus, Ambulance, Water Tanks, Trucks, etc.

Brand name, adaptability to Indian roads, and fuel-efficiency are the key factors that have led to the growth and development of the Indian automobile industry. Moreover, liberalization of government norms and policies for foreign investment, technology and easy loans has added to the advancement of this industrial sector.

DISTRIBUTION CHANNEL IN THE AUTOMOBILE INDUSTRY

Cost and customer-service improvements are necessary but not sufficient to transform auto retailing channels. Realizing the full potential of these programs is not possible without a reasonable view of the different customer segments that should be targeted; the appropriate mix and level of marketing and distribution functions needed for each segment and the best portfolio of distribution formats and channels to reach the targets.

Just as specific groups of customers have their own product requirements; different consumer segments have their own requirements for the purchase and ownership experience. These requirements can be effectively targeted with channel, format and “soft offer” package variations such as service contracts, financing or sales incentives. Ultimately, the consumer-segment requirements will drive the service requirements and in turn help determine the best cost and operating structure for the specific distribution format and customer-value proposition.

Creating purchase and ownership experiences to meet the needs of specific consumers has two other significant implications. First is the need for parallel formats and channels in a given region, each with its own pricing and bundle of service offerings. Parallel sales channels can range from the traditional dealer to the Internet or to direct sales. Similarly, parallel service channels could be created through specialized quick-fix workshops, independent dealers and do-it-yourself stores/garages. (See Exhibit VI.) Parallel channels and formats raise the possibility of channel conflict and the need for expanded skills to manage and reduce it.

The second implication of serving multiple, service-based customer segments is the need to avoid cannibalization. For example, a Mercedes “A” class owner with a limited guarantee and no branded service must be recognized as such and managed appropriately. This requires a system for identifying and distinguishing the “soft offer” packages sold to individual consumers. Mercedes is testing such a system in the form of a chip card. The chip card stores a description of the “soft offers” purchased and requires an explicit payment for additional services.

Creating a more flexible and targeted mix of channels and formats will be hard to do. But it will also require manufacturers to collect continuous and rapid feedback for new retailing ideas and approaches, consistent with a strategic path that is flexible enough to change as the organization learns over time.

The distribution chain of automotive industry in India is very similar to the distribution chain of the automotive industry in Europe and America. The order of the industry arises from the bottom of the distribution chain i. e., from the consumers and goes through the automakers and climbs up until the third tier suppliers. However the products, as channelled in every traditional automotive industry, flow from the top of the distribution chain to reach the consumers. Automakers in India are the key to the distribution chain and are responsible for the products and innovation in the industry.

The description and the role of each of the contributors to the distribution chain are discussed below.

Third Tier Suppliers: These companies provide basic products like rubber, glass, steel, plastic and aluminium to the second tier suppliers.

Second Tier Suppliers: These companies design vehicle systems or bodies for First Tier Suppliers and OEMs. They work on designs provided by the first tier suppliers or OEMs. They also provide engineering resources for detailed designs. Some of their services may include welding, fabrication, shearing, bending etc.

First Tier Suppliers: These companies provide major systems directly to assemblers. These companies have global coverage, in order to follow their customers to various locations around the world. They design and innovate in order to provide “black-box” solutions for the requirements of their customers. Black-box solutions are solutions created by suppliers using their own technology to meet the performance and interface requirements set by assemblers.

First tier suppliers are responsible not only for the assembly of parts into complete units like dashboard, breaks-axel-suspension, seats, or cockpit but also for the management of second-tier suppliers.

Automakers/Vehicle Manufacturers/Original Equipment Manufacturers (OEMs): After researching consumers’ wants and needs, automakers begin designing models which are tailored to consumers’ demands. The design process normally takes five years. These companies have manufacturing units where engines are manufactured and parts supplied by first tier suppliers and second tier suppliers are assembled. Automakers are the key to the distribution chain of the automotive industry. Examples of these companies are Tata Motors, Maruti Suzuki, Toyota, and Honda. Innovation, design capability and branding are the main focus of these companies.

Dealers: Once the vehicles are ready they are shipped to the regional branch and from there, to the authorised dealers of the companies. The dealers then sell the vehicles to the end customers.

Parts and Accessory: These companies provide products like tires, windshields, and air bags etc. to automakers and dealers or directly to customers.

Service Providers: Some of the services to the customers include servicing of vehicles, repairing parts, or financing of vehicles. Many dealers provide these services but, customers can also choose to go to independent service providers. 

KEY ISSUES & CURRENT TRENDS

Key Issues

Consumer Sentiment Index

Description: Customer Sentiment Index, 12 month rolling average of the Index; historical and forecast data and analysis.

End customers are very important to ensure the survival of the Motor Vehicle Manufacturing industry. Economic downturns and other events can affect the expenditure decision of households. When customers are not happy or optimistic about the future of the economy, they will tend to postpone expenditure until times are better. In 2008-09, customer sentiment is expected to fall, which will have a brunt on the augmentation in demand of cars.

Domestic Goods Price – Metal – Iron and Steel

Description: The price of input such as steel.

Steel is a major input used when manufacturing a motor vehicle. Rises in the price of steel puts cost pressures on manufacturers, which often leads to a fall in profitability. Over the past five years, the price of steel has been rising rapidly. These rises in price eventually pass from the manufacturers to the end customers’.

Import and Export Taxes (Duties) – Motor Vehicle Tariffs

Description: Tariff rates applicable to the industry

High taffies may restrict flow of trade but may attract investment if domestic market is big enough and growing. Over the last few years India’s tariff policies and conditions of import of vehicles have served the purpose of attracting investments. Industry is keen that the existing tariff structure roadmap and conditions of import of vehicles are retained without any modifications because of certain systematic deficiencies which make manufacturing less cost competitive in India as compared to some of the neighbouring countries like China, Thailand, Indonesia, etc.

Wold Price – Energy – Crude Oil

Description:  The world price of crude oil, $US/barrel, and price analysis.

The price of oil and petrol affect the driving habits of consumers and the type of car they buy. Over the past five years, the price of petrol has been influenced the buying decision of motorists, who are switching more to fuel efficient options. These include cars that run on liquefied petroleum gas (LPG), diesel and small cars that achieve better mileage. The trucking sector has also been struggling with the rise in the price of fuel, which has put enormous pressures on their costs.

Key Success Factors

The Key Success factors in the Motor Vehicle Manufacturing industry are:

Efficiency factor – Improve labour productivity, labour flexibility, and capital efficiency

Resource Availability – Quality manpower availability, infrastructure improvements, and raw material availability

Effective cost controls – Close relationship with supplies and goods distribution channels.

Establishment of export markets – Growth of export markets

Having an extensive distribution/collection network – Goods distribution channels

Successful industrial relations policy – Ethical and tactical industrial relations

Access to the latest available and most efficient technology and techniques – The degree of investment in technological improvements and product development

Optimum capacity utilisation – The level of plant utilisation

Management of high quality assets portfolio – Understanding implications from Government policies

Automobile industry contributes 4 of the national GDP and accounts for 5 of the industrial output in India. It is moreover, a major employment generator in the country. The Indian automobile industry provides employment to around 13 million people directly or indirectly at present, a number that is likely to double by 2016.

The liberalization policies of government have been one of the biggest factors behind the industry’s rapid growth. Supportive policy measures like relaxation of foreign exchange and equity regulations, reduction tariffs on imports, and banking liberalization leading to a boom in financing driven purchases and convenient EMIs have contributed to the present success of the Indian automobile industry.

With a number of foreign brands joining ranks with the domestic manufacturers, the Indian consumer is now flooded with choice. An average Indian can now select from a wide range of Indian and foreign products. Some of the major Indian players are Maruti Udyog, Tata Motors, Mahindra, Ashok Leyland, Hero Honda and Bajaj. Toyota, GM Honda, Daimler Chrysler, Ford, Volvo and Hyundai Suzuki are the key international players in the Indian Automobile market. However, despite the presence of foreign brands, the domestic companies are still the biggest players. Maruti Udyog and Tata vehicles share the top honours for passenger and commercial vehicles respectively.

The ICRA analysis of the Indian market projects heavy growth for competitively priced sports-utility-vehicles or SUVs and two wheelers. A number of major global brands like Honda, Suzuki, General Motors and Hyundai have launched their products in the SUV segment of the Indian automobile market. An average of 11.5% growth in the two-wheelers sales in 2004-2007 has kept a number of global companies interested in this segment as well. The market has been moreover bolstered by a healthy rise in the sales of heavy commercial vehicles, and the presence of a strong auto component industry that now ranks 2nd in the world.

One of the best things to happen for the Indian automobile market in the recent years was its telling improvement in the export sector. There was a 56% growth in exports from 2003 to 2004. Although economy cars continue to hold the lion’s share of the export market, vehicles worth more than USD 1 billion were also exported in 2004, for the first time in history.

This increasing demand for Indian cars on the foreign shores has helped the country’s automobile industry in two significant ways. First, it has decidedly contributed to the economic growth of the industry. Secondly, it has helped to improve the image of the Indian manufacturing infrastructure at a global level. This increased confidence has resulted in more and more foreign brands opening manufacturing units in India, directly contributing to economy and employment.

The Indian automobile industry is now riding high on success, and the bright picture does tend to obscure the problems and challenges that lay on the track of its growth. Poor road conditions, heavy pollution and large scale traffic related accidents are serious impediments in the way of the industry’s growth. However, steps are being initiated by the government to address these problems at various levels, and solutions are being worked out at a steady pace

Evolution of the Indian automobile industry

The Indian automobile industry has evolved into a massive market with lots of potential over the last decade. All the car manufacturing kingpins have come to India and invested in the Indian market. There’s obviously a reason behind it, the Indian automobile industry is booming. And all the international car giants are trying their level best to get a strong hold of the Indian market. A little more than a decade ago the Indian consumer interested in buying a car had just about a handful of options to choose from, today the choices are vast and mind boggling. It is impossible to come to a decision as to which would be the perfect car for you. The likes of Honda, Skoda, Volkswagen, Chevrolet, Nissan, Hyundai and Renault have all entered the Indian market. And these just add to the already existing local players like Maruti Suzuki, Tata and Mahindra who for years prior to this rapid development had shared and enjoyed market dominance.

All these international car manufacturers have set up factories and plants across the country in order to produce their cars within the country to make for cheaper cars.

All these big brands have realized the potential the Indian market has, and this potential is only increasing with time. Companies like Toyota, Honda and Chevrolet produce cars specifically for the Indian market, these cars aren’t manufactured in other parts of the world as they are designed keeping in mind the Indian traffic and road scenario. The market today has such a wide variety of cars to choose from. Every segment has multiple cars. The hatchback segment which is by far the most selling type of cars has so many cars and car makers battling it out to gain supremacy and dominance. Within the hatchback segment there are top end and lower end cars. The top end hatchbacks would include the Skoda fabia, Volkswagen Polo and the top variant of the Maruti Swift. These are considered to be premium hatchbacks. The lower level hatchbacks would be cars like the Maruti Alto, wagonr, and the Hyundai Eon. These are aimed at the common man, who’s looking for a low maintenance car which gives good fuel economy. The sedan segment has the same bifurcation where the premium sedans include the Honda Civic and Toyota Corolla, and the lower level sedans would include the Maruti Sx4 and the Volkswagen Vento.

Such a surge in the industry shows the potential the Indian market has and hence global players are trying everything in their power to capture a share of the Indian market. Even high end premium brands like Rolls Royce Aston Martin and Porche have opened showrooms across cities in India. Ten years ago one wouldn’t have even imagined walking into a Rolls Royce showroom in India or having the liberty of test driving a Jaguar in our own city. Keeping all this in mind it’s a real mystery in judging which would be the best family car in India

Wagonr is considered amongst the best family car which is a low maintenance car and gives great fuel economy as well.

PRODUCT PROFILE

In Automobile industries there are two types of products. One is Passenger vehicle & another is commercial vehicle. There are many manufacturers of vehicle makes both types of product. Like TATA, Maruti Suzuki, Renault, Ashok Leyland, Mahindra & Mahindra, etc.

Products and Services

The primary activities of this industry are:

Motor cars manufacturing

Motor vehicle engine manufacturing

The major products and services in this industry are:

Passenger motor vehicle manufacturing segment (Passenger Cars, Utility Vehicles & Multi Purpose Vehicles)

Commercial Vehicles  (Medium & Heavy and Light Commercial Vehicles)

Two Wheelers

Three Wheelers

Passenger Vehicles

Mahindra & Mahindra jeep

Maruti 800

Hyundai Santro

Zen Estillo

Ford Fiesta

Tata Nano

Tata safari

Mahindra Scorpio

Honda city

Toyota Etios

Toyota Tavera

Mercedes Benz B Class

Mercedes Benz C Class

Mercedes Benz E Class

Volkswagen Polo

Volkswagen Vento

Skoda Fabia

Skoda Laura

Commercial Vehicles

Truck

Semi truck (articulated lorry)

Van

Coach

Bus

Taxicab

Trailers

Box truck

DEMAND DETERMINATION OF THE INDUSTRY

The automotive sector is one of the core industries of the Indian economy. Indian Government’s impetus to the industry by allowing continuous economic liberalization since 1991 has made India one of the sought after destination for many global automotive players. The automotive sector in India is growing at around 18 per cent per annum.

Indian Auto industry has seen a phenomenal growth in the last 20 years. This is due to the convergence of a lot of positive factors. This article aims to examine at some of these to understand the situation better.

The sales trajectory of automobiles has witnessed a sharp increase since 1990s till 2000. Automobile industry has greatly benefitted from a sharp increase in demand and has added extra capacity, better research and development facilities and technological advancement and distribution setup across the country.

Factors Determining Demand of Automotives Indian Auto Sector

The convergences of government policies, economy’s growth, and people’s purchasing power have all contributed to the phenomenal growth of Indian Auto industry. Some of the important growth drivers are explained below.

Demand Determinants

Determinants of demand for this industry include vehicle prices (which are determined largely by wage, material and equipment costs) and exchange rates, preferences, the running cost of a vehicle (mainly determined by the price of petrol), income, interest rates, scrapping rates, and product innovation.

Exchange Rate:

Movement in the value of Rupee determines the attractiveness of Indian products overseas and the price of import for domestic consumption.  

Affordability:

 Movement in income and interest rates determine the affordability of new motor vehicles. Allowing unrestricted Foreign Direct Investment (FDI) led to increase in competition in the domestic market hence, making better vehicles available at affordable prices.

Product Innovation is an important determinant as it allows better models to be available each year and also encourages manufacturing of environmental friendly cars.

Demographics: It is evident that high population of India has been one of the major reasons for large size of automobile industry in India. Factors that may be augment demand include rising population and an increasing proportion of young persons in the population that will be more inclined to use and replace cars. Also, increase in people with lesser dependency on traditional single family income structure is likely to add value to vehicle demand.

Infrastructure: Longer-term determinants of demand include development in Indian’s infrastructure.  India’s banking giant State Bank of India and Australia’s Macquarie Group has launched an infrastructure fund to rise up to USD 3 billion for infrastructure improvements.  India needs about $500 billion to repair its infrastructure such as ports, roads, and power units. These investments are been made with an aim to generate long-term cash flow from automobile, power, and telecom industries. (Source: Silicon India)

Price of Petrol:

Movement in oil prices also have an impact on demand for large cars in India. During periods of high fuel cost as experienced in 2007 and first -half of 2008, demand for large cars declined in favour of smaller, more fuel efficient vehicles. The changing patterns in customer preferences for smaller more fuel efficient vehicles led to the launch of Tata Motor’s Nano – one of world’s smallest and cheapest cars. 

Players in the Automobile Industry

Audi

BMW

Chevrolet

Fiat

Force

Ford

General

Hindustan

Honda

Lamborghini

Maruti

Mahindra & Mahindra

Mercedes

Mitsubishi

Nissan Motors

Tata Motors

Top players in India Automobile industry

Some of the important companies and their details include:

Hindustan Motors:

One of the oldest car manufacturing companies in India, it has produced cars like Ambassador and Contessa. Having collaborated with foreign companies like Mitsubishi, and General Motors Corporation of USA, it has made an irrefutable mark in the manufacturing cars like the Lancer. Apart from this, the company has impressive manufacturing statistics in the field of passenger Cars, utility vehicles, and earthmoving equipment.

Mahindra and Mahindra:

Established in the year 1945, this company has given a cutting-edge dimension to the Indian automobile industry. It began as a general-purpose utility vehicle manufacturing unit and expanded its business to automative, tractor, MSL and inter trade. Presently, the largest company in the private sector, this company boasts of an advanced technological infrastructure and manpower.

Maruti Udyog Limited:

The first ever Indian company to manufacture low cost cars, in collaboration with Suzuki of Japan, Maruti is considered to be the largest automobile company in India. The company is known for producing high quality, fuel-efficient cars with Japanese technology, but adaptive to Indian roads. The company has attained the annual production mark of 3, 20,000, which is a trend setter for any Indian company. Among the cars it has manufactured are the Maruti 800, Zen, Maruti Omni, Wagon R, Baleno and the like.

Tata Motors:

India’s biggest manufacturer of commercial vehicles, the company boasts of an annual turnover of Rs 101.3 billion. It is counted among the top ten vehicle manufacturing companies of the world in 5-15 tonnes segment. Among its chief productions are light commercial vehicles, commercial vehicles, multi-utility vehicles, and passenger cars.

TELCO has launched numerous car brands in collaboration with foreign companies like Cummins Engine Company, USA, Daimler Benz A.G. and Holset Engineering Company, U.K. Using technology that not only cuts out on the pollution but also the cost, the company has manufactured vehicles like Tata Safari, Tata Sierra, Tata Estate, and Tata Mobile.

Presently, the company has a market share of 6.4 % in the luxury car section and 31.2% in the manufacturing segment of multi-utility cars.

Swaraj Mazda:

Swaraj Mazda is a joint venture of Swaraj Enterprise and Mazda of Swaraj symbolises best Indian technology and engineering, and Mazda has R&D and innovation edge on global scale. The company produces vehicles for goods and passenger applications, such as Bus, Ambulance, Water Tanks, Trucks, etc.

Brand name, adaptability to Indian roads, and fuel-efficiency are the key factors that have led to the growth and development of the Indian automobile industry. Moreover, liberalization of government norms and policies for foreign investment, technology and easy loans has added to the advancement of this industrial sector.

DISTRIBUTION CHANNEL IN THE AUTOMOBILE INDUSTRY

Cost and customer-service improvements are necessary but not sufficient to transform auto retailing channels. Realizing the full potential of these programs is not possible without a reasonable view of the different customer segments that should be targeted; the appropriate mix and level of marketing and distribution functions needed for each segment and the best portfolio of distribution formats and channels to reach the targets.

Just as specific groups of customers have their own product requirements; different consumer segments have their own requirements for the purchase and ownership experience. These requirements can be effectively targeted with channel, format and “soft offer” package variations such as service contracts, financing or sales incentives. Ultimately, the consumer-segment requirements will drive the service requirements and in turn help determine the best cost and operating structure for the specific distribution format and customer-value proposition.

Creating purchase and ownership experiences to meet the needs of specific consumers has two other significant implications. First is the need for parallel formats and channels in a given region, each with its own pricing and bundle of service offerings. Parallel sales channels can range from the traditional dealer to the Internet or to direct sales. Similarly, parallel service channels could be created through specialized quick-fix workshops, independent dealers and do-it-yourself stores/garages. (See Exhibit VI.) Parallel channels and formats raise the possibility of channel conflict and the need for expanded skills to manage and reduce it.

The second implication of serving multiple, service-based customer segments is the need to avoid cannibalization. For example, a Mercedes “A” class owner with a limited guarantee and no branded service must be recognized as such and managed appropriately. This requires a system for identifying and distinguishing the “soft offer” packages sold to individual consumers. Mercedes is testing such a system in the form of a chip card. The chip card stores a description of the “soft offers” purchased and requires an explicit payment for additional services.

Creating a more flexible and targeted mix of channels and formats will be hard to do. But it will also require manufacturers to collect continuous and rapid feedback for new retailing ideas and approaches, consistent with a strategic path that is flexible enough to change as the organization learns over time.

The distribution chain of automotive industry in India is very similar to the distribution chain of the automotive industry in Europe and America. The order of the industry arises from the bottom of the distribution chain i. e., from the consumers and goes through the automakers and climbs up until the third tier suppliers. However the products, as channelled in every traditional automotive industry, flow from the top of the distribution chain to reach the consumers. Automakers in India are the key to the distribution chain and are responsible for the products and innovation in the industry.

The description and the role of each of the contributors to the distribution chain are discussed below.

Third Tier Suppliers: These companies provide basic products like rubber, glass, steel, plastic and aluminium to the second tier suppliers.

Second Tier Suppliers: These companies design vehicle systems or bodies for First Tier Suppliers and OEMs. They work on designs provided by the first tier suppliers or OEMs. They also provide engineering resources for detailed designs. Some of their services may include welding, fabrication, shearing, bending etc.

First Tier Suppliers: These companies provide major systems directly to assemblers. These companies have global coverage, in order to follow their customers to various locations around the world. They design and innovate in order to provide “black-box” solutions for the requirements of their customers. Black-box solutions are solutions created by suppliers using their own technology to meet the performance and interface requirements set by assemblers.

First tier suppliers are responsible not only for the assembly of parts into complete units like dashboard, breaks-axel-suspension, seats, or cockpit but also for the management of second-tier suppliers.

Automakers/Vehicle Manufacturers/Original Equipment Manufacturers (OEMs): After researching consumers’ wants and needs, automakers begin designing models which are tailored to consumers’ demands. The design process normally takes five years. These companies have manufacturing units where engines are manufactured and parts supplied by first tier suppliers and second tier suppliers are assembled. Automakers are the key to the distribution chain of the automotive industry. Examples of these companies are Tata Motors, Maruti Suzuki, Toyota, and Honda. Innovation, design capability and branding are the main focus of these companies.

Dealers: Once the vehicles are ready they are shipped to the regional branch and from there, to the authorised dealers of the companies. The dealers then sell the vehicles to the end customers.

Parts and Accessory: These companies provide products like tires, windshields, and air bags etc. to automakers and dealers or directly to customers.

Service Providers: Some of the services to the customers include servicing of vehicles, repairing parts, or financing of vehicles. Many dealers provide these services but, customers can also choose to go to independent service providers. 

KEY ISSUES & CURRENT TRENDS

Key Issues

Consumer Sentiment Index

Description: Customer Sentiment Index, 12 month rolling average of the Index; historical and forecast data and analysis.

End customers are very important to ensure the survival of the Motor Vehicle Manufacturing industry. Economic downturns and other events can affect the expenditure decision of households. When customers are not happy or optimistic about the future of the economy, they will tend to postpone expenditure until times are better. In 2008-09, customer sentiment is expected to fall, which will have a brunt on the augmentation in demand of cars.

Domestic Goods Price – Metal – Iron and Steel

Description: The price of input such as steel.

Steel is a major input used when manufacturing a motor vehicle. Rises in the price of steel puts cost pressures on manufacturers, which often leads to a fall in profitability. Over the past five years, the price of steel has been rising rapidly. These rises in price eventually pass from the manufacturers to the end customers’.

Import and Export Taxes (Duties) – Motor Vehicle Tariffs

Description: Tariff rates applicable to the industry

High taffies may restrict flow of trade but may attract investment if domestic market is big enough and growing. Over the last few years India’s tariff policies and conditions of import of vehicles have served the purpose of attracting investments. Industry is keen that the existing tariff structure roadmap and conditions of import of vehicles are retained without any modifications because of certain systematic deficiencies which make manufacturing less cost competitive in India as compared to some of the neighbouring countries like China, Thailand, Indonesia, etc.

Wold Price – Energy – Crude Oil

Description:  The world price of crude oil, $US/barrel, and price analysis.

The price of oil and petrol affect the driving habits of consumers and the type of car they buy. Over the past five years, the price of petrol has been influenced the buying decision of motorists, who are switching more to fuel efficient options. These include cars that run on liquefied petroleum gas (LPG), diesel and small cars that achieve better mileage. The trucking sector has also been struggling with the rise in the price of fuel, which has put enormous pressures on their costs.

Key Success Factors

The Key Success factors in the Motor Vehicle Manufacturing industry are:

Efficiency factor – Improve labour productivity, labour flexibility, and capital efficiency

Resource Availability – Quality manpower availability, infrastructure improvements, and raw material availability

Effective cost controls – Close relationship with supplies and goods distribution channels.

Establishment of export markets – Growth of export markets

Having an extensive distribution/collection network – Goods distribution channels

Successful industrial relations policy – Ethical and tactical industrial relations

Access to the latest available and most efficient technology and techniques – The degree of investment in technological improvements and product development

Optimum capacity utilisation – The level of plant utilisation

Management of high quality assets portfolio – Understanding implications from Government policies

A Case Study On Vodafone Company Marketing Essay

Vodafone is one of the leading mobile communications company with setup in 27 countries and collaboration agreements with more than 35 countries, including Safaricom in Kenya. The company provided the opportunities for over 71,000 employees across the world and in 2008 had more than 289 million customers. More than 19 million people use Vodafone services in the united kingdom Vodafone’s aim is ‘to be the world’s number one mobile communications leader’ and a vital component of this is to ensure that customers beliefs and approve of the company. It achieves this by taking a responsible approach to the way it conducts its business. This augment its status and in order to develop customers loyalty. Vodafone’s business strategy and its Corporate Responsibility (CR) strategy are interlinked. The company trust that long-term business rewards come from doing business in

a sustainable way.

Vodafone’s approach to business is two-fold:

• to provide product extension – new features, dimensions and services in saturated

markets. These are areas like the UK, USA and Europe which have sophisticated users who want and expect new functions from their mobiles. Developing new ways of delivering products and services helps to keep existing customers and attract new ones. For example, 3G technology has improved the ability and quality of transferring voice and data. Very fast internet speeds allow extended services such as video calling, music downloads, mobile television and email messaging.

• to look for opportunities in emerging markets. These include some of the world’s

more remote areas, including parts of Africa, where many people do not yet have access to a mobile phone. The less developed infrastructure in these areas makes traditional landline telecommunications difficult. Vodafone is committed to providing these markets with the technology to develop communication that will help both economically and socially. There are now more than four billion mobile phones across the world and 64% of all users live in a developing country.

A brief history of Vodafone

The originality of Vodafone was Racal Electronic plc. Vodafone was bent in 1984 as subsidiary of Racal electronic. Before 1984 it was known as Racal telecom Limited. In contrast Racal Telecom limited was rewarded as UK’s first mobile licence in 1984.The Racal Telecom limited made the first mobile called midnight on the 1st Jan 1985. Vodafone was rapidly grew since its first mobile call in 1988. Vodafone able to reached 0.5 million customers in 5 years. In order to make more customers, the company introduced the roaming service in 1994. The company made the agreement for the roaming call between Vodafone and telecom Finland. Because of this intercontinental reach extends with licence and partnership in Germany, South Africa, Fiji, Australia and Greece. Afterwards Vodafone also introduced two new services like digital fax and text messaging. After a few years Vodafone expansion its capability in Netherlands, Uganda, Hong Kong, Germany, France. Vodafone’s customers reached 3 million by 1997.

Vodafone marketing strategy

A long term vision and strategy can be achieve by cautious development. Vodafone clarify its vision as well as mission of marketing strategy by the following clarifications of four ps.

Product

There are different production of Vodafone with huge features that provides customers with chance to play games, send and receives pictures to have different ring tones, receive information about travelling as well as view videos clips and received video message.

Place

– Vodafone operates more than 300 stores in the United Kingdom

– Vodafone also sells its product through independent retailers.

– Customers can see and handle products they are considering buying.

Price

– Vodafone looking for its services accessible to as many people as possible.

– It offers a lot of pricing structures to suit different customers groups.

– The price plans are available monthly basis as well as prepay option.

– Vodafone United Kingdom reward points for customers for every £1 spent on calls.

Promotion

-Advertising on TV, in magazines and in other media outlets reaches large audiences and spreads the brand image and the message very effectively. This is also known as above the line promotion.

Below the line

– Every stores have special offers, promotions and print of sale posters to attract those inside

the store to buy.

– The company develop better relations with the public in order to explain new products and

ideas.

– Vodafone’s stores, its products and its staff all project the brand image.

Swot Analysis

Strength

-Network coverage for calls and data almost 95% of the populations.

-Using Vodafone people are able to message, the internet and also sharing of videos, pictures and music through mobile phone.

-It provide the wide range of hand set as well as airtime plans to suit each and every type of customers and use.

– Vodafone proves itself one of the best communication network providers in the world.

Vodafone believes in creating long term partnerships with its suppliers in order to achieve this. My committing to buying large volumes over a number of years Vodafone can negotiate lower prices. This also remuneration the suppliers because they enjoy the greater security of having guaranteed orders. Vodafone lunch the new products and technology for the developing country in order to provide cheaper network communication system to those peoples.

In developed economies, mobile phones are considered a normal part of life and the

functions they provide add value to landlines. Customers expect increasingly sophisticated products. Vodafone’s integrated mobile system can be used for business, education or socialising. The latest handsets allow people to keep in touch with family and friends through emails, messaging and networking sites such as Facebook and Twitter. They can research and develop their interests online or play games, listen to music or watch TV in any location.

Opportunities

A business uses its strengths to take advantage of the opportunities that arise. Vodafone believes that its environmentally focused business conduct will result in good returns even in a price sensitive market.

Vodafone produced the M-PESA system in the developing country like Keney. This system involves:

There are over 2,200 M-PESA registered agents in petrol stations, supermarkets and other retail bases across Kenya and five million subscribers. The service has lots of benefits. For

example M-PESA has helped small businesses such as taxi drivers by enabling them to receive money for fares without having to drive around with lots of cash in their cars. The service was particularly helpful during a recent conflict in the country as it helped people to transfer money safely. M-PESA has also been used to buy everyday items, as well as to pay the rent, send funds to other people or buy phone airtime. It has even been used to pay school fees, as secondary schooling is not ‘free’ in Kenya. By providing safe, secure transfer of money,

Vodafone’s M-PESA system has:

• helped small businesses become more financially secure

• provided a safe way for wage earners to send money back home to their families

• solved the problems of carrying around large amounts of cash.

Following these achievements in Kenya, Vodafone has extended M-PESA into other emerging markets including Tanzania and Afghanistan.

Weaknesses

Vodafone has to acknowledge its weaknesses in order to improve and manage them. This can play a key role in helping it to set objectives and develop new strategies. Vodafone weaknesses may include:

-The size and scale of its global business. This could make it hard to control standards and quality. Some countries where Vodafone network and products are made don not implement the legislation to control working conditions. This could represent a weak link.

– Vodafone’s one of the greatest weakness is its cost.

-The need for low cost products. This needs to be balanced against producing good quality. Vodafone also needs to differentiate itself and its products from competitors. Vodafone believes there is no compromise between being able to offer good quality products and low prices.

-Vodafone needs to keep good communication with its customers and other stakeholders about its activities. The scale of the business makes this a difficult task. Vodafone produces publications in print and online and carries out major TV and radio campaigns to enable the business to communicate with different target audiences.

Threats

If a company is aware of possible external threats, it can plan to counteract them. Vodafone can use certain strength to defend against threats in the market by generating new ideas.

Threats to Vodafone may stalk from:

-Market forces- more competitors entering the low price in the new product and network markets. Vodafone needs to underpin its unique qualities to compete with these.

-Economic factors- The recession slows down consumer spending and disposable income reduces.

Vodafone addresses these issues in many ways. It manages weaknesses and threats to create a positive outcome.

Vodafone’s high prices create appeal amongst its customers in low financial times. It is important to put prices as low as possible when the retail sector is depressed. Vodafone’s pricing strategy targets consumers with tough financial resources. Its products will also appeal to those with lower budgets through good quality and design. The company must ensure that it is always recognised as having the lowest prices on the market in the future. Communication plays an important role here.

Conclusion

Vodafone uses the capabilities of the mobile phone to bring value to both developing and developed economies. The impact of mobile technology on developed markets over recent years has been immense and has focused on providing added value to customers through new and improved functions and features. By comparison, the impact of technology on emerging markets such as Kenya has provided a real lifeline both to individuals and to small businesses. The mobile phone has helped economic development in emerging economies. With growth in the provision of mobile phones, Vodafone has enabled great improvements in facilitating the flow of money and information, which is vital for economic growth. By improving Kenya’s telecommunications infrastructure and by providing the M-PESA system,

Vodafone has enabled more people to access and transfer money. This has also helped socially by helping people to take advantage of employment opportunities away from their home towns and villages.

Vodafone is one of the leading mobile communications company with setup in 27 countries and collaboration agreements with more than 35 countries, including Safaricom in Kenya. The company provided the opportunities for over 71,000 employees across the world and in 2008 had more than 289 million customers. More than 19 million people use Vodafone services in the united kingdom Vodafone’s aim is ‘to be the world’s number one mobile communications leader’ and a vital component of this is to ensure that customers beliefs and approve of the company. It achieves this by taking a responsible approach to the way it conducts its business. This augment its status and in order to develop customers loyalty. Vodafone’s business strategy and its Corporate Responsibility (CR) strategy are interlinked. The company trust that long-term business rewards come from doing business in

a sustainable way.

Vodafone’s approach to business is two-fold:

• to provide product extension – new features, dimensions and services in saturated

markets. These are areas like the UK, USA and Europe which have sophisticated users who want and expect new functions from their mobiles. Developing new ways of delivering products and services helps to keep existing customers and attract new ones. For example, 3G technology has improved the ability and quality of transferring voice and data. Very fast internet speeds allow extended services such as video calling, music downloads, mobile television and email messaging.

• to look for opportunities in emerging markets. These include some of the world’s

more remote areas, including parts of Africa, where many people do not yet have access to a mobile phone. The less developed infrastructure in these areas makes traditional landline telecommunications difficult. Vodafone is committed to providing these markets with the technology to develop communication that will help both economically and socially. There are now more than four billion mobile phones across the world and 64% of all users live in a developing country.

A brief history of Vodafone

The originality of Vodafone was Racal Electronic plc. Vodafone was bent in 1984 as subsidiary of Racal electronic. Before 1984 it was known as Racal telecom Limited. In contrast Racal Telecom limited was rewarded as UK’s first mobile licence in 1984.The Racal Telecom limited made the first mobile called midnight on the 1st Jan 1985. Vodafone was rapidly grew since its first mobile call in 1988. Vodafone able to reached 0.5 million customers in 5 years. In order to make more customers, the company introduced the roaming service in 1994. The company made the agreement for the roaming call between Vodafone and telecom Finland. Because of this intercontinental reach extends with licence and partnership in Germany, South Africa, Fiji, Australia and Greece. Afterwards Vodafone also introduced two new services like digital fax and text messaging. After a few years Vodafone expansion its capability in Netherlands, Uganda, Hong Kong, Germany, France. Vodafone’s customers reached 3 million by 1997.

Vodafone marketing strategy

A long term vision and strategy can be achieve by cautious development. Vodafone clarify its vision as well as mission of marketing strategy by the following clarifications of four ps.

Product

There are different production of Vodafone with huge features that provides customers with chance to play games, send and receives pictures to have different ring tones, receive information about travelling as well as view videos clips and received video message.

Place

– Vodafone operates more than 300 stores in the United Kingdom

– Vodafone also sells its product through independent retailers.

– Customers can see and handle products they are considering buying.

Price

– Vodafone looking for its services accessible to as many people as possible.

– It offers a lot of pricing structures to suit different customers groups.

– The price plans are available monthly basis as well as prepay option.

– Vodafone United Kingdom reward points for customers for every £1 spent on calls.

Promotion

-Advertising on TV, in magazines and in other media outlets reaches large audiences and spreads the brand image and the message very effectively. This is also known as above the line promotion.

Below the line

– Every stores have special offers, promotions and print of sale posters to attract those inside

the store to buy.

– The company develop better relations with the public in order to explain new products and

ideas.

– Vodafone’s stores, its products and its staff all project the brand image.

Swot Analysis

Strength

-Network coverage for calls and data almost 95% of the populations.

-Using Vodafone people are able to message, the internet and also sharing of videos, pictures and music through mobile phone.

-It provide the wide range of hand set as well as airtime plans to suit each and every type of customers and use.

– Vodafone proves itself one of the best communication network providers in the world.

Vodafone believes in creating long term partnerships with its suppliers in order to achieve this. My committing to buying large volumes over a number of years Vodafone can negotiate lower prices. This also remuneration the suppliers because they enjoy the greater security of having guaranteed orders. Vodafone lunch the new products and technology for the developing country in order to provide cheaper network communication system to those peoples.

In developed economies, mobile phones are considered a normal part of life and the

functions they provide add value to landlines. Customers expect increasingly sophisticated products. Vodafone’s integrated mobile system can be used for business, education or socialising. The latest handsets allow people to keep in touch with family and friends through emails, messaging and networking sites such as Facebook and Twitter. They can research and develop their interests online or play games, listen to music or watch TV in any location.

Opportunities

A business uses its strengths to take advantage of the opportunities that arise. Vodafone believes that its environmentally focused business conduct will result in good returns even in a price sensitive market.

Vodafone produced the M-PESA system in the developing country like Keney. This system involves:

There are over 2,200 M-PESA registered agents in petrol stations, supermarkets and other retail bases across Kenya and five million subscribers. The service has lots of benefits. For

example M-PESA has helped small businesses such as taxi drivers by enabling them to receive money for fares without having to drive around with lots of cash in their cars. The service was particularly helpful during a recent conflict in the country as it helped people to transfer money safely. M-PESA has also been used to buy everyday items, as well as to pay the rent, send funds to other people or buy phone airtime. It has even been used to pay school fees, as secondary schooling is not ‘free’ in Kenya. By providing safe, secure transfer of money,

Vodafone’s M-PESA system has:

• helped small businesses become more financially secure

• provided a safe way for wage earners to send money back home to their families

• solved the problems of carrying around large amounts of cash.

Following these achievements in Kenya, Vodafone has extended M-PESA into other emerging markets including Tanzania and Afghanistan.

Weaknesses

Vodafone has to acknowledge its weaknesses in order to improve and manage them. This can play a key role in helping it to set objectives and develop new strategies. Vodafone weaknesses may include:

-The size and scale of its global business. This could make it hard to control standards and quality. Some countries where Vodafone network and products are made don not implement the legislation to control working conditions. This could represent a weak link.

– Vodafone’s one of the greatest weakness is its cost.

-The need for low cost products. This needs to be balanced against producing good quality. Vodafone also needs to differentiate itself and its products from competitors. Vodafone believes there is no compromise between being able to offer good quality products and low prices.

-Vodafone needs to keep good communication with its customers and other stakeholders about its activities. The scale of the business makes this a difficult task. Vodafone produces publications in print and online and carries out major TV and radio campaigns to enable the business to communicate with different target audiences.

Threats

If a company is aware of possible external threats, it can plan to counteract them. Vodafone can use certain strength to defend against threats in the market by generating new ideas.

Threats to Vodafone may stalk from:

-Market forces- more competitors entering the low price in the new product and network markets. Vodafone needs to underpin its unique qualities to compete with these.

-Economic factors- The recession slows down consumer spending and disposable income reduces.

Vodafone addresses these issues in many ways. It manages weaknesses and threats to create a positive outcome.

Vodafone’s high prices create appeal amongst its customers in low financial times. It is important to put prices as low as possible when the retail sector is depressed. Vodafone’s pricing strategy targets consumers with tough financial resources. Its products will also appeal to those with lower budgets through good quality and design. The company must ensure that it is always recognised as having the lowest prices on the market in the future. Communication plays an important role here.

Conclusion

Vodafone uses the capabilities of the mobile phone to bring value to both developing and developed economies. The impact of mobile technology on developed markets over recent years has been immense and has focused on providing added value to customers through new and improved functions and features. By comparison, the impact of technology on emerging markets such as Kenya has provided a real lifeline both to individuals and to small businesses. The mobile phone has helped economic development in emerging economies. With growth in the provision of mobile phones, Vodafone has enabled great improvements in facilitating the flow of money and information, which is vital for economic growth. By improving Kenya’s telecommunications infrastructure and by providing the M-PESA system,

Vodafone has enabled more people to access and transfer money. This has also helped socially by helping people to take advantage of employment opportunities away from their home towns and villages.