Marketing Planning and Implementation
Marketing Planning is the process of grouping a market into smaller subgroups. This is not something that is arbitrarily imposed on society: it is derived from the recognition that the total market is often made up of sub markets that are subsequently called segments. These segments are homogeneous within i.e. people in the segment are similar to each other in their attitudes about certain variables. Because of this intra-group similarity, they are likely to respond somewhat similarly to a given marketing strategy. That is, they are likely to have similar feelings about a marketing mix comprised of a given product, sold at a given price, distributed in a certain way, and promoted in a certain way. Through the process of market segmentation, there are certain variables to identify customer groups, such as needs, income geographical, location, buying habits and other characteristics as well, we can focus on the parts of the market that it can serve best and make great profit. (Hassan, 2001)
Importance of Marketing Planning
Market segmentation is vital due to the fact that resources are limited. Therefore, all business will minimize their resources and maximize their profit to gain their benefit. The step is carried out in order not to waste any times and money on promoting their production in the wrong direction. Market segmentation is needed to spot their product’s market opportunities, gain competitive advantage and target marketing activity on promotion. In accordance with the decision framework, case organizations indicated that within-country consumer analysis is critical to the success of segmentation decisions. When selecting a target segment in a nondomestic market, one respondent described the process as seeking commonalties of “lifestyle and psychographic characteristics” to existing customers. (McDonald, 204) These commonalties are the links that allow for a unified global strategy. In the words of one respondent, “if you don’t find commonality among consumers, then you have to reinvent the wheel in each country–which we don’t want to do–the more links you find among consumers in different countries the more possibility for error you eliminate.” (Hassan, 2003)
There is a market where multinational corporations (MNCs) have transferred expertise to other, less industrialized, countries. These provide sources of cheap labour for manual skills as in Indonesia and Thailand, intellectual skills such as the computer software industry in India, and production expertise as in the example of the Republic of Korea. Bangalore, indeed, the centre of the Indian high-tech business, is becoming a fully-fledged research and development centre to rival Silicon Valley in the US. In an economy where competitiveness is global, companies have to take advantage of resources available in organizations in other countries to retain competitive advantage whether in innovation, cost, quality or speed of production and delivery.
Globalization is driven by market, cost, government, competition and other factors as well as by the motives of managers. Given the global strategic perspective, the corollary that it should be accompanied by a universal standardization is difficult to sustain as such a stance is product oriented and in defiance of the marketing concept. It is also apparent that different nationalities buy similar products for different reasons and different versions of a product for reasons of values, custom and preference as well as price. There are various models to assist in the decision about the extent of standardization and adaptation. In particular, differentiation and integration pressures are identified as critical to deciding whether a multi-domestic or global strategy should be pursued. They add a third dimension in ‘global strategic co-ordination’ which implies that a firm centralizes certain strategic resources while adapting where there is a need to do so. Such thinking has given rise to the saying ‘Think global, act local’.
Within the global economy a number of trends can be observed which are not obvious if the markets are individually considered. Countries can no longer be self-contained even if they have the resources to exist as such. Countries specialize sometimes in different products but often in particular varieties of a product rather than the full range, usually because the greater the scale of activity, the lower the costs become and the more price competitive a company is likely to be. Some products are more susceptible to this process than others. Over the last twenty years or so average costs in research-intensive industries such as the microchip industry have tended to fall quickly. The electronics industry, like pharmaceuticals and agro-chemicals, is typified by high rates of product innovation shortening the product life cycle. Producers need to generate a high level of sales relatively quickly to recover their fixed research and development costs.
Douglas and Craig (2001) developed a model using marketing research to prioritize international marketing options. Goodnow (2005) extended it to cover the setting of marketing objectives such as return-on-investment or market share targets which could be used alongside marketing research to select international market strategies and methods of entry. Harrell and Kiefer (2002) also used marketing research to determine a country matrix to ascertain the most favourable countries for international operations. Estimations of the attractiveness and competitive strength of each country enabled favoured multinational strategic market portfolios to be decided. Harrell and Kiefer applied their model to evaluate the favoured global markets for Ford tractors. (Harrell and Kiefer, 2002)
Szymaski et al. (2003) also emphasized the role of the globalization triggers or ‘drivers’, strategy levers and business performance that influence the firm’s control over its international strategy. Samiee (2004) extended the Douglas and Craig model to provide a conceptual framework for assessing the influence of the country of origin on customer evaluation of products in a global market. This assesses how international growth proceeds along a geographical continuum from regional to national coverage, from country to country towards global coverage. However, traditionally few firms reach full globalization; they usually remain with more limited international cross-border coverage. Those exceptional firms that do expand globally have become the MNCs of today with brands such as Coca-Cola, IBM, McDonald’s and Microsoft that have become household names throughout the world.
Other approaches to international marketing model development have included the need to adapt the marketing mix to reflect the features of the export market as well as the characteristics of the company, product and industry of the expanding firm (Cavusgil et al., 2003). Cavusgil et al. concentrated on the product and promotion components of the marketing mix, comparing those used in the home and host countries. Similarly, Jeannet (2002) developed the work of Bartels (2002) using the marketing mix as a function of the existing environment. Chan and Hwang (2001) evolved a model to identify the influences on global strategy and entry method choices of MNCs, emphasizing the role of global concentration, synergies and strategic motivations on environmental and transaction-specific variables. In this way, models have become more complex, attempting to take into account a range of issues that affect the influences on international marketing.
Strategic Options For International Expansion
International expansion has also been considered in terms of strategic development with strategic approaches for the domestic market being extended to have international, and global, coverage. Various methods have been used to determine favoured strategies for development using product/market matrices. Ansoff (2000) considered that the strategic options available to firms depend on the relationship between their existing or new product portfolio in their established or new markets. Within the existing framework, firms in their established markets can use penetration or product development strategies related to those currently being undertaken. The firm with existing products in existing markets has the options of withdrawal, consolidation or market penetration. If considering a new market, the firm can follow market development and diversification strategies involving related or unrelated diversification (Johnson and Scholes, 2002).
Entry into new markets with an existing product portfolio requires measures to ensure market development such as increased expenditure on promotion or investment in channels of distribution. New products for markets in which the firm is already established might require product development strategies, while new products in new markets might require a combination of related and unrelated diversification strategies. Related diversification can be effected through vertical and/or horizontal integration within the supply chain. Unrelated diversification could occur where firms decide to diversify into markets and products outside their present range of activities. However, unrelated diversification is a high-risk strategy dependent for its success on a firm’s resources in terms of finance and skills. Strategies with lower risk are those which extend the core business, namely those involving related developments in Ansoff’s terms. Related diversification is more likely to be appropriate than unrelated diversification, but the choice will depend on the market conditions at the time. (Ansoff’, 2000)
With Ansoff’s approach, firms are likely to favour expansion strategies using related developments rather than to follow higher risk diversification strategies. Firms prefer to apply their established expertise within new markets, rather than diversify into new activities within new markets. However, as the market becomes more competitive, with profit margins under pressure, some market leaders may diversify their interests along the value chain, despite the higher associated risk. Firms prefer to use strategies that develop their existing products and services, that is, penetration and/or market development strategies. (Ansoff, 2000) Within existing markets, market penetration is usually favoured in place of withdrawal from the market or consolidation of operations, as it will pose least risk, e.g. the firm may look for more customers within an existing market. Nevertheless, as price competition increases together with the associated reduced profit margins, the market penetration option may become less attractive. Then the firm may be obliged to consider new product development or other diversification strategies.
As innovation advances, markets fragment and emphasize that customers as individuals and organizations are not part of a homogeneous market but have their own unique problems to resolve. Using this as his point of departure, Pine (2003) has developed the concept of mass customization. This apparently contradictory term is given to what is claimed as a new frontier in business competition. It is made possible by the ability of microprocessors to embed intelligence in a wide range of products which, when allied to the plummeting costs of computer memory, facilitates the expansion of the service element in the product-service mix. The introduction of automation has been difficult for a number of reasons including the flexible nature of the materials used and the enormous range of styles and sizes required. Add to this the limited life of fashions and the large number of permutations involved in meeting needs in a heterogeneous and fast-changing market, survival in the shoe production industry is challenging. Mechatronics is the discipline which brings the power of the computer to assist in adapting the process of production to achieve the production variety needed at minimum cost to satisfy demand. Its adoption is assisted by the dramatic fall in the cost of computer memory enabling the profitable use of the computer in the manufacturing process.
International Marketing Planning : Geographical Segmentation
For those organizations unable, for reasons of product inflexibility, or unwilling to embrace mass customization, there are other alternatives. They can enter niche markets, or segment their market, to serve their customers by adapting, as circumstances require. By identifying market clusters across the world, companies can reduce the number of product variations, and the number of marketing mixes, to make the necessary penetration using, in essence, a market portfolio approach. (Aaker, 2004)
In order to obtain the benefits of mass production, a company can target a market segment across national borders, which creates cost savings while responding to the specific market needs. For example, the German brewer König has found a niche across countries in the supply of cask beer which keeps cool for days after chilling and which is aimed at the market for outside events where it is difficult to keep beer cool. Radio Finland identified a narrow market segment in its ‘News in Latin’ programme, aimed at people who had studied Latin and have a continuing interest in the application of the language to current situations, requiring creativity and imagination both in translating into and from the language. Examples include situations such as the use of essedarium caelarum meaning an aeroplane or ‘chariot of the skies’. (Cateora, 2003)
Organizations would prefer to have a standard product aimed at the segment being targeted because of cost, which encourages them to look for markets where there is no need for product modification. This entails basing the design on a benchmark market, which usually is the home market if that market is large enough to justify this step. If the home market is small, then a larger market may be selected. As long as the US remains the major country enabling international economic growth, then that market would be a reasonable one on which to build a product and move out into US-type markets. The US market for 60Hz electricity supply motors is the largest. Consequently, the majority of countries in the America’s copy that frequency. On the other hand, most of Europe is on a 50Hz electricity supply. Local regulations in countries like Canada differ in substance from US regulations, e.g. in relation to insulation. (Honomichl, 2002)
Glabalisation and Marketing Planning
While one option is to introduce a brand to foreign markets by proceeding cautiously from market to market, this alerts competitors as to what a company is seeking to do. There are two main alternatives to this. The company can launch the brand simultaneously in a number of countries. Local adaptations of product or advertising may be incorporated, as the product is fine-tuned to the emerging needs of the market. Acquired local brands can be unified. The Nestlé take-over of Rowntree (UK), Buitoni (Italy) and Perrier (France) relates to the need to acquire strong brands. A step towards unification of these brands is the inclusion of the Nestlé logo in light typescript under all of these acquired brands.
Kapferer (2004) illustrates the growing importance of brands with the example of Essilor, a leading international manufacturer of spectacle lenses, which is being challenged by companies like Nikon and Seiko. These latter companies have entered the market on the back of Nikon’s reputation in optics and Seiko’s in watch making. All of a sudden, brand awareness is a key factor in the consumer buying decision in this market. The company as a brand has been around for decades. It has been expanded to include industrial firms, banks, insurance companies, service industries and retailers selling their own brands. Axa, the French-based insurance giant with acquisitions in Europe and beyond, is using its own name to advertise the products of the acquired companies, as is evidenced by their television advertising messages and international sporting events. Both Nestlé and Axa intend that over time their brands will convey qualities and differences. It is not the registered trademark as such which creates value.
Sometimes, products are embedded in a particular culture and it is impossible to give an international identity to them. Kapferer (2004), an international authority on brands, showed that food brands are more likely to be standardized in Germany and the UK than in France and Italy, this difference being attributed to the greater importance given to eating in the Latin culture than in the British and German ones. Kapferer’s interesting Europe-wide survey was conducted to determine whether the concept of a European brand was a reality, or about to become one. Isolating four types of European manager and their sensitivity to differences between countries, he found wide variations in the ways they centralized or localized aspects of the marketing mix. These include the degree of control exercised by head offices over their affiliates, the kinds of competitive practices adopted, power-related factors and the advocacy of international and local advertising agencies, all of which may influence policy in relation to the Europeanization of the brand.
The franchising approach appeals to the individual aspiring to his/her own business or the small company. It provides expertise that would not otherwise be available. In the EU, recognition of franchising as one of the fastest ways of growing a business has been given legal backing to improve competition. It has been excluded from the strictures of Article 85 (1) of the Treaty of Rome and the general prohibition on restrictive agreements likely to distort free competition. The scope of the ruling does not extend to industrial franchising where a manufacturing process or technology, such as the manufacture of up-and-over garage doors, is involved. This area is covered by separate regulations that provide exemption from competition restrictions on know-how licensing agreements and by an existing rule giving clearance for patent licences.
Overall, Marketing Planning offers several benefits to a business. The company can market more efficiently, targeting its products or services, channels and communications program toward only consumers that it can serve well. Many people may think that market segmentation is only good for firms, since the firms will be benefit in terms of a better competitive position for its products, resulting in greater sales and profitability. On the other hand, customer will also have benefit from it. This is because a customer will get a greater satisfaction from the goods and services that they purchased. This is a particularly important point as the whole rationale of the marketing concept is increased business effectiveness through the provision of consumer satisfaction.
Target marketing clearly requires market segmentation. Thus Market segmentation involves the analysis of the purchases in the market, in particular the buying behavior, need patterns, socio-economic status or age. It is a consumer-oriented philosophy. The main objective here is to divide the market into sector/segments in each of which the customers are of similar nature and are influenced by similar buying motives. For example, the shoe market can be divided into several segments based on the age and sex of the purchaser and the function of the shoe purchased. Such analysis permits the production of multiple similar products with an appeal to a different population group. Initial entry might require establishing appropriate channels of distribution, such as agents and distributors, to support export activity. Local market expansion might need marketing to focus on promoting a particular message using ‘above the line’ media such as television and the press as well as ‘below the line’ sponsorship and public relations. Global rationalization could be undertaken by concentrating on cost cutting throughout the operations to achieve more competitive prices.
Whatever the level of international expansion, an international marketing plan has to be prepared. The marketing plan is a document that details the methods and tactics for attaining the strategic goals of the organization. It shows the actions needed to achieve the strategic objectives. Strategic plans usually have long-term vision, providing direction for the organization for upwards of two, three, four or five years ahead. Marketing plans most commonly run on a one-year time scale with provisional guidelines for the subsequent years two and three. Usually marketing plans are prepared on an annual cycle that fits the firm’s financial accounting year.
The plan should also consider the internal and external opportunities and threats facing the firm. Opportunities may relate to issues ranging from new product developments and new markets to mergers and acquisitions. Threats can include an assessment of the firm’s vulnerability to over-extending resources through too extensive geographical coverage, dependence on importing agents, lack of transferability of products and service to new markets, etc. The marketing plan identifies areas where the firm has strengths and weaknesses, and seeks to show where opportunities for expansion occur as well as any threats that may be encountered by these tactics. Awareness of these issues provides a framework for management to implement an action plan to optimize the opportunities and minimize the associated risks.
In the situation of the large firm, usually management operating within each country, or territory, prepares its own marketing plan. The plans have to fit the corporate strategic plan and have to be agreed with central, head office management. Considerable negotiation between all parties concerned may be required before the plans are accepted. The mission, the strategic goals and objectives, will be common for all concerned, but the method of implementing the goals may differ. Since most of the developed world and many parts of the less developed economies have access to the Internet, there is the potential for global coverage at the early stages of international expansion. The major constraint, apart from access to the Internet, is the limitation of logistics support for the product or service to reach the consumer, as is evident at peak demand periods such as Christmas when demand cannot always be met within the time constraints. In this way, increasingly, international marketing planning incorporates extensive use of the Internet as a communication channel alongside conventional international expansion approaches. Indeed, some firms concentrate entirely on using the Internet, almost to the exclusion of the conventional marketing mix. Firms such as Amazon.com and easyJet.com develop their marketing mix in terms of the product/service, promotion and pricing tactics in response to customer demand as evident through their use of websites within the Internet channel. In this way, the market planning process is increasingly used to consider cross-border international expansion on a shorter and more extensive scale than had previously been practicable.
International marketing plans form part of the strategic planning activity, usually undertaken on an annual cycle. The plan is a guideline that is agreed by all parties concerned, i.e. the strategic corporate planners at central head office and the operational managers within the organizational divisions. Theoretically, the plan can be revised, or modified, in agreement with all concerned, but such changes have to be justified. The annual plan provides goals, budgets and outline methods whereby these should be achieved, with those for the first few months usually being more detailed than for the later period. Indeed, it is often expected that as the planning year progresses new evidence will become available (such as sales performance) that favours modification of the original plan. Some flexibility is required to encompass the latest market information. However, the fundamental strategic approach as projected within the plan should remain. The strategic direction of international operations is usually maintained, although the details of the methods used to implement the strategy may be modified to suit local conditions.
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