Marketing and Distribution Management - Essay Example

Marketing and distribution management Part Value-based pricing refers to pricing method imposed by an organization in consideration to the perceived value that the clients are likely to attach to the product or service and subsequently buy at a certain cost. Cost-based pricing is a pricing method where the total amount charged on the product or service constitutes the aggregate input factor cost used in its production plus a given percentage of its cost added as a profit margin (Cant 55-65). Cost-based pricing is very appropriate where the production is done in larger volumes or in the case of price-based competitive market. This is because it will be easier to determine price floors and ceiling so that adjustments are done within this range depending on the competition trend. The main disadvantage of the pricing policy is that it ignores the public image and the market position of the company. Value-based pricing policy can prove to be very profitable if the company is sure that what they charge is consistent with the value offered to the clients (Mohr, Sanjit, and Stanley 34-45). The disadvantage of this technique is that it can scare off potential customers who are price driven, and it can equally attract more competitors. Microsoft has adopted value-based pricing due to the outstanding performance of its new product Windows 8 on various gadgets including mobile phones, tablets, and other portable electronics. This is the best technique for this company since it has to manage its public image by offering quality products for sustained competitive advantage. Skimming is one of the traditional pricing concepts applied to a new innovative product that has just been launched in the market (Ferrell and Michael 56-61). It is suitable when the clients are price-insensitive and simply driven by value of the product. On the other hand, penetration price is able to attract customers and gain market share and rise steadily after capturing clients. Customers tend to be very responsive to the price. In respect to Microsoft’s new innovation of Windows 8, it is imperative to underline that at its introduction what mattered was its value to the people and, hence, skimming technique application by the company. It is important to note that Microsoft operates in an oligopolistic market structure, and its survival therefore hangs on its ability to employ power-pricing model due to the uncertainty of the long-term price dynamics. Part 2 Vertical marketing system involves mechanisms through which firms that supply a given product or service chain work in co-operation with the goal of all of them maximizing benefit. This system is different from the conventional mode where each firm arranges and undertakes an independent supply chain. This system is effective in cost reduction and management of production. Horizontal marketing system is the merging of firms to the same level so that they can pursue marketing opportunities together (Frain 275-277). A typical example is where a producing firm merges with the producer, thereby maximizing their combined profit potential. The distribution approach that Microsoft has so far embraced is horizontal marketing, where it liaises with some firms and coordinates its production and marketing in collaboration with other firms and through its website. This has improved its public image in terms of efficiency and convenience, which translates to reduced production costs and high quality. This distribution approach makes the firm amass more synergy benefit for itself and promote its product to the potential clients who share common characteristics and are geographically dispersed across the world. The challenge with this system is that there are additional costs incurred for establishing tailor-made products that will fit the diverse cultural structure of different markets. One of the strategies of cutting the cost of production and the entire distribution while maintaining high quality needs to consider the channel of distribution. On-line marketing and transaction is one useful concept that can substantially cut on the cost of distribution while maintaining the public image of the company (Sheehan 33-46). It is imperative to underline the importance of applying the least factor input combination which needs to be technologically supported. Continuous innovation is vital in boosting the quality of the products and reducing the cost of other co-operating input factors. It is also important to outsource some services as this would bring in the concept of comparative advantage in terms of production cost. It is important to acknowledge that most distributors add some value and price to the product, and this is reflected in high charges on the product to the final consumer. This may not go well with some price sensitive consumers who are likely to associate the producer with the exorbitant cost and end up opting for an alternative manufacturer. It is therefore advisable to adopt e-commerce and have a shorter chain from the producer to consumer, mainly for physical transferability of the product. Part 3 Promotion is one of the principal pillars of marketing that determines how a firm is likely to perform in a competitive market. It is equally important to point out that under promotion lie five concepts that will boost the market share of the company (Groucutt, Patrick and Peter 15-18). Advertisement, being a paid-for message to be made public through non-personal mass media like TV, the Internet, newspapers and radios, is very appealing to clients and can significantly increase a firm’s market share. Sales promotion is also a promotional mix that enhances stimulated sales, and it includes organizing competitions, free product tasting and in-store displays. Public relations is a marketing tool that improves the image of the firm, and this influences the value customers will attach to the products of the firm. Personal selling is also appealing since it enhances direct communication between the manufacturer with its clients or agents, which provides the best avenue of getting necessary information useful in strategizing. Direct marketing involves an interactive session with clients and other interested parties in the products, and it yields immediate feedback concerning the product (Kurtz 500). Systematic application of the five promotional mixes stands out to be very vital in boosting the market share of Microsoft for its existing and new products. Sound marketing mix is itself a tool for significant performance by the company in the currently competitive market. The leveraged sales will make Microsoft redesign sales force training, increase extensive technology to its agents or field representatives, and use alternative channels with the aim of offloading low-value sales tasks. If the firm can give clients priority and equip its workforce in addition to managing customer database to drive earning, it is likely to generate more income. Microsoft is headed for production of simple, user-friendly software in Windows 8 that will be installed on various kinds of electronic communication gadgets of all sizes. The new Windows 8 software was introduced to counter the other competitors’ products and set pace in the information communication industry. The firm is strategizing on how to install this program in offices and for indoor use as a tool for competition positioning. Public relation links the product with the image of the firm and, if well conducted, can boost the market share of the firm. Considering the quality of the products that Microsoft has always delivered, the only thing it has to do is to advertise the new product to create awareness among the potential clients about the new arrival. Part 4 The concept of globalization is very important in determining the trend in marketing among various companies. There has been a raging debate as to the difference between the multinational corporations and the global companies. The bottom line in this case is that their marketing strategies are quite different. The common denominator in both of these cases is that each of them constitutes operation outside the geographical boundary of their motherland. Multinational market is a complex system in which the value creation and distribution products is done in different markets across the globe (Miltenburg 166). On the other hand, global market is a strategy in which the operations are dispersed across the world but co-ordinated from an integrated central point. The emerging socio-economic realignment across the world is gradually rendering multinational marketing techniques obsolete as they are overtaken by the competitive global firms. The idea behind these differences arises from the mode of manufacturing and distribution of their products in the culturally diverse global market. The multinational company still believes in homogeneous products and marketing mix, which may not work effectively at the international level owing to the diverse cultural characteristics of people (Vasudeva 13). This means that the incompetency they manifest highly affects their clients who want tailor-made products. In this respect, global firms produce identical products but customize them within the different local markets of different cultures. This tends to be more appealing to customers who want something that easily identifies with their culture, and this explains the mediocre performance of their multinational counterparts (Quelch and Rohit 24). This tendency of multinationals getting out of phase with the global market dynamism justifies their obsolete status and boosts global companies to absolute market power holders. Microsoft is advantaged since it has most of its products including office suites held in high reputation, and the only thing it has to do is to advertise for their new products. However, it is imperative to underscore the competition threat from other firms that also produce all-round products like Mac system from Apple Inc. For this firm to explore greater market share and improve its performance, it should encourage the use of innovative technology, have highly skilled human capital, and further invest in research and development. Works Cited Cant, M C. Marketing Management. Cape Town, South Africa: Juta, 2006, 55-65. Print. Ferrell, O C, and Michael D. Hartline. Marketing Strategy. Australia: South-Western Cengage Learning, 2011, 56-61. Print. Frain, John. Introduction to Marketing. London: International Thomson Business, 1999, 275-277. Print. Groucutt, Jonathan, Patrick Forsyth, and Peter Leadley. Marketing: Essential Principles, New Realities. London [u.a.]: Kogan Page, 2004, 15-18. Print. Kurtz, David L. Contemporary Marketing. Australia: South-Western Cengage Learning, 2011, 500. Print. Miltenburg, John. Manufacturing Strategy: How to Formulate and Implement a Winning Plan. New York: Productivity Press, 2005, 166. Print. Mohr, Jakki J, Sanjit Sengupta, and Stanley F. Slater. Marketing of High-Technology Products and Innovations. Upper Saddle River, NJ: Prentice Hall, 2010, 34-45. Print. Quelch, John A, and Rohit Deshpande. The Global Market: Developing a Strategy to Manage Across Borders. San Francisco: Jossey-Bass, 2004, 24. Internet resource. Sheehan, Brian. Online Marketing. Lausanne: AVA Academia, 2010, 33-46. Print. Vasudeva, P K. International Marketing. New Delhi: Excel Books, 2006, 13. Print. Read More