The Role of Brand Loyalty - Essay Example

Case Analyses BY YOU YOUR SCHOOL INFO HERE HERE Case Chabros There are far too many variables and unpredictable market conditions that prevent utilization of total sawmill capacity. For instance, in 2003, demand rose significantly for the products offered by the organization in the UAE, thus giving the business much more opportunity to exploit the market so long as its many suppliers could provide adequate supply. At the same time, the company’s growth and expansion into many different international markets gave the business the benefit of economies of scale, which translated into the ability to procure higher volume wood to ensure adequate supply. Instead of attempting to over-reach the company’s total capacity, seeking opportunities to maximize its current market position would be the most appropriate. Why is this? Chabros established a competitive pricing model that was aligned with an acceptable operating margin. Coupled with this competitive advantage, Chabros also maintained a quality-focused customer relationship management process that included flexible payment terms and no requests for letters of credit. This was a sustainable strategy until the global economic recession in 2009 which radically reduced sales in certain subsidiaries. As a proven business model of CRM and the ability to establish very competitive pricing in key markets, the business would only require adjustment of its current sales and marketing strategy to achieve the desired improvements in revenues. With the business always being at risk of changing currency values, market demand, and recessionary concerns, improving capacity would add more expenditures to the operating budget that would not, likely, offset gains by simply improving output capacity for its high revenue-producing production facilities. The most appropriate strategy for Chabros is to pursue a market penetration strategy to achieve its desired results. By maximizing capacity, increases in salaries and other associated labor would be highly detrimental to achieving market success. Chabros was considering entering the Moroccan market as a means of expanding its market presence, however there are factors that could seriously impede progress in finding rapid sales success there. Firstly, tariffs are extremely high on both products, especially veneer, which would have to translate into higher pricing in order to offset these new costs. Add to this a value-added tax rate of 14 percent, it is not likely that the same competitive advantages as related to pricing would work in this market when having to incur all of these government-mandated taxes and import tariffs. Furthermore, the Moroccan environment already has established supply contract agreements with major suppliers (monopolistic) which could conflict the process of establishing the proper agreements needed to make headway in relation to procurement. Instead of seeking a capacity maximization strategy, market penetration would allow the business to attempt to redevelop the CRM that gave the business sustainable growth until the recession, which was largely out of the control of Chabros. It was established in the case study that the business had a positive human resources understanding, which, if focused upon as a new type of competitive advantage, could improve both human capital and relationship management with a variety of domestic and international customers. Kalyanaram & Gurumurthy (2008) iterate that first movers in a market maintain somewhat automatic competitive advantages as risk averse customers will often favor the pioneer whilst making unfavorable assessments about late movers. Except for the financial issues stemming from the recession, the business had proven that its existing CRM, pricing and payment flexibilities provided to customers was sustainable. It is recommended that the business pursue a market penetration strategy, as the business could devote more resources toward building cross-cultural competencies that would translate to positive CRM, whilst also taking advantage of its first mover reputation and attempting to exploit these competencies. Case #2: Silvio Napoli There are clearly internal management problems in the Indian division, as the business called for non-customizable elevator products in order to keep costs low. The management team, however, defied this necessity by ordering materials that did not reflect cost awareness (e.g the glass fixtures). Furthermore, tariff prices were drastic and therefore it required a localized procurement strategy to avoid these costs, therefore transferring ownership of the operational portion of the business model to India. This market in relation to supply, however, was not forthcoming in areas of support and design which complicated the ability to provide rapid procurement of needed component products. The Indian market was also saturated with competition, one of which maintained a very strong brand reputation (Otis) that had been built many years prior. Chaudhuri & Holbrook (2001) iterate that when a business is able to establish this type of brand loyalty, the organization has many new opportunities for establishing premium pricing and such loyalty also provides excellent word-of-mouth advertising that is not easily replicable by competitors. Therefore, Otis now held 50 percent of market share and the name was easily recalled and respected by those who procured elevators from this strong brand. Being able to establish a marketing-based brand reputation that exceeded the market share held by Otis would require significant investment to gain the long-run loyalty that translates into better competitive positioning. Among the sales team, the root of the problem was that management was taking the liberty of making operational changes to Napoli’s carefully structured business plan that included procurement of equipment that was not cost effective. Without his authorization, the sales team went ahead and approved customized products on buyer contracts which posed considerable operational problems in relation to support, installation and maintenance. The management team did not take into consideration that the government would be imposing significant fees for importation, however the local environment was not currently developed or suitable for sustaining necessary component parts. Thus, the sales team was negating the business plan for achieving low break-even in an attempt to differentiate products rather than focusing on differentiating the business through service competencies. It should be recognized that the problems are related to both strategy and leadership in this new culture. Competition was installing high-end, customizable elevators with extremely long product life cycles so long as maintenance and support could be provided. This limited market growth opportunities as elevators represented, to the customer market, a one-time purchase with little need for additional products for decades. Now even though India represented very price-sensitive markets, the competency of service quality and financial terms also played a factor in the purchasing decision-making process for important revenue-building customers. This is where strategy and culture combine to cause problems, as the current sales team was not paying attention to these factors and attempting to build a positive brand reputation by differentiating service dimensions and attempting to build long-lasting relationships with important customer segments by appealing to their cultural dimensions in the sales model. The case study did not indicate that the business was taking steps to enhance its sales strategies to include emphasis on customer service, which was rated the number one influence of what drives purchasing decision-making. It is recommended that more emphasis be placed on incorporating culturally-relevant models of service quality and delivery for the Indian market, as the business would likely have more opportunity to successfully compete with major competitors such as Otis. The managers were not taking into consideration that features were one of the lowest influencers of buying decision-making, therefore procurement of customized products was deficient. Case #3: Unilever’s Butter Beater It was absolutely not feasible to believe that a standardized, homogenous integrated marketing campaign would work effectively in all European markets. The case study illustrated that Germans, as one example, maintained rather favorable attitudes as it relates to butter and saturated fat intake, therefore it is not surprising that with effective advertising customized for this particular market would meet with expected sales results. In Britain, as another relevant example, the alternative spread product was not as successful which had much to do with changing eating habits (healthy eating) that are socially driven and much out of the control of Unilever. If Unilever had been able to create a variety of customized advertising and promotional campaigns that appealed to the social characteristics of each market (local adaptation), the spread would have found more favorable market success Europe-wide. Unilever’s organizational structure was not the main problem. In 1995, Unilever established Innovation Centers that were responsible for development and determining the commercialization opportunities for many Unilever products in multiple domestic and foreign markets. The business was proactive in establishing the appropriate business divisions and structure necessary to achieve new market gains through research and development and conduct market research necessary to make viable and relevant products for key segments. It was not the change from localization to an international strategy that was the problem, as this was appropriate for diversifying brand and product to effectively meet market demand. It was unsuccessful promotional strategy that did not maintain a cultural connotation or lifestyle connotation in the integrated marketing campaigns established that caused the problems with lack of market successes. Definitely there should have been more attention paid to integrating lead-country development with other countries where the spread was introduced. Even though cultural characteristics and social beliefs about the integrity of fatty food products differed in each region, there was evidence that in most markets, apart from Germany, there was a growing homogenous attitude associated with the benefits of healthier eating. Unilever attempted to establish milestones before the product had even been test marketed and advertised in the countries where it was seeking market entry, which was unrealistic considering the diversity of opinion about fatty products already understood through marketing research and the utilization of focus groups. Unilever believed, based on hard data achieved through testing efforts, that so long as effective promotion was utilized, the alternative spread would be able to find market sustainability. It is therefore recommended that the business be more focused on learning the specific socio-cultural characteristics of each new market that looked desirable for entry of this product, as it could have established more realistic milestones and devoted an appropriate amount of capital investment in the proper areas of advertising and costs of market research. There is little compelling rationale for globalizing product development. This case study illustrated that cultural characteristics within a new market, whether international or localized, have the ability to dictate whether a product will meet with sustainable demand. Hofstede (2001) illustrates that the UK, as one example, is a very individualistic country with very little collectivist attitudes. This poses risk in attempting to predict whether UK consumers will maintain homogenous attitudes about healthy eating and the perceived risks of consuming saturated fats or whether market demand would be sporadic in key regions where the product will be distributed. The influence of local market culture conflicts the process of establishing a global brand name since each culture will assess and evaluate the product, its benefits and associated advertising with a very different lens. Borrowing cash or using derivatives, such as hedge funds, are the only real leverage in this type of product development which still would not have offset the impact of local cultural values on the ability of a product to gain revenues. Case #4: Citibank The business level strategy at Citibank was to seek market penetration, thereby expanding its product line and brand reputation in China. It helped to combine resources between Citi and its many allied partners in areas of finance and technology so that the organization would be considered viable to consumers and would also produce synergies associated with operational aspects of doing business in China. Citi was also attempting to introduce new expansion for its current product line to avoid the Citi name from reaching the decline stage of the product and service life cycles, which served as the rationale for the alliance between Citi and Sino-US Met Life. Citi could now, in this example, sell insurance to its high resource customers that were customizable in order to build better relationship management with these important customers. Strategic alliances were methods of ensuring that the business could build the necessary brand loyalty needed to secure long-run demand for Citi products and avoid the costs of introducing new operational and labor requirements that would impede profitability in important markets. The strategic alliance with CUP, as another relevant example, was a method of capitalizing on the strength of the CUP name as many Chinese consumers already trusted and utilized this bankcard association. By introducing opportunities for Chinese consumers to experience Citibank’s service excellence and also utilize pre-existing debit card usage for large markets, Citi was able to lure new markets to try the many different products being offered in Citi’s long product line. Dooley (2005) offers that when a product or service has reached its decline stage, cash management and the timing of product abandonment become critical concerns. Citi sought these alliances to instill growth back into the product and service life cycles by utilizing allied partner resources so that the business would not have to develop its own, expensive product and service innovations. The only quality recommendation, as currently aligned with strategy, is considering budget and profit expectations to use the technologies and support from allied partners to refresh the longevity and sustainability of existing products by introducing alliance-generated products to supplement the business. The co-operative strategies consisted of equity strategic alliances and non-equity strategic alliances. Equity alliances are those in which ownership shares become part of the alliance such as those with SPDB and the Guangdong Development Bank. Non-equity alliances were those under contract rather than shares ownership agreements, such as those with Sino-US Met Life and CUP. Risks associated included ensuring intellectual property was protected and did not cause disputes during the alliance as well as the ability and competency of managers in the allied partner to ensure quality service and product delivery. Returns in managing these risks paid off, providing Citi with much higher return on the investment illustrated by more deposit growth in the bank and the receipt of a variety of respected awards. These awards publicize the competency and investment prowess of Citi and also give much better clout to the establishment of a trusted and respected brand reputation. Innovation was also an outcome of successfully managing risk, by giving Citi a name as a pioneer in providing the first insurance policies in an investment environment. Synergies from these alliances are also reflected in the financial stability achieved, with Citi boasting a 99 percent increase in available operating resources that can, currently and in the future, be translated into new product and service innovations or market expansion in other developing countries favorable for entry. A higher net income as a result of these alliances also illustrate to investors that Citi has long-term investment sustainability which also leads to capital growth. Case #5: Air Asia There were many different dimensions of service and the product mix that gave the business sustainability even in the face of rising operational costs and intensive competition in key markets. As one example, Air Asia allowed its on-board staff to present a more relaxed image by not establishing specific protocols for dress and appearance, thus giving this business more brand credibility for markets that appreciate its personalized service touch. Much of this is attributable to marketing positioning strategy, whereby quality superseded the tangible value of low-cost fares that give the business more consumer loyalty. The Chief Executive of Air Asia also benchmarked successes of Richard Branson whose celebrity endorsements continue to give the Virgin Group much more positive brand reputation. By being more visible along the business model, the Chief Executive was able to attract the same type of free publicity that Branson experienced, which adds value to the Air Asia name. What this translates to is the development of loyalty for this airline in a variety of customer markets. More travelers translates into higher profitability that can offset the rising costs along the operations supply chain such as oil and fuel. Air Asia was also able to develop a unified and cohesive organizational culture that maintained a strong focus on human resources to give the business a competitive edge. By establishing an organizational climate with an ethics-based focus, the business was able to achieve cost reductions from competent and dedicated pilots who found efficiency that reduced the volume of fuel utilized during flights. Coupled with a successful investment hedging strategy, the business experienced lower-cost fuel prices that contribute to higher profitability. Moreover, Air Asia’s development of hub networks in key markets gave them more flexibility to service more markets and seek market penetration strategies to expand in such regions as Malaysia. Hub networking provided opportunities to engage in establishment of important strategic alliances that assisted in providing better quality and convenience in the online booking process. The efficiencies achieved through strategic alliances allowed customers to experience new innovations in the booking and check-in processes, thereby supporting the quality-based positioning in marketing that contributed to Air Asia’s sustainability even in the face of rising costs along the fuel and oil procurement network. Air Asia also used to invest considerable resources into training, especially as it pertained to maintenance of existing fleet airliners. By changing procurement to include only a single type of aircraft, the training process became less stringent and expensive as it was now easier to facilitate a maintenance model without reliance on costly support from multiple airplane manufacturers (Aruan, 2005). Being able to reduce operational costs in a variety of areas, not just maintenance, gave Air Asia the ability to continue to offer low fares without having to try to offset certain costs by passing additional ticket pricing to consumers that would have, long-term, jeopardized the quality reputation that Air Asia had established for itself. In so many ways, it is the brand strength and consumer attitudes toward Air Asia created by tangible service competency and advertising that have given the business more demand and, thus, higher revenues to offset rising procurement costs. Therefore, it is recommended to continue brand-building as a strategic advantage. Air Asia’s interests in Air Asia X, as one example, also gave the business new flexibility in capturing new market attention whilst also capitalizing on the existing brand name that had build loyalty since the 1990s. At the same time, some competitors that dominated certain routes had to abandon them in order to compensate for rising fuel prices, which provided opportunities for Air Asia and its subsidiaries to capitalize on these routes to gain more market interest. References Aruan, S.H. (2005). Might of Air Asia: Internal Analysis Perspective, University of Melbourne. Retrieved January 18, 2013 from http://sandygarink.tripod.com/papers/AA_IA.pdf Chaudhuri, A. & Holbrook, M. (2001). The chain of effects from brand trust and brand effect to brand performance: The role of brand loyalty, Journal of Marketing, 65(2), pp.81-93. Dooley, F. (2005). Logistics, Inventory Control and Supply Chain Management, Choices, 20(4). Hofstede, G. (2001). Culture’s Consequences: Comparing Values, Behaviours, Institutions and Organisations across Nations, 2nd ed. Thousand Oaks: Sage. Kalyanaram, G. and Gurumurthy, R. (2008). Market Entry Strategies: Pioneers versus late arrivals, Wright University. Retrieved January 19, 2013 from http://www.wright.edu/~tdung/entry.pdf Read More