Identification of Alternative Plans in Strategic Marketing Management - Assignment Example

Table of Contents 0INTRODUCTION 3 2.0 CORPORATE OBJECTIVES 4 4 3.0 MARKET OVERVIEW 5 3 Products 5 3.2 Target Markets 6 3.3 Size 6 3.4 Trends 6 4. 0 MARKETING AUDIT 7 4.1 External Analysis 7 4.1.1 PEST 7 4.1.2 Porter’s Five Forces Analysis 8 4.2 Internal Analysis 9 4.2.1 SWOT 9 5.0 ASSUMPTIONS 10 6.0 MARKETING OBJECTIVES AND STRATEGIES 11 6.1 Corporate Growth Strategies 12 6.2 Marketing Objectives 12 6.3 New Product Development 13 7.0 IDENTIFICATION OF ALTERNATIVE PLANS 13 7.1 Adopt New Marketing Mix 14 7.1.1 Product 14 7.1.2 Price 14 7.1.3 Place 15 7.1.4 Promotion 15 7.2 Alter Elements of Marketing Mix 15 8.0 PROMOTIONAL PROGRAMME 16 8.1 Sales and Promotion Team 16 8.2 Advertising 16 8.3 Product Trials 16 8.4 Outdoor Advertising 16 8.5 Word-of-Mouth 17 9.0 MEASUREMENT, REVIEW AND CONTROL 18 BIBLIOGRAPHY 19 1.0 INTRODUCTION Technological developments have changed the lifestyles of people and things are getting digitalised more rapidly than before. In consideration to the importance of technology in our daily lives, the industry, I have selected for Marketing Research and Planning is ‘Education IT products’. The company that has been selected is Lenovo. Lenovo is a manufacturer of PCs, laptops, desktops and other computer accessories. The history of Lenovo dates back to 1980s (Lenovo Website). Lenovo is operating in UK as well and it is considered as one of the top manufacturers of notebooks in the UK market (Schofield, 2010). The annual report 2009/2010 of Lenovo has revealed that shares of company in the mature markets including UK have declined as compared to its shares in China. Therefore, in this report strategic management analysis of Lenovo has been done and a new product plan has been proposed based on chosen future growth strategy. 2.0 CORPORATE OBJECTIVES The mission statement of Lenovo has been given below: “Lenovo strives to be a new world company that makes award-winning PCs for our customers. We operate as a company uninhibited by walls or organizational structures using world-sourcing to harness the power of innovation across our global team. We design innovative and exciting products and services to meet our customers’ needs.”(Lenovo Website) As mentioned in the annual report 2009 of Lenovo, the future corporate objectives of Lenovo are given below (Lenovo Website, 2010): Focus on maintaining its growth momentum in its core PC business whereas, exploring new opportunities. Reducing costs and increasing operational efficiency is another corporate objective and to achieve this objective, company has announced a global resource restructuring plan. To expand leadership position in China and to improve profitability in China To return to profitability and maintain and grow shares in the mature markets like UK, US etc To ensure faster end-to-end management in the mature and emerging markets To simplify the business model for global commercial accounts To explore new opportunities in mobile interest by coming up new products and through Lenovo Mobile unit 3.0 MARKET OVERVIEW 3.1 Products The current products of Lenovo have been classified into three categories including Professional Grade products, Lifestyle products and Accessories. Professional Grade Lifestyle Accessories ThinkPad Laptops IdeaPad Laptops Monitors ThinkCentre Desktops IdeaCentre Desktops Batteries & Power ThinkStation Workstations Essential Laptop/Desktop Storage ThinkServer Systems All Accessories Source: Lenovo Website The following figure shows sales of Lenovo’s products in 2009 and 2010. Figure shows that notebook computers contribute to the major chunk of the sales with 58 percent and 63 percent in 2009 and 2010 respectively. Figure 1: Sales Analysis by Product, 2009 Source: Lenovo Annual Report 2009/2010 3.2 Target Markets The company has categorised its markets into three groups including China, Mature Markets and Emerging Markets. The Executive Headquarter of Lenovo is in Morrisville, USA whereas, the Principal Operations are in Morrisville (targeting mature markets), Beijing (targeting China) and Singapore (targeting emerging markets). Moreover, company has established its manufacturing centres in China, India and Mexico (Lenovo Website). 3.3 Size China is the largest market of Lenovo and from 2009 to 2010; the sales of company have increased from 42 percent to 48 percent in China. On the other hand, sales have declined from 42 percent to 37 percent in mature markets however; still they represent a significant size of total sales. Figure II: Sales Analysis by Market Source: Lenovo Annual Report 2009/2010 3.4 Trends Based on sales trends, it has been identified that demand of notebook computers has enhanced whereas, the demand of desktop computers has declined. Second, Lenovo is expanding in Chinese market whereas, its share as a percent of total sales is declining in mature markets. 4. 0 MARKETING AUDIT 4.1 External Analysis 4.1.1 PEST Political UK government is showing great concerns towards green IT solutions, therefore, a window of opportunities is expected to open in green technology industry (Curtis, 2010). Government influences the operations of technology enterprises for example, to promote green practices, UK government has announced to cut UK budget in IT industry (Curtis, 2010). As a result companies dealing in the industry may face a long period of uncertainty (King, 2010). UK government supports the expansion of computer and internet use throughout the UK. British Government has launched Race Online 2012 program which aims to offer refurbished Linux-based PC only for 98 Pounds to UK citizens who do not have access to internet (Brown, 2011). Economic Current economic policy of UK has cut spending in IT and Technology industry as a part of Britain’s Deficit Reduction Plan and it is expected to create savings of £81 billion over four years (British Embassy Washington). UK is a leading market for consumer electronics and has a share of around 22% in European market in 2009 with retail sales reached to £10 billion (UK Trade and Investment, 2010). According to a survey of 400 companies conducted by General Electronic, High-Tech Manufacturing companies have prospective to improve British economy in the next few years (Marsh, 2011). Figure (Marsh, 2011) shows that in sample of 400 companies the percentage of participants increase who believe that general economic situation, conditions for UK High-tech manufacturing and performance of overall business will improve in 2011 (UK Trade and Investment, 2010). Figure: Opinions about UK Current and Future Situation Source: Marsh, 2011 Social Household wealth and consumer spending have increased and modern technology has become a primary characteristic of everyday life for example, in 2007, 78% of the households in UK had mobile phones and 61% used internet connections (National Statistics, 2009). Technological More investments in research and development are being promoted by UK government and Technology Strategy Board (TSB) has also presented a three year budget of £3 billion for 2009-2011. Moreover, Government’s R&D Tax Credit Scheme is further support technological companies. 4.1.2 Porter’s Five Forces Analysis Bargaining Power of Buyers Bargaining power of suppliers is low because of the presence of few big giants in this industry. Second, technological products usually represent a large expense for consumers and the products are unique in nature. Bargaining Power of Suppliers Bargaining power of suppliers is high because of a small number of suppliers and high cost to switch suppliers. Threat of Substitutes Threat of substitute is low to moderate because the products are unique in nature. However, since the customers have high switching cost therefore, substitution is not much possible. Moreover, customers’ loyalty is significant strong in this industry. Threat of New Entrants Threat of new entrant in this industry is small because the processes are well protected by regulations or patents, customers have significant brand loyalty, start-up cost is high and products are unique. Rivalry among Competitors Rivalry among competitors is high because only a few firms become market leaders by achieving customers’ loyalty. Moreover, because of the short lifecycle of technological products, need to sell them as quickly as possible and high probability of imitation are some other factors contributing to high rivalry. 4.2 Internal Analysis 4.2.1 SWOT Strengths Weaknesses Financial stability Strong image both in domestic and international market Leadership in innovation More revenues coming from notebooks which are in-demand as compared to desktop PCs International expansion and presence One of the best notebook manufacturers in UK Market leadership in China Low cost advantage because of manufacturing units in China, India and Mexico Shrinking revenues in mature markets Opportunities Threats Growing opportunities in green technology manufacturing Government strategy to expand internet users and PC users in UK therefore, government is expected to support new developments in educational IT industry as well Growing demand of consumer electronic products and increase government spending on technological products in UK market High-tech manufacturing is expected to flourish more in coming years and for economic and social interests, such companies may face friendly policies Merging with government to get sponsorship for new products development in educational IT-based products Cut in government spending for IT industry in new budget and economic policy to encourage only green technology Increasing competition and substitute products 5.0 ASSUMPTIONS First: Based on the high interest of UK government to promote PC and internet users, it has been assumed that government can be very supportive in the development of IT-based products especially in the educational sector and green manufacturing. It can positively impact Lenovo and other companies in the industry. Second: Based on the growing consumer demand for IT-based products, it has been assumed that Lenovo can face significant demand for its products if company target educational IT-based products. Third: Based on increasing focus of the government on green technology manufacturing and cutting spending for IT industry, it has been assumed that if technology-based companies in the UK do not incorporate green technology into their new product developments, they may face significant problems in future. Fourth: Based on changing demand patterns of consumers as evident from increasing demand of notebooks as compared to desktops, it has been assumed that companies which will pursue desktops as their core business may face significant demand shocks in future. Fifth: Based on changing demand patterns of consumers, it has been also assumed that consumer like convenient and portable technological products. 6.0 MARKETING OBJECTIVES AND STRATEGIES 6.1 Corporate Growth Strategies Following table represents the alternative future growth strategies which Lenovo can pursue. In consideration to corporate objectives, as company aims to achieve innovation leadership and meet needs of consumers, product development strategies are considered most suitable for Lenovo. Current Products New Products Current Markets Market Penetration Strategies Product Development Strategies Lenovo increases its market shares Lenovo focuses on increasing product usage Lenovo brings product improvements Lenovo introduced product-line extensions Lenovo introduced new products for same market New Markets Market Development Strategies Diversification Strategies Lenovo expands market for existing products Lenovo focuses on vertical integration Lenovo focuses on diversification into related businesses Lenovo focuses on diversification into unrelated business Source: Mullins and Larreche, 2006 6.2 Marketing Objectives Target Market: To develop a new product for increasing the customer base in the UK market and to meet the changing expectations of the existing customers Distribution: Adopt a new distribution channel in which a distribution/sales team will be developed to reach the target market such as educational institutions Market Penetration: To increase market shares by entering into new territories of new target market Sales: To increase the pound sales by 15 percent within the twelve months after the launch of new product1 Pricing: To introduce a pricing strategy that could make the new product affordable for the target market 6.3 New Product Development The proposed new product is "Electronic writing pad". This pad will be proposed as a substitution of a traditional paper notebook, therefore, it will be introduced as an educational IT product and it will be classified in “Lifestyle Category” of Lenovo products. The pad will have an Electronic pen which can be used on the touch screen of the pad just like a typical pen or pencil and the pages will be saved in the memory of the Electronic pad. This product will help the students to make lecture notes in a more efficient way and to save all notes in the memory of pad. It will be different from laptops, netbooks and notebooks because it is a substitution to traditional notebook and it will not offer complex functionality. 7.0 IDENTIFICATION OF ALTERNATIVE PLANS 7.1 Adopt New Marketing Mix Since it is a new product therefore, new marketing mix will be introduced. The Proposed marketing mix is given below. 7.1.1 Product Electronic writing pad will offer following features The pad will be able to record the lecture notes through pen rather than keyboard It will have two USB ports so that students can share their lecture notes) The product will also offer a media player so that videos of presentations can be played The product will be very light weight with very simple functionality and usage The material used in the manufacturing of product will be environmental friendly Figure: Electronic Writing Pad s 7.1.2 Price The proposed pricing strategy for the product will be price skimming strategy. This strategy is suitable because of short-life cycle of technological products and high imitation in the industry. The proposed starting price is £199. 7.1.3 Place The product will be initially introduced in the UK market, targeting UK students. The product will be available from the existing business partners of Lenovo in UK. The online retailers like BWCL, Dabs, Cheriton Online, PC World Business, Insight, TechnoWorld, WStore, Lambdatek and BT Business Direct, will also sell the product. Electronic writing pads will also be available online through Lenovo official website. Moreover, distribution teams will also be established. 7.1.4 Promotion The promotional campaign will target students and educational institutions like schools, colleges, universities etc. (Refer to Section 8.0 for more details) 7.2 Alter Elements of Marketing Mix If new marketing strategy fails, then changes could be made by altering the components of marketing strategy. For example, if proposed pricing strategy is not suitable then cost plus pricing strategy can be considered. The product features and distribution strategies will not be changed. Therefore, only price and promotional strategies will be subjected to change if need is felt. 8.0 PROMOTIONAL PROGRAMME 8.1 Sales and Promotion Team A team will be developed comprised on 6 members. The team will visit the institutions one by one and present the features of the new product. Since the product is expected to be launched on 1 September 2011, therefore, promotion team will start its activities just after the completion of product development. The objective of sales team will be to make the students aware of product features and to achieve on-spot sales. Moreover, sales team will also be responsible to take customers’ feedback directly. The teams will start its activities from 1 February 2011 to 31st January 2011. The estimated cost will be the salaries of the team members. If average salary per person is £1000 per month, the annual cost will be around £72000. 8.2 Advertising Ads will be developed with an aim to spread the message to a diverse audience. The ads will clearly communicate product features and only student groups will be casted in the ads. Ads will be broadcasted three months before launch of product on ITV or other channels if possible. Estimated cost is £18000 because the monthly average cost of ITV is around £1500 (ITV Media, 2011). 8.3 Product Trials Product trial will be an important component of promotional program. It aims to offer the product experience to students. Product trials will be given on-campus and they will start from 1st August 2011 to 31st December 2011. The cost allocated for product trials is £5000 annual. 8.4 Outdoor Advertising To reach huge target audience, the bill boards advertising strategy will be used. The billboards will be displayed three months before product launch and estimated cost is £507,500 (Marketing Minefield). Billboards near educational institutions will be preferred and selected. 8.5 Word-of-Mouth Word-of-mouth will be one of the main promotional strategies and it is important because of the nature of target audience (students). Students will be better inspired from each other. There will be no cost assigned for word-of-mouth. 9.0 MEASUREMENT, REVIEW AND CONTROL Before launch of product the awareness of students and their feedback about the product need to be monitored. After launch, sales performance needs to be monitored. Frequent surveys will be conducted before launch of product to analyse the awareness of students about product features and after launch of product the feedback of customer will be taken on how they learn and know about product. After each month before, during and after the launch of Electronic Writing Pad, the performance will be measured. Figure shows that after each month a survey will be conducted to collect feedback as represented for August. After September both survey and sales performance will be analysed. Figure: Measure and Review Performance BIBLIOGRAPHY British Embassy Washington, n.d. U.K. Economic Policy. [Online] Available at: http://ukinusa.fco.gov.uk/en/business/economic-policy/ [Accessed on 18th January 2011] Brown, E., 2011. U.K. Government Subsidises Linux PCs for the Poor and Unwired. [Online] Available at: http://www.linuxfordevices.com/c/a/News/ECycle-Race-Online-2012-program-in-UK/ [Accessed on 18th January 2011] Curtis, S., 2010. IT Industry Hit Hard by UK Government Cuts. [Online] Available at: http://www.eweekeurope.co.uk/news/it-industry-hit-hard-by-budget-cuts-7112 [Accessed on 18th January 2011] ITV Media, 2011. Cost of Advertising. [Online] Available at: http://www.itvmedia.co.uk/advertising-on-itv/cost-of-advertising [Accessed on 20th January 2011] King, L., 2010. What the Coalition Government Means for UK Tech Industry. [Online] Available at: http://news.techworld.com/data-centre/3223307/what-the-coalition-government-means-for-uk-tech-industry/ [Accessed on 18th January 2011] Lenovo, History. [Online] Available at: http://www.lenovo.com/lenovo/us/en/history.html [Accessed on 18th January 2011] Lenovo, Our Company. [Online] Available at: http://www.lenovo.com/lenovo/uk/en/our_company.html [Accessed on 18th January 2011] Lenovo, Products. [Online] Available at: http://shop.lenovo.com/gbweb/gb/en/learn/products/ [Accessed on 18th January 2011] Lenovo, Locations. [Online] Available at: http://www.lenovo.com/lenovo/uk/en/locations.html [Accessed on 18th January 2011] Lenovo, 2010. Lenovo Annual Report 2009/2010. [Online] Available at: http://www.lenovo.com/ww/lenovo/pdf/report/annual_report_EN_final_Aug_26.PDF [Accessed on 18th January 2011] Marketing Minefield, n.d. Billboards Advertising Buying Process. [Online] Available at: http://www.marketingminefield.co.uk/outdoor-advertising/billboard-advertising/costs.html [Accessed on 18th January 2011] Marsh, P., 2011. Hopes Rise in High-Tech Manufacturing. [Online] Available at: http://www.ft.com/cms/s/0/61ee95c4-2198-11e0-9e3b-00144feab49a.html#axzz1BUm70hd6 [Accessed on 18th January 2011] National Statistics, 2009. Social Trends. [Online] Available at: http://www.statistics.gov.uk/downloads/theme_social/Social_Trends39/Social_Trends_39.pdf [Accessed on 18th January 2011] Schofield, J., 2010. The Top Notebook Suppliers and Future of Netbooks. [Online] Available at: http://www.guardian.co.uk/technology/blog/2010/apr/27/notebooks-netbooks-suppliers-intel-atom [Accessed on 20th January 2011] UK Trade and Investment, 2010. Consumer Electronics. [Online] Available at: http://www.ukti.gov.uk/download/114912.../Consumer%20electronics.html [Accessed on 18th January 2011] Mullins, W. and Larreche, B., 2006. 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