Global Management - Chabros, Silvio Napoli and India, Butter Beater - Case Study Example

Analysis of Five Different Cases BY YOU YOUR SCHOOL INFO HERE HERE Analysis of Five Different Cases Case Chabros The diversity of the existing customer base for Chabros dictates that the business should use all of the available capacity in order to improve sales volumes. Chabros provides products utilising a business-to-business methodology, one in which there is much less emphasis on establishing psycho-social relationships like that of the B2C market. Instead, service quality, pricing and compliance are primary dimensions associated with what drives buyer decision-making in the purchasing process (Boone & Kurtz, 2007). This business would be hard-pressed to attempt to take any cultural-centric approach to building quality relationships with its customers. The case study showed that previous strategies associated with rejecting the need for letters of credit and providing certain payment term elasticity had brought the business much market success, that is until the recession began to erode profitability in some of Chabros’ markets. These factors, though, are associated with finance and there is simply not enough evidence that psychographic marketing (or similar relationship management strategies) would have any impact. To fully exploit opportunities to achieve greater market share, capacity must be utilised to its fullest capacity. Chabros is victimised by changing currency rates, which was illustrated in the case study when, in 2008, Chabros’ Serbian production facility could no longer sustain pricing advantages due to the influence of the Euro that was the currency being utilised for Russian supply products. Being so highly diversified in many international markets where suppliers and the subsidiary operate using foreign currencies, it imposes risks into the business model as it pertains to the sustainability of existing procurement methodologies when international currency values are subject to constant fluctuation. It would not, therefore, be a recommended strategy to seek market entry into new markets when pricing is significantly impacted by changing dynamics of exchange rates. For example, Chabros could enter the Moroccan market and attempt to compensate for losses in certain markets, such as Dubai, as Morocco maintains many sustainable advantages that could contribute to gaining international market share. The country provides taxation incentives for the first five years of operations, which would give the business opportunities to exploit this cash acquired through Moroccan-driven revenue growth. However, despite this advantage, tariffs being imposed on some of the company’s highest profit-generating products, the veneers, exceed international averages and there is ample risk that Chabros would have to raise pricing. As identified by Boone & Kurtz (2007), pricing is one of the most fundamental decision-making influences for the business-to-business market and there is risk that buyers would be turned off by rising procurement prices. It is recommended that Chabros focus on which production facilities maintain the highest capacity and lowest operational costs and then determine whether output can be increased without straining the business budget. Divestiture is an option for under-performing facilities if the operational costs associated with increasing capacity are forced higher. Since it is the concrete characteristics of product that assist in helping buyers determine whether to select Chabros or other competitors in this very saturated market, improving capacity output is the most viable solution for this organisation. Subsidiaries in the UAE, Oman, and Egypt, to name only a few, can explore opportunities for exportation rather than simply distributing within the country of production once capacity has been built into the production model. Rather than taking on new costs of facility management and labour costs, the business should be focusing on which production areas are efficient and can produce new distribution diversification strategies to achieve desired profitability. Case 2 – Silvio Napoli and India It is very difficult for Napoli to acquire the necessary products required to support installation of elevators in Indian markets, since local procurement is unsatisfactory and not very transparent for supporting the business. This is substantial for attempting to build market share in India as the country has recently begun imposing very high tariffs on imported products, making it more cost-effective to procure products from the local Indian market. There is, nevertheless, a duplicity in this whereby the company will have to pay higher prices for supply from outside of the Indian market, but there are many problems with ensuring a sustainable supply chain network domestically. The Indian market also poses problems to the business as it relates to the influence of competitive forces that seem to have many competitive advantages over that of Napoli’s business. Otis is a major competitor that currently holds 50 percent market share and it is an esteemed and valued business name with a great deal of history installing quality elevator products in India. Nandan (2005) reminds business leaders that it is very easy to replicate products and services in the industrial marketplace, therefore making the only non-replicable asset left for the organisation its brand image. “Product quality and price are no longer sufficient to differentiate” (Bennett & Rundle-Thiele, 2004, p.516). Unfortunately for Napoli, Otis has established this buyer-perceived conviction in the reliance and quality of Otis products which is very difficult to erode for a company with very little presence in the Indian market. Competitive competence and proficiency earned through reputation represents very monumental risks to achieving market interest in required target markets in this country. The problem with the sales team starts with management that is very non-compliant to executive-generated policies and procedures. It was the goal of Napoli to set up a standardized installation system that avoided the need to procure customised products. By staying on the low-end of quality and not seeking premium positioning on the market, this company would avoid the high transfer costs reflected in the case study and would also simplify all areas of operations as it pertains to installation and maintenance. The sales team, however, disagreed with Napoli’s evaluation of staying with standardised elevator products and, without consent, agreed to begin installing expensive and complicated glass features. Napoli cannot rely on the integrity and ethical stance of its sales and management teams and this has impacted the ability to break-even as it was set as a milestone with the first business plan developed by Napoli. There is a human resources break-down in the organisational structure that conflicts being able to stay within budget and also satisfy all costs of goods sold by attempting unauthorised premiumisation strategies. If Napoli cannot get compliance from the sales team, the business will not have the finances or the capacity to attempt to adopt premium products and services. It is a product of culture that Napoli is having a difficult time gaining market share and gaining customer interest in this business’ elevator products. The internal culture of the organisation is one that is divided on the integrity of Napoli’s business strategies. Napoli’s original business strategy had an acceptable break-even point so long as the business remained dedicated on providing standardised products to customers. It is recommended that Napoli take a lesson from respected management models that are transactional in nature, a model in which rewards or negative consequences are a direct outcome of performance and compliance. A sales team that makes subjective decisions that add new elements of risk to the business is unacceptable and, therefore, tighter controls should be established to deal with the cultural problems that are bringing hazard to finding sustainable market opportunities. Case 3 – Butter Beater The Europe-wide strategy was not feasible. Even though Unilever understood the importance of test marketing the new spread in many different cultures before launch, as well as establishing the Innovation Centres to promote and develop products, the method by which the company approached launch of this product was not accurately customised to meet local culture needs. The case study highlighted that there was a Europe-wide set of values associated with healthy consumption that was changing the variety of fatty products being consumed. Despite this, the company attempted to create homogenous ad strategies (as a cost reduction effort) upon launch without taking into consideration the need to include culture-specific elements in advertising and other associated communications in marketing. If the business had been more diligent in setting up a less-streamlined approach to market launch, it is likely that the alternative spread would have met with more positive evaluations from consumers; even those with healthy eating preferences. Because the actual spread was made with quality ingredients that are not synonymous with cheap spreads, such as margarine, the business did not put enough emphasis into translating the tangibles of product recipe to properly position the product in diverse cultural markets. If the costs associated with local adaptation for the product had been introduced, the business could have avoided the confusion that consumers were feeling about the duplicity of the marketing strategy for this product. There really was no need for integration between lead-country developers and other countries where the product was being launched. The Innovation Centres responsible for R&D on this product were relying on test market data achieved through focus groups and other market research efforts to determine whether the product would be accepted and valued in its chosen markets where the spread was being launched. The business was attempting to position the product under a single concept, which is essentially quality as compared to butter, thereby creating a new market that it believed did not currently exist. This was a standardised approach to market positioning through the marketing process that was not realistic when social attitudes regarding fatty foods consumption risks were so widely-different across Europe. Unilever should not have set milestones so early in the development and launch product and the case study seemed to illustrate that many members of the marketing and sales team were confused that the homogenous strategy was not being accepted by some markets. In Germany, a country in which butter consumption and fatty foods is commonplace in the social order, it is rather practical to simply assume that a product like Unilever’s new spread would meet with market acceptance. In other countries, the product was not supported by consumer target markets and was not meeting with the profitability expected by the milestones established by Unilever’s team. This is not really a problem with organisational structure, only that the sales and marketing teams as well as executive-level decision-makers did not take into consideration that the business would have to devote much more capital resources into creating localised advertising and promotional strategies to make the launch a multi-country success. In this particular case, the perceived quality and relevancy of the alternative spread was too heavily influenced by the social order and lifestyle changes that are unpredictable. Globalising product development would have only further damaged opportunities for using culturally-relevant communications associated with the spread that would have translated quite differently in many diverse European markets. It is recommended that Unilever stay with localised strategies. Leveraging this product would only be sustained by borrowing more cash and extending credit to Unilever, something that the business did not want to do and, instead, decided on a Europe-wide strategy that was unsuccessful in meeting its profit goals. Case 4 – Citibank Strategic alliances were the most appropriate method for Citi to gain new market demand and attract market loyalty by many of its high resource customers. Citibank was running the risk of its current products and services reaching maturity or decline, which would have created problems toward the strategic goal of expansion that was established by Citi’s senior leadership. Citi recognised that many Chinese consumers were using the CUP debit card and by establishing an alliance in which these cards were honoured at Citibank, it opened new opportunities to gain new deposits and investments from consumers that might not have selected Citibank without this alliance. Farh & Cheng (2000) identify that most Chinese citizens are hedonistic by nature, meaning that they seek to maximise their own satisfaction and utility as primary goals within the social order. They are also highly collectivist and tend to mould their purchase decision-making based on opinion and recommendation from colleagues and other peer reference groups (Hofstede, Hofstede & Minkov, 2010). Citi maintained many opportunities in several of its alliance strategies to build on these inherent, socially-driven attitudes with consumers by seeking brands with a strong reputation and in which consumers might find favour toward Citi for adding not only convenience in their service model, but to create a collectivist organisation that understands the lifestyles and needs of consumers. Citibank also achieved many competitive and financial advantages through its chosen alliances, such as by enhancing data management in the alliance with SPDB, which was a main goal for pursuing these alliances. Citi’s goal was to leverage its investments which was accomplished through reliance on its powerful reputation in the Chinese market built on years of trust, something valued in collectivist members of a society. The alliances were, oftentimes, aimed and targeted at fulfilment of the needs of consumers, thereby illustrating to many diverse markets that Citi was flexible and also culturally-sensitive. The alliances were equity strategic alliances and non-equity alliances. Equity alliances are those in which there is shared ownership exchanged in some new venture whilst non-equity alliances involve contracted relationships without shared ownership occurring. In the alliance with Sino-US MetLife Insurance, as one example, there were risks that consumers would not find value in an investment company selling insurance policies. There were also risks of mismanagement occurring within the organisation of allied partners that could have jeopardised such issues as customer relationship management or tarnished the brand reputation of Citi and the allied partner. Managing these risks, however, absolutely paid off for Citibank which is observable not only in the financial gains achieved through the alliances, but in the variety of positive publicity that was achieved by the bank. Citi received many different awards, including Best Bank in China, 2007 Best Service Excellence, and Best Foreign Bank in China. All of this publicity shows many different consumers, both targeted and new customer bases, that Citi is a trustworthy organisation that understands quality service and competency in the investment process. The market interest in the insurance policies now available through Citibank and the level of deposits that radically increased after developing these alliances illustrate how risk can be mitigated and removed from the business by adopting appropriate strategies for expansion of a maturing product portfolio. Citi was also recognised as being an innovator in the product and service mixes which is a critical component to gaining a respected business name in most consumer markets. It is recommended that Citi remain focused on seeking public relations opportunities to expand its positive brand reputation. Case 5 – Air Asia Air Asia maintained many different strategies that made it possible to continue to provide quality airline services at sustainable pricing models even when facing higher oil prices and emergence of intensive competition in many different markets. Air Asia was able to build a positive culture within the organisation that was enthusiastic and committed to supporting the business’ goals. The case study illustrated that pilots were able to reduce fuel consumption by 20 percent through simply being more efficient and industrious about using resources properly. Many businesses that are able to build effective human capital either through training or through role modelling by senior executives usually have many competitive advantages over competing firms. Development of organisational culture, modelled after such carriers as Southwest Airlines that has a similar low-frills business model, helped the business identify cost reduction opportunities that started at the lower ranks of authority and trickled upward throughout the operational model. Air Asia also developed a hedging and investment strategy that was aligned properly with the strategy designed to counteract rising oil prices. This is common practice with many transportation companies in an effort to remove risk when dealing with rising costs along the supply network (Kavussanos, 2003). On top of this strategy, Air Asia was also able to maximise efficiency by establishing hub networks controlled by the business that had the ability to service many more customers more efficiently. The case study showed that Air Asia differentiated its business from competition by providing legitimacy in quality, even though it was operating a low-cost and low-frills business model. The hub network being able to improve departure and arrival efficiencies and also allow for keeping ticket prices low by consolidating areas of operations gave the business more loyalty from customers and also brought the business increased revenues through ticket sales. Any increase in capital occurring from sales revenues, especially when the quality of the airline is perceived as superior to competition, will fill each airplane to capacity in which the ratio between sales revenues and operating costs is favourable for profitability rather than losses. Air Asia also is a success in using marketing strategies, including redevelopment of the product and services mixes and creating worthwhile promotions, by which the company gain more market interest and dedication. Air Asia takes advantage of opportunities to have publicity continue to reinforce quality, which was evident in the advertising layouts provided in the case study illustrating the competency and flair of Air Asia’s marketing focus. In 2005, Air Asia partnered with Manchester United, a premier football club in the United Kingdom, as a means of illustrating the business’ ability to gain new market attention (Air Asia 2005). Ongoing and relevant promotions act as some of the important foundation for how this company is able to ensure higher sales revenues and compensate for rising oil prices that often continue to plague their most powerful competitors. Furthermore, Air Asia is able to reduce many inefficiencies throughout its business model, such as by developing more efficient ground systems so that consumers see timely reliance on the company’s capacity and competency to service their needs. Air Asia’s own, self-developed models of strategic intention as illustrated by the case study show that the company believes service quality will be a determining factor as to whether the business will find sustainable growth and gain market interest. By looking for opportunities to improve its service quality, the company does not have to alter pricing or focus on pricing (which poses many risks to price-sensitive buyers), but instead can focus on selling quality over that of other no-frills competitors. It is recommended that Air Asia maintain its current focus on quality positioning to achieve further advantages. References Air Asia. (2005). Annual Report 2005. Retrieved January 17, 2013 from http://www.airasia.com/iwovresources/my/common/pdf/AirAsia/IR/AirAsia%202005%2 0corp%20section.pdf Bennett, R. & Rundle-Thiele, S. (2004). Customer satisfaction should not be the only goal, Journal of Service Marketing, 18(7), pp.514-523. Boone, L. & Kurtz, D. (2007). Contemporary Marketing, (12th ed.). UK: Thompson South- Western. Farh, J. & Cheng, B. (2000). A cultural analysis of paternalistic leadership in Chinese organisations, in J. Li, A. Tsui & E. Weldon (eds.). Management and Organisations in the Chinese Context. London: MacMillan. Hofstede, G., Hofstede, G.J. & Minkov, M. (2010). Cultures and Organizations: Software of the Mind. (3rd ed.). New York: McGraw-Hill. Kavussanos, M. (2003). Time varying risks among segments of the tanker freight markets, Maritime Economics & Logistics, 5(1), pp.227-250. Nandan, S. (2005). An exploration of the brand identity-brand image linkage: A communications perspective, Brand Management, 12(4), pp.264-278. Read More