Marketing Management: Fundamentals and Practices - Essay Example

?Tiny Tees: Case Study Question The STEP analysis is of great scope and relevance in gaining information about “Tiny Tees”. The term STEP is an acronym for Socio-cultural, Technological, Economical, and Political assessment. As given in the case scenario, the brand started commenced its operations only seven years ago. Therefore, it is difficult to analyse the sustainability of Tiny Tees in the market. In this situation, the STEP analysis would help Tom to assess the overall potential of Tiny Tees. Firstly, the analysis of socio-cultural factors would assist Tom to evaluate how the UK society and the country’s market culture may contribute to the Tiny Tees’ future operations. Socio-cultural factors include health consciousness, age distribution, population growth, individuals’ career tastes, and safety concerns. Statistical data show that UK’s birth rate has increased over the last two years. This increase in birth rate adds value to Tiny Tees. While analysing current UK society, it seems that people are highly concerned about the health of their family members. Hence, people tend to purchase quality cloth materials for their toddlers. Furthermore, trends indicate that people buy more number of baby clothes in order to keep their babies away from the greater risk of getting infections. Secondly, a detailed study of technological factors may aid Tom to assess the risks and opportunities arising out of the UK technological industry. Generally, marketers consider technological factors including research and development activities, technological growth, automation, and innovations. It is obvious that UK’s technological sector has undergone tremendous changes over the last two decades and hence the country’s technological sector offers a range of potential opportunities to Tiny Tees. The UK government encourages and supports technological innovations. Similarly, automation is very effective in the UK and it has been still developing at a greater pace. UK’s well developed transportation sector also offers better scope to Tom’s planned acquisition project. In short, technological factors can greatly contribute to the positive effects of the proposed acquisition. Thirdly, assessment of economical factors is necessary for Tom to understand the financial scope of the proposed project. Researchers have identified that economical factors including income growth rate, interest rates, inflation rates, and exchange rates play a pivotal role in determining the market success of a company. The global financial crisis 2008 negatively affected the economic growth of United Kingdom despite the monetary measures taken by the Bank of England. The profitability decline (given in Table 1&2) of the Tiny Tees can be greatly attributed to this economic crisis. Even though the UK economy is rapidly improving its growth status, it has not been completely recovered from the impacts of global recession yet. Therefore, the STEP analysis may assist Tom to forecast the future economic/growth status of the Tiny Teens effectively. Finally, it is necessary for Tom to analyse the political status of the market in which the planned project is going to be launched. The UK’s political spectrum seems to be stable. “Faster economic development” has become the mantra of the UK politicians and hence they try to promote country’s business sector by every means. As a result, entrepreneurs and other small scale traders get increased financial as well as technical assistance from governmental agencies. This situation will certainly contribute to the development of new ventures. Since the planned acquisition project comes under the category of small scale business, Tom would obtain greater support and assistance from the UK government. The UK government’s current business policies also provide the marketer with extensive future expansion opportunities. In short, the STEP analysis will help Tom to determine whether or not to acquire Tiny Teens. Question 2 To define, “buyer behaviour refers to the people’s or organisations’ conduct, activities, and actions together with the impact of various influences on them towards making decisions on purchase of products and services in a market” (Kapur 2009, p.131). The concept of buyer behaviour plays a crucial role in determining the sales volume of an organisation. Therefore, a marketer must know the various factors that influence customers in making purchase decisions. A buyer generally passes through a five-stage decision making process before purchasing a product or service. The various stages of this decision making process are need recognition and problem awareness, information search, evaluation of alternatives, purchase, and post purchase evaluation. In the first phase, the customer recognises a particular need to solve specific issue. In other words, the customer thinks that a particular product or services is necessary to resolve a deficiency or improve a situation. After identifying the issue or the need, the customer searches and gathers information from various sources such as friends, media, and other databases. In the third stage, the customer evaluates different models of the particular product in terms of reputation and available features. Through this process, the customer tries to find high quality product at a minimum possible cost. Thus, the customer chooses the high quality but most cost-effective product and reaches a clear purchase decision. In the post-purchase evaluation phase, the customer brings the product home and assesses whether he obtains sufficient utility for the money he has paid. Since the concept of buyer behaviour influences the market growth of each product, it is necessary for Tom to understand this model and its relevance to Tiny Tees. Marketing experts opine that it would be very difficult for marketers to improve their customer base and keep customers loyal in today’s competitive world unless they (marketers) actually comprehend their buyer behaviour. This concept may greatly assist Tom to root out his potential audience or target markets and thereby pay specific attention to those identified market segments. Generally, customers’ buying decisions are based on two reasons called rational and emotional reasons. For the effective marketing of the Tiny Tees brand, Tom has to specifically identify whether rational reasons or emotional reasons influence customers to purchase Tiny Tees. It is clear that new customer may choose Tiny Tees for rational reasons whereas existing customers would purchase the brand for rational as well as emotional reasons. In addition to this, Tom has to clearly understand how often customers buy Tiny Tees, whether they are buying for others, from where they gather information, and whether they are exclusive customers while going on with the proposed business acquisition. The case scenario says that Jane’s business specifically focuses on the design of baby and toddler T-shirts. In case of baby or toddler clothing, people generally collect product information from their friends and relatives. In addition, television advertisements may also influence customers in choosing toddler clothing materials including T-shirts. Therefore, a well understanding of the buyer behaviour concept may greatly assist Tom to create effective advertisements. It is clear that customers would give first priority to product quality and safety while purchasing baby clothing and hence the Tiny Tees products may be refused unless they maintain superior quality. If the Tiny Tess can offer superior quality products to its customers at a fairly low cost, the brand would outsmart its competitors. Referring to the final stage of purchase decision making; after the purchase and use of Tiny Tees, the customer would evaluate the utility he/she has derived from the purchase of the product. If the customer thinks that he obtained greater utility from the use of Tiny Tees, he may continue to choose the brand. In sum, for the sustainable marketing of the proposed business venture, Tom must acquire detailed knowledge in the buyer behaviour concept. Question 3 A market segment can be simply referred to a group of potential customers having similar needs and requirements, seeking similar services, and having similar levels of expectations and priorities. According to an observation, “market segmentation is the process of dividing the total market for a product or service into groups with similar needs, such that each group is likely to respond favourably to a specific marketing strategy.” (Longenecker et al 2006, p.151). In the opinion of Capon (2007, p. 43), gender, age, income level, company size, industry, geographic location, annual volume potential, and customer growth rate are some of the brainstorm approaches to segment a market. Market segmentation would greatly assist a marketer to address every customer’s needs. Theorists hold the view that market segmentation plays a pivotal role in improving an organisation’s competitive position in the market because each customer’s needs and tastes are met individually under this business model. While offering one product to all types of customers, the strategy is more likely to cause downward pressure on profit margins since this situation would provide competitive advantages to lowest cost producers. Therefore, the market segmentation strategy would greatly assist marketers to get rid of stiff market competition to some extent. As discussed above, market segmentation benefits a firm to identify its potential market segments and opportunities. Often, it is not possible for an organisation to serve all of its identified market segments. According to Kotler (2008, p. 183), it is necessary for the organisation to evaluate various market segments and decide how many and which of the identified market segments it (the organisation) can serve best. Experts have developed various steps and procedures to evaluate and select target market segments. Market targeting may assist a firm to concentrate its whole resources and capabilities on the targeted segment. In other words, this policy would help an organisation to avoid wastage of time, money, resources, and efforts. Easy identification of potential opportunities and fast product positioning are the major advantages of target marketing. This strategy will also help the marketer to deal with advertising using the most effective and cheapest media. The process of market segmentation and targeting would help Tom in moving the brand forward. Since Tiny Tees is baby-focused brand, market segmentation is an inevitable strategy to ensure the effective utilization of resources and money. It would be better for Tom to identify market segments comprising of young parents. After identifying such market segments, Tom has to target some specific market segments that are capable of generating higher levels of income. This market targeting policy may assist Tom to better identify the tastes and preferences of his target audience and thereby develop effective business strategies to meet those needs. Target marketing would also help Tom to assess the frequency of the purchase so as to maintain optimum stock levels. In other words, this strategy would aid Tom to avoid under and overstock of finished goods and raw materials; and ultimately, market targeting policy may be assistable for Tom to keep more amount of working capital with him. Furthermore, this business model may be helpful for Tom to identify market trend changes on time. Market targeting would assist Tom to trim down costs related to frequent market research activities because this policy always keeps one knowledgeable about the market trends. Lack of management complexity may be another benefit offered to Tom by this business model. Finally, market segmentation and targeting are the best possible strategies for Tom to obtain customer feedbacks and thereby improve his product quality as well as brand reputation. Question 4 In the words of Philip Kotler, marketing research can be defined as “the systematic design, collection, analysis, and reporting of data and findings relevant to a specific situation facing the company” ((as cited in Blankenship et al 1998, p.7). McDaniel and Gates (1998, p. 5) opine that marketing research is significant in improving the overall marketing system. The authors add that this process play two key roles. Firstly, marketing research is an integral part of the marketing intelligence feedback process (ibid). More precisely, this process assists decision makers to evaluate the efficacy of the current marketing mix and thereby make necessary changes to it. Secondly, the marketing research explores new opportunities in the market environment. Since marketers need to focus only on a specific market segment, they can easily find out emerging potential opportunities. Similarly, information also plays a crucial role in the marketing process. It is evident that a marketer cannot effectively promote his operations unless he keeps himself informed about every change in market trends. Information is a crucial component for decision makers to improve their marketing operations in accordance with the interests of actual buyers. Finally, information is an inevitable element in business expansion too. In short, analysis of various markets is necessary to ensure a brand’s long term sustainability. It is recommendable for Tom to analyse micro as well as macro environments of the Tiny Tees to reach a good acquisition decision. I strongly suggest Porter’s five forces model to evaluate Tiny Tees’ micro market environment. This model would assist Tom to assess various opportunities and risk factors persisting in the brand’s external market environment. Tom would obtain a clear understanding of the key market drivers including degree of competitive rivalry, threat of new entrants, threat of substitutes, buyer power, and supplier power in the baby clothing industry. This industry knowledge would greatly assist Tom to understand Tiny Tees’ operational feasibility in future. Moreover, Tom has to consider the internal strengths and weaknesses of the Tiny Tees. While analysing the internal management strengths and weaknesses, Tom should give specific focus on the targeted company’s financial statements in the recent years. A deep analysis on the company’s historical revenues and profitability may assist Tom to understand the actual financial status of the brand and its future growth potential. It is also advisable to take sales return data into account as this information would be beneficial for Tom to get a clear view of the Tiny Tees’ brand quality. Furthermore, it is advisable for Tom to conduct an independent market research programme to gather and analyse customer feedbacks on Tiny Tees products. For this purpose, Tom may adopt questionnaire methods, automated phone call surveys, and internet survey approaches. However, Tom must include every group of people in the survey because a badly planned market research may take him to wrong conclusions. Research on the future trends in baby clothing industry can also be initiated. This information may help Tom to evaluate whether Tiny Tees has the potential to meet the future industry requirements. Moreover, it would assist him to restructure Tiny Tees’ current management policies in a way the changing buyer needs are effectively met. Finally, Tom must conduct a detailed study of the Tiny Tees’ market reputation as repute is one of the valuable assets of any brand. If the brand possesses a good market stature, it would easily get credit assistance from banks and other external financial institutions. In short, extensive research on micro and macro environment, internal management strengths and weaknesses, financial reports, baby clothing industry, and band reputation would help Tom in making his decision. Question 5 While analysing the company’s historical financial data, it is obvious that the Tiny Tees’ financial status has been worsening for the last three years, and this situation may have negative impact on the brand in the future. To illustrate, the brand’s sales declined from ?85,000 in year 5 to ?74,000 in year 6 and it reached ?36,000 in the latest year. It indicates that Tiny Tees’s sales dropped by more than half in the year 7 as compared to the previous year. Naturally, the same trend is reflected in the case of profitability also. In the 4th year of its operation, Tiny Tees acquired a profit of ?13, 700. However, the brand’s profitability dropped to ?5,000 in the next year. In the last two years, the company obtained nothing in profits. Hence, Tiny Tees’ sales and profitability data reveal a dreadful market situation. Similarly, increasing rate of overheads also threatens the operational efficiency and sustainability of the brand. Although overheads data for the last two years are not available, the declining profitability reflects that overheads rate is still mounting. This increase in overheads despite the declining profitability may end up in the brand failure in the near future. The financial data also indicate that the contribution margin has started to drop by the year 5. In the current state, the brand cannot continue its operations since it does not have adequate working capital to perform its day to day activities. If Tom acquires this brand, he may be forced to bring external funds to the business and this situation would raise potential challenges to him. While considering current financial status of the Tiny Tees, it has less creditworthiness and hence banks or other financial institutions would not allow credit to the company. In short, lack of funds would cause troubles to Tiny Tees in the near future. Therefore, the company cannot continue its operations long unless it quickly improves its sales revenues and profitability. However, there are some economic factors that can have positive impact on the brand in the future. The case context clearly says that Tiny Tees has commenced its operation only seven years ago. The Table 1and 2 indicate that the brand’s operations were profitable until the year 4. The brand’s revenues and profits started to fall by the year 5 when its owner Jane gave birth to a baby. Since Jane found it extremely difficult to manage the needs of motherhood with that of a flourishing business, she could do nothing proactive to promote her business growth or sustainability. While closely watching the brand’s sales data, it is clear that the sales have drastically declined over the last two years. Hence, it can be assumed that Jane’s lack of concentration in business led to the Tiny Tees’ current market failure. In addition, Jane increasingly depended on existing customers and the 3 agents who sell her goods on commission basis. It directly reflects that Tiny Tees’ operations can be brought back to profitability if the management becomes proactive in developing business policies. Similarly, trimming down overhead costs would assist Tom to charge fairly lower prices for his products which in turn may attract more new customers. Since the UK government gives increased focus on childcare facilities, this situation would also contribute to the feasibility of the planned acquisition. The recovering UK economy also offers a prosperous future for the company. If Tom can raise additional external funds and if he effectively restructures Tiny Tees’ operational policies including commission based sales, it is possible for him to improve the brand’s profit margins in the future. Therefore, I would recommend Tom to go on with the proposed business acquisition project. References Blankenship, AB, Breen, GE & Dutka, A., 1998. State of the Art Marketing Research, Chicago: NTC Business Books. Capon, N., 2007. The Virgin Marketer, New York: Wessex Publishing. Kotler, P & Armstrong, G., 2008. Principles of Marketing, India: Pearson Education. Kapur, SK., 2009. Marketing Management: Fundamentals and Practices, India: Oxford & IBH Publishing. Longenecker, JG, Moore, CV, Petty, JW & Palich, LE., 2006. Small Business Management: An Entrepreneurial Emphasis, USA: Cengage Learning. McDaniel, C & Gates, R., 1998. Marketing Research Essentials, USA: Taylor & Francis. Read More