Business Marketing of LumiCore - Essay Example

? Business to Business Marketing Contents Introduction 3 Selection and evaluation of Target Market 3 Evaluation of Segment potential 5 Development ofMarketing Strategy 6 External Audit 6 Internal Audit 9 Porters Five Force 10 Strategic Analysis 11 5Cs of marketing Strategy 12 Marketing Mix 14 Conclusion 16 Reference 17 Introduction The report has been prepared with a view to submit it to the Board of LumiCore analyzing the market to enter by the LumiCore which is a subsidiary of the giant Brazilian chemical company LumiChem and manufactures a broad range of paints, pigments and coatings. It is planning to diversify its business into other market away from the Brazilian market and plans to enter and explore the business to business opportunity in UK market. UK is a potential market for chemicals especially for specialty chemicals such as paints, pigments and coating and therefore investing in UK will be beneficial and profitable for LumiCore. The aim of the report is to provide an analysis of the potential market segment and also evaluates the business potential of the particular target market and the segment in which the firm plans to enter. The report also highlights the marketing strategy which the company performs in order to understand the target market and formulate strategy accordingly to suit the business perspective of the country and the company together. Selection and evaluation of Target Market Business to business marketing differs from that of consumer marketing. In B2B marketing, the volume of purchase are much higher than consumer marketing and as a result the target market must be selected based on the economic growth rate and the number of industries in that particular region. The organizations are of prime concern in case of B2B marketing and not the customers and thus the market selected is UK. UK chemical industries are among those industries which generate profit and are able to increase the economic growth rate of the country. UK is known for its business dealings and LumiCore by investing in UK will prove to be profitable and also analyzing its post recession growth it can be concluded that UK is one of the best options of LumiCore to conduct business and generate revenue and profits. The target market selected is the UK market; Europe tends to dominate the chemical consumption at 45% of the total consumption. The European chemical market involves chemicals such as inorganic, petrochemicals, fertilizers and industrial gases along with fine and specialty chemicals. The market size of Europe alone was estimated to be about USD495billion in the year 2003. Major chemical market includes France, Italy and Germany. If we look at the whole of UK market which covers the base chemicals segment including both organic and in organic chemicals along with specialty and consumer chemicals. UK manufactures a wide range of products and forms one of the largest manufacturing industries and ranks 7th globally in terms of consumption. In the same year 2003, the UK chemicals market was estimated to be USD 40.9billion and was expected to grow even more in the future (ReportSure, 2012). In UK the chemical industries is run and managed by the Chemical Industries Association (CIA) which is regarded as the largest organization which aims to represent pharmaceuticals and chemicals business in UK and across UK (CIA, 2012). LumiCore intent to deal in specialty chemicals such as paints, coating and pigments and according to reports specialty chemicals in the UK covers a market that generates revenue from sales of value added chemicals. Thus the UK specialty chemicals market constitutes of total revenue of $19.3billion in the year 2011 and represented a “compound annual growth rate” of about 3.2% in between 2007 and also 2011. The performance of the chemical industry in UK is forecasted to accelerate CAGR of about 4.9% for the next five year financial period from 2011 to 2016 which in return are expected to drive in value of the particular market of $24.6billion by 2016 (Business Wire, 2012). The specialty chemicals market in UK provides the top line quantitative and qualitative summary which also includes the size of the market in the current financial year and also forecast for the future so that companies planning to invest in UK get all the required information which are essential and important for any investors to know before investing and proves to be useful as it provides with all the information which an investors intent to know. Based on the above evaluation on the UK chemical market it can be said that UK is a growing market for the chemical industry and especially the specialty chemicals which is expected to grow at a CAGR of 4.9% in between 2011 and 2016 making the future secured and with high rate of growth contributing to the overall economy. On global basis, the specialty chemical sector resumed its growth only in 2010 and 2011 and it suffered a severe setback during the economic recession. In the year 2012, the specialty chemicals was expected to increase with an average growth rate (IHS, 2012) and therefore based on the assumption it would be profitable for the company to expand in UK market benefiting the business and organizations with its chemical products. Evaluation of Segment potential Segmentation is important in order to understand which segment are the most attractive for the organization, to concentrate resources in the right areas such as investing in sales, distribution, manufacturing sector and others. Market segment should be measurable, substantial, accessible, differentiable and stable. Therefore the UK market is segmented based on the business markets taking into consideration the business sector, big forms, institutional and also governmental institutions. Chemical industry in UK is further segmented into organic, inorganic, specialty and fine chemicals. The company plans to segment its chemical into specialty chemicals such as paints, coatings and pigments. LumiCore manufactures chemicals and also plans to enter the UK market with its chemicals product but has segmented itself to enter the specialty chemicals such as paints, coating and pigments. The specialty chemicals sectors in UK has shown significant growth rate in the recent past and are expected to grow even more in the near future. Business market are segmented based on the size of the company, the industry, purchasing approaches, usage of the product along with situational factors such as urgency, seasonal trend and others including geographic. Based on the above factors, geographic location selected by LumiCore is UK market, and plans to start off in England and gradually expand into other cities of UK. The company would try to sell of its specialty chemicals to the organizations, big business and institutions. The specialties chemicals segment which the company plans to operate in UK is aided to be high in demand and are highly required by the business markets. The specialty market in UK tends to provide huge opportunity as with an impressive growth rate, the sector is attracting more number of businesses and is assumed that the ongoing restructuring will provide some of the companies with opportunity to deliver investment returns. Thus it can be said that the sector chosen by the company tends to show a positive growth rate. Development of Marketing Strategy External Audit External environment is defined as everything which exists outside organization boundaries that tends to affect it. The external environment constitutes of PEST analysis which stands for political, economical, social and technological factors. PEST is conducted to analyze the external factors impacting the working conditions of any business especially when the firm plans to enter foreign market. PEST Analysis Political Factors: The political factors also impact the functioning of the business. If the political conditions of the country are stable the business gets opportunities to flourish. The UK government encourages the retailers to provide opportunities for students, elderly workers and disabled at a large number and provides them job (Ivory Research, 2011). With increasing globalization, LumiCore has an opportunity to compete against the unforeseen challenges and make a place in the chemical industry in UK with its specialty chemicals. The company can further expand into other cities of UK through joint ventures or partnership in order to explore the new markets and gain market share. The political factors in UK are stable and support the business market in the country and believe that through business and expansion by foreign markets will help the UK to reach the top most slots in the global economy. Therefore it is suitable for LumiCore to expand and explore the UK chemicals market. Economical Factors: The chemical industry in UK has benefited the UK economy to a very large extends and it can UK ranks seventh in terms of consumption with respect to the chemical industry. The GDP of UK stood at 2.29trillion in 2011 for purchasing power parity and has achieved the ninth position on the global basis. Industries tend to contribute towards the growth of the economy at about 21.4% which comprise of chemicals and other industries also. UK is the third largest economy after France and Germany (CIA, n.d). The chemical industry in UK forms a valuable part of the manufacturing sector and tends to represents about 7% and contributes ?2.4billion towards balance of trade. UK’s chemicals industry is ranked as the sixth largest sector globally (BIS, 2002). Thus it can be said that the economical conditions also stable and UK is among the potential market where every industry plans to enter and Lumicore by planning to enter the potential market will be able to achieve stability and earn profits and contributes towards the growth rate. The company can further incur profits as the industries contribute a decent share of percentage in the GDP growth rate. Thus it is feasible to enter the UK chemical market. Social Factors: The essential of any business is to understand the culture of the society. Changes in the social trend impact heavily on the business. In this case the social factors will take into consideration the big organizations, institutions and other except the consumers as the paper deals in with the business market and not consumer market. It can be said that the demand for the chemical industries are quite high especially the specialty chemicals such as paints, coating and pigments. The industries and big organizations tends to apply the specialty chemicals in their office as and when required and with many industries coming up in UK resulting in many organizations the specialty chemical industry will surely flourish and will be accepted by the organization and big institutions. Therefore the business indented to set in UK market by LumiCore will be acceptable by the target business and will be able to create a name in the UK chemicals sector. Technological Factors: Technological factors play a major role in the success of any sector. The UK chemical industry hugely depends on innovation and has a pretty long tradition of being innovative. But in the recent past the rate of innovation has comparatively decreased and is characterized by change in increments. In 2001 UK spend an average of 2.2% against sales as compared to international sales which amounted to 4.2% and spending made towards R&D was proxy towards innovation (BIS, 2002). Thus UK needs to spend above the international averages and spend more on R&D and innovation techniques so to lead the new entrant positive outflow and success in UK. Internal Audit SWOT Analysis SWOT analysis is conducted to determine the internal and the external factors contracting the company or the organization. Internal factors are the Strength and weakness of the organizations and external factors include the opportunity and threat that comes from the outside world. An organization can overcome the weakness by applying the strengths and threats by utilizing the opportunities and achieve a competitive advantage. Strength: LumiCore is a subsidiary of the giant chemical company LumiChem and manufactures huge range of paints, pigments and coatings. The company has been performing well in the Brazilian market and it is assumed that after achieving success in the Brazilian market it has planned to diversify which indicates that the level of success for Lumicore was high adding up to the strength. To diversify company requires capital strength, human resources and others which mean that LumiCore had been able to achieve all the stability and thus expand in the UK market. Weakness: The cultural difference can be determined as one of the weakness of the organization. The working conditions and nature of business differs from that of Brazil and other countries in which LumiCore operates and thus the difference in nature and way of working can be regarded as weakness for LumiCore. Opportunity: Opportunity for the company is to expand into other emerging countries which show a positive growth rate in the chemical industry. As a result, after analyzing the UK market LumiCore intend to enter the UK market and then take the opportunity to expand into other cities in UK and also expand its market share and create a brand name in UK chemical market. It also has the opportunity to form partnership or joint venture with big organizations and institutions which would be profitable for the organization in the long run. Also it can tie up with governmental institutions and supply paint, coating and pigments leading to brand value and awareness in the market and among the target organizations. Threats: threats for LumiCore are the competitor in the UK market in the chemical sector who has already build a name in the specialty chemical sector and has been working for the big organizations and institutions. Also threats come from the uncertain economic factors which might lead to failure in the UK market. Porters Five Force Porters five force enable a manager to identify the competitive forces in the compelling industry in order to identify the threats and opportunities. The framework enables the mangers to identify the external factors and helps to shape the competition in the industry. The five forces compelled by Michael E. Porter includes, the bargaining power of both supplier and the customers, risk of entry by new competitors, substitute threat and rivalry among the firms in the industry (Hills & Jones, 2007, p.45). Thus in order to determine the competitive force of LumiCore, Porters five forces has been taken into consideration and are as follows, Bargaining power of the suppliers: the bargaining power of supplier which is LumiCore in this case is comparatively low as the company is new in the market and will take time to establish a brand name. There are other suppliers which have already built a brand name and therefore the power of supplier is less. Bargaining power of Customer: the bargaining power of customers are high because the fact being that LumiCore is a new entry and therefore the other established companies has already made a mark in the industry and the customers of the competitors tends to believe them and hire them for the required work. Thus it can be said that the bargaining power of the customers are high. Threat of new entrant: the threat of new entrant is moderate to high. Developing a chemical industry requires huge investment and therefore to enter requires huge amount of capital indicating that the threat of new entrant is relatively moderate. But with globalization and other factors, more and more competitors are entering the UK market making the competition much more high and analyzing the chemical industry which shows a huge potential growth rate making a tough competition. Threat of substitute: threat of substitute is relatively low because can be no substitute for the chemical industry and mainly the specialty chemicals such as paints, pigments and coatings. And LumiCore deals in variety of products in the specialty sector. Rivalry among the firms: the competition among the firms are quite high as with the existing competitors along with the new entrant the level of competition has increased leading to high rivalry among the existing firms. Strategic Analysis The UK chemical industry is termed as an industry which is in transition. With changing response from domestic demand and also due to globalization both this tends to form the driving factors towards higher added value products. With rise in globalization which also contributes towards the competitiveness in UK as a competitive location for manufacturing. UK has a high proportion of added value in specialty chemicals nearly about 60% which were mainly sold based on performance and the rest 40% on consumer products. According to the recent history of the UK chemical industry, it has been extensively dominated by restructuring and also through merger activities as most of the companies in UK have repositioned themselves in order to cope up with the global trends. The chemical industry in UK is large a form a valuable part of the manufacturing sector in UK. The UK Chemical industry tends to play a dynamic role in the global trade flow with respect to the chemical industry. Nearly about 26billion pounds are manufactured in UK in each year. Chemical products aim to pervade all the aspect in relation to the modern economy. The chemical industry in UK is the sixth largest industry globally and contributes to a large extend to the UK economy. The UK chemical industry contributes towards the sustainability as well as sustainable development of the country. The industry is creative as well as innovative in its approach and thus aims to deliver solutions for the needs of the society, environment and the economy and not just minimize the negative impact of the products and the process involved in manufacturing the chemicals. Most of the chemicals companies in UK have already contributed towards sustainable development (BIS, 2002). Thus based on the analysis, the UK has a high potential for the growth of chemicals industry and strategically it will be profitable for LumiCore to diversify and enter the UK market. Thus to achieve a competitive advantage LumiCore will have to implement sustainability in its products so that it is able to attract the target customers and achieve competitive advantage. 5Cs of marketing Strategy The 5Cs of marketing strategy is equally important in order to understand the competitors, the customer’s needs, company skill, collaboration and context. Competitors: Competitors of LumiCore are all the existing chemical suppliers or the manufacturers in UK and also from foreign market which operates in the UK chemical market. LumiCore deals in variety of products from paints, pigments and also coating and with its product aims to capture the UK chemical market. The company in order to create brand awareness needs to create brand value in UK so that it is able to stay ahead from its competitors. Competitor tends to forms and important part in the strategy making especially when firm enters a new foreign market. UK is a competitive market and therefore competition tends to be high in the prospective market and the company needs to keep track of its competitors and achieve a better place in the UK market place. Customers need: The customers here are the business markets mainly the big organizations, institutions and also government institutions. Unlike the consumer market the big institutions purchase the product in bulk and require manufacturing services on yearly or on six month basis. The demand for the chemical industry is quite high especially the specialty sector as it contributes highly towards the economic growth rate of UK. Thus the company should tackle the needs and demand of its customers. Company skill: the resources and skill of the company are essential to survive in an international market place especially when the market is like UK which is highly competitive. LumiCore is a subsidiary of giant Brazilian chemical company LumiChem and manufactures a broad range of paints, pigments and coatings. With its innovation and high skills it will be able to capture the market share in UK. Company skills are necessary for organizations to create a competitive advantage and stay ahead from its competitors both in foreign markets and also in the domestic market. Thus LumiCore will thus make sure to utilize all its skills and resources to perform positively in the foreign and highly competitive market. Collaboration: the company can form partnership or alliance with other major chemical companies operating in UK so to enhance its growth prospect and helps in generating awareness in the minds of its target customers. Context: LumiCore deals in global environment and after diversifying in the Brazilian market has planned to enter the UK market as it is categorized as one of the potential market with huge opportunity. Analyzing the PEST conducted in the previous area, it can be said that the political conditions of UK along with the economic factors favorable the growth of chemical industry in UK and at the same time encourages the foreign investors to invest in UK and its market and help it to grow its GDP and growth rate. Marketing Mix In addition to the 5Cs of marketing strategy, the 4Ps also plays an important part in the strategic formation of an organization. The 4Ps constitute of Product, Place, price and Promotion. In business marketing the 4Ps differs from that of consumer marketing. In business marketing the basis concept lies with the idea of doing business with the target market in the particular country. Product: Product in B2B marketing takes into consideration the benefits derived from the core products which are the feature the function and the benefits for the business customers; the product attributes includes the brand name, design, pricing, packaging and the country from where the business exits; support services also forms a part of the total product. The product introduced by LumiCore forms an integral part of chemical industry and the company plans to expand its product in specialty chemical sectors like paints, pigments and coatings. Price: The pricing objective for LumiCore in the UK market would be to maintain a stable market share which means the company is status quo oriented LumiCore would adopt the competitors based pricing strategy as UK is one of the most competitive market and its chemical sector tends to contributes towards the growth of economy. Therefore setting the price based on competitors pricing will be beneficial for the company and will be able to maintain a stable market share. Supply chain forms an integral part while deciding upon the pricing strategy by organization. In UK the manufacturing sector is highly regarded as an important component in the global supply chain. LumiCore supply chain will take into consideration all the necessary the factors so to manufacture quality product and reduce its cost to compete against the competitors and set is price based on the competitors based pricing. Place: LumiCore after diversifying its business in the Brazilian market has planned to enter the UK market and explore the opportunities available in the UK. The company initially plans to do business in England and latter shift in other cities in UK. Promotion: Promotions in B2B differs from that of consumer marketing and do not tends to involve all the form of promotional techniques. The big organizations and institutions are made informed about the new company in the city and the company can make colds calls or tie up with one or two organization to increase the brand value in the target market and generate awareness in UK chemical industries. Therefore through such technique the suppliers and the other organizations will be aware of the company. Direct promotional techniques are usually conducted in case of business marketing. Conclusion The UK chemical market is highly competitive and is expected to grow in the years to come. It has been seen that the chemical industry contributes towards the growth rate and helps in the GDP of the economy. LumiCore is a subsidiary of LumiChem and has already diversified its business in Brazilian market and after experience positive growth rate and profit the company has planned to enter the UK market and thus the above actions has been implemented to make sure that the diversification strategy results in a positive way for LumiCore. Seeing the potential growth rate in UK it can be concluded that investing in UK is good strategic option for LumiCore and utilizing its key resources and skill will help the company to build in brand value and brand name among the business customers in UK and latter expand into other cities of UK and enjoy a stable market growth share and is a feasible option for LumiCore. Reference BIS, 2002. ENHANCING THE COMPETITIVENESS OF THE UK CHEMICALS INDUSTRY. [Pdf]. Available at: < http://www.bis.gov.uk/files/file10002.pdf > [Accessed 1 November 2012]. Business Wire, 2012. Research and Markets: Specialty Chemicals in the United Kingdom: The UK Specialty Chemicals Market Had Total Revenue of $19.3 Billion In 2011. [Online]. Available at: < http://www.businesswire.com/news/home/20120718006452/en/Research-Markets-Specialty-Chemicals-United-Kingdom-UK > [Accessed 1 November 2012] CIA, 2012. About Us. [Online]. Available at: < http://www.cia.org.uk/> [Accessed 1 November 2012] CIA, No Date. United Kingdom. [Online]. Available at: < https://www.cia.gov/library/publications/the-world-factbook/geos/uk.html > [Accessed 1 November 2012] Hill, C. W. L. and Jones, G. R., 2007. Strategic Management: An Integrated Approach. USA: Cengage Learning. IHS, 2012. Overview of the Specialty Chemicals Industry. [Online]. Available at: < http://www.ihs.com/products/chemical/planning/scup/specialty-chemicals-industry.aspx> [Accessed 1 November 2012] Ivory Research. (2011). SWOT, PESTEL, Porter's Five Forces and Value Chain Analysis of Tesco. [Online]. Available at: http://www.ivoryresearch.com/sample36.php. [Accessed on 2 November 2012]. ReportSure, 2012. Chemical Market. [Online]. Available at [Accessed 1 November 2012] Read More