Implementation of Marketing Strategies - Assignment Example

? Implementation of Marketing Strategies Table of Contents Table of Contents 2 0 Introduction 3 2.0 Identification and prioritization of the current issues and challenges 3 2.1 Industry as a whole 3 2.2 The current market position 4 2.3 The nature of competition 5 2.4 Suppliers 5 2.5 Current and future opportunities and threats 6 2.6 Capacity to meet market demand 6 2.7 The effectiveness of existing marketing and marketing mix strategies 6 2.8 Current strengths 6 3.0 Recommended marketing strategies 7 4.0 Implementation of strategies through use of appropriate application of Marketing Models, Tools and Market Deliverables. 14 4.0.1 Application of product based management model 14 4.02 Application of the marketing strategies 16 Place 17 Promotion 18 5 Outline of the research plan 18 Reference 20 1.0 Introduction Marketing strategies are developed after careful consideration of external forces and internal strength of the organization to counter such external forces (Aaker, 1991). The present research study endeavours to produce ways to implement marketing strategies for British Sugar. British Sugar was founded almost 100 years back. Today the company can boast about being one of the leading sugar producers in the United Kingdom. The company is into several types of products like sugar, aggregate, animal feed, bio ethanol, electricity, food centre, tomatoes, TOPSOIL, and LimeX. 2.0 Identification and prioritization of the current issues and challenges 2.1 Industry as a whole The sugar production industry sourced the raw materials over the past five years. United Kingdom is highly dependent upon the global sugar market. This kind of over dependency on the global sugar market, makes the UK sugar market susceptible to huge fluctuations in production, supply, and other factors like the weather conditions and the prices in the internal sugar market (Armstrong and Schultz, 1992). United Kingdom was slow to realize that the sugar industries need to have some kind of reform. This is the reason the sugar reform happened after much delay, as late as 2006. This reform which is supposed to create facilities for the sugar market has in turn created a lot of problems, like imposing various kinds of quotas, various kinds of import tariffs and export tariffs. The imposition of the various tariffs has created a lot of problems (Brown and Dant, 2009). For example the companies which are small in size and also do not have very high turnover have problems paying innumerable tariffs. This adds to the production cost of the companies. Statistics indicate that the production of the sugar beet has fallen sharply across the whole of European Union. For this reason a lot of states in UK have decided to substitute beet sugar for ethanol and other kind of bio fuels. Despite the fact that the sugar industry is experiencing increasing pressure to keep the costs of production as low as possible together, compounded with dwindling profit margin, the sugar business still remains as one of the most vibrant business in UK (Day and Montgomery, 1999). 2.2 The current market position The UK sugar market excluding artificial sweeteners, but including sugar and spice is dominated by two firms which are British Sugar and Tate & Lyle. These two firms have a combined market share of 75%. This indicates that the national sugar market is highly concentrated. Although the overall sugar market of Europe is not as concentrated as United Kingdom (Dillon, 2001). The very high concentration is due to the strict regulatory reforms that increased the tariffs, which in turn has decreased the competition. Unlike the other competitor companies like Ab Sugar, the company alone has the privilege of holding the whole quota of the European Union. British Sugar alone caters to a market which is larger than the market served by the rest of the competitors in all respects. This explains that British Sugar is in a better position compared to competitors in terms of exposure to market. Unlike the competitor like Tate & Lyle and different smaller companies which resort to outsourcing of sugar from countries outside of European Union, British Sugar resources from within European Union (Gale and Chapman, 1994). This explains that unlike the competitors, British Sugar enjoys the ability to control the cost of outsourcing, since the suppliers are within EU, which is not subject to price fluctuations. The suppliers situated outside EU (European Union) are prone to international price fluctuations, so British Sugar has very few suppliers in its supply chain who are outside of EU. 2.3 The nature of competition The nature of competition is dependent upon the number of players in the market as well as the rules and regulation of sugar industry. The competition in the UK sugar industry is concentrated within few companies only. The high tariff cost has made the sugar industry unsuitable for new players and marginal players (Iacobucci and Hibbard, 1999). The inability to surpass the high cost of entry has made it impossible for new entrants to start business. Thus very few market players coupled with unfavourable reforms has tilted the sugar business in favour of the conglomerates like British Sugar. 2.4 Suppliers British Sugar is supplied by around 3600 growers. The company works closely with the growers, advisers, and haulers. The suppliers are cherry picked based on historical records regarding the quality of supplied raw beet, ability to meet and function within strict deadline (Morgan and Hunt, 1994). The suppliers are provided with knowledge and experience and capital from time to time to improve the quality of the produce. British Sugar itself also acts as suppliers of intermediary products to various food processing companies. Fig 1: Supplier engagement programme Source: (Reichheld, 1996) 2.5 Current and future opportunities and threats The market share of British Sugar is larger and more diverse that the market share of the rest of the competitors. It is estimated that the market share of British Sugar will continue to grow at an annual rate of 5% on an average for the next 2 years. Apart from that the company is set to increase the supplier base. The increase in the supplier base leads to further reduction in production cost due to competitive pricing among the suppliers (Rust et al. 2000). There are as such no threats to British Sugar except the huge demand tariff rate and quotas. The tariff costs add to the production cost significantly. 2.6 Capacity to meet market demand The company is well equipped and stocked to meet the current demands of the market. It is estimated that the industry demand for sugar in UK alone is 1429000 metric tons per year. British Sugar alone has the capacity to cater to more than 60% of the demand (Slater and Olson, 2001). Apart from the the current plans are underway to increase the production capacity to cater an extra 15% of the industry demand. 2.7 The effectiveness of existing marketing and marketing mix strategies British Sugar enjoys a commendable position in the British Sugar industry. This indicates that the company does not have to face the heat of the competitors. Given the fact that the market share as well as the profit margin of British Sugar is highest among all the sugar companies in European Union, it can be said that British Sugar has an effective marketing and marketing mix strategy (Suroweicki, 2009). 2.8 Current strengths Unlike the competitors, British Sugar was quick to realize the benefits of product diversification. British Sugar does not deal with sugar or sugar based products only. The company has a diverse product line like aggregate, animal feed, bio-ethanol, electricity, the food centre, tomatoes, TOPSOIL, Limex. Apart from diverse products, the company also enjoys more than 75% of the UK sugar market turnover (Van et al. 1996). The diverse product line compounded with diversified market portfolio gives British Sugar the ability to reduce risks. It market share is spread beyond the boundaries of EU. This gives the company the tactical advantage of having a well controlled international exposure. 3.0 Recommended marketing strategies Types of strategies Problem Strategies Recommendations Marketing segmentation strategies The market segmentation strategies indicate that there is as such no segmentation based on the psychographic profile of the customers. Neither there is any kind of behavioural strategy. There are only 2 kinds of strategies (Ahuja and Lampert, 2001). The strategies are geographic segmentation and the other type of segmentation is demographic segmentation. The market segment strategies can be done across four different verticals which are geographic segmentation, demographic segmentation, psychographic segmentation and behavioural strategies (Bagozzi, 1975). The demographic strategies include age, life cycle stage, income and the social class. The geographic segmentation includes the segmentation of the areas according to the sales generation and other types of factors like supplier segmentation (Chaudhuri and Holbrook, 2001). The psycho graphic segmentation includes mapping the customers based on lifestyle, personality, and values. Life style can be mapped across factors like culture, sports, interests and opinions. Personality can be mapped across factors like compulsive, gregarious, ambitious, and authoritarian. The values can be mapped across different types of values like the principles oriented, status oriented, and action oriented (Dickson, 1992. Since there are no psychographic segmentation as well as behavioural segmentation, these two types of segmentation can be applied (Fournier, 2002). These two types of segmentation can be done across 3 different groups which are suppliers, distributors and the customers. The customers can be further subdivided into retail customers and individual customer type (Hunt and Morgan, 1995). The psychographic profiling and the behavioural segmentation will help to understand which type of customers buy which kind of products more often. For example the retail giants like the Tesco and Sainsbury and Wal-Mart can be requested to send the data regarding the sales pattern of the products. The sales pattern data can be correlated with the customer characteristics like lifestyle, and personality and values (Hunt and Morgan, 1995. This will help to create a perception map. This perception map will help to identify which product is placed in which quadrant. Types of strategies Problem Strategies Recommendations Targeting strategies British Sugar has been using undifferentiated targeting strategy and concentrated targeting strategy. There are no direct proofs that will indicate that the use of the two types of strategy has become ineffective. There are although various indications that point that the number of firms and business and companies that relied on British Sugar has decreased sharply over the last 4 years (Milne and Rohm, 2004). There can be various reasons, but it is believed that the targeting strategies are becoming inefficient in the present business context. There are three different types of targeting strategies, which are undifferentiated strategies, concentrated targeting, and multi segment targeting. In undifferentiated targeting the whole market is viewed as one group and there is no individual segment (Porter, 1987). This type of targeting strategy involves the use of single marketing strategy. It is already said that British Sugar mainly follows demographic segmentation and geographic segmentation strategy. This indicates that the competition in the UK sugar industry is very limited, so the use of undifferentiated targeting strategy becomes even more convenient. Along with undifferentiated targeting strategies, there is another set of targeting strategy that can be used, which is the concentrated targeting strategy and multi segment targeting strategies (Reinartz and Kumar, 2000). The use of concentrated targeting strategy is helpful only when the company is serving a particular market niche. It is not possible to cater to a niche market for a conglomerate like British Sugar. So the concentrated strategy in case of British Sugar. Multi segment strategy is still not applied. As already discussed in the problem statement, the number of large scale enterprises and companies that relied on British Sugar for supply of sugar has decreased, so there is a chance to apply multi segment strategy. The companies and firms that bought in bulk amounts from British Sugar need to categorized according to the firm size, type and growth, not necessarily in that order. The targeting strategies should correlate with the sugar for that particular company depending upon the size, type and growth prospects (Sheth and Sisodia, 1999). The companies which have better growth prospects and those companies which are from those industries that have increased chance of expansion should be targeted first of all. Then those companies will be targeted which have low growth prospects and also belongs from those companies which have lesser chance of expansion. There are almost 500 companies who get supply from British Sugar (Srivastava et al. 1998). Among them almost 40% have more chances of witnessing higher growth, 30% has medium chances of growth and the rest 20% and 10% of the companies have little to no chances of growth at all (Szymanski, D. M., Bharadwaj, S. G., and Varadarajan, R., 2012). British Sugar should concentrate on targeting those companies which have the highest chance of growth first, followed by companies which have medium growth rate, then last of all the companies which have least possibility of growth will be targeted. Types of strategies Problem Strategies Recommendations Positioning strategies The position is associated with perception gaps. The company may try to position its product in one way, while the customers may perceive the product in a different way (Vence, 2002). This kind of perception gaps is one of the most basic problems associated with positioning strategy. Sometimes it may happen that the place the company is trying to position its products is already occupied by product of competitor companies who have better value proposition. The various kind of positioning strategies are positioning by price and quality, positioning by use or application, positioning by product user, positioning by product class, positioning by cultural symbols, positioning by competitor. British Sugar can apply symbolic positioning strategies. This brings the discussion to the positioning strategy done by Bourneville. Bourneville connects with the self image or ego or belongingness of the customer by using the famous ad tag line “You have to earn it”. In other words this ad indicates that only selected few who can “earn” to have the product. Likewise British Sugar should adopt a positioning strategy that connects with the ego or self image of the customer. Since this kind of product is not age specific or gender specific, so the product promotional strategies should be designed in such a way that it can connect with customers of any age and gender. 4.0 Implementation of strategies through use of appropriate application of Marketing Models, Tools and Market Deliverables. 4.0.1 Application of product based management model The product based management model chosen is BCG matrix. There are various types of project management model like the Barksdale and Harris Combined Portfolio, the GE business screen, the shell directional policy matrix and the Ansoff Matrix. The choice of the BCG matrix has special purpose. The use of this particular model will help to understand the way British Sugar can position its products based on proper market segmentation and proper targeting strategies (Ahuja and Lampert, 2001). This model will help to understand the divestment strategy of the products performing below the margin. The divestment revenue can be used to improve the market share of the upcoming products. Apart from that it will also help to understand how to convert the upcoming products into full fledged successful products or in other words make them act like cash cows. BCG matrix Source: (Bagozzi, 1975) British Sugar has a diverse line of products from sugar, aggregate, animal feed, bio ethanol, electricity, the food centre, tomatoes, TOPSOIL, LimeX. Now all of these products neither have the same market share nor have high growth rate. So the strategies is shelving off the low performing products through disinvestment and use the proceeds from the disinvestments to increase the market share of the newly launched products (Day and Montgomery, 1999). It is already discussed that the company is finding ways to reposition its brand name for the bulk category buyers. The new products are meant for the bulk category buyers. The strategy is to divest the products like the animal feed, tomatoes, and use the products for the upcoming products like sugar, bio ethanol, TOPSOIL. BCG matrix of British Sugar The first quadrant (question mark) products are sugar, bio ethanol, TOPSOIL. The second quadrant (star) products are aggregate. The third quadrant (cash cows) products are Electricity, the Food Centre, Lime EX. The fourth quadrant (dog) products are Animal feed, tomatoes, conference facilities. The products like Sugar, Bio ethanol and TOPSOIL are to be repositioned for the bulk buyers. Through the sales of the products and services like Animal feed, tomatoes, Conference facilities, it is estimated that only one fourth of the initial cost can be recovered for the 1st year (Fournier, 2002). The aim is to convert the 1st quadrant (question) mark products into 2nd quadrant (star) products in a matter of 2 years and then convert into cash cows in three years. 4.02 Application of the marketing strategies The marketing strategies applied are explained with the help of the 4Ps of marketing which are product, price, promotion and the place. Product As shown in the BCG matrix, the products which are in the low growth and the low market share quadrant will be disinvested. These products have shown poor performance over the last 5 years (Milne and Rohm, 2004). Despite repeated new measures starting from better market segmentation, targeting strategies as well as promotional strategies, these products have shown below margin improvement. The new products introduces are sugar, bio ethanol, TOPSOIL. Price Since the products are meant for the bulk buyers, so the price is set in such way that with increasing ordering quantity, the price will decrease significantly. As of now for every tonne of bio ethanol, the price demanded is ? 10000. For every 10% increase in ordering quantity, the price will decrease by 5%. Then for every subsequent increase of ordering quantity or 5% and more, the price will be reduced for 2.5%. The price reduction strategy is only estimation for the products. The actual reduction of the price for the products will be dependent upon the type of buyer and the geographic location. Different geographical locations are supposed to have different cost of living. Moreover it is already mentioned, that the bulk buyers will be separated by the type of company and the type of industry to which it belongs and also by the growth probability. So the pricing of the products will be subject to all these factors (Brown and Dant, 2009). Setting and changing the price does not guarantee that the customers will respond to the change in the price in the way it is expected to be. In order to make sure that the prices are paid, direct marketing techniques will be applied. Direct marketing techniques help to produce greater effect on the targeted customers. Place The selection of the right channel partner is linked with the customer satisfaction. This is because of the reason that an efficient supply chain makes sure that the raw materials for the products are delivered with the highest quality. Efficient distribution channels also make sure that the products get distributed to the designated outlets without suffering deterioration in the product quality. Since sugar and sugar by products are highly susceptible to natural degradation, so it is an absolute necessity that the best channel partners are chosen for both supply and distribution (Day and Montgomery, 1999). The channels partners are going to be evaluated based on historical records like performance efficiency, ability to function within deadlines, quality certifications of the suppliers. There will be three types of distribution like the intensive distribution, selective distribution, and exclusive distribution. Instead of going for a multi stage channel type, the channel types will be a two stage type (Dillon, 2001). With a two stage channel type it is much easier to control and monitors the distributors and suppliers. There will be seven different types of retailers like department stores, supermarkets, discount sheds, speciality shops, convenience, markets and cash and carry warehouses, catalogue showrooms. Promotion The promotion will be done by the help of four different types of marketing communication mix. They are media advertising, trade promotions, direct marketing, publicity and public relations. Both print media as well as online media is chosen. In print media, newspaper and magazines will be chosen. While in the online various kind of online platforms will be chosen like the social media platforms, the online video websites, various kind of blogs (Ahuja and Lampert, 2001). Other media that can be chosen are like paid inclusions, various search engine optimization techniques. Apart from that online product review forums can also be used. Trade promotions can also be conducted. The different states conduct trade promotions at different times in a year. British Sugar can use these trade promotions to promote the brand image and name. The trade promotions have people coming from different places of the country. Apart from that the company can also apply direct marketing techniques. The direct marketing techniques can be used if the customers are targeted using the emails and the normal mails. British Sugar can appoint a public figure to announce the introduction of new products. 5 Outline of the research plan It is not possible to get direct information regarding the various kinds of strategies followed by British Sugar like the marketing strategies, targeting strategies and the promotional strategies. For this reason the annual report of the company is analyzed in order to find credible information that can be applied to the research. It is much easier to gather information from the small and medium scale enterprises. So the different marketing, promotional and targeting strategies are recommended by studying the business pattern of the SMEs. It was not easy to gather the information from the SMEs also, since most of them do not publish annual reports. Therefore, a more direct approach is chosen, which is talking directly with the managers of the SMEs. 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