Markets, marketing and strategy - Essay Example

Markets, marketing and strategy Questions about the assignment The present analysis of the strategies and marketing tools of the merger between the two companies, based on their press releases, will be designed through the use of the two exact tools – PEST analysis of the general strategy and brands analysis. The aim of the analysis is to clarify the principal issues, which the companies for the merger face at present, to forecast the possible changes the merger will bring and offer possible solutions for the issues described. PEST analysis The core issue is the merging of the Reckitt Benkniser with the Boots Healthcare International. Reckitt Benckiser is the world leader in household cleaning, excluding laundry, and has a major presence in health and personal care. The Company is truly global, with over 60 operating companies and over 40 manufacturing facilities worldwide and has sales in 180 countries. BHI is a consumer healthcare business largely selling over the counter products. In the year to March 2005, BHI reported net revenues of £523m (+4% on 2004) and Operating Profit of £88m (+9% on 2004). PEST Analysis. A PEST analysis is an analysis of the external macro-environment that affects all firms. P.E.S.T. is an acronym for the Political, Economic, Social and Technological factors of the external macro-environment. Such external factors usually are beyond the firm’s control and sometimes present themselves as threats. (Vitale 2001, p. 27) Speaking about the political factors of the merger to take place, the principal ones to consider are trade regulations and tariffs, as BHI performs business in the three different locations all over the world, as well as such merger may be taken as the striving of both company for creating a monopoly. Taxation should also be taken into account; however, as BHI itself used to successfully run all three businesses, and the European Commission has approved on the merger, these factors are not threats here, though should be kept under control. Economic factors are also present here, as the merger presupposes intervention into business in other countries; however, as far as the businesses perform successfully, there is no threat of getting into worse infrastructure quality or facing difficulties with employment; Reckitt Benckniser has to closely consider the skill level of workforce, especially in business unit operated by BHI in Thailand, which may appear an opportunity for quality improvements. Social and technological factors here don’t represent any significance, as the businesses have been performing for a certain period of time and have both acquired stable position on the market. From the social viewpoint the merger may offer salary improvements for the workers, while higher forecast profits will contribute into technological innovations and thus better cost-effectiveness of production. Identifying PEST influences is a useful way of summarizing the external environment in which business operates. However, it must be followed up by consideration of how a business should respond to these influences. Speaking about more political factors, which may potentially influence the merger, it should be noted, that the healthcare area is becoming the object of closer attention on the side of the governmental structures. In order to comply with the requirements of the healthcare and environmental legislation of the country, as well as globally, it is first of all, necessary to closely study the legislation of each country. In order to make the compliance with the legislation better and closer, it will be useful for the merger to organize public campaigns which will let the consumers know about their products through the actions in relation to public hygiene and healthcare. The company has to follow up the necessity to install independent monitoring systems to ensure the compliance with the environmental legislation. Economic factors should be viewed on the side of expenditures per capita. With the planned growth of revenues £ 1 billion, and the desire of Reckitt Benckniser to keep the operating units, which BHI possess, it can be forecast that the per capita expenditures may decrease for the following reasons: first, the expansion of the production level will ultimately bring the fixed costs down; second, the acquisition of the technological innovations, which BHI possess, and their implementation for the products which Reckitt Benckniser owns will promote the decrease of expenditures per capita. Among the social factors which are to be taken into account with the healthcare and personal care products these are the employment factors, especially in relation to the units outside the UK. It is stated thoigh, that Reckitt Benckniser plans to keep all BHI’s operating units abroad, though it is equally important to pay more attention to the skill and education of the workforce. It is also probable, that with the merger, the shortening of the management board will be necessary to optimize the production and management processes. Simultaneously, the growing social factor to be taken into account, and which may ultimately appear to be profitable for the merger, is the growing concerns of the teenage health, especially skin problems, which one of the leading brands Clearasil may be able to solve. Technologies’ issue presupposes the use of the new trade channels to popularize the brands. For now BHI’s beneficial feature is the use of the wide range of the retail trade channels. It is beneficial and up-to-date to develop an internet network of distribution the products made by both Reckitt Benckniser and BHI. It is suggested, that with the merger, both companies create a single Internet-based distribution channel, which will offer the brands owned by both companies, reduce the expenses and promote both companies’ products equally. The result of the analysis shows that the merger between the two companies described is a means of: 1. Eliminating rivalry between the two companies; 2. Acquiring new technological solutions for the both companies’ products; 3. Expanding the market shares of both companies; 4. Creating new trading channels; 5. Creating the basis for the growth of the revenues. The main threats which have to be taken into account are those of taxation between the countries, as well as the legal issues of market expansion. Market analysis is useful as the basis for predicting the issues of any merger between any two global companies. The importance of this analysis is in creating stable strategy for keeping the marketing share which is already owned by the company’s brands, as well as the innovations and new technological solutions. Brands analysis The segment which Reckitt Benckniser plans to enter is the one of the health products (medicines). The segment is perspective not only for the fact, that BHI takes rather big part of it, and operates internationally, but for the fact that first of all, the segment of medicines is perspective as it is, as medicines and related health products are constantly needed, and will never lose their popularity; second, the combination of healthcare and personal care products makes this segment even more attractive and simultaneously, unavailable for the competitors. Geographically this segment will possess global scope, and its potential consumers will be retail buyers. Combination of these two kinds of products will possibly make them cheaper and thus more affordable for the ultimate consumers all over the world. This segment of the market is meant for the average consumer with the average income. The merger of the two companies will allow expanding the range of consumers. Despite the fact, that BHI is the company, which possesses less market share, than Reckitt Benckniser does, its brands (Nurofen, Ibuprofen, Clearasil) are widely known and are stable leaders of the personal and healthcare market. Nurofen was first launched in 1983 and has become the leader of the analgesic segment in the UK. The brand is available in more than 50 countries and can be easily called ‘superbrand’. It is equally important, that Nurofen is the product known for being constantly innovated, as for example, Meltlets, which does not need water to act. Clearasil is another famous brand which BHI owns. This brand has been made popular for being invented to solve the teenagers’ problems with skin. With this problem widely spread, the brand has immediately acquired popularity. Clearasil is the leader of the global market in skincare, which is directly related to medical products, and is probably a medium between medical and personal care product, being safe and effective at once. The brand is available universally, and it has been made successful through the wide range of products included into this brand, as well as through the use of various trade channels. Strepsils is the leading throat care product, which was launched in 1958 and is popular for its smooth and fast action. Thus, it has become clear, that for Reckitt Benckniser the merger with the company the owner of these brands is the profitable path to elimination of the rivalry in this segment of the market. The segment which Reckitt Benckniser plans to enter is the one of the health products (medicines). The segment is perspective not only for the fact, that BHI takes rather big part of it, and operates internationally, but for the fact that first of all, the segment of medicines is perspective as it is, as medicines and related health products are constantly needed, and will never lose their popularity; second, the combination of healthcare and personal care products makes this segment even more attractive and simultaneously, unavailable for the competitors. Geographically this segment will possess global scope, and its potential consumers will be retail buyers. Combination of these two kinds of products will possibly make them cheaper and thus more affordable for the ultimate consumers all over the world. This segment of the market is meant for the average consumer with the average income. The merger of the two companies will allow expanding the range of consumers. The brands described are not only constantly innovated to meet the modern requirements and satisfy the demands of the consumers. The product life cycle by which the brands described may be characterized ay be called as being mature – it is, perhaps, the common stage for all markets. It is in this stage that competition is most intense as companies fight to maintain their market share. Here, both marketing and finance become key activities. Marketing spend has to be monitored carefully, since any significant moves are likely to be copied by competitors. (Onkvisit & Shaw 1996, p. 229) The maturity stage is the time when most profit is earned by the market as a whole. Any expenditure on research and development is likely to be restricted to product modification and improvement and improve the production and quality. This is the brightest characteristics, to characterize the brands, and the products which now belong to BHI. By merging with BHI Reckitt Benckniser will be able not only to keep its marketing share, as it is usually necessary at the maturity stage of the product, but to expand it and to create the new products with the technology, which will be opened by BHI to Reckitt Benckniser. The competitiveness of the BHI brands is doubtless, which is proven but its long-term stable success on the market, its global popularity through the skillful use of the trading channels and wise advertising and marketing strategy. Reckitt Benckniser has revenue growth of 7% per year since 1999, which is the evidence of its successful branding and product promotion. Knowledge in the field of strategic analysis is either uncertain or incomplete. An expert in the field generally will not have all data at his disposal. In particular, many data concerning the environment of the enterprise, such as data of competitors and suppliers, will sometimes be missing or is difficult to uncover and thus cannot be taken into account. But also data from within the own enterprise is not always readily available. Whatever the reason for this lack of data may be, the expert is expected to generate an analysis the best he can based on data that is available. (Wilson & Gillidan 2005, p. 141) Thus, the analysis performed in this work is the introduction and the basis into deeper understanding of the marketing processes and factors, which influence both companies, and will ultimately, impact them as a merger. References Graham, J 1995, ‘Is marketing really a fault’, ABA Banking Journal, vol. 87, no. 4, p. 12-25 Hills, Gerald E 1994, Marketing and entrepreneurship, Quorum Books, Westport. Jackson, Anna Lee 2004, ‘Brand me: Marketing techniques to make you stand out’, Black Enterprise, vol. 35, no. 5, p. 78 Onkvisit, Sak & Shaw J.I 1996, International marketing: analysis and strategy, third edition, Prentice-Hall. Vitale, Rob 2001, Business to business marketing: analysis and practice in a dynamic environment, South Western College. Wilson, Richard M.S & Gillidan, Collin 2005, Strategic marketing management, third edition: planning, implementation and control, Butterworth-Heinemann. Read More