Principles of Marketing for Example Toga Toys - Essay Example

Principles of Marketing Introduction Toga Toys is a children education toy manufacturing company that aims to increase its sales in the near future. The founder of the organization, Mike Mitchel had claimed that the concern can significantly improve its revenue with the help of an appropriate marketing plan. The company was had manufactured the first fun game for children in the market in 1998, named SpelWhiz. However, overtime the popularity of the product has declined, as superior similar games are manufactured by its rivals, Global Toy plc and Kun Kids plc. Thus, in 2009 the company has decided to introduce the new “me too” version of the product. The business or marketing strategies of a company for the new product should be formulated on the basis of certain external market information. Thus, before formulating a marketing plan, Toga Toys should always acquire valuable information regarding the toy industry and external business environmental conditions (Baker and Hart, 2007). Figure 1: Systems and Sub Systems of Marketing Information (Source: Tyan and Drayton, 1987) The above flow chart shows that strategic decision making, controlling decisions and operational initiatives of an organization are highly influenced on the matters of external business environment. PEST Political Growth of new business firms indicates creation of greater employment opportunities. Thus the political authority of almost all the nations encourages new business growth and greater degree commercialization within their domestic economy. The toy companies are subjected to certain regulations imposed the government authorities. The Consumer Product Safety Improvement Act, 2008, the government of U.S. has stated that all the toy companies that manufacture toys of children under 14 years, should maintain the Federal Toy Safety Standards (Hoffman, 2010). Governments of other nations like China, India and U.K. have also implemented similar types of regulations. Economic Overtime, with rise in employment opportunities, the living standards of individuals across nations have increased. This has helped to augment the per person disposable income levels. Many toy companies conduct their manufacturing activities in emerging developing nations like China. This is because, the currency value of the country is low and companies are able to manufacture their products at lower costs (Hoffman, 2010). Social It is estimated that the proportion of internet users have significantly increased in the current era. Many children and young individuals prefer to spend time in social media over internet. This has lowered the popularity of outdoor and indoor sports among children. The academic pressures on children have increased in some nations and they have no time to play with toys. Additionally, it is also noted that children are becoming matured at a faster rate with the greater use of modern technological gadgets (Hoffman, 2010). Technological The state of technological knowhow has improved in all the countries. Business firms make use of the superior technology for lowering their manufacturing costs and increasing their production efficiency. Moreover, promotional activities of commercial firms have also undertaken a new dimension with the help of superior technologies (Hoffman, 2010). Porters Five Forces Bargaining Powers of Buyers (low) The bargaining power of the buyers in the industry is low in the toy industry. The switching costs of the consumers are very high when they shift from traditional toys to other substitutes like computer games. The consumers often do not bargain or rethink to purchase an expensive toy when their children strongly desire to play with it (Georgi and Mink, 2012). Bargaining Powers of Suppliers (high) The suppliers of the Toga Toys will provide raw materials for its output like plastic, paper and cardboard. The toy industry is highly competitive in nature and hence the bargaining powers of the suppliers within are industry is high to the small toy companies (Porter, 2013). Threat of New Entrants (low) The investment cost involved for settling up a new toy company is very high. The new company needs to have a sound distribution network in business. Moreover, the existing rivalry in the market is high and the potential rivals can always create strong entry barriers for the new firm like limit pricing. Thus, a threat of new entrant in the industry is relatively low (Porter, 2013). Threat of Existing Rivalry (high) The existing rivalry in the toy industry is very high. Products similar to Toga Toys are manufactured by many other giant multinational toy companies like Lego Group. The brand value experienced by these companies in the market ate high and these concerns often exercise monopolizing powers in the market (Porter, 2013). Threat of Substitutes (high) Children often prefer to use technological gadgets like video games for entertainment instead of traditional toys. Primary educational games are often played by children through computer. Al, such alternatives are potential substitutes of toys. Moreover, with the benefit of superior technologies the selling prices of electronic gadgets have significantly fallen and this has helped to increase its demand in the market (Porter, 2013). Value of Secondary and Primary Data In order to formulate an appropriate marketing plan, Toga Toys needs to acquire information regarding external business environment and toy industry forces through secondary as well as primary data resources. Secondary data is the formation previously collected by some other researcher. Such resources are available in electronic or published form. Toga Toys can collect valuable secondary information on market survey of toy industry in less cost and time. The secondary data published by the government agencies are highly authentic and reliable. Valuable statistical sales forecasting analysis can be conducted by Toga Toys through this method. On the other hand primary data can be collected by a company through its own customized research process. The information acquired from primary data sources is more detailed and authentic. After making few analyses on the basis of secondary data, Toga Toys can conduct the primary research on market in a more focussed manner. Primary data is collected through in-depth interviews, focus group sessions and questionnaire surveys. Application of the Information Toga Toys can make use of the collected secondary and primary information for framing marketing strategies for its company. The marketing plan of the company will be based on these strategies. The application of information collected from PEST and Porters models can be utilized in the company’s product, pricing, place and promotional strategies. Product The toy industry is highly competitive in nature and hence Toga Toys must design the features of its products on the basis of differentiation strategy. On the basis of this strategy, the company would make use of superior innovative strategies with which it would place its products unique in the market. However, the toys manufactured by the company should comply with the children safety standards introduced by the political authorities of the market. At the same time, the company should try to invent electronic educational or non educational toys for its customers. This is because; children in the contemporary world are more familiar to usage of electronic gadgets. Superior technologies should be used by the company for manufacturing its toys; such technologies should lower its production costs. Raw materials can be procured by the company at lower costs through good supplier relationships. Price The bargaining powers of buyers in the toy industry is low, hence the company can price some of its newly invented toys at a premium rate. However, it should be noted by the company that its brand value in the competitive market is comparatively low. Thus, the company should implement cost plus pricing strategy for most of its products. It can increase its product prices with rise in its brand popularity in the market. Premium pricing strategy should not be implemented by the company because the threat of substitutes and rivalry in the market is high. The company should aim to experience economies of scale in production through increased sales. Place The distribution network of the company should be wide and strategic. The company can aim to expand its business branches in the emerging economies of the world like Russia and China. Moreover, Toga Toys would be able to produce at low cost if it establishes its business branch in a low currency country like China. Promotion Since, the industry in which Toga Toys operates is highly competitive in nature; it would be rational for it to invest large sums of money in promotional purposes. The proportions of internet users are significantly increasing over time. The company should make its own official website through which it would promote its brand to a wide base of customers across different nations. At the same time it can advertise its brand name through social networking sites like Facebook and Twitter. Special discounts can also be provided by the company to its loyal customers. Concessions can be given to the large retailers for bulk purchases. By implementing the above strategies the company would surely be able to increase its sales in the near future. Task 2 The essay throws light on the business of Toga Toys. The founder of the company, Mike Mitchel, desires to augment the sales of its toys. It is true that external business environment analysis and a detailed insight of industry forces would help the company frame marketing strategies. However, it is equally important for the company to understand the characteristic features of its customers. This is because; the marketing policies of the company will become more efficient if it is based on the consumer features and preferences. Market Segmentation The characteristic features of the consumers can be analyzed in a more efficient manner with the help of a market segmentation process. In the contemporary business world market segmentation is considered to be a crucial tool of marketing strategy. It is the process by which a company segregates its buyers in terms of different groups, such that the characteristic features of the consumers in each group are similar. The market demand faced by a company is always heterogeneous in nature. The demand trends and pattern of each consumer is way different from the other. Market segmentation helps in isolating the entire heterogeneous market demand of a company in terms of separate homogeneous groups. The predicted response of the consumers from each homogeneous group is similar and hence it helps the companies frame the marketing strategies separately for each group. All the consumers in a market can be subdivided in terms of geographic, psycho-graphic, demographic, psychological or behavioural variables factors. Advantages of Market Segmentation The toy industry is growing around the world and at present more than 1000 companies operates within it. Overtime, the discretionary spending powers of the consumers have significantly increased across nations and this has enhanced the demand for entertainment products like children toys. The demand for toys has increased overtime with rise in population base of countries and growth in the proportion of child population between 2 to 12 years. Thus, the above review can be claimed that Toga Toys will need to frame marketing strategies for a wide base of customers. Without the essence of market segmentation, the company would not be able to target its most potential buyers in the market. With the help of market segmentation Toga Toys would be able to frame rational polices in business for its existing products and brands. It will also help the company appropriately position its products to the potential buyers. Existing gaps in the market can also be identified by the company through appropriate market segmentation. The company can formulate the upcoming new opportunities in the market through this gap analysis and accordingly launch new products in the market (Georgi and Mink, 2012). Demographic Market Segmentation This is the process under which, the market is segmented on the basis of demographic factors like age, gender and income. It is noted by researchers that the demand and perceptions of the consumers are similar for specific demographic factors (McDonald, 2012). Physiographic Segmentation This process of segmentation is also popularly known as behavioural segmentation. In this process the consumers are segregated in terms of their behavioural attributes. This theory states that the lifestyles of the consumers helps to determine their attitudes, activities and expectations (Atikian, 2013). The above chart shows that lifestyle, social class and personality are the three primary factors of psychographic segmentation. The demand created by the consumers significantly depends on their lifestyle. As, individuals who are retired professionals demand less transportation services than the working individuals (McDonald, M., 2012). The adventure loving individuals will demand for more trekking trip services more than the less adventurous individuals. Social class also significantly creates an impact on the consumers demand. The socially high profile consumers often prefer to purchase expensive products. The theory of status symbol consumption in economics claims that rich consumers often prefer to buy more expensive products for exposing their wealth to others. This is also known as conspicuous consumption. On the other hand, individuals belonging to a low social class prefer consuming useful products at relatively lower costs. Social class to which an individual belongs is often influenced by their income (Atikian, 2013). Market can be segmented on the basis of the geographical locations of the consumers. This is because the preference pattern of the consumers significantly depends on the climate and geographical features of their native location. Like if a company sells woollen products then its demand in cold countries in the Arctic zones will be more than the demand in tropical nations. However, the children toys manufactured by Toga Toys will be equally preferred by consumers from all geographical locations. Thus geographical segmentation is not appropriate for the company (Czinkota and Ronkainen, 2007). Toga Toys Market Segmentation The most suitable means of segmentation technique should be adopted by a company on the basis of its product and business features. From the above context it can be analyzed that market demographic market segmentation technique will be most appropriate for Toga Toys. Income: The income of a buyer determines his purchasing power. The company should analyze that its most expensive toys will be potentially affordable by the rich or high income consumers. This is because rich consumers will be less price sensitive than the middle or lower income buyer’s .The middle and lower income consumers of the market would aim to purchase less pricy toys for their children. Toga Toys can segment its market on the basis of two income groups, namely superior and inferior income groups (Atikian, 2013). Gender: The nature of demand created by the consumers is often dependent on their gender. Like young boys generally prefer to play with electronic sports toys like cars and guns. Action figures and children vehicles are more preferably liked by young boys. On the other hand, young girls like to play with dolls, stuffed toys and art & craft articles. Thus, in terms of gender of children, Toga Toys can classify its clientele in two groups. The “me too” version of the product would be targeted to the children as well as their parents. Age: Children’s preference for toys depends on their age. It is likely that the primary education toys of the company would be potentially purchased for children in the primary schooling age. If Toga Toys aims to manufacture toys for children above 12 years old, then it should always try to manufacture new products like puzzles and outdoor sports products. The company can segment its target customers on the basis of three age groups. Namely, these three groups can be 2-8 years, 8-12 years and 12-16 years. The target customers of the company’s newly launched senior puzzles will be the children between 12-16 years. On the other hand, its traditional primary educational toys would be manufactured by the company for children between 2-8 years (Hennessey, 2004). Conclusion The above context proves that market segmentation can always be beneficial for Toga Toys. The company can choice its target clientele through this process. The firm would be able to crystallize the needs of the customers in each group of a segmented market. The marketing activities of the company will become more economic and efficient through this process. If some segments of consumers are less satisfied with the products of Toga Toys, it can frame specific policies for them with the help of market segmentation. Thus, Toga Toys will surely increase its sales after making the marketing plan on grounds of external business environment, industry force and market segmentation analysis (Quazi, 2001). Reference List Atikian, J., 2013. Industrial shift: The structure of the new world economy. Basingstoke: Palgrave Macmillan. Baker, M. and Hart, S., 2007. The marketing book. London: Routledge. Czinkota, M.R. and Ronkainen, I A., 2007. International marketing. Toronto: Thompson Learning. Georgi, D. and Mink, M., 2012. The quality of electronic customer-to-customer interaction. Journal of Retailing and Consumer Services, 20, pp. 11–19. Hennessey, J. 2004. Global marketing strategies. Massachusetts: Houghton Mifflin. Hoffman, C., 2010. External analysis. [pdf] Westminster College. Available at: [Accessed 3 May 2014]. McDonald, M., 2012. Market segmentation: how to do it and how to profit from it. New Jersey: John Wiley & Sons. Porter, M. E., 2013. On competition. Massachusetts: Harvard Business Press. Quazi, H.A., 2001. Sustainable development: Integrating environmental issues into strategic planning. Industrial Management & Data Systems, 101(2), pp. 64-70. Tyan, C. A. and Drayton, J., 1987. Market segmentation. Journal of Marketing Management, 2(3), pp. 301-335. Read More