Retail Marketing: the Mega Mart Retail Company - Case Study Example

Q1. APPLICATION OF THEORETICAL CONCEPTS OF RETAIL MARKETING MIX AND CURRENT POSITIONING STRATGEY OF MEGA MART The Mega Mart Retail Company was founded in the year 1999 and is an independent retail company. The company has been highly successful in attracting the international customers, worldwide and has successfully gained a prominent market in the retail industry. The next sections presents a detailed analysis of the market conditions for the company, the opportunities and threats, the current position and management strategy of the company and the forces of change that are required to build a more efficient and successful organization. This section presents the SWOT analysis for the company and other retail marketing concepts based on product, price, place, and promotion. 1.1 SWOT ANALYSIS Strengths – 1. The company commands significant lead in retail sector and is also a well known international company and its products have been able to set their own brands in the international market up till now. 2. The company has a flexible and customer oriented product history with a considerable development in the sector and they have increased the market share with considerable figures. 3. The company products received good reviews from the countries where they have been launched and therefore have a good backup. Weakness – 1. There are a number of competitors that exist in the market which have built up a stabilized business with the local as well as international customers. 2. The relatively high cost of the product in comparison to the local options that are easily available in the market is a strong point which in not in favor of the product. Opportunities – 1. Can shift the prices to lower limits in markets where the absence of other international brands cannot command or interfere in the market. 2. The arrival of new products by the company into smaller and newer markets can open up doors to many other business opportunities for the company. Threats – 1. High expectations from the suppliers and end users. 2. Presence of local manufactures may lead to a total wash out of the company products. 3. Customer expectations to rise with time which may lead to additional costs for the company. 1.2 Retail marketing Concepts applied to Mega Mart This section will present the product, price, place, and promotion marketing mix issues and other customer oriented strategies applied by the company in order to gain customer base. Product - In the current scenario, with a large range of competitors in the industry, Mega Mart in order to increase its market share aimed to attract more customers through attractive product features like packaging. Proper packaged products and environment friendly and authenticity marks and quality concern seals grabbed the customer attention in the market full of duplicate and lower quality products, (Jacobson & Aaker, 2000). Price - Studies show that a number of top notch companies managed to capture market share with increasing product prices. Mega Mart being a strong brand in some markets can afford to increase the product price and capture more consumer attention, (Ehrenberg & England, 2000). However, the management decided that price hike had to be accompanied by some added features that will attract the consumer like - better quality, attractive packaging, free personalized services etc. Place – This aspect concerns with the distribution channels through which the clients buy and receive the company products. To carry this task step forward, the company shaped up some market growth local teams that acted as distribution channels. The aim of these localized company distribution units is to shape up the advertising approach, strengthen the links with the local retailers and market promoters, and at the same time unlock new streams for product distribution. Promotion - The company in order to increase the market share followed some promotional product programs like promotional literature and brochures, printed advertisements, advertising, providing verbal information about the product, seminars about company information and other products that added value to the product image and increased the market share for the company, (Keller, 1998). 1.3 Other Marketing Mix Solutions 1. Leadership –This mainly required the plans could be best fitted along with the company’s objective and at the same time generates enough enthusiasm amongst its employees. 2. Supply chain management – After realizing the loopholes of the company’s supply chain, the management decided to restructure the entire chain with the aim to help the managers to make faster and real time decisions, which the supply chain managers face constantly, (Doyle, 2001). The basic aims and activities that are encompassed within a supply chain by the company’s management are resource collection, procurement, warehousing, transport management activities, co-ordination with partners, suppliers and most importantly – the customers. 3. Enhancing information and operational systems --An accurate and timely information and feedback support system is needed at every level before execution of any activity. At the same time, tracking of results and communication of these results allows for more practical solutions to be implemented. The company set down a number of support systems. Q2. CRITICAL EVALUATION OF THE CURRENT COMPETITIVE ENVIRONMENT, USE OF RELATIONSHIP MARKETING AND RESPONSE TO CHANGING CONSUMER SHOPPING PATTERNS This Section will study the current competitive environment and balance of power for Mega Mart through a detailed PORTER analysis. Further, the section will study the use of Customer Relationship Marketing by the company and how the company responded the changing shopping patterns of the consumer by adopting Change Management. 2.1 PORTER ANALYSIS Porter’s five forces analyze the strong points of a company. Traditionally, the analysis is used to take notice of new product launches, upgrading of business services, and appropriate balance of power. In case of Mega Mart, the Five Forces Analysis determines the competitive power of the company. These are as follows: 1. Provider control: in this case, the power and control of the retail suppliers of Mega Mart to drive the prices of the final product or services from the company is assessed. This is further affected by the uniqueness of the products that are supplied by the company to these suppliers. As a rule, the lesser number of supplier’s, the less influence they have on the company’s product prices. 2. Buyer Power: This issue is concerned with the power of buyers which have the capability to control the prices. In the case of Mega Mart dealing in retail goods, the end buyer does not have much power to influence the product prices, (Ehrenberg & England, 2000). The reason for this is that the cost of switching from the company’s products to some other company to the buyers / consumers is almost the same in this case. 3. Competitive Rivalry: There are a number of large multinational companies that are working in the same field as Mega Mart. However, Mega Mart has been able to leave an impression since a number of years and has been performing consistently. The company has strived to maintain it product quality, which ensures little competition from other companies, (Keller, 1998). 4. Threat of Substitution: Since Mega Mart is retail company, the consumer does have a choice of opting for other number of companies present in the market. At some point in time, it might be possible for the end consumer to switch to a different company and the threat of substitution is very high in this field, (Ehrenberg & England, 2000). 5. Threat of New Entry: the market position of Mega Mart will also be affected by the entry of new companies. Although it is a huge financial stake for a company to enter into field, but subsequently, more of competitors will be a threat for the Mega Mart in the long run. If the company has strong and durable barriers to entry, then it can surely preserve a favorable position and take fair advantage of it, (Robinson, 2005). 2.2 Application of Relationship Marketing in Mega Mart With the increasing competition in the retail sector, it is not at all surprising to learn that the focus of the industry experts has shifted rapidly from the existing transactional form of marketing to a newer form - relationship marketing strategy. Mega Mart management has realized that it is more difficult to attract new clients than to sustain the existing set of clients, (Doyle, 2001). With the aim of creating more value for the business, and promoting more repetitive customer activities, relationship marketing strategy is now being used by Mega Mart to develop the relationships between the management and the clientele. Here are some techniques applied by the Mega Mart management in the relation to relationship management. Close observation of customer data: the Mega Mart management has clearly understood the need for speedy recovery of client data, business dealings, and other transaction data etc. for the benefit of the business of the bank. As a result of which, the management has upgraded its data storage and retrieval systems. Better management policies – the policies and new rules that are being laid out by the management in the wake of higher competition levels and customer demands are not departmentalized so that the efficiencies and benefits are not at sub-optimal at any level. Co-ordination between the management and the staff - since it is the staff that makes use of the implemented relationship management strategies with the customers, the management has closely selected those relationship marketing strategies that are easier to be implemented and effective, (Sustar, & Sustar. 2005). Relationship marketing is implemented both for the employees and the clients – RM strategy is taken into use by the management for the benefit and betterment of the management – employee relationship also. The management understands that until it owns an excellent team of motivated workers, it would not be able to achieve the set targets. Regular Up gradation in the system – since the management has a customer-based process, which at times is bound to become flawed or receive errors due to the manhandling by the staff, (Doyle, 2001). The management is cautious at all times in detecting these system flaws / errors and removing them from the system in order provide safety for the customer’s private information and ease of handedness to the employees. Training of Staff – the relationship management strategy is placed in the hands of the staff and the employees play the most important role in the actual implementation of the strategy. The interpersonal and customer interaction skill sets of the employees of the Mega Mart are regularly worked upon by experts. It is clear that relationship marketing is reforming the way service firms are conducting business. In order to remain competitive it is important that other retail companies also embrace the philosophy of relationship marketing. Relationship marketing is beneficial to both organisations and customers. 2.3 Application of Change Management in Mega Mart The hospitality sector is an important part of the Mega Mart business which is highly affected by the changes brought in the changing patterns of consumer shopping. The management needed to lay out an effective Change management strategy in order to remain competitive, and flexible in the changing times of consumer moods. The company needs to undertake close interactions between its staff and the clients and this relationship tends to get affected when any kind of internal or external changes takes place. In any hospitality industry like retail, change affects the clients and the employees at all levels. The clients are referred to as the external environment and the employees as the internal environment subjected to any kind of change, (Goldfinger, 1987). The main objective of including any kind of change management within a company is to attract more clientage while preserving the older ones and maintaining the profits. Mega Mart needs to set down policies to deal effectively at the individual (employee) and organizational level. The policy includes three aspects - becoming accustomed to change, controlling the amount of change, and implementation of the change. In case of Mega Mart, the change management worked to deal with the changes in the consumer management and subsequently profit from the change. An example of change management brought in by Mega Mart is the recent makeover that the company has brought about in some of its outlets. The traditional way at Mega Mart which was often supposed to be an uncomfortable furnishings by many clients, has been changed to a softer look. Also, the company wanted to raise its prices and not just keep on delivering products at low prices. The change was aimed at luring the customers to use and see Mega Mart as a convivial and a sociable place where social relations can be made, (Doyle, 2001). On the other hand, the company will still be offering same old lower prices on some products but with additional facilities like snacks and coffee. Apart from this, the company also introduced some brand new product lines especially for the young community in line with the modern trends and tastes. Also, to note, this change management is intended to win over other leading retail outlets that are going the international way to attract the youngsters. With the help of this new change management policy, Mega Mart wants to appeal to every age group and especially to younger people because this is the crowd that the company is deficient with. Q3. INTRODUCTION TO LOGISTICS AND THE TECHNQUES EMPLOYED BY MEGA MART TO OVERCOME TODAY’S GLOBAL LOGISTICS CHALLENGES This section makes an attempt to relate the concept of logistics for the advantage of Mega Mart and also study the various Logistics trends used by the company to achieve efficiency in the logistics chain. 3.1 Logistics and Mega Mart Logistics is the last stage of a product supply chain and this stage is concerned with the movement of the final finished product to the customer. In physical terms, the customer is the final destination of the product which is in turn linked through a marketing channel. This stage includes the co-ordination of order receipts, warehousing management, selecting transport carriers, shipment and distribution of the product to customers and set up an invoicing system to receive payments. Logistics is defined as “the time-related positioning of resources”. A good logistics supply chain would include the right resources in the right place, at the right time, right quality/quantity and at the right cost. Today, logistics management is acclaimed as a combining process that provides information networks and necessary infrastructure essential for the development and functioning of global supply chains, (Kim, 2006). In the case of Mega Mart, a business which consists of complex supply chain systems, it is important that every aspect of the chain adds value to their product in some form or other. An effective logistics management is an act of optimizing all actions throughout the supply chain process for the company’s business, and an efficient management of the logistic activities is the key to obtaining higher competitive retail business advantages, (Kotler, 2004).. The benefits that could be achieved with the help of a leveraged logistics strategy executed along with other enhanced supply chain management techniques can increase customer satisfaction, lower inventory tasks, less product obsolescence, and reduced workforce for the company. It is beyond doubt, that the ability to achieve a competitive advantage is dependent on the amount of logistics management synchronization and teamwork that any organization can show along with its supply chain partners, (Jacobson & Aaker, 2000). There are a number of activities that have been shortlisted by the company’s management which were enhanced with the help of a better logistics management system. They are: Assembly sub-assembly of products, Package and product labeling of goods, Management of inventory Processing and planning orders Track and trace products Reverse logistics Subsequently, by the application of better logistics management capabilities, Mega Mart achieved the following: Greater operational flexibility Ability to expand geographically Focus on core competencies Ease of achieving economies of scale 3.2 Techniques used by Mega Mart to achieve efficiency in the logistics chain 3.2.1 E-Logistics Mega Mart has turned to E-logistics which is essentially about electronically managing the order-to-cash process. The basic e-logistics model remains customer-focused, giving the purchaser (whether business or individual) the ability to: • Electronically place and pay for orders; • track orders from source to delivery; • select appropriate delivery time. It includes picking, packing, order confirmation and dispatch, customer help lines and returns process. In addition, demand driven secondary production activities, such as final assembly and servicing, are likely to increase with Consumer Web-based transactions. 3.2.2 Home Stretch Online consumption by the buyers has been predicted to rise ten times in next four years. Though, this accounts for a minor percentage of total retail sales, it is still having an inconsistent impact on supply-delivery operations. The e-fulfillment logistics model for the last mile will transform a number of times before the favored solution for supply and return is agreed. Establishing partnerships with existing home distribution channels can be a good option for Mega Mart. Recognizing the value of existing mature supply chain infrastructures, the company is planning a network based on established parcel delivery companies, the doorstep provider, eight-till-late local pick-up points and courier services, (Kotler, 2004). 3.2.3 IT and Logistics Use of IT technologies like logistics electronic data interchange (EDI), RIFD, the Direct Store Delivery (DSD) and the geographic information system (GIS) have definitely proved to be turning factor for Mega Mart. These techniques are basically examples of a sophisticated knowledge management system that supports the logistics business model in a highly competitive manner. The company invested a substantial amount of money on an electronic warehouse that drives the product information automatically without any man handling of information at any point in the logistics chain. RFID application - One of the most common IT applications within a logistics supply chain is that of bar codes which makes data collection accurate and fast. Most of the enterprises apply the bar code shipping labels or RFID application on their finished goods that are about to leave the company premises. But with changing trends, mangers have learned that if the use of bar codes is pushed back into the production system, then it provides tremendous labor and material savings, (Kotler, 2004). These new Information trends applied by Mega Mart in the company’s Logistics chain led to less time delays and this times saved was easily converted into financial benefits and increased productivity. Direct Store Delivery (DSD) - Similarly, the use of Direct Store Delivery (DSD) and other route accounting operations when combined with mobile printing applications saved a lot of time and reduces the cost by a remarkable amount and in turn increases the return on Investment. OLAP Cubes – The marketing and other relevant business data in the form of cube provides detailed information for resolving problems within the logistics distribution network of the business. For example, a problem with the Distribution network has been cited at many instances, causing difficulties with suppliers, production facilities, and distribution outlets. At the same time, the inefficient data distribution has been identified as a cause that leads to loss of integration of various processes and causes the inability to predict demands, forecasts, inventory and transportations needs. The use of data in the form of OLAP cubes helped to sort out the errors and analyze the losses and its causes in an effective manner, (Bateman, & Snell, 2004). GIS - A Geographic Information system or a GIS is a tool to capture, store and managing data which are spatially related to Earth. In close terms, the system is related to managing, integrating, storing and analyzing geographically referenced information. From the perspective of the business provider like Mega Mart, utilization of GIS to the value chain administration, human resources, technology development, procurement, sales and marketing, services and operations are adding value to the inbound and outbound logistic services, (Bateman, & Snell, 2004). Better management of distribution resources, higher level decision making, and easier routing, scheduling, tracking is made possible with the use of GIS in Logistics. Q4. RECOMMNDATIONS ON FUTURE STRATEGIES TO THE MANAGEMENT TEAM OF THE RETAIL COMPANY – MEGA MART This Section will forward some recommendations on how to improve the business processes involved. Bullwhip effect has been encountered within the supply chains of the company. This section will put forward certain to avoid the bullwhip effect. Also, this section will offer some latest recommendations on how to enhance communication levels between the company management and the retail suppliers of the company outlets. 4.1 Mega Mart and the Bullwhip Effect Any supply chain within an industry which is unmanaged will remain inherently unstable. Demand unpredictability augments as one progress up a supply chain away from the retail client, and even a minor amendment in customer demand may affect or produce huge disparities in orders that are positioned upstream which may in due course; make the whole supply chain network to fluctuate with large swings, (Doyle, 2001). This variation in demand as one move upstream is termed as bullwhip effect. In-efficient buffer stock policies, time delays and unfit ordering reactions are some of the main causes of bullwhip effect. 4.1.1 Countermeasures that can be taken by Mega Mart to avoid the Bullwhip Effect Being an international retail chain with an ever increasing global presence, it was very important for Mega Mart to identify Bullwhip effect and implement measures to avoid the effect. Here are some of the measures that can be taken up by the management to avoid the effect. Mega Mart supply chain management experts need to avoid Bullwhip effect within the company’s’ forecast driven supply chain. For this purpose, careful management of demands within each period should be carried out. The long term visibility of customer demand within each period should be predicted with highest possible accuracy by setting up a demand-driven supply chain which looks out for real time client orders, (Kotler, 2004). This real time tracking of client orders within a supply chain driven system is known as Kanban concept. This system helps to transmit the point-of-sale (POS) data from the cash registers at the outlets back to company headquarters many times a day. This information related to the demand by the customers of Mega Mart, will help to queue shipments to the various store distribution centers on time. This way an enhanced inventory positioning within the supply chain of Mega Mart will help to lower costs and offer better forecasting of customer demands, (Doyle, 2001). Heavy Investment in IT, information sharing concepts and good corporate culture with a strong focus on customer demand will help Mega Mart enhance its supply chain aspects and inventories in order to avoid the Bullwhip effect, (Denton, 1999). Here are some techniques to avoid Bullwhip effect. Order Batching – The Company’s management needs to realize that when larger orders exist, there is more variance. If order batching process is followed, then this reduces order costs, and offers more transportation economics, reducing costs and increasing sales benefits. The suppliers should be encouraged to order frequently in smaller batches which will lead to smaller variance. Shortage gaming - Very often, clients tend to order more when the supply is short. This unrestricted ordering phenomenon can be checked by reducing the order size flexibility and executing capacity reservations, (Bateman, & Snell, 2004). Fluctuating prices – The management can also initiate a scheme – Every day low prices (EDLP) to counter the effect of fluctuating prices. Under this system, special purchasing contracts can be executed so that there exists better synchronization between the delivery and purchase. Forecasting imprecision – better access to point of sale data (POS) and systems like Vendor Managed Inventory (VMI) can be used to avoid overstated demand forecasts which prove to be economically advantageous. Collaborative Planning and Replenishment (CPFR) – This process will help the management to integrate the IT techniques amongst the various supply chain partners involved with the company ((Bateman, & Snell, 2004)). This helps to reduce the inventories, forecasting errors, demand information visibility and enhance cooperation in the planning area. Other methods that can be used to decrease the uncertainty and variation and improve time lags in a supply chain are Just in Time replenishment (JIT), Strategic partnership, and enhanced information sharing techniques. 4.2 Information Sharing Initiatives between Management of Mega Mart and Suppliers Here are some of the initiatives the company can take in order to enhance the communication levels so that there is efficient communication with the suppliers with the existing supply chain and better results are obtained. Implementation of a centralized directory set up - the Active Directory service, which is an essential element of the Windows Server 2003 operating system. This system when inserted within the company’s supply chain can greatly help the staff to computerize the daily routine schedule and other administrative tasks by handling the systems remotely also. The use of Active Directory service will help the Mega Mart management to save the staff 50 hours every month, which were subsequently directed towards new efforts. Additionally, this time also allowed the floor managers at the outlets to devote more time to the customers. Establishing a reliable e-mail messaging system - Microsoft Exchange Server 2003 email messaging system and a collaboration server, which will assist the managers and staff at Mega Mart to check their email on their mobile phones, using a smartcard which will save their time from sitting behind the PC’s, thus becoming more mobile and decentralized organization to support the client driven company model, (Bateman, & Snell, 2004). This model can save up to 20 hours for the staff per month, which is substantial for the focusing on other project developments. For simpler management, Mega Mart can also license its messaging software under the Software as a Service (SaaS) model, through a local Internet Service Provider, Internet Solutions, (Samaddar, Nargundkar, & Darley, 2006). Peri Portal - A central, Web-accessible knowledge based system known as Peri Portal, where employees of Mega Mart can collect and share knowledge, find answers and contacts. This system is built using the Microsoft Office SharePoint Portal Server 2003 collaboration software, Microsoft SQL Server 2005 database software, and analytical software from ProClarity. IT intelligence tools - With the use of IT intelligence tools, Mega Mart managers can themselves be able to extract valuable business insights from the sales data of the restaurants. Previously, the managers were dependent upon the IT department to extract the data and interpret the reports, (Bateman, & Snell, 2004). With the help of intelligence tools like Peril Portal, directory and email systems set ups, they can themselves track the top products famous with the clients and products with lowest sales and subsequently bring about modifications within the supply chain. REFERENCES 1. Doyle, P. (2001). Marketing Management. Boston: Houghton Mifflin. 2. Ehrenberg, L. & England, T. (2000). Price management. Amsterdam: Elsevier Publishers. 3. Goldfinger, S.E. (1987). A matter of influence. 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