Launch of New Robotic Technology for Use in Consumer-Oriented Space Flights - Essay Example

Creating marketing value: Launch of new robotic technology for use in consumer-oriented space flights BY YOU YOUR SCHOOL INFO HERE EXECUTIVE SUMMARY ABB is currently seeking a diversification of its existing robotics division to include a new and revolutionary type of product: space tourism industry robotics. The space tourism industry is growing exponentially, though it has not yet launched in consumer markets. Highly in the developmental stage, such investors and businesspersons such as Richard Branson of the Virgin Group are taking the lead in gaining private and corporate investment to ensure launch by 2015. One of the most fundamental marketing opportunities for companies like ABB is the demand for science, research and experimentation which will be occurring on these regular space flights. Seeing that this industry has not yet reached its launch stage, ABB maintains an excellent opportunity to develop robotic systems that are aligned with needs for researching and science in the space tourism model. ABB will be utilising its current human-centric positioning that has given the business considerable market loyalty with B2B customers. Coupled with this highly critical business dimension, ABB will be changing its isolated expert systems to be more inclusive of communities of practice philosophy to improve internal knowledge and also build more trust in the organisational model at ABB. Alignment with production systems is yet undetermined as there are no historical templates by which to predict volume of customer demand, production output timelines, or even procurement. Because of this, ABB must focus more on customer relationship management, the most critical dimensions of the marketing mix, and building cohesive strategic alliances with customers and supply chain partners to make this new venture a sustainable success. Creating marketing value: Launch of new robotic technology for use in consumer-oriented space flights 1. Introduction ABB, a multi-national organisation with its headquarters in Switzerland, operates primarily in the power industry and automation technology industry. ABB maintains operations in over 100 countries, maintaining approximately 144,000 employees. A total revenue for all operational divisions was approximately 40 billion USD, making this one of the largest business conglomerates in the world. Revenues associated with automation comprised 8.8 billion USD, or 22 percent of total global revenues (ABB 2012). Thus, automation systems, including robotics, represent a viable business opportunity under the current operating, multi-national business model. ABB is renowned for its tangibles and intangibles of service and product delivery associated with automation, especially in areas of robotics. ABB is quickly becoming a key market player in global markets for its robotics prowess, providing such products as automated palletisation robots, packaging robots, press tending robots for manufacturing, painting robots, and general machining robotics to enhance industrial production systems (ABB 2013). Advancements in ABB-generated technologies now allow the organisation to diversify its robotics division and capture new markets by targeting the booming space tourism and travel industry. This report highlights how ABB can create sustainable revenue growth and extend customer value through the development of space-oriented robotics systems that can be marketed to customers in the Middle East, the United States, and China. This is a booming market, the space tourism industry, that provides ample opportunities for companies like ABB that wants to be a first mover, thereby establishing brand advantages in key market segments, in a high-profit and developing industry. 2. How to create sustainable value According to Kalyanaram and Gurumurthy (2008), first movers in a new industry maintain many favourable advantages over that of late movers. Customer segments will often evaluate the pioneer with favourable evaluations if the first mover is able to effectively satisfy customer needs. Late movers are then compared to the pioneer with significantly negative assessments (Kalyanaram and Gurumurthy 2008). The space tourism industry is currently being funded by private and corporate investors, with some support from international governments. However, there are currently few well-known brands in the business-to-business market environment that maintain brand equity for being pioneers and expert brands in space tourism. ABB maintains significant opportunities to capitalise on its positive B2B business reputation domestically and internationally to achieve greater revenue growth if the organisation is able to effectively align operations with promotional strategies to gain this reputation as a key market expert. What makes ABB so distinctively different from its other industrially-based competition is the method by which the organisation has been able to position itself in key markets. In the UK, brand recognition was established by positioning the organisation not through product or expertise, but by engaging the humanistic characteristics of its many buyer segments. Figure 1 illustrates this positioning prowess that has given this brand considerable market loyalty. Figure 1: Promotion for ABB illustrating people-centric positioning Source: BBN International. (2011). ABB Instrumentation, The Business Branding Network. [online] Available at: http://www.bbn-international.com/case-studies/abb-instrumentation (accessed 7 February 2013). As illustrated by Figure 1, ABB has taken an approach to brand-building by appealing to buyer characteristics and needs, with an emphasis on the social order of ABB’s contribution to enhancing lifestyle globally. This is the foundation by which ABB will be able to create sustainable long-term value: The current positioning strategies of the business are tested and proven marketing models that continue to outperform other industrial competitors operating in these same international markets. To achieve this, the SOSTAC model of marketing provides the guidance by which to transfer this same positioning strategy into a new, fledgling market to build immediate brand equity and customer loyalty. Figure 2: The SOSTAC Marketing Model Under this model, the situation asks the business to inquire where are we today? The current success under humanistic people-centric positioning illustrates the solution. Transference of this existing brand-building strategy into China, the United States and several Middle East countries can be achieved by appealing to these same market characteristics. For instance, in Saudi Arabia, a country in which there is considerable growth in private and corporate investment for development of space tourism, it is a very collectivist nation. This means that the social condition favours group membership and where members of society find their own personal identity through the social belonging and opinion of important peer networks (Cheung et al. 2008). Therefore, based on social characteristics in several collectivist Middle East countries, the current positioning strategy illustrated in Figure 1, which found market success in the UK, should be completely (if not more efficiently) transferred to this new target market. The objectives of ABB should be to maintain focus on its humanistic, team and socially-cohesive branding strategy to build revenues and brand equity internationally. Komninos (2002) offers that it is often quite difficult for some companies to recognise when their products or services have reached the unwanted decline stage until revenues begin to illustrate less customer demand. ABB currently sells automation and robotic systems to the same market of customers without much growth and expansion except for the computer chips and associated technologies that support automation systems with existing B2B buyers. The objective of diversification to avoid the decline of robotics, thus improving predictable long-term production scheduling and proper capital allocation, is one of the fundamental goals of providing products to the space tourism industry. 2.1 The strategy for space tourism customer development A 1995 survey identified the vast market potential for space tourism. In North America and Germany, as only two markets, 70 percent of respondents indicated they would be willing to spend several months’ salaries to ensure an opportunity for space tourism (Collins 1995). Today, interest has tripled as space tourism becomes a reality in the near future, with some analysts anticipating the industry to be worth an excess of $450 billion (WTO 2011). How, though, does this translate for market and revenue opportunities for ABB, a supplier of robotics systems? Richard Branson, the founder of the multinational conglomerate The Virgin Group, is one of the most prominent investors and developers of the space tourism industry. Virgin Galactic, a subsidiary of The Virgin Group, is currently developing (in partnership with foreign and domestic government, investors and NASA) the systems and vessels necessary to make space travel for consumers a reality by 2015. Branson recently signed a multi-million dollar agreement with Nanoracks, a Houston, Texas industrial company, to build on-board space experimentation laboratories on consumer travel flights (Del Castillo 2012). These new market opportunities have been created by the American-based NASA program that has shut down practically all of its space-faring agencies and development projects. Now, private investors such as Branson dominate this industry and are working with specialist partners (e.g. joint ventures) with many industrial companies to facilitate a more effective launch of consumer space travel. Space engineers and experimenters require automated technologies (robotics) to facilitate more effective research projects. For example, in the United Arab Emirates a major corporate investor, Aabar Investments PJSC, provided $280 million USD to assist in developing more innovative satellite launching capabilities under the Virgin Galactic business model (Space News 2009). ABB should be benchmarking the strategies of Richard Branson in gaining investor interest and development of appropriate joint venture strategies to facilitate more interest in purchasing robotic equipment for use in space travel. Thus, one of the most critical strategies to achieve diversification of the robotics division is to develop a customer relationship management framework that can assist in recruitment and sustainability of B2B buyers in need of automated research and facilitating robotics. The specific tactic to achieve diversification in the aforementioned strategy is to approach sales from a premiumisation focus, similar to that of The Virgin Group. ABB maintains, in its current industrial market due to its effective human-centric positioning strategy, considerable brand loyalty. Chaudhuri and Holbrook (2002) illustrate that when brand loyalty has been achieved, companies are able to promote premium pricing structures and it is much easier to gain market interest due to the potency of existing word-of-mouth. ABB should be approaching new markets involved with space tourism to illustrate its prowess and expertise in robotics, utilising a direct sales strategy. Under ABB’s current sales model, one of the most fundamental brand enhancers for the business is the methodology by which ABB provides training to B2B customers and their internal stakeholder users. ABB provides its customers with offline and online support systems that train businesses on how to utilise complicated robotic technologies. Licensing agreements allow for 50 users to be engaged with the training software simultaneously, facilitating a communities of practice approach to customer relationship management (ABB Robotics 2010). The software, Robot Studio, allows users to share ideas with other users, post their questions for ABB, and utilise a community of experts to ensure proper training (ABB Robotics 2010). It is this focus on customer relationship management and establishing the systems needed to sustain long-term brand loyalty that ABB should be utilising and capitalising on when approaching new markets in North America, China and the Middle East. 3. Alignment of ABB strategy with marketing function Having established that customer relationship management, benchmarking success dynamics of brand-loyal companies such as Virgin Galactic, and development of an appropriate product relevant for space engineering and research/experimentation, ABB can now integrate this diversification strategy with the most fundamental aspects of marketing necessary to gain market interest. ABB must make reliance on the 7Ps of marketing to reach a successful launch of space tourism robotics that will be accepted by B2B buyers and ensure proper market development. 3.1 Product and pricing The most fundamental aspect for ABB is ensuring that an appropriate, innovative and relevant product is provided to target customer segments. Currently, ABB offers its IRB120 robot that is used for scientific experimentation and learning in university classrooms. This robot weighs only 25kg, making it functional and very portable (ABB Robotics 2010). Unfortunately, research did not indicate the specific revenue gains and loyalties achieved by ABB with its many industrial and educational customer segments. However, the allowable space that will be allocated on consumer space flights is limited and this represents a significant marketing advantage for ABB: portability and light-weight function. ABB should be utilising its direct sales strategies to exhibit these features that will be required of research and experimentation organisations that will represent the primary target markets for this innovation. From an operational perspective, the company can use benchmarks from the IRB120 design model, making enhancements for functionality that is customised for new markets involved in space research. Pricing models should be aligned with premiumisation, based on testimonials and word-of-mouth of many industrial buyers that have come to trust and rely on ABB for its educational and scientific prowess in key markets; as it has been established that ABB has considerable brand equity in these important market segments. Fortunately, in a business relationship between ABB and Shanghai Huizhong Manufacturing, ABB has gained considerable market loyalty from such conglomerates as Hyundai, Ford, Toyota, Volkswagen and Audi for providing excellence in automation products that enhance the brand reputation of these major automotive manufacturers (Yao 2008). Seeking endorsements from these major companies will only serve to enhance the brand equity of ABB robotics products, but also provide more justification for a premium pricing model. 3.2 People and promotion Place marketing is largely irrelevant in this new diversification strategy for ABB as direct sales will require appropriate engagement with foreign and domestic customers domestically and internationally. However, people can be a significant competitive advantage to enhance market interest. ABB actively promotes its corporate social responsibility in terms of satisfying and engaging key internal stakeholders. It is a we conscious organisation focusing on building human capital, maintaining integrity and ethics, and with a genuine multi-cultural discipline within the organisational model (Steel 2012). Below is ABB’s value proposition aligned with corporate social responsibility: “We offer the compelling opportunity to touch lives and improve communities, by shaping projects that leave a lasting impression. There is a constant focus on your development, together with the freedom and support to make your mark on a truly multicultural, global business” (Steel 2012, p.17). According to many marketing practitioners, the value proposition is one of the most fundamental methods by which companies are able to engage buyer markets by illustrating how value can be sustained utilising internal corporate philosopher for the seller. ABB should be aligning this value proposition and use people and processes aligned with a cohesive and dedicated organisational culture of experts and talent capital to further justify a premiumisation pricing model. Promotion will be one of the most effective methodologies by which ABB gains market attention in the space travel industry. Reinforcing to the B2B customer markets that this is a viable and sustainable industry, with ABB as a contributing champion to its success, should be the focus of advertising and other promotional materials aligned with an integrated marketing communications campaign. The business must be able to illustrate to buyer segments that this is a tourism opportunity with a sustainable product life cycle. Ideal methodology in a project, which is relevant to each customer segment buying automated systems, is the ability to plan, organise and manage the project (Slack, Chambers and Johnson 2010). ABB should be setting a promotional strategy that enhances buyer perceptions of ABB’s role as an educator and project facilitator with the resources and human capital competencies to facilitate a more effective project transition upon purchase of ABB space industry robotics. This is aligned with its corporate social responsibility prowess that has given the business considerable brand equity with existing markets. The ability of ABB to engage in partnered collaborations throughout the project life cycle will enhance their relevancy in key target buying segments. 4.1 Risk and difficulty in integration Michael Porter (2012) illustrates the risks stemming from the external market that can complicate strategic momentum. One such risk is supplier power on the market when attempting to establish a productive and efficient supply chain. ABB faces some risks in this capacity, as in order to procure necessary technology and software products needed for robotics development, a non-cohesive international supply chain currently dominates the procurement network for this industry. ABB will have to seek out strategic alliances in key procurement a region which, according to Copacino (1996) is one of the most fundamental methods of enhancing supply strategy. ABB must engage suppliers in the earliest stages of development to fully exploit supplier resources and talents and also to prepare them to be adaptable to procurement needs. In this industry, the switching costs for suppliers are extremely low, as there are many global companies that provide robotic equipment to many B2B buyer segments. There is little margin for pricing negotiation under existing procurement networks, therefore ABB should be exploiting the core competencies of known or potential suppliers in order to provide more leveraging in pricing and delivery strategies. Yet another difficulty in aligning marketing with operational strategy is extending internal innovation and expertise into the external market, which is something that ABB does not have a great deal of practical experience engaging in. According to Stover (2007) interaction with other organisations and talent experts, rather than maintaining an isolated posture, is necessary if important knowledge conversion is to be enacted. Based on the aforementioned promotional strategy necessary to achieve market loyalty and the direct sales strategies needed to fully engage customer segments, the business must integrate external scientific and production expertise into the internal operational model to maximise knowledge transfer. Though the technical schematics for robotics are understood, the practical application of automated systems to researchers, scientists and experimenters is not part of the tacit knowledge held by existing internal personnel. This means the business must develop more effective human resources policies to fully engage staff members to be interactive with more external consultants and partners to facilitate more effective launch of robotics innovations. This will be a critical dimension to ensuring market success in an industry where suppliers have little experiential knowledge of the dynamics of space experimentation. This is where customer service and risk management go hand-in-hand, as the business can tangibly illustrate its cohesive and dedicated organisational culture to various vendors and customers that must be involved in knowledge transfer engagements with ABB. The quality of engagement between external consultants and suppliers and internal stakeholders at ABB will provide more sustainability if the business follows appropriate models of sales and service. Outside of the aforementioned difficulties in establishing the ability to successfully launch space-oriented robotics, the business must develop a relevant and focused risk management conception to identify contingency strategies in the event of certain sales or operational failures. The first methodology relevant for ABB is establishment of a total quality management framework, utilising a variety of balanced scorecards and marking instruments to measure productivity, compliance, and identify any quality-related failures in production and research and development. One of the most relevant risk reduction templates for ABB that is aligned with promotional strategy is utilisation of the Delphi Method. This involves experts from within ABB as well as any desirable external consultants conducting non-statistical reviews of processes aligned with a total quality management philosophy. The Delphi Method involves scheduled meetings of tacit knowledge holders offering opinion, emotional stance, intuitions, and quality determinations where all stakeholders have opportunities to propose innovative solutions (Rowe and Wright 1999). The Delphi Method serves as not only a risk assessment tool, but also provides opportunities for ABB to fully engage with important suppliers and consultants to come up with proactive solutions to potential problems operationally or associated with quality marketing demands. Through these risk-identifying engagements, ABB can also express its dedication to cooperative alliances and allowing partners and vendors gain experience and knowledge from ABB internal core competencies to further enhance customer relationship management. 5. Operations Estimating volume of outputs will be significantly difficult as there are no precedents established for being an important seller in the space tourism market. Only through examination of legitimate production schedules, customer ordering histories, and revenue will a viable model of operations be considered sustainable over the long-run. However, this is where consultation with various knowledge holders in customer segments and supply chain partners will assist in determining appropriate stock availability, range of services necessary for each robotic product, and data management needed in all aspects of operations. However, the business should be utilising time-based activity costing as the most relevant measurement of production efficiency until historical, statistical data can provide a more meaningful template for operational sustainability and procurement. The TDABC method involves consideration of the number of orders, the volume of new customers, and the volume of express purchases as aligned with the time necessary to achieve quality and expedient outputs (Kaplan and Anderson 2007). Furthermore, in this industry, there will likely be little processes established in terms of returns or complaints, other than engaging internal talent experts to provide appropriate maintenance of robotics systems under contractual agreements. There are, however, opportunities for the business to further its brand reputation for being a responsible and ethical business by providing the educational software and technical schematics so that customers can provide self-service maintenance once they understand the fundamentals of equipment preservation. ABB has found considerable market success by establishing such educational tools with many of its industrial customer segments. Operational strategy should then involve consultation with internal tacit knowledge holders to develop a self-help manual for maintenance to facilitate a more effective brand reputation for providing a wide range of services associated with the product that can be translated into more value for buyer segments. ABB should be promoting the net present value of the investment for robotics buyers, recognising the time value of investment as a means to generate more interest in procurement. The following equation represents how to align operations and investment with return on investment that can be translated into a more effective promotional strategy: The formula for the NPV is: NPV = C0 + C1/(1+r) + C2/(1+r)2 + ... + CT/(1+r)T C0 Initial investment (= negative cash flow) Ct Cash flow of the respective year r Opportunity cost of capital T Number of years Return on investment (ROI) is a better Source: Eilingsfeld, F. and Schaetzler, D. (2009). The cost of capital for space tourism ventures. [online] Available at: http://www.spacefuture.com/archive/the_cost_of_capital_for_space_ventures.shtml (accessed 7 February 2013). Customers are going to want to know whether robotics equipment, based on their own opportunity costs for making this purchase (or associated with customer operations) will provide (and when) return on investment. The goal of promotion is to extend a perception of knowledge and expertise to the customer segments which is the only predictable dimension of operations in this industry that has yet to launch. 6. Gantt Chart of Strategy Implementation References ABB. (2012). Innovative, responsive, entrepreneurial: The ABB Group annual report 2011. [online] Available at: http://www400.abbext.com/2011/ar/servicepages/downloads/files/annual_report_2011_abb_ar11.pdf (accessed 10 February 2013). ABB. (2013). Robots. [online] Available at: http://www.abb.com/product/us/9AAC100735.aspx (accessed 9 February 2013). ABB Robotics. (2010). Learn with ABB Robotic Package for Education. 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