Kelvinator Refrigerator Strategy Development Report - Case Study Example

Kelvinator Refrigerator Strategy Development Report Name Professor Institution Course Date Kelvinator Refrigerator Strategy Development Report Executive Summary Kelvinator hold a great reputation in relation to production of greater standard of houseware products. Its appliances have been sold in several countries, including Australia. Currently the growth rate and positive trends of Australian houseware industry is encouraging (Ibisworld 2013). This market opportunity looks good for the company in its objective of expanding and targeting the Australia market. Kelvinator is intending to launch its new refrigerator which has 2 doors; first door on top is for the fridge, and second door below is for hot food in an Australian market. In order for Kelvinator to compete at global marketplace like Australia, the company must to formulate the a good global marketing strategy in reaction to customer tastes and demands, economic situations, government trade barriers, political and legal risks and market structures. However considering the busy scheduled that most young couple’s faces today; that is work and home chores, this products has the potential to do well in the market. Kelvinator is targeting on new young couple who have no time to cook. Therefore they can cook once and store the food in refrigerator either in cold or hot state saving them time from warming them in microwave. Table of Contents Kelvinator Refrigerator Strategy Development Report 2 Executive Summary 2 Table of Contents 3 1.0 Introduction 4 2.0 Situation Analysis 4 2.1 Political 5 2.2 Economic Factors 5 2.3 Social Factors 5 2.4 Technological Factors 6 2.5 Legal Factors 6 3.0 Industry analysis 7 3.1 The Porter's five Forces model 7 3.2 The Industry Life Cycle 8 4.0 Competitors Analysis 8 4.1 SWOT analysis for major competitors 9 4.2 Current and future strategies 9 5.0 Customer segmentation, market target and financial projections 10 6.0 Recommendation and justification of strategy 10 7.0 References 12 1.0 Introduction After distress owing to the economic recession, houseware manufacturers are getting back to growth just as consumer confidence enhances. Appliance and houseware market and industry faces stiff competition from other stores department and supermarket that sell houseware. According (Ibisworld 2013) the industry is attaining the maturity stage and has a high quality of houseware products that are well-defined with technological enhancements within every product segments. Most players have an established market place with numerous players currently expanding into position segments within that industry. The sector also faces competition stiff competition from other substitute like microwave and so on (David 2005). Bearing these factors in mind this strategy development report intend to analyze the Australian houseware market situation before the company make an entry into the market. The report will also provide recommendations and justification for the strategy. 2.0 Situation Analysis Kelvinator’s ability to remain on top of its refrigerator production efficiency and quality it terms of rankings will be accredited to the company’s internal environment. This will involve the way the company will have analyzed appliances market. However, the company has one advantage in that the production process is handled by the top managers who are well-known for their capability. Kelvinator’s production team is recognized for their voracious obsession “to enhance its market share through efficiency, effectiveness and product innovation” (Kraus, Fink, Rößl & Jensen 2007, p.9). Hence, to completely understand the situational analysis of Kelvinator Company, a PESTLE analysis is established. External environment finds out the current condition of Kelvinator Company, and also assists in finding out the potential impacts to the organization. 2.1 Political The political environment of the Kelvinator has crucial influence on the effectiveness of the marketing the new refrigerator. The company may experience high taxation that might be placed on product. Similarly the administration may decide to lower the taxation on new products in order to promote locally manufactured goods. This can probably go well with company, and they can use this opportunity to maximize their sales in various Australian market. 2.2 Economic Factors The global economic downtown had huge effect on not only refrigerator but Australian house ware industry as a whole. The inflation rate rose up and also the unemployment rate in the Australia went up, and because products like refrigerator were considered as luxury product, the consumers began spending less money on them (Ibisworld 2013). However, the appliance industry is improving as people are getting busy and prefer automatic products. 2.3 Social Factors All through the history of Kelvinator Company, two elements have been on the front position of Kelvinator products, the design and quality of the product. Also, with the purchasing power of the people has gone higher in Australian markets the purchase of luxury products have increased (Ibisworld 2013). This is positive news for Kelvinator refrigerator who are looking forward to improve the lives of young couples by making their schedule easier. Appliances are considered a status symbol in the society therefore people will definitely buy it (Analoui & Karami, 2003). They may not only consider this to buy it but also the new experience that comes with it, that is having 2 doors; first door on top is for the fridge, and second door below is for hot food. They would want to save time for warming up the food. 2.4 Technological Factors Kelvinator Company has invested heavily in product research and development area and therefore, Kelvinator refrigerator look to do better and remain top in the market in the new innovative product ranking. Hitt, Ireland, Camp & Sexton (2002, p.7) postulates that the technology is changing so in the electronics field and old products are phased out, which has contributed to more competition. Thus, “as far as technological change is concerned, the products life cycle has been reduced considerably making” (Chan & Foster 2001, p.65) Kelvinator Company to take this advantage by introducing new product, Kelvinator refrigerator in the market. Technology advancement is also an added advantage to the new Kelvinator refrigerator in that “it can not only be used to market and promote the product but also to make online sales” (Hitt, Ireland, & Hoskisson 2001) . 2.5 Legal Factors The company has to comply with new Australian warranty laws that were enforced in 2011 (Ibisworld 2013). This is in a bid to comply with Australian Consumer Law requirements. This will not only ensure that the company take keen interest in the production department but also ensure that their goods are of higher quality and customer satisfaction. 3.0 Industry analysis According ibisworld report (Ibisworld 2013), Australian houseware has reached maturity stage of the product life cycle and has a well define houseware products. The report also says the competition is very high coming from store departments and supermarkets that sell the same products (Ibisworld 2013). Therefore for a company to take competitive advantage, it must invest heavily on product research, development and innovation. Kelvinator Company offers a high-end product that will enhance the standard of living away from traditional refrigerator which only have a fridge for storing food in cold condition. Kelvinator Company “has the capability to employ its strengths and opportunities to create a competitive advantage” (Armstrong & Kotler 2002) in the Australian houseware industry. We can “use The Porter's five Forces model to help managers to understand where the product control lies” (Kirk 2009) in an organization situation with regard to new Kelvinator refrigerator. 3.1 The Porter's five Forces model The level of competitiveness in a houseware industry can be observed as combination of five forces, rivalry amongst competitive companies, possible entry of new players, possible increase of substitute products, bargaining power of consumers and bargaining power of suppliers (Armstrong & Kotler 2002). The houseware industry from the start is leaning toward consolidation, as the market structure can correctly be classified as oligopoly. The industry comprises of players such as Kelvinator, Minhlong, Habitat Housewares Pty Ltd, Samsung, and LG etc. De Wit & Meyer (2008) claim the competition in this market is take place in the context of cost and competitive advantage. Each player attempt utmost to outdo rivals by manufacturing the latest refrigerator and sell them at competitive price. This likely reason why the new companies find it difficult to enter the Australian houseware market while current players attempting to remain in the market. In the past there has been no brand loyalty because most players have been producing traditional refrigerators which are identical. However, Kelvinator is seeking brand loyalty through their new refrigerator which is different in terms of applications. Kelvinator is also attempting to outdo substitutes like microwave with their new product that not only store food but also maintains it at a hot state. 3.2 The Industry Life Cycle The houseware industry generally has reached the maturity phase of its products life cycle (Saaksvuori, 2008). With the production new Kelvinator refrigerator some weak players in that industry will have to move out whilst others will have to consolidate their operations because of declining margins with the passing of time and economic crunch. The competition has also compelled Kelvinator to differentiate their provision by producing a 2-door refrigerator with fridge and second door below is for hot food which is an aesthetic design with a superior performance. Saaksvuori (2008) claim this is an attempt to keep improving their products based on the new trends in the market. 4.0 Competitors Analysis The competitive strategies created by Kelvinator on its new 2-door refrigerator will the firm to achieve its objective by price leadership and non-price competition. Kelvinator intend to employ cut-throat strategy by providing lesser price compared to Samsung and Panasonic that will in turn help it attract several customers. The new product development will offer value to customers and also help the firm to improve its market share (Ulrich, Karl & Eppinger 2004). 4.1 SWOT analysis for major competitors The major fear of Kelvinator Company is actually the high degree of competition in the houseware industry. To be successful with its new product the company must to thoroughly carry out market research so as to position itself in the Australian market. Even though after carrying out market research, Kelvinator’s “major competitors such as Electrolux, Samsung, Panasonic, LG, Whirlpool and General Electronics still have great strengths and opportunities compared to the company” (Spotonlists 2013). Strengths Weaknesses 1. Large customer base 2. Strong brand 3. Customer loyalty 4. Advance Technology 5. Large resource base 1. Lack of control to market entry 2. Making similar products (lack differentiation strategies ) 3. High prices Opportunities Threats 1. Unexploited Market 2. Increase in online marketing and sales 3. global expansion 1. Emergence of other substitutes like microwave 2. Technological innovation 4.2 Current and future strategies Major competitors in Australia market “are currently depending on their strong brand, expansion and large resource base” (De Wit & Meyer 2008) to outdo their counterparts. However, with the technology advancement and new companies getting into the market, competition will be based on the technology, quality and price. Companies that invest much on technology, especially on social media will blame themselves for their ineffectiveness (De Wit & Meyer 2008). Some of social media marketing platform that look promising are Facebook, LinkedIn, Twitter and YouTube. 5.0 Customer segmentation, market target and financial projections Kelvinator refrigerator is produced to target a particular market, in particular young couple who just start a family and have no time to cook. After doing market research, the company settled on this segment with the fact that these categories of customers look for something trendy and convenience. Demographically, youthful people form the largest number of customers; therefore, this can improve the product sales (Thomas, 2010). The strategy development plan is projected to cover a period of years and will focus on Australia-wide (check for financial sales projection under appendix in figure 1). 6.0 Recommendation and justification of strategy In the coming years, Kelvinator Company will have to devise some very potential strategies to guide them towards the production and sale. On these strategies it is recommended that they capitalize on their opportunities offered by the macro environment in order to sustain competitive advantage (Mullins, Walker & Boyd 2010). One method of achieving this is to acquire patents of its research and development efforts. In so doing, other market players will not have the permission to copy Kelvinator strategy. The company has to consider its clientele as its number one main concern and has to provide them with a great quantity promotions and sales (Hayashi 2001). The must make sure that this new refrigerator provide value for the customer by offering a superior appliance with aesthetic designs and superior performance. The company must also not just adhere to new Australian warranty laws but also provide technical support whenever the customer needs it (Chamberlin 2009). This strategy will enhance its customer service and improve its status in the market. Kelvinator should produce a superior performance refrigerator at a low cost in order to attract large number of customers (Chan & Foster 2001, p.58) who want to move away from a traditional refrigerator to their new product. This will help the company in maximizing its sales in the projected three years also dominate the market share. For Kelvinator to re-position itself, it must use new Kelvinator refrigerator to build brand image through brand awareness and promotion. According to Shaw (2012) for the brand awareness and sales, the company has to partner with the local distributor or intermediaries in Australia. The analysis of this strategy development Plan for Kelvinator refrigerator answers the question whether this promising product can be successful at the local market. This report guides the management on the production and sales of this new product with regard to the business environment. This report remains just a paper until it is implemented. Thus it’s the responsibility of the top management to ensure that this report is implemented to promote its sales and generate revenue in line with organizational goals. 7.0 References Analoui, F & Karami, A 2003, Strategic management in small and medium enterprises, London, Thomson. Armstrong, G & Kotler, P 2002, Marketing: an introduction (International edition), New Jersey, Prentice Hall. Chan, S & Foster, J 2001, Strategy formulation in small business, International Small Business Journal, vol. 19, no. 3, p. 56-71. Chamberlin, P 2009, Customer service complaint handling, viewed 28th August 2013 from http://www.impactfactory.com/p/customer_service_skills_training_development/issues_936-2103-87287.html. David, F 2005, Strategic Management Eight Edition, New York, Pearson. De Wit, J & Meyer, H 2008, Strategy Process, Content and Context, London, Thomson Learning. Hayashi, A 2001, When to trust your gut, Harvard Business Review, vol. 79, no. 2, p. 58-65. Hitt, M. A., Ireland, R., Camp, M & Sexton, D 2002, Strategic entrepreneurship: Integrating entrepreneurial and strategic management perspectives. In M. A. Hitt, R. Ireland, M. Camp & D. Sexton (Eds.), Strategic Entrepreneurship: Creating a new mindset (pp. 1-13), Oxford, Blackwell. Hitt, MA., Ireland, R & Hoskisson, R 2001, Strategic management: Competitiveness and Globalization (4 ed.), Cincinatti, South-Western College Publishing. Ibisworld 2013, Houseware Retailing in Australia: Market Research Report, viewed 28th August 2013 from http://www.ibisworld.com.au/industry/default.aspx?indid=1876 Johnson, JM 2009, Five pillars of sustaining exceptional service, Chicago: 3 Palms Publishing Group, LLC. Retrieved October 7, 2010 from http://www.communicoltd.com/pages/166_five_pillars_of_sustaining_exceptional_service.cfm Kraus, S 2007, Strategic Planning in New Ventures and Young SMEs, Thousand Oaks, CA: Sage. Kraus, S., Fink, M., Rößl, D & Jensen, S 2007, Marketing in Small And Medium Sized Enterprises, Review of Business Research, vol. 7, no. 3, p. 1-11. Kirk, B 2009, Creating an Environment for Effective Innovation, Presentation given at the Stage-Gate Innovation Summit 2009, Clearwater Beach, Florida. Mullins, J., Walker, J & Boyd, H 2010, Marketing management: a strategic decision making approach, Boston, A McGraw-Hill Irwin. Porter, M 1996, What is strategy? Harvard business review, 61-69. Viewed 28th August 2013 from http://www.ipocongress.ru/download/guide/article/what_is_strategy.pdf Saaksvuori, A 2008, Product Lifecycle Management, London, Springer. Shaw, E 2012, Marketing strategy: From the origin of the concept to the development of a conceptual framework, Journal of Historical Research in Marketing, vol. 4, no.1, p.30-55. Spotonlists, 2013, Top 10 Best Fridge Manufacturing Brands in World, Viewed 28th August 2013 http://spotonlists.com/health-lifestyle/top-10-best-fridge-manufacturing-brands-in-world/ Thomas, N., John H., & Joseph, Z 2010, The Strategy and Tactics of Pricing: A Guide to Growing More Profitably, London, Prentice Hall. Ulrich, K & Eppinger, S 2004, Product Design and Development, 3rd Edn, McGraw-Hill, New York. 8.0 Appendix Figure1: Projected financial sales for the next three years (Johnson, 2009) Sales Forecast Millions of Canadian Dollar (CAD) year 2013 2014 2015 Net Sales Operating income Ordinary Income Net Income Research Divindends/CAD 1,343,545 64,220 60,912 46,123 30,051 42 1,555,550 75,043 80.736 57,999 32,051 54 1,800,340 88,955 107,584 70,131 30,052 60 Read More