Environmental Analysis and Assessment of New Strategy

Questions: Task 1 a) Examine a few definitions (at least two) of marketing and explain the marketing process with example drawn from HM. b) Discuss the different kinds of marketing orientations and recommend the most suitable marketing orientation for HM. Task 2 a) Analyse the macro and micro environmental factors that influence the marketing decisions of HM. b) Propose a new product for HM and examine the concept of segmentation and recommend segmentation criteria and targeting strategy to be used for the newly developed product. c) Identify factors that will influence buyer behavior and propose a new positioning strategy for your organisation and its newly developed product. Task 3 a) Using HM as your chosen company, explain how the new product was developed to achieve sustainable competitive advantage. b) Evaluate a range of distribution methods that HM can use for the newly developed product to provide convenience to a target group of customers. c) Discuss and critically evaluate the various pricing methods used by businesses and recommend pricing strategy that HM can use for the newly developed product. d) Explain the concept of integrated marketing communication and discuss the elements of promotional mix including extended the extended marketing mix as relevant to HM's newly developed product. Task 4 a) Evaluate the marketing mix variables for two segments of the consumer market and discuss how different it would be for businessto-business services (B2B). b) Assuming that HM decides to enter the international market with the newly developed product, examine and discuss the differences between domestic marketing and international marketing. Answers: 1. Marketing strategy analysis a) Marketing process Marketing, as a subject has been exposed to a wide and in-depth body of research works and analysis. The concept of marketing is essentially multilayered and has a number of associated aspects that shape up the pattern and dynamics of a chosen strategy. However, irrespective of the diversities in patterns, marketing strategies are designed to fulfill a limited set of objectives. According to Kotler, Marketing is the the process of building profitable customer relationships by creatingvaluefor customers and capturingvalue in return (Kotler, Burton, Deans, Brown Armstrong, 2012). In other words, Marketing is often considered as a tool for creating effective perceived values for the customers. These perceived values, in the long run, can be consolidated and leveraged by a brand to create a loyal base of lucrative customers. HM, the apparel retailer giant based in Europe, has been successful in identifying the perceived values of its potential customer base. The objective of the brand h as been to understand the psyche of its target customers and design values accordingly. As a result, the brand has been able to achieve the important objective of creating a strong base of satisfied customers. In this regard, the strategies applied by the brand can be considered as successful as marketing has been identified as- A management system with customer satisfaction as the object of all marketing effort (Reynolds Lancaste, 2013) HM has, over the years, developed and maintained a value-for-money approach, as far as its marketing strategies are concerned. Based on this approach, HM has created and maintained its own competitive advantage. The three generic strategies that are generally applied by firms, operating in a competitive market, are as follows: Cost leadership Differentiation Focus Competitive Advantage Competitive Scope Low Cost Differentiation Industry target Cost Leadership Differentiation Segment target Cost Focus Differentiation Focus HM has chosen to design a strategy based on differentiation. The brand has managed to evolve from a firm catering to a niche market to an organization with a broad base of customers. The differentiation has been on the basis of creating a unique brand image that distinguished it from its competitors. The management has identified fashion as a temporary and perishable commodity. Hence, the pricing structure has been designed accordingly, without compromising on the expected and perceived quality of the items offered. This strategy helped in differentiating the brand from the rest and gradually creates an industry wide customer base and strong competitive advantage. In the US market, HM has adopted a marketing strategy based by focusing mainly on the customer group consisting of younger women. Thus, HM has combined different marketing strategies, depending on the nature of the market. Zara, one of its strongest competitors, has mainly differed from HM, on the pricing strategies (McDona ld, 2012). Zara caters to customers who are willing to pay premium prices to obtain branded apparels. However, the difference in pricing strategies has been one of the distinguishing factors between HM and its more prominent competitors. 1.2 Marketing orientation Marketing strategies can be based on a range of viewpoints, on the part of the management, depending on the nature of the business and the type of customers that an organization caters to, among other factors. The marketing policies and associated approaches determine the alignment of the strategies. However, the basic objective of the various marketing orientation plans followed by different organizations is to consolidate respective foothold in the industry. The different types of marketing orientation are: Sales Product Production Market The sales orientation approach mainly concentrates on maximization of profits earned. However, this approach generally does not consider any thorough analysis of the psyche and preferences of the customers. Thus, in case of HM this strategy is not feasible as the competitors are focused on continually capturing the untapped needs and preferences of the potential customers. Production oriented approach aims towards cost-leadership by producing products on a large scale at minimum cost. However this strategy is applicable in case of FMCG brands that produce standard products (Dahlen, Lange Smith, 2010). HM, being a leading apparel brand, relies on thorough research and development, hence cannot afford to follow a production oriented approach. Product oriented approach adopted by a brand, emphasizes on the superiority of the products, in terms of quality and features, as compared to the competitors. However, in the global market, HM has strong competitors who have already differentiate d themselves in terms of perceived quality. Moreover, HM has never positioned its brand on the basis of superior quality. Thus adopting product oriented approach will lead to inconsistency and confusion among global customers. HM should adopt market oriented approach while establishing itself in untapped global markets. This approach is designed on the basis of thorough analysis of the needs, preferences and buying behaviors of the potential customers. HM should develop its marketing strategies based on the common global traits as well as the unique aspects displayed by the potential customers in the hitherto unexplored overseas market (Baines, Chris Kelly, 2013).. 2. Environmental analysis and assessment of new strategy a) Environmental analysis The business environment of HM consists of several aspects that shape up the patterns of the marketing and operational strategies. These aspects require analysis and assessment on a regular basis. The entire business environment can be classified into: Macro environment Micro environment The major factors of the macro business environment are as follows: Political- One of the major issues regarding the political environment is the outsourcing policy followed by HM, over the years. The organization has to strictly abide by the regulations imposed by the government regarding the outsourcing of labors to developing countries. These restrictions, quite often, complicate the framework of manufacturing and supply. Economic- The value-for-money policy adopted by HM has enabled it to survive the general financial crisis that has affected the purchasing powers of consumers worldwide. Customers have perceived the brand to be affordable, even in the period of recession, leading to steady revenue and profit margins (Hamilton Webster, 2012). Social- In the recent past, the entire fashion industry has been under constant scrutiny for its adverse effects on the community and the overall environment. HM has taken initiatives to contribute towards the environment and will continue to consolidate its image as socially responsible organizations, through a host of activities. Technology- Apart from constantly innovating the product features and attributes, HM, in the last few years, has invested substantially in systematic modifications of its store layouts at certain key locations with the aim of reducing the waiting time of customers. Technology has also been used effectively to expand marketing channels as well platforms of customer feedbacks. Legal- Regulations regarding imports and exports and outsourcing are the major legislatures that the company has to abide constantly. Moreover, regulations regarding wage distribution of labors are critical, since HM has adopted an outsourcing policy (Kardes, Cronley Cline, 2014). The major components of the micro environment are: Customers- HM has expanded its customer base from niche to a much broader one, over the years. The customers perceive the brand as one that can deliver quality items at affordable prices. The price leadership policy coupled with the brand message that fashion is a disposable product has ensured a steady base of loyal customers. Suppliers- HM is significantly dependent on its suppliers, since it does not have its own independent factories. The brand reputation and goodwill of HM along with the fair wage policy adopted by the organization has ensured a strong base of suppliers, mainly belonging to the overseas market (Wells Foxall, 2012). Competitors- The level of competition can be analyzed based on the following framework: Threat of new entrants- There are high chances of new competitors emerging in the fashion industry because of the constant exploration of niche markets, based on various criteria such as pricing strategy, demography of customers, behavioral aspects among others. Bargaining power of suppliers- The suppliers have limited bargaining power because of the global brand reputation and hence high negotiating power of HM. Bargaining power of Buyers- The buyers are increasingly being offered a host of alternatives, as far as fashion brands are concerned. Thus the bargaining power of the buyers is quite high. Threat of substitutes- The price leadership and Fast Fashion policy followed by HM guarantees a distinct identity, in spite of other similar brands, and hence neutralize the scopes of any retail apparel brand taking away its market share (Young, 2011). Level of overall rivalry, in the long run, can be considered as moderate mainly because of the strong brand positioning. b) New product segmentation and brand positioning HM can offer a new product to a market that has not been explored so far. Traditionally the brand has focused on perishable fashion commodities at competitive prices. However, HM should diversify to a market, whose psyche and buying behaviors differ from its traditional set of customers. Market Penetration Existing Product Existing Market Product Development New Product Existing Market Market Development Existing Product New Market HM should launch a range of luxury wristwatches, for women that should be priced at a premium range. The price range should be consciously kept at a premium range in order to capture those customers who have, on an average, greater purchasing powers than the current customer base. The segmentation of the customers should be: Demographic- The products should initially be designed only for the females. This is because of the fact that the brand is perceived mainly as one that offers apparels for females. The age group should be within 30-45 years, chosen on the basis of the level of financial independence of the target group. Behavioral- Specific sections of the potential customers associate high quality with high prices. This particular customer segment generally opts for premium priced products, as they perceive that these products have better quality than those with low or moderate prices. HM should enrich its brand value through effective product expansion. Customers should perceive that HM has a wide range of products for diverse customer ranges. The expansion in brand positioning will be useful in combating the existing and potential competition in the industry. 3. Competitive advantage and marketing mix a) Sustainable competitive advantage Brand HM has to leverage certain aspects in order to implement its expansion in an effective manner. These aspects are vital tools to create and develop brand identity and perceived attributes (Palmer, Cockton Cooper, 2012). The expansion of the customer base will be implemented, based on the following criteria: Capability- HM has always maintained a customer focused approach while designing its marketing activities. The psyche and needs of the specific customer groups have been analyzed while implementing marketing strategies. The brand has been perceived as one that understands the latest demands and trends of the fashion world, and accordingly deliver tailor-made product for the target group. This has helped in creating a perceived competitive advantage over most of its competitors, which brand should be leveraged to attract and sustain new customer segments. Resources- The Research Development team has traditionally been able to introduce fashion related products to the intended customer groups, through innovation (Mullins Komisar, 2013). Moreover, the vertical integration system among the various key stakeholders will enable reach to the target customers, through vast networking and effective co-ordination. A separate Research Development needs to be developed to research on the new product attributes and designs. Competitive advantage These two components should be utilized effectively to create the new brand positioning as well as to communicate the same to the target customer group. The new product should be positioned as an alternative to those customers who prefer classic range of products that have more perceived longevity and can be used for many seasons. This particular category will further enhance the brand positioning and competitive advantage of HM. This is because of the fact that luxury watches for women belonging in the specified age group is a niche market and currently a few prominent brands operate in it. b) Distribution strategy The new product will be targeted to customers, who are slightly more matured, in terms of age as well as preferences, than the traditional base of customers of HM. However, initially limited range will be launched in a few selected stores at Sweden. Inbound logistics- Selected group of suppliers, located in both Asia and Europe will be co-ordinated and clarified about the exact requirements for the new product launch. A new group of local suppliers need to be selected. The suppliers will transport the materials to the production facilities located in the vicinity. Operations- The production team will co-ordinate directly with the RD department and operate accordingly. The operations facility will be located in Sweden, within the vicinity of the suppliers. Outbound logistics- The finished products will be transported directly to the selected stores at Sweden, post approval from the management and RD department. Marketing and Sales- The launch of new product ranges should be announced through hoardings at strategic locations, prominent displays and verbal communication at point of sales at the selected stores where the products will be launched. Moreover, the brand website should be updated along with interactive online tools to assess customers reactions and level of anticipations leading to the launch of the new range. c) Pricing strategy The pricing strategy has to be designed on the basis of the nature and specifications of the intended target group of customers. Pricing strategies quite often can enhance or diminish the intended positioning of a brand (Boone Kurtz, 2013). Moreover, pricing strategies are often perceived as an integral part of the entire brand identity. There are a host of alternatives as far as pricing strategies are concerned. Skimming pricing involves setting high prices in order to ensure maximization of profits and revenues initially. Gradually the prices are reduced and the products are made more affordable. However, this strategy is not feasible in this case as the price will be kept high consistently with an intention of attracting specific groups of customers. High low pricing involves maintaining high prices with occasional promotions and discounts. In this case, there are no scopes of discounts in the initial stages hence this strategy is not feasible (Eagle, Dahl, Czarnecka Lloyd, 2014 ). Premium pricing strategy should be implemented in case of the new product launch. This will ensure that the target customers will associate the high prices with better quality and durability compared to the traditional product range offered by the brand. d) Integrated marketing communication Integrated Marketing mix is a common tool that is being used increasingly by prominent brands. It is aimed at ensuring maximum reach to the target customers as well as desired impact on the intended group of potential customers. The main components of Integrated Marketing mix are as follows: Product- The new luxury watch range will benefit from the brand reputation and value of HM. Moreover, the anticipation will expectedly be high as HM will be tapping new customer base and product range Price- Premium pricing strategy will be followed to attract the intended customer group (Armstrong, Adam, Denize Kotler, 2014). Place- The marketing channels will encompass traditional channels including in store displays and billboards at posh locations of the city where the target customers are expected to visit consistently, advertisements in high end fashion magazines and online channel including social media and brand website. Promotion- The promotional activities will include: Advertising- Traditional and online channels will be utilized for advertisement PR- Press conferences will be arranged to announce the launch of the new product range People at service interface- The salespersons at points of sale, at selected stores will educate and make the customers aware of the new product range. Positioning- The product range will be positioned as luxury items with durable quality (Richter, 2012). People- The target customer group are that which generally relates high quality with high prices and will consist exclusively of females within the age group 30-45 years. 4. Marketing mix and international expansion a) Marketing mix variables in different markets The marketing mix model for consumer segments consists of some basic components. These components are constant across the breadth of products available in consumer segments. However, the nature and patterns of these components often varies in accordance with the type of product. Segmentation Targeting Positioning Identifying segments-Luxury designer apparel segments customers on the basis of behavioral and lifestyle. Competition level-This continues to be a relatively niche market as global luxury brands in these category are few worldwide (Grose, 2011). Market attractiveness-The market consists of customers who have high purchasing power. Resources- Luxury brands generally have the resources of producing exclusive designs Competitor analysis- The number of global competitors is few, but prominent, as it is essentially a niche market. Actual target market- Specifications about the gender, age group are essential. Value proposition- Positioned as a product range that are available to a limited set of customers, who have better purchasing power than the average buyer. Identifying segments- Soft drink products generally target the mass market, segmenting on the basis of demographic and psychographic criteria (Pride, Ferrell, 2014). Competition level- High as this is a crowded market. Market attractiveness- Mass product generally has high market attractiveness, provided positioning is distinct Resources- Emphasis on cost leadership through resource optimization as this is a mass market product Competitor analysis- The market is crowded with prominent brands. Actual target market- The youth segment is the most lucrative one. Value proposition - Positioned as a youth oriented brand, highlighting the attributes and traits of the segment Fundamental differences between B2B and B2C marketing mix are as follows: B2C marketing mix often involves emotional buying behavior, based on sentimental factors. In case of B2B, rational purchasing is dominant (Hutt Speh, 2012). Brand loyalty is an integral part of B2C marketing mix. In B2C marketing, partners and customers are chosen almost solely on the basis of compatibility and convenience The basic components of marketing mix are same in case of both B2B and B2C. Compared to B2C market, B2C market focuses on more complicated value propositions and fewer number of target customers (Stevens, Loudon Wrenn, 2012) b) International marketing Both domestic and international market is comprised of similar components. However, specific aspects of these components differ significantly, when these two markets are compared. In case of HM, international marketing will offer the following unique aspects: Segmentation- The segmentation part will be similar as HM will retain the basic value proposition of delivering fashionable products at affordable prices in the international market. However, depending on the type of market that the brand operates in certain unique behavioral and demographic aspects of the overseas customer base has to be assessed (Zentes, Morschett Schramm-Klein, 2012). Accordingly, certain age and gender groups should be emphasized. In the domestic market female customer base is prioritized, with offerings for men and family also. However, depending on the nature of international market, the focus needs to be modified. Target- The relative attractiveness of the various segments has to be identified and assessed. The viability of the various segments may be quite different from those in the domestic market. Also, researches may reveal certain new potential customer segments. 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