Background
The use of pencil began in the early years of the industrial revolution, and the main users have always been craftsmen and artists. Over the years, Faber-Castelle, a company that has been in business from 1761, has been the main producer of pencil, with many designs being sold to the market. However, the emergence of information technology proved to be a major challenge to the company, as demand for pencils declined, with many people preferring the use of computers. As a result, the company continued to conduct research on innovation, designs and capabilities of pencils with the aim of promoting their continued use.
Even with the advancement of computer technology, pencils still remain relevant, and this is evidenced by the fact that Faber Castelle has continued to grow in terms of production capacity and profitability from the sale of pencils. Indeed, its pencils are very popular in developing countries mainly because they are sturdy and cheap, thus they can be accessed by many people whose purchasing power is low. This paper will discuss strategies that Faber Castelle has used to remain relevant in the market despite various issues and challenges.
Faber-Castelle’s Core Competencies
Company’s Mission
Faber Castell has been able to stay relevant for a long time, mainly because of its commitment to keeping customers satisfied. The mission statement of the company is to have the values of the company well managed. The business should include social and environmental responsibility, as well as human virtues such as honesty, humbleness and tolerance. Moreover, the company signed a social charter in 2000, which prohibited child labour and discrimination in addition to protecting employers from exploitation by employers. The company is not interested in short-term goals that will only bring short time profits; rather, its intentions are anchored on long-term goals that have the potential of generating sustainable profits for the generations to come.
Internal Forces
The company has been able to manage its resources, internal controls and production capacity. Faber Castelle has been able to maintain a healthy inventory management system that ensures raw materials are replenished in time even before they start dwindling. In addition, the company procures high-quality inputs that enhance its ability to produce the best pencils in the world used by the world’s best artists in their artwork.
One important internal capability of Faber Castelle is its investment in research and development such that it is able to know what customers need at any given time. The company used one of the best mass customization strategies, commonly referred to as collaborative customization; this involved the company holding dialogue with present and prospective customers and then developing outputs that reflect the needs of such customers. Another mass customization strategy used was cosmetic customization, where the company produced a variety of products to suit each segment in the market. For example, Faber Castelle produced the Secret and the Orchestra products for women and men, respectively.
The external forces that the company had to deal with
Various external forces had a significant influence on the conduct of business at Faber Castelle. First, in its quest to be successful, the company made sure that it took care of environmental issues and ensured that its activities did not negatively affect people in the community where it operated. In relation to competitor forces, the company engaged in healthy competition and always strived to gain a competitive advantage over its rivals. Even today, the company is always coming up with new products, thus keeping its customers guessing at all times about the next innovation.
Technology has always been one force that has kept Faber Castelle on its toes. For instance, with the invention of iPads and smartphones that can be used to draw and take notes, pencils are not so much in use. However, the company still manufactures pencils, which have never lacked market. Finally, customers’ preferences keep changing with time, thus forcing the company to continue manufacturing new products in order to meet customers’ satisfaction.
First Market Strategy
Faber Castelle is the oldest company in the manufacture of pencils, as it has been in operation for almost eight generations since its inception. With competition emerging in later years, the company decided to use a pricing strategy, which enhanced the company’s growth in terms of market share and profitability. Over the years, Faber Castelle’s growth curve has been on the right path, forcing the company to keep on improving the design of pencils for enhanced quality. Indeed, the recognition that customers prefer quality over price has enabled the company’s performance to continue improving. Evidently, despite its increasing price, pencil remains marketable in most parts of the world.
Product Life Cycle
The product life cycle is the turn of events from the invention of the product to the finished product available in the market. A product normally has four phases, including introduction, growth, maturity and decline. The first pencils to be produced by Faber Castelle were produced in 1761 by a man called Kaspar Faber.
As shown in the above diagram, the product is currently in the maturity stage, as evidenced by declining sales due to lack of new market demand. In this maturity stage, users have recognized Faber Castelle and have already become loyal to the product. Indeed, the company is already established, and although there is a space for new entrants in the market, Faber Castell is not threatened in any way.
Strategies Used by Faber Castell
Marketing Strategy
Faber Castelle has been able to stay in the market because it has had a good market design and strategy on how to promote its business. It also had a good marketing solution that has worked ever since it was established. For starters, the company concentrated on understanding conditions and the company’s position in the US market. The results showed potential viability, thus necessitating an increase in brand awareness.
One aspect of the strategy was to improve distribution structure and network by enhancing virtuosity concept in all campaigns and in initiatives of entering the US market. Here, the company is celebrated in its mastery of manufacturing the best writing instruments.
There was the development of a number of themes around the virtuosity concept for use in enhancing the penetration of the company’s products in the market. This was to be done differently, as each client segment had different needs. There were five potential themes, but the company decided to pursue only two in its market agenda to suit men and women. These two were “Secrets” and “Orchestra”. The “Orchestra” was all about music, its affinity and elegance, aimed at targeting the European audience. Its main target was the male audience who used colours and materials like shiny metals and cherry wood.
Moreover, the targeted class was the artistically conscious and sophisticated upper-class men adults. On the other hand, the “Secrets” was meant for young women in society. This would leverage the intimacy between a woman and their most preferred recreational activity, taking notes. The company realized that women are fond of putting down their thoughts and noting things like a kitchen shopping list and the like. In support of these two themes, the team established a series of initiatives, for example, the expansion of distribution and communication strategies.
The use of integrated marketing
The company explored an important channel involving the use of the internet. Here, Faber Castelle created a website that would be used to centre an iconic product dubbed the “perfect pencil”.
This wooden pencil would also have been installed close to a museum such that people would get a chance of seeing it when they visited the museum. This placement of the pencil was meant to be decorated with stories of the brand and the products it deals with.
Faber Castelle also designed products that would be supported by the “Secrets” theme. The team would later come up with other initiatives that were PR related such as publishing a book or books with anonymous secrets from notable citizens or famous celebrities and sponsorship of periodic contests, especially among young composers in the US.
Improving the product
The company managed to improve its products by taking the initiative to know the needs of customers and providing products that matched such needs. One of the things the company did is cutting the edges of the pencil from a cylindrical cone in order to prevent it from rolling and falling on the floor, and eventually breaking. Faber Castelle also identified that children are colorful creatures, and as a result, the company decided to change from its previous lead pencils to more colorful pencils made from harm-free chemicals.
The company did research on how to make the pencils stronger and identified a design that used wood covering, thus making them durable and attractive. Another innovation involved making pencils easier to hold and use. This was done by adding some rubbery dots on the pencils to prevent them from slipping out of children’s little hands when they sweat. The company also saw the need to design pencils in a triangular shape, which was a darling for children. Even with technology, Faber Castelle has managed to remain competitive due to its aggressiveness in producing quality products that appeal to consumers.
Pricing
There is nothing that sells a company’s product more than its pricing. However, a customer should get value for his or her money. Faber Castelle has the best prices in the market, and the fact that it has the best products also makes marketing even easier. Prices are strategically set such that they make the products to be within reach of many customers. However, the price does not indicate that the product is cheap either. The following table has the pencil prices in Indian Rupees.
Competition and Other Challenges
How Faber-Castelle has Survived Competition
Faber-Castelle has continued being in business due to its ability to remain relevant despite changes in market dynamics and consumer behaviour. The ability to keep on improving its product is what has kept the company afloat. Pencil lovers have been happy all this time, and all they have are praises and satisfaction for this pencil producing company. The best thing about pencil product is that, even after many years of being on the shelf, one just needs to sharpen it and continue using it; it does not perish or expire. Even if in some countries the sale of pencils is slow, the most important point is that there is still some significant growth. The company has continued growing even with all the economic hitches such as recessions. Evidently, in the last financial year, Faber Castell had a 6% growth which was a good thing considering that many companies registered losses.
Problems that Faber Castelle Faces in staying in the Market
School funding
The US government has been accused of poor funding in schools, especially when it comes to basic provisions like pencils. This means that the burden of providing school supplies is left to teachers, parent and guardians who might not be able to provide them. As a result, parents resort to cheap and low quality imported pencils. However, this problem can be solved by the government making restrictions on imports of low-quality pencils. Moreover, Faber Castelle should concentrate on quality differentiation in order to continue winning the hearts of domestic consumers.
New Technology of iPads and Smart Phones
People will always move with the latest trend in technology; here, the latest trend is iPads and smartphones. People no longer need to carry pencils and papers to jot down notes. All they need to have is a specific pencil (a stylus sort of), and they can jot down all the notes they need. Later the iPad or the smartphone will put the notes in a good format, and the user can use the notes whenever they need them. This is becoming a problem for pencil, making it only applicable by preschoolers and artists.
Import of wood from China and Russia
Another concern bothering Faber Castelle is the import of wood from China and Russia. The company has been sourcing wood from China, which has become scarce due to increased demand from other industries in the country. Another issue with Chinese wood is that the resurgence in GDP is likely to cause inflation, especially in the wood supply industry, thus impacting the market and rising cost of production. The company would have to pass the extra cost to customers in order to sustain its profitability. Eventually, there is likely to be low demand for the expensive pencils.
Labor costs in China and accessibility of Raw Material
Labor costs in China have increased, thus making it hard for companies, especially from the US to do business in China, thus reducing the production of pencils. The US’ domestic energy costs are also declining while supply of lead overseas is also becoming complicated because planning and inventory has proved to be a costly affair. Therefore, although domestic market can supply the company with lead, the mineral is dwindling as days go by, thus making it less reliable source of raw materials.
This has compelled the company to move from one country to the next looking for raw materials, thus increasing costs of operations and hindering growth. It is also worth noting that venturing in foreign market is always accompanied by the need to comply with restrictions and regulations of host countries. This slows down the process internationalization, and as such, Faber Castelle has to conduct an extensive background survey to establish the most favorable and viable market to venture into.