Entry and Expansion Strategy
Product strategy is both a component and a determinant of the marketing mix. For it has a great influence on the other elements of the mix: advertising, personal selling, channels of distribution, physical distribution, and pricing. No marketing decision is properly made without an appraisal of product policy. Since products are basically means of solving problems for buyers and sellers, physical environment, biological, technological, and cultural forces change them.
The very perceptions and interpretations of environmental developments by consumers create product opportunities. The product line, ready-made American biscuits will need to consider the life-style factors influencing product development. Urbanization, leisure, competition, discretionary income, travel, styles, tastes, automobiles, informality, and convenience have led to the emphasis on product form, readiness, packaging, combination, and selection convenience.
Market Entry
Retailing standards and practices are deeply entrenched in national culture, an arena in which the Vietnam conscientiously avoids interference. For example, national planning restrictions prevent hypermarkets from reaching their full market potential by limiting square footage or disallowing permits. Hours of operation are also controlled by either national or regional legislation in all member countries. Joint venturing with native Vietnam firms also permits retailers to take advantage of indispensable expertise and established distribution networks (Crawford 2003). The structure of the foreign representatives varies by country.
In Vietnam, the company can maintain a marketing subsidiary and its agents will successfully maintain their position of market leadership. This employs eight full-time staff, handling marketing and a small distribution facility which included a warehouse. In the main, however, the company makes use of the independent distribution system, which comprised about a hundred medical dealerships, serviced by about twenty commission agents. The first stage is to find a partner and open new offices in Vietnam. This stage will take from 3-4 months (Bellis 2001).
The success of any company is closely connected with its management team, structure of the company and people work with it. The structure of the foreign subsidy will be: a general manager on the top who coordinates the work of the division and reported to the main office. Two groups (customer service and fright forwarders) report only to him. The senior management team is responsible for advertising and promotional activities, customers’ support and delivery.
Each foreign representative office has a after sale service department as an obligatory requirement of the policy (Coyle, 2003). Generally, database information is used to help identify, classify, and profile individual customers. This enables the marketer to develop more effective product offerings, pricing strategies, and communication programs and improves its skill at product timing and delivery. With the database information, the marketer can develop forms of two-way communication with each individual customer. Thus, a buyer-seller relationship is created (McDonald and Christopher 2030).
At the second stage (from 6 months to 1 year), market penetration, product planning requires considerable lead time for change, for the addition or deletion of products. It is not uncommon to spend two to four years in developing new products, and this requires advanced market intelligence. The aims are
- to counteract competitive activity and assure that loss will not occur because someone else introduces the product first;
- to realize potential profitability;
- to guard against shifts in consumer tastes;
- to gain complementary relationships;
- to gain an additional share of market;
- to complete a product line; and
- to use common raw materials as well as production and marketing facilities.
Before launching a product, the company should establish various criteria concerning the size of the available market, the rate of return on investment, the net profit, the patentability of the item, the congruency with current corporate situations, and the impact on the sales organization (Keegan and Green 2007). The term demand, therefore, is multidimensional. Market opportunity is a more specific and narrowly defined term and reflects a more dynamic picture of the demand relationship from the standpoint of the marketing organization itself (Labarbera et al 1998). It refers to the demand for a particular good and service that a firm can provide. Executive vision is a significant variable in assessing opportunity.
The American buskins will position itself as a premium brand proposing unique taste and quality. The limit pricing strategy will help American biscuits to gain market share and obtain competitive position (Tayeb 2000). It is important it is for business directors and managers to understand properly the financial characteristics of the business. This requires the identification of Volume — Cost — Profit — and Cash relationships. The behavior of this Volume — Price linkage is dependent on the level of the Contribution Margin for the particular business (Keegan and Green 2007).
The business planning and budget setting processes used in many businesses tend to produce incremental changes in performance, often particularly achieved by small adjustments to the level of costs incurred — improving financial efficiency (Eden and Ackermann 1998). This Cost Profiling analytical technique seeks to identify potential opportunities for more radical changes to the business cost base. It focuses on improving financial effectiveness by examining the relationship between costs incurred and benefits to the business. The on—going activities’ of the organization are identified; for example customer enquiry handling, preparation of weekly management reports, production engineering etc.
These activities may involve many departments/business units across the organization, thereby incurring cost in each location. Using the budgets/management accounts data for each cost centre’ (i.e. an organization unit where costs are incurred) an analysis is prepared to identify the costs associated with each activity. Through this process the entire costs of the business are analyzed by activity. The focus here is to identify the value to the business’ of the activity. The first step is to identify a set of criteria against which benefit can be judged (Black, 1999).
A company’s market share, current and future, may fluctuate readily. Competitors’ marketing mixes are designed to switch customers to their own brands. Thus, executives are concerned with brand switching–they wish to increase the switch-in rate and decrease the switch-out rate. There are two groups of competitors: national producers and global brands like Nestle. The strength of local producers is unique cultural traditions and products while the strengths of international marketers is their global brand name and customers’ loyalty (Boone and Kurtz 1992).
As an integral part of business, marketing management is concerned with setting goals, establishing policies and programs, and implementing business action for the entire firm. Its major tasks are to translate consumer wants and needs, actual and potential, into profitable products and services that the company is capable of producing; to cultivate markets to support these products; and to program the distribution activities necessary to reach the markets.
Marketing is, therefore, not merely a limited specialized activity of the business, but rather a perspective for the total management team. It does not function as a separate entity in the business, nor is it more important than any other primary activity, such as manufacturing or finance, yet through actual and potential sales it does establish constraints within which the other activities must be performed. This cost of quality approach is in accord with the foundation stone of the supply side of standard economics, the principle of opportunity cost. Improved product quality requires investment outlay, and improvements beyond some point imply higher costs of production with consequently higher prices (Bartlett 1994).
Distribution and Advertising
Distribution
American biscuits are confronted with making a choice from among a variety of distribution alternatives. Although generalized solutions to all distribution channel decisions cannot be formulated, general guidelines can. The economic functions of channel members can be analyzed, significant factors and forces shaping distribution systems can be assessed, and the variety of channel arrangements currently employed to overcome distribution barriers can be classified. In this chapter we shall be concerned with the design of effective distribution systems — with the decision problems confronting managers regarding the choice of the proper balance of middlemen necessary to satisfy customer wants and achieve corporate goals (Bartlett 1994).
In order to reach potential consumers, American biscuits’ distribution decisions will be designed to combine, supplement, or modify those of other firms, in order to form channels of distribution that achieve the most effective distribution. Since markets are dynamic, the opportunity for new combinations is continuously available. Channels are thus used to overcome barriers.
These barriers include the separations of time and space between producers and markets, the costs of moving goods, the communications barriers between producers and users of products, and the separation of demand. In surmounting such barriers, middlemen serve two groups — manufacturers and customers (Brownlie 1995(. Their economic justification stems from performance of their functions more effectively than others. And yet, the margins of middlemen are periodically under attack and investigation, especially in the food industry, where farmers resent the disparity between their margins and those of middlemen (Griffith et al 2000).
American biscuits will sell its products through independent directly to restaurants and cafés, bars and fast food restaurants, and through the retail chain. But middleman functions are not superfluous and cannot be eliminated — although the number of times some of them are performed may be reduced. They can, however, be shifted to customers or manufacturers. But by so doing, costs may actually be increased. The task is to perform them efficiently with minimum duplication (Lance and Woll 2006).
Dealers evaluate product lines on the basis of congruency with current and competitive lines, sales policies, resources, facilities, service to customers, reputation, and profitability. However, effective dealer performance demands not only an acceptance of the product, but also a willingness to handle and promote it as a manufacturer’s programs require. The design of a distribution channel necessitates consideration of the following:
- information on the significant factors such as past, present, and projected markets, products, and customers;
- the constraints facing the company;
- information about competitors’ channels;
- problems in current business practice;
- feasible alternatives for meeting problems and constraints; and
- the nature of ideal and practical models and the likely consequences of each (Lance and Woll 2006).
Channel selection rests basically on cost-revenue considerations. The choice of a channel will be based on profitability, in both the short and the long run. Yet in channel analysis, undue attention is often given to comparisons of sales volume without heed to corresponding costs. Two other potential weaknesses with the use of multiple channels need to be considered by the manufacturer. First, some channels may be better matches with the image of the product line and manufacturer than others, whereas other channels can hamper the image of the manufacturer in the marketplace. For example, a manufacturer of top-of-the-line stereo equipment may hurt its brand identity by using discount stores in one of its channels (Coyle, 2003).
Advertising and Promotion
Advertising and promotion will pay a special attention to cultural norms and traditions of Vietnamese. It must be recognized that advertising constitutes only one of several methods of promotion. The choice of which of the competing methods to use depends on the cost and effectiveness of these competing modes. A widely used and frequently bought product is usually more suitable for promotion by means of advertising than one infrequently bought by a few.
This is apart from other considerations that may dictate the choice among alternatives (Lance and Woll 2006). A contact by a salesman has a higher marginal cost and probable return than one by a television advertising message. A profit maximizing firm takes this into account in deciding whether to use salesmen or television advertising to promote its products. It is, therefore, easier to understand the differences in the advertising intensities among products in terms of a general theory of promotion or communication than by means of a special theory designed to explain advertising alone.
The main advertising channels will be national press and radio, TV and the Internet. Also, American biscuits should place its ads in transport and local shops (posters, ets.). ‘Off-the-page’ purchasing will rely on impulse, and there is a need to present an attractive proposition. The advertisement must be informative enough to enable potential customers to make a decision to purchase. The use of demographic descriptors can be helpful in identifying commonalities (Lance and Woll 2006).
For consumer markets, these will include age, sex, education, stage in the family, life-cycle, and socio-economic group. Personal selling is generally portrayed as being most effective in the transactional stage — in making the sale. Promotion may be used as complementary or supplementary market-communications activities. Their respective roles depend on company products, customers, and markets.
Often they are used in a complementary manner, with advertising paving the way for personal-selling activities. In other situations, such as in making industrial sales, personal selling is usually the most important component, while advertising may be a supplementary activity that helps create awareness. In either case, both should be coordinated by marketing managers. Salesmen should be aware of advertising plans and programs, and advertising campaigns should be developed within the boundaries of sales tasks, both of which should be viewed as mutually supporting functions. The main promotion strategies will be price reductions and press conferences, sponsorship of events and talk shows. In addition, in urban areas, American biscuits can use the following methods: direct response advertisements; direct mail and mail drops; personal (direct) selling (McDonald, Christopher, 2003).
In the last few years, viewers’ emotional responses to advertisements have joined “cognitive responses” as important predictors of post-exposure attitudes. This naturally leads to the consideration of how best to assess emotional responses. The current approach is to record subjects’ ratings of a relatively long list of emotional adjective scales. Because such a list is alleged to be comprehensive, it is applied to all ads without modification (Lance and Woll 2006).
Critics propose the use of a briefer list of feelings that have been selected to apply to an individual ad. The rationale for a tailored set of emotional responses or feelings is straightforward. We assume that advertisements produce a positive attitude toward the brand by evoking an intended sequence of emotion (and cognitive) responses in viewers. Ad-specific feelings are designed to measure the particular emotional responses intended by the advertiser. As such, these responses should be good predictors of the resulting overall attitudes (Johnson and Scholes 2003).
Conclusion and Recommendations
In order to deliver value to the customer, American biscuits create a unique way of conceptualizing the managerial role is required. Cross-cultural differences and unique market will have a great impact on strategies and challenges faced by American biscuits in Vietnam. The company should focus on a customer and create customer value -not company value. Quality products and quality processes are said to be key factors differentiating market leaders from market followers.
It is therefore interesting that the discipline of economics has had almost nothing to say on the subject of quality. Specifically, decision makers in business and government may have failed to give importance to the topic of quality partly because they had been unwittingly trained to view the world through the lenses of deficient theoretical models. The ability to produce quality products, in the narrow sense of meeting standards, is held to be implicit in the nature of technology.
The technology is seen as imbedded in forms of capital, human and machine. In that view, better quality requires the technological forms that produce it, and the technology, in turn, requires investment. In other words, quality costs. Technology itself is almost always taken as an exogenous factor in economic analysis. Among the factors that govern the advertising and sales programs that should be selected are the degree of newness of the product, the existing degree of competition, the ease of entry of competitors who offer similar products, the brand loyalty of customers, the company image, and the corporate niche in the marketplace.
Also, management must decide whether it wishes to skim the market or penetrate it deeply. In such cases, the major challenge is to ensure that each of the channels makes sense on economic grounds. A major problem could arise if certain of the retailer’s suppliers become upset by the mechanisms or means through which the retailer is selling their products.
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