Introduction
T17 RAG Technology House has made an important decision to enter the microcomputer business in the global market. The strategy that has been taken by the corporate headquarters is that after two years, this new division should be able to sustain its own operations and generate substantial profits for the mother company.
According to Keller (2003, p. 76), two years may be a short period for a large company to break even and generate returns on its investment. As shown in the previous analyses, it is clear that the top management has decided to make a massive investment into this new project. This means that any form of failure in this project may not be acceptable.
The corporate headquarters has made the decision of making a seed capital of $ 7 million within a period of two years. Such a massive investment must be used to generate a strong value to the parent firm. As the head of this new division, it is important to draw a clear market plan that would help achieve the expectations set by the headquarters within a timeframe of two years.
This may not be a simple task, especially given that the products are to be delivered to the global market. All the major continents are targeted, and within the two years, the products should be available in North and South America, Europe, Asia-pacific, Africa, and Middle East regions.
In this market plan, the focus will be to find the most appropriate marketing strategies, financial plans, and assessment approaches that will propel the firm to the desired heights.
History of the Firm
According to Fisher and Vallaster (2008, p. 74), one of the best ways of developing an effective plan for the success of a firm is to start by analysing its history. The process of analysing a firm’s history helps in determining the past trends in order to determine what the future holds for the firm. As stated in the section above, this is a new PC division that has just been introduced by the parent firm.
This division lacks any history because it has just been created and it is yet to take off in the market. This means that its past can be analysed by knowing the history of the parent firm. T17 RAG Technology House has been operating in the market for some time as a large international electronic firm. It has specialised in various electronic products, but had not made an entry into the personal computer business.
In order to succeed in the challenging market environment, the management had developed a mission statement that would guide its operations. The mission statement reads as follows: “RAG Technology was founded with the vision of producing innovative and affordable computing solutions to enable people explore and develop themselves in any industry.”
From this mission statement, it is clear that this firm has been struggling to develop the revolutionary computing products that have the capacity to meet the needs of people in various industries across the world. Another important factor that the mission statement focuses on is the fact that this company offers its products at affordable prices.
This message is specifically meant to appeal to the cost cutters who are interested in efficient products at affordable prices. The firm has been operating in the global market, and given its financial strength, it is clear that its past operations have been successful.
Market Assessment
According Fisher and Vallaster (2008, p. 114), when developing a market plan one of the most important stages, is the market assessment process. This is specifically important in cases where the firm is entering a new market. The management team will need to conduct an assessment of the external market in order to determine how the external market forces may affect the firm once it gets operational.
In the PC industry, one of the most important factors that the management of this division will have to be ready to deal with is the stiff competition that is posed by the rival firms such as Adroit Inc., RISE, Pikainen Tech, and SmartBox. The main problem that this firm may face is that most of the people in the market today, including the cost cutters, buy the brands that they trust.
This means that it will take some time before this new brand can win the trust of the target market. With a timeframe of two years that the top management expects the new division to break-even with the investment made, only a superior marketing strategy can be of help to this firm.
The current personal computer market has five major segments that this new division should be aware of before introducing its products to the market. The graph below shows the five market segments.
The first segment has the cost-cutters. These are customers in the lower market segment who want cheap products. Although they prefer high performance products, their buying decisions are closely guided by the prices of the products they buy. They are comfortable with the low-priced products even if their performance is not the best in the market.
A large population of consumers falls into this market segment. Above the cost-cutters is the Workhorse. This segment has the consumers who are interested in the easy-to-use products that are modestly priced. Although they base their buying decision on the prices of the products, quality also plays a major role in defining their buying decision.
They may be willing to pay a little more- as long as the price remains modest- in order to get better quality products. They are mostly office workers who want efficient PC to help them in their daily work. This is the largest group of customers that this new division should target. The innovators are consumers who need personal computers with a capacity to handle large computational problems (Kotler & Keller 2012, p. 57).
They need computers with the latest technologies to handle their accounting, engineering, or inventory management problems. They are always willing to pay a small premium for high performance computers. It is important to note that they also consider the price as an important determinant of their buying behaviour. They form a small percentage of the market.
The fourth segment is the Mercedes segment. This is the highest segment consisting of a few customers who are willing to pay high prices for high performance products. Their buying decision is wholly defined by the quality of the products they purchase. These customers look for high performance computers which can support engineering problems or other technical issues.
They do not mind the price that they have to pay as long as the product meets the high performance that they desire. The last segment occupies a special position in the market of personal computers. The segment is known as the traveller’s segment. As the name suggest, these are the travellers who need computers that they can use while travelling.
They may be business executives who are interested in a product that can help them monitor their business operations while they are on their trips. They form a small percentage of the market. Although they are always interested in the high performance products, they are sensitive to the prices of the product they purchase.
With this knowledge about the market, it would be easy for the management to determine the best moves to make in the market. The market research conducted shows a 12-month potential demand for various segments in different cities.
From this research, it is clear that the majority of the cost-cutters are in Shanghai, the innovators, Mercedes, Workhouse, and travellers are majorly in Chicago. This regional arrangement is important in defining the number of stores to be opened in various locations.
Performance to date
As at this moment, it may not be easy to determine the performance of this firm in the market because it is yet to start the operation. It is currently laying structures that will be used in its operations. This means that at this moment, there are only expenses without any income generated from the process.
The performance report indicates that the brand Optimus which is one of the products of T17RAG Technology House has experienced an impressive performance in Chicago when compared to that of the rival firm.
The new division of personal computers may need to capitalise on this good image that has been created in this region. The following diagram shows the profitability of the firm in the second quarter as extracted in its books of accounts.
Source (Data obtained from the books of the company).
From the reports, it is clear that Adroit Inc. has several brands that offer stiff competition to the products offered by this firm in various regions in North America, Europe, Asia-Pacific and parts of Africa.
Marketing Strategy
According to Kotler and Keller (2012, p. 58), the market entry strategy that a firm uses to get into a new market will largely define its level of success in that particular market.
The market entry strategy is always defined by the market size targeted, the level of competition a firm can sustain during the early stages of the entry, and the involvement that the firm wishes to have in the new market. Given the level of competitiveness in this industry, the approach taken by this firm should be that which can give it a competitive advantage over other existing brands.
Market entry strategy
Choosing an appropriate market entry strategy is one of the main ways through which this firm gain a competitive edge over its market rivals. Based on the decision of the top management unit, this new division will make a direct market entry by using the sales offices in the target markets.
This direct market entry will enable this firm to generate an impact in the market that would help in defining the new brand for the new product. This strategy is appropriate because all the other competitors will be entering the market at the same time. This means that none of the competing firms will have a competitive edge over the other market rivals.
All other competing firms also have the same market knowledge and resources when introducing their products in the market. This means that the main difference between the firms will be the approach they shall take in the market. Using the direct market entry is specifically important in the creation of awareness about the existence of the product, and the superiority of the brand of this firm over the other market rivals.
Customers who will be using this product for the first time will be able to visit the offices of this firm and ask any question that they may have about the product, and the representatives will be ready to respond to their questions. This may not be possible in cases where the products are sold through retailers.
However, it is important to note that this strategy may be very costly, especially with the fact that this firm will be making a global market entry.
The brand management strategy
A strong brand in the market helps a firm in distinguishing its products from that of its competitors. The brand management strategy taken should emphasise on the values treasured by the target market. As stated before, the main target market for this new division will be the cost-cutters and the Workhorse segments.
In order to succeed when targeting these market segments, the emphasis should be on the affordability and efficiency of the brand. The positioning of the products should focus on meeting these two important factors that define the buyer behaviour for this product.
This should be done with a clear knowledge of the strategy taken by the rival firms. This means that the brand management strategy should be flexible enough and sensitive to the market changes.
The pricing strategy
According Fisher and Vallaster (2008, p. 87), choosing an appropriate price for the new products is very important for a firm to gain a competitive edge over its market rivals. The price judgment should be based on the cost of production, the price set by competitors, and the market segment targeted.
The first priority should be that, the set price must be able to meet all the cost of production and earn the firm some income that may make the business viable. The second factor would be the price charged by the competitors. The price of the firm should not be massively skewed from that of the competing firms.
Finally, the market segment targeted will also define the price judgment. The Mercedes class may not have as much problem as the cost-cutters when it comes to pricing.
Promotional campaigns
The management of this new division will need to use promotional campaigns in order to inform the customers of the existence of the brand, and the superiority of its products over the market rivals. The Advertisement judgment is another important factor to be considered when defining the appropriate marketing strategy.
When planning to reach out to the customers in different regions, the local media strategy may be very important. It is an assured way of reaching out the targeted customers. The local media chosen by the competitors should also be an influencing factor, especially if it is working well for the competitors.
Financial Strategies
Developing an appropriate financial strategy is an important ingredient in the success of this new business unit. Within the first year, there will be four financial periods, and in each period, the management unit will be given $ 500,000 to spend. In the second financial year, the division will be awarded $ 5 million to support its operations. In the first two quarters of the first year, most of the finances of this firm will go into expenses.
This will involve setting up new sales offices for the new products in the major cities. The last two quarters will involve operational strategies that will be geared towards income generation.
As mentioned above, the pricing strategy should be set having understood various environmental factors to ensure that there is a regular flow of income into the firm. The pro forma income statement below shows the income and expenses of this organisation.
Pro forma income statements
Source (Data obtained from the books of the company).
As shown in the pro forma statement above, in the first two quarters, the cumulative net profit for the division will be a negative value because the firm will be spending without having the sales that would generate it some income.
Increasing market share and growing the business
According to Fisher and Vallaster (2008, p. 112), one of the most challenging tasks in a new business is maintaining a steady growth in the market.
In order to increase its market share, the management of this new unit will need to maintain the promotional campaigns using both the social and mass media. All the products associated with this brand should be of high quality, and the customer care unit must always be ready to address issues raised by the customers.
Conclusion
Developing a comprehensive business plan is a complex process that involves various activities. For T17 RAG Technology House that is planning to make a market entry into the microcomputer industry, the first step will be a self-assessment analysis to determine its strengths and weaknesses.
The firm will then conduct a market assessment to determine how well it can succeed once it makes an entry. With this knowledge, a strategy that involves a market entry approach, brand creation and promotion, and pricing strategy can be developed.
List of References
Fisher, C & Vallaster, C 2008, Connective branding: Building brand equity in a demanding world, Wiley, Chichester.
Keller, K 2003, Strategic brand management: Building, measuring, and managing brand equity, Prentice Hall, Upper Saddle River.
Kotler, P & Keller, K 2012, Marketing management, Pearson Education, Harlow.