The intense competition in the global market has made all the world-leading organizations to restructure their marketing strategies as well as streamline their management. All these deliberate attempts are done with the aim of positioning the firms strategically to be able to compete with its competitors. It is for this reason that the Schneider Electric (China) has adopted some pricing and distribution strategies.
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Since the firm is an international venture, the organization management is vigilant to ensure that it is competing with other global firms for the scanty market opportunities. Despite its vast production superiority, Schneider Electric is facing some strategic marketing challenges that are limiting it from exploiting its full potential.
Therefore, this report endeavors to highlight some of the challenges that the firm is facing and provide redial measures to solve them. To achieve this, a thorough evaluation of some economical theories and concepts will be examined to generate a cohesive and a well-integrated report.
The secret behind all prosperous organizations are dependent on the strategies, which they formulate specifically to steer the firm’s production capacity to greater heights. Scholars have revealed that strategic planning is only successful when implemented by a well-informed management organ.
The management is not only expected to posses the right management skills and competencies but also it is support to carry out regular research to adjust their management accordingly.
Furthermore, an international organization like Schneider electric requires an up to date state-of-of-the-art to predict the future changes in global prizes and demand. Such timely warning systems play a vital role in influencing the decisions of the management.
Objectives of the report
This report aims at exploring the following issues;
- Investigate the Schneider Electric (China) pricing and distribution strategies
- To understand Schneider Electric’s internal environment
- To understand the external environment of Schneider Electric company
The report covers the Schneider Electric (China) specifically the operations and activities of the marketing department. This report endeavors to evaluate the marketing strategy that is employed by the firm to reach out to its customers with ease while making the required profit. The report provides the information that is obtained to provide recommendation and the way forward.
This report is a case study that was carried out in Schneider Electric (China). It specifically covers the Marketing unit with the aim of understanding the effectives of pricing and distribution Channels. The findings of the report are to be used in helping the organization to better its performance.
This research is a case study to obtain in-depth information about the internal information of the organization. This method was selected due to its effectiveness in obtaining information about the internal information or the where the information covered is conformed in a small geographical region. Hence, this research method proves effective in obtaining the finer details.
In this research data and information was obtained from secondary sources. Mainly, information was got from the internet. Therefore, the scope of information was restricted to the information that is given to the public domain by the firm via internet. Secondly, this choice was opted for due to the long distance that discouraged primary data collection.
Pricing and Distributions Strategies. Low Cost Leadership
Schneider Electric Company has always maintained its policy of low cost leadership in order to meet the needs of its clients in the most convenient way. This has been made possible by its enormous capital base that has made it to produce in large scale (Pattnaik, 2010). Pattnaik (2010) further asserts that the huge capital base has ensured that the firm is enjoying economies of scales.
This concept is founded on the basis that the firm’s ability to purchase supplies in large volumes thus getting high discounts rates. In addition, voluminous manufacturing of the electronic equipment has made it possible for the firm to cut its operation cost. This is because increased production does not require additional management personnel’s (Sawyer, 1985, p.47).
Although low cost leadership is a traditional competitive strategy most organizations finds it difficult apply it for a long time in the modern economic era. However, Schneider electronic has been able to do this due it continued use of nuclear energy resources (Pattnaik, 2010).
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The long overhaul of its operation has made Schneider to assume an experiential advantage in dealing with logistical issues in a more competent way than its competitors. The firm has also managed to invest heavily on other sources of energy such as Geothermal and solar energy to supplement the nuclear energy. All these have made it possible for the form to sell it products at lower prices compared to its immediate competitors.
The firm has also maintained its low cost pricing strategies due to its principal of transferring human resource. The cost of human resource varies from one country to another depending on the wage rate and the living standards of a country. Schneider has always resorted to hire some competent human resources from countries with lower standard of living to work in countries with higher wage rates.
According to the ILO report, the wage rate in UK is about ten times the wage rate in the Indian. Hence, by importing labor from India to work in the UK helps the firm in keeping it production cost low. However, the organization does not total rely on foreign labor force but it reserves the senior management to the Chinese nationals to provide guidance and management guidance.
Lengeot (2000, p.3) asserts that major Chinese organizations are run from Hong Kong and they pay salaries are closely related to those paid in America. In addition, he demonstrates that the Chinese people are more versatile and are more interested in facing new challenges rather than sticking to one job.
For this reason, the Chinese lacks loyalty and therefore most Chinese firms have to cope with high employee turnover (Lengeot, 2000, p.2). Since development of employee, loyalty has proved a tedious task and rather than incurring high expenses in promoting this, Schneider prefers using expatriates (Lengeot, 2000, p.7).
The low cost leadership strategy, largely, has worked in the favour of the Schneider Electric company. However, evaluation of economic theories suggests that the strategy should be implemented with great care. Just like the giffen goods whose demand is positively related to prices; when the prices of some apparatus falls their demand decreases due to the notion that such goods are of poor quality.
Such a notion might be borrowed thus wrongly damaging the reputation of some normal goods whose prices is reduced. Generally, lowering the prices means the goods are of poor quality (Jain & Ohri, 2007, p.61).
For normal goods the lowering the prices is usually associated with drop in quality. Thus, the management should be keen to avoid tarnishing its reputation. To avoid such notion the management should mainly use low cost leadership in venturing in maiden markets.
Schneider Electronic has a wide rage of products, which are produced and sold simultaneously. The marketing department has developed well-knit product assortments to meet the needs of their clients efficiently. The product mix includes power distribution systems, back up facilities such as the UPS, conservation systems, power intelligence services and other electronic components.
The wide range of product guarantees that the firm has a continuous sale throughout the year. The ability to have such a wide assortment of the products has transformed the firm to be one stop shop for all electrical equipments and services.
The benefits of developing variety of products have gone well in establishing its brand name both within and without the country of origin. Such a well-established brand name has led to the reduction of advertisement cost since the company’s name has gained a global reputation.
Other gains have been acquired by the ability of the firms to promote new product lines. Thus, the determination of the firm to carry out intensive campaign to popularize the company’s name has been associated with multiple benefits.
The development of home automation product line the firm has been able diversify its revenues to a great deal. This product line has become famous for the way it meets the required home environment by regulating temperatures in high latitude regions.
This product line is also popular in low latitude regions in cooling the ever-warm temperature. This is just a single product line that has been generated to meet the needs of a specified customer group.
Schneider Electronic has been operating in a competitive market where both prices and demand are regulated by the market forces. In such a free market situation the customer have perfect information and therefore free to buy from any of their available suppliers.
Since the market dictates the prices, the company cannot manage to influence the prices of the entire market because the competitors will follow suit. For this case, Schneider has benefit a great deal by it popular brand name and its ability to carry out extensive advertisement campaign.
Although there is perfect information, the company has strived to maintain customer royalty by ensuring it is providing reliable customer services and after sales services. These customer services have been attained by having expert demonstration and installation services for the highly technical systems.
In addition, the company has remained true to its word by ensuring that all products with a varied warranty are replaced. These services have cemented the bond that exists between the firm and its customers.
On the other hand, the management should ensure that a balance exists between product promotion and revenues generated. It should be understood that the excessive promotion means incurring more cost, and so it is prudent to cut on the cost to maximize on the profits generated.
Owing to the fact that the firm is trying to appeal to a global market, the management is obliged to design a more acceptable means of promotion such as the internet, which is expensive and widely used. Nonetheless, promotional expenses are unavoidable but still they can be cut down to recoup more profits.
Since launching online marketing, the company has been using the agency distribution method to reach out to its customers. Once the customer has bought a product online, the marketing department arranges for the transportation of the products in a timely manner. After the arrangements of the logistic issues the customer is advised on where and when to collect his or her purchases.
The agency method has been effective in countries without regional branches. However, the firm has diversified its operations to over a hundred countries. Such diversification has been very successful in solving the problem associated by many intermediaries and correspondences that causes unnecessary delays.
Apart from cutting down on transportation costs, operations in the regional branches have also facilitated in a taking advantages of the locally available resources.
Most international organizations prefer to use fewer distribution channels to cut down on the cost. This requires the management to either engage in forward and backward mergers. Forward mergers occur where the organization decides to absorb the suppliers and distributors.
The logic behind mergers is to ensure that few intermediaries are involved in the operation. On the other hand, the management may opt to merge with raw materials in order to cut down on the cost of production. The Schneider Electric has in the recent past being involved in mergers and takeovers.
While mergers have proved vital in large multinationals and international corporations, the management should be vigilant to ensure that the competent personals are involved to avoid loopholes.
Initially, Schneider Electric was using a less sophisticated system for dealing carrying out its accounting and helping in management operation. This system was developed in France and it was susceptible to slow performance due to overwhelming pressure (Lengeot, 2000, p.5).
To streamline its distribution the firm had to employ a more sophisticated system to help cope with the increased sales due to the involvement in the international market. Adoption of powerful system has ensured timely transfer of logistics and distribution information across the globe.
Findings and Discussion
International Business environment
All business organizations operate in a specified environment hence its operations are influenced or constrained by the conditions in surrounding. However, large International Organizations are influenced a lot more diverse forces. Apart from the local surrounding the international firms is also affected by the foreign issues, which vary from one country to another.
All business organizations are affected by two types of challenges; the internal factors and the external factors. Internal factors are issues, which affect the firm’s internal operations while the external environment refers to factors beyond firm’s direct control that have a direct impact on organizational performance.
This report will focus on the SWOT analysis to identify factors in the internal environment affecting operations of Schneider Electric. SWOT stands for Strengths, weakness, opportunity and threats facing an organization. External factors are those factors whose magnitude is beyond the control of the organization. For a better understanding of the external environment, this report will use the PESTEL analysis.
In the international business environment, the organization has to strive to rake the advantage of any opportunity that is within its immediate neighborhood. Nonetheless, the immediate environment is equally restrained by challenges and inherent shortcomings. To understand how the company is dealing with its internal affairs a SWOT Analysis is very handy.
Strengths of Schneider Electric (china)
By virtue of being a large organization, the firm has a huge capital base that has been used to install huge machinery and up to date state-of-the-art. All these have provided a strong foundation for the firms operations both within the country and internationally.
Huge capital base has been used to foster for stable production and continuous customer satisfaction. Of great importance is the ability of the organization to attract and appraise the most skilled and technically competent personnel that can help towards giving it a technical advantage.
The research and development (R&D) department have enough financial support for technological innovation. Through such technical prowess, Schneider Electric recently helped the Beijing Yanshan Petrochemical Co Ltd to save 450, 000 Yuan per year after a successful installation of power saving plant that was locally developed (Fangfang, 2009).
Moreover, the R&D department has been relentless in its efforts to launch some environmental friendly power generation system. A recent project saw Schneider participate jointly with the government in a project to conserve the environment by generating free emission energy appliances (Peret & Vitte, 2007).
Finally, the R&D department has occasionally carried out intensive research activities, which are aimed at improving it, operation both on the international marketing.
Despite its increased popularity and well-developed reputation, Schneider Electric has had it fair share of shortcomings. The most intriguing setback is the inevitable high employee turnover rate. Lacks of continued employee services have made the form to incur heft training and cost and lapse in production technology.
Baron (2005, p. 45) affirms that any business should strive to maintain its competitive edge. The further says inability of firm to retain its competent employee casts doubt over the firm’s ability to cope with future competition.
Schneider Electric is a versatile organization that has numerous market opportunities both locally and internationally. In the local frontier, the organization is cherishing increased industrial diversification. As industrialization activities increase so is the demand for the electric power and appliances.
Fangfang (2009) reveals that Schneider Electric was planning to form a partnership China’s Delixi Group to participate in a project develop low-voltage electricity. Similarly, the firm has numerous ventures and mergers plans in the international field, all of which endeavors to develop the companies production capacity.
Brooks, et al (2004, p. 47) point out that mergers and take-over are vital for any business organization aspiring to participate internationally. The other advantage that the organization enjoys is bestowed in its use of sophisticated system that facilitates better management and information timely correspondence. Such inherent advantages have made Schneider Electric to wipe out fierce competition from its main competitors.
No single organization that operates in a vacuum i.e. where there are no challenges e.g. sustained competition. Since Schneider operates in a perfectly competitive environment, the organization ensures that it continuously strategizing on ways of assuming the market leadership.
Some renowned economists have highlighted some challenges that affect the business such as international competition, existences of monopolistic powers and fierce oligopoly businesses (Morrison, 2006, p. 215). Further threat to the Schneider Electric has been brought by ever decreasing raw materials.
However, the management has been organizing for mergers and takeovers to facilitate steady raw materials supply as well benefiting from the already established brand name.
Schneider Electric: External forces
Just like other international organizations, Schneider Electric is facing some exogenous forces, which are beyond its managerial control. However, the organization has undertaken upon its capacity to adopt itself to the various environmental challenges.
To understand these challenges a critical PESTEL analysis is conducted. PESTEL is an acronym for Political, Economical, Social, and Technological, environmental and legal factors.
Despite many governments opting to promote free market operations, many governments’ have assumed the role of regulating the market condition to ensure the all players operate on a fair ground. An international organization faces numerous challenges in all the country it operates on, this is because it has to comply with divergent government policies and regulation.
The main challenges are to complying with the tax regulations, Legislations and trade union requirements. Apart from having to comply with the trade union related demands, the government requires all firms to enhance or ensure a working environment conducive for all employees. Boxall and Purcell (2007, pp. 68-80) advocate that an organization ought to treat and satisfy its workforce for optimal results.
The government also ensures that any firm operating within borders adhere to anti-slavery and child abuse requirements. All these regulation are applicable in all countries and therefore the firms should consider obeying them.
Other government induce regulations include; trade restrictions, labor laws, environmental conservation rules and tariffs (Brooks et al, 2004, p. 146). Some other countries have trade restrictions as measure to protect local industries from fierce competition.
Schneider Electric has been operating under diverse economic environments, which have often offered the management lot of challenges to deal with. Each country experiences different economic growth, interest rates and inflation rates. The uncertainty of these factors causes dilemma and anxiety for the management. In the recent past, the firm faced huge loss due to the financial crisis that occurred.
However, strong management in China eased the loss suffered compared to other international branches. Fangfang (2009) reveals that the China Venture suffered a 5 per cent loss compared to the massive 20 per cent drop in the Europe and America.
Brown and Osborne & Brown (2005, p.15) identify globalization trend as an economic factor that has conflicting demands; both positive and negative ones. He argues that globalization trends have exacerbated competition depth as new and existing organizations are becoming more vibrant.
The social factors that affect any firm predominantly revolve around the cultural aspects (Minor, 2006). These issues include the lifestyle, population growth rate, age distribution, the cost of living, and peoples’ attitude toward work (Minor, 2006). All these factors have significantly influenced the way the organization behaves under special circumstances (Applegate & Johnsen, 2007, p.32).
As aforementioned, the Chinese people have a tendency of switching from one job to another thus lacking loyalty. To cope with such a problem, the organization has opted to utilize or deploy employees from other countries.
The applicability of Schneider Electric products has not faced many cultural based challenges in meeting the needs of different age groups. However, the firm has opted to modify some of its appliances to meeting specific target groups depending on their purchasing power and regional distributions patterns.
Schneider Electric has been forced to undergo rigorous recruitment and training exercises to acquire the required skilled personnel to carry out it mission in developing countries. Although most developing countries are in need of employment opportunities and the people are willing to work but the countries lack competent skills.
Such lack of skill has compelled the organization to intensify its expatriation venture or to embark on the training mission. Schneider Electric organization has however, insisted on quality products and therefore it ha s been its policy to train its employees until they are competent enough.
In order to deal the issues of high employee turn over the firm has decided to launch some saving scheme and long-term service benefits for employees who have worked for long.
Schneider Electric has continuously embarked in innovation projects, which have been steered by the R&D department. These innovations have ensured the organization has maintained it position at the peak of quality product generations and quality services delivery. This has been ensured the firm has embarked in the automation of its production processes.
Similarly, the firm has launched automatic generator backup to serve when there is power blackout. Such endeavors have not only facilitated speedy adoption of the firm in new environment but it has as well helped cement its existing markets.
All manufacturing and processing companies are governed by a set of rules and regulation aimed at protecting the environment from destruction. The environmental regulations include compliance against harmful emissions (Worthington & Britton, 2006, P. 325).
Most government consented to the Kyoto protocol to help protect the environment against harmful emissions, which contribute to climate change. Other regulations are aimed at controlling the overuse of nuclear energy and other resources.
To this end, Schneider Electric has jointly worked together with the government to preserve the environment (Fangfang, 2009). In view of the fact that each country has its unique rules, international organization are forced to adjust to meet such regulations.
Finally, Schneider Electric operations are often influenced by some legal laws, which are fastened to ensure all players are involved in legally acceptable businesses. The main legal rules that affect international businesses are; the employment law, health and safety law, discrimination law and consumer law.
Since not all these are similar in all countries, the management is expected to adjust its operation to adhere to them. Any operation that contravenes these legal operations may lead to the closure of the organization (Baron, 2005, p. 89).
Considering the discussed issues, the research recommends a number of measures that could be applied towards bettering marketing and distribution operations. First, the firm should consider investing heavily in research to develop new products.
Secondly, the firm should avoid over reliance on low cost leadership strategy and focus more on value propositions that make sense to customers. Finally, it is in the opinion of the researcher that the firm should develop early warning systems to unexpected economic crisis.
Schneider Electric (China), being a global electric producer, has been in operation for quite some time now. Throughout this period, the firm has stabilized its operation to fortify its competitive prowess. However, it has been revealed that regardless of the numerous research and innovations, the firm’s operations have been limited by a number of internal and external factors.
Nonetheless, the management has been keen on ensuring that it meets the challenges in the business environment through its marketing strategies. Finally, future success of the firm can only be anchored on the firm’s determination to adopt new technology as well as improving on management practice.
Having evaluated Schneider Electric’s marketing and distribution strategies, there is need for the company to develop a new product mix to target specific clients. Should the above recommendations be followed the firm will have better economic prospects.
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