Situation Analysis
Strength
Stormer’s patented ironing machine is said to be the invention of the century. He has introduced modifications and fine tuning to his pet project every now and then, at the same time, he also teaches science. He has spent a considerable sum of money, including valuable time and efforts; now he wants to focus on it and become a successful businessman. The machine is environmentally friendly, hates pollution, and can iron out at least 400 garments weekly.
Weakness
Customers have to hang properly their garments in special hangers made for the purpose, which cost an additional $5 each for the customers. Without these hangers, there’s no way you can steam your garments in the steam cabinet which looked like a cupboard. What’s more adding to running the business is the cost of building a unit of the machine – $50,000 with maintenance cost of $3000. In operating it in a commercial establishment, a capital investment of $150,000 is needed to run the business. There are other expenses needed for running the business of ironing machine, for example, the lease for the outlet, operating expenses to include salaries for the manager, the machine operator, etc.
Stormer is new in the business: he needs advice and experience. He needs a manager and experienced assistant who can be trusted while he’s away. He also needs a consultant who can advise him in the intricacies of business.
Another weakness is availability of raw materials for Stormer’s ironing machine. Purchasing the hangers from Stormer is also needed. There may be some difficulties in finding suppliers along this line of product; finding suppliers could prove a hindrance to business success. With the emergence of China as supplier/producer of low-cost electronic materials, the company may have to import the materials or outsource product development. This is one of the problems of the industry and even in other products – finding the appropriate and efficient suppliers that can provide low-cost materials. Since Stormer’s machine is new to the market, he may find competitive forces improving their products to compete with his own.
Opportunity
There is an increasing demand of labour in the ironing services because of changes of lifestyles in the new century. A big percentage of households in many countries is composed of single parents or individuals who need the assistance of a household help, in some ways, or particularly an ‘iron lady’, or someone to take care of the household. These households have the money to pay. The law of supply and demand works in this instance: there’s more demand than the supply of ‘iron ladies’.
This is a great opportunity for Stormer, the hero who is content with being a dreamer. He has the brains and the resources but lacks enthusiasm and zest. Nevertheless, he started a crude invention which, if fine tuned to the needs of the households in question, could bring him thousands, if not millions, of dollars. Stormer needs some motivation.
Threat
Stormer’s invention is new in the eyes of the public. Although it has been tested a bit in Stormer’s home, along with his wife as the manager, it has not yet proven its real worth to the taste of the consuming public. There could be new entrants because steam-ironing is not really that strange to existing laundry shops which may be testing the waters, before Stormer’s machine had been introduced. There are new inventions already in the market on steam ironing, one of which is a handy electric iron, or so it looks like an electric iron, but releases hot liquid and steam, at the same time it acts as electric iron but can do the trick while the garment is hung, much like Stormer’s machine. This one however is ‘cute’ and handy and can be easily handled by the single person who is always in a hurry to go wherever he/she wants to go. Threat of new entrant is real and can put Stormer’s new business and invention into bankruptcy and oblivion.
Marketing Objectives and Strategy
Marketing/financial objectives
Marketing objectives for Stormer’s ironing service may stem from how it will interest the consuming public. First of all, the target market will be the ordinary household and those who are single parents, or individuals who are busy with their careers.
Stormer needs a team to implement the marketing strategy. This team will do the selection and analysis of the target market which includes the ordinary household and housewives, single parents, and persons living independently who need ‘iron ladies’. But there’s just no ‘iron lady’ out there who can provide ironing services. The team can also provide the appropriate marketing mix of product, distribution, promotion, price and people. However, the marketing strategy formulates a plan to cover the implementation of Stormer’s ironing services which make use of the ironing machine.
First of all, we have to handle the two broad sets of variables in the marketing strategy, and these are the ones about the marketing mix, and those that make the marketing environment. The marketing environment is composed of the forces that will affect Stormer’s ironing service. We can demonstrate these marketing environment, marketing strategy, marketing mix and customer satisfaction in figure 1.
Figure 1 showing the variables product, distribution, promotion, price and people, which are constructed around the buyer or consumer. The marketing environment can be forces which describe the political, legal, regulatory, societal/green, technological, economic forces and competitive forces, which affect business and Stormer’s ironing services. (Lee, 2007, p. 61)
Strategy statement
Marketing has to satisfy the customers’ needs and wants. This was simply said by Jobber and Lancaster (2006, p. 256): ‘Marketing must aim to satisfy customers.’ This has many implications for the product. In the case study, Stomer’s product is not just ironing service. He can aim for more. For example, there are the profits on the hanger, of which he has charged $5 each, but can be used for a long time, 5 years to be exact.
In the context of products, this goal demands an understanding of the core product requirement. However, it depends on marketers identifying and providing the actual product features expected and – with ever increasing importance – aspects of the augmented product such as customer service, warranty, delivery and credit, personnel installation and after sales support. The strategy of customer service, warranty, delivery and credit, personnel installation and after sales support can strengthen and give more appeal to the product along with its brand name.
The marketing concept states that an organization should try to provide products that satisfy customers’ needs through a coordinated set of activities that also allows the organization to achieve its goals. Customer satisfaction is a major aim. Stormer must continue to alter, adapt and develop his product to keep pace with customers’ changing desires and preferences. The marketing concept stresses the importance of customers and emphasizes that marketing activities begin and end with them (Jobber and Lancaster, 2003, p. 15).
Marketing mix development
Product and business development
Stormer’s ironing machine is a state-of-the-art steam ironing which provides fast service to single parents, single persons, or the busy career person who needs to wear formal business suits. This product needs to be operated by a machine operator, or someone who is trained to handle the step-by-step process. If you are not trained to do it, the results may not be good for your garment. What is remarkable for this equipment is that it can be refined and built to simplification wherein it can be a do-it-yourself ironing machine, good for one person, or can be simply operated at home. If, however, Stormer gets tired of operating an ironing service outlet, he can just concentrate on refining the machine, mass manufacture and sell ironing machines throughout the country.
Moreover, if Stormer aims to develop his product, needs engineers and technicians, or a Research & Development team to refine the product. The team will have to conduct research and intensive study in the production of ironing machines. It has to be a top-quality and one that can provide good competition for the others.
Classify Stormer’s product using the three-way consumer products classification system. Through the product classification system, we have to measure the output of the Stormer’s ironing service, now with a business outlet. This is discussed in the Financial Objectives.
On the other hand, we have the three levels of our product:
- the core product – the level of a product that provides the perceived or real core benefit or service;
- actual product – a composite of the features and capabilities offered in a product quality and durability, design and product styling, packaging and brand name; and
- the augmented product – support aspects of a product, including customer service, warranty, delivery and credit, personnel, installation and after sales support. (Jobber and Lancaster 2003, p. 248)
Place (location) strategy
Location is very important for this kind of business – the ironing service. First of all, it is necessary that Stormer conduct a survey; he can hire a company or a few personnel to do this. The survey will find out which location has the most single individuals, those who live on their own, and those who need ironing services because of the nature of their job and career that require formal suits. This is not so difficult a task since surveys are always conducted in offices and homes which are concentrated near populated areas. It is very common that in offices and buildings, apartments, flats and rooms are also present, to provide single individuals spaces to dwell in temporarily. Working couples, single parents, students, office people – this is the wide and broad market for Stormer’s ironing services. A commercial outlet, a small business outlet, or a residential lot can provide want Stormer needs. His wife can help if location is just near their residence, and she still can attend to their two little kids. However, it is necessary that the price of the establishment has to be taken into consideration seriously, or planned carefully since this is where Stormer can meet major problems or challenges.
Promotion
Promotion and adverts can be done through the internet. Other additional strategies involve infomercials and multi-media advertising. The internet is a fast-growing and effective communication that has been used by more and more businesses and organizations, not to mention the multitude of people, young and old, who patronize and log on everyday and every minute of the day.
Pricing strategy
Customers’ interest in the ironing service can stem from the usefulness of the ironing service.
Strategy involves providing effective customer service warranty, delivery and credit. An initial offering of 75 cents for every garment is practical for Stormer’s outlet. At home with his wife, he used to charge 50 cents. That is practical too because it was in the testing period.
Price has a strategic element, since price is commonly how products become positioned against other products in the market: undercutting competitors on price is a common way of competing. Although several areas of marketing activity, including managing the supply chain, can lead indirectly to cutting costs, price is the only area where marketers can directly improve their profits. Even a small increase in the price can generate a very large increase in profits: for marketers, the problem often lies in finding ways to justify a price rise to consumers.
Distribution
To provide a systematic but effective distribution system throughout the different branches across states. Distribution may mean supply chain. Supply chain can further aim for the ironing machine’s parts and raw materials. Distribution of garments to customers’ homes and offices can be one way of promoting the product or service.
Strategy implementation
Action plan for implementing the marketing strategies identified
“Sales strategies and tactics may only be arrived at, implemented and assessed against a framework of company-wide objectives and strategic planning processes.” (Jobber and Lancaster 2003, p. 64)
- By increasing prices, we can increase revenues, but not too high since our primary objective is to deliver low-cost ironing service.
- Another strategy is increasing sales volume at the company level or increasing market share;
- By increasing industry sales, we can also increase revenues.
- By giving discounts to customers for certain amounts of products purchased. However, this strategy of giving discounts should be discussed at the managerial level and not by the sales force who might give more than what is authorized or specified, to the detriment of the company’s policies.
- By personal selling, in the long term, Stormer can increase output sales for the ironing service. Personal selling can be implemented for a long term survival and the sales people can identify customer needs and wants.
Monitoring Procedures
Managers and supervisors who are in the field can do the monitoring procedures. Complaints and suggestions can be endorsed through the company’s website which will have the weblog portion for the customers and employees. A team will monitor the effectiveness of the plan. This will be composed of Stormer as the leader and staff who have displayed enthusiasm for the advancement of the new company. Action plan for the team will include a round-the-clock supervision, somebody to man the website and its complaints department, and a continuous monitoring of the output of the company’s products.
Projected Income Statement
Stormer will require an amount that can provide him at least one ironing machine of $50,000, and a capital investment of $100,000. The amount will be added with $25,000 for the lease of the retail outlet, and $10,000 for the annual operating expenses. Salaries for the manager and the machine operator will be $60,000 and $47,000, respectively. The total financial requirement for one retail outlet will amount to $292,000.
However, to gain maximum profits, it is recommended that 2 machines will be provided for one outlet. So this will add another $50,000, which is the amount required to build a machine.
Considering that Stormer will be doing business in at least one outlet or stall in a business establishment, sales will increase depending on his kind of marketing strategy and gimmick to gain customers.
In the initial business operation which Stormer conducted at home with his wife, a single ironing machine had an average of 400 garments over the weekend, and he was charging 50 cents for every item. Full-time homemaker Camilla had 26 items (or garments) for weekly ironing. If we divide the 400 weekly output with 26 items, that would mean one single ironing machine had at least 16 households served a week. But this does not mean that it was the maximum work load that one single machine could perform a week.
Suppose we increase the machine’s output to 2,000 garments a week; and charge 75 cents per garment (because we have to increase the price considering that Stormer’s business is now fully operational in a business outlet), the result will be an output of $1,500 weekly for one machine alone; monthly income will be 6000, and $72,000 for the entire year. Two thousand garments ironed weekly by Stormer’s machine means, 76 households are served. If there are 2 ironing machines, $72,000 will be multiplied by 2 to make $144,000.00
The more ironing machines, the more households are served or more garments ironed by Stormer. Operating expenses will multiply once Stormer adds or builds new machines. He can do it, and the more machines, the bigger is the profit. However, he has to test market volatility, time, and the other environmental forces, else he’ll lose in a year’s time.
Stormer’s gamble however can provide him advantage, or can be on his side. His machines are his own, original, and are patented. They will last until retirement, meaning for the next year, he spends only $3000 for operating expenses. He doesn’t have to buy a new machine; he only needs to build new ones.
For the second year, Stormer will only have to spend for operating expenses, rental and salaries. He can have other strategies for the business.
Stormer has one machine but can build another one for $50,000. It is practical to have 2 or 3 machines at the same time, for a single outlet, depending on the location strategy.
The following is Stormer’s projected income statement for the next 12 months.
The number of machines to be used and built will depend on the location and size of the outlet that Stormer can provide.
References
Jobber, D. and Lancaster, G. (2003). Selling and Sales Management, Sixth Edition, England: Pearson Education Limited.
Lee, K. Y., (2007). The Business of Marketing. Perth: Stratstar.