global marketing 9th edition pdf free download

Marketing has strong influences on the management of a firm, internal, inter-firm relationships, and the supply chain. The marketing, as a business philosophy, guides firms to look for customer satisfaction at profit in a coordinated manner. Marketing means a basic set of values and beliefs about the importance of the customer that guide the firms in their daily operations. Marketing also provides philosophical foundation for human behaviors within a firm. In other words, marketing as a business philosophy, guides a firm's behaviors to develop, maintain, and enhance inter-firm relationships to satisfy customers. Marketing is also a necessary component for implementing supply chain management. One of the components of supply chain management implementation is partnership with compatible corporate philosophies, at least for key relationships. Marketing should be the compatible supply chain partners' philosophy, so all partners in the supply chain strive to satisfy customers at a profit through inter-functional coordination within and among the supply chain partners. Thus, under compatible marketing philosophies, supply chain partners become more willing to be efficient and effective toward a common goal which is customer satisfaction at a profit. Effective supply chain management requires all partners in the chain to build and maintain close long-term relationships. Successful supply chain relies on forming strategic partnerships that means long-term, inter-firm relationships with trading partners. This book is about marketing management, its role and importance to the supply chain management in a global scale. Second book published simultaneously is about supply chain management on which marketing and marketing management have great impact. As marketing and supply chain are interrelated research areas, both of these books could be useful for university students to study the "Marketing Management" and "Supply Chain Management" courses at both graduate and postgraduate levels.

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NGUYEN HOANG TIEN

DINH BA HUNG ANH

GLOBAL

STRATEGIC

MARKETING

MANAGEMENT

NGUYEN HOANG TIEN

DINH BA HUNG ANH

GLOBAL

STRATEGIC

MARKETING

MANAGEMENT

Warsaw 2017

Dr Nguyen Hoang Tien wrote chapters: I, III, IV, V and VI.

Dr Dinh Ba Hung Anh wrote chapter II.

Issue I, Warsaw 2017

Any fragment of this book may not be reproduced, copied or saved in processing

systems or any other form using mechanical and electronic devices or others wit h-

out permission of the publisher.

ISBN 978-83 -65009-22 -7

Publisher:

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THIS BOOK IS DEDICATED TO

NGUYEN THANH VINH

BORN IN 04.02.2016

Table of contents

Foreword ..................................................................................................... 11

Chapter I

INTRODUCTION TO GLOBAL MARKETING .................................. 13

I.1. MARKETING AND MARKETING CONCEPT ................................. 13

I.1.1. Defining Marketing ..................................................................... 13

I.1.1.1. Marketing ........................................................................ 13

I.1.1.2. Marketing Management .................................................. 18

I.1.2. The Marketing Concept ............................................................... 20

I.2. MARKETING STRATEGY AND MARKETING MIX .......................... 24

I.2.1. Marketing Strategy ...................................................................... 24

I.2.1.1. Internal Factors............................................................... 26

I.2.1.2. External Factors .............................................................. 27

I.2.2. Target Markets and Marketing Mix ............................................. 46

I.2.2.1. Target Market .................................................................. 46

I.2.2.2. Marketing Mix ................................................................. 47

I.3. MANAGEMENT ORIENTATION TO GLOBAL MARKETING ...... 52

I.4. GLOBAL MARKET AND GLOBAL MARKETING ......................... 54

I.4.1. Global Market .............................................................................. 54

I.4.2. Global Marketing ......................................................................... 57

I.4.2.1. Global Marketing Issues ................................................. 58

I.4.2.2. Global Marketing Practices ............................................ 62

I.5. GLOBAL MARKETING IN SUPPLY CHAIN MANAGEMENT ..... 64

Chapter II

MARKET RESEARCH METHODS ....................................................... 71

II.1. MARKET RESEARCH PROCESS ..................................................... 71

II.1.1. Market Research and Marketing Research ................................. 71

II.1.2. Market Research Process ............................................................ 75

II.2. PRIMARY AND SECONDARY RESEARCH ................................... 81

II.2.1. Primary or Secondary Research ................................................. 81

II. 2.2. Sources of Data for Research .................................................... 83

II.2.3. Primary Research Techniques .................................................... 83

II.3. SAMPLING AND INCREASING RESPONSE RATES .......................... 90

II.4. RELIABILITY AND VALIDITY OF RESEARCH ........................... 94

II.5. ETHICAL ISSUES OF RESEARCH ................................................... 95

Chapter III

MARKET ENTRY STRATEGIES .......................................................... 98

III.1. BARRIERS OF MARKET ENTRY ................................................... 98

III.2. INDUSTRY ANALYSIS .................................................................. 106

III.3. MARKET ENTRY STRATEGIES................................................... 114

Chapter IV

STRATEGIC MARKETING MANAGEMENT .................................. 124

IV.1. STRATEGIC PLANNING ............................................................... 124

IV.1.1. Strategic Management .......................................................... 124

IV.1.2. Strategic Planning ................................................................. 126

IV.1.3. Different Levels of Strategy ................................................. 129

IV.2. KEY CONCEPTS OF STRATEGIC PLANNING .......................... 132

IV.3. PROCESS OF STRATEGIC PLANNING ....................................... 138

IV.4. STRATEGY IMPLEMENTATION AND CONTROL ......................... 151

Chapter V

SEGMENTING, TARGETING, POSITIONING ................................. 155

V.1. CONSUMER MARKET AND ORGANIZATION MARKET ......... 155

V.1.1. Consumer Market and Organization Market ......................... 155

V.1.2. Consumer Demand and Organization Demand ..................... 158

V.2. CONSUMER BEHABIOR AND BUYING DECISION ...................... 159

V.2.1. Consumer Buying Behavior .................................................. 160

V.2.2. Consumer Buying Decision Process ...................................... 160

V.2.3. Factors Affecting Consumer Buying Decision

Process Motives ....................................................................... 162

V.3. ORGANIZATION BEHAVIOR AND BUYING DECISION .......... 167

V.3.1. Organization Buying Behavior .............................................. 167

V.3.2. Organization Buying Decision Process ................................. 168

V.3.3. Factors Affecting Organization Buying Behavior ................. 170

V.4. SEGMENTATION, TARGETING, POSITIONING ........................ 170

V.4.1. Market Segmentation ............................................................. 170

V.4.2. Market Segments Targeting ................................................... 180

V.4.3. Positioning on Targeted Market Segments ............................ 182

V.4.4. Marketing Mix and Positioning ............................................. 184

Chapter VI

SERVICE MARKETING ....................................................................... 188

VI.1. CHARACTER OF SERVICE MARKETING ................................. 188

VI.2. SERVICE MARKETING MIX ........................................................ 193

VI.2.1. Product .................................................................................. 193

VI.2.1.1. Product Life Cycle ................................................. 195

VI.2.1.2. Role of Product in Service Marketing .................... 195

VI.2.1.3. Product Strategy .................................................... 196

VI.2.1.4. Branding ................................................................. 198

VI.2.2. Price ...................................................................................... 200

VI.2.2.1. Pricing Techniques ................................................ 201

VI.2.2.2. Market Entry Pricing Strategies ............................ 202

VI.2.3. Place ..................................................................................... 204

VI.2.4. Promotion ............................................................................. 206

VI.2.4.1. AIDA Model ........................................................... 207

VI.2.4.2. Promotion mix ........................................................ 210

VI.2.5. Physical Evidence ................................................................. 217

VI.2.6. Process .................................................................................. 217

VI.2.6.1. Pre-service Process ................................................ 219

VI.2.6.2. In-service Process .................................................. 221

VI.2.6.3. Post-service Process .............................................. 222

VI.2.7. People ................................................................................... 222

VI.2.7.1. People Strategy Mix ............................................... 224

REFERENCE ........................................................................................... 237

LIST OF ILLUSTRATIONS .................................................................. 241

LIST OF TABLES ................................................................................... 243

Foreword

Marketing has strong influences on the management of a firm,

internal, inter-firm relationships, and the supply chain. The marketing,

as a business philosophy, guides firms to look for customer satisfac-

tion at profit in a coordinated manner. Marketing means a basic set of

values and beliefs about the importance of the customer that guide the

firms in their daily operations. Marketing also provides philosophical

foundation for human behaviors within a firm. In other words, market-

ing as a business philosophy, guides a firm's behaviors to develop,

maintain, and enhance inter-firm relationships to satisfy customers.

Marketing is also a necessary component for implementing supply

chain management. One of the components of supply chain manage-

ment implementation is partnership with compatible corporate philos-

ophies, at least for key relationships. Marketing should be the compat-

ible supply chain partners' philosophy, so all partners in the supply

chain strive to satisfy customers at a profit through inter-functional

coordination within and among the supply chain partners. Thus, under

compatible marketing philosophies, supply chain partners become

more willing to be efficient and effective toward a common goal

which is customer satisfaction at a profit. Effective supply chain man-

agement requires all partners in the chain to build and maintain close

long-term relationships. Successful supply chain relies on forming

strategic partnerships that means long-term, inter-firm relationships

with trading partners.

This book is about marketing management, its role and i m-

portance to the supply chain management in a global scale. Second

book published simultaneously is about supply chain management on

which marketing and marketing management have great impact. As

marketing and supply chain are interrelated research areas, both of

these books could be useful for university students to study the "Ma r-

keting Management" and "Supply Chain Management" courses at

both graduate and postgraduate levels.

Dr Nguyen Hoang Tien

Chapter I

INTRODUCTION TO GLOBAL MARKETING

Objectives:

Define marketing, principles of marketing and marketing management

Define the marketing strategy and marketing mix

Define global market and global marketing

Global marketing in supply chain management

MARKETING AND MARKETING CONCEPT

MARKETING STRATEGY AND MARKETING MIX

GLOBAL MARKET AND GLOBAL MARKETING

GLOBAL MARKETING IN SUPPLY CHAIN MANAGE-

MENT

I.1. MARKETING AND MARKETING CONCEPT

I.1.1. Defining Marketing

I.1.1.1. Marketing

Marketing is an area of research on the needs and on how busi-

ness can satisfy customer needs in profitable ways. Marketing is both

a science (economic science) and an art (to make people satisfied, to

gain their trust and sympathy).

Although there is no single definition of marketing, it is usually

accepted that marketing consists of individual and organizational a c-

tivities that facilitate and expedite satisfying exchange relationships

in a dynamic environment through the creation, distribution, promo-

tion and pricing of goods, services and ideas. So, marketing consists

of many activities which are aimed at facilitating and expediting ex-

changes. Marketing facilitates the satisfying exchange relationships

and for an exchange to occur, four following conditions must exist:

 Two or more individuals, groups or organizations must par-

ticipate;

 Each party must possess something-of-value that the other

party desires;

 Each party must be willing to give up something-of-value

to receive something of value that the other party holds;

 The parties must be able to communicate with each other to

make their something-of-value available.

Illustration 1. Marketing concept

Source: Own development

Table 1. Exchange relationship

High quality (reliability)

After sales services and warranty

Source: Own development

There is one thing to be remembered that the exchange must be

satisfying to both buyer and seller. Satisfaction for the buyer may re-

sult from being satisfied with the product and service or with the

transaction itself, whereas satisfaction for the seller is derived from

making a profit through a particular exchange relationship, or from

achieving another organizational objective. Although it is mentioned

that there is no single definition of marketing, the concepts of ex-

change and customer satisfaction are the two most popular compo-

nents of a definition of marketing.

Philip Kotler (1988, p3) defines marketing as: "….as a social

and managerial process by which individuals and groups obtain what

they need and want through creating and exchanging products and

value with others". Before, that is in 1972, he proposed that the es-

sence of marketing is the transaction (exchange of values actually

made between parties) and, thus, marketing is specifically concerned

with how transactions are created, stimulated, facilitated, and valued.

According to P. Drucker, marketing is about understanding and

properly responding to (fulfilling) the needs of customers.

American Marketing Association (1985) defines marketing as:

"…the process of planning and executing the conception, pricing,

promotion, and distribution of ideas, goods and services to create ex-

changes that satisfy individual and organizational needs". In other

words, the objective of marketing is creating exchanges, and the ou t-

put of it is customer satisfaction.

Kotler (1997) and Churchill and Peter (1995) defined an ex-

change as a process in which two or more parties voluntarily provide

something of value to each other. According to Kotler (1997), a tran s-

action takes place when an agreement is reached, whereas exchange is

the process to execute an agreement. Exchange takes place within

a market, defined as a collection of buyers and sellers that interact

with each other (Pindyck and Rubinfeld, 1992). In this context,

Churchill and Peter (1995) proposed various parties who are involved

in the marketing effort: firms that produce goods or services, whole-

salers and resellers of goods and services (such as stores), and cus-

tomers or clients and after-sales service operators.

In an express recapitulation we agree that those above men-

tioned definitions of marketing rest on the following core concepts:

 Needs – the state of lacking something, both materially and

spiritually;

 Wants – the expressions of needs;

 Demands – the expression of needs in certain economic

conditions;

 Products – instruments to fulfill the needs of customers;

 Utility – ho w products effectively fulfill the needs of cus-

tomers;

 Value – customers benefits brought about by products

compared to the price they have to pay;

 Satisfaction – an emotional state to be achieved by compar-

ing real benefits brought about by products and prior ex-

pectation;

 Exchange – a voluntary behavior to give up something for

something in return;

 Transaction – the exchange expressed in detail by terms of

agreement such as price, place and time of a deal;

 Relationship – relation between the buyers and the sellers

which could be transactional (one-off) or based on long

term mutual benefits and interests;

 Market – a place or space where the buyers and the sellers

meet to carry out transactions;

 Marketer – market maker, marketing staff.

It must be clear that marketers do not create needs. Needs pre-

exist marketers and hence marketers do influence wants and demands.

Defining customer's wants and demands is not easy. Marketers may

need to teach customers to learn what they want. Consider high tech-

nology products such as iPhone and Nokia as examples.

Marketing occurs in a dynamic environment. It exists in an en-

vironment of changing forces such as laws, regulations, political ori-

entations, social pressures, economic issues and competitive condi-

tions and technological changes which will be discussed later in this

chapter. These factors influence the effectiveness of marketing in fa-

cilitating and expediting changes.

Marketing involves product, place, promotion and pricing ac-

tivities. It involves designing and developing a product, communi-

cating and making the product available to the right people at the right

time at an acceptable price.

Marketing activities are important to businesses and the whole

economy. A business organization must sell products or services or

ideas to survive and remain healthy financially and marketing activi-

ties, whether directly or indirectly, help sell the organization's pro d-

ucts. Marketing ultimately helps to keep the economy alive and

healthy. As technology develops, it drives down the cost of globaliza-

tion and as a result, global competitors are penetrating more markets

and this has increased competition tremendously in all major markets.

The increase in competition is expected to continue to a level that has

never been experienced before. Hence, marketers must think globally,

strategically and creatively to maintain their own competitive position.

Being offered with more choices and the freedom to choose, custom-

ers will become more demanding, making it difficult for marketer to

satisfy them and maintain long-term relationships. Mass customization

and relationship management are some of strategies that can be adopt-

ed in creating better value for customers. Hopefully, through this, cus-

tomers can appreciate their suppliers better and continue working

them.

I.1.1.2. Marketing Management

After understanding marketing as such, it is now necessary to

consider the key role of marketing management in enterprises. Mar-

keting management is defined as a process of planning, organizing,

implementing and controlling marketing activities to facilitate and

expedite exchanges effectively and efficiently. Planning should be

a systematic and continual process that focuses on assessing external

opportunities and internal resources. Organizing marketing activities

must involve developing the internal structure of the marketing unit to

direct them (marketing activities). Implementing the marketing plan

should involve all-out co-ordination of marketing activities, employee

motivation and effective communication within the marketing unit.

Marketing managers must control this by establishing performance

standards and evaluating actual performance by comparing it with

these standards to reduce differences.

Global marketing management means the marketing manage-

ment of an enterprise in a broader world complex and fast changing

context. To understand global marketing management one should be

familiar with marketing management and global marketing, both of

them will be discussed in detail further.

Illustration 2. Global marketing management

Source: Own development

Table 2. Global marketing context

Global marketing context – trends and challenges

Interested by central and local government and many

non-profit organizations to achieve social and public

goals.

IT impacts the way businesses carry out marketing

activities: market research; product design, production

and distribution; communication with target segments

of customers; customer relationship management; the

way products are informed and acquired.

Globalization

of the world

economy

Geographical and cultural distances are diminished.

Businesses are easily reaching out to the world in terms

of trading, establishing joint-ventures, distributing and

communicating to target customers worldwide.

Regionalization

of the world

economy

Rising reverse trend to the process of globalization:

anti-globalization, nationalism, populism, trade and

own market protection.

Corporate

social responsi-

bility and busi-

ness ethics

Beside economic effectiveness of production and busi-

ness processes, all of them should pay close attention to

the customers', community, society and environment's

benefits; simply sustainable development.

Source: Own development

I.1.2. The Marketing Concept

The marketing concept is certainly not simply another defini-

tion of marketing; it is a sophisticated way of thinking or a manage-

ment philosophy about an organization's entire range of activities. The

marketing concept suggests that an organization should try to satisfy

customers' needs through a co-ordinated set of activities that also al-

lows the organization to achieve its goals. Consequently, satisfying

customers is the major goal of the marketing concept. The marketing

concept stresses that a business organization can best achieve its goals

by providing customer satisfaction through well co-ordinated activi-

ties. However, a business must consider not only short-run, immediate

needs but also broad, long-term desires and needs of the customers.

All departments must work together to meet customers' (consumers')

short and long-term desires and needs, and a lack of co-ordination

may lessen customer satisfaction or even cause intense dissatisfaction

in a strongly competitive business environment.

The marketing concept is essentially a business philosophy

(Barksdale and Darden, 1971; McNamara, 1972), and the philosophi-

cal foundation for a market orientation (Jaworski and Kohli, 1993).

Kohli and Jaworski (1990) conceptualized a market orientation as the

implementation of the marketing concept. They argued the marketing

concept consists of three pillars:

 Customer focus;

 Co-ordinated marketing;

 Profitability.

Evolution of Marketing Concept

First came the production era (production focus). During the

second half of the XIX century, the Industrial Revolution came into

being and started impact all spheres of business world. As a result of

new technology and new ways of using labor, products streamed out

of factories into the market place, where consumers' demand for the

new manufactured goods was strong.

The next period was the sales era (profit focus). Between the

mid of 1920s and early 1950s, businesses viewed sales as the major

means of increasing profits, and business people believed that the ma-

jor marketing activities were personal selling and advertising.

The marketing era (customers' needs focus ) arrived in the early

1950s, when businesses found that they had to first determine what

customers wanted, and then produce it, rather than simply make prod-

ucts and then try to change customers' needs to fit what they had pro-

duced. Today, marketing is acquiring a global perspective, and as

a result, marketing either standardizes products for customers around

the world or customizes (differentiates) products for customers in sp e-

cific markets. The selling and marketing concepts are contrasted below.

Illustration 3. Selling (seller) and marketing (buyer) concept

Source: Own development

1. Learn about customers' needs

2. Create satisfying products/

services/solutions

Staff, structure,

management issues

Table 3. Characteristics of customers' needs focused marketing

Macromarketing – applied

for countries, regions

Micromarketing – applied

for organization, business

Business marketing –

for profit organization

Non business marketing –

for none profit organization

Online, virtual marketing

Concentrate on selected market segments only

All-out effort to serve targeted market segments

All departments should engage to create perfect values for

customers

To impress and attract customers to win them from com-

petitors

To fulfill customers' needs in terms of perceived values

Due to quick change in the marketing environment and

customers' preferences, advantages and values created for

them may be obsolete tomorrow

Leads to maximum of production to respond to the needs

of customers; so the economy is growing and society is

developing as well

Leads to customers' loyalty, credibility and trust to the

products and companies' brand

Diverse, abundant and broad selection in terms of types,

quality, price and substitutes of products and services to

satisfy individual, unique and fast changing customers'

preferences.

Creates values for society to enhance individual's life

quality as needs are better satisfied

 Discover customers' needs and satisfy them; be starting

point for business activities

 Balance company's benefits and benefits of customers and

society

 Competitive instrument to position and create reputation in

the market

 Central to all other functional activities in a company

 Market research and needs discovery

 Respond to the market needs by adapting 4 marketing in-

struments (4P)

 Leading market needs by innovatively creating new prod-

ucts and their functionality

 Profit making

 Satisfying customers' needs and achieving own goals in

coordination with other functional activities

Source: Own development

It is now important to consider implementing the latest market-

ing concept (marketing era, focus on customers' needs). We have al-

ready established that the marketing concept affects all types of busi-

ness activities. Therefore, the top management of an organization

must incorporate the marketing concept so completely that it becomes

the basis for all the decisions and goals set for their firm. Management

staff must implement the marketing concept by establishing an infor-

mation system that will enable the firm to learn about customers'

needs and use the information internally to create satisfying products

Next, it is necessary to restructure the firm to co-ordinate all activities.

However, there is a limit to a firm's ability to satisfy customers' needs

for a particular product, so the company must determine customers'

product needs accurately. Sometimes, by satisfying one segment of

the society, a firm creates dissatisfaction within other segments. Dur-

ing the implementation the marketing concept, a firm may encounter

difficulty in maintaining employee morale during any restructuring

required to co-ordinate the activities of various departments and care

must be taken to minimize organizational problems.

I.2. MARKETING STRATEGY AND MARKETING MIX

I.2.1. Marketing Strategy

Companies get into serious trouble because they believe they

can duplicate a product of competitors and can easily produce the

same products at lower price. A glaring example is the economies of

scale that a Chinese company in China can exploit. While one may

argue about the lower production cost and lower labor cost, eventual-

ly, Chinese labor cost will rise. Marketing strategy involves selecting

and analyzing a target market and creating and maintaining an appro-

priate marketing mix that will satisfy that market, and that is the re-

sponsibility of an organization's marketing managers. They should

consider two broad sets of variables when developing and managing

marketing activities. In other words, those sets of variables are shap-

ing marketing strategy and marketing activities of an organization.

First, marketing mix decision variables are internal factors impacting

directly and frequently (the micro-external environment) or indirectly

and infrequently (the macro-external environment) on enterprise's

marketing activities over which an organization has control. Second,

marketing environmental variables, the external factors related to poli-

cy and strategies of enterprise, which are subject to less control by an

organization. Internal and external factors/variables contribute to the

marketing environment which, according to P. Kotler, impact on the

capacity of marketing management toward successful transactions for

and with target customers. In light of current trends of globalization,

both external and internal group of factors are becoming:

 More complex – as they impact heavily and in different

way on efforts and marketing decisions of enterprises;

 More changeable – as they impact on the results of enter-

prises' marketing programs causing them to be necessarily

readjusted;

 Less predictable – as they are more and more uneasy to

control.

Illustration 4. Marketing strategy and shaping factors

Source: Own development

To ensure growth and survival as products diminish, an organ i-

zation must find its elf new products and markets. Managers must con-

sider modifying existing products, introducing new ones, or deleting

undesirable ones as ways to ensure survival. Also, managers should

market the products to a greater number of individuals in the existing

market, convince current customers to use their product more fre-

quently, and expand geographic boundaries of the market to improve

organizational financial security and developmental stability.

Illustration 5. Market and product development

Source: Own development

I.2.1.1. Internal Factors

We should now consider internal organizational factors that a s-

sist marketing managers in achieving their aims. Organizational objec-

tives, financial resources, managerial skills, organizational strengths

and weaknesses and cost structure are the primary internal factors to

consider when analyzing market opportunities and organizational ob-

jectives. It is vitally important that the organization should pursue ex-

ternal opportunities that are consistent with its objectives and re-

source. For example, financial resources restrict the types of opportu-

nities the organization can pursue. Financial resources are needed to

operate marketing plan in terms of, for instance, paying salary for

hired marketing staff, leaflets designing and distributing. Also man-

agement's skills and experience can limit the types of opportunities

pursued as they will put forward general directions for enterprise and

execute related goals, to which all marketing plans and programs must

conform. Strengths and weaknesses of the firm may involve many

factors and could include specialized skills and technology. Infor-

New market

Current product

Current market

New product

Current market

Current product

mation and production technology are strictly associated with quality

and price, the two of four marketing instruments, of products and ser-

vices. The organization's cost structure can be affected by many

things such as geographic location, employee skill mix, access to raw

materials and equipment and facilities. All the previous points should

be considered and evaluated in pursuing the enterprise's objectives.

Illustration 6. Internal factor analysis

Source: Own development

I.2.1.2. External Factors

The business environment is changing erratically with much

changes taking place in all aspects of the global environment. Market-

ers need to constantly assess the business environment in anticipation

of these changes so as to be able to react quickly and take advantage

General Weakness and Strength

of them. For example, being in the business of supply chain manage-

ment, a supporting industry that can ride on the growth of many other

industries, marketers must consistently look outward for developments

that can provide new growth opportunities for the organization. Listed

below are some issues that are impacting supply chain businesses

around the world, and they are either happening now or will be in the

near future. It is now necessary to consider environmental forces;

there are seven major forces in the marketing environment: (1) politi-

cal forces, (2) legal forces, (3) regulatory forces, (4) social forces, (5)

economic forces, (6) technological forces and (7) ecological forces.

These forces affect the marketer's ability to facilitate and expedite ex-

changes in several ways. They affect customers' lifestyles, living

standards and product preferences. Moreover, they influence whether

and how marketing managers can perform marketing activities, and

may affect buyers' reactions to the firm's marketing mix. The fluctua-

tion of the various forces and their speed of change present many chal-

lenges to marketing managers. The marketing mix components to-

gether with the above mentioned external factors affect greatly the

organization.

The environment in which a marketer competes can be broadly

categorized into two major categories; they are macro-environment

and micro-environment. The macro-environment refers to the broad

environment in which a business exists and this generally refers to the

country in which the business is being conducted. Forces of this nature

affect all kinds of businesses. The micro-environment is more specific

to the business and this makes reference to the specific industry in

which the business is competing and the forces in this environment

will be examined in the later. Situational factors in this environment

affect the performance of an organization, and more importantly, they

are changing with time. Therefore, it is imperative that marketers are

kept abreast of these changes so as to be able to take the necessary

measures when the need arises.

In the macro-environment, the common model used in this

analysis is the PEST model. This is the acronym for:

 Political forces – forces in the political and legal frameworks;

 Economic forces – the driving economic factors affecting

the well-being of a country;

 Social forces – this encompass the social and cultural fac-

tors that can affect the organization;

 Technological forces – technological advancement varies

with countries and regions and this also play a role in the

way a business is being conducted.

Illustration 7. PEST model – external factors analy sis

Source: Own development

 Political forces

Political changes around the world can either offer new oppor-

tunities or threaten existing businesses in the countries where the

changes are being conducted. Countries in the Asian region are still

experiencing changes in this aspect. These include Cambodia, Vi-

etnam, Indonesia and the Philippines as these countries are still in the

process of forming a stable government. Businesses that are operating

in there must be attuned to the political situation and in the event of

violent changes they may consider to withdrawing their business out

of the region. For those businesses that are not there yet, they can con-

sider investing into these countries when the political environment

stabilizes. The main reason is that these markets tend to experience

high growth after political situation stabilizes. Political situation that

deserve attention is the development between China and Taiwan. The

fact that China is currently the world's biggest growing economy,

many businesses has invested in China in pursuit of the opportunities

it presents and any confrontation will definitely affect the stability of

the region, increasing the financial and social risks that businesses

face. As for unstable countries like Iraq, North Korea and some other

countries in the Middle East, South America and the African region,

as soon as they stabilize, they present great opportunities and market-

ers can immediately capitalize on its growth potential. Another issue

that arises from politics is the impending threat of terrorism. However,

the real danger is not just in the destruction it can cause, but also in the

unpredictability of this kind of threat. It is almost impossible to com-

pletely identify and track these terrorists and this gives them the abil-

ity to strike at almost anywhere and anytime. In the business sense,

terrorism has driven up the cost of insurance, thus increased the cost

of business operations too. For countries in regions that are perceived

to be high in this risk, businesses not only bear the high cost of insur-

ance, they must also risk the loss of its employees. Act of terrorism

is increasing and as long as they prevail, businesses run this risk and

need to manage it. There are no fail-safe method to completely elimi-

nate this risk, however, taking steps in security measures will at least,

help to reduce this risk. Politics play a pivotal role in the macro-

environment as it has the ability to influence many of the other forces

of the environment. For example, the economy of a country is closely

linked to the policies of the government and very often, the economic

performance of a country is a result of these policies.

In the study of political forces, 3 main areas that deserve atte n-

tion are:

 Types of government (a);

 Stability of government (b);

 Role of government in business (c).

Through the study of the types and stability and role of the

government, managers can speculate on the risks it is subjected to.

This form of risk is known as political risk. Based on the assessment

of this risk, organizations can decide on the amount of investment it is

willing to invest in the country.

Illustration 8. Political forces

Source: Own development

Type of government

(political system)

Stability of government

(political turmoil or power change)

Role of government in business

(strategic industries, development priorities)

Ad (a) In general, most countries adopt the capitalist form of

ideology; however, there are still the limited few that employ the

communist or socialist way of running a country. This is not entirely

bad for businesses, as China has shown that it is still capable of

providing a channel for global trade. However, with a single party

government, there is no balancing force in its policy-making; no one

to question and challenge the decision makers, hence this may result

in some bad decisions. Another issue of this form of government is the

concentration of power, it is common that power within the party is

concentrated to a single person or a group of elites and this may pr o-

vide them the opportunity to corrupt as there is no challenger to stand

up to them. As for the capitalist form of government, they usually ad-

vocate free entrepreneurship and can provide a favorable environment

for businesses to grow.

Ad (b) Businesses need to operate in a stable environment to

thrive and stability of a business environment is much dependent on

the political situation in a country. Changes of government bring

about much turmoil in a country as demonstrated in many stances over

the decades. The recent occurrences in countries around the South

East Asian region during the economic crisis, has shown that turmoil

not only affects the people but businesses as well. Businesses in the

affected countries lost heavily through riots, poor purchasing power

and many other reasons. It is through these changes, especially if not

executed with care that put the country in chaos. The recent change of

government in Iraq has caused the entire country and the global econ-

omy much difficulty and in addition, terrorism is increasing in there

and is disrupting business activities being conducted. Another effect

of terrorism is the increased cost of business. After the 9-11 incidents,

businesses are buying terrorism insurance in a bid to hedge against

potential attacks and losses. Even if the transition is smooth between

governments, the new government may alter its policy towards trade

and business, and this will in turn affect the businesses in the country.

The change of Prime Ministers of Malaysia has illustrated the differ-

ences in which the way each of them governed. Immediately after tak-

ing over the post of Prime Minister, Mr. Abdullah Ahmad Badawi

stopped almost all infrastructure projects costing the construction i n-

dustry millions of dollars in revenue. The selection of Donald Trump

as 45th president of USA in 2016 has change the world order dramati-

cally toward nationalism by putting America first, and has redefined

completely external relations with southern neighbor Mexico, with the

biggest powers in the world including the EU, Russia and China.

Ad (c) Government plays many roles in the business environ-

ment. Firstly, it is the role of the planner. Government plans for the

types of businesses it wishes to control and sometimes, it is also re-

quired to plan for businesses it wishes to attract. Quite the opposite,

there will also be times when it plans for businesses that it wishes to

discard. In all of these situations, proper planning is conducted, mostly

to protect the economy and sovereignty of the country. Planning d i-

rects the economy in the direction that the government wishes to de-

velop, businesses that are not aligned in the chosen direction, tends to

encounter difficulties in their operations and activities. For example,

when the Singapore government announced its liberalization program

of the banking industry in 1999, it started a chain of events that result-

ed in the consolidation of local banks. This program has opened doors

for foreign banks, putting pressure on local banks for better perfor-

mance so as to remain sustainable in a highly competitive market. As

a result, consolidation was chosen for the reason of increased re-

sources pooled together and economies of scale so that operating cost

can be reduced. This decision made by the government has changed

the banking environment and businesses in this industry were required

to make painful adjustments to these changes. Some governments go

to great length in planning for the protection of selected industries

within the national economy. Though this kind of plan may impede

the development of the industry, it was mostly planned based on non-

economic reasons. For example, rice industry in Japan is very much

protected by the government. Tariff for imported rice was raised up to

1,000%, and this was to increase the cost of imported rice. In doing

so, the local farmers can still operate a profitable business in a high

cost environment. Besides playing the role of planner, government

also acts as a legislator and regulator of businesses. First of all, the

government specifies the type of judicial system and set the legal

boundary for businesses to operate in. The government manages the

judicial system so as to maintain fairness and ethics in the business

environment. Secondly, the government plays the role of regulator and

this involves the setting of standards and certification procedures for

businesses to operate with legitimacy, failing so, businesses will be

penalized. Car industry of Singapore has experienced changes in regu-

lations, e.g. the addition of catalytic converter for cleaner emission

and child seat for child safety, and this can result in either a threat or

an opportunity for different businesses. Most recently, the Central

Government of China attempted to regulate the pace of economic de-

velopment and ordered new projects to be scrapped, this resulted

in a standstill of several material industries and these included the

steel, cement and aluminum industry. Legislation in Asia is impacting

on marketing. For example, Indonesian government has launched pro-

grams after programs to loosen regulatory and administration controls

on the economy to improve business climate and encourage FDI. Ma-

laysia is constantly modifying its investment incentives to encourage

foreign and domestic investments. In Taiwan, the administration has

signed an ECFA with China to encourage investments in Taiwan.

From here, it is evident that political force is an important force to

consider in the analysis of the macro-environment.

 Economic forces

In terms of economic development, besides China, India is the

next biggest giant. Its economic potential lies in the Information

Technology market where many multi-national companies (MNCs)

had already invested into the country, setting up their offices and

manufacturing facilities. Freight forwarders and courier agents can

stand to benefit by providing the services required by these industries.

Besides this development, another economic issue that should be not-

ed is the supply of oil and this is because oil has an inevitable effect

on almost all economies in the world. Oil, being a major commodity

that is used in almost all businesses, will create an inevitable impact

on business when oil supply and price change. Oil price has surpassed

the expectation of many, reaching the price of more than USD140 in

June 2008. This created a rippling effect on all economies and indus-

tries, as almost all economies are oil importers, with high dependency

and spending on the import of oil. For supply chain business, the im-

mediate impact will be seen in price surge in transportation and freight

forwarding services. An increase in oil price will immediately affect

the price of fuel that is required in the operation of vehicles, i.e. truck,

ships and airplanes. The fuel surcharge implemented by some airlines

is an example of how oil price can affect its business. Businesses must

always be prepared for this as the world's oil reserve is reducing dras-

tically. On top of that, demand for oil is ever increasing since the entry

of China into the World Trade Organization. The result of China's

entry is the social and economic development of China and this has

opened up the 1.3 billion people in China to an uncontrolled consump-

tion of oil. Consequently, the global supply is unable to match the in-

crease in global demand of oil. This situation is further aggravated by

the volatility of oil supply in Iraq and other oil producing nations. In

any case, as more economies develop, demand will continue to rise,

creating the environment for the increase in oil price. Hence, organiza-

tions should always be prepared in anticipation of future increase or

even decrease in oil price in case of oil substitutes are discovered.

Economic forces can be divided into two main categories and

they are macroeconomics and microeconomics. Macroeconomics re-

fers to the general economic situation pertaining to the country as

a whole, while microeconomics addresses issues specific to a particu-

lar industry or market.

Illustration 9. Economic forces

Source: Own development

 Macroeconomics.

Governments formulate its economic policies to provide

a stable economy for the country and its people to grow.

These policies can be divided into monetary policies and

fiscal policies. Monetary policies refer to money matters

Microeconomic

(particular market or industry)

Macroeconomic

(general economic condition and policy)

and this relate to foreign exchange, etc., while fiscal poli-

cies govern the tax and expenditures of the government. In

relation to businesses, the taxation system of the country

will have implications on the operating cost of the business.

As for the expenditure, it will provide an overview of gov-

ernment spending and the industries that can benefit from

this spending. Monetary policies dictate on how money is

managed in and out of the country. This can have great im-

pact on the businesses especially if the currency is con-

trolled. The Yuan was perceived to be greatly undervalued

and was giving an advantage to China exports; in addition,

this would also mean less profit when repatriated back to

the foreign investor after exchanging into foreign currency.

Finally, with both monetary and fiscal policies, the govern-

ment reveals its position on international trade.

Though some countries are still resistant to this, most coun-

tries around the world are recognizing the dynamism of

trade across borders and this is because of the inevitable de-

velopment in the environment. Besides joining the World

Trade Organization (WTO), countries formed their own

economic bloc, e.g. EU, APEC, etc. to facilitate free trade.

In addition, there has been a spate of free trade agreements

(FTAs) signed between countries to expedite the free trade

process. Businesses and its supporting industries can ride on

this wave of free trade in the expansion of their businesses

into foreign markets. It has made it easier for a business to

enter into foreign market however, on the down side it has

also made it easier for competitors to enter into the local

market as new players.

Apart from economic policies controlled by the govern-

ment, general economic performance of a country is

a strong indicator of the economic activities and the pur-

chase power of its people. This is usually measured in per

capita income, gross domestic product (GDP) or gross na-

tional product (GNP). Purchasing power is determined by

the income of an individual hence, if the economy is flour-

ishing, the people will enjoy good employment and is likely

to purchase goods and services reflecting their prosperous

life. Naturally, businesses in such an environment will have

a better chance of survival, however, and if otherwise, or-

ganizations may want to reconsider its entry into the foreign

market.

 Microeconomics (micro-environment of enterprise).

This is the study of the specifics of a particular market or

industry. Organizations usually look at the issues of demand

and competition. In demand side, organizations must unde r-

stand firstly the need of a product or service, affordability of

the people, followed by the willingness to purchase it. Some

demands are clearly visible while others may require re-

search to ascertain. This is especially so for new products

that no one in the country had seen. In a competition side in

addition to demand, organizations must understand the

competitors and the level of competition in a concrete sector

(industry) of the economy; this is to minimize the chance of

an organization of investing into a highly competitive mar-

ket, resulting in a loss in the business venture. Besides de-

mand and competition, there are many other factors affect-

ing the industry, this will be discussed in the following u s-

ing Porter's 5 forces model. Suppliers deliver input produc-

tion factors such as machines, equipment, materials, energy,

etc… Long term relationships should be built with credible

and trustworthy suppliers. Moreover, managers should di-

versify the suppliers with them they cooperate to avoid the

risk of being too much dependent on one or several of them.

The intermediary embraces marketing brokers (delivering

diverse marketing services such as market information,

partner and customer finding); whole-sellers or retailers

(who help in products and services distribution in a profes-

sional way with reasonable price and lower risk); transport-

ers, insurers and clearers (delivering supporting services for

intermediaries). The end-customers are diverse in terms of

purchase behavior and purchase power and their preferences

are changing over time. The competitors can appear within

one branch (sector, industry; using railways service instead

of air transport), between branches (due to limited financial

resource, customers can choose product of one branch –

spend summer vacation abroad, on the expense of other

branch – investment in training courses), between brands

(within one product customers can choose different brands ,

i.e. Coca-Cola and Pepsi). Public opinion is any of the

stakeholders groups interested in and having impact, posi-

tive or negative on enterprise's marketing activities. They

are identified such as: financial circle, news reporters circle,

state and local government organs, non-governmental or-

ganizations and associations.

Illustration 10. Modified Porter's five forces model

Source: (Porter 1985)

 Socio-cultural forces

As businesses go global, management must adapt itself to man-

age employees of different cultures. Each different culture has their

unique characteristics and managers must understand them well

enough so as to be able to manage work teams comprising people

from all over the world. In the study of social forces, demographics

can generally provide a good summary of the social behavior of the

people in the country. Demographics like education level, income lev-

el, and median age of population, class structure and culture can offer

organizations an insight of what to expect in the foreign environment.

Every country is different and acknowledging this social difference is

important to global marketers as this not only shapes the preferences

and acceptance of a product or service in a foreign country, it directs

the way business is being conducted so as to be deemed acceptable by

the natives in the country.

In most writings, culture was singled out as a key determinant

in driving the social forces hence culture was studied in place of all

the other indicators of demographics. This was chosen with good rea-

sons, firstly there are too many demographical factors to study and

next, the study of culture will overlap into many areas of the other

demographics. For these reason, culture is also chosen as the focal

point here. Every country has its own culture and some of which have

more than one. In each of these cultures, even smaller groupings of

different sub-cultures may exist. This sub-culture is usually unique to

the place where it originated and varies with little differences depend-

ing on its origin. For example, the culture in China may be of Chinese

origin, however depending on which part of this vast country the indi-

vidual is from, the sub-culture affects the individual to think and b e-

have in a way that can be quite different from a Chinese of another

region. Culture can be understood, by studying the attitudes, beliefs

and value system of the group. Attitude is a learned predisposition to

behave in a consistent manner towards a given subject or object and

this behavior can be either favorable or unfavorable. Though attitude

can be learned, it is extremely difficult to change and usually takes

a long time for the individuals to change their attitude. Therefore,

marketers should try to understand these attitudes and act in a manner

to generate a positive attitude from the foreign market. Beliefs are

usually shaped by a combination of knowledge, opinion and faith.

People form opinions about a particular product and brand and it is

based on this belief that they will react accordingly. Marketers must

understand how belief is affecting them so that they can execute the

appropriate program of either changing their belief or reinforcing

them. Value is a set of beliefs usually passed down from ancestry and

reinforced by social institutions such as schools or churches. Accord-

ing to each value system, individuals will prioritize and act in pursuit

of what they believe in. Global marketers need to understand the value

system of the foreign environment and adjust its overseas operations

so that it does not clash with it. Social forces may seemed an insignifi-

cant force but do not be fooled as it is the organization entering into a

foreign land and it must understand its customers and business env i-

ronment well enough so as to minimize conflicts while operating

there. Sometimes, it is the smallest conflict that was not resolved ami-

cably and resulted in the downfall of an organization.

Illustration 11. Social forces

Source: Own development

 Technological forces

Technology has advanced tremendously over these few dec-

ades. It is used as a competitive tool in raising the productivity of o r-

ganizations. This was achieved through automation and the discovery

of new processes that can reduce the operation cost of an organization.

Technology has also helped in customer management with shorter

response time as organizations take advantage of the development in

information technology. However, when operating on a global con-

text, it would be foolish to expect technology assimilation to be uni-

Demographic features

(social differences)

Cultural identity

(attitudes, beliefs, values)

versal, i.e. technological development and knowledge is used in the

same way throughout the world. Technological development varies

with countries depending on the education of the people and the

standards set by the regulatory bodies and this can have an effect on

knowledge transfer for the purpose of operation relocation. An auto-

mated machine from Germany may not be well received in a country

of lesser educated as the locals may not be able to understand the o p-

erations and its required maintenance, in enabling the machine to per-

form to its optimum. Hence, operational efficiency using certain tech-

nologies may vary when transferred to another country. In the aspect

of marketing, again with the differences in technological knowledge

around the world, marketing of technologically advanced products or

services into foreign markets of low literacy may not be accepted as

they do not even understand it. For this reason, marketers must ascer-

tain the need and usefulness of their products and services, some of

which may even need to be modified to suit the needs of the foreign

markets.

Next, one of the most significant technological implications on

marketing is in the development of the Internet. With the Internet,

marketers can publish their offerings on the Internet, extending its

reach to the global market at a very low cost. However, just like the

effect of free trade, as much as it is easy and cheap for marketers to

access to markets abroad, it is the same for competitors coming into

the local market. However, this is an unstoppable force that is uniting

the world into a single market, marketers who chose to ignore this will

find themselves fighting competitors from all over the world and

struggling to survive in their local markets. This is probably the most

critical factor, as technology tends to provide advantage to marketers

to improve the efficiency and effectiveness in its business operations.

Although it is unable to provide competitive advantage to the users as

the same technology can always be easily adopted by other users,

marketers should still try to capitalize on this because failing so they

will fall behind the others in providing competitive service. Develop-

ment in the Information Technology has greatly improved the respon-

siveness of marketers in enabling them to respond quickly to the needs

of the customers and the changes in the environment. Customers' pu r-

chases and feedback can also be track in real time so that marketers

can take immediate action to rectify its shortcomings. For example,

the news of an outbreak of a flu virus in Malaysia can quickly be

communicated to other parts of the world, enabling marketers to re-

spond. Perhaps the IT development that had created the biggest impact

is the development in the Internet. With increasing subscriptions to the

Internet, more users are logging on to the Internet creating another

platform for businesses to be conducted virtually and this can be

reached the global market at a very low cost to the marketers. The

management of supply chain has capitalized on this in various man-

ners. Through the establishment of Intranets and Extranets that are

accessible through the Internet, suppliers can manage information on

a real time basis, and at the same time, allow it to be accessible on

a global basis. Extranet, makes use of the Internet to consolidate pur-

chases and allow its members in bidding for the purchases, through

this process, suppliers and buyers can widen their reach in both ac-

cessing to customers and widening the sources of supplies. Websites,

of this nature, benefit the suppliers as well as the purchasers. Others in

the supply chain makes use of the Internet to manage customers' d e-

mand by allowing customers to feed real time data of their needs to

the suppliers, that way, suppliers can immediately respond to these

needs. Another way to take advantage of the Internet is that suppliers

can now display their product and stock information on the website,

allowing customers to plan for their own purchases. Finally, commu-

nication through the Internet via e-mail and Internet phone, allows

cross border communication to be executed at a very low cost. This

mode of communication greatly reduces the cost to global marketing

and is helping marketers in accelerating its response time.

Another technology that is changing the mechanics of supply

chain is the use of the RFID technology (Radio Frequency Identity).

Like the conventional bar coding, this technology helps to tag prod-

ucts on an individual basis. In bar coding, the bar code is printed on

the packing of the product or the label that is pasted on the product.

To track the movement of the product, a bar code reader is pointed at

the bar code and the data is captured via the reader, and the infor-

mation is sent to the computer. Using conventional bar coding, the

user must physically align the reader to the code, hence creating much

labor in an exercise to tag and track the products. This is especially

difficult when the products are stacked on shelves that are vertically

stacked. Some of these shelves can be stacked to the height of few

meters of which can be dangerous and difficult to access to. Unlike

bar coding where users need the bar coding machines to read the data

off the bar codes, RFID uses a radio transmitter to achieve this. By

transmitting radio waves, it detect the chips embedded in the product,

these chips will then send a signal back to the receiver and the infor-

mation is captured and stored. Using RFID technology, product

movement can be tracked continuously without having to look for the

physical product. This application is already used in the tracking of

pharmaceutical products in ensuring the authenticity of its origin by

the time it gets to the users. The same application can also be used in

freight and courier businesses where service providers can track their

customers' merchandise as it moves from the factories to its different

destinations. This information can also be fed into the organizations'

extranet and through the Internet, customers can also monitor the real

time movement of their property. Marketers should always stay at-

tuned to technological developments as more is expected to come.

These new changes will bring about new opportunities and challenges

that are impossible to avoid.

Illustration 12. Technological forces

Source: Own development

I.2.2. Target Markets and Marketing Mix

I.2.2.1. Target Market

We should now consider the selection of target markets. These

are groups or segments of customers for whom a firm creates and

maintains a marketing mix that specifically fits that group's needs and

preferences. Target market may be a group of young people just be-

tween 18 and 24 years old who are especially interested in newest

high-tech ICT products and are willing to discover and ready to use

new ones. Marketing managers' evaluate possible target markets to

determine a number of factors including:

Different impact, varies with

 Locals

 Countries

 Regions

 Continents

 First, how entry into a market would affect the firm's sales,

costs and profits;

 Second, whether the firm has the resources to produce

a marketing mix of a particular target market and whether

satisfying those needs will be consistent with the overall

objectives;

 Third, whether the target market can be narrowly defined

or broadly. An additional consideration is the business

should focus marketing efforts on one or several target

markets.

I.2.2.2. Marketing Mix

The marketing manager must consider the development of

a marketing mix and this consists of four components that can be var-

ied by type and amount. The marketing mix of Product, Price, Promo-

tion, and Place was introduced to marketing education by Jerome

McCarthy in 1960s. These mnemonically easy-to-remember labels

rapidly became the organizing structure for virtually all introductory

marketing textbooks. Since then, there have been many advances in

marketing thought and conceptualization, including the broadening of

the marketing concept (1970s), an emphasis on the exchange transac-

tion (1980s), and, most recently (1990s), the development of Relation-

ship Marketing and Total Quality Management. Each of these advanc-

es has posed challenges to McCarthy's four P's. How ever, McCar-

thy's core concept is quite robust and stands the test of time.

 First, the product variable which can be a good, a service

or an idea. Also, creating and altering packages, brand names

and accompanying services are product variable decisions;

 Next is the place (distribution) variable. To serve its cus-

tomers adequately, a firm must evaluate alternative distri-

bution methods. Marketing managers must make products

available in the desired quantity to as many customers as

possible (marketing channels management) and hold total

inventory, transport and storage costs as low as possible;

 The third, promotion variable is the element of the market-

ing mix and that facilitates exchanges by informing one or

more groups of people about the organization and its prod-

ucts. It is used for a variety of reasons: to increase public

awareness of the organization, to make consumers aware of

a new brand, to educate consumers about a product's fea-

tures, to convince them about advantages of products, to

build image of enterprises;

 The forth, price variable, a final element of the marketing

mix. Consumers are interested in product prices because

they are concerned about the value obtained in an ex-

change. Marketing managers are usually concerned with

establishing pricing policies and determining and adjusting

product prices. Price can also be used to establish product's

image and marketing managers must consider this in de-

veloping a marketing strategy.

The mentioned four elements of marketing mix should be seen

from customers' point of view (see illustration below) and work close-

ly together. Their effectiveness of cooperation may differ, depending on:

 Resource (human, material, finance, information on science

and technology development) and position of enterprise

in the market;

 The character and life cycle of a product;

 The feature of a given market segment and other factor pe r-

taining to macro business external environment.

Illustration 13. 4P marketing mix from consumers' view

Source: Own development

The marketing mix is a set of the given marketing tools or in-

struments one can use to pursue its objectives in the target market. In

terms of products, first element of marketing mix, they could be per-

ceived in a much broader view, encroaching or even including scope

of other marketing tools. In that sense, product consists of three layers:

 Product, in a true sense – function (1), design (2), packag-

ing (3), features (4), price (5), efficacy (6);

 Services, accompanying product – before sales (1), during

sales (2), after sales (3), delivery (4), guarantee (5), availa-

bility (6), advice (7), add-ons (8), return (9);

PRODUCT

Conceived

values for

customers

PLACEMENT

Convenience

for customers

PROMOTION

Communication

for customers

 Intangibles, related with subjective judgments – values

proposition (1), quality perception (2), reputation (3), im-

age (4), brand name (5), recommendations (6).

The product, alike industry (branch, sector) or even the whole

economy; undergoes a life cycle. While some products seem to live on

perpetually, others have a short life. Nevertheless, all products have

the 4 stages of a life cycle – introduction, growth, maturity and decline

– each requiring marketers to implement different strategies to max-

imize its effectiveness in its marketing activities.

Illustration 14. Product Life Cycle

Source: Own development

Stage 1 – Introduction

At this stage, the new product is introduced into the market.

Being new to the market, customers are unaware of its benefits or

sometimes even the existence of the product, hence, much effort is

directed towards the promotion of the new product and to communi-

cate to the market the benefits offered by the new product. The sales

are expected to be low because it will take some time before the mar-

ket reacts to the promotion. As a result, it is normal to be unprofitable

at this stage of the life cycle. The other two reasons for the expected

loss is the sunken cost invested into the development and production

of the new product and the huge investment into promotion to create

the awareness in the market.

Stage 2 – Growth

After introducing the new product into the market for a while,

the new product begins to gain recognition in the market. More cus-

tomers start to acknowledge the benefits it brings about and purchase

the product, however, it is not only capturing the attention of the cus-

tomers, competitors also start to take note of the new product, espe-

cially if the product is successful and is gaining high sales. At this

stage, both sales and profit start to increase but it is not time to reap

profit, as more promotion must be communicated to the market to per-

suade more potential customers to purchase. This is a measure against

competitors that can come at a later date and surpass the marketer in

competing for the market share. Product design also start to change, to

encompass new features to meet the changing needs of the market.

Price may also need to be adjusted to face the incoming competition.

Stage 3 – Maturity

This is the stage where growth of sales begins to slow down.

Though there is growth, its rate is slowing and this is because majority

of the market has already purchased the product. Another reason for

this is the presence of many competitors in a mature market. Price

competition is increasing and profit starts to taper off. Promotional

method used is mostly discount pricing as marketers tries to gain mar-

ket share. Cost cutting in all aspects of the business is exercised to

minimize cost so as to be able to lower the selling price. Profit tends

to be highest at this stage because of the high sales volume, reduced

production cost and the reduction in promotion.

Stage 4 – Decline

At this stage, instead of experiencing growth, marketers are

faced with declining sales and this trend will continue until the de-

mand stagnates at a very low constant. This situation can arise from

the introduction of a new product that has made the current product

obsolete. Another possible reason is the maturation of the market, i.e.

the demand is minimal because most customers had already made

purchases of the product. Price and profit are sliding quickly however

marketers are still profiting because of a lack of investment. Here,

marketers normally do not invest more into this product, i.e. promo-

tional and production investment as the return on investment is usually

unattractive. However, marketers need to decide if it wants to continue

marketing the product in the market, if so, it can consider acquiring

competitive companies, so as to increase its presence and establish

itself as the market leader. In the long run, smaller competitors will be

weeded out as they lack the resources to compete. Alternatively, mar-

keters can choose to exit the market by either divesting the business or

liquidating the business if it cannot find a buyer for its business.

I.3. MANAGEMENT ORIENTATION TO GLOBAL

MARKETING

A global company can pursue a strategy of serving world mar-

kets from a single country, or source globally to focus on select markets.

For example, in an ethnocentric approach, global companies can retain

their association with a particular headquarters' country. A global

company's response to global market opportunities depends on man-

agement's beliefs. Foreign operations or markets are viewed as being

secondary or subordinate. There is a widespread assumption that

headquarters' knowledge and capabilities can be applied also in other

parts of the world. That's why sometimes valuable managerial

knowledge and experience in local markets may go unnoticed. In gen-

eral, the world view of a global companies' strategy, structure and

personnel can be described as, beside ethnocentric approach just men-

tioned, polycentric, regiocentric, and geocentric. These orientations

are called the EPRG framework (Keegan, 2002):

 Ethnocentric orientation. This is assumption that the home

country is superior to the rest of the world. Company per-

sonnel see similarities in markets, and assume that products

and practices that succeed at home will succeed anywhere.

Opportunities outside the home country are largely ignored.

This type of company is known as a global company (GC);

 Polycentric orientation. This view describes management's

belief or assumption that each country in which a company

does business is unique. This assumption allows each sub-

sidiary to develop its own unique business and marketing

strategies; the term multinational company (MNC) is often

used to describe such a structure;

 Regiocentric orientation. This view uses a region as the rel-

evant geographic unit; management's goal is to develop an

integrated regional strategy. (European company that con-

centrates on Europe is regiocentric). A regiocentric manag-

er might be said to have a world view on a regional scale.

Research suggests that many companies are seeking to

strengthen regional competitiveness. This type of structure

is referred to as regional company (RC);

 A geocentric orientation views the entire world as a poten-

tial market and strives to develop integrated world market

strategies. This type of company is known as a transnation-

al company (TNC). The geocentric orientation represents

a synthesis of ethnocentrism and polycentrism; it is a world

view that sees similarities and differences in markets and

countries, and seeks to create a global strategy that is fully

responsive to local needs and wants.

In summary, the ethnocentric company is centralized in market-

ing management, the polycentric company is decentralized in its mar-

keting strategy and activities; the regiocentric and geocentric compa-

nies are integrated in its marketing strategy and activities on a regional

and global scale respectively.

I.4. GLOBAL MARKET AND GLOBAL MARKETING

I.4.1. Global Market

Theodore Levitt's article "The Globalization of Markets"

(Levitt 1983 ) has spawned a host of new references to marketing ac-

tivities: global marketing, global business, global advertising, global

brands, as well as serious discussions of the processes of international

marketing. Professor Levitt's premise is that world markets are being

driven "toward a converging commonalty." Almost everyone every-

where wants all the things they have heard about, seen, or experienced

via the new technologies. He sees substantial market segments with

common needs, that is, a high quality, reasonably priced, standardized

product. The "global corporation sells the same thing in the same way

everywhere". Professor Levitt argues that segmenting international

markets on political boundaries and customizing products and market-

ing strategies for country markets or on national or regional prefer-

ences are not cost effective. The company of the future, according to

Levitt, will be a global company that views the world as one market to

which it sells a global product. Competition in the future will require

global marketing rather than international or multinational marketing.

Professor Levitt's article has provoked many companies and marketing

scholars to re-examine a fundamental idea that has prevailed for dec-

ades; that is, products and strategies must be adapted to the cultural

needs of each country when marketing internationally. This approach

is contrasted with a global orientation suggesting a commonality in

marketing needs and thus a standardized product for the entire world.

While the need for cultural adaptation exists in many markets and for

many products, the influence of mass communications in the world

today and its influence on consumer wants and needs cannot be de-

nied. Technology allows instant news and live broadcasts from half-

way around the world to be shown to hundreds of millions of potential

consumers everywhere in the world. One study of the importance of

cultural differences in marketing concluded that in a marketing world

characterized by intensive communications, standardization, and the

employment of similar technologies, cultural differences tend to d i-

minish. Indeed, the process of globalization on the supply side has

already begun. Certainly, the homogenizing effect of mass communi-

cations has eliminated many of the regional differences that once ex-

isted. It is difficult to deny the influences of mass media and commu-

nications on the tastes and consumer behavior. It seems reasonable to

believe that people in other cultures exposed to the same influences

will react similarly and that there is a converging commonalty of the

world's needs and desires. An example is the influencing power of

Korean serial dramas. Its impact has been felt in ASEAN and Middle

East. Does this mean markets are now global? The answer is yes.

There are market segments in most countries with similar demands for

the same product. Levi Strauss, Revlon, Toyota, Ford, McDonald's,

and Coca-Cola are companies that sell a relatively standardized prod-

uct throughout the world to market segments seeking the same prod-

ucts to satisfy their needs and desires. Does this mean there is no need

to be concerned with cultural differences when marketing in different

countries? The answer is "it depends"; for some products adaptation is

not necessary, but for other products more sensitive to cultural values,

adaptation is still necessary. The issue of modification versus stand-

ardization of marketing effort cannot be answered as easily as yes or

no. The astute marketer always strives to present products that fulfill

the perceived needs and wants of the consumer. Some products suc-

cessful in one culture are equally acceptable in another; Pepsi-Cola is

a good example. Other products demonstrate the vast differences in

what is acceptable from one market to another. Chicken wings, and

necks and offal would probably need some creative adaptation in Eu-

rope. Marketing internationally should entail looking for market seg-

ments with similar demands that can be satisfied with the same pro d-

uct, standardizing the components of the marketing mix that can be

standardized, and, adapting where there are significant cultural diffe r-

ences that require parts of the marketing mix to be culturally adapted.

The question of adaptation versus standardization of products and

marketing effort is a dilemma in global marketing. Most problems

encountered by the foreign marketer result from the strangeness of the

environment within which marketing programs must be implemented.

Success hinges, in part, on the ability to assess and adjust properly to

the impact of a strange environment. The successful global marketer

possesses the best qualities of the sociologist, psychologist, diplomat,

lawyer, prophet, and businessperson. It is that a study of foreign mar-

keting environments and their influences on the total marketing pro-

cess is of primary concern and is the most effective environmental

approach to global marketing. It is intended to demonstrate the unique

problems of global marketing. It attempts to relate the foreign envi-

ronment to the marketing process and to illustrate the ways in which

the environment can influence the marketing task. Although market-

ing principles are universally applicable, the environment within

which the marketing plan is implemented can change dramatically

from country to country.

I.4.2. Global Marketing

As a next stage of the marketing concepts development to sup-

port expanding business around the world, competition in the future

will require focusing and implementation the concept of global mar-

keting concept, rather than still paying attention to the previous, suc-

cessively developed but outdated marketing concepts:

 Export marketing – that are marketing activities that sup-

port foreign market penetration of a given domestic co m-

pany in the burgeoning stage of globalization;

 Marketing in foreign market – that are marketing activities

that support a given company, which has been already pen-

etrated the foreign market, to compete effectively there

with foreign and local companies;

 Multinational marketing – that are diversified marketing

activities operating in many different countries where

a given company is present simultaneously in many foreign

market fronts;

 International marketing – that are diversified marketing ac-

tivities across many countries, where a given company has

its operations and those marketing activities should be co-

ordinated in order to achieve better effect.

I.4.2.1. Global Marketing Issues

Global marketing requires marketers to behave in a way that is

global and local at the same time by responding to similarities and

differences in world markets (Keegan 2002, p6). The world is rapidly

becoming a one-world economic and market system. Today most

business activities are global in their scope. Finance, technology, re-

search, capital and investment flows, production facilities, marketing

and distribution networks all have global dimensions. Every business

must be prepared to compete in an increasingly interdependent global

economic network environment, and all business people must be

aware of the effects of these trends when managing a multinational

company (MNC) or a domestic company that exports. A company

guided by this orientation or philosophy is generally referred to as

a global company, its marketing activity is global marketing, and its

market coverage is the world. A company employing a global market-

ing strategy strives for efficiencies of scale by developing a standard-

ized product, of dependable quality, to be sold at a reasonable price to

a global market, that is, the same country market set throughout the

world. Important to the global marketing concept is the premise that

world markets are being driven toward a converging commonalty

seeking in much the same ways to satisfy their needs and desires.

Thus, they constitute significant market segments with similar de-

mands for the same product over the world. With this orientation

a company attempts to standardize as much of its effort on a world-

wide basis. Some decisions are viewed as applicable world-wide,

while others require consideration of local influences. The world as

a whole is viewed as one market and the firm develops a global mar-

keting strategy. The global marketing company would fit the regiocen-

tric or geocentric classifications of the EPRG schema, as discussed

in the previously. Some early interpretations of global marketing fo-

cused narrowly on the standardization or globalization of product

branding and advertising, and the concept of global marketing as an

operating orientation was accepted or rejected on the basis of whether

or not a global market existed. Reports abound of global marketing

successes and failures. The notion of global marketing is a more pow-

erful idea if the scope of the concept is broadened beyond the idea of

the existence of global markets. The global marketing concept views

an entire group of national markets as a unit, examining the group as

one market and developing a marketing plan that strives for standardi-

zation wherever it is cost and culturally effective. This might mean

a company's global marketing plan has a standardized product but

country specific advertising or a standardized theme in all countries

with country or cultural specific appeals to a unique market character-

istic, a standardized brand or image but adapted products to meet sp e-

cific country needs, and so on. In other words, the marketing planning

and marketing mix are approached from a global perspective and

where feasible in the marketing mix, efficiencies of standardization

are sought. Wherever cultural uniqueness dictates the need for adapta-

tion of the product, its image, and so on, it is accommodated. We must

acknowledge at least two dimensions to the question of global busi-

ness. One side focuses on orientation of firms as just discussed, the

other dimension of the question of global business is whether a global

market exists as defined by Levitt. In other words, do segments across

several countries with similar needs and wants that can be satisfied

with a single standardized product exist? Although a company might

visualize the world as a single market rather than as a series of country

specific markets, to what extent the world has actually become a ho-

mogeneous market, (that is, a global market) is another question.

These two dimensions of globalization should be separated. Regard-

less of the degree to which global markets exist, a company can bene-

fit from a global orientation.

Illustration 15: Customization vs. standardization

Source: Own development

Table 4. Customization vs. standardization

CUSTODIZATION

(STANDARDIZATION+

CUSTOMIZATION)

Multi-domestic

business strategy

Home copy

business strategy

Same standardized

marketing mix for all

foreign markets (Coca

Cola, McDonald's)

Customized, fully

responsive to the

changing demands,

tastes and prefer-

ences (FMCG and

global supermarket

chain)

Domestic marketing

shows no difference to

international marketing.

Avoid high cost, depend-

ing on types of products

(construction and pro-

duction material)

Saving cost, time and

efforts, easy to be i m-

plemented

More cost, time and

efforts needed to

implement this strat-

egy

Appropriate for truly

global products and

services

To explore locally

different taste and

specific preference,

choosy and unfamil-

iar customers

Not suitable for local

products with local

conditions and speci-

ficities

Not suitable and rea-

sonable for standard-

ized and global

products without

local specificities

Total success or total

failure

Reduce risk but suc-

cess is never being

fully secured

Source: Own development

Moreover, global marketing managers, due to erratically

changeable global business context, should be flexible enough to ap-

ply the environmental approach to marketing, which consists in care-

fully analysis and diagnosis each foreign market environment (FME)

individually, and adjust their company's marketing plans and activi-

ties (MPA) adequately to the diverse and unpredictable impacts of

foreign business contexts.

Illustration 16. Environmental approach to global marketing

FME – Foreign market environment

MPA – Marketing plan activities

Source: Own development

I.4.2.2. Global Marketing Practices

After presenting about global marketing issues, it is worthwhile

to briefly consider some of the practical aspects and essential practices

executed in global marketing:

 Focus on familiar concepts, brands – There are too many

marketing concepts, philosophies, orientations, approaches,

brands, partnerships, opportunities across countries, beyond

political and geographical boundaries and throughout many

different cultures in the global world we all understand cer-

tain topics. A firm should beware and take a selective ap-

proach to all of them. A firm should devote more time to

study carefully to be familiar with them to the extent as de-

tailed as possible. The rule is to trust and refer to the most

familiar and the most comprehensible of them;

 Choose overseas partners carefully – Always take a closer

and careful look at any given field of cooperation and scru-

tiny potential partners before jumping in joint projects. You

need to understand where partners sit legally and financia l-

ly, and strategically and be realistic about their potential in

terms of but not only the market influence, and on how

they are perceived by customers, partners, and other stake-

holders in their companies and in the society in general be-

fore any step forward to be made;

 Don't make when you can buy – This rule is concerning the

strategy of outsourcing. It means that a firm doesn't have to

engage in all stage of production or delivering service. In-

stead, it should focus on what it can do best in the value

chain and find out partners and let them do the rest for you

within their competencies. This is the best way to optimize

costs and develop specific competencies to stay competi-

tive in the global market and global value chain. The an-

other point here is that a firm should not only engage other

partners into its own business but also be engaged in busi-

ness of others, as partner, globally, to acquire more experi-

ence to indirectly contribute to its own global competitiveness;

 Localize your product or service – To ensure that your

technology is capable of being adapted to produce products

and deliver services best suitable in various markets. Be

familiar with and understand comprehensibly the local cul-

ture, traditions and customs to readjust, redesign or even to

remake own products and services to fit the local tastes and

likings reducing to minimum cultural contention and mis-

understanding;

 Invest in each territory separately – Take the time to

devote money and efforts to plan and execute a proper in-

dividualized marketing and market research, PR and distri-

bution campaign in each of, if not solely your biggest,

overseas markets. Tailor each country's particular brand

message separately as well;

 Treat subsidiaries, partners with mutual respect – Free ex-

change of help and information is crucial when operating

on a global scale. Appoint key, motivated, trustworthy de-

cision-makers to oversee such partnerships in different op-

erations and develop such international relations;

 Manage expectations – Success in one territory (country,

region) does not automatically guarantee victory in another

arena either, this is immutable truth and absolute principle.

I.5. GLOBAL MARKETING IN SUPPLY CHAIN

MANAGEMENT

The marketing concept has strong influences on the manage-

ment of a firm, inter-firm relationships, and the supply chain. The

marketing concept, as a business philosophy, guides firms to look for

customer satisfaction at a profit in a coordinated manner. Webster

(1992) proposed that marketing as a culture means a basic set of val-

ues and beliefs about the importance of the customer that guide the

firms in their daily operations. In case of teamwork and human coo p-

eration and interrelation marketing concept provides philosophical

foundation of individuals' or groups' activities or behaviors (called

a market orientation) within a firm. Cravens (1995) argued the cus-

tomer is at the center of the relationship-marketing paradigm. In other

words, the marketing concept, as a business philosophy, guides

a firm's behaviors (called relationship marketing) to develop, main-

tain, and enhance inter-firm relationships to satisfy customers. The

marketing concept is also a necessary component for implementing

supply chain management (SCM). Authors (e.g. Cooper et al., 1997a;

Lambert et al., 1996) suggested one of the components of SCM im-

plementation is partnership with compatible corporate philosophies, at

least for key relationships. The marketing concept (i.e. the philosophi-

cal foundation of a firm's activities) should be the compatible supply

chain partners' philosophy, so all partners in the supply chain strive to

satisfy customers at a profit through inter-functional coordination

within and among the supply chain partners. Thus, under compatible

marketing philosophies, supply chain partners become more willing to

be efficient (i.e. cost reduction) and effective (i.e. customer service)

toward a common goal (i.e., customer satisfaction at a profit). Effec-

tive SCM requires partners to build and maintain close long-term rela-

tionships (Ellram and Cooper, 1990; Cooper et al., 1997a). Ellram and

Cooper (1990) contended that a successful supply chain relies on

forming strategic partnerships, which expect long-term, inter-firm re-

lationships with trading partners. In this context, SCM puts more em-

phasis on a partnership approach, or relationship orientation (Morris

and Imrie, 1992). In the end, those inter-organizational relationships

tie firms to each other and may tie their success to the supply chain as

a whole (Cooper et al., 1997b). Ultimately, Webster (1988) expected

the emergence of not only a chain, but a network of strategic partner-

ships among designers, technology providers, manufacturers, distribu-

tors, and information specialists, which would fit the need of function-

al integration within a supply chain.

Relationship marketing, through close inter-firm relationships

such as partnerships, strategic alliances, and joint ventures, should

increase inter-firm cooperation, one of the components of the imple-

mentation of SCM, including joint inventory and cost reduction, and

joint planning (Cooper et al., 1997a). In relationship marketing strate-

gy, buyer-seller partnerships, strategic alliances, joint ventures, and

networks are formed, all of which assume mutual, inter-dependent

relationships governed by cooperative norms. The cooperation of

partners involved in these various close inter-organizational forms, in

turn, help partners achieve a high level of customer satisfaction in

a rapidly changing business environment (Cravens, 1995). Cooper et

al. (1997) posited the implementation of SCM involves reducing

channel inventory, increasing channel cost efficiencies, maintaining

long-term relationships, encouraging inter-firm cooperation, and shar-

ing risks and rewards among the partners. Relationship marketing

helps achieve the objectives of SCM such as efficiency (i.e. cost re-

duction) and effectiveness (i.e. customer service) through increased

cooperation in close long-term inter-firm relationships among supply

chain partners.

A market orientation, by its nature, requires close inter-firm re-

lationships that are the sources of information outside the firm. Kohl

and Jaworski (1990) claimed the market, which is the unit of analysis

of a market orientation, includes end-users and distributors as well as

exogenous forces that affect their needs and preferences. Therefore,

a firm should have intimate relationships with its customers to closely

monitor their current and future needs and to make sure that customers

obtain what they want from the firm. In addition, the firm should have

close relationships with distributors, suppliers, and any other partici-

pants in the market to identify influences of those market participants

on customers' needs and preferences.

A market orientation plays a pivotal role in implementing

SCM. First of all, a firm's market orientation produces and stores val-

uable market information that is needed in the process of building,

maintaining, and enhancing supply chain relationships. For example,

since a firm has information about customers, suppliers, competitors,

sociopolitical environments, and technological trends, it could answer

such questions as which supply chain best serves its customers' needs,

with which firms it should work to implement SCM, what should be

the objectives to be pursued in SCM, and so on. In addition, Cooper et

al. (1997a) suggested one of the components of the implementation of

SCM is information sharing through two-way communication be-

tween partners within a supply chain. A market orientation should in-

directly contribute to information sharing within a supply chain be-

cause market information obtained by individual partners could serve

as the basis of shared information among the supply chain partners.

Information sharing among the partners in a supply chain may simply

be part of practicing organizational learning within the boundary of

a supply chain rather than the boundaries of individual firms and dy-

adic inter-firm relationships. Brown and Hendry (1997) claimed two

major ongoing changes in SCM practices are (organizational) learning

through the supply chain and working better with suppliers. When

combined, these changes help partners within a supply chain achieve

better two-way relationships with suppliers. With improved infor-

mation exchange, partners are better able to utilize supplier creativity

and knowledge, improve processes (particularly for cost savings and

performance benefits in the supply chain), and encourage individual

learning within an established supply chain context.

Finally, a market orientation facilitates relationship marketing

that, in turn, could promote the implementation of SCM indirectly vis-

à-vis relationship marketing. Cooper et al. (1997a) indicated building

and maintaining close long-term relationships among partners beyond

the life of a contract that encourage inter-firm coordination are needed

for the implementation of SCM. Gundlach and Murphy (1993), Mor-

gan and Hunt (1994); Gruen (1997) suggested relationship marketing

depends on inter-firm cooperation that focuses on the systematic d e-

velopment of ongoing, collaborative business relationships. Therefore,

the implementation of relationship marketing promotes inter-firm co-

operation, in addition to close long-term relationships among the sup-

ply chain members.

The marketing concept, market orientation, relationship mar-

keting, and SCM are not separate. Rather they are inextricably inter-

twined. The role of marketing through the marketing concept, a mar-

ket orientation, and relationship marketing is essential for the success

of SCM.

 The marketing concept promotes individual firms' coordi-

nated activities inside and outside the firms to accomplish

customer satisfaction at a profit;

 A market orientation, which is the implementation of the

marketing concept, requires firms to generate, disseminate,

and respond to market information;

 Relationship marketing aims at establishing, maintaining,

and enhancing either dyadic relationships or multiple rela-

tionships in a supply chain to create better customer value.

Organizational learning, a major component of a market orien-

tation, goes beyond the boundaries of a firm since there is a multitude

of learning resources and skills to fulfill customers' demand in an eff i-

cient and effective way. Thus, a market orientation not only promotes

the emergence of relationship marketing but also provides the reasons

for it to exist.

Not only do marketers need to deal with enhancing new skills

and fostering diverse relationships with supply chain partners, they

need to deal with customers' demands. The various demands are in-

cluded in the following table.

Table 5. Customers' demands classification

Target market dislikes products or services (PS)

To reverse that trend

Target market is unaware of PS

More promotion in place

Target market not satisfied with current PS

New products needed

Target market turn away from current PS

Find out new markets

Synchronize marketing activities

Maintain current demand level

Source: (Kotler 1973)

Before the end of this chapter, it may be necessary to consider

the increasing important role of marketing in generating leads. Board-

room business leaders are constantly under extreme pressure to deliver

improved quarter by quarter results. Their performances are purely

measured by their ability to drive bottom-line growth. One of the

common pitfalls in bottom-line improvement is cutting marketing

costs and other related costs. This is a short-term approach that does

not contribute to building a profitable and sustainable business. An-

other common pitfall is making the sales team solely responsible for

the revenue pipeline, i.e. the top-line. This usually results in highly

stressed sales staff that leads to high staff turnover. The answer lies on

building sustainable enterprises by keeping eyes on the top-line

growth. And marketing ought to play a key role if not the driver to

increase the top-line. Marketing has its skin in the game of demand

generation. Organizations find themselves in an environment of inten-

sifying competitive landscapes, complex sales cycles, and prolifera-

tion of the internet culture which has changed the dynamics of buyer

research behavior. Hence, marketing has to assume its position in or-

der to understand and tap the new market environment.

Illustration 17. New market as marketing demand generation

Source: Own development

New market

Current product

Current market

New product

Current market

Current product

Chapter II

MARKET RESEARCH METHODS

Objectives:

Understand the process of market research, primary and secondary

research

Understand the quality and ethical issues of market research

MARKET RESEARCH PROCESS

PRIMARY AND SECONDARY RESEARCH

SAMPLING AND INCREASING RESPONSE RATES

RELIABILITY AND VALIDITY OF RESEARCH

ETHICAL ISSUES OF RESEARCH

II.1. MARKET RESEARCH PROCESS

II.1.1. Market Research and Marketing Research

In marketing, question that one needs to consider is what is

there to do the research and why, because marketing is considered ra-

ther as an art to satisfy customers at profit rather than any science.

Businesses of all kinds face risks and to reduce these risks, marketers

try to find out as much information as possible and as quickly too.

Next, businesses are always working with limited resources hence

managers must try to maximize the return on the resources by allocat-

ing them to the best possible option, and this is accomplished again

with the help of information. Lastly, marketing is all about meeting

the needs of customers hence, it is important to know what customers

really need. All of this information can be gathered through the use of

market research. Market research is a research for information pertain-

ing to the market situation, this means that the scope of information is

not restricted to that of the customers; it should also include infor-

mation about competitors, suppliers and any other factors that affect-

ing the market. In this changing environment, the organization is co n-

stantly subjected to changes that it cannot control therefore, in order to

survive, organizations must find out about these changes and adapt to

them quickly. Examples of changes are changes in customer prefer-

ence, new competitors, new products launched and many others.

Marketing research, as a difference to the market research, is

a research not only for market information but also for information on,

among other marketing issues, the marketing mix instruments' impact

and effectiveness on the process of realization of the marketing strate-

gy in order to achieve predetermined marketing objectives. Marketing

research is to guarantee primary data, accurate and on time infor-

mation needed; collect, analyze data and present achieved results to

support case specific marketing decisions in terms of reducing risks

and coping with changes; and strategic marketing plan in terms of en-

hancing effectiveness of business activities).

Illustration 18. Market research and marketing research

Source: Own development

Marketing research

(Active management)

Market research

(Passive management)

Table 6. Characteristics of marketing research

Preliminary – customers and busi-

ness approach, in the field research;

more costly

Secondary – documents analysis, at

desk research; less costly

Qualitative – How, what, why?

Discovery – in -depth analysis of a certain problem

through brainstorming

Description – finding out details but not get in-

volved into causal relationships

Causal relationship – find out relations between

variables

One-off – case specific and non-repetitive

Continually – done by market research institutes on

commercial basis

Mix – in a response to the needs of customers

Objects of market

and marketing

research

Consumer – behavior, taste, preference, power of

purchase

Buying motivation – iPhone, care, motorbike

Market size and level of demand – growth, niche,

market share

Competition – effectiveness, solutions

Objects of market-

ing research only

Product – improve current products and develop

new ones

Placement – find new channels and methods of dis-

tributions

Pricing – determine, adjust price, rebate

Promotion – what instruments, intervals, time and

time lines

Branding – build, develop and sustain brands, re-

search on brands' recognition and coverage

International mar-

keting research

Multicultural, multilingual;

Market's largeness and diversity in terms of taste,

preference and customs;

Differing regional policy and legal systems;

Higher cost, more complexity, more time and re-

source consuming market and marketing research;

Quick and unpredictable changes;

Diverse source of information in terms of richness

and updatedness; credibility and professionalism;

commercial nature;

Using IT instruments of research

More difficulty in updating research results.

Source: Own development

Illustration 19. Marketing research and marketing information

system (MIS)

Source: Own development

Marketing information system is an instrument to reorganize

information sources coming from market and marketing research to

serve the needs of information of an organization now and in the fu-

ture. A balance between the need of possessing certain amount or type

of information and the cost of achieving them should be put in place

to guarantee economic effectiveness of the marketing information sys-

tem. Marketing research is one of the many possible information in-

puts to marketing information systems. The roles played by marketing

information systems (displayed in the following table) are to support

marketing decisions, i.e. setting and adjusting the price over time (i.e.

product life cycle) to guarantee optimal turn-over and maximal profit.

Table 7. Roles of marketing information system

Assessing the need

of information

Based on self-assessment of managers' information

needs and possibility of information system.

Collecting information – internal reports (on trends,

current situations), external intelligence, independ-

ent marketing research

Analyzing information – using mathematical mod-

els, statistical methods, econometric tools to dis-

cover dependency and relations between variables,

to verify hypothesis; to support the decision making

process.

Synthesizing information – compare results of qual-

itative and quantitative analyses.

Recapitulations, reports on results of researches,

conclusions, proposals.

Distributing infor-

mation

Using Information Technology to guarantee:

-Real time

-Low cost

-Convenience

-Accuracy

Source: Own development

II.1.2. Market Research Process

Market research is achieved through a series of successive steps

within a process and they are as the following:

a) Define the problem;

b) Define the research objective/s;

c) Develop the research plan;

d) Collect the information;

e) Analyze the information;

f) Presentation of findings.

a) Define the problem

The first step in marketing research is to define the research

problem. Often, in the initial stage of the research, a problem may be

recognized in a very general form and therefore restrict the researcher

from comprehensively designing the program. Situation analysis may

be one of method of defining the problem and answering the 4 sub-

questions:

 What is the problem?;

 What is the probable cause of the problem?;

 What information is needed to solve the problem?;

 What possible solutions could be taken after obtaining the

information?.

It is clear that if the user, marketer, cannot answer the question,

then the market researcher is obligated to produce a proposal outlining

the problem and eventually an effective solution. Researchers must be

aware that the user has the duty to jointly formulate the problem into

a definite statement. Marketers need to navigate between defining the

problem too broadly or too narrowly. For example, if we were to ask

marketers to find out the needs of supermarket customers, then there

will be plenty of unwanted data. On the other hand, if we wanted to

find out what the products that shoppers buy every visit to the super-

market, then there is a high chance that such data can be solicited from

customers. Too narrow a scope would be requesting customers to state

how many of them would be willing to pay 3 USD for a tube of tooth-

paste. As mentioned earlier, there are generally three types of re-

search:

 Exploratory – to gather preliminary data to establish new

ideas or hypotheses;

 Causal – to test cause-and-effect relationship;

 Descriptive – to establish magnitudes e.g. if the price of

a tube of toothpaste is 3 USD, how many people would be

willing to buy it.

b) Define the research objective

Prior to the research, it is imperative that the objective is set

correctly; this is to ensure that the research is carried out correctly to

address the issue in question. Research objectives can include opinion

polls about new product, reaction of new pricing, etc. If the objective

is not set properly, the researcher may be wasting resources on some-

thing that is irrelevant. The areas to be covered include:

 Development of hypothesis;

 Outline of the research questions;

 Determine the scope of the research.

The development of the hypothesis is not absolutely necessary.

However, its presence does help to sharpen and shape the entire re-

search. As an example, if the organization suspects that the low sales

turnover is due to lack of public awareness, then it needs to research

into advertising. The research questions will ask the type of infor-

mation needed for the research and as input at questionnaire design.

An example of the research question would be "How much money

does the current customers spent per month at the store?" or "What is

the penetration of Product A in area A?" The research question can be

improved by identifying the target segment and area under study (e.g.

perception of customers of brand A).

c) Develop the research plan

This stage involves the most efficient plan for gathering the da-

ta. The researcher has to use his or her skills to design the research

approach. When carrying out the research, there are many considera-

tions, for example, types of research tools used, sampling method and

size, and many others. Each of these considerations has many options

of which can be advantageous and disadvantageous depending on the

nature and problem of research. Research managers must choose the

best considerations to solicit the most accurate data under the con-

straints of cost and time; hence it is critical that they must know each

of these considerations well so that they can choose the best combina-

tion for each research. The research plan comprises the following ele-

ments in the table.

Table 8. Market research plan

Primary data; Secondary data

Observation; Focus groups; Survey; Experi-

ment

Questionnaires; Mechanical instruments

Sample unit; Sample frame; Sample size;

Sampling procedure

Telephone; Mail, Face -to -face

Source: Own development

In terms of data sources, the research can call for gathering

primary, secondary or both forms of data. Secondary data consist of

information that already exists somewhere and is collected for other

purposes. Conversely, primary data is original data collected by the

researcher for the specific purpose of the research.

Primary research data can be collected in many approaches: ob-

servation, focus groups, surveys, experiments. These will be covered

later.

The research plan must include a sampling plan which calls for

four decisions:

 Sample unit. Who is to be surveyed? The target market

must be unambiguously defined. In the case of the super-

market, should only women be the sample unit? How about

men? How about age?;

 Sample size. How many people should be surveyed? While

large samples give more reliable results than small samples,

it is not necessary to sample the entire target population to

achieve reliable results as it is usually impossible and un-

feasible. The outcome is determined by a credible sampling

procedure;

 Sample frame. Where should one find the sample from the

target population or yellow pages or walk-in customers at

the supermarkets;

 Sampling procedure. How should be respondents be cho-

sen? Should a probability be used? The tables Probability

sampling procedure and Non-probability sampling proce-

dure provide a number of ways on how to select the sample.

d) Collect the information

In order to collect the information, the respondents need to be

contacted. There are a number of choices:

 Mail. The mail may be the best way to reach respondents

who may not want to be personally interviewed. The words

have to be very clear and precise;

 Telephone. Useful when there is a need to reduce costs or

to gather data quickly. For this method to be effective, in-

terview has to be short;

 Personal interviews. The most effective way of collecting

data. Interviewer can ask for information but it is the most

expensive method of data collection. Prior arrangements

have to be made to enter premises. Information collection

can be achieved manually, mechanically or a combination

of both. Research plans may be well thought, however, if

the collection of the information is not executed properly, it

may create misinformation of which will not serve the pur-

pose of the research. Errors may occur at any stage of the

research process. It can happen when the question asked is

ambiguous or when the interviewer is improperly trained.

Other instances can be machine failures for mechanical

mode of information collection. These are just some of the

examples where information may be improperly collected.

Research managers must try to minimize this chance of er-

ror, so as to protect the integrity of the data collected.

Table 9. Collecting information

The best way to reach respondents who may not want to be

personally interviewed. The words have to be very clear

and precise.

Useful when there is a need to reduce costs or to gather

data quickly. For this method to be effective, interview has

to be short.

The most effective way. Interviewer can ask for infor-

mation but it is the most expensive method. Prior arrange-

ments have to be made to enter premises.

Source: Own development

e) Analyze the information

Raw data, by itself, is useless because it does not tell anyone

anything. Analysis must be done and to do this, simple statistics can

be employed to understand the mean, median and mode of the data

collected. More complex methods can involve the use of time series

analysis and correlations models. Due to technological advancement,

complex modeling can also be achieved with the aid of computer

software and one of the most popular software used is the SPSS.

f) Presentation of findings

After analyzing the data, the last step is to present the analysis'

results to the management for the appropriate response action. For the

ease of understanding, presentation is usually made in graphical form.

Pie charts, bar charts and line graphs are some examples that are

commonly used.

II.2. PRIMARY AND SECONDARY RESEARCH

II.2.1. Primary or Secondary Research

Research can be a costly exercise. However, there are instances

when this cost can be reduced. This is when the research objective can

be accomplished through just secondary research. Secondary research

is a research for secondary data, i.e. data that was collected by an ear-

lier research conducted by other parties. The main advantages of using

secondary research are the low cost and its short research time. This

will not only help the organization in saving money but it is also able

to provide the information quickly, allowing the organizations to act

quickly based on the information. As mentioned earlier, secondary

researches are only useful in some situations but mostly the y are not.

The reasons behind that are:

 Objectivity of research – the objective of the earlier re-

search differs, hence the differences in the methodology,

sample, etc., will render the research result to be different;

 Currency of research – the earlier research was conducted

at an earlier time and the environment may have changed,

therefore information collected may have already been out-

dated. Nevertheless, despite these issues in secondary re-

search, it is still commonly used, especially for exploratory

research. Prior to a market research, exploratory research is

sometimes conducted to confirm the issues at hand or they

are also used to narrow the scope of the research, through

this, the researcher can reduce the chance of researching on

the wrong issues and make the research more efficient.

Table 10 . Advantages and disadvantages of primary

and secondary research

Advantages of primary research

Disadvantages of primary

research

Advantages of secondary

research

Disadvantages of secondary

research

Source: Own development

II. 2.2. Sources of Data for Research

Secondary data can be sought from many sources, both inside

and outside an organization. Information within the organization in-

clude information from invoices, delivery orders, salesman reports,

inventory reports, etc. These can indicate customer purchases' patterns

and other information about the market. Information outside the or-

ganization can be searched from public sources, e.g. the Internet,

newspaper reports, periodicals, and association publications. As men-

tioned, if secondary resource is unable to fulfill the research objective,

researcher must proceed to conduct primary research even if it is more

expensive.

II.2.3. Primary Research Techniques

Primary research is the research for primary data or sometimes

they are known as first-hand information, this is information collected

directly from the market, by the researcher. This kind of research is an

expensive and time-consuming process and therefore must be con-

ducted with prudence, to achieve the research objective with minimal

cost. There are many methods for collection of primary data and some

of the commonly used methods include focus groups, observations,

experimentations and interviews.

Focus Group

Groups that are organized for the purpose of discussing the re-

search question are known as focus groups. In the recruitment of

group members, they are properly screened and chosen, and it is

common that they are paid to attend the focus group session. The

members of the focus group must be in the target group of the prod-

ucts or services offered by the organization, so as to represent the

views of the target customers. These members should be chosen from

varied backgrounds to add color to the discussion. During the session,

a facilitator is present to guide the discussion and at the same time the

facilitator can make notes of observations and comments contributed

by the group. Focus group sessions are usually recorded both audio

and video recorders. Due to the discomfort created by the presence of

the recorders, some of the equipment may be hidden, to minimize its

effect on the group members.

 Advantage – The main advantage of this method is that in-

depth discussion can be made with each of the member

sharing their views or opinions on the research question.

With a skilled facilitator, he or she can guide the group in

probing the relevant issues while the managing the group in

a way that everyone in the group, can have their share of

airing their views;

 Disadvantage – The success of the research is largely de-

pendent on the skill of the facilitator, to observe and guide

the session. Another disadvantage is that this method is on-

ly applicable in the research for qualitative data.

Observations

Observations are useful in the understanding buying behaviors

of customers and they can be made manually or mechanically. Obser-

vations are sometimes made in shopping malls and supermarkets for

their purchase patterns and behaviors and these are accomplished via

cameras. Scanners can be deployed to keep track of purchases made

by chosen participants for the same purpose. Observations are also

carried out on the Internet and they are used to observe the types of

website a user goes to, how often it was visited and how long he or

she stays on each site. Software programs helped the researchers by

sending out cookies to the users who are logged onto their website.

These cookies will collect the information from the users' personal

computer and send them back to the server. With the data collected,

researchers can understand the purchase patterns of product types and

quantity and even, time and place of purchases.

 Advantage – Hidden information can sometimes be uncov-

ered, especially when the issues are difficult to research. It

can be issues of taboo subjects or those that are difficult to

explain;

 Disadvantage – Observations can only research about the

action or behavior of the respondent but it cannot help the

researcher in understanding the motivation behind the b e-

havior.

Experimentation

When the research is conducted in a controlled environment,

this is a form of experimentation. This allows the researcher to control

and manipulate selected parameters of the experiment, to assess the

outcomes under different conditions. This is used in the development

of new products and services and is useful to fine-tune the offerings

before marketing them to the target market.

 Advantage – Because the experiment is conducted in a con-

trolled environment, the researcher is given the flexibility

to conduct the test under limitless conditions. This offers

the researcher to test for the best results or offerings;

 Disadvantage – It is also because of the controlled envi-

ronment that the disadvantage exists. It is almost impossi-

ble to simulate the controlled environment to be exactly the

same as that of the real world; hence, there will always be

slight differences in the outcome when the finished prod-

ucts or services are launched into the market. Sometimes,

these differences are negligible; however, there are times

when these differences are significant enough to be damaging.

Interviews

To obtain the data directly from the customers, interviews are

the most commonly used methods. This involves soliciting infor-

mation through a series of questions posed to the respondents. There

are various means of contact with the respondents and they are per-

sonal, telephone, mail and through the Internet.

Personal interviews

Personal interview is a method used as an essential source of

information which involves communication between two persons, an

interviewer and a respondent, during which the interviewer initiates

the gathering of primary data from the respondent. During the course

of the interview survey, replies from the respondents are recorded by

the interviewer". As the research seeks to capture the perception in

detail, interviews enable this to be done. This method can be used to

establish as much as possible about the details of role and hence deep-

er insights into the role of childcare supervisors. The interviewer a p-

proaches the respondent directly and the interview is done on a one-

to-one basis. The interviewer is equipped with the questionnaire, list-

ing the questions to be asked in sequence, besides that, interviewers

are sometimes required to carry sample products or show cards with

pictures depicting illustrations that are required to show in the course

of the interviews. Personal interviews can be conducted at different

locations, depending on the availability of the respondents. It is fre-

quently conducted at public places, for example, shopping malls and

this is sometimes known as mall intercepts. It can also be conducted at

the offices or residences of the respondents.

 Advantages – Using personal interview, the interviewer is

able to judge the respondent's reactions and conduct the

necessary probe if required. Another advantage is the flex i-

bility for interviewer to clarify on misunderstandings of the

questions. Finally, interviews in this manner, allow the in-

terviewers to bring show cards or samples that are some-

times required in an interview;

 Disadvantages – This can be a costly exercise as a substan-

tial number of interviews must be conducted to attain a rea-

sonably accurate result and each of these interviews is con-

ducted individually. Besides this, interviewers need to trav-

el to respondents' destinations for each of the interview,

not forgetting the time lost in between each interview. Both

the lost time and the traveling cost translate to an increase

in cost for the researchers.

Telephone interviews

Unlike personal interview, the interviewer communicates with

the respondents over the telephone instead of doing it on a face-to-

face basis. An interview schedule would be helpful. An interview

schedule consists of question type, question wording, question se-

quence and layout. This ensured that there is consistency of treatment

across interviews, thereby enabling comparability purposes. The

schedule, always remaining in the hands of the interviewer who en-

tered the information, contained an assembly of carefully formulated

questions for information gathering. The structure of the schedule has

to be clear, neat and easy to follow and it must follow guidelines to

extract the appropriate responses and avoid ambiguous answers. Such

examples include the avoidance of childish or elementary wording so

as not to insult the respondents. On the other hand, sophisticated or

complicated wording could result in misunderstanding. It is therefore

suggested that researchers should consider the kinds of questions and

modes of response after the schedule is conceived and crystallized. To

draw the right responses, the types of questions could be categorized

as open-ended, closed-ended and scaled. Open-ended questions allow

respondents to answer in their own words and express any ideas gen-

erated from the question itself. This is appropriate if responses are un-

known to the researcher, or when no fixed pattern of information, atti-

tude or opinion is anticipated. Clearly the advantages were flexibility

and creating greater rapport between the interviewer and the inter-

viewee. However, such questions could result in unexpected answers.

This is not a major disadvantage since there is a need to identify the

unexpected, illuminate the odd and raise important, if uncomfortable,

questions about the given and most taken-for-granted purposes and

perceptions. In contrast, closed-ended questions, which are also in-

cluded in the interview schedule, are used to elicit facts or give a yes

or no response or provide a response from a pre-determined list. Such

questions make the answers more definite. These types of questions

are, therefore, favored for their simplicity in administration. The ad-

vantage of either a 'yes' or a 'no' is the achievement of greater uni-

formity of measurement and coding is facilitated but it says nothing

about what the child care supervisors understand by leadership or why

they reached this conclusion. Conversely, the disadvantages included

superficiality and forcing an answer when there is none. To overcome

this problem, a third category of response designated as 'don't know'

is also added for some of the questions in the schedule. However, this

choice of neutrality provides an avenue to remain noncommittal to the

question asked. Therefore, in this research, a reminder is made on the

schedule to probe deeper when the researcher detected a non-

committal response. Besides open-ended and closed-ended questions,

were required to state their degree of preference, for example. Thus,

a scaled response is needed. A scaled-response question utilizes

a scale developed to measure the attributes under study. The response

options were identified by the questionnaire. A scaled response is one

structured by means of a series of gradations. There are various types

of scales, each of which possesses different characteristics. The char-

acteristics of the scale determine the scale's level of measurement.

 Advantages – Like personal interview, it offers the inter-

viewer the opportunity to clarify on interview issues imme-

diately. Another key advantage is the cost savings and this

is because the interviewer need not travel to the respond-

ent's location and only need to make a telephone call, sav-

ing the time in traveling and the traveling cost;

 Disadvantages – Because the interviewer needs to engage

the respondent using the telephone throughout the entire in-

terview, the interview cannot be lengthy as it may wear out

the respondent and cause him or her to lose interest in the

interview. Another disadvantage is the inability to display

show cards or samples of which may be helpful in an interview.

Mail interviews

This kind of interview is self-administered, i.e. the interview is

conducted without the presence or assistance of an interviewer. The

questionnaires can be sent through the traditional public mail system

and until recently, these interviews are conducted via email and this is

possible because of the increased usage of the Internet. When using

the traditional mail system, the questionnaire is sent to the respondent,

usually with a self-addressed return envelope. When the respondent

has completed answering the questions in the questionnaire, he or she

will return the completed questionnaire to the researcher via the self-

addressed envelope. As for the email interview, the questionnaire is

sent via the Internet attached to an email to the respondent. Upon

completion, the respondent will then send the questionnaire back to

the researcher through the same media, i.e. the email:

 Advantages – Cost saving is a major advantage, using this

form of interview. The costs involved for normal mailing

will include the cost of postage and the self-addressed en-

velope. These costs are insignificant when compared to the

hiring of interviewers. The cost saving using email inter-

views is more noticeable because there is no postage or en-

velope cost;

 Disadvantages – The response for this kind of interview

tends to be low for the reason of self-administration. There

is no interviewer to encourage and help them with the ques-

tionnaire. In the event of misunderstanding or incompre-

hension, there is no one to turn to for assistance. Another

reason for the low response rate is that respondents found it

troublesome to send the questionnaire back to the research-

er even when they are provided with the return envelope.

II.3. SAMPLING AND INCREASING RESPONSE RATES

In any types of primary data collection, there is always the is-

sue of sampling. Where and how does one obtain a sample that is rep-

resentative of the target market? How many respondents should be

included in the survey? To address these issues, researchers must first

identify the population that is being researched. The population refers

to the entire target market as indicated in the research objective. From

this population, a sample and that is a fraction of the population, is

chosen. In choosing the respondents out of the population to form the

sample, there are two broad categories of methodology and they are

the probability methods and the non-probability methods.

Probability Sampling Methods

Using this method, it ensures that every member of the popul a-

tion is given an equal chance of being selected for the interview. Two

commonly used methods in this category are the Simple Random

Sampling and the Stratified Sampling. Probability samples are de-

signed to be measurable. This means that statistical inferences can be

made from the population values. Probability sampling includes sim-

ple random sampling and stratified sampling. In simple random sam-

pling, the researcher has no information about the population. It is ap-

propriate when the universe under study is reasonably small. It uses

tables or computers to generate random numbers assigned to each

member or group of the population. A simpler method would be

a simple random draw to extract the member from the population.

Stratified sampling is in a sense a restricted random sampling in that

random samples are drawn from the strata rather than from the entire

population. This method works best when the population is heteroge-

neous. Stratified sampling is very similar to that of simple random

sampling, however, prior to the selection or drawing, the population is

divided into smaller groups called strata. After this, simple random

sampling is applied on each of the stratum. Then aggregate all samples

to form a stratified random sample.

Table 11 . Probability sampling procedure

Probability sampling procedure

Every member of the population has a known and equal

chance of selection

The population is divided into mutually exclusive groups

(such as age groups) and random samples are drawn from

each

The population is divided into mutually exclusive groups

(such as blocks) and the researcher draws a sample of the

groups to interview

Source: Based on Kotler et al 1996 p.166

Non-probability Sampling Methods

In non-probability sampling, the selection of samples depends

on the personal judgment of the researcher. The probability of any

particular element being selected is unknown. Therefore, no statistical

techniques are appropriate to assess the magnitude. These methods are

used, in contrast to probability sampling, usually for the reasons of

simplicity and convenience. Being simpler, it is also cheaper and the

resulting sample may not be totally representative of the population.

There are many occasions when non-probability samples are best suit-

ed for a researcher's purpose. Examples include shopping center in-

terviews and product taste tests. Convenience sampling and quota

sampling are two common methods under this category. Convenience

sampling, as the name suggested, is conducted to the convenience of

the researcher. A common application is to locate the interviewers in

areas where there is a high possibility of meeting the required re-

spondents hence it becomes easy for them to locate these respondents.

No attempt is made to establish a population representative. These are

used to test products. Quota sampling is probably the most sophisti-

cated among non-probability sampling and is a combination of strati-

fied sampling and convenience sampling. The population is divided

into different strata and convenience sampling is applied onto each

stratum. The researcher exercises control one or more parameters of

the population eg gender, age and race. Hence, the researcher is able

to group the respondents into a sample with the common characteris-

tics as far as the control parameters are concerned. This ensures that

sample will be a replica of the population of interest.

Table 12 . Non-probability sampling procedure

Non- probability sampling procedure

The researcher selects the most accessible population

members from which to obtain information

The researcher uses judgment to select population

members who are good prospects for accurate infor-

mation

The researcher finds and interviews a prescribed

number of people in each of the several categories

Source: Based on Kotler et al 1996 p.166

Increasing response rate

High response rate links with the marketer's ability to com-

municate successfully why the respondent's response is critical. Some

useful tips include:

 Send a personalized letter or an email of advance notice;

 Assure respondents of confidentiality;

 Offer incentives;

 Keep questionnaire short;

 Provide summary of survey results.

In case of mail response, these following steps could be helpful:

 A personalized cover letter;

 A pre-paid self-addressed envelope;

 Sending reminder letters to non-responses;

 Offer monetary incentives.

II.4. RELIABILITY AND VALIDITY OF RESEARCH

Reliability of Research

The reliability of a measurement is indicated by its consistency.

Embodied in this concept is the idea of replicability of results when

using the same data collection instrument. A reliable interview sched-

ule or questionnaire item is one that consistently conveys the same

meaning. A reliable question should produce the same responses r e-

gardless where they were addressed to, otherwise the question is

deemed to be unreliable. If the question does not present a single im-

age of meaning for a given person, it cannot be sure which meaning of

the question the respondents has in mind when they answered the

question. When we speak of research method reliability, we are dis-

cussing whether the questions in the data collection methods work

consistently. If the questions show agreement and produce similar re-

sults, then the questions are considered to be reliable.

Validity of Research

This section addresses the types of validity such as response

rate and interpretative validity and st rategies to overcome researcher's

biases and enhance the validity of the research. Validity tells us

whether the research measures what it is supposed to measure. It

therefore deals with the entire research process, beginning from the

design stage to the data collection stage to the data analysis stage. It is

noted that while it may not be possible to eliminate all the biases asso-

ciated with each stage of the research, the aim is really to minimize

these. In the research, the validity of a schedule or questionnaire item

is concerned whether or not the item actually elicits the intended in-

formation. Schedule or questionnaire items are valid if they are suc-

cessful in eliciting true responses relevant to the information desired.

It is essential that respondents understand and respond to the ques-

tions, as those conducting the research if the responses are to be valid.

A pilot test should enhance the validity of schedule or questionnaire

with the purpose of ensuring the questions are clear, the questions are

non-leading or double-barrel; and language is familiar and appropriate

to the respondents who are expected to respond accurately

II.5. ETHICAL ISSUES OF RESEARCH

Once interviews are arranged and conducted, the role of the re-

searcher becomes critical especially in terms of providing clear expla-

nations of the purpose of the study and helping participants to feel at

ease by establishing rapport and gaining trust. Besides maintaining the

anonymity of respondents, there is also the ethical issue about misrep-

resenting, distorting and deleting findings, which have been provided

in good faith by participants. There is an involvement of interpretation

and conjecture in deciding what to select and how to express and order

it, retaining researcher's main role which is to describe and elucidate.

It is important to recognize that researchers need to operate in accord-

ance with an ethical code. British Ethical Research Association (BE-

RA) has established ethical guidelines by providing a framework

comprising three headings – re sponsibilities to participants, responsi-

bilities to sponsors of research and responsibilities to the community

of educational research. BERA advocates voluntary informed consent

to be the condition in which participants understand and agree to their

partic ipation without any duress (BERA, 2004, p.6). In this research,

the consent process ensures that individuals are voluntarily participat-

ing in the research with full knowledge of relevant risks and benefits.

Clark (1995) claimed that informed consent of those who participate

in research should be secured and underpinning this requirement is the

idea that participants should be respected as persons. Therefore, child-

care supervisors and management committee members were asked

prior to each interview that consent is necessary and that their right to

withdraw from the interview is recognized. In the research using in-

terviews and observations an issue of establishing and maintaining the

rapport in this relationship is highlighted. Such relationships are es-

sentially ethical ones. Research relationship can be characterized as

collaborative, implying a mutual engagement in the research process

on the part of interviewer and respondents. A problem which may

arise is the ownership and control of data. The need to know is often

seen to be in conflict with the rights of individuals. The researcher

keeps on stressing that the data was to be collected, processed and

published for a specifically designated purpose and will not be used

without their written consent. BERA advocates that researchers must

informed participants of any detriment. Care is taken to think carefully

to ensure that no one should be harmed, physically or psychologically.

Care is taken not to invade their privacy asking them sensitive ques-

tions that impinge their private lives. No personal question, if not

needed, should be asked as BERA recommend that participants are

entitled to privacy. Behind the theory, method, analysis, ontology,

epistemology, and methodology research stands the personal biog-

raphy of the researcher, who speaks from a particular class, gender,

racial, cultural, and ethnic community perspective. These are the is-

sues that the researcher needs to be fully aware when he or she

launches the research program.

Chapter III

MARKET ENTRY STRATEGIES

Objectives:

Identify trade barriers used by different countries against foreign

companies

Judge the attractiveness of an industry by using the Porter's 5-force

model

Choose market entry strategies based on above carried out analyses

BARRIERS OF MARKET ENTRY

INDUSTRY ANALYSIS

MARKET ENTRY STRATEGIES

III.1. BARRIERS OF MARKET ENTRY

After analyzing the macro-environment, we will be addressing

other issues and considerations in decision to venture abroad. These

additional considerations are as follow: trade barriers; analysis of spe-

cific industry or market; market entry strategies.

It is only after analyzing these additional factors the marketers

can have an idea of how they can invest and do business abroad, of

possible associated risks and the expected return using the different

means of entry.

We have already covered the macro-environmental factors and

provided an idea of what to look for in the analysis of a foreign coun-

try. However, in the event that a marketer wishes to venture overseas,

he or she may face difficulty in doing so. This is because of trade bar-

riers erected by the government for the purpose of protecting either

the country or certain trades or industries. As mentioned in the previ-

ous chapter, globalization is a double-edge sword that can work for

marketers, and as much as against them. Through globalization, it al-

lows local businesses access into foreign markets thus expanding the

market potential but at the same time, it also allows foreign competi-

tors to access an d compete into the local market on a fair basis. When

the government of a country makes a decision to allow free trade, it

subjects its local businesses to global competition. This may not go

well with the government especially if the locals are not as competi-

tive as the foreign competitors. As a result, the same government be-

comes unpopular and risks its chance of being re-elected. Apart from

this, certain governments rely heavily on contributions from the busi-

ness community, i.e. for election funds hence it can be dangerous for

the ruling government to offend them. Beside the reason of competi-

tive nature, industries are protected for other reasons like security,

skill retention and many others. Protectionism is not uncommon and is

happening all over the world. Protectionism can come in many forms

and these are: tariffs; subsidies; import quotas; local content require-

ments; standards and regulations; a nti-dumping duty; non -tariff barriers.

Tariffs

Tariffs are taxes imposed on imported goods. Adding taxes will

increase the cost of the imported goods and reduce the profit earned.

In a competitive industry, it will render the importer to be uncompeti-

tive. This is used regularly to protect certain industries from overseas

competitor. One of the most prominent issues faced in Japan, was its

tariffs, of up to 1,000% for the import of rice. Another example is the

tariffs, varied between 40% and 300%, levied upon imported cars in

100

Malaysia so as to protect its national car manufacturer. Tariffs help

incompetent producers in safeguarding its industry, as long as the ta r-

iffs are present, these producers will not be forced to look for alterna-

tives. On a broader perspective, it is destroying the country's econ o-

my, as resources are not directed to create higher value; instead they

are utilized on investments that are either not profitable or paying

back with only a meager return. Another effect of tariffs is that the

government is forcing the consumers in paying more for what they

could have gotten at a lower price.

Table 13 . Positive and negative sides of tariff

Help startup, inexperienced

producers in safeguarding

their industry

Destroying the country's economy, as

resources are not directed to create

higher value

Consumers pay more for what they

could get at a lower price

Source: Own development

Subsidies

Subsidies are given out by governments to local producers to

offset their cost. This can come in the form of grants, low-interest

loans, tax reductions or exemptions and even government investments

into the companies. Firstly, this method is useful in grooming strategic

industries that the government believed to be important, and it is very

practical in smaller economies where economies of scale are not

achievable. Secondly, through this method, producers can produce at

a lower cost and enable local marketers to market the product at

a lower price, this will increase the competitiveness of the local mar-

101

keter, making it difficult for foreign marketers to compete. In addition,

it help local marketers in exporting their products into the overseas

market as it help them in competing with low cost competitors thus

allowing them to compete globally more effectively. The European

Union has recently admitted that it has provided subsidy for its sugar

production and the amount was as much as €1.3 billion, this has

helped it to achieve its position of being the world's second largest

exporter of sugar though its climate is not really suitable for such

crop. Subsidies do look to be a good alternative in helping budding

businesses; however, it comes at a price of paying to help the compa-

nies. From the perspective of the government, if the businesses do

succeed, it can generate income for the country; however, will compa-

nies be motivated to succeed when they know that there will always

be unconditionally supported by government? And then next question

is, are the taxpayers agreeable to using their money to help those pri-

vate enterprises? In a Brexit referendum in 2016, Scottish people vo t-

ed mainly to remain in the EU just because the lavish subsidiaries they

can get from EU for businesses in the agriculture sector while most of

British people chose to leave. These are many other issues that are still

unanswered as the business environment is far more complex and in-

volves many other factors than just cost. Nevertheless, this method of

protectionism is still widely used especially in many developed economies.

Table 14 . Positive and negative sides of subsidiaries

Produce at a lower cost and

enable local marketers to market

the product at a lower price

102

If the businesses do

succeed, it can generate income

for the country

Business will not be motivated to

succeed because there will always

be handouts for them

Source: Own development

Import quotas

A quota is a control of the quantity of goods being imported in-

to a country. It is achieved by giving out import licenses to one or few

importers. The license will explicitly state the quantity that each of

them can import within a limited period of time, usually on an annual

basis. In some instances, these licenses are sold through a bidding

process and the bids can sometimes be very high, depending on the

demand of the imported goods. Using tariffs, importers can still im-

port foreign products but usually having to pay a higher price. How-

ever, for quotas, it totally disallows excessive quantity of the imported

goods, and this tends to raise the price of the goods because of the

limited supply. To protect the local industry, local consumers are de-

prived of the opportunity to make use of products made from another

country. A good example is that of the United States where it imposes

quota on Chinese textile imports, this has not only aggravated trade

relationship between China and US, it has also restricted Americans

from buying textile products at a cheaper price.

Table 15 . Positive and negative sides of quotas

Protect the local industry

Raise the price of the goods because of the

limited supply

Aggravate trade relationships between

countries

Source: Own development

103

Local content requirements

This kind of requirement states a percentage of the finished

product, to be produced locally in order to be allowed entry into the

local market. It is used by many governments of developing countries,

in trying to improve its economy by moving up the value chain. I n-

stead of relying of just simple assembly of the finished product, com-

plex components may need to be manufactured locally and as a result

the locals will eventually pick up the required knowledge and skill,

and increase its value in the value chain. An example of this is that of

General Motor (GM). In a bid to enter China's market, GM signed

a deal with Shanghai Automotive Industry in 1997 and in it, GM is

required to source 40% of its car from sources in China and this was

expected to be raised to, as much as 80%. Finally, if there are existing

producers of the required component in the countries, this requirement

will serve to protect these producers, acting just like a quota.

Table 16 . Positive and negative sides of local content requirement

Locals will pick up the required

knowledge and skill, and in-

crease its value in the value chain

Foreign companies may choose

other destinations if LCR rate is

too high and remain for too long

Protect supportive industries

(producers of the required compo-

nent) in the country

Source: Own development

Standards and regulations

Governments imposed excessively high standards on importers,

sometimes even higher than the local producers. These standards are

104

based on health, safety and quality and occasionally these standards

are also applied on the packaging and labeling of the products. Based

on these difficult and sometimes unattainable standards, foreign firms

find it impossible to meet these requirements, hence disallowing them

to market their products in this foreign market. From June 2004, using

regulatory control, the China government will require all wireless

networking products sold in China to use a technology made only by

Chinese companies. This measure will serve to protect manufacturers

in China. Mentioned above are just some of the techniques that go v-

ernments used in protecting its industries, these are not exhaustive and

more creative ways are emerging to cope with the changing environ-

ment, making it more difficult to penetrate into the foreign market.

However, by doing so, it is not only depriving its people of the fre e-

dom of purchases, it is also babysitting its own economy, usually ren-

dering it to be uncompetitive in the long run.

Table 17 . Positive and negative sides of standards and regulations

Protect domestic industries

and Manufacturers

Deprive people of the freedom of pur-

chases

Babysit own economy, rendering it to

be uncompetitive in the long run

Source: Own development

Anti-dumping duties

The term dumping refers to the sale of products at price which

is lower that is charged in the country of origin. Anti-dumping laws

105

are enacted in countries to counter dumping. Importing countries levy

a duty to cover the price difference between the two markets.

Table 18 . Positive and negative sides of anti-dumping duties

Criticism from international community

Source: Own development

Non-tariff barriers

It can be defined as public or private measure taken to reduce

international trade. One of most common forms is so called "buy M a-

laysian'. These are statements made by government officials or private

individuals that discriminate against foreign suppliers. Another form

could be restrictive customs procedures. This involves implementing

rules and regulations that make compliance difficult and expensive,

discouraging exporters. A third form of non-tariff barrier is technical

regulations, e.g. safety standards, pollution standards, packaging

standards and many others. Some countries require permits before ma-

terials can be imported.

Table 19 . Positive and negative sides of non-tariff barriers

Protect domestic industries

and manufacturers

Decrease international trade

Source: Own development

106

III.2. INDUSTRY ANALYSIS

Through the analysis of the PEST model in the previous cha p-

ter and the understanding of the different trade barriers set up against

global trade, marketers can understand the risks and difficulties in the

setting up of a wholly own or joint-venture business abroad. However,

these are issues related to general environment, what about the indus-

try (sector, branch) itself? Is it a profitable industry? Is it going to

competitive? These are questions that must also be addressed irrespec-

tive of the place where the business is going to be conducted. To con-

duct this analysis, Porter's 5 forces model will be applied for this pur-

pose. This model formulated by Michael Porter, a professor of Har-

vard University, has identified the 5 major forces within an industry

that will determine attractiveness of a branch and competitiveness of

company operating in it. As indicated in illustration below, the 5 forc-

es stipulated in the model are: Threat of New Entrants; Power of Buy-

ers; Threat of Substitutes; Power of Suppliers; Competitive Rivalry.

Illustration 20. M. E. Porter's five force model

Source: (Porter 1985)

107

By analyzing each of these forces in an industry, companies

can understand the balance of power in an industry and formulate the

appropriate strategy to take advantage of the power.

 Threat of new entrants

For any industry, if it is easy for new entrants to enter an indus-

try to start a business, it will be unappealing to existing organizations,

as they will be faced with more competitors as soon as the industry is

perceived to be profitable. These new entrants will naturally increase

the competition in the industry and marginalize the future profit of the

existing competitors. As a result, the life cycle of the market or prod-

uct becomes shorter and marketers will not be able to enjoy their long-

term profit. Conversely, in industries that are difficult to start a new

business, it would benefit the existing marketers of the industry. With

potential competitors having difficulties to enter and compete in the

market, the demand of the market can be shared amongst the limited

competitors. This will in turn enable the existing competitors to enjoy

their profit for a longer period of time. As explained, ease of entry into

a market can have profound effect on the existing marketers hence this

threat of new entrants must be analyzed with due respect. Entry barri-

ers can be present for many reasons, and exist in many forms. Sug-

gested below are some of the examples:

 Size of capital investment – In some industries, the capital

investment is so sizeable that not many organizations or in-

dividuals can afford to do so. Even if they can afford to, the

mere size of the investment would prompt them to recon-

sider the decision. For example, in the recent years, the

need for cheaper airfare has given rise to the acceptance of

no-frills airlines and this has caused an increase of new air-

lines providing this service at a very low price. However,

108

as the investment going into this kind of business usually

requires large amount of funds, only limited companies or

individuals can afford this investment and join the industry

as a competitor, hence there are only few competitors in

this industry. In contrast, when Breadtalk has proven its

success in the bakery businesses, more individuals can join

the industry, as it is easier and cheaper to start a bakery

business;

 Economies of scale – This refers to the size of the market

and the related quantity that an organization can produce

and market, so that the quantity is large enough to bring

about some savings in, either purchase, production or mar-

keting cost. For example, cost savings can be derived from

purchase when negotiating for cheaper prices based on

large quantities ordered. In some organizations, there is the

practice of using 'blanket' order where the order is meant

to cover over a period of time. Due to the requirement over

the specified time span, the order quantity is increased, al-

lowing the purchaser to negotiate for a lower price. In

smaller economies, where the market is limited and there is

already an established organization selling the product, it is

unlikely that a new organization will achieve the same

economies of scale as there is insufficient buyers in the

market. As a result, the newcomer will have little chance of

success, and will eventually fail in the business venture;

 Switching cost – This cost refers to the cost that is assumed

by the customers if they switch from one supplier to anoth-

er. In some cases of purchases, it will cost the customers

more if they were to change from supplier to another, this

109

cost can come in the form of training, parts cost or sunken

cost made on capital equipment. For example, if an organi-

zation were to purchase an industrial crane, it will need on-

ly to continue the purchase of its spare parts for the contin-

ued use of the crane, however, if the organization decides

to change and buy another brand, he or she will have to pay

much more for the new crane. Because of this extra e x-

pense, some customers prefer to stay with their original

supplier, as it will cost them less. In situations where the

switching cost is high, it is unlikely that the new entrant

will succeed in persuading customers to switch over to their

brand. On the other hand, in the market of commodities

like coffee or office paper, the switching cost is low and

usually brings about a competitive industry where new en-

trants are rampant;

 Government policy – Government sometimes set up barri-

ers, not just to prevent overseas organizations for compet-

ing in an industry, but also the local organizations. This is

achieved through either certification or licensing where on-

ly organizations with the proper certification or license

from the government can operate in the country. In Sing a-

pore, it is illegal to operate a mobile telephone network

without prior approval from the government. There are

many reasons to use this kind of barrier and one of them is

security-related. New entrants trying to enter the industry

will find it impossible to do so. After reviewing the entry

barriers that new entrants are likely to face, a portion of the

industry's attractiveness can be ascertained, as it is depen d-

ent on the effectiveness of these barriers. If the barriers are

110

weak and new entrants find it easy to start a business and

compete equally as a competitor, there is a high chance that

the industry will grow to become unprofitable and some-

times even unsustainable in a very short time, hence this

industry is perceived as one that is unattractive for invest-

ment. Conversely, if the entry barriers are high, organiza-

tions will stand a good chance of earning good and long-

term profit as the industry is protected against new entrants.

 Power of buyers

If the power of buyers is weak, organizations operating as sup-

pliers will have the upper hand and be able to manipulate and control

the buyers; this will normally translate to good profit for the organiza-

tion. The power of buyers is dependent on the size and buying power

of the buyer. If the buyer is big and has the ability to make huge pu r-

chases, it can be extremely powerful in compelling its suppliers to ad-

here to its terms and conditions. Examples of these are Wal-Mart or

the NTUC Fairprice supermarket chain. Through sheer size and their

wide reach to customers, it gave them power over the suppliers as not

many stores can boast the same capability. With this power, these su-

perstores can negotiate for very low prices and favorable terms and

conditions for themselves. Another dimension of power of buyers is

assessed by, the number of suppliers in the industry. If there are many

of them, buyers have the power to pick and choose the suppliers they

want to work with. This is especially true when the products are

commodities of which are undifferentiated for different suppliers.

However, if there are only few suppliers or if the products are special-

ized due to technological development or other reasons and the prod-

ucts cannot be copied, power of the buyers is then diminished. A final

note on the power of buyers and that is the current trend. Driven by

111

globalization and increased Internet usage, a new trend that can in-

crease the power of the buyers has emerged. This is the application of

bidding on the Internet. There are now some on-line websites where

buyers put their requirements on the Internet and allow suppliers to

bid for the purchases. Naturally, in a bidding exercise, the supplier

with the lowest price will win the bid and this will drive the price

down. In addition, because the bidding is executed on the Internet, the

bidding exercise is open to both local and overseas suppliers, increa s-

ing the competition for the purchase. This trend of online bidding is

unlikely to change instead increased usage is expected when adoption

of the Internet intensifies. Therefore, suppliers must find ways to re-

main competitive or to establish strong relationship with customers so

that they value the products and service so much that they are willing

to pay a little extra to continue this relationship. Power of buyer i n-

creases with globalization as global competitors is finding access to

overseas buyer easier than before. In an industry where buyers are

powerful, it may not be attractive to invest into such an industry, as

the profit will likely suffer from the pressure of the buyers.

 Threat of substitutes

Substitutes are products or services that can perform a similar

function although it is not exactly in the same category of product or

service. The competition in the substitute industry can have an adverse

effect on the related industry, as competition tends to drive down the

price, resulting in the customers seeking for substitute products as

they can still satisfy their needs. This is especially common when the

customers are not severely affected when they switch to the substi-

tutes. For example, though Kentucky Fried Chicken (KFC) may not be

in the burger business, it is still competing in the fast food category,

and when KFC launches a promotion, it will affect the sales of fast

112

food burger chains like McDonalds and Burger King. In this analysis,

industries of substitutes should also be taken into consideration. If

they are in abundance and the switching cost to these substitutes is

minimal, it may not be advisable to compete in this industry.

 Power of Suppliers

In any industry, it is evitable that the organization makes pur-

chases from one supplier or another and it is common for an organiza-

tion to make purchases from 10 or more suppliers. Amongst these

suppliers, organization needs to assess their power by analyzing an

organization's dependency on a particular supplier and if this depend-

ency is high, the organization may be at the mercy of the supplier.

Generally, this assessment is based on the number of suppliers availa-

ble for the same product, the importance of its supplies and if there are

alternative if the supplier fails to deliver. Through this assessment,

organizations can estimate its dependency and risks of its supplies,

without which is impossible for the organization to function. Some

suppliers can be powerful because of its ability to develop superior

products while others may be preferred by the customers because of

the brand image. Some buyers may be big and powerful but it can still

be weak in comparison with its suppliers when it is highly dependent

on these suppliers. In the case of Intel, though Hewlett Packard or Dell

Computers are big computer companies, they are still weak and de-

pendent on Intel for its supply of superior computer chips. Supplies

are inevitable in the operation of an organization hence analyst must

make the proper analysis of its dependency and risk, especially for

critical supplies that are uncommon.

 Competitive Rivalry

In most industries, it is almost impossible to avoid competition,

unless of course if it is a protected industry and competitors are not

113

able to penetrate the market. Using this evaluation of the competitive

rivalry, it will give the analyst an idea of how competitive the industry

is, as this will affect the attractiveness of the industry. In industry

where competition is high, it is unattractive to new entrants as the

price tends to be low and there are already many competitors compet-

ing for the limited market. However, if the competition is low, there is

a high chance that the new entrant will earn a good return, as demand

tends to exceed supply, allowing marketers to maintain a high price.

In this evaluation, the focuses are placed on the following points:

 Number of competitors – As mentioned earlier, price and

profit of a product tend to lower when there are a lot of

competitors and competition increases, and this is a situ a-

tion of supply exceeding demand. Though the number of

competitors is not the only factor affecting the price, it is

still a good indicator of the profitability of the products

marketed in the industry;

 Industry growth – Industries go through the cycle of intro-

duction, growth, maturity and decline, depending on which

stage of the cycle the industry is going through, the price

and profitability again vary. Normally prices are high and

competitors are few, in the stages of introduction and

growth, and price will peak just before maturity stage and

will fall gradually after that. Marketers need to assess at

which stage they are entering and consider if there are still

viable profit to be made;

 Product differentiation – If a market can be differentiated,

competition is spread out to smaller market segments this

will decrease the competitive rivalry of any specific seg-

ment. However, if the product cannot be differentiated, all

114

competitors will be competing in a single market and com-

petition tends to be more aggressive. Marketers must try to

find ways to differentiate themselves so as to minimize the

competition they are faced with;

 Exit barriers – These are barriers that will discourage com-

petitors from exiting the industry. With these barriers,

competitors will stay and compete even when the industry

is deemed as unattractive and as a result, competition be-

comes intense as the industry accumulates more competi-

tors. Barriers of this nature include capital investment and

contractual agreement. Marketers can assess the ease of ex-

it and estimate the level of competition in the industry.

Through the analysis of the PEST and 5 forces model, mar-

keters can finally make an educated guess on the risk and

profitability of going into the foreign market. Depending on

the perceived risk and profitability, marketers can choose

different entry strategies to manage the risk as they enter

into the foreign market; these strategies will be discussed

in the next passage.

III.3. MARKET ENTRY STRATEGIES

There are many options that marketers can choose from, in or-

der to enter into a foreign market. The 4 main strategies are:

 Export;

 Licensing;

 Joint venture;

 Wholly owned subsidiary.

115

Each of these strategies varies in the level of investment, level

of risk, and level of managerial control and return on investment as

are indicated in the illustration below.

Illustration 21. Investment, risk, return, control of entry strategies

Source: Own development

 Export

This strategy is one of lowest risks and is commonly used in all

parts of the world. The requirement for this strategy is just a willing

importer (importing partner, partners) in the foreign country therefore

investment into this strategy is minimal. The only costs involved are

the communication cost and the freight cost of sending the product

overseas. The risk is also minimal with exporter having to risk only

about non-payment, and as for the risk of lost and damaged goods, it

can be managed with an insurance coverage. These are the major a d-

vantages of this strategy. However, with only minimal risk and in-

116

vestment, the return or profit will also be limited. On top of that, this

strategy does not allow the exporter to control the importer's manner

of handling the imported goods, and if the product is mishandled re-

sulting in poor or non-performance of the product, it could affect the

brand of the product. This effect can be detrimental if the bad reputa-

tion of the brand spread to exporter's country and may affect the sales

of the product in the home country. Another disadvantage is that the

importer may also be representing a competitor's product hence less

or no attention may be given to the product. Finally, this strategy is

prone to all types of trade barriers and may not be effective in market-

ing the product in an overseas market. Despite all the disadvantages

using this strategy, it is one of the most popular strategies and it is be-

cause of its low investment and risk. For marketers who are not famil-

iar with the foreign market, this is always a safer choice and it allows

the marketer to assess the attractiveness of the foreign market through

the sales of its product, during which marketers can also learn more

about the market. The exporting procedure can be done wholly and

directly by company, exporter itself, if it possesses enough potential

and experience; or may be indirectly supported by Export Manage-

ment Companies, foreign customers, importing agencies of foreign

companies, export brokers or wholesale exporters; or in combination

of own experience and outsourcing to home and local partners.

Table 20. Positive and negative sides of export

Minimum cost of communica-

tion and of the freight sending the

product overseas

No control of product perfor-

mance may cause damage to brand

and reputation and sales as a conse-

quence

117

Minimum risk of non-payment

and lost or damage

Prone to all types of trade barriers

Return and profit are limited

Knowledge on international

business is less needed

Less responsive to local customers'

needs

Flexibility in shifting from direct

to indirect export

Source: Own development

 Licensing

This is a contractual agreement between the licensor and the li-

censee whereby the licensor will grant rights to the licensee of some

form of intangible property for a specified period. The kind of intan-

gible properties involved are usually knowledge in the form of de-

signs, processes, formulas or patents. Others can involve trademarks

and copyrights. Licensee will then market these properties and repay

the licensor in the form of royalty, usually a percentage of the sales of

the property. By teaching the licensee the knowledge or allowing the

licensee to use a particular trademark, licensee will be able to market

the exact identical product in the foreign country on the behalf of the

licensor. This usually involves strict regulatory controls from the li-

censor, in order to protect and maintain the quality of its product. Just

like export, if the licensee were to err and create a bad impression of

the product, it may also affect the brand name in the licensor's coun-

try. Hence, it is common that some form of qualification is required in

the selection of the licensee. Licensing is used by brands like Walt

Disney in the marketing of its toy products and it is also commonly

used in the music industry where licensee is given the right to dupli-

cate songs to be marketed under a particular label.

118

Another form of licensing is contract manufacturing where the

licensor will teach the licensee the knowledge of manufacturing a spe-

cific product. The finished product is then marketed in the same coun-

try. This kind of licensing is advantageous to licensor as capital in-

vestments, like production equipment and accessories are made by the

licensee thereby reducing the investment required by the licensor. Be-

cause the production is totally managed by the licensee, it allows the

licensor to focus on other business functions like marketing, research

and development, etc. Another advantage is that this is useful in tack-

ling the local content requirement that are sometimes set up by go v-

ernments to block and this strategy can avoid this type of trade barrier

because its product is made in the foreign country.

Another form of licensing is management contract where the

licensor (usually from developed countries in the world) is hired by

licensee (usually from developing countries in he world) to manage

certain complex objects (i.e. 5 star hotel, skyscrapers, colossal cruiser

or commercial liners) or issues (nuclear reactor maintenance) due to

specific knowledge and experience owned by one side and lacked by

other side.

The last common type of licensing is franchising. Unlike con-

tract manufacturing and licensing where manufacturing plays a key

role in the business activities, franchising deals usually with the ser-

vice industry. Similar to licensing, franchiser will impart knowledge

to franchisee and set guidelines on the operations for them to adhere

to. Again like licensing, franchising is an effective way of marketing

services to an overseas environment with minimal cost involved and

franchiser is repaid in the form of royalty. McDonalds and Starbucks

are the two well-known service providers that have used this method

in their global expansion into other countries. In Singapore, Standards

119

Photo Processing and Informatics has grown tremendously using the

same strategy. It is clear that licensing is popular as it allows licensor

to penetrate into other markets with minimal cost and this is the key

advantage of licensing. However there are several disadvantages that

organizations need to consider. Firstly, licensor has little or no control

over its licensee, licensor may try to achieve this by stating clearly its

requirements in the contract but this has limited capability in control-

ling when the actual operation is in full swing. If the licensee were to

make any mistake, it is usually too late as the damage to the brand is

already done. Licensors try to minimize this chance by stringently

qualifying each of the potential licensees before awarding them the

license. Secondly, unless the licensor is able to provide value in the

long term, licensee may not want to renew its contract after learning

sufficiently from the licensor. Lastly, with a combination of accumu-

lated knowledge by the licensee and the lack of interest to renew the

contract, licensees can easily be evolved into direct competitors as

soon as they are released from the legal entanglement of the contract.

Nevertheless, this form of market entry strategy is still popular and

may be increased as the world move into the new knowledge econo-

my, after all provision of knowledge is a service itself.

Table 21. Positive and negative sides of licensing

(Manufacturing)

-Reduce the investment required

by the licensor

-Tackle local content require-

ment

(Trademark)

Wrongdoing of licensees will

cause potentially bad image of

the product, affect the brand name

in the licensor's country

Penetrate foreign markets with

minimal cost

Licensor has little or no control

over its licensee

120

Licensees can easily be evolved

into direct competitors after

learning the knowledge

Source: Own development

 Joint venture

Using this strategy, marketers together with one or more for-

eign partners, set up a joint venture in the foreign market, and natural-

ly, this new organization will be shared with the partners depending

on the shares allocation of each partner. This strategy works on the

synergy of both the organization and its foreign partner where the or-

ganization will provide the management and technical expertise of the

product while the foreign partner can provide information pertaining

to its local market. Due to this arrangement, marketers can learn very

quickly and accumulate knowledge of the foreign market and this

learning curve is shortened by its participation in operational activi-

ties, with the assistance of the foreign partner. This is useful in enter-

ing markets with high trade barriers, as the foreign partner would usu-

ally have the knowledge in overcoming these barriers. Besides

knowledge accumulation and overcoming trade barriers, the return on

investment is more substantial as compared to export and licensing.

Again like other strategies, this strategy is also plagued with disad-

vantages. Firstly, the risk is higher due to the investment required into

the joint venture. In addition, there can be issues of control over the

operations as both partners usually have their own, sometimes oppos-

ing, agenda in the long term. This will give rise to conflicts that may

hamper the development of the joint venture. Lastly, as much as the

marketer is learning from the foreign partner, the partner is also learning

from the marketer, in terms of technical and management knowledge.

This knowledge transfer may provide the opportunity for the foreign

121

partner to set up its own company and compete with the joint venture.

Nonetheless, this is an effective strategy in entering markets with high

trade barriers and therefore, it is used quite commonly in the global

markets. General Motor used this strategy and joint-ventured with

Shanghai Automotive Industry, in its entry into the China market in

1997 before China join the World Trade Organization (WTO).

Table 22. Positive and negative sides of Joint-venture

Risk is higher due to the investment

required into the joint venture

Overcoming trade barriers

Issues of control over the operations

Substantial return on invest-

ment

Foreign partner can set up own

company and compete with the JV

Source: Own development

 Wholly-owned subsidiary

Organizations using this method will have full ownership of the

subsidiary operating in the foreign country. To accomplish this, an

organization can set up its own subsidiary from scratch (green field

site), however it will take a long time for the organization to operate

efficiently as the subsidiary needs time to learn about the market, cul-

ture, business practices, etc. This learning curve can be shorten via

acquisition and that is when the organization goes into the foreign

country and purchase an existing company that can perform the same

function. Though it can shorten the learning curve, it has a key disad-

vantage and that is the existing staffs that had worked in the company.

These staffs tend to be accustomed to the old ways of operation and

122

may encounter difficulty in adapting into the new management and

culture. Any which way the subsidiary is formed, it should still bring

about the key advantages of higher return on investment and better

control of the management since it no longer needs to share the organ-

ization with anyone else. Opposing to this strategy is the key disa d-

vantage of risk bearing, and this is because the organization will need

to bear all types of risk existing in the foreign country, as there is no

partner to share the risk with. In fact, this strategy is most risky of all

entry strategies but it is still used especially in countries of high stabil-

ity and openness like Hong Kong and Singapore, as risk in these coun-

tries, is perceived to be low. Schering-Plough Ltd used this method

and set up its US$230 million Multi-Product Bulk Pharmaceutical

Plant at Tuas, Singapore in December 2003. In summary, after as-

sessing the macro and microenvironments, trade barriers and the var i-

ous entry strategies, marketers should now have a better understanding

of the choices they make in entering a foreign market. Not mentioned

in this text are certain factors that should also be recognized and they

are the long term goals of an organization, its resources in terms of

finance, knowledge and human, and finally the support of all staff in

the organization. In compliance with any of these factors can also lead

to the failure of entering into a foreign market.

Table 23. Positive and negative sides of wholly owned subsidiaries

Higher return on investment

Bear all types of risk existing in the

foreign country

Better control of the manage-

ment processes

Source: Own development

123

Finally we present some factors that might impact the process

of selection of entry mode/strategy of a foreign company desiring to

enter the foreign market:

 Business environment specificities – unfamiliarity and dif-

ference in terms of social and cultural customs and practic-

es, political regulations and legal stipulations;

 Intermediary's specificities – conditions, practices and

scope of business cooperation may be totally different in

each of local markets;

 Products and services' specificities – product's features,

warranty and maintenance conditions, after sales services

and supports, unloading and distribution;

 Operational and functional capacity of enterprise – in terms

of finance, production, operation, R&D, technology, human

resource, marketing organization, competition, cooperation

to carry out professional service and performance world-

wide;

124

Chapter IV

STRATEGIC MARKETING MANAGEMENT

Objectives:

Differentiate between the types of strategies for the different man-

agement levels

Understand the key concepts of strategic planning

Understand the process of strategic planning and use the following

model to carry out strategic analysis for different levels of enterprise:

 BCG Model;

 SWOT Model;

 Ansoff Model.

Implement and control process of strategy implementation

STRATEGIC PLANNING

KEY CONCEPTS OF STRATEGIC PLANNING

PROCESS OF STRATEGIC PLANNING

STRATEGY IMPLEMENTATION AND CONTROL

IV.1. STRATEGIC PLANNING

IV.1.1. Strategic Management

As the definition of marketing goes, it is to understand and ful-

fill the needs of the customers at a profit to the organization. Failing to

meet customers' needs or in generating profit for the organization,

will result in the downfall of the business. Organizations with large

number of employees and resources would require proper planning

and management so as to ensure that they are properly deployed and

125

contribute to the achievement of the organization's objective. Hence,

it is important for organizations to plan for its activities so as to

achieve the marketing objective. Strategic management, i.e. the man-

agement of an organization's strategy is therefore applied to achieve

that objective in the context of long-term planning. The strategic

management process includes: Strategic Planning; Strategic Imple-

mentation; Strategic Control.

This is to make certain that the strategy is properly planned and

executed so that the organization can stay on track, in achieving its

objectives.

Strategic marketing management is the process of strategic

management of marketing function of an organization. That is to

guarantee that marketing function is carry out properly, marketing

strategy to be planned and executed in accordance and to support a

given business strategy allowing an organization to achieve its objec-

tives. So, the strategic marketing management process should include

the following major stages: Strategic Marketing Planning; Strategic

Marketing Plan Implementation; Strateg ic Marketing Plan Control.

Illustration 22. Strategic marketing management

Source: Own development

126

IV.1.2. Strategic Planning

Before we start to discuss about the planning, marketers should

understand the needs to plan. This is because planning is a tedious

exercise involving many staffs of different management levels and

much time is dedicated to this process. Failing to understand the need

to plan will result in poor planning, as planners may not commit

whole-heartedly to the process, instead they do it just to please the

superiors. Planning is executed for many reasons and they are:

 Making the most of an organization's limited resources –

Organizations are always limited in its resources and these

include tangible and intangible resources. Some examples

of tangible resources are cash and capital assets while in-

tangible resources include knowledge and brand equity. Us-

ing different configurations of these resources, organiza-

tions try to find the best way to compete against its competi-

tors, emerging as the leader. The wise use of these resources

becomes critical in organization because they are limited,

and that means marketers need to make the best use of them

as there are only so few of each of the resources. Another

reason is that they are exhaustible, and once depleted, they

may be difficult to replenish. In planning, planner tries to

look into the future and allocate these resources to take a d-

vantage of the future environment so that each of the re-

sources are used in its optimum applications that can help

organizations in gaining its advantage over its competitors;

 Coping with change – Change is becoming rampant and er-

ratic and organizations need to change to cope with this

chaotic time in order to survive. However, change can be

127

confusing and difficult to understand, making it difficult for

marketers to cope, resulting organizations being thrown into

turmoil. Some organizations attempt to change, however,

without planning the change can be unfocused and confus-

ing. Marketers may not be able to provide valued products

to their customers and as a result, customers will turn to

competitors for better offerings. Organizations that are una-

ble to cope with the changes in the environment will even-

tually be eliminated from the market due to competition.

With planning, organizations will try to understand the

changing competition and the changing needs of the market,

then it can position itself into an advantageous position

in the future market so as take advantage of these changes;

 Providing the employees with a focused direction – In any

organization, staffing is inevitable. Organizations of differ-

ent sizes will employ different number of people and orga n-

ization performance is largely affected by the concerted ef-

fort of its employees. Each employee is different as each of

them, is affected by different culture, education, attitude,

experience, perception and many other factors. This assort-

ment of people will result in differing views and opinions,

and the outcome is different behavior and actions that can

affect the organization performance. Without proper direc-

tion and management, employees in an organization will act

on their own accord and reduce the organization's effort in

marketing its product to the market. To counter this, mar-

keters plan and communicate the organization's plan and

objective to the employee so that everyone in the organiza-

tion knows about it. This will direct them to work effective-

128

ly in helping to achieve the organization's objectives; it will

also provide them a sense of direction that will help moti-

vate them towards the objective. The need for this sense of

direction is heightened by the changes in the environment.

As organizations evolve to cope with the external changes,

employees can sometimes be disillusioned and confused

about these changes. This can demoralize employees and

discourage them against change. On the other hand, with

proper planning and communication, the understanding of

change can be improved and the change can be better per-

ceived. Consequently, with the full co-operation of the em-

ployees, organizations can change effectively and quickly

adapt to its new environment;

 Consistency in communication to the public – Marketers

need to be consistent in communicating to the public about

its offerings. This will help in the memory retention of the

brand and the organization. Through planning, marketer can

periodically communicate its offering based on a single

theme. Over a period of time, the public will be able to re-

call and distinguish the distinction in the organization's of-

ferings as compared to the competitors. This will increase

the marketer's chance of marketing its offerings to the right

target market. After understanding the needs to plan, the

next discussion is focused on the planning per se. In plan-

ning, there are different types of planning for different types

of strategy, suited for the different management levels and

the different time horizon. Marketers need to understand the

significance of each of them so as to be able to apply the

appropriate plan for each different strategy.

129

In addition to strategic planning, the lower levels of planning

are tactic and operational planning with shorter time horizons and less

resource engaged.

Illustration 23. Strategic, tactic and operational planning

Source: Own development

IV.1.3. Different Levels of Strategy

As mentioned earlier, there are many types of planning, each

for the different management level and different time horizon result-

ing in different types of strategy. The different types of strategy are:

 Corporate strategy;

 Business strategy;

 Functional strategy.

130

Illustration 24. Levels of strategy

Source: Own development

 Corporate strategy

Corporate strategies are developed through corporate planning

and they are developed by planners, at corporate offices (headquar-

ters) of large conglomerates. The conglomerates tend to own many

different business units or products. Each of these business unit or

product target a different market and each play a different role for the

organization at different point in time. Some businesses are main-

tained for the purpose of generating cash while others may be estab-

lished in preparation for a future market. By managing a range of

businesses or products, organizations can grow effectively into differ-

ent markets. It also helps the organization in managing its risk as it

spread the investment and risk over many businesses. A common

model used in corporate planning is the Boston Consulting Group

model (BCG model) and a modified model that evolved from the

BCG model is the General Electric model (GE model).

131

 Business strategy

Businesses owned by conglomerates are known as strategic

business units (SBU) and planning executed by these businesses is

known as business planning. This kind of planning is used to develop

the business strategy in support of the corporate strategy. For example,

when the corporate office plans to groom and grow a particular busi-

ness unit, business strategy for the selected business unit will focus on

strategies to grow aggressively. In addition, business units often sup-

port and cooperate with each other in a bid to achieve their objectives

and the overall goals of an organization.

Illustration 25. Business units' interrelations

Source: Own development

 Functional strategy

In each of the SBUs, there are functional units like the human

resource department, production department, marketing department,

etc., and each of these departments must also plan their strategies in

support of the business strategy and these are known as functional

strategies. In previous literature of strategic planning, it has been ac-

cepted that strategic planning for corporate strategy is meant for long

term planning of which can range from 10 to 15 years. However, in

the recent years when changes in the environment has become so ac-

celerated and intense that long term planning is no longer able to serve

its purpose in helping the organization, a modification of it has gene r-

132

ally been accepted and it has effectively reduced strategic planning to

just from 3 to 5 years. Cascading down from corporate strategy formu-

lated at the corporate office of a conglomerate to the functional strate-

gy of each of the SBU, strategies at the different levels work hand in

hand to ensure that the corporate objective is met. As illustrated in the

illustration below, functional strategy is planned to support the SBU,

and in turn, the business strategy is executed to support the corporate

strategy. A combination of these strategies will help the conglomerate

in achieving its planned objective.

Illustration 26. Functional strategies' interrelations

Source: Own development

IV.2. KEY CONCEPTS OF STRATEGIC PLANNING

Before we proceed to the strategic planning, there are some key

concepts that must be understood. They are terminologies used com-

monly in planning and they are:

 Critical Success Factors (CSF);

 Core competency;

 Unique resource;

 Positioning;

 Competitive advantage.

133

Organizations exist in diverse markets and in each of the mar-

ket, there are various success factors, some of them are significant and

known as Critical Success Factors or Key Success Factors. Within

each organization, there exists competency, resources and specific

position in the market that are unique to each of them. By understand-

ing these organizational factors and the required success factors of the

market, marketers attempt to develop their competitive advantage over

their competitors as illustrated in the following.

Illustration 27. Factors impacting corporate competitive advantage

Source: Own development

 Critical success factors

Prior to a purchase, customers will identify his or her needs and

search for options that can fulfill these needs. After gathering infor-

mation about the various options in the market, customers make their

choice based on an evaluation of the criteria they create. Each of the

Market:

CSF of the industry

Organization:

-Core competencies

-Unique resources

-Positioning

Organization's com-

petitive advantage

134

criteria in the evaluation exercise carries different weight. Depending

on the needs of the customers, they will rank them in a hierarchical

manner and rate each of the criteria in their perception. After rating

each of the criteria, customers will add up the total score of all of the

criteria and the option with the highest score will usually end up being

the choice of purchase. As marketers, it is important to identify these

criteria that the customers' evaluations are based on. By improving on

these factors, marketers can increase its chance of selling the products

to the customers. These factors are critical to the success of the mar-

keters hence they are called critical success factors (CSF) and are

sometimes known as key success factors (KSF). In any industry, there

are always some factors that marketers can make use of, however they

differ with industries. For example, in the industry of warehousing

service, security may be a key consideration especially with the in-

crease in terrorist attacks over the recent years. This could also be an

important criterion with customers who are dealing with sensitive or

expensive inventories. Hence, by focusing on this factor to be better

than its competitors, the warehousing service provider may be able to

gain some advantage over its competitors. Another benefit of focusing

on a single factor is that it can build its reputation based on this factor

and boast itself to have the highest security warehouse in the market.

Through the identification of these factors, marketers can position

themselves to be leader in the market, specialized in the chosen factor.

It is important for marketers to choose the appropriate factor to focus

on and the selection of the factor depends on many factors, e.g. com-

petitors' positions, company's resources, preferences of customers,

etc. Many marketers make the mistake of focusing on too many fac-

tors and this confuses the customers and gives them the impression

that the marketer is not a specialist in anything.

135

 Core competency

In the choice of identifying which CSF/KSF to develop, organ-

ization needs to look inward, i.e. into the organization and asks itself

what it possesses and what it is good at. This inward search is the

search for the core competency of the organization. A point to note

about this competency is that it must be difficult for competitors to

copy and this means that not all that the organization is good at, can

be considered as its core competency. This is because if it is easy to

copy, competitors can easily emulate the organization and offer simi-

lar products or services into the market, rendering the organization to

be the same as all the others. Then effort going into the development

of this competency will be wasted and the organization will be com-

peting on equal standing with its competitors, forcing it to compete

probably on price, of which will not be beneficial to the organization.

Another consideration is that organizations must try to search for this

competency within the organization. The reason is that it is always

easier to develop and improve on what the organization possesses than

to try developing something new. Of course, it is possible to develop

something from scratch; however this will take time and may be cost-

ly to do so. Therefore, organization should analyze its strength and

understand itself better before deciding. Core competency exists in the

form of organizational skill or ability. Organizations accumulate

knowledge from its past experiences and find ways to improve the

way it conduct its business. It could be experiences and skills in the

area of research & development, production, purchase, etc. With these

accumulated knowledge and skills, organizations can find ways to

market its product more efficiently and effectively as compared to its

competitors. As described earlier, the competency exists through or-

ganization's skill or ability. Being competent in a skill that can en-

136

hance the CSF, the organization can provide better value to its cus-

tomers. For example, if an organization is competent in producing low

cost papers (core competency) and the market is extremely cost con-

scious (CSF ) the organization can focus and improve on its cost re-

duction (competitive advantage), to enhance its competitive position

in the market.

 Unique resources

Operating a business is always about configuration of its re-

sources. With optimal planning, resources can be maximized to gener-

ate the highest return on investment in its resources. However, with

unique or specialized resources, organizations can not only ensure

high returns, they can also provide the organization with an advantage

over its competitors. Unique resources, in this instance, refer to spe-

cialized skill, privileged information, advanced tech nology, special

material, etc., and any other resources that other organizations cannot

easily acquire. Organizations, having the ability or in possession, of

these resources will able to create a competitive advantage over its

competitors, this hold true for as long as the competitors are not able

to do so. In the event when they managed to do so, the competitive

advantage is immediately eliminated.

 Positioning

Positioning is defined as a process in which marketers strive to

design and communicate its unique offerings in relation to its competi-

tors, so as to be perceived as competing in a specific target market,

and not competing with all competitors from the entire market. The

organization's position can comprise of its products or services, the

selected markets and the degree to which it is distant away from its

competitors. The process of positioning is costly and time consuming

to achieve, however, upon reaching the objective, organizations will

137

enjoy recognition that will draw the targeted customers towards them,

especially in a selected market where there is no perceived compet i-

tion. With this positioning, organizations can gain an advantage over

its competitors, as it is perceived to be the ideal organization, when

compared to its competitors that can fulfill their unique needs. Lastly,

a consideration about the choice of competitive advantage is that it

controls the scope of market in which an organization can compete

effectively. Because of the way the organization produces and markets

its products, it limits the scope of the market and restricts it from mar-

keting its products into other markets. This is one disadvantage of

competitive advantage. Hence, it is critical to choose an appropriate

advantage leading to the market potential and one that can be sus-

tained over a period of time before competitors find ways to overcome

this advantage. Relying on the combination of the above, organiza-

tions can achieve its competitive advantage over its competitors. For

global companies, having a structured strategic framework is almost a

given. Nevertheless, the strategic planning model deserves a detailed

study to highlight the importance of structured and systematic pla n-

ning for global organizations.

 Competitive advantage

This is defined as an advantage in which organizations can use

to compete against its competitors. Using this advantage, organiza-

tions can perform better and offer better value to its target customers.

According to many literatures, competitive advantage can generally be

derived from within the company using the following sources: core

competency, unique resources and positioning.

138

IV.3. PROCESS OF STRATEGIC PLANNING

After understanding the different concepts in strategic man-

agement, it is time to explore the process of strategic planning. They

are top-down as follow:

 Vision clarification;

 Mission statement;

 Goals and objectives setting;

 Corporate Strategy – Business portfolio design using BCG

model/matrix;

 Business Strategy – Business unit analysis using SWOT

model/matrix;

 Functional Strategy: Marketing strategies; Growth strate-

gies – Using Ansoff model/matrix; Marketing mix strategies.

Illustration 28. Process of strategic (marketing) planning

Source: Own development

Functional

(marketing) strategy

139

 Vision

For planning to be successful, there must first be a vision of

what the organization hopes to achieve in the future. This vision is just

about an idea intuitively and creatively formulated in the mind of the

leader or leadership board. Though there is no concrete or structured

methodology in achieving this vision, it plays the role of inspiring

employees and providing them with a guidelines and a sense of direc-

tion in the organization's effort and endeavor forward. Hereafter pre-

sented are visions of the Vinamilk

, one before and one after 2008, a

moment of a breakthrough change of this company.

 Mission Statement

After visualizing the future of the organization, it is time to

state them explicitly so as to be able to communicate the vision to the

different stakeholders inside the company and outside, in the business

environment. These stakeholders include investors, employees, cus-

tomers, suppliers, governmental agencies, etc. A good mission state-

ment should encompass the following:

 Organization intention and aspiration – this describe the in-

tention and aspiration of the organization, and also the posi-

tion it wishes to attain in the future;

The largest diary company in Vietnam and one of 50 largest South East Asia's corporation

Vision of Vinamilk (before 2008):

Vinamilk will focus all resource to become diary and healthy food

company with highest sustained growth in Vietnam throughout

product lines strategy which guarantees long-term competitive ad-

vantage

Vision of Vinamilk (after 2008):

Vinamilk desires to become Vietnam's number one symbol of trust

related with nutritional products for the health of people

140

 Type of business it is involved in – mission statement must

also state the kind of business it is involved in and the type

of customers it is serving, this will give an idea of the indus-

try that it is in and the kind of activities that is expected of

them;

 Statement of key values – Finally, it must also communicate

about the value system of the organization of which can be

translated into the organization's culture. Af ter stating the

mission for the organization, the planning is initiated to

achieve what the organization sets out to achieve.

Hereafter presented are missions of the Vinamilk, one before

and one after 2008, a moment of a breakthrough change of this company.

 Goals and objectives

Goals and objectives are to express the mission more concrete-

ly in certain space and time. Moreover, goals are the basis:

 To plan the business and deploy necessary resources;

 To control and assess business performance pursuant to the

plan.

 Corporate strategy – business portfolio design

This stage is applied when the organization has various busi-

ness units or product lines operating in different markets. Corporate

Mission of Vinamilk (before 2008):

Vinamilk will unceasingly diversify product lines, expand the mar-

ket to retain sustainable leading position in the domestic market

and maximize benefit of investors.

Mission of Vinamilk (after 2008):

Vinamilk is committed to bring about the highest quality nutritional

source with respect, love and responsibility for the community and

society

141

strategy is used to help the conglomerate in achieving its objective and

this entails the management of the business units owned by the con-

glomerate. However, before planning, a proper analysis of the bus i-

ness units is necessary, so as to understand the current state of the en-

tire organization. To do this, a portfolio analysis model called the

BCG model is used, this model plays the dual role of analysis and

helping the organization in deciding the strategy for each of the busi-

ness units, so the planners can decide which of them would require

more or less investment. It can also help organizations in the man-

agement of growth by visually presenting the growth potential of the

different business units.

BCG model – the Boston Consulting Group (BCG) model is a

commonly used model for planning the corporate strategy. The other

commonly used model is the General Electric (GE) model. The BCG

model is a 2X2 matrix while the GE model is a 3X3 matrix evolved

from the BCG model. This model is illustrated below.

Illustration 29. BCG matrix

Source: Own development

142

This model is also known as the Growth-Share matrix of which

is represented by the axes of the matrix. The circles in the each matrix

represent the different business units or products and they are also

known as Strategic Business Units (SBUs). The size of these circles

represents the sales turnover of the SBU. The vertical axis is the Mar-

ket Growth Rate ranging from low to high and it is an indication of the

growth potential of each of the SBU while the horizontal axis is the

Relative Market Share, also ranging from low to high, and that is the

indication of its relative market share of the SBU. The four quadrants

of the matrix represent the four categories of developmental stage with

reference to growth potential and its relative market share. The SBU

in each of the quadrant of the matrix indicates the current develop-

mental stage that the SBU is going through and they are named ac-

cording to their quadrants' names. The position of these SBUs will

determine the different financial requirements of each SBU, its strate-

gic choices and implications and they are as follow:

 Question Marks – SBUs in this quadrant will experience

high growth, however, they are relatively weak as com-

pared to its competitors as their market share is small. O r-

ganization needs to consider if it wants to invest into them,

so as to increase its market capitalization. In this decision,

the major considerations are the risk involved and the

availability of the fund. Though the growth potential is

identified, there is no guarantee that the growth will de fi-

nitely materialize and even if it does, by investing more in-

to the SBU, it does not guarantee an increase in the market

share as competitors can chart similar course of actions and

maintain their competitive positions. The other considera-

tion is about the availability of the fund, by investing the

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available funds into a selected SBU, it may deprived the

others of the same opportunity, hence, organization needs

to consider carefully the SBUs that they are focused on and

others that they may need to forsake;

 Stars – Stars has high growth potential and enjoy high mar-

ket capitalization and tends to be market leader. Organiza-

tion will usually invest more into them for the purpose of

securing its competitive position so that when the market

grows, these Stars can be exploited to maximize both sales

and profit for the organization;

 Cash Cows – In this quadrant, Cash Cows are usually car-

ried forward from the Star quadrant when the market

grows. This segment is known as Cash Cow because this is

the time when the most cash can be harvested from the

SBU as it reaches its maximum growth potential while less

funds is invested into these Cash Cows because of the lik e-

lihood for its market growth to decline;

 Dogs – This is a category where the market share of the

Dogs is relatively small and there is little or no market

growth potential for the Dogs. These tend to be carried over

from Cash Cow after the market demand had reached its

peak in the quadrant of Cash Cow. Organizations must de-

cide if it wishes to continue its activities in these markets, if

so, a common strategy is to acquire other competitors so as

to be the market leader and wait for the others to fade out.

If the organization decides to exit the market, it can either

sell the SBU to other competitors or liquidate it.

By studying this portfolio at any point of time, corporate plan-

ners can assess the organization from a few perspectives:

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 Question Mark and Stars – How much growth potential it

had in the long term? Does it have sufficient potential

growing SBUs to ensure the survival of the organization? If

so, how much fund is expected to groom them? If not, what

should the organization do to create more SBUs in the

Question Mark and Star quadrants?;

 Cash Cows – When should organization start reducing in-

vestment, going into the Cash Cow so as to start milking

them for cash? With the number of Cash cows, are they

generating sufficient fund to finance the other SBUs?;

 Dogs – Organizations can identify the Dogs and decide on

the fate of these Dogs. By divesting them, organizations

can also generate cash for the organization, however, if the

organization decides to keep them, more funds is expected

as it is required to acquire the other competitors, so as to

increase its dominance in the market.

A good portfolio is a balanced one where SBUs are well spread

in all quadrants. This spread ensures that there is sufficient funds be-

ing generated by the Cash Cows and there is sufficient future growth

in both the Question Marks and the Stars. Ideally, there should always

be an excess of Question Marks, as not all will grow into Stars, the

other reason is that it will present the organization with more choices

and a higher chance of success. Using the BCG model, planners at the

corporate level can have a better understanding of the current and fu-

ture status of the entire organization. It will also help planner in de-

termining the strategy for each of the SBU, of which the corporate

strategy is based on.

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 Business Strategy – business unit analysis

After planning on a corporate level using the BCG model, each

of the strategic business unit will in turn plan their business strategy to

support the strategy set by the corporate strategy. Before planning the

business strategy, an in-depth analysis of the business unit is required

and the model used to accomplish this is the SWOT model.

SWOT model – SWOT is actually the acronym for Strengths,

Weaknesses, Opportunities and Threats. Strengths and weaknesses

address the internal environment of the business unit while opportun i-

ties and threats address the external environment of the market. Using

this model, business unit tries to match the strengths and weaknesses

of the business to take advantage of the opportunities of the market,

while avoiding the threats in the market:

 Strengths – This is the business unit's strength and it refers

to the organizations' competencies. It can be found in or-

ganizational skill, resources and even positioning, men-

tioned earlier in the text;

 Weaknesses – This signifies the weaknesses of the organi-

zation and depending on the nature of the market, this can

be made reference to many factors, e.g. high cost, bad rep u-

tation, poor quality, simplistic product design, etc.;

 Opportunities – This suggests the current or future opportu-

nities the market present. This is usually the result of some

changes in the environment, e.g. trend change, legislation

change, new technological development, etc. With these

changes, businesses can take advantage of them and offer

new products or services to fulfill the needs of the new

market;

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 Threats – This indicates current and future threats that the

business should avoid. Threats are presented in many forms,

e.g. competitors, material shortage, trend change, political

turmoil, etc. All of these factors can threaten the viability of

the business.

Through the SWOT analysis, planners can sift out market op-

portunities that can be capitalized by the business and steer away from

threatening markets. After the analysis, planners will plan the appro-

priate strategy for the business unit.

 Functional Strategy

In all of these business units, are their own functional units, e.g.

production department, human resource department, marketing de-

partment, etc. All of these departments are also required to plan their

functional strategy in support of the business strategy. Since we are

focused on the subject of marketing, the following discussion will be

directed only towards the formulation of the marketing strategy.

Marketing strategies

Like other functional units, the marketing department needs to

develop its strategy to support the business strategy. In this area, the

topic of segmentation, target marketing and positioning should also be

discussed as it is critical to the success of the marketing strategy,

however, because of the gravity of this topic, it will be discussed in

the following chapter. Michael Porter suggests that marketers can fo-

cus on 3 areas on which they can develop the strategy. They are as

follow:

 Overall cost leadership – This strategy is focus on cost re-

duction so as to be able to produce and market its products

at the lowest possible cost. With this, marketers can trans-

147

fer the cost saving to the customers, by selling the products

at a lower price than its competitors. This strategy is useful

in markets where competition is high and it is difficult for

marketers to differentiate themselves from the competitors.

This strategy is also used in the marketing of commodities

where price competition dominates the market;

 Differentiation – Using the differentiation strategy, market-

ers try to set them apart from the competitors by focusing

on certain characteristics of the product or market. Market-

ers communicate to the market of their focus on these char-

acteristics, defining the differences between them and other

competitors. Characteristics, in this case, can be design fea-

tures valued by the customers, safety of products, service

backup for products, etc. Depending on the nature of prod-

uct, market and competition, these characteristics vary. Us-

ing this strategy, it tends to allow marketers to charge

a higher premium as customers can be willed to pay more

for something that they value;

 Focus – This refers to a focus on a particular segment of

the market that is less competitive. Marketers using this

strategy can avoid competition and is helpful for organiza-

tions that are limited in size and resources. Upon targeting

the segment, marketers can either use the cost leadership or

the differentiation strategy to achieve its objective. Using

any of the above three strategies, marketers can formulate

their strategies. These strategies are designed strictly for the

purpose of marketing and are not able to address the issues

of growth. If the business is facing competition in the mar-

ket and need to look for growth, marketers will need other

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strategies for the identification of growth and a common

model used for this purpose is the Ansoff model, also

known as the Product-Market Expansion Grid.

Growth strategies

For identification of growth opportunities, a popular model is

the Product-Market Expansion Grid (or Ansoff matrix). In this model,

there are four suggested courses of action as illustrated below.

Illustration 30. Ansoff matrix

Source: Own development

 Market penetration strategy

This strategy works on the basis on penetrating deeper into

the market without modifying the products. This strategy

can be executed by price reduction, encouraging more cu s-

tomers to buy the product or the same customers to pur-

chase increased quantity, resulting usually in a bigger ma r-

ket share for the marketers. This strategy is easy to execute

and there is low risk involved as marketers is familiar with

both the product and market preferences;

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 Market development strategy

The mechanism of this strategy is to market the same prod-

uct, but into another market without modifying the product.

This is usually used when the same product is able to fulfill

the needs of another market, and the competition in the new

market is lesser. These markets may differ in geographical

aspect, i.e. from one region to another or from one country

to another. Or, markets may differ in other aspects, e.g.

customer types. For example, for courier companies target-

ing mostly business customers, it can offer the same service

to consumers of which is a totally different market. This

strategy is relatively easy to accomplish, however, market-

ers must confirm that the new market is acceptable towards

the product without modification, as there may be signif i-

cant differences in customer preferences between the markets;

 Product development strategy

As suggested by the name, the product is modified and in-

troduced into the same market. Mobile phone manufactur-

ers are using this strategy regularly in introducing new

models into the market. This market is also less risky as

marketers are familiar with the market and are able to un-

derstand the needs and preferences of its customers;

 Diversification

This strategy requires the marketers to develop new prod-

ucts, venturing into new markets. This growth strategy

holds the highest risk of all the strategies; however, it is

still frequently used especially when emerging markets

proves to be attractive to marketers. Finally, after under-

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standing the different focuses of marketing strategy and the

different growth strategies that marketers can adopt, mar-

keters need to know of ways to translate them into practical

strategies.

Marketing mix strategies

In the process of marketing, it is always about the manipulation

of the marketing mixes that helps the marketers in marketing to the

market. Therefore, to execute the marketing strategy, they must be

translated into the various marketing mixes strategies, so that the a p-

propriate action plan can be executed for each of the marketing mix.

In this instance, they are:

 Product strategy – This will dictate the planning, design

and production of the products. Depending on the chosen

strategy, organizations have a variety of choice in this deci-

sion. Some of the possibilities include low cost product,

high quality product, product modification and many others;

 Pricing strategy – Pricing can varies dependent on the busi-

ness strategy and objective. It can adopt low price tactics or

premium pricing. Pricing of a product can also be broken

down to render the product to be more competitive. De-

pending on the marketing strategy, marketers need to adopt

the complementing pricing strategy;

 Promotion strategy – Depending on the marketing strategy

and the image the organization hopes to build, different

promotional tools can be used to implement the strategy, to

communicate to the market;

 Place strategy – It is dependent on the marketing strategy,

product and target market and will decide the intensity and

151

locations of its distribution. Marketers can choose different

types of distribution strategy to distribute its products;

 Physical evidence strategy – This refers to physical evi-

dence retained by the customer, in consumption of a ser-

vice. Very often, the chosen strategy is very similar to that

of the promotion or communication strategy as they both

play the role of communicating to the market;

 Process strategy – In service marketing, different processes

can be employed to project the image of the service level

the organization is offering, again, this is governed by the

marketing strategy and objective;

 People strategy – In the choice of people strategy, this is

usually carried out in co-operation with the human resource

department, as it is the department managing the recruit-

ment, selection and training of the service personnel. Mar-

keting strategy, in this instance, dictates the number and

types of employees it requires, to achieve the marketing ob-

jective.

Combining the applications of all of the above strategies, and

execute them carefully and skillfully, objectives of the marketing

strategy should be achieved.

IV.4. STRATEGY IMPLEMENTATION AND CONTROL

 Strategy implementation

For the strategy to be successful, proper execution of the strate-

gy must be carried out. To achieve this, communication of the strategy

must be extended to all levels of the organization. This is a top down

approach of management informing of the employees of their expecta-

152

tion. However, a bottom up approach must also be jointly applied, as

management requires feedback into operational issues that may clash

or impede the accomplishment of the corporate objective. Participa-

tive style of management is also recommended, as employees tend to

be more committed when they can contribute to the decision making

in the organization. For any strategic plan to work, it has to be trans-

lated into activities that can be acted on:

 Detailed road map of activity – How to go from point A to

point B;

 Time frame including date start and date end – When and

how much time it takes;

 Person responsible/accountable – Who leads the process of

going from point A to point B;

 Budget – How much money it requires;

 Non-fi nancial resources – Staff, input materials, intangible

assets, etc. convertible to money.

While the strategic plan is mandatory for the global arena, the

marketing plan and sales plan are absolute necessity at the local level

to cover the concept of 'think global, act local'. This has been dis-

cussed in the previous chapters.

 Strategic control

Finally, in strategic management, control is an important ele-

ment in ensuring the success of an organization. Firstly, through the

feedback, it checks and ensures that the plans are carried out as in-

tended. This allows corrections to be made along the process of im-

plementation. Secondly, the feedback passes market information back

to the management and this is probably the most important use of con-

trol, especially in the current times of change. Environmental changes

are accelerated and this makes the planning process more challenging.

153

Due to accelerated changes, plans that were deliberated may not be

relevant by the time it is executed. This is where control provides the

channels for feedback, informing the senior management of the need

to modify its strategies.

Illustration 31. Strategy realization and control

Source: Own development

In summary, after understanding the process of strategic man-

agement from the corporate to the functional level of the business unit,

marketers should be able to grasp the implications of their role in the

business environment. More detail of the strategic choice of marketing

strategy will be discussed in the next chapter of segmentation, target

marketing and positioning.

 Organizational Structure

A final word is most appropriate for global companies. The i s-

sue of structure has not been addressed as it is presumed that global

companies need to have the structure to cover the world. A common

phenomenon seen happening in many organizations, is the flattening

of organization. By flattening, it means reducing the management lev-

els in an organization, and a major advantage of this is that it allows

154

decision making to be made at a lower level. This can quicken the d e-

cision making process as information do not need to travel through as

many layers of management, and as a result, organizations can re-

spond faster to changes in the market. The responses can be made in

response to changes in competition, customer requests, customer

complaints, etc. However, in implementing this, employees must be

adequately trained so that the optimal decision is made at each level.

Employees, even at the lowest level, are empowered and entrusted to

make decisions intelligently. Besides being able to respond quickly, it

frees managers of their time, so that they can focus on more important

issues. Due to the emphasis on employee expectations, human re-

source development plays a critical role in achieving this, as it is the

function that recruits and trains employees of an organization. Human

resource department is also the department that makes human resource

policies that can either motivate or discourage the employees, result-

ing in the staff turnover rate in the organization. High staff turnover

would mean a loss of knowledge as employees depart, they leave with

the accumulated knowledge of products, customers, competition, etc.,

and this can delay the objective of becoming a flatter organization.

Finally, with all the changes happening around us, marketers cannot

afford to slacken and must constantly be sensitized to them as this will

help organizations in maintaining its relevance in the business and

ensure its survival in the global environment.

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Chapter V

SEGMENTING, TARGETING, POSITIONING

Objectives:

Understand the essence of consumer and organization market

Differentiate between consumer and organization buying behavior

and decision making

xplain how organizations segment and target customer groups

Explain how organizations position themselves in the target market

CONSUMER MARKET AND ORGANIZATION MARKET

CONSUMER BEHABIOR AND BUYING DECISION

ORGANIZATION BEHAVIOR AND BUYING DECISION

SEGMENTATION, TARGETING AND POSITIONING

V.1. CONSUMER MARKET AND ORGANIZATION

MARKET

V.1.1. Consumer Market and Organization Market

This chapter considers the main aspects of consumer and or-

ganizational buying behavior and the ways in which marketers should

reach these customers. It should be recognized that each consumer and

organization is faced with and impacted by different forces. Conse-

quently, it is not possible to develop models, which predict behavior

for every single consumer and organization. Therefore, the models

discussed in this chapter are put forward in order for marketers to be-

come familiar with the factors that should be considered in putting

together the marketing strategy of their organizations.

156

First of all it is important to establish what constitutes a market.

Basically, a market is an aggregate of people who, as individuals

and/or organizations, have the need, ability, willingness and authority

to purchase products. There are several requirements for a market and

an aggregate of people must meet these to be considered a market.

They must:

 Want or need the product;

 Have the ability to buy the product;

 Have the willingness to use their buying;

 Have the authority to buy the product.

Consumer market consists of purchasers and individuals in

their households who intend to consume or benefit from the purchased

products, who do not buy products for the main purpose of making

a profit. Alternatively, organizational or industrial markets consist of

individuals or groups that purchase a specific kind of product for re-

sale, direct use in producing other products, or use in general daily

operations. The four categories of organizational markets, to which we

will refer later, are:

 Market of producers

Producers markets consist of individuals and organizations

that purchase products for the purpose of making a profit

by using them to produce other products or using them in

their operations. A wide range of industries make up the

producer markets, including agriculture, forestry, fisheries,

mining, construction, transport, communication and utilities;

 Market of resellers

Resellers markets consist of intermediaries that buy fin-

ished goods and resell them to make a profit. Resellers do

not change the physical characteristics of the product, ex-

157

cept for occasional minor alterations. One type of reseller is

a wholesaler , and these purchase products for resale to re-

tailers, to other wholesalers, to producers and to the gov-

ernment. Alternatively, retailers purchase products and re-

sell them to final consumers. When making purchase deci-

sions, resellers consider five factors:

 The level of demand to determine quantity and price levels;

 Amount of space required for the product, ease of plac-

ing orders;

 Availability of technical assistance and training programs;

 Whether the product complements or competes with

products the firm currently handles;

 Market of governmental institutions

Governmental markets include national (central) govern-

ment and local governments. The government spends a vast

amount of money on a wide range of goods and services.

The types and quantities of products that government mar-

kets purchase reflect societal demands on government

agencies. Many firms do not try to sell to the government

because of the complex buying procedures necessitated by

the public accountability, i.e. usually made through bids or

negotiated. However, although complex these can be very

lucrative;

 Market of non-governmental institutions.

Institutional markets include churches, libraries, museums,

state uni versities and charitable organizations. Since insti-

tutions have different goals and fewer resources than other

markets, marketers may use special marketing activities to

serve these markets.

158

Much information about industrial customers is based on the

Standard Industrial Classification (SIC) system. SIC uses combina-

tions of letters and numbers to designate economic characteristics of

industrial, commercial, financial and service organizations. The Cen-

sus of Distribution further subdivides SIC categories and provides

more detailed information about product classes and product items.

Additional data are available for each SIC category through various

government and nongovernment publications. The SIC system is

a ready-made tool that allows industrial marketers to divide industrial

firms into market segments based mainly on the types of products

produced or handled. A firm can identify and locate potential custom-

ers by using industrial directories. These publications contain infor-

mation such as name(s), SIC number, address, telephone number and

annual sales and lists of potential customers can be developed by area.

Since a firm may be unable to pursue every potential customer, seg-

menting by benefits rather than general customer characteristics may

be more productive.

V.1.2. Consumer Demand and Organization Demand

There are several characteristics that distinguish industrial (or-

ganizational) demand from consumer demand. The demand for differ-

ent types of industrial products also varies. First, organizational de-

mand is derivative (from other demands). Organizational customers

purchase products to be used directly or indirectly in the production of

goods and services to satisfy consumers' needs. Therefore, the demand

for industrial products derives from the demand for consumer prod-

ucts. Inelastic demand is the second factor. For many industrial prod-

ucts, a price increase or decrease will not significantly alter demand

159

for the item. When a sizeable price increase for a component part rep-

resents a large proportion of the product's cost, demand may become

more elastic. The price increase of the component part causes the price

at the consumer level to rise sharply. The inelastic characteristic ap-

plies to market or industry demand for the industrial product but not to

the demand for an individual supplier. Joint demand is the third factor.

Joint demand occurs when two or more items are used in combination

to produce a product. With joint demand, shortages of one item may

jeopardize sales of all the jointly demanded products. The fourth fac-

tor is demand fluctuations. The demand for industrial products may

fluctuate enormously because it is derived from consumer demand.

When an organizational marketer's customers change their inventory

policy , the firm may notice substantial changes in demand. Significant

price increases or decreases can lead to surprising changes in demand

in the short run.

V.2. CONSUMER BEHABIOR AND BUYING DECISION

Illustration 32. Buying behavior and decision process

Source: Own development

Organization

buying

behavior

Customer

buying

decision

process

Organization

buying

decision

process

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V.2.1. Consumer Buying Behavior

Buying behavior is the decision processes and acts of people

involved in buying and using products. Consumer buying behavior is

the buying behavior of person who purchases products for personal or

household use and not for business purposes, whereas the opposite is

true for organizational buying. There are four main types of consumer

buying behavior:

 Routine response behavior – which involves very little

search and decision effort and is mainly, used for products,

that are low-priced and bought frequently and quickly;

 Limited decision making – which is used for products pur-

chased occasionally and/or to acquire information about

unfamiliar brands in a familiar product category and re-

quires a moderate amount of time;

 Extensive decision making – where buyers use many crite-

ria for evaluating brands and spend more time seeking al-

ternative products and searching for information about the

products. Extensive decisions are made by consumers buy-

ing expensive products and infrequently purchased lower-

priced items;

 Impulse buying – involves no conscious planning but

a powerful, persistent urge to buy something immediately.

V.2.2. Consumer Buying Decision Process

There are five stages in the consumer buying decision process

and the actual act of purchase is only one stage in the process. Not all

decision processes, once initiated, lead to an ultimate purchase; the

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individual may terminate the process at any stage. Of course not all

consumer decisions include all five stages. With a deep understanding

of the buying cycle, marketing is able to synchronize the appropriate

marketing activities:

 Problem recognition. The first stage is problem recognition

and this stage occurs when a buyer becomes aware of a dif-

ference between a desired state and an actual condition.

The individual may be unaware of the problem or need and

marketers may use sales personnel, advertising and pa ckag-

ing to aid recognition, the speed of which can be slow or

fast;

 Information search. The second stage is the information

search which begins after the consumer becomes aware of

the problem or need. The search for information about

products will help resolve the problem or satisfy the need.

There are two aspects of an information search: internal

search and external search. In the internal search, buyers

search their memories for information about products that

might solve the problem, and then an external search is

made if they cannot retrieve enough information from their

memories for a decision. When successful, an information

search yields an evoked set of products or a group of

brands that the buyer views as possible alternatives;

 Alternatives evaluation. The next, third stage is an evalua-

tion of alternatives. In this stage, the consumer establishes

a set of criteria against which to compare the characteristics

of the products in the evoked set. The consumer rates and

eventually ranks the brands in the evoked set using the cri-

teria and their relative importance. Marketers can influence

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consumers' evaluation by framing the alternatives through

describing alternatives and attributes;

 Purchase. This allows consumers to move on to the fourth

purchase stage whereby the consumer selects the product or

brand to be purchased. Such things as product availability,

seller choice and terms of sale may influence the final

product selection;

 Post purchase evaluation. The final stage is known as post-

purchase evaluation in which the buyer begins to evaluate

the product after purchase, based on many of the criteria

used in the evaluation of alternatives stage. Cognitive dis-

sonance is dissatisfaction that occurs when the buyer ques-

tions whether he or she should have purchased the product

at all or purchased a different brand. This occurs especially

after high value purchases.

V.2. 3. Factors Affecting Consumer Buying Decision Process Motives

Motives also play a major part in consumer behavior. A motive

is an internal energizing force that orients peoples' behavior towards

their individual goals and a buyer's actions at any time are affected not

by just one motive but by a set of motives, some stronger than others.

These affect the direction and intensity of behavior.

Ability, Learning and Knowledge

Ability, learning and knowledge are also important considera-

tions. Ability refers to an individual's competency and efficiency in

performing tasks. Learning is a change in an individual's behavior that

is caused by information and experience, and the learning process is

strongly influenced by the effects of an individual's behavior. Custom-

163

ers learn about products directly by experiencing them or indirectly

through information from salespersons, friends, relatives and adver-

tisements. Knowledge consists of two components: familiarity with

the product and the individual's ability to apply the product.

Attitudes

Attitudes should also be considered. Attitudes refer to

knowledge and positive or negative feelings about an object or activi-

ty. They are learned through experience and interaction with other

people and can be changed. Customers' attitudes towards a firm and its

products strongly influence the success or failure of the organization's

marketing strategy. Marketers use several approaches to measure con-

sumer attitudes towards dimensions such as prices, package designs,

brand names, advertisements, salespeople, repair services, store loca-

tions and features of existing or proposed products. They can include:

direct questioning of consumers; projective techniques; attitude scales,

which measure intensity of feelings towards an object.

Changing people's negative attitudes is generally a long, expen-

sive and difficult task.

Personality

Personality is another major factor for marketers to be aware

of. This is all the internal traits and behaviors that make a person

unique. The uniqueness of one's personality arises from family back-

ground and experiences. When promotion focuses on certain types of

personalities, the advertiser uses personality characteristics that are

valued positively.

Personal factors

We should now consider a range of personal factors influencing

the buying derision process, and here we mean that a personal factor is

164

one that is unique to a particular individual. Demographic factors in-

volve individual characteristics such as age, race, sex, and income and

can influence who is involved in family decision-making and one' s

behavior. It can influence the extent to which a person uses products

in a specific product category. Situational factors include external cir-

cumstances or conditions that exist when a consumer is making a pu r-

chase decision and these influence a consumer's actions in any stage

of the buying process such as time pressures, product scarcity and

weather. Another factor is the level of involvement, for example the

importance and intensity of interest in a product in a particular situ a-

tion. A low involvement results when buyers form an attitude about

a product and evaluate its features after purchasing it. Alternatively,

high involvement buyers spend much time and effort researching their

purchase beforehand. Situational involvement results from the particu-

lar circumstance or environment in which buyers find them.

Psychological factors

Further important considerations are psychological factors in-

fluencing the buying decision making process. We can first look at

perception, which is the process of selecting, organizing and interpret-

ing information inputs to produce meaning. Since an individual selects

some pieces of information and ignores others, only a small number of

information inputs are selected to reach one's awareness because one

cannot be conscious of all inputs at any one time – a phenomenon

called selective exposure. Input is more likely to reach the person's

awareness if it relates to an anticipated event. Also, a person is likely

to let an input reach consciousness if the information helps satisfy cu r-

rent needs. Marketers have realized that if the intensity of an input

changes significantly, it is more likely to reach awareness. The selec-

tive nature of perception also results in selective distortion and selec-

165

tive retention. Selective distortion is changing or adjusting currently

received information. Selective retention occurs when people remem-

ber information inputs that support their feelings and beliefs and for-

get inputs that do not. A person's self-perception, or self-concept, may

affect purchase decisions and consumption behavior. Marketers try to

influence consumers' perceptions but sometimes fail. For example,

a consumer's perceptual process may operate in such a way that a

seller's information never reaches the consumer's awareness. Also,

a buyer may receive a seller's information and perceive it differently

from what the marketer intended. When buyers perceive information

inputs that are inconsistent with prior beliefs, they are likely to forget

the information quickly.

Social factors

Social factors influencing the buyer's decision process include a

number of factors, the first of which are roles and family influences.

A role is a set of actions and activities that an individual in a particular

position is supposed to perform based on the expectations of both the

individual and surrounding persons. Each individual has many roles.

An individual's roles, particularly family roles, influence that person's

behavior as a buyer to some extent. Reference groups also have an

impact on buyer behavior. A reference group is a group with which an

individual identifies so strongly that he or she takes on many of the

group members' values, attitudes or behaviors. Families, school

cliques, church groups and professional groups are examples of refer-

ence groups. A reference group is a point of comparison and a source

of information for an individual. The extent to which a reference

group influences a purchasing decision depends on the individual's

susceptibility to reference-group influence and strength of involve-

ment with the group. Reference group influence may affect the prod-

166

uct derision, the brand decision, or both. A marketer sometimes uses

reference group influence in advertisements to promote the message

that leads people in a specific group to buy the product and be highly

satisfied with it. Social classes are also important, however, this de-

pends on the extent to which class systems operate within particular

cultures; this is more prevalent in some countries than others. Social

classes are often aggregates of people with similar social ranking. The

criteria used to group people into classes vary from one society to an-

other. In different societies, people are grouped according to many

factors, including occupation, education, income, wealth, religion,

race, ethnic group and possessions. Individuals within social classes

develop common patterns of behavior. Since social class affects so

many aspects of a person's life, it also influences to some extent the

type, quality and quantity of products purchased. Marketers commo n-

ly divide consumers into different categories, but they should remem-

ber that there is considerable diversity within each status group.

Cultural factors

Culture and subculture are further important factors to consider.

Culture is everything in our surroundings that is made by human be-

ings and includes tangible items such as food, clothing, furniture,

buildings and tools and intangible concepts such as education, welfare

and laws. Furthermore, it includes the values and a broad range of b e-

haviors accepted by a specific society. The concepts, values and be-

havior that make up a culture are learned and passed from one genera-

tion to the next. Since culture influences widely affect the ways in

which people buy and use products, culture affects the development,

promotion, distribution and pricing of products. International market-

ers must take into account the cultural difference of other regions of

the world. Indeed, if you are employed in this function within an or-

167

ganization you will no doubt be able to think of many examples. Sub-

cultures are cultural divisions based on geographic regions or human

factors, such as age or ethnic background and may be characterized by

considerable variations in purchasing behavior.

V.3. ORGANIZATION BEHAVIOR AND BUYING

DECISION

V.3.1. Organization Buying Behavior

We will now look at some different dimensions of organiza-

tional buying behavior. Organizational transactions tend to be much

larger than consumer transactions and suppliers often must sell their

products in large quantities to make profits. Generally, organizational

sales are negotiated less frequently than consumer sales and some

items, such as capital equipment, are used for a number of years. Oth-

er industrial products, such as raw materials, are used continuously in

production. Several people or departments within the purchasing o r-

ganization may be involved in the transaction. Industrial buyers are

generally considered different from purchasers of consumer products

because they are well informed about the products they purchase or

seek additional information before buying. They do not seek psycho-

logical s atisfaction accompanying organizational advancement and

financial rewards. Those who consistently exhibit rational organiza-

tional buying behavior are likely to attain personal goals because they

are performing their jobs in ways that help their firms achieve organi-

zatio nal objectives.

So let us look at the primary concerns of organizational buy-

ers. The first of these is the level of product quality. A product must

meet specifications so that its use will not result in malfunction for the

168

ultimate consumer. Obtaining a product that meets but does not ex-

ceed specifications is important to avoid excess costs. The second is

services. The services suppliers provide may be the primary element

that differentiates one product offering from another. Often the mix of

services is likely to be the major way by which an organizational mar-

keter can gain a competitive advantage and includes such things as:

market information; technical product information; data regarding

demand; information about economic conditions, supply and delivery

information; maintaining an inventory; on-time delivery; repair ser-

vices and replacement pans; credit. The third factor is of course the

price since this influences operating costs and costs of goods sold,

thus affecting the selling price and profit margin.

In terms of types of organizational purchase, we have new-

task purchase, modified rebuy and straight rebuy purchase. In a new-task

purchase, the organization makes an initial purchase of an item to be

used to perform a new job or to solve a new problem. In a modified re-

buy, a new-task purchase is changed the second or third time it is pur-

chased, or the requirements associated with a straight re-buy purchase

are modified. A straight re-buy occurs when the buyer purchases the

same products routinely under approximately the same terms of sale.

V.3.2. Organization Buying Decision Process

Organizational (or industrial) buying behavior refers to the pur-

chasing behavior of producers, resellers, government units and institu-

tions. The buying center consists of individuals who are involved in

making organizational purchasing decisions and includes users, influ-

ences, buyers, deciders and gate-keepers:

169

 Users are organizational participants who actually use the

product being acquired;

 Influencers often are technical personnel who help develop

the specifications and evaluate alternative products for pos-

sible use;

 Buyers select the suppliers and actually negotiate the terms

of the purchases;

 Deciders actually choose the products and vendors;

 Gatekeepers control the flow of information to and among

persons who occupy the other roles in the buying center.

The number and structure of an organization's buying cen te r s

are affected by the organization's size, its market position, the volume

and types of products purchased, and the firm's managerial philoso-

phy. In some cases it is clearly seen that these roles can overlap. There

are several stages of the organizational buying decision process:

 First stage – one or more individuals in the organization

recognize that a problem or need exists;

 Second stage – the development of product specifications

requires the organizational participants to assess the prob-

lem or need and determine what will be necessary to re-

solve or satisfy it;

 Third stage – involves searching for possible products to

solve the problem and locating suppliers of such products;

 Fourth stage – the products on the list of several alternative

products and suppliers generated in the search stage are

evaluated to determine which ones (if any) meet the prod-

uct specifications;

 Fifth stage – product to be purchased and its supplier are

chosen, and the product is actually ordered;

170

 Sixth stage – the product and supplier's performances are

evaluated.

V.3.3. Factors Affecting Organization Buying Behavior

Just like consumer buying behavior, organizational buying be-

havior is influenced by several factors: First, environmental factors ,

i.e. uncontrollable forces such as laws, regulatory actions and guide-

lines. Second, organizational factors will include the buying organiza-

tion's objectives, purchasing policy and resources as well as the size

and composition of the buying center. Third, interpersonal factors,

these refer to the relationships among people in the buying center. Fi-

nally, individual factors, these are the personal characteristics of indi-

viduals in the buying center, such as age, educational level, income

and position in the organization.

V.4. SEGMENTATION, TARGETING, POSITIONING

V.4.1. Market Segmentation

We should now consider the ways of selecting target markets.

There are two widely used approaches to identifying target markets:

the total market approach (mass marketing) and the market segmenta-

tion approach (target marketing). In the total market approach, or un-

differentiated approach, the organization designs a single marketing

mix and directs it at a total market for a particular product. The as-

sumption is that the needs of the target market for a specific kind of

product are very similar, thus the business can satisfy most customers

with a single marketing mix. However, the trend is far away from the

total market approach. Even so, there are two requirements for effec-

171

tive use of this total approach: a large proportion of customers in the

total market must have similar needs for the product, and the organiza-

tion must be able to develop and maintain a single marketing mix that

satisfies customers' needs.

In essence, to summarize what we presented so far, it is worth

to remind what marketing hopes to achieve:

 Determine current and future requirements for each segment;

 Analyze and incorporate requirements into strategic plans;

 Evaluate and improve process for determining customer re-

quirements;

 Evaluate and improve customer relationship management

process;

 Evaluate and improve the process of determining customer

satisfaction;

 Use the information to develop and improve strategic plans.

In an increasingly competitive marketplace, companies are

more intimately involving their customers as partners in building and

sustaining value. Mass marketing may become obsolete especially as

consumers become better informed and increasingly demanding about

any product or service. Accordingly, business strategies are evolving

to maximize product or service penetration. It is not enough to simply

find a descriptive way to categorize segments of the market. To be

valuable, each segment must have something in common, something

which allows marketers to meet their needs specifically and more e f-

fectively.

Market segments are groups of customers who have the same

needs and so act similarly in response to a value proposition and mar-

keting mix. The market segments are related to certain specific needs

to be fulfilled. Marketers must decide which market segments to enter.

172

A marketing program that covers all elements of the marketing mix

can be designed to suit the requirements of targeted segments. When it

comes to a marketing program at FMCG manufacturers, segmentation

has evolved into a multi-faceted approach to customer needs assess-

ment, delving into behavioral and psychographic variables such as

personality, loyalty or value sets. From point of view of these, it is

clear that customers will create and belong to clusters. These clusters

form what we term as market segments. Market segments should have

the following features: homogeneous, distinct, large enough, accessi-

ble and viable. Market segmentation is the process by which custom-

ers in markets with some heterogeneity can be grouped into smaller,

more similar or homogeneous segments. Segmentation is a process

whereby companies divide their client base into sub-groups based on

standard demographics such as age, gender and income in order to

identify target groups. Segmentation is appropriate for heterogeneous

markets whereby customers have different requirements. Indeed, in

completely heterogeneous markets, the only way to satisfy everyone is

by offering tailor-made products. In most markets, however, the ag-

gregation of customers into groups with similar product needs and

wants is feasible. By segmenting the market a firm may gain several

advantages. It is possible to achieve a better understanding of custom-

er needs, wants and characteristics, assuming proper research is car-

ried out. On a related point, marketers who are closely in touch with

segments can be responsive to slight changes in what target customers

want. Some segments may be too small which could raise the cost of

marketing. Conversely, a large base may not necessarily be ideal ei-

ther. An example is when a campaign is needed to target a group with-

in a limited time and there may be insufficient resources. However,

one could argue with long term planning and email blitz.

173

Table 24 . Advantages and disadvantages of segmentation

Advantages of segmentation

Disadvantages of segmentation

Better understanding of customer

needs, wants and characteristics

Small segments could raise the

cost of marketing

Responsiveness to slight changes

in what target customers want

Limited time and insufficient

resources

Discover and explore new potential

market segments and opportuni-

ties (niches)

Better competitiveness and eco-

nomic performance

Source: Own development

Here are some important criteria (variables, bases) usually

used in the market segmentation:

 Demographic variables – include age, sex, family, race and

religion, and have been shown to be closely related to con-

sumers' product needs and purchasing behavior;

 Socio-economic variables – include income, occupation,

education and social class, and sometimes these variables

are included under the demographics label;

 Geographic variables – include climate, terrain, natural re-

sources and population density and are particularly appro-

priate for international marketing;

 Personality, motives and lifestyle:

174

 Personality can be useful when products are similar to

competing products although segmenting a market ac-

cording to personality has caused problem since some

market research shows weak relationships between con-

sumer choice and personality traits;

 Motives can also be used in segmentation. Here markets

are divided according to consumers' reasons for making

a purchase and such things as product durability, econ-

omy, convenience and status all relate to motives;

 Lifestyle is a further consideration and it encompasses

rather numerous features relating to peoples' activities,

interests and opinions. It is used to segment markets ac-

cording to how individuals spend time, their values and

beliefs, and gives a broad view of buyers based on their

activities, interests and opinions;

 Product-related characteristics – which includes: purchase

behaviors, like brand loyalty or price , durability, unique-

ness; the purchase occasion such as emergency purchase or

routine rebuy; the benefits sought, e.g. customers buying

toothpaste seek different benefits, which may include taste,

fluoride protection or fresh breath; consumer behavior and

user status, for example, whether consumption is light or

heavy; and attitude to a product, as consumers have differ-

ent perceptions and preferences for particular products.

We will now consider whether a firm should use single-

variable or multi-variable segmentation. Single-variable segmentation

is achieved by using only one variable and is the simplest and easiest

form to use. Unfortunately, it enables marketers to be only moderately

precise in designing a marketing mix to satisfy individuals in a specif-

175

ic market segment. Alternatively, multi-variable segmentation is

achieved by using more than one variable. This can be much more

beneficial since the marketer gains more information about the indi-

viduals in each segment and can more precisely develop a marketing

mix to satisfy individuals in a specific segment. However, the number

of segments created increases, reducing the sales potential of many

segments. Whichever strategy is adopted, segments must be measura-

ble and easy to identify so those segments can be compared with re-

spect to estimated sales potential, costs and profit. Also, segments

must be substantial so that they have enough profit potential to justify

the development and maintenance of a special marketing mix for the

segment. The segments must be accessible so the organization can

reach it with a particular marketing mix, and must be reasonably sta-

ble over time so that action taken has a chance to work. We have a l-

ready said that marketing research is necessary, and understanding the

profile of marketing segments is a common application. A compre-

hensive understanding of what the individuals in segments are like is

essential to organizations.

Consumer and organization market segmentation. The segmen-

tation bases between consumer and organization markets may differ

significantly. Variations in organizations' demands result from differ-

ence in climate, terrain, consumer preferences and size or similar fac-

tors. Also, the required product features, distribution systems, price

structures and selling strategies may vary among different types of

organizations. A further consideration is how a firm uses products as

this affects the types and amount of the products purchased and the

manner in which they are purchased.

176

Table 25 . Segmentation criteria for consumer and organization

market

Characteristics of segment

Metropolitan – Countryside

Domestic – International

North – Central – South

Plain area – Mountainous area

Demographical and socio-

logical

Age; Sex; Householder's size; Income; Mar-

ital state; Education; Profession;

Personality;

Lifestyle;

Style;

Purchasing motivation;

Contingency of buying;

Benefit sought for;

Product usage;

Product loyalty;

Characteristics of segment

Domestic – International

North – North-East – North-West

Central – North-Central – South-Central

South – South-East – South-West

Company's characteristics

Form of ownership

Size and organizational structure

Features of activities

Purchasing characteristics

Procurement policy

Procurement procedure

Size of order

Frequency of order

Supplier's characteristics

Diverse source of supply

Relationships with partners

Long-term commitment

Source: Own development

177

Segmentation strategy

There are several ways in which an organization can react to

the market opportunities.

 Market penetration – can be adopted and this involves in-

creasing sales in present markets by taking sales from the

competition;

 Product development – offering new or improved products

to current markets;

 Market development. This involves developing existing

products in new markets by finding new applications

and/or customer groups;

 Diversification. The most risky strategy, i.e. moving into

different markets by offering new products.

Illustration 33. Ansoff's product-market matrix

Source: Own development

The next few sections will deal with the process of segmenta-

tion, targeting and positioning (S -T-P) . Here, in the following section,

we have a procedure for S-T-P process:

178

1. Segmentation:

a) Design criteria for segmentation;

b) Identify segments based on given criteria;

2. Targeting:

a) Evaluate attractiveness of each segment;

b) Select the target segments;

3. Positioning:

a) Identify possible positions for each target segment;

b) Select best and feasible positions;

c) Develop marketing strategy toward selected position.

Illustration 34. STP process

Source: Own development

Since most markets are characterized by intense competition,

marketers need to understand the nature of this competition. Conse-

quently, decisions about which segments to target and what kind of

competitive advantage should be sought can be made. The decision

179

becomes even more apparent when we consider that companies have

limited resources. Therefore, to target the whole of a market is usually

unrealistic. This means that the effectiveness of personnel and materi-

al resources can be improved by a more narrow focus on a particular

segment. The strategic nature of the marketing concept provides per-

haps the best advantage, namely dividing markets up allows compa-

nies to develop plans to suit the particular needs and requirements of

customers in different segments. It will also be appreciated that time

scales covered by strategic plans can also be structured accordingly.

The process by which segmentation takes place consists of segment a-

tion, targeting and positioning, each of which requires thorough re-

search. When segmenting the market the manager must consider vari-

ables for segmenting the market, including profiles of emerging seg-

ments, and then validate the segments that arise. The next step is to

decide on a targeting strategy and here the manager must decide

whether to concentrate on a single segment with one product, or offer

one product to a number of segments, or even to target a different

product at each of a number of segments. This depends on the deci-

sion as to which and how many segments to target. The next step is

then to position the product. The key here is to understand consumer

perceptions then to position the product in the mind of the consumer

with the design of an appropriate marketing mix. This procedure is for

disaggregating the total market. We should consider the selection of

segmentation variables, the dimensions or characteristics of individu-

als, groups or organizations that are used for dividing a total market

into segments. We should also consider two main factors when choos-

ing segmentation variables. First, the variable should be related to

peoples' needs for the use of, or behavior towards the product. Second,

the variable must be measurable.

180

V.4.2. Market Segments Targeting

After segmentation has taken place the firm should decide on

its targeting strategy . Target market is a set of customers sharing same

criteria of segmentation and the organization is determined to serve

them and direct all marketing activities to them at profit. Companies

select target market segments based on their:

 Resource and competitive capacity;

 Business goals – in terms of the ambition of the leadership;

 Uniformity of products – in terms of product lines available;

 Uniformity of the market – in terms of needs, behavior, at-

titudes and reactions to marketing efforts of companies;

 Competitors' strategies;

 Specific of the sector in which they operate.

There are three types of marketing strategy in general. With

concentration (focus) strategy, the organization directs its marketing

efforts towards a single market segment through one marketing mix.

The advantage of this is that it gives the firm an opportunity to ana-

lyze carefully the characteristics and needs of a distinct customer

group and then focus all efforts into satisfying that group's needs. Al-

so, it enables a firm with rather restricted resources to compete with

much larger organizations. However, the problem is that if the compa-

ny's sales depend on a single segment and that segment's demand for

the product declines, the organization's financial strength also de-

clines. Therefore, a spreading strategy may be more appropriate, i.e.

targeting a number of segments so that not all the resources are tied to

one segment. Unfortunately, with few resources a firm may not be

able to put the required resources into attempting this strategy. Conse-

quently, only a limited amount of segments can sometimes be targeted.

181

Illustration 35. Selection of target markets

a) Mass marketing

b) Differentiation marketing

c) Focus marketing

Source: Own development

182

V.4.3. Positioning on Targeted Market Segments

Position of a given product or brand is a set of impressions,

feelings and notions of customers about one brand or product in com-

parison with other brands or products. Positioning is to use all marke t-

ing efforts to build an image of product, brand or even of company

in comparison with those of the competitors in custom ers' awareness

and recognition. It is now important to consider positioning strategies .

The main point to notice is that positioning is not what is done to the

product, it is what is created in the minds of target customers, and the

product must be perceived by the selected target customers to have

a distinct image and position vis-à-vis its competitors. At this juncture,

it is appropriate to discuss what marketers should know about compe-

tition. Competition is not about just at the product level but at various

other levels. The product must stand out and have a clearly defined

position. In-depth market research is required to understand customer

motivations and expectations. Consumers generally assign a position

to a company or product relative to the market leader. A product's po-

sition is affected by the reputation and image of the company and its

other products, and by the activities of its competitors. Perceptual

mapping is commonly adopted to visually depict consumer percep-

tions and prioritizing of brands and their perceived attributes.

Table 26 . Process of positioning

ANALYSIS OF CURRENT SITUATION

Analysis of customers (their profile, important factors when

they purchase product; how they identify company's products

and brands)

Analysis of competitors (their 4P strategies, strengths and

weaknesses, their positioning strategies)

183

Analysis of own business (business goals, resources, strengths

and weaknesses, current comparative position)

To determine current position (of own business) and positions

of competitors according to important criteria (i.e. price and

function of a given product) to determine own position or self-

reposition properly based on own advantages such as:

- Product differentiation – quality, design, safety, diversity and

wide selection;

- Service differentiation – accompanying services: warranty,

repairmen, spare parts, reliability, promptness, accuracy;

- Image differentiation – symbols, slogans, theme songs, colors,

events;

SELECTING OF POSITIONING STRATEGIES

- Based on product's features – price, quality, package, service

or certain feature;

- Based on benefits for customers – specific, very unique bene-

fit;

- Based on customers themselves – for certain group of custom-

ers due to their personal features and specific needs;

- Based on comparison – comparing with competitive or substi-

tutive products.

IMPLELENTING OF SELECTED STRATEGY

Through action program jointly with marketing mix 4P to cre-

ate and engrave certain image in the customers' mind in the

target market.

Source: Own development

Hereafter are some of the most important mistakes in position-

ing that must be avoided to guarantee success of the positioning pro-

cess of products, brands or organizations:

 Over-positioning (generate no or less than enough trust and

credibility) or under-positioning (waste of resources);

 Positioning using too many factors/criteria not focusing on

the most important ones;

184

 Inappropriate positioning, leading to indifference and un-

mindfulness of customers;

 Incorrect positioning mixing up one factor/criterion, prod-

uct feature with another.

V.4.4. Marketing Mix and Positioning

In marketing, positioning is the process by which marketing a t-

tempt to anchor in the minds of target markets for its brand. It was

popularized by Al Reis and Jack Trout. The concept is fairly simple.

In a crowded world bombarded constantly with product information, it

is critical for marketers to create a first impression in the minds of

consumers. Hence, there is first mover advantage. The underpinning

concept of first mover is the belief that consumers only accept infor-

mation which is consistent with their prior experiences. The cliché of

mind share results in market share seems to be true. Does it mean that

late entrants are doomed to failure? Not quite. There are many classic

cases when these brands acknowledge the number one and then posi-

tion themselves accordingly without challenging the market leader

head-on. Consumers consciously rank brands in their minds. Lesser

known brands therefore locate themselves relative to the market lea d-

er. While in the short term, the market leader will not be displaced, the

lesser known brand could increase its market share. Renowned exam-

ples include Avis versus Hertz; 7-Up versus Coke and Pepsi. It is the

positioning that will integrate the marketing mix decisions. In market-

ing, it may be wise to diversify to a number of segments, in which

case, different mix approaches are necessary. By customizing each

marketing mix to each segment, the product should more closely satis-

fy customer needs in each segment. Each differentiated strategy will

185

require its own positioning plan. Undifferentiated strategy uses con-

sistent marketing activities to ensure control and lower marketing

costs because of marketing economies of scale. There is only one

marketing strategy with a single positioning for all market segments.

Finally, we will answer how the S-T-P process contributes to

achieve the marketing purposes set out initially, that are:

 Determine current and future requirements for each segment

We realize that customers are heterogeneous and in order to

reach them efficiently and with efficacy, these customers

can be grouped into smaller, more similar or homogeneous

segments. These customers are divided into sub-groups

based on standard parameters such as size, similarities

in order to identify target groups. Segmentation is appropri-

ate for heterogeneous markets whereby customers have dif-

ferent requirements. Indeed, in completely heterogeneous

markets, the only way to satisfy everyone is by offering tai-

lor-made products. In most markets, however, the aggrega-

tion of customers into groups with similar product needs

and wants is feasible;

 Analyze and incorporate requirements into strategic plans

Determine current and future requirements for each seg-

ment. By segmenting the market we may gain several a d-

vantages. It is possible to achieve a better understanding of

customer needs, wants and characteristics, assuming proper

research is carried out. On a related point, marketers who

are closely in touch with segments can be responsive to

slight changes in what target customers want. After segmen-

tation has taken place the firm should decide on its targeting

strategy. With the concentration strategy, we direct out

186

marketing efforts towards a single market segment through

one marketing mix; or multiple segments via a melting pot

of marketing mix. The advantage of this is that it gives the

firm an opportunity to analyze carefully the characteristics

and needs of a distinct customer group and then focus all ef-

forts into satisfying that group's needs. Also, it enables

a firm with rather restricted resources to compete with co m-

petitors;

 Evaluate and improve process for determining customer re-

quirements

At the moment, we use CRM to log in requirements. The

requirements are stated in terms of products. There is very

little data on the decision-makers and the organizations such

as buying behavior and norms. We are building up

a knowledge base of our customers. This will take time and

require the entire organization to input the data. The mem-

bers of our organization are still not sharing information

about our customers. Many of them felt that it is not their

responsibility to hand over the information. Even though

they do hand over data, there is no system to capture the

qualitative data. And such data can be difficult to decipher

when syntax are considered. Understanding customers

makes targeting and positioning easier. Individual custom-

er's needs could be pin-pointed and naturally, strategies

could be crafted to meet each of those needs;

 Evaluate and improve customer relationship management

process;

 Evaluate and improve the process of determining customer

satisfaction

187

Once customer satisfaction level is established on a strate-

gic level as well as on an individual level, one can decode

the customers' feedback. One must then interpret qualitative

data. Customer satisfaction is determined by asking cus-

tomers what they feel about us. While this is one way,

it does have its flaws. What customers say may not translate

into action, meaning while a customer may say he is satis-

fied; he may not buy our products and services. Testing cus-

tomer satisfaction is a better tool than a survey. But it must

be noted that customer survey is necessary. It is a blunt tool

to determine satisfaction. Getting customers to buy is prob-

ably sharper tool;

 Use the information to develop and improve strategic plans.

188

Chapter VI

SERVICE MARKETING

Objectives:

Understand four unique characteristics of service marketing that

give rise to the three additional instruments in marketing mix

Implement marketing program, using the 7Ps marketing mix of ser-

vice marketing

Understand profoundly the strategic role and direct impact of staff

and their skills, competencies in service marketing

Implement effectively the people strategy mix into service organiza-

tion

CHARACTER OF SERVICE MARKETING

SERVICE MARKETING MIX

VI.1. CHARACTER OF SERVICE MARKETING

Knowing about the strategies in marketing, it is time to imple-

ment marketing per se, to achieve this, it is important to understand

each of elements of the marketing mix so that the plan can be execut-

ed to fulfill the marketing objective. According to Kotler, marketing

mix can be broken down into 4 major categories and they are the

product, price, place and promotion. However this is applicable only

to the marketing of pure products. Pure products are tangible products

that can be physically touched and more importantly, that customers

can claim ownership of the products after purchase. Examples of these

189

products are rice, paper and a whole lot of other physical products. In

addition to the marketing of pure products, there is also the marketing

of services where they are intangible and customers who make pur-

chases will end up with no tangible product.

Unlike pure products, services have 4 major characteristics that

make it difficult for marketers to market. These 4 major characteristics

are:

 Intangibility – This characteristic of service refers to the in-

tangible form of service that is being purchased and con-

sumed. Different from physical product where the marketer

can show, demonstrate or even allow the customer to sam-

ple the product prior to a purchase, service is impossible to

do so. Moreover, buyers will not own any physical product

after purchase, so it becomes impossible to show the cu s-

tomers the physical form of their purchase. This compli-

cates the marketing process and makes it more difficult to

convince the customer to buy. An example of this is the

service provided by the cinema operators, customers who

make purchases, will only acquire the experience of watch-

ing and listening to the movie in a pleasant environment,

they will not be taking or owning anything by the time the

movie ended. Another example is that of the freight for-

warding service and in this case, the customer pay for the

service of moving their property from one destination to

another and again similar to that of the movie, the customer

do not physically purchase or own anything after the pur-

chase. Without tangibility, it creates much difficulty in per-

suading customers to make the purchase, as there is nothing

for the customer to sample. To counter this difficulty,

190

physical evidence of the service is introduced and this will

be discussed as an additional P, which stands for physical

evidence in the marketing mix;

 Perishability – This refers to the inability to store service

for future purchase. As for physical product, marketers can

forecast demand and produce in preparation for the de-

mand. As demand is difficult to predict, excess stock can

always be kept in preparation. In a situation where demand

is high, stock can be drawn to satisfy the demand and when

demand is low, the product can still be kept in stock. This

will minimize the chance of the marketer missing out on

the chance of selling its product to the market. However,

for the marketing of services, it is impossible to do so. Ser-

vices produced by the service provider, when not con-

sumed, it cannot be stored and as a result, it will perish

with the marketers losing the chance of marketing it. For

example, for the hotel service, the rooms that are left va-

cant for the night will be sales lost as a result of perishabil-

ity. Nights that the rooms are left vacant cannot be kept or

stored for future sales. Another example can be that of the

warehousing business. Days that the warehouse is unoccu-

pied, cannot be retrieved to be sold at a later date, the op-

portunity to sell the space for that day simply perish, thus

incurring a loss to the business. To counter this, organiza-

tions may consider reducing the quantity of service provi d-

ed, for example, reducing the number of hairstylists or r e-

ducing the number of rooms for rental. However, when

demand increases, marketers will lose the opportunity of

marketing its services to the customers and as a result, the

191

excess customers who cannot be served by the marketers,

will look for alternative, thus turning mostly to the compet-

itors. To resolve this issue of perishability, marketers use

demand management technique to attempt to even out the

demand so that it can be constant. If the demand is kept

constant, it will ensure that the service providers are kept

busy at all time, i.e. full occupancy, while being able to

serve all its customers, and not allow them the opportunity

to turn to the competitors. Marketers achieve this by e n-

couraging demand in off-peak hours through discount pric-

ing. Using this technique, marketers can attract customers

to purchase the service in off-peak hours, increasing occu-

pancy and reducing loss. Another advantage of this is that

customers, who have purchased and consumed the service

during off-peak hours, will not go back to the service pro-

vider, and this create vacancy during normal hours for the

rest of the customers to purchase. Cinema operators and

telephone service providers are common users of this tech-

nique to ensure full occupancy of its services;

 Variability – This is made reference to the variation of

a service. For physical products, it is possible to control

almost all aspects of quality to ensure consistency in the

product sold. Because the product is produced in a factory

environment, proper quality management can be used to

control the consistency of its offerings; however, for ser-

vice it is almost impossible to do so. Firstly, there will al-

ways be variation between one service and another as it is

impossible to control them to be exactly the same and this

is caused by many factors, e.g. the environment in which

192

the service is consumed, the mood of the service provider,

the facial expression of the service provider, etc. Another

reason is that customer expectation changes and varies with

some customers having higher expectations while some do

not. This gives rise to the requirement of the next additional

mix and that is process and this will be discussed later;

 Inseparability – For customers of pure products, they will

purchase the products from the marketers, wholesalers or

distributors and there is no contact between the producer of

the product and the customers. However, for the purchase

and consumption of service, customers inevitably come in-

to contact with the service providers in order to consume

the service, and this increase the need for professionalism

when dealing with customers. In the provision of medical

service, the doctors and nurses are the contact persons that

customers come into contact with hence it is crucial that

these service providers are trained sufficiently to manage

the customers. Even a mere driver of a transportation com-

pany cannot avoid this training as they are the ones that

come into contact with the customers and if the customers,

in the process, felt that they are not duly served, they will

still complain and probably go to a competitor for their fu-

ture requirements. This characteristic of service has in-

crease the need to look into the practice of human resource

in an organization, i.e. people and this will be discussed as

the final addition in the marketing mix.

193

VI.2. SERVICE MARKETING MIX

After discussing the 4 characteristics of services, the next thing

is to focus on the marketing mix and as mentioned earlier, they are the

4 marketing mix elements of product, with the addition of 3 extra el-

ements to tackle the complexity of the marketing of services. In all,

they are the 7 elements of marketing mix of services or more simply

denoted as the 7Ps of marketing. These 7Ps are: Product; Price ; Place ;

Promotion; Physical evidence; Process; People.

VI.2.1. Product

In the consideration of product, it is important to understand the

concept of product planning. This is because new products or services

are constantly introduced while obsolete products or services are regu-

larly eliminated from the marketplace. Marketers need to plan and

consistently assess the relevance of its offerings so as to remain com-

petitive in the market. One of the attributes of products is the product

life cycle.

Table 27 . Product characteristics

Basic elements – functionality, design, color

Package – brand, usage instruction

Service – warranty, installation, spare parts, support

service

Concerning all three mentioned components in the

product structure

Moving toward standardization or customization

Moving to another market, customers group

Moving to consumer/organization market

Finding new application or using in combination of

other products

194

Collecting ideas – all round market and intermediary

investigation

Verifying ideas – selecting best ideas based on specific

criteria

Business analysis – determining product's commercial

feasibility

Product testing – verify credibility, safety, functionali-

ty, quality parameters

Market testing – trial limited market commercialization

Commercialization – full market commercialization

Applied to organization (industrial) market

Global products being symbol of economic integration

and penetrating global market

Applied to consumer, end-customer market

Local products being symbol of socio-economic re-

gionalization and need to be adapted willingly or un-

willingly to penetrate local specific market

A combination of both mentioned trends:

-Standardization – to reduce costs, retain image recog-

nition

-Customization – to get on with local tastes, prefer-

ences, customs and practices

To protect, inform about and propagate the product, its

functionalities and benefits

To attract customers and differ from other competitors

Impact by local culture and stipulated laws

Standardization strategy – reducing cost and consisten-

cy in brand recognition

Customization strategy – for diversification purposes

Recycling as positive approach toward Corporate So-

cial responsibility

To impress customers and retain those impressions in

their mind. Product positioning may be based on:

-Product attribute

-Product benefit

-Product usage and functionality

-Quality and price

-Customers structure and profile

-Comparison with competitors

Source: Own development

195

VI.2.1. 1. Product Life Cycle

A common model marketers used for this purpose is the Prod-

uct Life Cycle or PLC for short. According to the model, the life of a

product is just like that of a human and will go through 4 stages in its

cycle, i.e. from the birth or introduction of a new product to the death

or obsolesce of a product after it matures through a period of time.

The model identifies 4 stages and the different strategies suited for

each stage of the life cycle. Using this model, marketers can plan its

strategies by monitoring the life of its products and launch new prod-

ucts so that they can remain relevant in the market by continuing mar-

keting valued products to the market. The 4 stages of a life cycle are

introduction, growth, maturity and decline, each requiring marketers

to implement different strategies to maximize its effectiveness in its

marketing activities. This has been discussed in the previous chapter.

VI.2.1.2. Role of Product in Service Marketing

In this classification of product, it is sometimes difficult to dis-

tinguish between product and service. Most products sold nowadays

invariably come with some level of service while the marketing of

service is supported by kind of physical products, therefore, it is al-

ways a mix of either, with the support from the other. It is almost im-

possible to find pure products or pure services, in fact, product and

service lies on a continuum with varying degree of dependency on one

another as illustrated below.

196

Illustration 36. Product-service continuum

Source: Own development

Although in the marketing of services, the focus is on service,

sufficient attention should still be given to product as it plays the role

of complementing the service to be marketed. For example in the

marketing of transport service, though the trucks will not be purchased

and owned by the customer but by the service provider, it will provide

an impression of the level of service to be expected from the service

provider. By assessing the condition and the quality of the truck, cus-

tomers can assume the service level extended to them. Of course, this

product cannot accurately characterize and assure the service level,

but customers will still make judgments through them, hence it is im-

portant that the complementing product must be in a condition to re-

flect the level of service so as not to increase or lower the expectation

of the customer. In line with globalization, some products may need to

be modified to suit the application and regulation of the different

countries that the service may be provided in.

VI.2.1.3. Product Strategy

Services, just like product, can be segmented according to the

needs of the customers. In different markets, the same organization

can offer different level or types of services. For example, Singtel

not

only offer fixed line telephone service, it also offer mobile phone line

Singapore Telecommunication

197

services, broadband services, paging services and a whole lot of other

services. Depending on the needs of the customers and the competi-

tion in the industry, services can be streamlined to provide only the

core service, making it competitive and in situations where customers

request for more services, add-on packages can be included to com-

plement the core service. For example, a courier company can provide

only courier services, however, when customers request for packing

services or even warehousing services, this can be added upon the cus-

tomer request. Marketers must be updated about the changes in the

market and related to customers; they must always be experimenting

and testing for new services to be offered, especially in this competi-

tive global environment. Competitive reaction is also one of the rea-

sons where competitors offer new services that are proven to be popu-

lar with the market.

Illustration 37. Service model

Source: Own development

198

VI.2.1.4. Branding

In service marketing, besides considering the type of service,

there is also the issue of branding. Branding is important to marketers,

as it is the key element in helping marketers in communicating its

relative position in the market, i.e. the application of the positioning

strategy. As businesses expand into global markets, brand names are

also extended into overseas market. Organizations need to decide if it

wants to use the same brand for both domestic and overseas markets.

To achieve its goal, it must first understand the implications of both

options. Using the same brand name will incur lesser cost in advertis-

ing as the same advertisements may be used over different parts of the

world, resulting in lesser production cost of the advertisement. Anoth-

er advantage is the familiarity it provides for travelers that are entering

into different countries. Seeing a familiar name in a foreign enviro n-

ment will induce a sense of security especially if the customer has

used and is comfortable with the products under the same brand.

Products with the same brand name will appeal to them and this will

increase the chance of purchase over other unfamiliar brands. Con-

versely, having the same brand name has its disadvantages too. First-

ly, if the brand name is affected with bad publicity in the local market,

the effect will also be carried into the overseas market, affecting the

sales there. Another disadvantage is that if there are radical differences

between the products or services offered in the different countries,

different brand names may be required to reflect the different offer-

ings. Finally, due to the reason of market segmentation, different

brand names are used to illustrate the positions of its different offer-

ings in the different market segments. Hoteliers use this strategy when

they are competing in different segments of the hotel industry.

199

Table 28 . Same brand name advantages and disadvantages

Advantages of the same brand

name

Disadvantages of the same brand

name

Lesser cost in advertising

Bad publicity in the local market

will resonate overseas

Familiarity, increase the chance

of purchase

Inability to reflect the different

offerings

Inability to serve different seg-

ments of the market

Source: Own development

After understanding the choices of branding, the final conside r-

ation is the choosing of a good brand name. Brand name, like logo, is

a symbolic representation of the organization, product or service and it

will provide a first impression to the market of what to expect of the

organization or the brand. As a result, brand name must be chosen to

reflect the image the organization wishes to project. There are a few

guidelines that organizations may want to consider in choosing the

brand name and they are:

 Distinctive – Something unique as compared to others and

this will help customers in remembering the brand name,

e.g. Carrefour;

 Suggest something about the product or service – The

brand will prompt the kind of offerings marketed by the or-

ganization, e.g. Pizza Hut, United Parcel Service;

 Easy to pronounce, spell and remember – Being easy to

pronounce and remember, customers' retention of the

brand name can be extended, e.g. Sony;

200

 Capable of registration and legal protection – By being able

to register and protect its brand name, organizations is pro-

tecting itself against piracy and counterfeiting;

 In service marketing, branding is everything since there is

no tangible product to reflect the offering; hence, marketers

need to commit considerable effort in building its brand

name, to assist in the marketing of its services.

VI.2.2. Price

Price is a key determinant of profitability and this affect the

economic condition of the organization. In most situations, organiza-

tions want to sell its offerings at the maximum possible price so as to

maximize profits. However, it is almost impossible to determine

where the maximum possible price is. Pricing is affected by many fac-

tors, e.g. cost of raw material, demand for the offering, competitors

and their pricing, pricing of substitute offering, customers' perception

of the brand, economies of scale, etc. It is extremely complicated to

correlate these factors, and worst of all, these factors are dynamic and

impossible to track instantaneously.

Table 29 . Pricing strategy characteristics

Price in combination of

remaining elements of

marketing mix

Price should be reasonable for consumers, cor-

responding to the values they get; profitable for

the sellers and/or producers (to cover the cost of

production and other cost of marketing in dif-

ferent locales globally) in short and long run in

different foreign markets

Price should be flexible in regard to different

groups of customers, marketplaces, specific

moments of transaction

201

Internal factors: Cost of production, transport,

storage, business policy and marketing objec-

tives

External factors: Market demands, competition,

policy and laws (including tax and tariff)

Price and international

business policy

Business policy and strategy are strictly associ-

ated with:

 Sale turn-over

 Market share

 Profit

 Risk aversion

 Market penetration

 Dealing with competition

 Stop loss and withdrawing from market

 Brand image building and investment

 Currency preference

 Trading conditions (delivery, payment, war-

ranty and return)

 Economic conjuncture

Source: Own development

VI.2.2.1. Pricing Techniques

Nevertheless, marketers must determine the price so that it does

not confuse the customer and there are various techniques that can be

used. One of them is the value added pricing where marketers first

find out how much the customers are willing to pay for each of the

function or value that comes with the function, and then add all of

them together to result in the final price where the offering will offer

all the functions in a total package. Another technique is known as the

competitive pricing. The setting of price is based on its relative posi-

tion against the biggest competitor where marketers will price its

products to be either lower or higher than an established competitor,

communicating to the market its position against the said competitor.

202

This is a commonly used technique mainly because of its simplicity.

Lastly, due to differences in the factors affecting pricing, prices can

vary with geographical areas. For the same service or product, price

can be different in two different places.

Finally, price is the most common consideration in the custom-

er's evaluation of a product. Hence this usually leads to a price war

where competition will drive down the price of every supplier, bene-

fiting not the marketers but the customers. To avoid this, two common

strategies can be employed. The first strategy is through a breakdown

of the price of the product, i.e. pricing the product with just its core

function and charging the extra functions at a separate price. Car man-

ufacturers regularly use this strategy to compete. The second strategy

is through a bundling strategy and this involves the product to be bun-

dled with other products so that profits can be manipulated and hidden

in the different products, without stating the actual price of each prod-

uct. This process will make it tougher for competitors to guess the

profit made on each product. Computer manufacturers and even ser-

vice providers like slimming centers and tour operators regularly use

this strategy.

VI.2.2.2. Market Entry Pricing Strategies

In the marketing of new products or entering into new market,

price is usually set without any basis for comparison because there is

nothing to compare with. Marketers can use either one of the 2 mar-

ket-entry pricing strategies that are commonly used:

 Market skimming strategy – where the price is set high

in the beginning stage or the introduction of the new prod-

uct. As time goes on, this price is gradually decreased until

203

it stagnates when competition becomes widespread. Using

this technique, marketers can aim to maximize its profit

from each of the different level of the market before it a d-

vances to the next lower level. This strategy allows market-

ers to recoup its development and production costs very

quickly when the new product is launched. A weakness of

this strategy is that it is prone to competitor's reaction. Due

to the high price it set, competitors will interpret it as

a profitable product and will try to produce a similar prod-

uct, so as to compete for a slice of the market share. Be-

cause of this weakness, the strategy is applied only to mar-

kets where competitors find it difficult to enter, either due

to technological advancement or protected by other means

such as government licensing. Mobile phones manufactur-

ers like Nokia or Sony Ericsson are always using this strat-

egy when they launch the new models of their phones;

 Penetration strategy – in situations where competitors are

perceived to be able to react quickly to the new product or

market, this strategy is used. Using this strategy, marketers

price their product at a low price when it launches it prod-

uct, doing so, it will help them to sell a huge quantity into

the market allowing them to gain a large market share.

Even when competitors enter the market, there is only

a small group of customers left to compete for, making it

unattractive for them to enter the market. This is especially

critical if the market is small, resulting in competitors being

unable to achieve its economies of scale, hence incurring

a higher cost in the production of its products.

204

VI.2.3. Place

This refers to the distribution of the product or service, making

it accessible to potential customers, i.e. convenient for customers to

access, however that does not mean that the location for all services

must be geographically widespread. This is because certain types of

services are meant to locate only in exclusive places where only

a small but privileged group of customers will make the effort to trav-

el to the place for purchase. The location usually provide an idea of

the level of service rendered, for example, types of food service varies

with the places where they are located, whether they are in shopping

centers or neighborhood shops. In general, for marketers accessing to

the general public, it is common that they should locate their offerings

to be near as possible to their customers, this will increase the chance

of purchase as they are conveniently available as and when the cus-

tomer needs it. In the global market of services, marketers must track

the development of new markets all around the world, as developing

markets are markets with great opportunities and the requirement of

services tends to increase as the market develop. In China where the

biggest growing economy is, service providers are keen in tapping the

potential of this market and some start as early in the 1980s even be-

fore China enter into the World Trade Organization. An example is

that of 'K' Line Air Service where they had set up their representative

offices in Shanghai, Guangzhou and Shenzhen as far back as 1992.

Table 30 . Placement characteristics

More complex, long lasting and troublesome due to:

 Lack of market practices knowledge

 Political, geographical, cultural and language factors

205

 Trading barriers

 Incompatibility of distribution systems and their

operations

Impact positively or negatively depending on man-

agement capacity and state macro-policy

International

placement

system

(channel)

Intermediaries:

 Producers

 Export brokers

 Import brokers

 Wholesale distributors

 Retail distributors

 End-customers (consumers)

Domestic distributors: Export Management Company;

foreign customers; Export brokers; Export wholesal-

ers; Export agencies; Direct exporters

Foreign distributors: Foreign export sale representa-

tives; Foreign wholesale stores; Export subsidiaries;

Redistributors; Export services performers

Length of

distribution

channel

Long channel:

 Convenient shopping; better brand recognition

 Increased cost and price; quality not guaranteed

Short channel:

 Reduce intermediary cost; customer may buy and

complain directly

 Monopolistic position of producers

International

distribution

management

Promotion: conference, exhibition, international fair,

commission mechanism and diverse forms of coopera-

tion, training, supportive services, contact and coordi-

nation (relationship management and sustenance)

Control and empowerment

International

market

penetration

Difference between consumption and industrial prod-

ucts distribution

Forms of penetration:

 Foreign companies under our own brand

 Foreign companies under their own brand

 Alliance between MNC and local enterprises to

produce, export and distribute goods and services

 Buy back distribution system

 Building anew (greenfield) distribution system

Source: Own development

206

VI.2.4. Promotion

Promotion is sending messages, delivering information to lead

market needs of consumers and distributors so as to impact their own

purchasing decisions through developing active buying attitude,

changing consumers' thoughts and behaviors in a beneficial ways for

the company. International promotion is a promotion activity in a mul-

ticultural, multilingual, multi-religious environment, with much more

diverse and complex co nsumers' attitudes, minds and behaviors. This

is probably the most critical factor of marketing as it plays the role of

communicating to the market about the offerings. Communication will

provide the perception of the offering and this will define the expecta-

tion of the customers. Doing so, customers will know exactly what

each company or brand is offering, and will increase shoppers' eff i-

ciency in their purchases. Marketers can also position themselves

in the specified segment and avoid unnecessary competition. To

achieve the objective of communication, an integrated approach of

using five different communication tools is used. The tools of promo-

tion, referred to as promotion mix, are:

 Advertising;

 Personal selling;

 Sales promotion;

 Direct marketing;

 Public relation.

These tools, with each of their strengths and weaknesses, are

used at different times or situations, sometimes with just a single tool

and others in combination, to deliver the intended message. The

choice of tools is dependent on the objective of the promotion.

207

Table 31 . Promotion characteristics

Barriers of

international

promotion

Language – Bilingualism and multilingualism

Local laws – permission and prohibition

Culture – taboo

Means of communication – traditional or electronic

Attitudes, preferences and tastes – very different between

regions, countries tribes, locales

Economy and income – average income, gap between rich

and poor

Purchasing process – differing between end-customers

(consumers), private businesses (large and SME), public

authority and enterprises together with country based spec-

ificities

International

promotion

impact

factors

Strategy: pull (stressing attractiveness of own products and

services) and push (stressing unattractiveness of those of

competitors)

Money and other resources

Cost of each of promotion activities

Time horizon of competition

Market entry mode

Feature of promotion tool, market and product itself

1. Market analysis and assessment

2. Setting goals

3. Designing message

4. Selecting promotion tool

5. Determining action plan based on time, effort

and budget needed

6. Implementing action plan

Source: Own development

VI.2.4.1. AIDA Model

The objective of a promotional campaign is dependent on the

buyer's readiness to make a purchase. A common model to gauge this

readiness and for setting the promotional objective is the AIDA mod-

el, where each of the alphabets stands for the different stage of the

208

customer's readiness in purchase, and they are Attention, Interest, De-

sire and Action:

 Attention – This is the first stage where communication

aims to capture the attention of the market. This usually

happens at the introduction stage of the Product Life Cycle

where the new product is just launched into the market. At

this stage, the market is unaware of the new product, hence,

promotional activities aims to create awareness or attention

to the new product or brand. The tool chosen for this objec-

tive is usually advertising. Advertising is used to communi-

cate to the public and advertisement used tends to straight-

forward, showing the simple illustrations of the product,

without much information provided as marketers hope only

to generate awareness. Advertising media to be employed

here includes all kinds of media, i.e. both broadcast and

print media;

 Interest – At this stage, it is important to generate interest

in the product and this is achieved by communicating the

benefits of the product to the market. Unlike the earlier

stage where limited information is provided, more infor-

mation is made available to the market and again adver-

tisement is used. However, advertisement for this stage

is usually more informative, thus more of print media is

chosen to achieve this objective. Print media, are media

that allows advertisement to be printed on and distribute to

the market, this include newspapers, magazines and bro-

chures. Through advertisement on this media, potential cus-

tomers can read and gather information at their own pace.

In addition to advertisement, public relations can also be

209

used. This involves the invitation of the press to assess and

write about the new product in the newspapers, information

appearing in the newspapers enjoys higher credibility than

those communicated through advertisement hence, this can

convince the potential buyers more easily;

 Desire – After creating attention and generating interest, it

is time to induce the desire for purchase. Consumers usual-

ly have the motivation to fulfill more than one need at any

one point of time but most will not be able to do so because

of limited resources, so consumers usually rank and priori-

tize their purchases to fulfill each need in a ranking order.

For marketers, the task is to persuade consumers to modify

their ranking and move the motivation to purchase their

products to be first in the ranking order. To do this, sales

promotion is most commonly used. Being a short-termed

incentive, sales promotion offers the opportunity to pur-

chase the same product at a reduced price, but the offer is

valid only for a short period of time, consequently this

tends to influence the consumers to take advantage of the

offer, resulting in a desire to purchase to the new product;

 Action – This refers to the purchase action of the buyer. At

this stage, the most suitable promotion tool is personal sell-

ing. After generating sufficient interest and desire for pur-

chase, consumers make the effort to purchase the product.

Personal selling is most suited at this stage because of the

need for guidance for the consumers throughout the pu r-

chase process. Depending on the type of product and the

level of assistance required, marketer need to provide suffi-

cient salespersons so that consumers can experience

210

a pleasant encounter throughout the purchase process. Im-

agine a situation where advertisement and sales promotion

were executed successfully, resulting in a mass of potential

customers coming to the outlet to make the purchase, but

there is no salesperson to guide and help them in the qu e-

ries, this could result in chaos and instead of selling suc-

cessfully, it may create a bad impression of the marketers

resulting in consumers leaving even before making a pur-

chase. Alternatively, marketers can consider using direct

marketing for this stage of purchase readiness. By allowing

consumers to purchase via telephone, fax, mail and e-mail,

marketers can manage the purchase process more easily.

VI.2.4.2. Promotion mix

After discussing the different stages of purchase readiness us-

ing the AIDA model, the next issue is the discussion of each of the

promotional tool in a so-called promotion mix.

Advertising. This is a form of paid communication, using one

or more forms of media, to communicate a non-personal message to

the market. The message is aimed at the mass market that it is target-

ing hence it is not personalized to suit the taste and need of any indi-

vidual. In the advertisement, the marketer is the paid sponsor and is

usually identified in the advertisement. Marketers regularly advertise

using all forms of media, communicating to thousands or millions of

people every day. The media available are broadcast or print media,

both having their advantages and disadvantages. Using broadcast me-

dia like television and radio, marketers are able to transmit colorful

images or catchy tunes or dialogues, and this form of advertising is

211

extremely effective especially if it appeals to the target market. The

advertiser can maximize their creativity using this type of media to

capture the attention of the market. Using broadcast media has a major

drawback and that is the inability to provide much information. This is

because of cost and difficulty in communicating huge amount of in-

formation. As broadcast media tends to be expensive, there is limited

airtime for the advertisement to be broadcasted in addition it is also

difficult for people to comprehend too much information through tele-

vision and radio within the limited time of the advertisement. Howev-

er, using print media, like the newspaper and magazine, large amount

of information can be communicated very effectively. People tend to

spend time in reading newspaper and magazines, and the message be-

ing printed on the media, will allow them time to slowly read and d i-

gest the information printed. An interesting platform has emerged

within these decades and it can combine both the broadcast and print

media and that is through the Internet. It allows advertisement to ex-

ploit the advantages of the different types of media. Using the Inter-

net, advertisers can play movies, music and even publish detailed in-

formation allowing the customers to read through thoroughly. Cus-

tomers can choose to print the advertisement in hard copy if he or she

wants to retain the advertisement for further consideration and with

the use of cookies and selected website, advertisers can target their

customers more accurately.

Advertising can be used in conjunction with other tools to pro-

vide synergy in the communication process. For example, in a sales

promotion where prices are discounted, the sales promotion will not

be effective if the market is not informed and to achieve this, advertis-

ing is used.

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In global advertising, marketers need to consider the strategy

used, whether it is a standardized advertising strategy or a localized

advertising strategy. Using a standardized strategy, i.e. the same mes-

sage communicated throughout the world, the main advantages are

cost efficiency where advertising cost is kept to a minimal since there

is no extra production cost to produce a different advertisement and

consistency of message communicated as the same advertisement is

communicated throughout the world. However, there are situations

where marketers need to localize its advertisement to suit the local

market and this is when there are huge differences in the market in

areas like competition, culture, attitude, perception, values, etc., and

all of these affect the way customers interpret the advertisement. Even

in the standardized strategy, it is common that to have slight modifica-

tions as it is used in the different countries. Again, this is to suit the

taste of the local culture and sometimes, to correspond to the legal

requirements of the country it is advertising in.

Finally, advertisers aim to communicate to the market, howev-

er, there are 2 issues advertisers are faced with today, that are affect-

ing the effectiveness of advertisement. First, it is the amount of adver-

tisement that an individual is exposed to everyday. Day in and out,

everyone is exposed to hundreds of advertisement, this is through the

television, radio, newspaper, magazines, billboards, bus and train ad-

vertisement, and many other forms of media. Amassed with this

amount of advertisement, individual tends to ignore or forget the ma-

jority of them hence rendering the advertisement to be ineffective.

Another reason is that people tends to avoid advertisement. It has been

established through studies that most television viewers tend to avoid

advertisement by switching to other channels, going to the washroom

or attending to other chores. With video recording, most viewers can

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choose to skip the advertisement. This has prompted advertisers to

consider the return on investment using advertisement. Even though

advertisement is plagued with these uncertainties, advertising is still

regularly used because it is one of the most effective methods in

communicating to the masses. In terms of cost to communicate to an

individual, it is still one of the lowest, as an advertisement is exposed

usually to thousands of people, reducing the average cost it takes, to

reach an individual.

Personal selling. This is a personalized form of communica-

tion, where the salesperson will address the need of the prospect and

personalize the message and sometimes, even product or service to the

customer. By using a salesperson, it brings about the main advantage

of being able to address issues faced by the prospect, this can include

misunderstanding of the service or product, clarification required

where the offering is complex and even helping the prospect in under-

standing their own needs. Another advantage is the ability to build

strong customer relationship. Especially in the case of business pur-

chase where there is a high chance of repeated purchase, establishing

strong relationship with the customer will increase the chance of re-

peated purchase. With strong customer loyalty, customers will re-

purchase without going through the process of evaluation as required

in the purchase of an unfamiliar product. Personal selling is a very

effective tool especially in the final stage leading to the purchase of

the offering, but this also has its disadvantages. This is an expensive

tool as the cost of hiring a salesperson is high, on top of that, a sales-

person can only meet and communicate with only a limited number of

prospects per day. This is extremely expensive when compared to a d-

vertisement where communication can be extended to many more

people at a much lower cost. Next, salesperson can sometimes be over

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zealous and pressure prospects into buying something they do not re-

quire, this can be damaging to the reputation of the company or its

brand. In the context of global marketing, salesperson are traveling to

more places, meeting an even greater variety of people. This made the

requirement of a salesperson to be more stringent as they must have

the knowledge and ability to communicate effectively with people of

different culture. Lastly, personal selling is useful in the final stage

where persuasion is crucial in the decision making of the potential

customer but it can only succeed when this tool is used in conjunction

with other tools.

Sales promotion. It is a short-term promotional tool used to

promote sales. Sales promotion is used for many purposes it can be

used for inducing trials of new products, increasing sales, countering

competition and even clearing excessive stocks. Sales promotion is

usually used for only a limited period of time because extensive usage

can destroy the image of a brand. There are many ways to implement

sales promotion. The common methods include free gifts, discounted

price and rebates. Different methods of sales promotion can offer dif-

ferent applications. Free gifts and discounts are given to encourage

customers to buy quickly or buy more, and this will help organizations

in increasing its market share. Others use sales promotion to build

loyalty and this is accomplished through the use of rebates. By en-

couraging customers to buy repetitively through rebates, customers

become accustomed to the marketers and tend to return to them for

purchases of that particular product. Starbucks uses this strategy to

entice customers to return to them for repeated purchase.

Direct marketing. Using a well-organized database and some

form of mass communication mode e.g. Internet, television, telephone

or mail, marketers propose a sales offer directly to the prospects and

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this is called direct marketing. This proposal comes with the instruc-

tion on the manner that how the prospect can respond. The response

can be made through the mail, facsimile or a simple phone-call. Direct

marketing is a cheap and efficient way to reach prospects as it reduces

marketing cost by removing the layers of wholesalers and distributors.

Popularity of this tool is increasing and it is due to the advancement in

information technology, enabling marketers to collect and organize

database efficiently and effectively. Using the Internet, direct market-

ing helps marketers in accessing to the global market at a very low

cost and with the use of cookies; marketers can target their customers

more accurately. One drawback using method is that it may create

a misconception about the marketers when they target the wrong cus-

tomers or when the customer is not ready to commit to the purchase.

There are many complaints about junk mails and Spam in both the

traditional mail and the Internet, and this is the result of sending direct

mails to the wrong group of people. Some recipients of such mails

may just dispose of the mail but others may launch complaints about

them and this can affect the reputation of the marketer. In addition to

the problem of bad reputation, marketers also waste resources when

these mails are thrown away. To avoid this, database must be accu-

rately assembled and subject to regular updating, so as to minimize of

the chance of misdirecting the mail. Lastly, direct marketing is often

used in conjunction with sales promotion. Marketers who have accu-

mulated database of their existing customers commonly use this com-

bination when they wish to either clear their old stocks or launch new

products. In either case, it is easier to market to their existing custom-

ers who have purchased their products, and it also create an impres-

sion that the marketers are giving its customers, priority in the pur-

chase of these products.

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Public Relations. This is the only form of communication that

is not paid directly by the marketer and because of this marketers can

exercise little control over this form of communication. Public rela-

tion, as the name suggests, is the range of activities that an organiza-

tion conduct, so as to communicate the image of the organization or

the brands, to the different stakeholders in the market. Many organiza-

tions make use of this to create goodwill so that customers will like

them and support these organizations by purchasing their products or

services. Public image can be improved by the organization's partic i-

pation in some activities that are perceived as beneficial to the society.

This includes donations made to welfare organizations, participation

in activities or practices that protect the natural environment, sponsor-

ship of sporting or social events. Through any of these activities, or-

ganizers of the activities will help promote the marketers by informing

the public of the marketer's participation and this is usually done, by

naming either the brand or the marketer as their sponsors. To enhance

the image of the marketer, it can sponsor the same event repetitively.

For example, NKF Charity Show is an annual event and if the same

marketer were to sponsor the event consecutively for a few years, it

will create the perception that the marketer as synonymous to the

event; and this will boost the public image of the marketer. Another

form of public relation is the press release and press conference and

these activities are directed towards the press. This is when the press

is furnished with information of extraordinary significance, e.g.

launching of new product, issue of public shares, etc., and the press

will publish report about them. Information coming from a third party,

in this case the press, is perceived to be impartial hence enjoy a higher

credibility as compared to messages communicated via advertising.

This is commonly applied to the launching of new product, and with

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the report from the press, the marketer can communicate to a wider

audience. Marketers have many choices in the execution of their pro-

motion strategy, choosing the right combination is crucial to the suc-

cess of the organization.

VI.2.5. Physical Evidence

Physical evidence is a crucial mix and this is useful for 2 pur-

poses. As mentioned earlier in the marketing of services, there is no

tangible product to be owned by the customer, hence it will be diffi-

cult for marketers to show or demonstrate to the customers the benefit

that the customer will get, for making the purchase. To help in the

marketing of services, physical evidence in the form of brochures, cer-

tificates, printed testaments or press reports can be used to give an

idea of what to expect and the kind of benefits the customers will

probably get if he or she were to make the purchase. Next, physical

evidence also serves to remind customers of their purchases, reinforc-

ing them of the benefit that they have gained in the purchase of the

service. Given that the customers do not possess or acquire any tangi-

ble product after paying for the service, physical evidence is often

used to remind them, hence reducing the cognitive dissonance effect

that may materialize after spending large amount of money.

VI.2.6. Process

To tackle the issue of variability of the service process invol v-

ing both the service provider and the customer, monitoring of the

quality of the process plays an important role. The customer will go

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through the process, resulting in only an experience that the customer

will decide if he or she is satisfied. Consequently, the customer will

then decide if he or she will become a repeat customer, and make the

purchase of the same service in the future. For example, the customer

pays for the service of a medical doctor, and the customer will meet

with the doctor, i.e. the service provider who will provide the service.

The customer will go through the experience of medical consultation

with the doctor, and in the end the doctor will advise the customer on

the result. In the purchase, the customer do not acquire the ownership

of any tangible product, but only the experience of being consulted by

a doctor, and this is achieved through the process of medical consulta-

tion. Hence, it becomes critical that customers must find satisfaction

in the process. Failing doing so, the customer will go to another ser-

vice provider the next time the same need arises. The difficulty in-

volving process is that every customers going through the same pr o-

cess may have a different perception of the service, after all, not eve-

ryone going through the same experience will have the same percep-

tion. For example, a group of tourists going on a '10 -days Europe'

tour, will result in an assortment of opinions among the tourists, rang-

ing from the very satisfied to very dissatisfied. These opinions are af-

fected by many issues, like experience, culture, expectations, etc., and

made it difficult for service provider to manage. To overcome this, the

marketers must first manage the expectations of the customers. Prior

to the purchase, potential customers must be made known of what to

expect so that they do not have unrealistic expectations. This is nor-

mally accomplished with proper sales training so that the salespersons

do not oversell the service, and another way is through the use of

some literature, e.g. brochure. With brochures stating the process and

the benefits, customers will not be misled into higher expectations.

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Secondly, service providers can formalize their operating procedures

and this is to ensure that each customer goes through the same process

irrespective of who the customers or the service providers are. On top

of that, quality checks can be conducted to guarantee that service pr o-

viders conform to the procedures set by the marketers. Finally, mar-

keter must actively provide the channel for feedback and find out how

customers felt about the whole process in case of any abnormality ex-

perienced during the service process. Generally, process, in this case,

can normally be categorized into 3 categories and they are: Pre-service

process; In -service process; Post-service process.

VI.2.6.1. Pre-service Process

This is a series of processes where a customer goes through be-

fore making the purchase. The process can be simple or complex, de-

pending on the nature of the service. Some pre-service process in-

volves complex consultations where service provider must first find

out the need of the customer before customizing the solution to suit

the need of the customer. In the case of a warehousing agent, the pre-

service provider may want to find out the needs of the customer before

submitting the proposal to the potential customer. The agent may need

to investigate about the nature of the products to be stored in case of

special requirements, the quantity to be stored, the movement of the

product and maybe even the security requirements. The service pro-

vider will need to research on this information and this is usually

achieved by interviewing the potential customer. After collecting all

the necessary information, the service provider will then propose its

recommendation to the potential customer. The pre-service process is

important as the potential customer will form his or her perception of

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the service provider as he or she goes through the pre-service process

and this will usually develop into some kind of bias either for or

against the service provider. The decision of purchase may be heavily

influenced by this bias. If the potential customer feels that the service

provider is unprofessional or careless, he or she may decide not to

purchase from the same service provider even before seeing the final

proposal. In the situation of a banking service, the pre-service process

is much simpler. As banks are usually located in populated areas, the

pre-service will probably involve the process of accessing to the bank,

i.e. whether the bank is conveniently located or if it is easy to park

a vehicle if the customers were to drive their own vehicles. Failing

any of which, the bank will find that it will have very limited number

of walk-in customers. That is the waiting time, if banks that are very

conveniently located and are usually crowded, the waiting time tends

to be long and this may repel customers from going to that bank or

that branch. Popular banks or branches try to reduce the ill-effect of

this pre-service problem by installing queue numbering system and

broadcasting interesting programs on their in-house televisions, to

take the customers' mind off the process of waiting. If the customers

are affected by the long waiting time, it will, not only affect the per-

ception of the bank, the customer will also feel unhappy even before

seeing the bank officer, and upon meeting them, it will increase the

chance of them complaining or venting their frustration on the service

provider. The effect is detrimental for the bank even if the bank is not

at fault. Hence, pre-service process must be thoughtfully designed and

executed, as it can seriously affect the purchase decision of the ser-

vice.

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VI.2.6.2. In - service Process

This is the part of the process where the customer experience

for himself or herself, the purchase he or she had made. The process

must be designed with the minimal hassle to the customer. With de-

velopment in information technology, this process can be developed to

be perceived as professional and efficient, for example, having updat-

ed information about the customer will impress upon the customer that

the service provider is genuinely concerned about them or having lat-

est information about development in the industry will give the im-

pression of their professionalism. With the right application of infor-

mation technology, customers need not repeat themselves on the same

information and this will reduce the monotony and frustration of hav-

ing to do the same thing repeatedly. Depending on the nature of the

industry, the process can be benchmarked differently, hence defining

the competency of the service provider. For example, in the service of

medical practice, customers want a thorough examination allowing the

doctors and themselves in understanding their medical condition, so

that the right treatment or medication can be administered. In this in-

stance, customers would want a slow and meticulous examination, and

probably assess the doctor by the accuracy of his or her diagnosis, and

how quickly the customers recover after the service. Timing or time

spent during the service is never considered as virtue of this trade.

However, in the example of banking or courier service, timing is ev e-

rything. Due to this, organizations must understand the need and ex-

pectations of the customer and set the right measure to gauge, in e n-

suring that it is providing the best service, as perceived by the custom-

ers. In doing so, it can also communicate to its service staffs the

measure that is used for their performance appraisal.

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VI.2.6.3. Post-service Process

This is the process that a customer encounters after purchase

and consuming the service. Again, depending on the nature of the ser-

vice, customers may require some level of service to help them rein-

force that the money is well spent or to help them in remembering the

service so that they will come back again where the same need arises.

Follow-up service is a common technique used by some hoteliers to

remind customers of their hotel stay and this can come in the form of

a thank-you card or a feedback form. This kind of process helps in the

building the image of a service provider and serves to help building

customer loyalty. Finally, irrespective of the kind of process the cus-

tomer is involved in, it is crucial that service providers try to under-

stand the attitude and perception of their customers while going

through the process and those after that. This is because of the

uniqueness that a service can provide and as long as customers found

it in their service providers, they will continue to stay with them for as

long as they are not disappointed, and it helps the service providers

in building their loyal customers in this competitive environment.

VI.2.7. People

This is the last of the marketing mix and this mix is critical be-

cause of the inseparability between the service providers and the cus-

tomers. Throughout all of the processes in services, the most common

factor is the interaction with people and in this case, is the service

provider. It can be in the role of a doctor, salesperson, lecturer, lawyer,

waiter and many other professions that provide services for their cus-

tomers. Customers formed their opinions of the service organizations

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based on what they experience and the only person that is guiding the

customers through the process is the service provider, hence it is im-

portant that service providers empathize with the customers and help

them through the process in the most suitable manner. Due to this,

service provider must be properly trained to maintain their profession-

al disposition and try to help their customers. Organizations that have

good human resource practices tend to train the staffs well and retain

them in the organization for a long time, this helps service providers

to learn and accumulate knowledge and in turn, helping to serve their

customers better.

Professional service providers, not only need to know info r-

mation pertaining to the service they provide, they also are required to

know of ways to handle customers under different circumstances. This

involves human skills that are very difficult to teach and are usually

learned after many years of experience in dealing with customers.

Lastly, staff morale is also critical, as motivated staffs tend to provide

better service.

Hence, organizations must try to motivate and retain its staffs

as these knowledge and skills take many years to master, this is one of

the ways organizations can gain its competitive advantage over its

competitors and that is providing service at a level that surpasses eve-

ryone else. In summation, using and manipulating each of the market-

ing mixes, marketers achieve their objectives by communicating and

marketing their services to the market. Finally, knowing the marketing

mixes in this dynamic business environment is not sufficient for mod-

ern marketers to compete, marketers must also be aware and reactive

to the changes in the business environment and this is discussed in the

next passage.

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VI.2.7.1. People Strategy Mix

People are the most important, proactive element in service

marketing mix. This section will discuss identified possible human

resource strategies that might be explored both in impacting other

marketing instruments and enhancing the overall effectiveness of the

7Ps marketing mix in a today's global marketing orientation of ente r-

prises. Eleven (11) human resource strategies are introduced in the

below mentioned part (Nguyen Hoang Tien 2017 pp. 121-153). More

could be found in the "Strategic international human resource man-

agement" (Nguyen Hoang Tien, EMENTON Publisher, 2017).

Human capital management strategy (GPS1 – HCM). Human

Capital is a stock of accumulated knowledge, skills, experience, crea-

tivity and relevant workforce attributes.

Human Capital Management treats people as a high level stra-

tegic issue; develops human capabilities to achieve higher levels of

performance; is defined more broadly with the emphasis on measure-

ment, and this approach makes it almost distinguishable from other

strategies; So, Human Capital Management is concerned with obtain-

ing, analyzing and reporting on data that inform the direction of value-

adding people management strategy. Human Capital Management in-

volves systematic analysis, measurement and evaluation of how peo-

ple policies and practices create value. The four fundamental objec-

tives of Human Capital Management are:

 To determine the impact of people on the business and their

contribution to value;

 To demonstrate that Human Resource practices produce

value for money in terms, for example, of return on in-

vestment;

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 To provide guidance on future Human Resource and busi-

ness strategies;

 To provide data that will inform strategies and practices de-

signed to improve the effectiveness of people management

in the organization.

High performance strategy (GPS2 – HPS). High-Performance

strategy is to achieve competitive advantage of an organization by im-

proving performance. A High-Performance strategy sets out the inten-

tions of the organization on how it can achieve competitive advantage

by improving performance through people. The aim is to support the

achievement of the organization's strategic objectives. This aim can

be put into effect by means of High-Performance Work Systems.

High-Performance Work Systems includes practices that facili-

tate employee involvement, enhance skills and strengthen motivation

based on: open, creative and people-centered culture (1); training, loy-

alty, inclusiveness and flexible working (2); measuring performance

outcomes (3). Here are some of characteristics of High-Performance

Work Systems:

 Internally consistent and coherent, focused on solving op-

erational problems and implementing competitive strategy;

 Practices that raise the level of trust in workplace, increase

intrinsic reward, and thereby enhance organizational co m-

mitment;

 Important role in achieving a fit between strategy, technol-

ogy, people and structure.

A High-Performance strategy has to be aligned to the context

of the organization and to its business strategy. Every organization

will therefore develop its own different strategy. High-Performance

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Work Systems provide the means for creating a performance culture.

They embody ways of thinking about performance in organizations

and how it can be improved. They are concerned with developing and

implementing bundles of complementary practices that as an integra t-

ed whole will make a much more powerful impact on performance

than if they were dealt with as separate entities. The development pro-

gram requires strong leadership from the top. Stakeholders, such as

line managers, team leaders, employees and their representatives

should be involved as much as possible through surveys, focus groups

and workshops.

Corporate Social Responsibility strategy (GPS3 – CSR). Cor-

porate Social Responsibility is exercised by organizations when they

conduct their business in an ethical way, taking account of the social,

environmental and economic impact of how they operate and going

beyond compliance. Co rporate Social Responsibility refers to actions

taken by businesses in the workplace and local community. It has also

been concerned with the impact of business behavior on society and as

a process of integrating business and society. Corporate Social Re-

sponsibility must root in a broad understanding of the interrelationship

between a corporation and society while at the same time anchoring it

in the strategies and activities of specific companies.

Corporate Social Responsibility strategy is integrated with the

business strategy and associated with Human Resource strategy be-

cause it is concerned with ethical behavior both outside and within the

firm, with society generally and with the internal community.

Corporate Social Responsibility activities include incorporating

social characteristics or features into products and manufacturing pro-

cesses, adopting progressive Human Resource Management practices,

achieving higher levels of environmental performance and advancing

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the goals of community organizations. Business' social activities are

summarized under four headings:

 Community – Skills and education, employability and so-

cial exclusion were frequently identified as key risks and

opportunities. Other major activities were support for local

community initiatives and being a responsible and safe

neighbor;

 Environment – Most companies reported climate change

and resource use as key issues for their business, and 85 per

cent of them managed their impacts through an environ-

mental management system;

 Marketplace – The issues most frequently mentioned by

companies were research and development, procurement

and supply chain, responsible selling, responsible market-

ing and product safety. There was a rising focus on fair

treatment of customers, providing appropriate product in-

formation and labeling, and the impacts of products on cus-

tomer health;

 Workplace – This was the strongest management perform-

ing area, as most companies have established employment

management frameworks that can cater for workplace is-

sues as they emerge. Companies recognized the crucial role

of employees to achieving responsible business practices.

Increasing emphasis was placed on internal communica-

tions and training to raise awareness and understanding of

why it is relevant to them and valuable for the business.

More attention was being paid to health and well-being is-

sues as well as the traditional safety agenda. More work

was being done on diversity, both to ensure the business at-

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tracts a diverse workforce and to communicate the business

care for diversity internally.

Organization Development strategy (GPS4 – ODS ) . Organiza-

tion Development is defined as the system wide application and trans-

fer of behavioral science knowledge to the planned development, im-

provement and refinement of the strategies, structures and processes

that lead to organizational effectiveness. Organization Development

helps people work more effectively, improve processes such as formu-

lation and implementation strategy and facilitate management of

change.

Organization Development strategies concentrate on how

things are done as well as what is done. They are concerned with sys-

tem wide change and are developed as programs with the following

features:

 Supported and managed from the top but may use third

parties (change agents);

 Systematic analysis and diagnosis of the strategies, circum-

stances, changes and problems;

 Improve the way organization interacts, communicates,

participates, plans, manages conflict;

 Ensure that business and Human Resource strategies are

implemented and change is managed effectively.

The activities that may be incorporated into an Organization

Development strategy are summarized below:

 Action research – systematically collecting data from peo-

ple about process issues and feeding the data back in order

to identify problems and their likely causes. This provides

the basis for an action plan to deal with the problem that

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can be implemented cooperatively by the people involved.

The essential elements of action research are data collec-

tion, diagnosis, feedback, action planning, action and eval-

uation;

 Survey feedback – data are systematically collected about

the system and then fed back to groups to analyze and i n-

terpret as the basis for preparing action plans. The tech-

niques of survey feedback include the use of attitude sur-

veys and workshops to feedback results and discuss impli-

cations;

 Process consultation – involves helping clients to generate

and analyze information that they can understand and, fo l-

lowing a thorough diagnosis, act upon. The information

will relate to organizational processes such as inter group

relations, interpersonal relations and communications;

 Inter group conflict interventions – aim to improve inter

group relations by getting groups to share their perceptions

of one another and to analyze what they have learnt about

themselves and the other group. The groups involved meet

each other to share what they have learnt and to agree on

the issues to be resolved and the actions required.

Employee Engagement strategy (GPS5 – EES ) . Engaged people

at work are positive, interested in and even excited about their jobs

and prepared to go the extra mile to get them done to the best of their

ability. An engagement strategy will address all the means that an or-

ganization can use to promote this type of effort. The significance of

engagement is that it is at the heart of the employment relationship.

It is about what people do and how they behave in their roles and what

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makes them act in ways that further the achievement of the objectives

of both the organization and themselves.

Employee Engagement means putting discretionary work effort

beyond the minimum to get the job done, in form of extra time, brain-

power or energy. Discretionary behavior is the choice that people of-

ten have on the way they do the job and the amount of effort, care,

innovation and productive behavior they display. There is a close link

between high levels of engagement and positive discretionary behav-

ior. Positive discretionary behavior is more likely to happen when

people are engaged with their work.

Engaged employees are aware of business context, and work

closely with colleagues to improve performance within the job and

workplace for the benefit of the organization. In general engaged e m-

ployee: is positive about the job (1); identifies with the organization

(2); works actively, performs more effectively (3); helps, treats others

with respect (4); goes beyond the requirements of the job (5); keeps up

to date with developments in the field (6); looks for opportunities to

improve performance (7).

Knowledge Management strategy (GPS6 – KMS). Knowledge

explicit is codified, recorded, available, held in databases. This sort of

knowledge is carefully codified and stored in databases to be accessed

easily by anyone in or out of organization using Information Technol-

ogy. Knowledge tacit exists in people's minds and acquired through

personal experience: expertise, know-how, business insights and

judgment. This sort of knowledge is closely tied to person and shared

mainly through direct personal contacts by means of informal confer-

ences, communities of practice, workshop, brainstorming and one-to-

one sessions.

231

Knowledge Management is a process of creating, acquiring,

sharing and using knowledge to enhance learning and performance

in organizations. Knowledge Management allows companies to cap-

ture, apply and generate value from their employees' creativity and

expertise. It is concerned with both stocks and flows of knowledge.

Stocks included expertise and encoded knowledge in computer sys-

tems. Flows represent the ways in which knowledge is transferred

from people to people or from people to a knowledge database.

Knowledge Management strategy aims at capturing collective

expertise and distribute it to where biggest payoff can be achieved.

Source of competitive advantages lies not in the market but within the

firm, i.e. capability to gather, lever and use knowledge effectively.

There are two approaches toward Knowledge Management strategy:

codification strategy related to explicit knowledge management and

personalization strategy related to tacit knowledge management.

Employees Resourcing strategy (GPS7 – ERS ) . Employees Re-

sourcing strategy is concerned with ensuring that the organization ob-

tains and retains the people it needs and employs them efficiently. It is

a key part of the strategic human resource management process, which

is fundamentally about matching human resources to the strategic and

operational needs of the organization and ensuring the full utilization

of those resources. It is concerned not only with obtaining and keeping

the number and quality of staff required but also with selecting and

promoting people who fit the culture and the strategic requirements of

the organization.

Employees Resourcing strategy exists to provide the people

with skills required in a bid to support the business strategy; but they

should also contribute to the formulation of that strategy. Human R e-

source directors have an obligation to point out to their colleagues the

232

human resource opportunities and constraints that will affect the

achievement of strategic plans. Employees Resourcing strategy is not

just about recruitment and selection. It is concerned with any means

available to meet the needs of the firm for certain skills and behaviors.

A strategy to enlarge the skill base may start with recruitment and se-

lection but would also extend into learning and development to en-

hance skills and modify behaviors, and methods of rewarding people

for the acquisition of extra skills. Performance management processes

can be used to identify development needs and motivate people to

make the most effective use of their skills.

In order to guarantee a success of the Employees Resourcing

strategy managers should avoid the following negative effects: Lack

of group cohesion; Conflict with managers and supervision; Recruit-

ment, selection rapid turnover; Over-marketing. And also managers

should pursue the following things to enable organization to make the

best use of people and adapt swiftly to changing circumstances: Seg-

regate the workforce into a core group and one or more peripheral

groups; Outsourcing; Encourage multiskilling to increase the ability of

people to switch jobs or undertake any of the tasks possible.

Talent Management strategy (GPS8 – TMS). Talent is an indi-

vidual who can make a difference to organizational through immedi-

ate contribution or by demonstrating the highest potential. Talent

Management is a process of identifying, recruiting, retaining and de-

veloping talented people. It is related with more comprehensive and

integrated activities to secure the flow of talent in an organization,

bearing in mind that talent is a major corporate resource. Talent man-

agement starts with the business strategy and what it signifies in terms

of the talented people required by the organization. Ultimately, its aim

is to develop and maintain a pool of talented people. Its elements are:

233

Attraction and retention policy; Talent audit; Talent relationship man-

agement; Performance management; Learning and development; Ca-

reer management.

A Talent Management strategy consists of a view on how the

processes described above should mesh together with an overall ob-

jective, to acquire and nurture talent wherever it is and wherever it is

needed by using a number of interdependent policies and practices.

The development and implementation of a Talent Management strate-

gy requires high-quality management and leadership from the top and

from senior managers and the Human Resource function. The ap-

proaches required involve emphasizing growth from within, regarding

talent development as a key element of the business strategy, being

clear about the competencies and qualities that matter, maintaining

well-defined career paths, taking management development, coaching

and mentoring very seriously, and demanding high performance.

Learning and Development strategy (GPS9 – LDS). Learning

and Development strategy is to ensure that the organization has the

talented and skilled people who are given opportunities to enhance

their knowledge, skills and competency; and is concerned with devel-

oping an organizational learning culture and individual learning.

Learning and Development strategy embrace:

 Learning – relatively permanent change in behavior as a re-

sult of practice and experience. Learning is the major pro-

cess of human adaptation. Learning is a process by which

a person constructs new knowledge, skills and capabilities;

 Training – the planned and systematic modification of be-

havior through learning events, programs and instruction

that enable individuals to achieve the levels of knowledge,

234

skill and competence needed to carry out their work effec-

tively. Training is one of several responses an organization

can undertake to promote learning;

 Development – the growth or realization of a person's abi l-

ity and potential through the provision of learning and edu-

cational experiences;

 Education – the development of the knowledge, values and

understanding required in all aspects of life rather than the

knowledge and skills relating to particular areas of activity.

Learning Culture is one in which learning is recognized by top

management, line managers and employees generally as an essential

organizational process to which they are committed and in which they

engage continuously. A learning culture encourages employees to

commit to a range of positive discretionary behaviors, and that has the

following characteristics: empowerment instead of supervision, self-

managed learning instead of instruction, long-term capacity building

instead of short-term fixes.

Organizational Learning is a process of coordinated change

with mechanisms built in for individuals and groups to access, build

and use organizational memory, structure, culture to develop long-

term capacity.

Learning Organization is an organization which continually ex-

pands to create its future; continually improves by rapidly creating and

refining the capabilities required for future success; facilitates the

learning of all its members and continually transforms itself.

Employee Rewarding strategy (GPS10 – ERW). Reward strate-

gy is an organization's declaration of intent in the longer term to de-

velop reward policies, practices that further the achievement of busi-

235

ness goals and the needs of stakeholders. Employee Rewarding strate-

gy provides a sense of purpose and direction and a framework for de-

veloping reward policies, practices. It is based on the needs of organi-

zation and its employees.

Employee Rewarding strategy may be a broad-brush affair

simply indicating the general direction in which it is thought reward

management should go. Additionally or alternatively, Employee Re-

warding strategy may set out a list of specific intentions dealing with

particular aspects of reward management (specific reward initiatives).

 Broad-brush Employee Rewarding strategy – commit the

organization to the pursuit of a total rewards policy. The

basic aim might be to achieve an appropriate balance be-

tween financial and non-financial rewards. A further aim

could be to use other approaches to the development of the

employment relationship and the work environment that

will enhance commitment and engagement and provide

more opportunities for the contribution of people to be val-

ued and recognized;

 Specific reward initiatives – the selection of reward initia-

tives and the priorities attached to them will be based on an

analysis of the present circumstances of the organization

and an assessment of the needs of the business and its em-

ployees.

Employee Relations strategy (GPS11 – ERL). Employee Rela-

tions strategy defines the intentions of the organization about what

needs to be done and what needs to be changed in the ways in which

the organization manages its relationships with employees and their

trade unions. Employee relations s trategy should be distinguished

from employee relations policies. Strategies are dynamic as they pro-

236

vide a sense of direction and give an answer to the question 'How are

we going to get from here to there?' Employee relations policies are

more about the here and now. They express the way things are done

around here as far as dealing with unions and employees is concerned.

Employee Relations strategy is based on the philosophy of the

organization on what sort of relationships between management and

employees and their unions are wanted and how they should be han-

dled. Four approaches to Employee Relations strategy have been iden-

tified:

 Adversarial – the organization decides what to do, and em-

ployees are expected to fit in. Adversarial approaches are

much less common than in the 1960s and 1970s;

 Traditional – management proposes and the workforce re-

acts through its elected representatives. The traditional ap-

proach is still the most typical, but more interest is being

expressed in partnership approach;

 Power sharing – employees are involved in strategic deci-

sion making;

 Partnership – employees involved in policies, but do not

have the right to manage. A partnership strategy will aim to

develop and maintain a positive, productive, cooperative

and trusting climate of employee relations.

237

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LIST OF ILLUSTRATIONS

Illustration 1. Marketing concept ........................................................ 14

Illustration 2. Global marketing management .................................... 19

Illustration 3. Selling (seller) and marketing (buyer) concept ............ 21

Illustration 4. Marketing strategy and shaping factors ...................... 25

Illustration 5. Market and product development ................................. 26

Illustration 6. Internal factor analysis ................................................ 27

Illustration 7. PEST model – external factors analy sis ...................... 29

Illustration 8. Political forces ............................................................. 31

Illustration 9. Economic forces ........................................................... 36

Illustration 10. Modified Porter's five forces model ........................... 40

Illustration 11. Social forces ............................................................... 42

Illustration 12. Technological forc es .................................................. 46

Illustration 13. 4P marketing mix from consumers' view .................. 49

Illustration 14. Product Life Cycle ...................................................... 50

Illustration 15: Customization vs. standardization ............................. 60

Illustration 16. Environmental approach to global marketing ........... 62

Illustration 17. New market as marketing demand generation ........... 70

Illustration 18. Market research and marketing research .................. 72

Illustration 19. Marketing research and marketing information

system (MIS) .............................................................. 74

Illustration 20. M.E. Porter's five force model ................................. 106

Illustration 21. Investment, risk, return, control of entry strategies . 115

Illustration 22. Strategic marketing management ............................. 125

242

Illustration 23. Strategic, tactic and operational planning .............. 129

Illustration 24. Levels of strategy ...................................................... 130

Illustration 25. Business units' interrelations ................................... 131

Illustration 26. Functional strategies' interrelations ....................... 132

Illustration 27. Factors impacting corporate competitive

advantage .................................................................. 133

Illustration 28. Process of strategic (marketing) planning ............... 138

Illustration 29. BCG matrix .............................................................. 141

Illustration 30. Ansoff matrix ............................................................ 148

Illustration 31. Strategy realization and control .............................. 153

Illustration 32. Buying behavior and decision process ..................... 159

Illustration 33. Ansoff's product-market matrix ................................ 177

Illustration 34. STP process .............................................................. 178

Illustration 35. Selection of target markets ....................................... 181

Illustration 36. Product-service continuum ...................................... 196

Illustration 37. Service model ........................................................... 197

243

LIST OF TABLES

Table 1. Exchange relationship .......................................................... 14

Table 2. Global marketing context ..................................................... 19

Table 3. Characteristics of customers' needs focused marketing ...... 22

Table 4. Customization vs. standardization ........................................ 61

Table 5. Customers' demands classification ...................................... 69

Table 6. Characteristics of marketing research ................................. 73

Table 7. Roles of marketing information system ................................ 75

Table 8. Market research plan ............................................................ 78

Table 9. Collecting information .......................................................... 80

Table 10. Advantages and disadvantages of primary

and secondary research ....................................................... 82

Table 11. Probability sampling procedure ......................................... 92

Table 12. Non-probability sampling procedure ................................. 93

Table 13. Positive and negative sides of tariff .................................. 100

Table 14. Positive and negative sides of subsidiaries ...................... 101

Table 15. Positive and negative sides of quotas ............................... 102

Table 16. Positive and negative sides of local content

requirement ........................................................................ 103

Table 17. Positive and negative sides of standards

and regulations .................................................................. 104

Table 18. Positive and negative sides of anti-dumping duties ......... 105

Table 19. Positive and negative sides of non-tariff barriers ............ 105

Table 20. Positive and negative sides of export ............................... 116

244

Table 21. Positive and negative sides of licensing ........................... 119

Table 22. Positive and negative sides of Joint-venture .................... 121

Table 23. Positive and negative sides of wholly owned

subsidiaries ........................................................................ 122

Table 24. Advantages and disadvantages of segmentation .............. 173

Table 25. Segmentation criteria for consumer and organization

market ................................................................................ 176

Table 26. Process of positioning ...................................................... 182

Table 27. Product characteristics ..................................................... 193

Table 28. Same brand name advantages and disadvantages ........... 199

Table 29. Pricing strategy characteristics ........................................ 200

Table 30. Placement characteristics ................................................. 204

Table 31. Promotion characteristics ................................................ 207

Dinh Ba
Hung Anh
Pham Thi Diem
Pham Van On

This study aims to understand the formation and development of customer service culture at Sacombank(Saigon Commercial Joint Stock Bank)asthe basis of a banking service. This is a new topic and there is not a single article that covers it or is available. The research has selected a number of articles and comments related to the CRM (customer relationship management) system to be able to collect data, synthesize data, then analyze and predict the situation and provide factors specific factors affecting customer service culture. The results of the study show that the construction and development of services should be based on strengths and overcome weaknesses of the CRM system. In which, the important factors are studied to develop the CRM system to cope with the challenges and changes of the business market in the future at Sacombank. The research not only mentions Sacombank 's own CRM but also highlights the strengths and weaknesses of CRM at Sacombank compared to other banks in the market. From the assessment of strengths and weaknesses, the research has also provided some solutions and recommendations that can help Sacombank to consult and give development orientations and policies not only in the current situation. The economy has been seriously affected by Covid-19 pandemic, both now and in the future.

Currently, with increasingly fierce competition for market share among banks, improving customer satisfaction at banks is an issue that needs special attention. Therefore, it is necessary to conduct analysis and assessment of customer satisfaction about the bank's products and services and service culture to know how customers perceive themselves, know the advantages and disadvantages of the bank. need to be maintained and inadequacies should be corrected. Not outside the general trend of banks today, BIDV is also aware of the importance of improving customer satisfaction when using BIDV's services to create a competitive advantage with other banks. Other customers, namely individual customers, are an important component of the bank's main profit.

Pham Thi Diem
Nguyen Thanh Vu
Ho Tien Dung
Nguyen Hoang Tien

The economy of Vietnam is in the process of rapid growth, the service sector is developing strongly and get the attention of everyone. Banking and financial services have been promoted when meeting new needs of people. Currently, there are many banks in existence and development, but the products and services of most banks are the same. So what makes a difference, attracts and creates trust for customers about our bank is the customer service culture. Banks must make a difference; stand out in the service customer care to between the bank competitors, customers can get entitled to us. As well as not only bring good service, but also to elevate the service perfectly to thereby receive satisfaction, retain customer loyalty as well as exploitation of new potential customers.

Ho Tien Dung
Pham Van On
Vu Tuan Anh
Nguyen Hoang Tien

This study was conducted to discover the factors affecting customer service quality satisfaction for Vietcombank in Ho Chi Minh City. Quantitative research method has been carried out with the research object being customers who are directly performing transactions at the bank. There are 347 valid questionnaires processed through exploratory factor analysis (EFA) and testing the research hypotheses by linear regression. The results show that the factors of reliability, system, guarantee, interest rate and cost, tangible factors (facilities and forms) have a positive influence on customer satisfaction at Vietcombank in Ho Chi Minh City). In which, emphasizes the importance of two factors of interest rate, service fee and system in improving customer satisfaction with the service, thereby enhancing loyalty to the bank. CRM is a sound business strategy to identify the most profitable customers and potential customers of the bank. Therefore, customer relationship management in the bank is one of the prerequisites for the bank to achieve the desired goals.

The topic of customer service culture has a very important position and role in the development of every business. In today's social trend, the most important resource of an enterprise is people. In which corporate culture is the glue that binds each individual in the organization together, if an organization has a good corporate culture, it will increase the work motivation of each individual and direct the strength of each individual into the organization. Common goals of the organization, that helps to increase the effectiveness of the organization many times over. Therefore, it can be affirmed that corporate culture is an intangible asset of each enterprise. Considering the specific factors of the banking industry, this is a service business, associated with the human factor. In particular, banking services are high-class and complex services, so the requirements for the human factor must be at a higher level. Therefore, building corporate culture of commercial banks is very necessary, but there are also many difficulties. As one of the earliest established joint stock commercial banks in Vietnam, Vietnam Prosperity Bank - VPBank has made steady progress throughout the bank's history. Especially since 2010, VPBank has grown tremendously with the development and implementation of a comprehensive transformation strategy. According to this strategy, VPBank aims to become one of the top 5 joint-stock commercial banks in Vietnam and one of the top three retail commercial banks in Vietnam by 2017. Supporting the implementation of the above strategy is the corporate transformation of VPBank. Building a strong corporate culture is a key factor and an urgent requirement for VPBank to successfully implement its transformation strategy. The corporate culture at VPBank itself exists, but for many reasons, those cultural features have not been clearly and systematically expressed. Especially in the past time, VPBank has developed very strongly with a rapidly increasing team, including the participation of many foreign officials in VPBank's ranks. In which, members of the Board of Management at VPBank are nearly 30% foreigners, especially in key divisions that decide VPBank's business activities. Therefore, VPBank is forming a multicultural and highly internationalized environment. This led to a rapid change in VPBank's culture, during which the groups within had certain cultural conflicts. So what is VPBank's solution? Therefore, studying the topic: "Corporate culture at Vietnam Prosperity Bank - VPBank" to answer the research question: "What are the aspects of VPBank's corporate culture?.

This article will systematize knowledge concepts and theoretical issues related to customer relationship management and select a CRM application model suitable for commercial banks. Regarding the research object, this article will focus on analyzing the current situation of customer relationship management at Vietcombank, thereby building a more complete customer relationship management system. Buildin g customer policies with the target customer group to create value for customers, maintain and increase customerloyalty will help reduce management costs, increase business efficiency, contribute to improving customer satisfaction, customer service capacity at Vietcombank. Keywords: CRM, Vietcombank, customer relationship management, Ho Chi Minh City

This study aims to introduce the formation and development of CRM system at BIDV. This is a new topic and there is not a single article that covers it or is available. The research has selected a number of articles related to the CRM system to collect data, then analyze and predict the situation and give specific factors for the research paper. The research results show that promoting and exploiting the strengths and overcoming the weaknesses of the CRM system at BIDV bank. In particular, the factors of developing the CRM system are extremely important to face future business challenges at BIDV. Not only mentioning CRM at BIDV, the research also highlights the strengths and weaknesses of CRM at BIDV compared to other Big4 banks. From the assessment of strengths and weaknesses, the study has also provided a number of solutions and recommendations that can help BIDV bank to consult and provide orientations and policies for the development bank not only present but also in the future. Keywords: CRM, BIDV, Big4, CRM system at BIDV

Strategy formulation is the first important step of managers on the way to bring businesses to success. A good strategy with a clear vision and mission, worthy of the business will help managers orient the development of the business, staunchly support the business to overcome difficulties, and maintain determination to the end selected target. In the context of the increasingly integrated world, the world economy has almost no borders to divide the market, the competition between businesses is becoming more and more fierce. In order to find the possibility of success in that fierce market, building a suitable strategy is a vital element to help businesses determine the difference as a foundation for development and success. Managers can analyze their business to build their appropriate strategies using a variety of methods. Therefore, to understand better, the author decided to perform business analysis for Nguyen Hoang Group (NHG) using the BCG matrix. Keywords: Business analysis, BCG matrix, Nguyen Hoang Group.

Dinh Ba
Hung Anh
Nguyen Hoang Tien

Nguyen Hoang Tien

Strategic Human Resource Management and International Human Resource Management are new management academic courses delivered at many world universities. They appeared as a result of the combination and integration approach toward the fields of Strategic Management, International Management and the field of Human Resource Management as a background. Strategic Human Resource Management highlights the importance of all the Human Resource Management functional areas, including recruitment, training and remuneration (compensation) through uplift all of them to the whole-company strategic level while International Human Resource Management adds the international dimension to the tradition understanding of Human Resource Management. During these courses the students, the readers will study, beside Strategic Human Resource Management in theories, the main Human Resource strategies that cover one functional area of Human Resource Management or several areas at the same time in both the domestic and international dimension. So, the content and the possible application in practice of those main Human Resource strategies will be examined in detail. Due to the fact that the course of Strategic Human Resource Management as well as the course of International Human Resource Management are totally new and delivered mainly in English. Moreover, all accessible textbooks are presented in English. This textbook, in a quite condensed form, is very useful and helpful for the readers to quickly and easily understand the main points of the given two important issues. As an author, I hope that this textbook will make the study of Strategic Human Resource Management and International Human Resource Management courses easier and more fruitful.

Previous study of exchange by marketing scholars has emphasized events and conditions leading to and the outcomes of exchange interaction. However, limited attention has been directed toward the role of ethics and law in exchange. The emerging perspective of relational exchange suggests the importance of these foundations. The authors examine the interrelationship of contract law and ethics for building and sustaining marketing exchanges. They explore dimensions of ethical exchange and offer managerial and research implications.

Frederick E. Webster

New organization forms, including strategic partnerships and networks, are replacing simple market-based transactions and traditional bureaucratic hierarchical organizations. The historical marketing management function, based on the microeconomic maximization paradigm, must be critically examined for its relevance to marketing theory and practice in the 1990s. A new conception of marketing will focus on managing strategic partnerships and positioning the firm between vendors and customers in the value chain with the aim of delivering superior value to customers. Customer relationships will be seen as the key strategic resource of the business.

Relationship marketing—establishing, developing, and maintaining successful relational exchanges—constitutes a major shift in marketing theory and practice. After conceptualizing relationship marketing and discussing its ten forms, the authors (1) theorize that successful relationship marketing requires relationship commitment and trust, (2) model relationship commitment and trust as key mediating variables, (3) test this key mediating variable model using data from automobile tire retailers, and (4) compare their model with a rival that does not allow relationship commitment and trust to function as mediating variables. Given the favorable test results for the key mediating variable model, suggestions for further explicating and testing it are offered.

Philip Kotler

Marketers engage in a variety of tasks which are not carefully distinguished in the literature but which are radically different in the problems they pose. Eight different marketing tasks can be distinguished, each arising out of a unique state of demand. Depending upon whether demand is negative, nonexistent, latent, irregular, faltering, full, overfull, or unwholesome, the marketer finds himself facing a unique challenge to his craft and his concepts.

Hiram C. Barksdale
Bill Darden

The marketing concept sparked the interest of business executives and marketing educators when introduced as a pioneering idea some twenty years ago. The doctrine has since influenced the thinking of businessmen and has changed the direction of marketing education. The authors report the results of a survey designed to measure current attitudes of executives and educators toward the marketing concept, its operational adequacy, and its contributions to business and to consumers.

Carlton P. McNamara

The marketing concept is a term which pervades marketing literature and provides a framework in which marketing management is taught. However, little empirical evidence exists on how well practitioners have implemented the concept. The author performs service to marketing practitioners and academicians by exploring the "track record" of American industry in implementing the marketing concept.

Source: https://www.researchgate.net/publication/338585621_GLOBAL_STRATEGIC_MARKETING_MANAGEMENT

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