Estrucks Marketing and Product Objectives - Case Study Example

5 Product Market Focus The product market focus of Efficiency Motors would rely heavily on the firms strategic decisions in the previous periods and on the firm’s overall goal. Efficiency Motors (Firm E) currently offers three products that targets the 2F and 4F market (Effiz), 3U and 5U market (Euro), and the 1T and 3T market (Estruck). Firm E wants to gain a stronger market share in 1T and 5U markets and it aims to attract the 3T and 3U customers at the same time. 5.1 Marketing and Product Objectives 5.1.1 Marketing Objective for Value Seekers (1) E’s marketing and product objective for the value-seeking segment is to overtake Firm D’s performance in period 10 by at least 5% margin. The firm will do this by appropriately increasing its marketing and advertising funds to reach greater market populace and to convince Value-seekers that Estruck is the product of choice for them. This means focusing more on the strategic advertising campaign that would entice the market to choose Estruck at the same time upgrading the product design to meet the expectations of the market. 5.1.2 Marketing and Product Objectives for Family (2) Firm E has led the family market segment for the last four periods by combining safety features with excellent pricing schemes with its Efizz. However, the sales trend indicates that the performance of Firm E in this segment has declined in the last three years while its main competitor in this segment has gained on the firm. The objective of Firm E for this segment is to regain its market position and dominate the competition by at least 8%. This can be done by focusing on the product feature in advertising and at the same time increasing the incentives of the dealers to encourage them to sell more Efizz. The marketing objective is to increase the advertising focus on safety at the same time integrate superior interior design and capacity to its advertising theme to achieve the 8% market share lead by period 10. Firm E’s product objective for this segment is to upgrade its product to increase its rating on its interior by up to 5. 5.1.3 Marketing and Product Objectives for Enterprisers (5) Firm E’s position in the Enterpriser’s market has slowly declined after it reached its peak in period 3. Firm E’s product competing in the market is Euro, a utility vehicle, whose overall features were once received warmly by the market. With the increasing competition against the needs of the Enterpriser market for Luxury vehicles which Firm E did not offer, the firm is slowly pushed to the 4th place when it comes to the overall performances of the competing firms in these markets. However, Firm E’s position in the utility vehicle section is strong against Firm A’s products. Product Objective for this market segment includes an introduction of new product that would join the competition for Luxury vehicles. Obtaining a fairly stable market share for this product is not very difficult since Firm E’s reputation for style and quality in its other products are unparalleled. Marketing Objective includes increasing the overall market share for this segment to up to 40% by the end of period 10. 5.2 Target Market Firm E has established strong positions in the three market segments discussed. In the discussion, it was noted that other market segments that are not necessarily the focus of Firm E’s marketing and advertising efforts are also being drawn to the product the firm offers. In order to increase the stability of Firm E’s market position, it has to incorporate these market segments into its marketing and advertising campaigns. It means that Singles and High Income market segments will be seriously pursued in the periods that would follow. 5.2.1 Target Market - Singles (3) Firm E can do this by introducing chic design (or variants) that would appeal to the Singles segment without compensating the price. Instead of overhauling the production process and the design, small changes can be introduced like slightly changing the contour of the product’s body, or introducing a new color that would appeal to the taste of the market. This can also be achieved by increasing the emphasis on the current advertising campaign As for Euro, Firm E can increase the reception of the segment by increasing the performance and other features of the car that appeal to the segment. The aim for the Singles segment is to increase the market segment by up to 45% of the market share in Estruck and up to 58% market share for its Euro products by the end of period 10. 5.2.2 Target Market - High Incomes (4) Like the Singles segment, the High Income segment is not the focus of the Effiz product when it was released yet somehow the product has a positive appeal to the High Income Market. This indicates a very fertile market for Firm E considering that Firm E’s Effiz introduces style, quality, and performance to the general market. Like the Singles segment, incorporating advertising and marketing campaigns for Effiz on this market should consider the possibility that it would affect the general focus of the Firm and which may introduce instability to the strong market position held by Firm E on the Family segment. Firm E can do this by introducing chic design (or variants) that would appeal to the High Income segment without compensating the price. 5.3 Point of Difference Historical data indicates that the market easily liked Firm E’s products because it presents products whose features are superior and comprehensive compared to the products offered by various brands. Realizing their position in the competition, the brands introduced new features that aimed to beat the introductory features of Firm E. Yet despite the efforts poured by the competition, the firm has established itself in the market and it considers itself strong against market fluctuations. From a product perspective, Firm E has dominated the competition by (a) introducing products with the right mixture of unique interior and style that none of its competitors were able to imitate and (b) it gives best deals to its dealers which earned it a premium dealership rating since it released its product in the market. From a management perspective, Firm E was able to establish itself in the market because of its leadership in terms of technology and innovation and its general belief that its products need not be superior in one aspect alone, but must rather achieve superior balance in every aspect that is important to its markets. 5.4 Product Positioning Product positioning is very much related to the discussion on point of difference. Point of difference are the features and functions of Firm E’s products that the firm believes to carry its signature whereas product positioning are the features and functions of Firm E’s products it wants its market to see. Firm E can position its products under three main campaigns which are (a) high-end quality, (b) low-price, and (c) advanced technology. Historical data indicate that the competitors are trying to outdo what Firm E has perfected over the previous periods either by introducing new hypes in their products or by increasing their advertising campaigns to lure the market to purchase what they offer. Firm E can shrug these efforts off by positioning themselves as market leaders, which they are, and as a company that values its customers more than they do for their profit by introducing vehicles that are equipped with state-of-the art technology that ensures high performance, good quality, and safety and at the same time pricing their product so that the general market can avail of the technology they have perfected. By pursuing this line of thought, the firm could be able to differentiate itself from the competition by establishing its ground as an industry leader that is more than willing to take an extra mile just to make sure that their customers get what they deserve. 6 Marketing Program This section refers to the strategic map of the firm’s marketing program until period 10. 6.1 Product Strategy The product strategy of the firm will be based on the previous discussion on the marketing and product objectives because strategies must be based on the trend of needs and the goals and objectives of the firm. Firm E’s product strategy will generally fall into three categories which are (a) increase the attractiveness of the features offered by its existing products, (b) introduce new variants that would cater the more sensitive needs of the identified target market, and (c) employ more effective methods on strategic operations like the introduction of manufacturing and production strategies that would help the firm lower its inventory and newer and more effective advertising approach. Increasing the attractiveness of the features offered by Firm E’s existing products is a must in order to recover its market share it lost in the process. This may mean that Firm E has to go through a lot of product upgrades on the areas where it has lost to its competition or it could simply mean that the marketing, advertising, and promotional strategies employed by the firm on its products should be more direct and should fiddle with the psychology of its consumers. This further implies that Firm E should pursue unconventional advertising and marketing campaigns in order to penetrate a bigger market. Introducing new variants to its product is a direct consequence of the need of the firm to take good hold of the potential growth offered by the target market previously identified. This product strategy is necessary in order to capture the target market and increase its market share in the process. Introducing new variants to its products is a relatively cheaper choice compared to introducing a totally new product in the market. 6.2 Pricing Strategy There are a lot of factors that must be taken into account when doing the pricing strategy for the next four periods. For one thing, the firm has to consider the capability of the market to purchase the products it offers and for another, it has to look into its economic indicators, cost of goods sold, and profitability in order to create an effective and nearly accurate projection of prices in the next four periods. Given the historical data available for the three products offered by Firm E, the following pricing strategy is drawn as well as their justifications. Effiz – Depending on the economic performance and the associated increase in the materials and labor costs associated with producing Effiz, the brand will have to increase and decrease by at least 3% on its profit margins. This means that a good estimate for the future price of Effiz will be within the range of $17, 500 to $19,500 for the next four periods. Effiz could not price its product too high because it may turn off the consumers nor too low because the firm needs to be profitable. Estruck – Like Effiz, Estruck also can not be priced much higher than its competitors because the brand is identified with affordability. Over the last few periods, the price driver for Estruck is basically the subsequent increase of the cost of goods sold which changes its marginal percentage by up to 5%. Given the threat of high inflation and low interest rates, it is best to assume that the marginal profitability of Estruck for the next four periods would fall in between 25% to 35%, or the price would be within the $18,000 to $22, 000-range. Euro – Unlike the first two products whose price varied from period 2 to period 5, Euro’s pricing has never change yet despite experiencing fluctuations on its profit margin and significant increase on the overall cost of production and distribution. Given this trend in the previous pricing strategy employed on Euro, it is most likely that Euro’s price will be pegged at $23, 650 or somewhere close to it, probably at the price range of $23, 150 or $ 24, 150. 6.3 Advertising/Promotion Strategy The importance of the effort to advertise and promote its products to the market lies in the ability of the activity to regenerate the amount spent on them and more. Understanding the correct approach that can be employed by the firm to increase the awareness of the target market of its product will invariably increase the number of sales that can be generated by the firm in every period. An increase on the budget for promotions will motivate dealers to sell more cars and thus increase its earning capacity in the process. Effiz – The main thrust of Effiz’ advertising is safety. A focus on the car’s safety features would make it appealing to the Family segment but does not necessarily say much on its other segment which is the High Income segment. In order to capture a significant percentage on this market as well, it is highly imperative for Firm E to introduce style and performance on its advertising efforts for the brand. This will not only increase the likelihood of reception of the High Income market but will also draw other markets such as the Singles and the Value-Seekers. This could mean a significant increase of the advertising budget by up to another $50 million per period as seen appropriate. Estruck – Estruck is boasting its undeniable superior quality compared to the rest of the products in the competition. Its significantly low price relative to the quality it offers makes it very appealing to the Value-Seeker segment. However, it lacks the posh needed to attract more of the Singles segment. An excellent advertising campaign is the one that would be able to integrate quality and cost-efficiency with posh and superior style. By doing so, Estruck can expect to achieve its goals defined in the discussion above. This could mean a significant increase of the advertising budget by up to another $30 million per period as seen appropriate. Euro – Given the sales history of Euro, its advertising and promotions budget is expected to stay at $80 million and $30 million. Euro is able to establish itself in both its target market and its captured market so there is no need to increase the awareness of these segments. There is a need though to realign the advertising efforts to include the areas that were missed as discussed in the previous sections. Dealer Discounts – One of the most effective promotional strategies that have helped Firm E achieve its profits in the past periods is its ability to give its dealers better deals compared to the competitors. In the next four periods, the firm will invest more on the dealer discounts it offers in order to achieve its target sales. This could mean that the dealer discounts would increase by up to 15% for the whole four-year duration in order to motivate them to sell more of the firm’s products. 6.4 Distribution In order to achieve the proposed targets for period 10, the firm needs to increase the number of its dealers. A target of 550 dealers until period 10 is a good approximate since the firm will increase its production and will be reaching more of newer market segments. This means that another 120 dealers will be opened in the next four periods. This could also mean that an approximate increase of $50 million will be utilized for training and development programs on sales and marketing. 6.5 Organizational Resources There would be no changes in the manufacturing capabilities of the firm from this period until period 10. This is because the firm has a utilization percentage of 102% and it has a huge amount of inventory in its stock. This indicates that the current capacity of the firm’s manufacturing lines is more than enough to sustain the present and the future demands of the market. Adding more manufacturing capabilities may become unwanted expenses in the long run. 7 Financial Data The data estimates for the result shown shows very unstable inflation for the rest of the four year period ranging from an 7% high inflation rates to about 8% low inflation rate. Again the estimates were done conservatively to take into account unexpected market movements that may affect the profitability of the firm. Working on a 15% variation on the economic performance would give the organization a wider perspective in terms of meeting its goals especially since the worst case scenario of the financial data is a slump of -8% from what its current economic condition is. Previous financial data shows that the firm is holding on despite the economic variations and changes in the interest rates in the market. There is a high probability that the firm will remain profitable until period 10 given the historical data although it is more likely that the revenue would fall very low on period 7 given the economic trend. 9 Evaluation and Control 9.1 Products 9.1.1 Effiz Effiz will be focusing in winning the 4F market without giving up the strength of its 2F market. The firm plan to do this in two ways – intensifying advertising campaign and introducing new variations in the current design. Effiz already has a strong market presence and has built a strategic focus over the period but recently was taken over by the competition. There is nothing wrong with Efizz’ marketing approach or with the design of its products. Rather, the market is seeing more of the competitor’s products and so firm E must be able to win that back by increasing the positive perception of the market towards it. The best way to go about this challenge is to maintain its current advertising expenditures and spend some on the introduction of variants that would seriously focus on the needs of the 4F market. By increasing its advertising focus on the message it wants to show its target market (4F) and integrating this message with the message employed towards the captured market (2F), Effiz is expected to positively increase its brand position in the market and hence its sales and revenue. If by period 8 the performance target of Efizz would not be met, the firm should introduce another product that could meet the demands of the market, scraping Effiz whenever necessary by period 9. 9.1.2 Estruck Estruck has a similar concern with Effiz. The product is profitably strong in its present market and the demand of the product is also increasing in other market segments. What the firm can do about the product is very similar to the approach that will be done with Effiz but the degree of the product variation can be intensified to appropriate levels. Estruck no longer needs to be advertised to the market because it has had a great advertising exposure already. The focus of firm E for Estruck is to increase the quality, style, and performance of its products to competitive levels with its competitors in order to recapture its large share in the market. Estruck will not necessarily be overhauled in case it would not be able to compete in the market by period 8 but there is a possibility that older versions of the model will be scraped off from the manufacturing and advertising. 9.1.3 Euro Euro has always been strong in the market and the recent decline noted could have been brought by the hype of the market towards the advertising campaigns exerted by the competitor. In order for Euro to control the movement of the competition, it needs to increase the focus of its advertising campaign to compete head on with the competitor’s product advertising. That means the advertisements will be positioned in the same media used by the competitor in order to play with the psychology of the target and captured markets. 9.2 Company Performance Company’s sales show a growing trend with its debts kept at minimum. The manufacturing capabilities of the firm are also utilized at optimal rate and the firm focused on giving value to its dealers and resellers. These elements account for firm E’s success in the market. While the company’s financial performance has experienced growth in the recent periods, there is a noticeable decline in its market share. This is a troubling fact for the company not only because if the trend will continue until period 9, firm E will have serious difficulties reaching its financial goals and objectives by period 10. The best way for firm E to deal with the increasing demand for stability is to have a head-on competition with the rest of the competitors in order for the firm to regain its market strength and strong market reception of its products during the earlier periods. Appendix The financial projection is based on a 15% fluctuation of the current economic condition, having 7% maximum change in the economic performance and a -8% minimum growth rate for the firm. Period 6 Period 7 Sales 19648 18174.4 Materials 9880 9139 Labor 4826 4464.05 Gross Margin 4924 4571.35 Marketing 904 971.8 RnD 1798 1932.85 General Admin 987 1061.025 Overhead 617 663.275 Depreciation 1043 1121.225 Income from Operation -407 -5750.18 Extraordinary -64 -68.8 Licensing Fees 0 Interest/Income Expense -442 -475.15 Net Income -914 Tax 0 Income After Tax -914 -1722.78 Period 8 Period 9 Period 10 Sales 19628.35 20845.31 21470.6691 Materials 9550.255 10142.37 10446.6419 Labor 4664.932 4954.158 5102.78279 Gross Margin 5413.165 5748.781 5921.244 Marketing 1015.531 1078.494 1110.84874 RnD 500 50 51.5 General Admin 1108.771 1177.515 1212.84038 Overhead 693.1224 736.096 758.178841 Depreciation 1171.68 1244.324 1281.65402 Income from Operation -4489.1 -4286.43 -4415.02 Extraordinary 0 0 0 Licensing Fees Interest/Income Expense 0 0 0 Net Income Tax Income After Tax 924.0601 1462.352 1506.222 Total Income After Tax 1255.859 The projection given in the table below is a good assumption on the number of units that the firm can dispose and their respective financial indicators. Firm E will set its focus on the different figures given but priority will be placed in achieving these figures in the next 4 periods. Period 6 Period 7 Period 8 Period 9 Period 10 Sales ($) 19648 18174 19628.35 20845.31 21470 Sales (000's units) 964 887 958 1017 1048 Market Share ($) 17.1 15.73 16.99 18.04 18.59 Market Share (units) 19.1 17.44 18.73 19.82 20.40 Net Income ($) -914 -826.95 -884.00 -932.76 -959.13 Cum Net Income ($) 7281.7 6515.21 6935.64 7298.21 7498.88 Read More