Marketing Segmentation, Bargaining Powers of the Buyers - Assignment Example

Q1 – A: Marketing segmentation involves dividing the customer into division with similar needs and wants, this allows better allocation of the firms’ resources which are limited. Due to limited resources, a firm is expected to make choices on the best way to serve a specific group of customers (Wedel and Kamakura, 2012). Benefits; Allows a business to reach consumer with similar needs and wants in a precise manner. Reduce the risks of the decision on where, when and how the products or services will be marketed. Increase and enhance market efficiency through directing the efforts to a specific based on their characteristics. The market is able to bring the product to the final customers based on their wants and needs. This makes the customer more satisfied giving the business a competitive edge over the competitors. Q1-B: Tooth paste utilizes target marketing. This is where the marketer is able to differentiate among varying market segments and chose the segments which to develop the products for. The products are customized based on each of the segment. Segmenting a tooth paste will be based on the specific similar reasons why people’s needs the tooth paste. This includes sensitive teeth, yellow teeth, cavities and age. Family life cycle will be used in making tooth paste for the grown-ups and that of children. Tooth paste for children have less strong taste and are packaged in attractive materials. They are also less strong to ensure they do not damage children gums. For the grown-ups, the toothpaste will be packaged in environmental friendly packaging and will have stronger taste matching the needs for adult users. This is demographic segmentation where toothpaste is marketed to all sizes and ages. Another form of segmentation to use is benefit segmentation. This is through aspects such as, teeth whitening, sensitive teeth, fresh breath, cavity protection and tartar control. Customers who have these conditions will be attracted to the toothpaste. An example is Sensodyne which is a toothpaste developed for the market segment with sensitive teeth. The producer has adequate knowledge on this segment and hence develops products specifically for them. Behavioral segmentation will be used based on the behavioral of the consumers, usage and the process of decision making. This will involve making toothpaste that will appeal to trendy youth of those who wants to identify with a certain popular niche. It may involve use of brand ambassadors who influences certain behaviors or trends in society. Psychological segmenting will be used to divide customers based on their opinions and lifestyle (Wedel and Kamakura, 2012). The psychological aspects of the customer will count in this case. Customer social standing and their lifestyles will be the main aspects used. Q2- A: Is a term that was first used by Michael in his book “Competitive Advantage: Creating and sustaining superior performance’’ (1985). It is defined as activities performed by an organization and are linked to the organization competitive position. Value chain analysis involves describing the activities that occurs within and around an organization and connecting them to the competitive strength of an organization. The value which every activity adds to the organization is evaluated. The ability to manage particular activities and linkages between them act as a source of competitive advantage. It involves primary and support activates (Porter, 2001). Primary activates: In an airline industry, the primary activities include inbound logistics, operations, outbound logistics, marketing and sales and post sales services. The support activities include procurement, technology development, human resource management and infrastructure. Inbound Logistics: In an airline inbound logistics involves the goods that are received from the company suppliers. Through establishing an ongoing relationship with supplier, it becomes possible to gain a competitive advantage in an airline. There is also use of technology for stock control and training to ensure that the firm has a competitive advantage. Operations: Operations involve transporting passengers and goods. The airline industry gains a competitive advantage through offering security to the goods and passengers. The airline also provides quick and efficient services such as offering for ticket bookings online among other services online. Outbound logistics: Outbound logistics involves sending the final product to the customer for consumption. In the airline, it involves offering excellent customer services and support in different airports. The airline also ensures that goods carried are able to reach the final consumer safely. Marketing and sales: This is one of the main areas for gaining a competitive advantage. The marketing and sales department in an airline carries marketing activities to customers among other stakeholder. The airline sets aside a large budget for sales and marketing to gain a competitive advantage. Post sale service: This in an airline involves handling of complaints on products and services offered. The airline uses the post sales services as a great avenue to gain a competitive advantage. This involves use of loyalty cards and maintaining close communication with their customers. Support activities: These are activities supporting the main activates within the value chain. Procurement: This relates to purchase of goods and services needed for business operations. Due to the large size of the airline, they benefit from economies of scale when procuring. Technology development: This is an important source of competitive advantage for airline. The companies are able to reduce costs and enhance efficiency through technology. This makes the airline to regularly improve their technology and invest in research and development. Human resource management: This involves managing the employees well to enhance job satisfaction and motivation. Airline uses programs to improve employees’ satisfaction and also enhance their pay. Firm infrastructure: The infrastructure is another area where airline gains a competitive advantage. This is through expertise, knowledge management and physical infrastructure. Q2- B Airline profits are determined by their ability to manage their value chain and gain a competitive advantage. Despite this, managing a value chain in airline industry is complex and the level of competition is high. Maintain an airline is also expensive hence making them venerable to low profitability. The activities in an airline value chain are also hard to manage due to existing competition. Airline is a cost intensive and requires a lot of capital for it to operate successfully. The industry requires a lot of investment in equipment and infrastructure which are also expensive to maintain and sustain. Airline business is seasonal and requires high cash flow. Most of the cash obtained is used in paying for leases, debts and acquiring new aircrafts. They are also labor intensive hence spends a lot to pay their workers. All these issues lead thin profit margins in the airline industry. Porter 5 forces analysis Bargaining powers of the buyers The airline buyers consist of two types of buyers; individual flyers and travel agencies and online portals. The individual buyers are diverse and in most developed countries they are many. The second group uses a middle man. This gives the airline a large group of buyers. There are low switching costs among the buyers despite the loyalty. Each of the airlines has their focus on what they are best at including the costs and amenities. The bargaining power of buyers is low in the industry. Bargaining power of the suppliers The suppliers are the manufacturers of planes. The top manufacturers are Boeing and Airbus. The planes supplied are very similar. The airlines cannot easily switch their suppliers due to long term contracts. Most of the planes are acquired through long term loans and favorable credit terms. This makes it hard to switch the supplier. There are few suppliers in the airline industry. Despite this, the airline firms are the only source of income for the manufacturers. This makes them to have a low threat. Threat of entrants The threat of entrants is low. The industry requires high investment for new players. The existing firms have a large cost advantage and a strong customer base is required to gain profits. The existing firms can use their high capital investment to drive away new firms. Also, customers tend to fly with the well known airline brands. This is especially due to safety and cist concerns. The licensing for a new airline also acts as a barrier since it takes a long time and is highly regulated. Threat of substitutes The threat of substitutes is medium. Passengers can choose other forms of transport such as bus, car, train or boat. Despite this, plane is faster and can travel for long distances. They are also convenience and have best customer services. Industry rivalry There is intense industry rivalry in airline. The business is in the mature stage of its life cycle. The costs have been extremely high and it’s hard to leave the industry. The competition among the different players is high. There has been rise of low cost carriers. The rivalry is high and firms without adequate capital are pushed out. Q3- The most important considerations in the aspects of supply chain are: Is the supply chain operations controlled to reduce overall costs? Does the supply chain leverage the core competencies of the organisation? Does the supply chain meet the specific supply goal? Does the supply chain minimize the operational costs and maximize the efficiency? Does the supply chain lead to value creation for the organisation? Does the supply chain improve the overall organisation performance and customer satisfaction through an improvement in customer service delivery? -Is the distribution network working as intended? This involves looking at the distribution network and analyzing it while taking into considerations on future expansion, how customers are able to receive service from the company facilities, inbound and outbound logistics. - is the supply chain efficient. - Is the supply chain design flexible enough? Are there society and environmental concerns in the supply chain? - Are the legal aspects of the supply chain well addressed? - Who are the suppliers? This involves analyzing the suppliers and determining their ethical and efficiency among other factors. - Is there need to redesign the supply chain? - Are there strong planning capabilities on the supply chain? These questions look at all aspects of the supply chain. The questions start with the aspects which are most important for the business supply chain which are based on objectives and strategy (Karunaratne, Chi, Min and Sorooshin, 2012). Q4- No. I would not engage in the project using this method of payment. This is due to fact that disagreements can rise due to difficulties in calculating the amount of benefit or savings that the assignment has delivered. The methods that are used to calculate the benefits or savings attained are not accurate hence may lead to biased compensation. The detailed schedule of definitions and the calculation basis are a major source of disagreements between the client and consultant using this method. After the services have been offered, ambiguity in some terms or lack of clear guidelines may lead to inaccurate estimations of benefits or savings made. Unless there is pre-agreed measures, this form of compensation will lead to more problems. I would prefer a simple daily rate which is fixed. This will ensure that the key deliverables are met by the end of the contract and avoid any misunderstanding. Fixed price contracts can only be carried out if the firm is engaging with a highly experienced practitioner. This is a consultant who is capable of estimating the requirements to deliver the clients’ needs (Eso and Szentes, 2007). Q5- Determination of balance sheet items; Common stock for 2009=$250+100=$350 Plant and equipment=$700+200=$900 Bonds=$500+120=$620 Accounts receivable= $300+$250=$550 Inventory=700 Accounts payable=$250 Retained earnings = $600+$250=$850 1-Estimate Balance Sheet as of December 31. Current Assets 2009 Current liabilities 2009 Cash 20 Accounts payable 250 Account receivable 550 Long-term liabilities and equity Inventory 700 Bonds 620 Fixed Assets Common Stock 350 Plant and Equipment 800 Retained earnings 850 Total Assets 2,070 Liabilities and common equity 2,070 2- Estimate the cash flows of the business, giving a breakdown into operating, investing, and financing cash flows (no need to present a formal cash flow statement) Cash flow statement Cash flow from operating activates: Operating income (EBIT) 700 Increase in inventory (50) Increase in accounts receivable (50) Decrease in accounts payable (100) Net cash flow from operating activities 500 Cash flow from investing activities Purchase of equipment (200) Net cash flow from investing (200) Cash flow from financing activities Payment of dividends (200) Interest (50) Income tax (200) Share issue 100 Net cash flow from financing activities (350) Net change in cash (50) Beginning Cash Flow 100 Ending Cash Flow 50 Q6- Assumptions: -The firm manufacture widgets for the useful life equipment 10 years. - No inflation or change in technology. - 15% used as the discount rate for real after tax cash flows. - All operating cash flows occur at year end. - The two projects run for 10 years. ----- Manufacturing option; Cost of Machinery 150.000 - Working Capital 30.000 - Total Outlay 180.000 Price/Cost savings per widget manufactured ($2-$1.5) 0.50 Total annual widgets manufactured 100.000 Estimating Incremental Cash Flows; Revenue – cost savings/year 50.000 Less Depreciation 15.000 EBIT 35.000 Less Tax 50% 17.500 EAT 17.500 Add back depreciation 15.000 Annual After tax operating cash flows 32.500 Present Value of Annuity Factor, 15%, 10 years 5.02 Present Value Factor 15%, 10 years 0.25 Discounted Cash Flows: Present Value of Operating Cash flows 163.109.98 Present Value of (30.000) working capital released at the end of 10 years 7.416 - NPV incremental Cash Flows 9.474 Decision Rule; Accept Manufacture if NPV is positive Reject the Manufacture project if NPV is Negative Indifferent if NVP is equal to zero In this case the NPV is negative therefore reject the idea to manufacture. The buying option should be undertaken. Q7- Entrepreneurs respond to uncertainty through the effectuation decision making (Sarasvathy, 2009). As a media professional, use of effectuation as a decision making process makes it possible to increase resilience against the environmental shocks and pressures. This makes the use of effectuation vital especially in cases of heightened uncertainty. In my company, the findings on entrepreneur decisions making rules have an impact. This is especially in facing uncertainty as the media house tries to establish itself as a leader in the new economy through technology. The media company I work for is highly entrepreneurial especially in the internet space. Despite this, the venture faces a lot of uncertainty. The main aim had been to venture into online streaming. There are uncertainties of demand and supply which also face the firm in the financial market for the firm. There are regulatory uncertainties which also face the firm in the internet economy. This is including the technical standards required and existing ambiguity in the tax and privacy laws. Through use of the principles of effectuations it is possible to deal with these uncertainties. The firm has to get out and test the hypothesis with the real customers. It will involve risk taking and aligning resources to create value. It my place of work, there are two areas which require restructuring to make it more compatible with effectuation perspectives. The first area is competition with strategic partners. The TV channel has been competing with partners who would be great if used to create strategic partnerships. Building partnerships generate opportunities according to effectuation principles. The station can collaborate with the advertisers who can complement their skills needs. This may lead to co-creation hence more outputs and profits. Strategic partnerships will not only allow the business to come up with new business but will also create an entire new market for the industry. The decision to collaborate has more advantages than competing with partners who can complement the media company skills. Another area that needs restructuring is risk taking in the TV station. The station has been investing without basis of risk taking. This has led to unaffordable risk taking trough use of casual rationality. The firm have invested in new programs which targets a new market among the youth using a lot of resources. This has put the firm risk high and in case of failure, the loss cannot to be contained easily. It would be prudent for the station to invest with the amount of money that they can afford to lose. This will make it possible to avoid unaffordable risk taking. Through the effectuation process, it is possible for the firm to have more flexibility in entrepreneurship using the resources that they have at their disposal and taking advantage of the environmental contingencies as they grow. This makes the firm to take calculated risks which does not jeopardies its operations. It will also allow the station to come up with minimum viable product (MVP) through effectuation process. Before investing it is also important to test whether the MVP is viable through analyzing the goal. This will ensure that the product will satisfy the customers based on the set of functions (Sarsvathy, 2009). Read More