Nov 2016 Q6

There are a number of approaches which can be used in answering this question. Candidates might focus on aspects such as market and environmental analysis or on segmentation, targeting and positioning. Marks will be awarded as to how appropriate their approach is to improving the situation for Gaspo. However it is expected that most candidates will apply the marketing mix model, the most commonly used to this scenario.

It would appear that Obed needs to develop an appropriate marketing mix to facilitate the entry into this new Ghanaian market segment. This mix usually comprises four elements – product, place, price and promotion. These need to be integrated together, to mutually reinforce the impact of a marketing offensive and not in isolation where one aspect may counteract the influence of another. For example the development of a luxury brand image (promotion) will be harmed if a price strategy concentrates on a low or a ‘penetration’ price.

The product needs to be focused on a domestic/household market. A utilitarian office approach may not fit in well with the prevailing household image. Quality may have a higher priority here. The style of the furniture will also need to match the furniture in the rest of a household – there may need to be a choice between classical and modern styles. Furthermore size may be more critical. Houses are frequently smaller than offices so the furniture may need to be more compact.

It may be advantageous not only to supply the finished products but the company could add value by providing both design and installation services. This, of course, will require a stronger Ghanaian presence. This could be achieved by having a good distribution network (place). Although the products are manufactured in India because of the lower costs, the customer will be looking for a presence locally. Stock must be available locally so as to avoid delays in order processing. This will provide reassurance. Furthermore potential customers will wish to see examples of the products, layout and workmanship before they commit themselves to purchase. Gaspo will need to have a number of showrooms in major centres where business is expected. Not only will these be depots for supply but they will also act as centres for marketing. This will be an expensive facility, offsetting the cheaper labour costs. The company will have to ensure that these new markets can generate sufficient revenue to compensate for these increased costs.

These showrooms will be part of the promotion element of the mix but they will have to be complemented by other media activities. Advertisements in furnishing or household style magazines could attract new customer groups. It may also be possible to buy mailing lists of people who work from home. Directors of small companies and self-employed individuals frequently receive direct mail from financial institutions about banking services and also offers from IT suppliers. Why not information about office furniture and other services? The company should also be aware of the benefits of promotion by using the world-wide web.

Price also needs to be considered as a competitive tool in this new venture. The price must not be so low that prospective purchasers question the quality of the product. However it must also be remembered that in certain circumstances this furniture cannot be offset against tax as a cost as it can in a bona fide company transaction. Therefore the company needs to be careful not to price itself out of the market. They have to be aware of what competitors are offering. It may be sensible to have competitive prices for the furniture but charge a premium for the design and installation work.

[There are no precise solutions as to how the marketing mix is to be determined. Candidates may propose different approaches. These will be accepted, assuming that there is an inherent logic in their application and that they are not inconsistent with a candidate’s premises and the objectives of the company]

A company, which has acquired a competitive advantage, should not relax its vigilance. In business nothing is permanent and competitors will soon retaliate. There are a number of methods by which a company can attempt to maintain its position.

• If the company’s strength is built on being a low-cost producer it must attempt to continue to get low cost supplies by buying in bulk, ensuring regular deliveries to avoid heavy stock-holding costs. It must control its labour costs and continue to innovate so as to maintain production advantages by simplifying the production process. It must keep overheads low and ensure low distribution costs. However if a company’s competitive position is derived from its ability to differentiate its products or services it must ensure that it maintains its lead in marketing by emphasizing a strong brand identity, a strong corporate image and by having technological superiority. This can be done by enhancing its research capability and in designing unique products.
• It is also critical to be aware of customer needs and so marketing research is an important input. Companies can also maintain their advantage if they can develop and build prohibitive switching costs into their products/services. These costs which tie a customer to a supplier can include financial links, the supply of materials and the supply of specialist services (in the case of Gaspo it could be the provision of design and installation services).
• As mentioned earlier the development of a strong brand name can tie consumers more closely to the supplier. Patents and trademark legislation can also protect the competitive advantage of certain companies although there are sometimes difficulties in certain markets where intellectual property rights are not always fully protected.
• However companies who rely mainly on the law to protect a competitive advantage run the risk that they may become reactive, hanging on to what they have. These firms would be well advised to continue to seek ‘new’ strengths either in marketing or manufacturing rather than rely on the protection of ‘old’ strengths.