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Министерство образования Российской Федерации Хабаровская государственная академия экономики и права

Кафедра иностранных языков и межкультурной деловой коммуникации

Н. В. Лобастова

Международный маркетинг

Учебное пособие

Хабаровск 2002

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Unit I.

What is marketing?

Reading

Marketing touches everyone’s life. It is the means by which a standard of living is developed and delivered to people. Many people confuse marketing with selling, but in fact marketing occurs both before and after the selling effect. Marketing actually combines many activitiesmarketing research, product development, distribution, pricing, advertising, personal selling, and others- designed to sense, serve, and satisfy consumer needs while meeting the organization’s goal. Marketing begins and ends with the customer. Truly successful marketing understands the customer so well that the product or service satisfies his need so perfectly that the customer is desperate to buy it. The product almost sells itself. Of course this will only happen if the product or service is better than those of competitors. The core concepts of marketing are needs, wants, demands, products, exchange, transactions, and markets.

Companies are always looking for marketing opportunitiespossibilities of filling unsatisfied needs in areas in which they are likely to enjoy a different advantage, due to their particular competencies. Marketing opportunities are generally isolated by market segmentationdividing a market into submarkets or segments according to customers’ requirements or buying habits. Once a target market has been identified, a company has to decide what goods or services to offer, always remembering the existence of competitors.

Marketers do not only identify consumer needs, they can anticipate them by developing new products. They will then have to design marketing strategies and plan marketing programs, and then organize, implement, and control the marketing effort. Once the basic offer, for example a product concept, has been established, the company has to think about the marketing mixthe set of elements of a marketing program, their integration, and the amount of effort that a company can expend on them to influence the target market. The best-known classification of these elements is the Four P’s: Product, Price, Promotion and

Place or the marketing mix.

Aspects to be considered in marketing a product include its quality, its features, style, brand name, size, packaging, services and guarantee, while price includes consideration of things like the basic list price, discounts, the length of the payment period, and possible credit terms. Place in a marketing mix includes

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such factors as distribution channels, coverage of the market, locations of points of sale, inventory size, and so on. Promotion groups together advertising, publicity, sales promotion, and personal selling.

The next stage is to create long-term demand, perhaps by modifying particular features of the product to satisfy changes in consumer needs or market conditions.

Marketing can also involve the attempt to influence or change consumers’ needs and wants. Companies try to do this in order to sell their products; governments and health authorities sometimes try to change people’s habits for their own good or for the general good. In other words marketers must be good at managing the level, timing and composition of demand, since actual demand can be different from what the organization wants.

Marketing practices have a major impact on people in our society. Different goals have been proposed for a marketing system, such as maximizing consumption, consumer choice, or quality of life. Interest in marketing is growing as more organizations in the business, international, and non-profit sectors recognize the ways in which marketing can improve performance.

Understanding the main points

1.What activities does marketing combine? What are all these activities aimed at? Who do the marketers principally focus their attention on?

2.What is meant under marketing opportunities of a company? How should a company act to enjoy its advantages and keep control over this or that market segment?

3.What is a marketing mix? Give the definition of each P.

4.Why is the creating of long-term demand so vital for marketing?

5.Why have many nonprofit organizations adopted marketing techniques in recent years? For example, how does your academy market itself to attract new students?

6.As college students, you and your friends sometimes discuss the various courses you are taking. One of your friends says to you, “Marketing’s nothing but selling stuff. Anybody can do that without taking a course.” Another friend says, ”Yeah, all marketers do is write stupid ads.” As a roleplaying exercise, present your arguments against these statements to your class.

Vocabulary focus

I. Look through the text and match the words in italics with their definitions given below. Read and translate the sentences with these words.

1.mixture; a group of different things, people, etc

2.for smth that brings gain, advantage or improvement

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III. Match up these marketing actions with the eight tasks described above.

Tell under what circumstances we should use them.

a.Alter the pattern of demand through flexible pricing, promotion, and other incentives.

b.Connect the benefits of the product with people’s needs and interests.

c.Find new target markets, change product features, develop more effective communication.

d.Find out why people dislike the product, and redesign it, lower prices, and use more positive promotion.

e.Increase prices, reduce availability, make people scared.

f.Keep up or improve quality and continually measure consumer satisfaction.

g.Measure the size of the potential market and develop the goods and services that will satisfy it.

h.Raise prices, reduce promotion and the level of service.

IV. Rearrange the sentences below to make a complete text about marketing and sales.

a.Consequently, senior management tends to set sales goals on the basis of the economic and competitive situation, as well as the need to keep plants running at or near capacity, and then tries to find ways to sell the output in the short term.

b.Furthermore, sales departments generally resist the dominance of marketing, as they have different objectives.

c.In capital intensive industries such as steel or chemicals, for example, it is desirable to keep equipment operating as much as possible.

d.In other words, products are sold rather than bought.

e.In other words, you don’t sell what you make; you make what will be bought, so that selling becomes almost superfluous, i.e. not needed or wanted.

f.Most contemporary marketing theorists distinguish between the now out- of-date ‘selling concept’ and the modern ‘marketing concept’.

g.Of course, this is a little utopian: the existence of competitors offering comparable products will always make some selling necessary.

h.The former – the selling concept – assumes that resisting consumers have to be persuaded by vigorous ( active and energetic) hard-selling techniques to buy non-essential goods or services.

i.The marketing concept, on the contrary, assumes that the producer’s task is to find wants and fill them.

j.They are generally interested in the short-term and in the achieving current sales targets rather than planning the right products and marketing strategy

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6. A market in which one single producer can fix an artificially high price is

7. A market selling goods aimed at the widest possible number of consumers

(a famous example was selling the Model T Ford) is called ………….

a. undifferentiated market b. monopoly c. market nicher

8.A market dominated by a few large suppliers, and which it is hard for new companies to break into, is called a/an ……………

9.A large corporation or a group of companies marketing a large number of different goods is called a …………….

a. conglomerate b. market nicher c. oligopoly

9. A group of companies which choose to collaborate by sharing out markets, co-ordinating their prices, and so on, form a ………………

a. cartel b. conspiracy c. joint venture

11. A situation in which the market leader can determine the price that its

12. A market in which it is normal to have only one supplier – e.g. utilities such as water, gas, electricity – is called a ………..

a. conglomerate b. natural monopoly c. pure monopoly

VII. It is very common to use military metafors in business: we talk about management strategy and tactics, and takeover deals are often described as coups and raids.

Listening. Listen to the marketing manager talking about her company. Complete the passage below. (New Insights into Business p.125)

It’s true that we’ve been deeply affected by our competitor’s latest s………… s………… . A new plan of action must be developed as soon as possible.

L…………….. have been particularly high in every foreign c…………. . We have lost m………. m………. in Russia and Venezuela. Even in the home market we c………… c………. . However we are not going to g…… u… .

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We are developing a new m……… p…….. which will help us regain some of our market share. The war will c……….. for some time yet but we are confident that we can still win.

Replace the words and phrases you inserted in the text with military expressions given below.

surprise attack, territory, casualties, surrender, are outgunned, campaign, key strongholds, rage on.

Reading. Complete the texts by inserting the words below each text. Read and translate the texts.

An Offensive strategy

We’ve been making successful ………. into their market share for 18 months, and now is the time for a change of ……….. . We’re going for a frontal …….

We have an excellent product, and if we use all the ……… in our …….. , we should be able to convince consumers of this fact. We will …… all our resources and launch a media ………… . This will be the most expensive …… in our history. We have also recruited twenty new sales reps and we are going to send our ……… into the field, to …….. their market.

A Defensive Strategy

We are going to dig in and defend our ……. . This is a suicide ….. by our competitors. They probably expect us to ……. , and a small price cut won’t

………… them. We have enough cash reserves to win a price ……… , so I suggest that we cut our price 20% immediately. The best form of …….. is attack. You’ll see, they’ll …….. within two weeks. This is a ……..they’re going to lose. There is no way they are going to …… our market.

A Takeover bid

bidan offer to buy smth at a particular price; to make an offer

After striking the first blow with their unsuccessful dawn …… last month,

Wright & Bergkamp have now launched a takeover bid for their High Street rivals Merson’s. A fierce …….. is expected for control of the electronics retailer. For Merson’s chairman David Adams, the bid came as no surprise: “They’ve been ….. our shareholders with propaganda for weeks, but they won’t

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succeed. We’re ready for ……. and we’re going to …….. them all the way. “Indeed Merson’s have already launched their …….. , issuing a press release which questions some of Wright & Bergkamp’s accounting methods. Yet City analysts suggested yesterday that the ………’s hostile bid is likely to succeed unless Merson’s ……… with another retailing group.

Unit 2. Marketing Strategies

Reading

Text 1.

A company’s marketing strategies – sets of principles designed to achieve longterm objectives – obviously depend on its size and position in the market. Other determining factors are the extent of the company’s resources, the strategies of its competitors, the behavior of the consumers in the target market, the stage in the product life-cycle of the products it markets, and the overall macroeconomic environment.

The aim of market leader is obviously to remain the leader. The best way to achieve this is to increase market share even further. If this is not possible, the leader will at least attempt to protect its current market share. A good idea is to try to find ways to increase the total market. This will benefit everyone in the field, but the market leader more than its competitors. A market can be increased by finding new users for a product, by stimulating more usage of a product, or by exploiting new uses, which can sometimes be uncovered by carrying out market research with existing customers.

To protect a market share, a company can innovate in products, customer services, distribution channels, cost reductions, and so on; it can extend and stretch its product lines to leave less room for competitors; and it can confront competitors directly in expensive sales promotion campaigns.

Market challengers can either attempt to attack the leader, or to increase their market share by attacking various market followers. If they choose to attack the leader, market challengers can use most of the strategies also available to market leaders: product innovation, price reductions, cheaper or higher quality versions, improved services, distribution channel innovations, manufacturing cost reduction, intensive advertising, and so on.

Market followers are in a difficult position. They are usually the favorite target of market challengers. They can reduce prices, improve products or services, and so on, but the market leader and challenger will usually be able to retaliate

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successfully. A market follower that takes on a larger company in a price war is certain to lose, given its lesser resources.

In many markets, market followers fall in the middle of a V-shaped curve relating market share and profitability. Small companies focusing on specialized narrow segments can make big profits. So can the market leader, with a high market share and economies of scale. In between come the less profitable market followers, which are too big to focus on niches, but too small from economies of scale.

One possibility for followers is to imitate the leaders’ products. The innovator has borne the cost of developing the new product, distributing it, and making the market aware of its existence. The follower can clone this product depending on patents and so on, or improve, adapt or differentiate it. Whatever happens, followers have to keep their manufacturing costs low and the quality of their products and services high.

Small companies that do not establish their own niche – a segment of a segmentare in a vulnerable position. If their product does not have a “unique selling proposition”, there is no reason for anyone to buy it. Consequently, a good strategy is to concentrate on a niche that is large enough to be profitable and that is likely to grow, that doesn’t seem to interest the leader, and which the firm can serve effectively. The niche could be a specialized product, a particular group of end-users, a geographical region, the top end of a market, and so on. Of course unless a nicher builds up immense customer goodwill, it is vulnerable to an attack by the market leader or another larger company. consequently, multiple niching – developing a position in two or more niches – is a much safer strategy.

Understanding the main points

Read the statements, define whether they are true or false, speak on them.

1.If a market leader succeeds in increasing the size of the total market, its competitors benefit.

2.The size of a market can be increased without attracting any new consumers.

3.Market challengers generally attack the leader and market followers.

4.Market challengers cannot use the same strategies as leaders.

5.Market leaders generally win price wars.

6.Market challengers can attack leaders by way of any of the four P’s of the marketing mix.

7.Market followers generally achieve cost reductions through economies of scale.

8.The most profitable companies are logically those with medium or high market \ share.

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9.For a market nicher, product imitation can be as profitable as product innovation.

10.A market nicher is never safe from an attack by a larger company.

Vocabulary focus

Look through the text and match italicized words with their definitions given below. Translate the sentences with these words.

1.to carry the cost of

2.to face (with); to have to deal with

3.to start a quarrel or fight with

4.the length of smth

5.not well protected; be easily attacked

6.to do smth bad to so who has done smth bad to you

7.the market meeting the demands of the higher social groups

8.being able to manufacture things more cheaper by doing so in large quantities

9.to be useful or profitable to

10.to copy smth completely

11.to make changes; introduce new ideas

12.at some point between

13.space (territory) which can be filled with

Discuss the meaning of these strategies. Use a good dictionary such as the

Longman Business English Dictionary to help you.

cost cutting, a demerger, rationalization, a sell off, a disposal, acquisition, an economy drive.

1.Which of the above strategies can be used by companies to: a) get bigger? b) get smaller? c) become more efficient?

2.Which are likely to result in people losing their jobs?

The verbs and nouns below are often combined when talking about strategy. Make word partnerships. Then use them to make up your own sentences.

Eg. The company has achieved its target of a 20% market share.

Speaking

What is strategy? Which of these definitions do you prefer? Why?

1. Strategy is making predictions based on analysis.

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2.Strategy is having a clear plan, then putting it into action.

3.Strategy is continually adapting to change.

Innovation

The words below are often used when talking about innovation. What do they mean?

R&D, brainwave, blueprint, prototype, setback, breakthrough, patent.

Reading Text 2. Innovation and the market

a.Discuss these questions. Then read the article.

1.Do you think it is better to innovate or imitate products and services ?

2.Can you name any companies which were a) innovators? b) imitators?

Why the last shall be first By john Kay

Have you heard of Berkey or Ampex? Gablinger or Chux? Perhaps, you should have, because each occupies an important place in the history of product innovation. Berkey produced the first hand-held electronic calculators, Ampex the first video recorders. Gablinger developed low-alcohol lager and Chux sold the first disposable nappies.

Or perhaps you should not, because none of these companies made a commercial success of their innovations. Today the calculators we use are probably made by Casio, our video recorder comes from Matsushita, our lowalcohol beer is Miller Lite, our nappies are made by Proctor & Gamble. In each of these markets the innovator was swept away.

Xerox looks like an exception to this sorry catalogue. The company was first into the photocopier market and, even if its dominance was ultimately challenged by Canon, it remains a large and successful company today. But Xerox was also a pioneer in fax machines and personal computers. Each of these eventually proved to be a success – but not for Xerox Corporation.

As we all know, it was Apple that developed the personal computer market. But

Apple’s leadership quickly disappeared when IBM came on the scene.

Apple then jumped ahead by introducing the graphical user interface. Its windows and mice brought personal computing within the reach of everyone. But it is Microsoft that does this now.

The business world is not kind to pioneers. Even if you know how a market will develop, timing is a matter of luck – or of quite exceptional skill. There are two closely related lessons. One is that being first is not often very important. The other is that innovation is rarely a source of competitive advantage on its own. Individuals and small companies can make a great deal of money out of good new ideas. The success of large established corporations – Matsushita, Philip Morris, IBM or General Electric is generally based on other things: their depth

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of technical expertise, their marketing skills. And time and again these characteristics enable them to develop the innovative concept far more effectively than the innovators themselves.

This is not to say that there is no role in business for the great innovator. After all, General Electric was built on the extraordinary creativity of Thomas

Edison’s mind, the Ford motor company on the abilities of its eponymous founder. The imagination of Walt Disney created a company that is still without parallel or rival. Perhaps Akio Morita of Sony occupies a similar place in the annals of modern business.

( From the Financial Times)

Answer the questions

1.What is the main point made by the writer?

2.Several well-known companies are mentioned. What reasons are given for their success?

3.What is the connection between Disney, Ford, General Electric and Sony?

Use words from each box to make word partnerships from the article

Language review ( Passives)

A.Look through the text and find the sentences with passive structures.

B. The sentences below describe stages in the launch of a new drug. Use the verbs in the box to complete the sentences. Then put them in a logical order.

1.The drug ………… on animals.

2.The drug ………… in the lab.

3.Market research …………….. .

4.The drug ……….. on humans.

5.The trials ……… the Ethics committee.

6.A licence ………………….. .

7.The results of the trials ……………. .

8.Approval …………… by the authorities.

9.The drug representatives ……………... .

C. Use the notes below to describe stages in the launch of a new car. Include passive and active structures. Use words first, next, then and finally.

1.designer – choose

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2.design – produce

3.model – build

4.modifications – make – R&D/engineers

5.design – modify

6.prototype - build

7.new engine – use – or existing engine – develop – can be very costly

8.new model – test – special tracks or roads

9.deal with problems – costly if problems serious

10.journalists – invite – test – drive model

11.reviews – write – by journalists – major newspapers and car magazines

12.model – display – famous more exhibition – Geneva or Earls Court Motor Show

Pamela Pickford trains business people to make presentations. Which of the points below does she make? Listen and mark each one T(true) or F(false)

1.When preparing a presentation, try to find out what your audience already knows.

2.Everyone in your audience should be at the same language level.

3.Visit the room in which you are presenting before you actually make the presentation.

4.The first stage of your presentation is when you should get the full attention of your audience.

5.If you memorize the introduction, you will be more confident when making a presentation.

6.The whole text of your presentation should be written on post cards.

7.If you use an overhead projector, you should remember to turn it off when you don’t need it.

8.Remember that the content of the presentation is much more important than your presenting style.

Skills Presentations

Comment on the following statements. In your opinion are they :

a. essential b. helpful c. unhelpful for a successful presentation Why?

1.Tell a joke at the beginning.

2.Speak more slowly than you normally do.

3.Smile a lot.

4.Involve the audience.

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5.Invite questions during the presentation.

6.Always keep to your plan.

7.Move around during your presentation.

8.Use a lot of gestures to emphasize important points.

9.Read out your presentation from a script.

10.Stand up when giving your presentation.

b. Listen to a presentation to a company’s sales team about the launch of their new chocolate bar. Tick the expressions in the Useful language box.

Useful language

Introducing yourself

Good morning everyone. Let me introduce myself. My name is ….. . I’m a specialist in ….. .

Structuring the presentation

I’m going to divide my talk into four parts. First I’ll give you ….. ; after that …. ; finally ……. .

Inviting questions

If you have any questions, don’t hesitate to ask. I’ll be glad to answer any questions (at the end of my talk).

Giving background information

I’ll give you some background information. Let’s start with the background.

Referring to the audience’s knowledge

As you know….. As you are aware…… .

Changing the topic

Right, let’s now move on to ….. . OK, I’ll now look at …… .

Concluding

To sum up ……. . So to summarize…… .

Referring to visuals

If you look at the graph …… . Could I draw your attention to the chart? If you take a look at the first year, you’ll see …… .

Ending

Thanks very much. Any questions? Well, that’s all I have to say. Thank you for listening.

Case study International Leatherware

Background

The International Leatherware Association (ILA) represents leather goods manufacturers and retailers. One of its main functions is to promote the use of leather for new products. Each year the Association awards prizes to companies with outstanding new ideas. Companies send a detailed product description and a marketing plan, and the four best proposals are selected. These companies then

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present their product concepts to a panel of judges. The presentations and awards are televised and the event is broadcasted worldwide.

Task

Your company is competing for the ILA’s top prize. You believe that you have an outstanding idea for a new leather product. Read the Case study documents. Then, prepare your product presentation and present it to the rest of the group. Answer any questions they may have. When you are not making a presentation, you are a member of the judging panel. Decide who should get top prize.

AIL guidelines to competitors

1.The purpose of the competition is to encourage innovation in the leather goods industry. The competition aims to raise the profile of leather as a material for producing goods.

2.Any product made with leather may be entered in the competition.

3.Product concepts should be very creative and have excellent sales potential.

4.It will be an advantage if a company can offer a product showing a new use for a leather.

5.Guidelines for the presentation are available upon request.

Guidelines for presenters

1.Introduce your team. Outline the structure of your presentation.

2.Describe the product design, features and consumer benefits.

3.Describe the product’s target market.

4.Mention other competing products.

5.Present your strategy for the new product. For example; *branding, packaging, other product features (guarantee, etc.) *pricing strategy

*distribution (What sales outlets will be used?)

*promotion (What advertising, product launch and sales promotion?)

6.Describe any ideas for television or radio commercials.

Change “There is nothing permanent except change.”

(Heraclitus of Ephesus (535-475 BC), Greek philosipher)

a.Which of these situations would you find the most stressful?

1.Divorce.

2.Going on holiday.

3.Moving house.

4.Moving to another country.

5.Losing your job.

6.A personality clash with your boss.

7.An annual health check-up.

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8.Being the victim of a robbery.

b.What has been the most significant change in your life?

c.Which of these business situations would worry you most? Why?

1.You read in the paper that your company will probably be merging with another company.

2.You keep your job after a merger, but you are in a less powerful position.

3.Your company has to relocate to the other side of the city.

4.You are asked to relocate to an exotic foreign country.

5.You are promoted but are now in charge of a hostile workforce.

6.You have to decide who to make redundant in your new department after a merger.

Reading Text 3. Managing Change

A. Jack Welch successfully led General Electric through a period of great change. Do you think he sees change as a danger, an opportunity or a challenge?

B.Read the quotations quickly. What is Welch’s general attitude to change?

1.“We want to be a company that is constantly renewing itself, leaving the past behind, adapting to change. Managements that hang on to weakness for whatever reason – tradition, sentiment, or their own management weaknesswon’t be around in the future.’

2.“How do you bring people into the change process? Start with reality. Get all of the facts out. Give people the rationale for change, laying it out in the clearest, most dramatic terms. When everybody gets the same facts,

they’ll generally come to the same conclusion”.

3.“The difference between winning and losing will be how the men and women of our company view change. If they see it as a threat, we lose. But if they are provided with the educational tools and are encouraged to use them – to the point where they see change as an opportunity, then every door we must pass through to win big around the world will swing open to us.”

4.“Gradual change doesn’t work very well in the type of transformation General Electric has gone through. If your change isn’t big enough, the bureaucracy can beat you. Look at Winston Churchill and Franklin

Roosevelt. They said, “This is what it’s going to be”. And then they did it. Big bold changes.”

5.“(GE leaders always) have enormous energy and the ability to energize and invigorate others, to stimulate and relish change and not to be

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frightened or paralyzed by it, and to see change as an opportunity, not a threat.”

6.“Most bureaucracies unfortunately still think in incremental terms rather than in terms of fundamental change. Changing the culture means constantly asking now how fast am I going, how well am I doing versus how well I did a year or two years before? How fast and how well am I doing compared with the world outside? Are we moving faster, and are we doing better against that external standard?”

C.Write sentences about how companies should or shouldn’t react to change, according to Jack Welch.

For example, Companies should adapt to change; they shouldn’t hang on to weaknesses.

D.Find words or phrases in the quotations which mean:

1.the reasons for an action (quotation 2)

2.potential danger (quotation 3)

3.courageous (quotation 4)

4.to enjoy (quotation 5)

Listening Resistance to change

A.Why do people sometimes resist to change? Make a list of reasons.

B.Listen to the first part of an interview with Jeremy Keeley, an independent management consultant.

Why do people resist change, in his opinion? List the points he mentions.

C.Listen to the second part of the interview. Jeremy talks about a situation in which change was handled well.

Make notes under the headings below. Compare notes with a partner.

Situation Chief Executive Communication Difficult decisions

D. Complete these sentences from the interview. Use the words in the box. The

1.The client had to …………. (considerably) reduce its costs.

2.It was trying to compete with its major competitor on a basis of ……….

(production of large quantities).

3.The major competitor has a major ……… (a position ahead of all others).

4.Every single person in the organization knew this chap’s ……. (idea of how the future will be).

5.They were going to …….. the market (divide the market into parts).

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6. The company was going to go for much larger ……….. (difference between a product’s price and costs) and for much more ‘value added’.

E. Work in small groups. Describe a business or personal situation that involved change. Was the situation handled well or badly?

Which groups below should be involved in deciding strategy? Why?

shareholders, middle and junior managers, suppliers, boards of directors, government representatives, other employees, senior managers, customers, trade union representatives.

Text 4 Competition

Vocabulary Describing competition

B. Complete the chart with companies or products in your own country (for example, cars, soft drinks, sports shoes, jeans). Compare your table with a partner.

C.Which products do you buy that are not market leaders or market challengers? Why do you buy them?

D.Choose one adjective from each pair to make word partnerships with competition. Then use them to comment on industries or companies.

For example, There is strong competition between Coke and Pepsi.

E. Match the verbs with the prepositions (where necessary) to make phrases with the competition. Then make sentences using some of the phrases.

For example, Our company welcomes competition – it keeps us alert.

The text below presents three strategies for firms to achieve above-average performance. Before you read it, discuss what strategies companies in the following sectors might use to compete with the rivals:

a. supermarkets b. construction equipment c. luxury cars.

B.Read the first sentence only of each paragraph. What three strategies does the text mention? Do you think they are similar to any of the ideas you discussed?

C.Match the words below to the definitions. Then read paragraph one.

D. Match the words below to the definitions. Then read paragraph two and three.

E. Match the words below to the definitions. Then read paragraph four and five.

tailors

to the exclusion of optimizing narrow

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Three strategies to gain a competitive advantage

Cost leadership is perhaps the clearest of the three strategies. In it, a firm sets out to become the low-cost producer in its industry. The firm has a broad scope and serves many industry segments, and may even operate in related industries; the firm’s breadth is often important to its cost advantage. The sources of cost advantage are varied and depend on the structure of the industry. They may include the pursuit of economies of scale, technology, preferential access to raw materials and other factors.

The second strategy is differentiation. In a differentiation strategy, a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers. It selects one or more attributes that many buyers in an industry perceive as important, and uniquely positions itself to meet those needs. It is rewarded for its uniqueness with a premium price.

The means for differentiation are peculiar to each industry. Differentiation can be based on the product itself, the delivery system by which it is sold, the marketing approach, and a broad range of other factors. In construction equipment, for example, Caterpillar Tractor’s differentiation is based on product durability, service, spare parts availability, and an excellent dealer network.

The third strategy is focus. This strategy is quite different from the others because it rests on the choice of a narrow competitive scope within an industry. The focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others. By optimizing its strategy for the target segments, the focuser seeks to achieve a competitive advantage in its target segments even though it does not possess a competitive advantage overall.

A firm that engages in each strategy but fails to achieve any of them is ‘stuck in the middle’. It possesses no competitive advantage. This strategic position is usually a recipe for below-average performance. A firm that is stuck in the middle will compete at a disadvantage because the cost leader, differentiators, or focusers will be better positioned to compete in any segment. In most industries, quite a few competitors are stuck in the middle.

From Competitive Advantage,

By Michael Porter

F.Answer these questions about the text.

1.Which sentence best expresses the main idea in paragraph one. A firm can get a competitive advantage by:

a.selling goods in many markets.

b.making as wide a range of goods as possible.

c.producing goods more cheaply than its rivals.

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2.Which sentence best expresses the main idea in paragraph two or three. When a firm uses a differentiation strategy:

a.it tries to persuade consumers that its products have special qualities.

b.it tries to reach a small group of loyal customers.

c.it wants to attract as many buyers as possible.

3.Which of these sentences best expresses the main idea in paragraph four. If a firm chooses focus as its strategy, it tries to:

a.do better than its rivals in a small part of the market.

b.prevent other firms from entering the market.

c.do business in a large number of narrow markets.

4.In the final paragraph, does the writer say it is a good or bad thing for firms to be stuck in the middle? Why?

G.Discuss these questions.

1.Can you think of companies which use one of the strategies in the text? What about your own company or a company you know well?

2.Can you think of any companies which are stuck in the middle? What do you think they could do to improve their competitive position?

Listening Competition and the market

Kevin warren, a Vice President of Coca-Cola and Schweppes Beverages (UK), is talking about competition.

Answer the questions below. Then listen to the first part of the interview and check your answers.

1. How many servings of Coca-Cola are sold worldwide?

2.Complete the chart.

To be successful you need: -a portfolio of pr………

-an efficient manu……. g and dist……….. n operation

-the best br…………

-the most recognizable pack………

1.Choose the correct answer. Kevin thinks the way to stay ahead is to focus on:

A. the actions of your competitor. B. your own products and customers.

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2.Listen to the second part of the interview. Which of the se statements more accurately reflects Kevin’s views?

1.Price is the most important element when you are talking about value.

2.Value for money is not only about price. Cheaper is not always better.

3.Do you think competition always leads to better products and better value?

4.Listen to the third part of the interview. What changes in consumer habits does Kevin predict?

Language review Talking about the future

The CEO and the Production Manager of a small but successful PC lap top firm are discussing some sudden news from their sales manager, Steve Andrews. Steve has been negotiating an important contract.

A. Read the conversation and find examples of different forms of future tense.

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B.Work in pairs. Take turns to add comments to the sentences below. Use will, going to, the present continuous, or the present simple.

1.I’m sorry, I can’t attend the sales meeting tomorrow ……………

2.We’ve decided how to cut costs next year …………..

3.The line’s engaged …………..

4.Don’t worry if you can’t drive me to the airport ……..

5.I’ve got the details about your flight to Turkey …..

6.Oh no, the computers have crashed again ……….

7.I’ve made up my mind …………

8.Oh John, you asked me about the time of your presentation tomorrow…….

Discussion Competitive strategy

Read the two texts below. Discuss the questions that follow.

Blues Fight The Reds

In 1996, after over 100 years of rivalry, Pepsi launched ‘Project Blue’to challenge Coca-Cola’s position as market leader in the soft drinks market. At a cost of 330 million pounds, Pepsi changed the color of their can to blue as well as painting a Concord airliner blue. They also used supermodels Claudia Schiffer and Cindy Crawford, and tennis star Andre Agassi in the campaign. It was felt that blue was a trendy, futuristic color which would differentiate Pepsi from the red of Coca-Cola. However, the campaign failed to achieve its main aim.

1.Why do you think the campaign was unsuccessful?

2.Can you suggest ways for Pepsi to compete more successfully with CocaCola?

Fly Me, I’m Cheap

In autumn 1995 Easyjet and Ryanair, two small North European airlines, introduced budget flights on UK domestic routes. Other carriers responded with similar services but British airways decided not to. Later, British Airways changed its mind and in May 1998 it launched its successful airline Go. This offers low-cost flights with no on-flight food or entertainment on certain domestic and European routes.

1.Why do you think British Airways changed its strategy?

2.How do you think its decision affected the small airlines? What can they do to respond?

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believes that City Plaza will make a good contribution to group profits if it positions itself correctly in the market.

Facts and figures

The following tables give information about City Plaza Hotel and its rivals in the area, Majestic, Belvedere and Mount Charlotte.

Table 1

Majestic ****

Description Market leader. 300 rooms. 5 large conference rooms. Luxurious and very customer-orientated. A ‘yes I can’ attitude.

Target market High income. Tourists, business people, conventions and special events, e.g. golf tournaments, concerts, etc.

Facilities A wide range including: bar and night club, 2 restaurants, swimming pool, fitness center, gift shop and hairdresser. Guest rooms have many facilities, e.g. coffee-maker, air conditioning, safe, minibar; fax machine and voice mail, if required.

City Plaza****

Description Market follower. 250 rooms. 3 conference rooms. Needs to redecorate, modernize and improve its service.

Target market Tourists, business people, group bookings and organizers of conventions (as above).

Facilities one large restaurant and bar, shop, sauna; tour organizer. Guest rooms have good basic facilities, e.g. coffee-maker, hair dryer, iron, minibar.

Belvedere ***

Description Market nicher. 190 rooms. 1 conference room. Inexpensive for its three-star rating.

Target market Middle-income tourists. Package tour visitors.

Facilities One restaurant and bar, newsagent / gift shop. Health care studio and small swimming pool. Guest rooms have similar facilities to City Plaza.

Mount Charlotte **

Description Budget hotel. 360 rooms. No conference room. A large breakfast room. Cheap prices, friendly staff.

Target market People looking for cheap, ‘no frills’ accommodation.

Facilities No restaurant. A small bar. Comfortable rooms, with few facilities.

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options and advise Price Inc. on the correct positioning of the hotel. MLA has formed small teams within its organization to study the problem.

You are one of MLA’s consultants. Work in teams and do the following:

1.Analyze and interpret the data. Decide what facts and figures are important to help you work out a new strategy for City Plaza.

2.Discuss each option, considering its advantages and disadvantages. If you wish, you may add other options.

3.Decide on a strategy for City Plaza and note down your reasons. Then present your recommendations to the other groups.

4.Working as one group, agree on a strategy and action plan for City Plaza.

Options

The management are considering four options before deciding how to use the

C$2.75 million. They estimate that the cost of redecorating a room to ‘market leader’ standard would be approximately C$12,000. The options are as follows:

1.Take City Plaza Hotel up-market so that it is clearly seen as market leader.

2.Reposition the hotel as a budget hotel with either low prices and limited service, or higher prices and a basic range of services.

3.Stay in its present position as a market follower, but improve the hotel.

4.Aim at a niche market, for example, middleincome older tourists, family groups, or young visitors.

“Plan Well and Prosper”

Whether a firm is a major motorcycle manufacturer or a tiny, family-run motorcycle repair shop, planning for the future is a key to prosperity. Planning is an ongoing process of making decisions that guide the firm both in the short and long term periods.

Strategic planning is the managerial decision process that matches the organization’s resources (such as its manufacturing facilities, financial assets, and skilled workforce) and capabilities ( the things it is able to do well because of its expertise and experience) to its market opportunities for long-term growth. In a strategic plan, top management, usually the chief executive officer (CEO), president, and other top executives, define the firms purpose and specifies what the firm hopes to achieve over the next five or so years. For example, a firm’s strategic plan may set a goal of increasing the firm’s revenues by 10 or even 20 percent in the next five years.

Tactical planning ( sometimes called functional planning) is done by middlelevel managersthe vice presidents or department directors. Tactical planning typically includes both a broad five-year plan to support the firm’s strategic plan and a detailed annual plan for the coming year.

Firs-line or lower-level managers (a benefit manager, a safety director, a wage and salary manager in the human resource department, a quality control

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manager, a marketing communications manager, a sales manager) are responsible for a third level of planning, operational planning, which focuses on the day-to-day execution of the tactical plans.

Business planning is an integrated activity. It means that all the organization’s strategic, tactical and operational plans work together.

In the first stage of strategic planning, a firm’s top executives define the mission of the organization, top management’s vision of why the firm exists, how it is different from other firms, and the place in the market it wants to take. Decision making in the strategic planning stage revolves around such “soul-searching” questions as: What business are we in? What customers should we serve? What kinds of products and benefits can we create for them? How should we develop the firm’s capabilities and focus its efforts? In many firms, the answers to questions such as these become the lead items in the organization’s strategic plan. They become part of a mission statement, a formal statement that describes the organization’s overall purpose and what it hopes to achieve in terms of its customers, products, and resources.

The underlying goal of all marketing strategies and plans is to create a competitive advantage for the firmthat is, to take what the company does really well and outperform the competition, thereby providing customers with a benefit the competition can’t. A competitive advantage gives consumers a reason to choose one product over another again and again. Competitive advantage is created through identifying a firm’s distinctive competency, a firm’s capability that is superior to that of its competition. For example, CocaCola’s success in global markets - Coke has 50 percent of the world’s soft-drink business - is related to its distinctive competencies in distribution and marketing communications. Coke’s distribution system got a jump on the competition during World War II, when the firm decreed that every soldier would have access to a five-cent Coke. The US government liked the morale-building effort, and assisted Coke in building 64 overseas bottling plants. Coke’s skillful marketing communications program (television commercials) is another distinctive competency that has contributed to its global success.

The second step in creating a competitive advantage is to turn a distinctive competency into a differential benefit. Differential benefits set products apart from competitors’ products by providing something unique that customers want. Differential benefits provide reasons for customers to pay a premium for a firm’s products and exhibit a strong brand preference.

Note that a differential benefit does not necessarily mean simply offering something different. Mennen marketed a deodorant with a distinctive feature: It contained vitamin D. Unfortunately, consumers did not see any reason to pay for the privilege of spraying vitamin D under their arms. Despite advertising claims, they saw no benefit and the product failed. The moral: Effective product benefits must be both different from the competition and wanted by customers.

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Examples of mission statements

AT&T: We aspire to be the most admired and valuable company in the world. Our goal is to enrich our customers’ personal lives and to make their businesses more successful by bringing to market exciting and useful communication services, building shareowner value in the process.

Sierra Club: To explore, enjoy, and protect the wild places of the Earth; to practice and promote the responsible use of the Earth’s ecosystems and resources; to educate and enlist humanity to protect and restore the quality of the natural and human environment; and to use all lawful means to carry out these objectives.

MADD: The mission of Mothers Against Drunk Driving is to stop drunk driving and to support the victims of this violent crime.

First National Bank of Bowie: Our mission is to be a profitable, sound, responsive, locally owned community bank that provides ultimate protection for depositors’ funds. Our goals are to grow and create shareholder value.

Huff Realty, Inc.: Jim Huff Realty is a company dedicated to excellence; using innovative real estate marketing skills and state-of-the-art technology to provide the highest-quality services to our clients and customers; above all, preserving a belief in people.

The Quaker Oats Company: To meet the needs of consumers through innovative marketing and manufacturing of healthful, good-tasting products that contribute to a healthy lifestyle and consumer well-being around the world, yielding above-average return over time for our shareholders.

Pfizer Inc.: Over the next five years, we will achieve and sustain our place as the world’s premier research-based health care company. Our continuing success as a business will benefit patents and our customers, our shareholders, our families, and the communities in which we operate around the world

Discuss the statements. Do you agree with them? Give your reasons.

1.Defining the mission for an organization is the first stage of strategic planning.

2.Competitive advantage for the firm is the underlying goal for all marketing strategies and plans.

3.Business planning is an ongoing and integrated process of making decisions that guide the firm both in the short and long term periods.

4.Companies should focus on what they do best rather than diversify.

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diversify-become different in form, quality, activity

Marketing Practice:

1.Assume that you are a marketing director for a small local bank and that your boss, the company president, has decided to develop a mission statement to add to this year’s annual report. He’s admitted that he doesn’t know much about developing a mission statement and has asked that you help guide him in this process. Write a memo outlining what exactly a mission statement is, why firms develop such statements, and your thoughts on what the bank’s mission statements might be.

2.Assume you are the new marketing assistant in a small municipal hospital whose market consists of the residents in the city district and the students and faculty of a large nearby university. You have been asked for ideas that organization might use in promotional activities to draw clients who might otherwise choose a larger facility across town. Develop a list of the consumer segments in the hospital’s market ( for example, elderly, children, college athletes, international students, professors, and so on), and for each segment, identify possible features and benefits the hospital might emphasize in its promotions to attract that segment.

Listening – Developing a strategy

A. You will hear an interview with Marjorie Scardino, Chief Executive of the media group Pearson plc. Before you listen, choose the best definition for each of the italicized words below. (Market Leader p.98)

1.The assets of the company are

a.the customers they have.

b.the things they own.

c.the markets they are in.

2.If a company improves its cash generation

a.it increases its sales revenue.

b.it has cash available at all times.

c.it invests more in its business.

3.If a company disposes of an asset, it

a.values it.

b.keeps it.

c.sells it.

4.If companies have an authoritarian way of management

a.the management give responsibility to workers at lower levels.

b.the management keep tight control over everyone and everything.

c.the management have many ways of communicating with employees.

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5.If you stitch two materials together, you

a.separate them.

b.cut them.

c.join them.

B. Listen to the first part of the interview and make notes. Then complete the summary of what she says.

Developing a strategy

First, the management thought about five things:

1.The assets of the company.

2.What’s unique about these assts.

3.……………………………

4.…………………………….

5.…………………………….

( They considered all these things, then they developed a strategy.)

Their strategy consisted of three simple steps:

1.The first step ……………..

2.The second step …………..

3.The third step …………….

C.Now listen to the second part of the interview. Which of the trends below are mentioned.

1.Companies are becoming more international.

2.Employees are becoming more valued by management.

3.Employees are working more in teams.

4.Management are having more control over staff.

5.Management are changing their style.

D.Answer these questions.

1.What strategies impress Marjorie Scadino?

2.What three points does she make about Coca-Cola’s strategy?

E.Discuss these questions.

1.Is the trend towards globalizm that she mentions a good or bad thing?

2.Do you think Coca-Cola will have to change its strategy in the future? How?

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Skills / Decision-making /

A.Discuss these questions

1.Is decision-making only about sensible, rational choices? Should emotion play a part? What about when choosing the following?

a wife or husband, a present for someone, a new company logo,

a holiday destination, a new product to develop, someone for a job.

2.Think of an important decision that you have made. How did you decide?

3.Do men and women have different ways of making decisions?

4.Who makes the big decisions in your household? Why?

B.Which ideas below do you agree with? Which do you disagree with? Why?

1.Before making a decision:

a)write down the pros and cons.

b)try to reduce stress.

c)take a long time.

d)have a sleep or a rest.

e)consult a horoscope.

f)ask as many people as possible.

2.If a choice has cost you a lot of time and money, stick to it.

3.Rely on the past.

4.Reduce all decisions to a question of money.

5.Be totally democratic in group decision-making.

C.Listen to the management of a retail group discussing problems at their store in Paris. Tick the expressions in the Useful Language box that you hear. ( Market Leader p.99)

Useful Language

Asking for the facts Can you bring us to date?

We need more information about where we are going wrong.

I think on balance we feel we should keep the store going.

Stating future action So, the next thing to do is ….

What we’ve got to do now is …..

D.Marion Haynes, a well-known writer on decision-making, recommends eight steps for making decisions. Use her approach to do the role play below.

1.Discuss and analyze the situation.

2.Define the problem.

3.Set an objective.

4.State what is essential and desirable.

5.Think of alternatives.

6.Decide how to evaluate them.

7.Evaluate alternatives.

8.Choose among alternatives.

Rope play

You are board members in a manufacturing firm which employs 500 people. As your company is making a loss, you must cut costs. Hold a meeting to choose one of the following options. State what action you intend to take.

Cut factory workers’ wages by 10% Reduce everyone’s salary by 8%

Make 50 employees redundant Pay no end-of-year bonuses

Case study

Background

Texan Chicken was founded by Eva and Ramon Martinez. They had had no previous experience in the restaurant industry. They opened their first restaurant in West London, and within five years had built up a chain of 40 outlets, using a franchising system.

The reason for their success was the quality of their product. Their delicious fried chicken was based on a recipe that Ramon had discovered when traveling in Texas. It was served with a sauce which varied from mild to very hot,

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depending on the customer’s taste. All the restaurants offered a take-out service, which was popular with customers.

When Texan Chicken went public the share price rose by 12% within a week. There seemed to be no limit to Texan Chicken profits and expansion.

Present situation

Unfortunately the company’s share price has fallen recently by over 80%. There has also been strong pressure on Eva and Ramon Martinez to resign as cochairmen of the business. At present, they own 40% of the shares. The other major shareholder is a South African businessman, Martin Webb, who owns 12%. Eva and Ramon Martinez have called in a team of management consultants to advise them on their future strategy.

Listening

Listen to this interview on Business News, a daily radio program in which experts comment on topical business items. Note down four problems facing the business. ( Market Leader p. 100)

Texan Chicken recently did a survey to find out what its customers thought about its restaurants. Here are the results.

Consumer survey (summary)

How often customers visit the restaurants

Food products bought most often

1.Quarter chicken, salad and rice

2.Chicken breast burger

Task

You are members of management consultant team called in by Eva and Ramon Martinez to advise them on their future strategy. Discuss the options below. Consider any other ideas for improving profitability. Work out a plan of actions which will turn the company round.

Options

The following options will be discussed by the management consultants at their next meeting.

1.Persuade Eva and Ramon Martinez to resign. Appoint a new Chief Executive with extensive experience of franchising in the food industry.

2.Seek opportunities to merge with a large fast food company which could offer management expertise and financial resources.

3.Improve profits by extending in Europe through joint ventures. A German supermarket chain has already shown interest in such a venture.

4.Make major changes in the business. For example:

a)Have more company-owned outlets. This would give greater control over the restaurants.

b)Offer special promotions (e.g. huge discounts on certain meals).

c)Launch a major advertising campaign.

Unit 3. Corporate alliances and acquisitions

Listening. ( Insights into New Business p.116)

a) Listen and match the terms below with the definitions. Then use three of the terms to complete the newspaper extracts.

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Business in brief

Glaxo buys 80% stake in Polish drug group

Glaxo Wellcome, one of the world’s leading pharmaceutical companies, is paying $220m ( to take an 80% stake in Polfa Poznan, Poland’s second largest drugs group. The ……… is the biggest made by a western pharmaceutical producer in east Europe.

Canal Plus and Pathe in film distribution link

Canal Plus and Pathe, two of France’s largest media and entertainment groups, are joining forces to form a pan-European network of film distribution companies. Their new ………. will negotiate the acquisition of cinema, television and video rights for pictures across Europe, both with the Hollywood studios and other European film producers.

ELF pays 528m dollars to take 5% stake in Russian group

ELF Aquitaine, the French company, is to form a strategic ……… with Yuksi of Russia, paying $528m for a 5% stake in the country’s largest oil company.

b) Read the following extracts from the financial press. Decide whether each one refers to a) a joint venture, b) a merger or c) an acquisition or a takeover.

1.Walt Disney Co., Hearst Corp and Peterson Publishing Co. are discussing a deal that would combine their considerable influence in the publishing world to launch a weekly magazine to compete with ‘Sports Illustrated’ next year.

2.General Motors is to start building its Chevrolet Blazer, a sports utility vehicle, in the factories of Elabuga Avtomobilny Zavod (ELAZ) in Tatarstan, an autonomous part of Russia. This business project will be owned by ELAZ and GM, which plans to invest as much as $250 m in the plant.

3.Poland may call off talks on the sale of newsstand chain Ruch to France’s

Hachette distribution service if it fails to make a firm financial offer soon.

4.Bank Inicjatyw Gospodanczych (BIG) and Gdanski are planning to work together on a new deal. They will form one new bigger and stronger bank and together they will control 4% of Polish banking assets.

5.Just as Daewoo Electronics chairman Bae Soon-Hun thought he had agreed a deal to buy Thomson Multimedia, the consumer electronics arm of Thomson, he heard that it had refused his offer.

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Reading Company mergers

Discuss these questions.

1.Why do firms merge?

2.What problems can arise before and after a merger takes place?

In the interview below a Chief executive describes how he and his board decided whether to merge with a larger company in the same industry. Read the interview and note down the arguments for and against the merger.

An interview with John T. Chambers, Chief Executive, Cisco Systems

A merger of equals had a lot of appeal. If you combine the Number 1 and Number 2 players in an industry, by definition you are Number 1 in terms of size. And when you are growing that fast, you have a number of key management openings you have to fill. By combining two companies with good management teams, you automatically build up the strength of your management and you do it quickly. You can also widen your customer base and have more distribution channels.

In addition, the merger automatically makes your remaining competition second level. As a result, your competition must rethink its strategy. In the end, you force a period of mergers and acquisitions on your competition. They have no choice but to respond to the changes you initiated.

When we looked more closely, our concerns were raised. For example, 50 percent of large-scale mergers fail. Mergers can fail on a number of levels. They can fail in terms of their benefit to the shareholders, customers, employees and business partners. A decision has to be right with each of those groups, or we would not go forward with it.

If you merge two companies that are growing at 80 percent rates, you stand a very good chance of stopping both of them. That’s a fact. For a period of time, no matter how smoothly they operate, you lose momentum.

Our industry is not like the banking industry, where you are acquiring branch banks and customers. In our industry, you are acquiring people. And if you don’t keep those people, you have made a terrible, terrible investment. We pay between $500,000 and $2m per person in an acquisition. So you can understand that if you don’t keep the people, you’ve done a tremendous disservice to your shareholders. So we focus first on the people and how we incorporate them into our company, and then we focus on how to drive the business.

From Thought leaders, Loel Kurtzman

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Choose the best answer.

3.When Cisco Systems buys another company it pays special attention to:

a.the money it has spent

b.the staff it acquires

c.the opinions of its shareholders

4.What is the most interesting point that Chambers makes, in your opinion? Explain why.

Listening. You will hear Margareta Galfard, Director of Communication for Volvo in France, talking about why the merger between the major automotive companies, Renault and Volvo, failed. Listen and decide if the following statements are true (T) or false (F). ( Insight into Business p.117)

1.The reason why the merger failed are very simple to understand.

2.The shareholders were afraid that Volvo would lose its Swedish identity.

3.The shareholders feared that Renault was trying to take over their company.

4.The Swedish management were keen for the merger to go ahead.

Can you think of any other reasons why a merger might fail?

Read the text about failed mergers, which uses the Volvo-Renault deal as an example, and see if it mentions any of your suggestions.

When egos collide ( In the acquisition jungle, alpha males are dealbreakers)

Perhaps business schools should add anthropology to the curriculum; the parallels between the behavior of corporate executives and that of great apes are uncanny. The spectacular collapse of the supposed alliance of drug giants Glaxo Wellcome and SmithKline Beecham is a textbook example.

There was a clear business logic to the union of the two pharmaceuticals giants. The deal gave the companies a drugs research and development budget more than twice the size of their closest rivals, Novarris and Merck, and the combination of their complementary research technologies could have left them streets ahead of the competition; cost-cutting alone could have saved $1bn. But because these two great beasts of the jungle (the CEO’s of the corporations) chose to throw sand in each other’s faces, the deal is off, at least for now.

Corporate egos cause problems but they seem to be inevitable in a business culture that prizes drive, determination and leadership above all. Having the strength of personality and the ability to outmanoeuvre others is a fundamental

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prerequisite to climb to the top of corporate ladder. So with a power-hungry alpha male at the top of each company, it is not surprising that every time a mega-merger is announced, there’s a high probability of a boardroom bust-up. Nicholas Bates, head of Human Resources Management at the European Business School, says many senior businessmen actually go off the top of the scale on personality tests. “Some of them are almost psycho-pathological and would have no hesitation taking everyone down with them. Some are verging on paranoid. Nevertheless these are precisely the sorts of personalities that companies want because they can transform a business; the problem only appear when they have to get together with peers intheir organization who don’t share their views. Then clashes are inevitable.

Europe’s most spectacular and public bust-up was between automotive giants Volvo and Renault. In September 1993 Volvo and Renault announced they were to tie the knot, with Volvo holding a minority 35% stake. However, three months later Volvo shareholders and senior management rejected the marriage plans because of concerns that the deal undervalued Volvo, and was turning into a Renault takeover, without Renault paying the acquisition premium. Simmering resentment over chairman Pehr Gyllenhammer’s dictatorial management style at

Volvo added spice to the management revolt. The divorce is reputed to have cost Volvo several hundred million dollars and forced the resignation of Gyllenhammer after more than two decades in the driving seat. Egos play such a large role when two giant corporations come together that it is hard to make them work unless one personality is prepared to take a back seat or step down.

The $26 bn. marriage between Swiss giants Ciba and Sandoz to form Novartis in 1996 is often held up as a textbook example of how mega-mergers can work.It is successful, but much of that success is dependent on the fact that key personnel were ready for retirement, or were prepared to relinquish old roles in favor of new opportunities in other scenarios.

Compromise is essential if mergers between two powerful corporations are to work to the advantage of both parties and their shareholders. Otherwise friendly discussions break down and can easily turn into all-out war. In the corporate jungle, the question is now whether the imperatives of shareholders can control the egos of managers, to force through deals that deliver them the financial return they expect. This is where independent directors ought to play a part, although they rarely do.

an ego - a person’s opinion about him/himself alpha – the highest mark in an exam anthropology – the study of people

uncanny – strange and difficult to explain streets ahead of – much better than

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to outmanoeuvre – to gain an advantage by having a better plan verging on – almost, nearly

simmering – just hidden below the surface to relinquish – to let s.b. else take

compromise – agreeing, while accepting some things you don’t like

Reading

Read the text again and answer the questions.

1.According to the author, why should GlaxoWellcome and SmithKline Beecham have gone ahead with their alliance.

2.Why didn’t the deal go through?

3.What does Nicholas Bates say about the personalities of many senior businessmen?

4.What reason does the author give for the success of the Ciba-Sandoz merger?

5.What according to the author makes a successful merger?

Vocabulary

1. Choose the best definition for the word in italics in the sentences from the

3.The deal give the companies a drugs research and development budget more than twice the size of their closest rivals.

4.Corporate egos cause problems but they seem to be inevitable in a business culture that prizes drive, determination and leadership above all.

5.Having the strength of personality and the ability to outmanoeuvre others is a fundamental prerequisite to climb to the top of the corporate ladder.

6.The problem only appear when they have to get together with peers in their organization who don’t share their views.

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a.people who hold higher positions

b.b. people who hold lower positions

c.people who hold similar positions

8.In the corporate jungle, the question is now whether the imperatives of shareholders can control the egos of managers.

2.Expressions normally associated with marriage are often used to describe mergers. Read the text again and find three examples.

3.Find the following idioms in the text. In pairs, discuss what they mean.

1.to throw sand in each other’s faces

2.to climb to the top of the corporate ladder

3.a boardroom bust-up

4.in the driving seat

5.to take a back seat

Discussion

Read these profiles of some senior business people. Which of the characteristics do you think are essential, useful and dangerous? Discuss your answers.

Seven warning signs

1.Dominates conversations, commandeers meetings, interrupts and finishes off sentences of others. Competitive in all aspects of life, not only business but tennis, squash or drinking.

3.Bold, doesn’t worry about going into new situations and meeting new people.

4.Has a high opinion of himself and his abilities and he always thinks he’s right.

5.Loves pressure. He likes tight deadlines, is impatient to get ahead and does several things at once.

6.Must be the center of attention at meetings, parties, social gatherings, and can’t do without attention or flattery.

7.Loves power and the trappings. Couldn’t be without a chauffeur-driven car, panelled office, secretaries and trips on Concorde.

8.Has abnormal energy level, is always on the go, needs little sleep, and is constantly restless.

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Language review Dependent prepositions

When you learn a new verb it is important to know which prepositions can follow it.

*Some verbs are regularly followed by one preposition: You can depend on that.

*Other verbs may be followed by a number of prepositions: agree with, agree on, agree to, agree about.

1.Complete these sentences with one of the verbs paying attention to the italicized preposition, translate the sentences.

agree apologize build respond think hear refer incorporate focus

1.The CEO thinks a joint venture is the best way to break into the Russian market, but I don’t …….. with him.

2.Did you ……… about the alliance between Lufthansa and SIA?

3.If you ………. to the annual report it clearly sets out the facts.

4.What do you …… about the latest news on the proposed merger?

5.The Chairman had to ………. for misleading the shareholders at the AGM.

6.Combining two companies with good management teams, you automatically

……up the strength of your management.

7.Good managers should …… on the people involved in company’s activity.

8.If you merge two companies, you have to think how to ……… people into one company.

9.Good managers should ……… to all the changes taken place in business environment.

2. Replace the words in italics with a verb from A and a preposition from B,

1.The company had hoped that the new sportswear designs would be a success but in fact they never really became popular. ( caught on)

2.They finished by having to abandon the idea altogether.

3.Following the recent takeover of his company the chairman has announced his intention to resign.

4.I’m afraid I can’t hear what you are saying. Could you talk louder please?

5.He’s new here, but he seems to be making progress.

6.Many businesses fail in their first year.

7.We need to think of the future and decide where we want to be in five years.

8.It’s a pity we let that opportunity pass; we need more orders like that.

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Complete the sentences below.

1.The Sales Director apologised ………

2.The R & D department succeeded ……..

3.We all agree ………

4.The safety inspector insists ……….

5.You can never rely …………

6.The Board’s job is to focus ……….

7.We are looking forward ………….

8.Several managers don’t approve …..

Complete this letter to shareholders. Use appropriate forms of these verbs.

rely on, combine with, consist of, advise on, succeed in, budget for, spend on, account for, compete with, invest in.

Dear Shareholder,

I write to inform you that the Board has received information of a takeover bid for your company. This ……….. an attempt by Thor Engeneering to acquire a controlling interest by offering to purchase shares at a price of 650 dollars. We have brought in a team of consultants to ………… the tactics we should use to resist the bid.

Although the offer seems attractive, it does not reflect the true value of the company or take into account our future prospects. We have ……. a major program of expansion. During the next two years we plan to …….. new plant and equipment. We have also allocated funds to ………. a new computerized stock control system which will allow us to …………… our much larger rivals. Furthermore, we plan to ………… a machine tool company in a joint venture in China. We are confident this will allow the company to ……… opening up new markets in Asia.

Policies like these ……… our success to date and contribute to our vision of the future. Therefore, we strongly advise you not to accept Thor

Engineering’s offer. You can ………. the Board to keep you fully informed of any future developments, but for the present we advise you to take no action in relation to the offer.

Yours Faithfully

Derek Hammond

Chairman

significant statistics

We never develop and ……. a product solely on the basis of …….. . That’s much too risky. You can’t just trust the intuition of senior managers or product managers, you have to do market research or marketing research as they call it in the States. We collect and …….. information about the size of a potential market, about consumers’ tastes and ………. , their reactions to particular product features, packaging features, and so on.

Lots of people think that market research just means going out and asking consumers for their ……… of products, but that’s not true. Actually, talking to consumers is a relatively minor market research tool, because it’s very expensive. In fact, personal interviewing is the very last thing we’d do. We usually find that our own accounts department, which keeps records of sales, orders, ……….. size, and so on, is a far more important source of information.

Our sales representatives are another good source.

There are also a lot of printed sources of secondary …….. we can use, including daily, weekly and monthly business newspapers, magazines and trade journals, our competitors’ ……….. reports, official government ……… , and reports published by private market research companies. We only engage in field work, and ……… primary data from customers, middlemen, and so on, if both internal research (analysis of data already available in the accounts and sales departments) and secondary data ( available in printed sources) are inadequate.

If we do go out and do field work it’s usually a survey, which you can use to collect information about product and ……… features, and to measure the effectiveness of advertising copy, advertising media, sales …….. , distribution channels, and so on.

An effective and relatively inexpensive method of survey research is the focus group interview, where we invite several members of the target market (and pay them a small amount of money) to meet and discuss a product …….. . The interview is led by a trained market researcher who tries to find out the potential consumers’ opinion and feelings about the product.

Focus group are informative, but they’re usually too small for us to be sure that the chosen sample of consumers is statistically valid. Questionnaire research,

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involving many more …….. , is more likely to be statistically ………. , as long as we make sure we select the appropriate sampling unit – whether it’s a random sample of the population, or a sample of a selected category of people – and the sample size is sufficiently large. When we’ve established a sample, we do the interviews, normally by telephone or mail, sometimes by personal interviewing.

Text 2

Read and answer the questions

Marketing research is the process of collecting, analyzing, and interpreting data about customers, competitors, and the business environment in order to improve marketing effectiveness.

We can identify three types of information needed to make smart decisions. Ongoing information: Marketing managers may use daily or weekly sales data to analyze regional sales by brand or product line, and they may rely on monthly sales reports to measure progress toward marketing’s sales goals and market share objectives. For example, Kmart’s marketing managers use up-to-the- minute sales information obtained from store cash registers around the country so they can detect problems with products, promotions, and even the firm’s distribution system.

Monitored information: Marketing managers need information about the firm’s external environment. It is generally called marketing intelligence. This type of information allows the firm to monitor conditions that effect demand for existing products or create demand for new products. Marketing managers typically use this intelligence on a regular basis to predict fluctuations in sales due to economic conditions or political events. For example, knowledge of demographic trends such as a declining birthrate and an aging population allows a firm like Gerber that makes baby food to develop new nutritional products aimed at the unique needs of the elderly.

Specific information: Sometimes marketing managers need more specific information, such as immediate feedback on a brand’s sales performance, that can’t be obtained from data sources that focus on broad social trends like birthrates. Marketers use specific information to identify opportunities for new products, to promote existing ones, or to provide data about the quality of their products. For example, Procter & Gamble challenged rival Revlon’s claim that its ColorStay line of cosmetics won’t rub off. In this case, P&G researchers wanted to answer a specificquestion – was ColorStay’s claim true? Procter &

Gamble commissioned 270 women to provide the specific information needed to supportits case against Revlon. The women rubbed their cheeks against their shirts while wearing ColorStay, and reported that in fact most of the shirts did get stained. Revlon countered that P&G’ test was flawed because women may have been encouraged to rub too hard. They did their own test on 293 women

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who were told to use “the pressure they use when caressing someone else’s face”. This time few stains were found.

This case proves that marketers must rely on several kinds of market intelligence, including ongoing intelligence about the firm’s external environment, monitored information about how the brand is doing in the marketplace, and specific information to answer particular questions that may arise about how consumers perceive and use the brand, in order to make effective decisions.

The first step of marketing research is defining the problem.

Sometimes marketers cannot determine exactly what the problem is because they are focusing on symptoms, such as declining sales, and not on the underlying problem that’s causing sales to drop. For example , a drop in sales of a suntan lotion may be due to a new competitor, lack of cooperation from distributors, or perhaps to a fashion trend that emphasizes the pale look over a deep tan.

Defining the problem has three components:

*Specifying the research objectives: What questions will the research attempt to answer?

*Identifying the consumer population of interest: What are the characteristics

of the consumers involved in the problem situation?

* Placing the problem in an environmental context: What factors in the firm’s internal and external business environment might be influencing the situation?

The research objective could revolve around any number of possible questions:

Is the firm’s advertising failing to reach the right consumers? Do the firm’s cars have a particular feature (or lack of one) that is turning customers away? Is there a problem with the firm’s reputation for providing quality service? Do customers believe the price is right for the value they get? The particular objective chosen depends on a variety of factors, such as the feedback the firm is getting from its customers, the monitored information it receives from the marketplace, and sometimes even the intuition of the people designing the research. For example, Mercedes-Benz monitors drivers’ perceptions of its car, and when the company started getting reports from its dealers that people were viewing the cars as “arrogant and unapproachable”, even to the point at which they were reluctant to sit in the models on display in the showroom, a research project was undertaken to better understand the reason for this perception.

The research objective determines the consumer population that will be studied. The research might focus on current owners to find out what they especially like about the car. Or the research might study nonowners to understand their lifestyles, what they look for in a luxury automobile, or their beliefs about the company itself that keep them from choosing the cars. For example, research conducted for Mercedes-Benz showed that although people rated its cars very highly on engineering quality and status, many were too intimidated by the

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elitist Mercedes image to consider buying one. Mercedes dealers reported that a common question asked by visitors to showrooms was, “May I actually sit in the car?” Based on this research, Mercedes took steps to soften its image by changing the tone of its advertising to project a slightly more down-to-earth impression.

Environmental conditions also provide a valuable perspective. Foe example, when the economy is tight and sales of luxury cars are generally declining, the population to be studied might be narrowed down to a select group of consumers who are still willing and able to indulge in a luxury vehicle.

The second step in marketing research is determining the research techniques.

Research techniques can be different: interviews, focus groups, case studies and ethnographies are exploratory research. They are used to generate insights for the future, ideas for new strategies. Consumer interviews are one-on-one discussion in which an individual share his or her thoughts in person with a researcher.

The focus groups typically consist of five to nine recruited consumers who sit together to discuss a product, ad, or some other marketing topic introduced and led by a trained moderator.

Case study is a comprehensive examination of a particular firm or organization. The goal is to identify the key decision makers, to learn what criteria they emphasize when choosing among suppliers, and perhaps to learn something about conflicts and rivalries among these decision makers that may influence their choices.

An ethnography is a detailed report based on observations of people in their own homes or communities and how people use the products bought. For example, Warner-Lambert hired a firm to study how consumers actually use its Fresh Burst Listerine mouthwash. The firm paid families who use Fresh burst and families who use its competitor, Scope, to set up cameras in their bathrooms so researchers watch how they used each product.

As we’ve seen marketers have many tools in their arsenal. There are interactive surveys which can be made by mail or over the telephone. A short list of questions is offered to the respondent. Face-to-face surveys, in which a live interviewer asks questions of a respondent by going door-to-door, used to be a common way to collect data. Nowadays on-line surveys are growing in popularity as more and more consumers prefer answering questions about products via computer. Passive observations can be personal or mechanical. Personal observations are employed just to watch the consumers and understand how they react to marketing activities. For example, “traffic analysis” can pay off by pinpointing ”dead spots” in stores. After Frito-Lay found that shoppers spend twice as much time in the coffee aisle as in the snack food section, it began to advertise its chips near the coffee cans instead. Mechanical observation relies on nonhuman devices to record behavior. For

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example, some grocery stores use infrared sensors in their ceilings to track the movement of shopping carts.

Casual research helps to understand cause-and-effect relationships. In casual research, marketers want to know if a change in something (for example, placing cases of beer next to a diaper /nappy/ display) is responsible for a change in something else (for example, a big increase in diaper sales).

The research tries to ensure that the data are valid and reliable and that responses are representative of the target market. The final step is to implement the results by integrating this feedback into long-term planning.

Answer the following questions

1.What types of information marketers need to make smart decisions? Speak about ongoing, monitored and specific information in detail, give examples.

2.What are the phases in the marketing research process?

3.Why is defining the problem to be researched so important?

4.What is the goal of exploratory research? What techniques are used to gather data in exploratory research?

5.What kinds of surveys are used by marketers to ask potential customers about their likes and preferences?

6.What is meant by reliability, validity and representativeness of research results?

7.What is your attitude toward marketing research? Do you think it is a beneficial activity from a consumer’s perspective? Or do you think it merely gives marketers new insights on how to convince consumers to buy something they really don’t want or need?

Exercise 1 Market Testing

Nine sentences in the text are unfinished. Choose the correct sentence endings from a to i below

New products must obviously be extensively tested for safety and performance. If they successfully pass these tests, they will then normally be market tested, (1…..). Market tests are designed to inform a company how many consumers will try a product and, unless it is a durable good, (2…..) .

Tests will also reveal which dealers want to handle the product.

Testing can be carried out by giving the product free to trial consumers, or by a “mini-test”, which involves placing it, for a fee, in a number of stores selected by a market research agency, or by selecting particular towns or regions as full test markets. If a lot of people try and then re-purchase a new product, (3….) .

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If there is a high trial rate but a low re-purchase rate, (4…..). If only a few people try the product, but many of these re-purchase it, (5…..) .

For durable industrial goods, the most common form of testing is to offer the new product (6…..) . Alternatively, a firm can display the product at a trade fair or in distributors’ or dealers’ showrooms, and study customers’ reactions.

Some ideas reach the product development stage, perform adequately in test marketing, but then fail to be commercially successful; (7…...) . Enthusiasm for a new product may cause executives to misinterpret market research data which should have told them that (8…..) . On the other hand, even good new products can be destroyed by poor promotions or (9…..) .

a.by even better products developed by competitors.

b.how many will re-buy it and adopt it, and what the frequency of repurchase is.

c.it fails to offer a “unique selling proposition”, or that it is badly designed or wrongly placed.

d.it will probably be necessary to increase advertising and sales promotion spending to encourage more people to try the product.

e.something is clearly wrong with the product.

f.the company will probably go ahead and launch it in as large a geographical area as they have the capacity to supply.

g.this may be due to a previous failure of market measurement or forecasting or research.

h.to selected potential customers for trial.

i.unless, perhaps, the company is involved in a race with a competitor’s product, in which case it might launch a product immediately.

Exercise 2. Market Potential

Match up the terms with their definitions given below

1.marketing environment

2.market demand for a product

3.marketing program

4.sales response function

5.market potential

6.company potential

7.market share

8.market forecast

9.sales forecast

10.sales quotas

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a.a company’s plans regarding the marketing mix, including product features, price, expenditure on promotions, the allocation of resources, and so on

b.a company’s sales expressed as a percentage of the total sales of an industry

c.figures set as goals for a company division, a product line, a sales team, individual sales representatives, etc

d.the economic situation, and demographic, technological, political, cultural changes, and so on

e.the expected level of company sales based on a selected marketing plan and an assumed marketing environment

f.the limit approached by company demand as it increases its marketing effort relative to its competitors

g.the limit approached by market demand, in a given environment, when additional marketing expenditure no longer produces a significant return

h.the market demand that corresponds to a whole industry’s planned level of marketing expenditure

i.the relationship between sales volume and a particular element of the marketing mix

j.the total volume that would be bought by a particular customer group or market segment in a particular geographical area and period of time, in a defined marketing environment under a defined marketing program

Exercise 3

Complete the text using the words given below

In order to analyze market, ………… , and to plan their marketing activities, companies have to measure current demand and ……….. future demand. This will depend on the overall marketing ……… , which can of course change, but so too can the company’s marketing program.

Market demand is not a single number but a function, which responds, to a finite extent, to demand stimulating marketing expenditure. Some markets are extremely ……….. to marketing expenditure. The market for many products, for example, can usually be expanded quite easily. Other markets cannot, so the level of marketing spending will hardly effect them. Here a company’s marketing effort will be designed to increase its market ………. rather than the size of the total market.

In a ……….. market, individual firms with an effective marketing program can and do increase their market share. There is, therefore, a company demand

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function, or a sales response function which forecasts the likely sales …….. during a specific time period associated with different possible levels of a marketing mix element. But of course market …….. depends on many factors in the marketing environment that a company cannot control, such as the general health of the national economy. Furthermore, the sales response function assumes that other ………. , such as competitors’ prices, remain constant, whatever the company spends on marketing. This is obviously untrue, and so has to be compensated for in calculations.

Marketing expenditure gives first increasing, then diminishing ……… , as there tends to be an upper limit to the total potential demand for any particular product. The easiest sales prospects are sold first, so that only more difficult ones remain. Competitors are also likely to increase marketing effort at the same time, so each company will experience increasing sales ………… . If sales did not stop increasing at the same rate, the firm with the greatest level of marketing effort would take over the whole industry, and create a natural ……… .

Make up partnerships with the word market or marketing

Exercise 4 Market Forecasting

Rearrange these sentences to make a complete text about market forecasting by surveys and tests

a.An alternative to both surveys and market tests is to analyze existing data, such as time series of past sales of a product, taking into account the business cycle, and unpredictable events such as shortages, strikes, price wars, and extreme weather conditions.

b.Consequently, market tests are often carried out for new products, for products whose buyers do not carefully plan their purchases or who are highly erratic in fulfilling their intentions, or for products that are being sold in new areas or by new distribution channels.

c.Direct market tests, unlike surveys, enable a forecast to be made based on what people actually do.

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d.Even though consumers do not always have clear intentions, or carry out their original intentions, and they are not always prepared to disclose them, buyerintention surveys are often quite accurate for major consumer durables and industrial goods.

e.Forecasts based on what people say are made from surveys of buyer intentions, conducted by personal, telephone or postal interviews of a statistically selected sample of consumers.

f.If surveying customers is too expensive, an alternative method is to get estimates from sales representatives who are, after all, close to consumers, especially those of highly specialized, technical products.

g.If this is done badly it can result in excessive inventories and costly price cuts, or, on the contrary, lost sales due to insufficient production.

h.Surveys are also the only possible forecasting technique for new products for which past data does not exist.

i.There are various methods of forecasting, but they all depend on one of three factors: what people say, what they do (which is not always the same), and what they have done in the past.

j.To estimate total market potential a company needs to forecast the number of buyers, and the average quantity that they will purchase.

k.Where a company does not have its own sales force, distributors can sometimes provide equivalent information.

Read the following text and make a list of the different techniques that companies can use for market research

Hello to the good buys

A new marketing campaign promising hassle-free and faster fuel buying for customers is under way in America. Suzanne Peck reports on the 18-month research project which involves Shell Oil researchers ‘moving in’ with their customers to test their buying habits.

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1.Three years ago when Sam Morasca asked his wife what could be done to exceed her expectations when buying gasoline, her answer ‘that I would never have to think about it any more’ made him pause and think. The marketing people from Shell Oil Products, of which Sam is vice-president, were desperately seeking ways to increase the business, and to come up with a strategy which would put them clearly ahead of their competition by differentiating the Shell Oil brands in the eyes of consumers. “We are big business for Shell Oil, contributing US $7 bn of revenue, and the leading retailer of gasoline, but it is a fragmented market and the mission was to profitably expand the business”, said Sam.

2.Today, after 18 months of cutting edge research, Shell Oil is on track to make buying fuel at their 8,900 service stations clearly different with a new brand initiative. Its aim is to deliver through facilities, systems upgrades, and new operating practices, a hassle-free fueling experience targeted at specific customer segments.

3.Over the past few years, the company has been developing detailed knowledge of consumer needs and attitudes, which formed the basis for the new brand initiative. Team leader Dave Yard, manager of Strategy and Planning –

Marketing, picks up the story. “We began with a customer segment study of

55,000 people, who we stopped in the shopping malls in six cities for a 45minute interview into their attitudes, especially regarding driving and cars. The result was that everyone wanted three things from a service station: competitive price, a nearby location and good quality fuel – something they all believed was already being delivered by the industry.

4.This meant their buying decisions were influenced by other factors – some wanted full-service outlets like the old days, some chose a service station depending on whether it looked safe or not. ‘There were ten different segments with different needs, and we wanted a better understanding of each of these audiences.

5.A focus group was set up for each segment; an anthropological study was carried out, which involved team members spending waking hours with people from each segment, watching them at home and accompanying them on shopping trips to see their buying habits; and a clinical psychologist was hired to create a psychological profile of each segment.

6.The study indicated that three groups, which comprised 30% of the driving public, should be targeted:

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*Premium Speeders – outgoing, ambitious, competitive and detail oriented. They drive upmarket cars which make a statement about them. Efficiency rules, plus fast pumps, quick access and payment.

*Simplicity Seekers – loyal, caring and sensitive, frustrated with complexities of everyday life. Want simple easy transactions.

*Safety Firsters – control oriented, confident people, like order and comfort of the familiar. Higher value on relationships and go out of their way to stations that make them feel comfortable. Prefer to stay close to cars.

7.“The common thread was that they all wanted a faster and easier service than anything already available”, said Dave, “so the study ended and the launch began”.

8.The field organization and Shell Oil retailers combined forces to determine how to eliminate the little hassles that customers sometimes face, such as improved equipment and clear instructions on the pump. The innovations are currently being test marketed. A new advertising campaign was launched and a sophisticated measurement system introduced to monitor satisfaction, behavior and perception of the brand. ‘Fueling a car is a necessity of life and I believe we are ahead of the gamebut we won’t allow ourselves to stop and be caught up’.

hassle – problem

gasoline (US) – petrol (GB)

to differentiate – to show how products are different from each other an upgrade – making something work better, and do more

to make a statement about s.b. – to show what kind of person s.b. is to go out of one’s way – to make an effort

fueling up (US) – filling up (GB)

Read the text again and number the different stages in the research project in the correct order.

a.They analyzed the results, which showed that there were 10 different consumer segments.

b.Focus group studied the 10 segments.

c.Shell Oil’s marketing team decided to differentiate the Shell brand from the other brands on the market.

d.Shell launched a new advertising campaign.

e.They interviewed 55,000 people about their attitudes to driving and cars in general.

f.Work started on improving products and services.

g.They carried out a detailed study on the market over 18 months.

h.Three groups were chosen as the target markets.

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Vocabulary focus

1. Match the words from the text with their corresponding definitions

2.Find words and expressions in the text which correspond to the following definitions.

1.Many different types of consumer who buy the same product (para 1) f________ m________

2.The most advanced and up to date (para 2) c______ e________

3.Conclusions people reach about which products to purchase (para 4) b_________ d________

4.An informal discussion group used for market research (para 5) f_______ g_______

5.A shared characteristic (para 7) c________ t_______

6.A method of evaluation (para 8) m_________ s_______

3.Complete the passage using words from Vocabulary 1 and 2. Change the form of the words where necessary.

As more and more industries are making products specifically adapted to particular 1.segments of the market, market researchers are being asked to conduct studies and to compile more detailed 2.……….. of consumer groups.

Broad classifications based on sex, age and social class are not sufficient for companies operating in highly competitive and 3.………. .……… . Questionnaires are carefully designed to 4………. the exact needs and demands of consumers as well as establishing what effects consumer

5………… ……….. when they choose one product instead of another.

Advertising campaign can then be targeted to appeal to the identified

6…………. . Finally, marketing people must 7……… the success of the campaign and modify it if necessary.

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4. Some compound adjectives can be formed by combining two words with no hyphen, in the text “Hello to the good buys”, upmarket means ‘for the richer section on the market’.

Replace the words in italics with a compound noun made of a word from A and a word from B. Use some words more than twice.

1.The invoice still hasn’t been paid. It’s now two weeks late. ( overdue)

2.Some of our customers are complaining that our products are too expensive.

3.Our latest policy is to introduce more luxury products. This means that we will phase out our less sophisticated brands.

4.During the Christmas period many employees will be on vacation and as a result the company will be short of personnel.

5.The only catalogue I could find is from last year but I’m afraid that the information in it is no longer valid.

6.For the last few weeks I’ve been staying late to get everything finished; I really feel that I’ve been doing too much.

7.The database is two years old and needs to be changed to include the latest information.

8.The workers claim that they are not earning enough.

9.My bank account has been in debit for the last two months.

Discussion

1.What are the advantages of the research made by Shell Oil over the more conventional data collecting processes?

2.Would you agree to participate (as a potential consumer) in this type of research? Why (not)?

3.Why do you think some people do accept?

Read this description of a Shell TV ad called ‘Stealth’ and discuss the questions.

‘Stealth’ – A driver in a sporty Jaguar presses a button to avoid road obstacles, and refueled by a Draken jet aircraft while traveling at speed between skyscrapers.

1.Which of the target profiles described in the text would it appeal to most? Premium Speeders, Simplicity Seekers or Safety Firsters?

2.What sort of advertisements do you think would appeal to the other two target profiles?

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Skill focus Reading

Direct mail marketing involves sending publicity material to people directly by mail. It is highly successful for selling magazine subscriptions, insurance and financial services. The letters contain:

a very personalized first sentence designed to ensure that the reader continues reading.

a persuasive and clear sales message, adapted to a specific market segment.

direct and convincing language, intended to appeal to a chosen audience.

1. The profiles below are based on the results of several hundred interviews conducted in a shopping center by a major insurance company. Following the survey, the company decided to concentrate its direct marketing sales efforts on two specific products: a life insurance plan for young couples and a pension plan for slightly older couples. Read the profiles and match the letter extracts below to the profiles.

1. Profile for the insurance

Young married couples who have just had their first baby. They are aged between 25 and 30 and have fairly good salaries but are very careful about their spending. They have never considered insurance before and are put off by the complicated documents. They are suspicious of insurance sales people and would not agree to spending hours going over figures with them. They would respond if the insurance plan was inexpensive and looked easy to take out.

2. Profile for private pension

Couples aged between 35 and 45 who are just beginning to have some financial stability. They have never considered pensions until now because they felt they couldn’t afford it and that they were too young to think about retirement. They are a little anxious as they realize that they have left it very late, and would like to discuss their financial situation with ‘an expert’ who could advise them on the best plan.

a.Our new policy is guaranteed to give you the best value for money currently available. There is no red tape, just a simple application form which takes two minutes to complete.

b.It’s still not too late to join the club and dream about the future. Just pick up the phone and make an appointment and you can start saving straightaway. The sooner you start the more you have to look forward to!

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c.Of course most parents recognize that it is important to provide insurance cover for the family, but many of the schemes around are confusing and too expensive.

d.Offered direct to you – no sales commission, no insurance broker to pay and no pushy sales people in your living room.

e.Act now and enjoy later is our policy and it’s possible without giving up luxuries in the meantime. Our policy adviser will take all the time you need to draw up a plan specifically adapted to your financial situation.

f.They have no worries about whether they will be able to afford holidays, presents for their grandchildren and all those little extras that make life easy and comfortable in later years.

g.Just return the attached enquiry card. There’s no postage to pay and we will send full details to your home address so you can read at your leisure.

Complete the two letters, using the extracts a – g.

Letter 1

Dear Parent

The arrival of a new baby is such an important time, it is almost impossible to think about the practical side of being a parent ….. however, I know that you’ll agree that nothing matters more than your baby’s future.

1 c

We feel that now is the right time to tell you about a plan which has been designed especially for young people like you. Interested? Read on.

2

So you see it really is your type of plan. 3 4

Don’t miss the opportunity to provide financial protection for your family at a low cost. I look forward to receiving your enquiry card.

Yours faithfully

Letter 2

Dear John and Mary

Have you ever wondered how lucky you really are? Have you ever wondered what the future has in store? Our policy holders are looking forward to the future and planning how they will spend all the money they have saved.

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5

6

So relax, the situation is under control. 7

Looking forward to hearing from you very soon,

Sincerely ….

Marketing Practice

1.Your marketing research firm is planning to conduct surveys to gather information for a number of clients. Your boss has asked you and a few other new employees to do some preliminary work. He’s asked each of you to choose three of the topics that will be included in the project and to prepare an analysis of the advantages and disadvantages of mail surveys, telephone surveys, face-to-face surveys, or observation for each.

a.The amount of alcoholic beverages consumed in a city

b.Young adults’ use of illegal drugs

c.Why a local bank has been losing clients

d.How heavily the company should invest in manufacturing and marketing home fax machines

e.Reader recall of magazine advertisements

f.What local doctors would like to see changed in the hospitals in the city

g.Consumers’ attitudes toward several sports celebrities

2.Marketing Mini-Project

You are planning to conduct a marketing research.

1. With a group of two or tree students select a small retail business, fast-food restaurant or a student canteen in your academy to use as a “client” for your project.

Choose a topic from among the following possibilities to develop a study problem:

*employee-customer interactions

*the busiest periods of customer activity

*customer perception of service

*customer likes and dislikes about offerings

*customer likes and dislikes about the environment in the place of business

*the benefits customers perceive to be important

*the age group that frequent the place of business

*the buying habits of a particular age group

*how customer complaint are handled

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2.Develop a plan for the research:

j.Define the problem as you will study it

k.Choose the type of research you will use

l.Select the techniques you will use to gather data

m.Develop the mode and format for data collection

3.Conduct the research

4.Write a report and that includes four parts.

a.Introduction: a brief overview of the business and the problem studied

b.Methodology: the type of research used, the techniques used to gather data (and why they were chosen), and the instruments and procedures used, the number of respondents, duration of the study, and other details that would allow someone to replicate your study

c.Results: a compilation of the results (perhaps in table form) and the conclusions drawn

d.Recommendations: a list of recommendations for actions management might take based on the conclusions drawn from the study.

Unit 5

Sharpening the Focus: Target Marketing Strategies

Selecting and Entering a Market

The goal of the marketer is to satisfy needs, but in our modern, complex society it is naive to assume that everyone’s needs are the same. Even a ‘weighty’ decision like what type of fast food to eat depends on many factors.

Understanding these factors gets even more complex today because technological and cultural advances in modern Western society have created a condition of market fragmentation. Market Fragmentation occurs when people’s diverse interests and backgrounds have divided them into different groups with distinct needs and wants. Because of this diversity, the same product or service will not appeal to everyone.

Consider, for example, the effects of fragmentation in the fast-food industry.

Back in the days when a McDonald’s hamburger was still a novelty (with less than a million sold!), people were happy to order just plain burgers, fries, and a

Coke. Today’s consumers would be very unhappy if they didn’t get to select from many types of burgers, or if salads, chicken, or even specialty sandwiches like McRibs disappeared from the menu. Marketers must balance the efficiency of serving the same items to everyone with the effectiveness of offering each individual exactly what he or she wants.

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Instead of trying to sell something to everyone, modern marketers often select a target marketing strategy in which they divide the total market into different segments based on customer characteristics, select one or more segments, and develop products to meet the needs of those specific segments. So, target marketing strategy is a three step process: segmentation, targeting and positioning.

Segmentation is the process of dividing a target market into smaller pieces based on one or more meaningful, shared characteristics. Segmentation is a way of marketing life. The truth: You can’t please all the people all the time, so you need to take your best shot. The marketer must decide on one or more useful segmentation variables that divide the total market into fairly homogeneous subsets of customers or groups, each with different needs and preferences.

Segmentation variables play a significant role in purchasing decisions. They can include geographical factors – region, population density (urban, suburban, rural), size of town, and climate; demographic factors such as age, sex, family size, or stage in the family life cycle; and other variables including income, occupation, education, social class, life style, and personality.

Targeting is the next step in target marketing. Marketers evaluate the attractiveness of each potential segment and decide which of these groups they will try to turn into customers. The customer group or groups selected are the firm’s target market. To determine which segment will be profitable to enter and which target segment will be viable, the firm tries to forecast each segment’s market potential – the maximum demand expected among consumers in that segment for a product or service. To determine market potential, the firm must weigh the number of consumers in the segment and how much they spend in the product category.

Undifferentiated targeting strategy is appealing to a broad spectrum of people, having the same needs and wants so that the same product and message will appeal to many customers.

Differentiated targeting strategy develops one or more products for each of several distinct customer groups and makes sure these offerings are kept separate in the marketplace. A differentiated strategy is called for when consumers are choosing among brands that are well known, and each brand has a distinctive image in the marketplace.

Positioning The final stage of the target marketing process is to provide consumers who belong to a targeted market segment with a product or service that meets their unique needs and expectations. Positioning means developing a marketing strategy aimed at influencing how a particular market segment perceives a product or service in comparison to the competition.

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The success of a target marketing strategy depends on marketers’ abilities to identify and select an appropriate market segment; on designing a product or service to meet a segment’s needs; and on developing a marketing mix that will create a competitive advantage in the minds of the selected target market. Besides, marketers must evaluate responses to the marketing mix selected, and continually monitor changes in the market that might indicate a need to reposition the product.

Analyze competitors’ position: Marketers must understand the current situation on the market. What competitors are out there? How are they perceived by the target market? Are there other products or services that provide the same benefits people are seeking? For example, when a company such as Coca-Cola develops a new drink, it must consider how to compete against many alternatives in addition to those offered by Pepsi. The surprised success of Jolt, which is fortified with caffeine, led Coca-Cola to develop Surge in order to target students, athletes, and people who don’t like the taste of coffee but who need to “Feed the Rush”.

Identify competitive advantage: The next task is to offer a product or service with a competitive advantage, to provide a reason why consumers will perceive the product as better than the competition. Such advantages can be: a superior image such as status of luxury (Kelvin Llein), a unique product feature (Levi’s 501 button-fly jeans), better service (Cadillac’s roadside assistance program), or even better-qualified people (the legendary salespeople at Nordstrom’s department stores).

Finalize the marketing mix: Once a positioning strategy is set, marketers must put all of the pieces of the marketing mix into place. When McDonald’s decide to target African Americans, it had to be sure that a good number of its restaurants were located in areas where African Americans live and that these consumers would respond to its advertising messages and other promotions.

The elements of the marketing mix must match the selected segments. This means that the product or service must deliver benefits the segment values, such as convenience or status. Besides, marketers must price this offering at a level these consumers will pay, make the offering available at places consumers are likely to go, and correctly communicate the offering’s benefits in locations where consumers are likely to take notice.

Evaluate the target market’s responses and modify the strategy: The target marketing process is ongoing. Over time the firm may find that it needs to change which segments it targets, and the needs of people in these chosen segments may change as well. Marketers need to monitor these changes and

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adjust their positioning strategies when necessary. Sometimes marketers redo a product’s position to respond to marketplace changes.

A classic example of such a makeover, a strategy called repositioning, is

Marlboro cigarettes. Believe it or not, this brand was positioned as a women’s cigarette when it was first introduced – complete with a red-tipped filter to hide lipstick stains. The brand really took off, however, when Marlboro “adjusted” its image as a male product, complete with “macho” Marlboro cowboy.

Defining the service to customers

Positioning is the process of creating a specific image for a product that differentiates it from competitors. High quality is the goal of every successful service organization. Researchers have identified five dimensions that successfully position a service, whether it’s a theatre troupe, or an auto repair shop.

Services often rely heavily on physical evidence, i.e. apparel (fine and special clothes), facilities, graphics, and other visible signals of product quality, to communicate a desired position. Such cues as the facility ( modern décor versus traditional), distinctive colors, logos ( the lion of the Dreyfus Corporation versus the bull of Merrill Lynch) all communicate the underlying characteristics of the service organization.

Responsiveness: Some services emphasize the speed and care with which they respond to customers’ requests. For example, print shops such as Kinko’s and PIP promote their 24-hour service and their preservation of the client’s valuable documents. Domino’s Pizza was known for its promise to deliver a pizza within 30 minutes.

Empathy: An organization that says that it understands its customers’ needs and genuinely cares about their welfare often gains and edge on the competition. Recall the long-standing motto of State Farm insurance: “Like a good neighbor, State Farm is here”.

Assurance: An organization can emphasize the knowledge or competence of its employees. This is a good strategy to minimize risk, especially for services in which the customer finds it difficult to evaluate the quality of service received.

For years Texaco proudly proclaimed, “You can trust your car to the man who wears the star”.

One of the most powerful ways to create physical evidence for a service is to adopt a branding strategy. Service marketers such as McDonald’s, the tax preparation firm H&R Block, the Carolina Panthers, and the Century 21 realty company have essentially branded their services to create a unique identity for

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themselves. By developing a clear image for a brand name, consumers feel as if they “know” the service. Brands are like people in that we can often describe them in terms of personality traits. These descriptions might include words like cheap, elegant, sexy, bold, wimpy. A brand personality for a product or service is a distinctive image that captures its character and benefits. A recent advertisement for Elle magazine says: “She is not a reply card. She is not a category. She is not shrink-wrapped. Elle is not a magazine. She is a woman.”

If there is only one brand in a market, it is likely to be positioned in the center, so as to attract the most consumers possible. Appealing to all groups from the center with undifferentiated product gives a company the largest potential market, while minimizing production, inventory, market research and product management costs. A new competitor can either situate its product next to the existing one, in a straightforward battle for market share, or try to find a corner of the market in order to gain the loyalty of a consumer group not satisfied with the center brand.

If there are several brands in the market, they are likely to position themselves fairly evenly throughout the space and show real differences to match differences in consumer preferences. If, on the other hand, several producers are competing for the largest center segment, new entrants onto the market will probably find that smaller segments with less competition are more profitable. In fact, targeting a particular market segment is often the only realistic strategy for firms with limited resources, although it can be risky, as the segment might get smaller or even disappear, or be attacked by a larger competitor.

At the beginning of a product’s life cycle, companies often produce only one version, and attempt to develop demand by undifferentiated marketing, before switching to differentiated marketing in the product’s maturity stage.

Differentiated marketing involves developing several brands, each positioned in a different segment. This obviously maximizes total sales, but equally increases R&D, planning, market research, forecasting, production, promotion, administration and inventory costs.

Match the terms with their definitions

1. segmentation a. providing products to meet the needs of different consumer groups in different market segments

b. to situate

c. dividing

d. to aim at

Answer the following questions

1.What is market segmentation and why is it and important strategy in today’s marketplace?

2.What can be regarded as segmentation variables?

3.What is the difference between undifferentiated marketing and differentiated one?

4.What is product positioning? What does the success of target marketing strategy depend on?

5.List the steps in developing and implementing a positioning strategy.

6.What criteria do you use to judge a good service positioning?

7.Where can we position our product on the market if there is the only one brand on it? Why?

8.Where can a competitor place his product in the similar circumstances and why?

9.Where should a company position their product if there are several brands on the market? Why?

10.Why is it sometimes risky for a new entrant to target a smaller segment with less competition?

Unit 6 Marketing mix - Products

Use the following terms to complete the definitions below. Translate the

1.A ………. is a name ( or sometimes a sign, symbol or design) used to identify the goods or services of a particular manufacturer, seller or supplier, and to differentiate them from the goods or services of competitors.

2.A ……...is defined by marketers as anything capable of satisfying a need or want (including services such as bank loan, a haircut, a meal in a restaurant, or a skiing holiday).