Gower Ltd Turnover Growth - Case Study Example

1 Introduction Gower Ltd., owned by Seth Gower and his wife, is a small company that manufactures and markets premium quality potato crisps through selected outlets. It currently employs 6 people who are not highly paid, grows potatoes on its own family farm and does its own processing which presently consists of hand-frying. From a small beginning it has grown to have a turnover of £ 1 million in 2007 and now aspires to reach a turnover of £ 10 million by 2012. 2 Problems of Growth For a phenomenal growth by tenfold in the next 5 years the company requires a management strategy. There are three functional areas that will undergo substantial changes when this growth is planned. Firstly the company has to arrange for outside suppliers for additional quantities of potatoes. Secondly it will require more employees and space to enhance its processing facility that consists of hand frying. Lastly it will need to have a marketing strategy to sell this higher quantity of the product to new customers in a wider area. Amongst them marketing strategy is the most important as the company has not required it for arriving at the present status. But now it cannot do without giving it the due importance. 3 Marketing Strategy Markets are heterogeneous and are created by reasons of different values, needs wants, constraints, beliefs and incentives. Customers differ in their values and perceptions and want to purchase things that have value for them. Value is not just the monetary part, but also the usefulness and emotions that with go with it. The need and want play a great role in determining this value. The price actually determines the location from which this purchase will be made. Marketing is also about knowing how competitive the company is against its rivals. 4 Force Five Analysis An important method of finding the competitiveness is by using the Five Force Analysis devised by Porter M.E. (1985), often called the Porter’s five force analysis. This will help the management to devise appropriate marketing strategy to take care of vital issues. Porter divides the competitive environment into five forces of ‘powers’, these are Power of buyers, Power of suppliers, Threat of new entrants, Threat of substitutes, Intensity of rivalry between existing firms. (Porter, M. E.1985) In fact the Five Force Analysis is the answer to the problem questions posed earlier and therefore can be stated to be a critical constituent of any purposeful marketing strategy. The Power of Buyers Four different reasons influence a buyers’ decision. They are also known as 4Ps as explained by Phillips Kotler . This needs careful study to understand customer behaviour. (Kotler. P,.1986) i Product. The buyer is greatly influence if the product is perceived as useful for him. ii Price. The price is not usually a stand-alone factor. It has to be comparable with other products but with weight given to factors like quality and after sale service. iii Promotion. Image plays a very important role. Whether it is the image of the product which enhances value or status or the image of the buyer when he acquires a product, both factors are extremely important for the buyer in arriving at a purchase decision. iv Place or Time of offer. It is of great value to the buyer if a product is offered to him at a place and time that suits him. In recent years the 4P concept has come under criticism and as a result different marketing mixes have been put forward by Kotler P,. (1986); Mindak and Fine (1981); and Nickels and Jonson (1976). But the one put forward by Booms and Bitner (1981) to include another 3Ps viz., Process, Physical Evidence and Participants has gained the most acceptability and popularity in marketing literature. 5 Process Marketing and Sales policies are important factors that attract a customer to a product. Warranties offered, replacement guarantees, quick response from employees are comfort levels that promote a product’s marketability. 6 Physical Evidence This is the defining of the environment where the marketing activity is to take place and is concerned with the location and general ambience of the sales outlet. 7 Participation Largely neglected earlier, but by far the most important aspect of marketing is the adequate training of the employees that are involved in the marketing process. Their knowledge and confidence builds up an image of robust product and enthuses the customer. The whole attitude and behaviour of involved personnel reflects the concern of the marketing organization in offering a quality product and the personal touch is perhaps the final point that concludes a deal successfully. A satisfied customer is the company’s best brand ambassador and word of mouth publicity is the most precious campaign that any company wish for and this 7th P is no doubt the most important of them all. B The Power of Suppliers When there a few suppliers of goods, they offer better terms and service to the company but when they are few, they normally offer goods and services as per their own priorities. The external factor that affects quality of service depends largely on the cooperation and coordination of various suppliers. Their quality of service improves, or depreciates, the company’s own service to its customers. The power of the suppliers cannot be ignored. A good supply chain management will ensure and engender customer loyalty which is the single biggest achievement the company can boast of. Threat of New Entrants The Evolutionary Cycle of Competitive Behaviour advocates that change takes place only when one of the competitors come out with an innovation and others follow it and improve upon it until it becomes an industry standard, at which time the cycle ends. The two ends of the cycle are Innovation and Efficiency. Then, with the introduction of another innovation, the cycle recommences. The performance of all players is evaluated vis-à-vis the efficiencies they are able to achieve. This theory evolved by Strebel (1966) suggests that evolution is a continuous process, no product can expect to be acceptable to customers in its present form and functionality to be for all time to come. This aspect must also be borne in mind when devising any marketing strategy and the company must be ready, willing and able to innovate whenever the situation demands a change for survival. D Threat of Substitutes At any point in time there is always a possibility that, inspired by the popularity and acceptability of a product, a substitute is offered that will replace it due to its better features or innovative idea (J. Schumpeter 1934). E Intensity of Rivalry Finally the competition never gives up and is always finding newer and better ways and mean to make inroads into the market share of an existing product. This is an ongoing struggle and has to be met head on with innovative practices. A few of the marketing strategies in this direction are Product Strategies, Brand Management, Publicity and Promotional Strategies. 5 Marketing Strategies Product Strategies A product should be placed in a way that conveys value for money offers. It is extremely important for a company to place the product differently to different segment that it wants to cater. Each segment should be satisfied with what is in offer to them. The offers should also march or better those offered by competition in an equal playing field. There must also be flexibility to change strategies or to take advantage of prevailing circumstances to convince the customer of the genuineness of the offer. Brand Management The brand is about customer recall. Products must be remembered to enable the customer to make a decisive choice in their favour when he is inclined to accept or use them. This is created by adequately projecting the benefits and values attached to them through promotions, campaigns, advertisements, special offers and above all through after sales service. This indeed a positioning strategy, that places the product in a special category. Publicity Strategy Advertising is not publicity. It conveys the inherent qualities and benefits of the product and service. It also conveys the usefulness and attempts to either fuel the desire of the customer or to fulfil it. It must force or induce the customer or even excite him to buy or use the product or service. Sales Promotion on the other hand deal with offers like discounts or specials deals and are usually used in lean seasons or times when sales are sluggish. Public relations are company releases that are given through the print or electronic media about the company’s objectives or achievements. They serve as reminders to the customers of the company’s wish to serve them better or reports performances to enhance the company image. 6 Conclusion The five force analysis clarifies that marketing strategies based on these realities will enable Gower’s to achieve their objective. It is seen that following sound marketing strategies will pave the way for steady growth of the company. The company should therefore endeavour to formulate right marketing strategies, especially that of branding and promotions to remain as a premium product. This positioning is important as the proliferation of Crisps in the market can be overcome only by occupying a niche place in the market. 7 Bibliography Booms, B.H. and Bitner, M.J. (1981), “Marketing strategies and organization structures for service firms”, in Donnelly, J.H. and George, W.R. (Eds), Marketing of Services, American Marketing Association, Chicago, IL, pp. 47-51 Kotler, P., Armstrong, G,. Principles of Marketing, Prentice Hall & Pearson Education Mindak, W.A. and Fine, S. (1981), “A fifth ‘P’: public relations”, in Donnely, J.H. and George, W.R. (Eds), Marketing of Services, American Marketing Association, Chicago, IL,pp. 71-3. Nickels, W.G. and Jolson M.A. (1976), “Packaging – the fifth P in the marketing mix, Advanced Management Journal, Winter,pp. 13-21. Porter, M.E. (1985) "Competitive Advantage", The Free Press, New York, 1985. Strebel, P. (1996). Breakpoint; How to Stay in the Game. Mastering Management, Part 17, London; Financial Times. Schumpeter, J. (1934), The Theory of Economic Development, Harvard University Press, Cambridge, Massachusetts. Read More