Marketing Brief or Carrefour Hypermarket - Case Study Example

Table of Contents Introduction 2 Marketing Environment 4 PEST Analysis 4 Political Factors 5 Economic Factors 6 Social Factors 9 Technological Factors 10 Current Competitive Factors – SWOT Analysis 10 Tesco 11 Asda 12 Waitrose 12 Possible Future Influences 13 Segmentation 14 Market Communications 15 Market Communications Recommendations 16 Relationship Marketing – 5% of Budget 20 Introduction My client, Carrefour Group, is considering opening a Hypermarket in Southampton. The client is concerned about market position and the level of target market it should seek (top, middle, or bottom end) as well as the competitive presence, strategy, and marketing communication. The purpose of this brief is to set forth an analysis of the marketing environment using standard business analytical models, e.g., a PEST and SWOT analysis, to perform a market segmentation including competitors’ target and positioning, as well as analyze the market communication methods of the competitors. This brief will conclude with specific recommendations regarding marketing communications to assist Carrefour Group in attaining its corporate goals. Briefly, the Carrefour Group is the world’s second-largest retailer and the largest in Europe, and operates four main grocery store formats: hypermarkets, supermarkets, hard discount and convenience stores (Carrefour 2009a: n.p.). The Carrefour Group’s hypermarket generally features a large facility (average of 8,400 sq. meters), a range of 20,000 to 80,000 food and non-food products, and a focus on a price leadership strategy (Carrefour 2009b: n.p.). Accordingly, prior to making an investment in the Southampton market, management has requested my company to provide detailed market evaluation data available to them sufficient for a final decision. Marketing Environment To assist management in understanding the external, macro-environment in which it is considering entry, it is often useful to employ a PEST analysis. It has been noted, “while this is a simplistic device and cannot capture all of the vast number of external influences upon the firm, it is a useful step in enabling the firm to develop a strategic framework” (Johnson & Turner 2003: 334). PEST Analysis A scan of the external macro-environment in which Carrefour Group operates can be expressed in terms of the following factors (Blair & Hitchcock 2001: 99): Political Economic Social Technological As management plans to locate its Hypermarket operations in Southampton, will be used in this model. A PEST analysis fits into an overall environmental scan as shown in the following diagram (Box 2008: 15): Political Factors Political factors include both government regulations and legal issues, and define both formal and informal rules under which Carrefour Group must operate. Analysis of the political factors in Southampton and the UK indicates: Tax Policy – [INSERT SOME RESEARCH ON THE GENERAL TAX STRUCTURE OF THE SOUTHAMPTON AREA REGARING BUSINESSES] Regulatory Scheme – [INSERT THE LICENSES NEEDED TO OPERATE A RETAIL STORE IN SOUTHAMPTON, LIKE BUSINESS LICENSE, RESALE TAX PERMITS, VAT REGISTRATION, ETC.] Legal Requirements – [CHECK TO SEE IF THERE ARE ANY ZONING ISSUES FOR THE SOUTHAMPTON AREA IN TERMS OF A HUGE STORE. HAVE THERE BEEN ANY PROTESTS IN THE AREA AGAINST LARGE STORES SUCH AS THESE] Economic Factors Economic factors are those market conditions tht impact the purchasing power of potential customers and the company’s cost of capital: Economic factors such as wealth distribution, purchasing power, economic growth, consumer spending, inflation, unemployment, and interest rates are all key determinants of demand. One of the most sensitive issues for many businesses today is the level of interest rates. At present in the United Kingdom the interest-rate is the lowest it has been for over four decades. Another key economic factor impacting on competition is exchange rates. Fluctuations in exchange rates affect exports and imports. Arguments and discussions are still going on in relation to the fixing of exchange rates within the European Union and the UK joining single currency 'club'. The past two decades have also seen a revolution as domestic financial markets have been opened up to create a massive global capital market. This change has contributed to the explosive growth of the financial markets. A 'free' capital market ensures that savings are directed to the most productive investments without regard for national boundaries. (Kermally 2003: 146) The following are factors in the macro-economy of which Carrefour Group management should be aware: Economic Growth – A snapshot of the latest U.K. Labor Department statistics is presented in the table below (National Statistics 2009: n.p.): Given the recent banking crises in combination with the economic downturn in general, consumers will be very conservative in their spending and be very price conscious; so a price leadership strategy should be able to present a strong cost competitiveness with the current market participants. As long as Carrefour can demonstrate value factors exceeding costs—and with targeted marketing—the company should expect to be able to ride out the worst of the downturn Interest Rates – Given the recent emergency reductions in bank rates, as well as the overall credit market crisis, there is no reason to expect that there is significant risk to Carrefour Group in this category of macro-environmental analysis, particularly if it plans to use long-term debt financing for property acquisition and construction. Exchange Rates – As Carrefour Group is an international operator, exchange rate risk is a material consideration. “Whether a multinational is clearing international payments...or defining the worth of a subsidiary, there is a common thread in all these activities…they are exposed to the financial hazards created by changes in the exchange rate…known in the global finance literature as exchange rate risk” (Carrada-Bravo 2003: 147). Basically, this means that currency fluctuations can significantly impact business; for the better or the worst. One only has to look at the recent increase in the British Pound/USD to understand how an investment held in USD would hamper the profits of a British company holding the paper. Inflation Rate – For the same reasons as stated in the section on interest rates, there is no forecast of an increase in inflation for the near-term. Accordingly, the risk assessment for Carrefour Group is minimal. Management should always, however, maintain a watchful eye on this issue, as inflationary trends would most certainly impact the company. Social Factors Social factors include the demographic and cultural aspects of the external macro-environment. These factors affect customer needs and the size of potential markets. Some social factors relevant to Carrefour Group operations include: Average Consumer Income – [INSERT SOME RESEARCH ON THE IMPACT OF PRICING IN THE AREA TO THE SUCCESS OF RETAIL SALES] Population Growth Rate – While this is a traditional social consideration, Carrefour Group is not directly impacted by population growth other than the potential market growth that ensues—or the market shrinkage that is possible—from such changes. Accordingly, this firm finds no significant risk regarding Carrefour Group operations from this social factor. Demographic Distribution – Carrefour Group is marketing to the middle and lower consumer markets, which is highly distributed across all ages and economic ranges of consumers. The only demographic distribution of consequence is that of Southampton itself. Technological Factors Technological factors can lower barriers to entry, reduce minimum efficient production levels, and influence outsourcing decisions. Some technological factors that should be considered by CarreFour Group are: TECH FACTOR ONE – OFFER COMMENT ON A TECHNOLOGICAL CONSIDERATION HERE. TECH FACTOR TWO – GIVE AT LEAST ONE OTHER EXAMPLE HERE. Current Competitive Factors – SWOT Analysis The competition for Carrefour Group, and its plan to construct a Hypermarket in Southampton, has been identified as three companies with similar business models; Tesco, Asda, and Waitrose. It will be informative to perform a SWOT analysis on these companies in order to better understand the opportunities available to management of Carrefour and what weakness of the competition can be exploited. This concept has been validate by Honeycutt, Ford, & Siminitras (2003), who state the necessity of “…gathering information that provides an accurate understanding of competitors and their sales organizations. A first step is identifying major competitors…[and] identify both direct and indirect competitors. Once noted, the sales manager conducts a comprehensive SWOT analysis that documents how each category of the organization ranks in comparison with identified competitors” (95). Accordingly, this analysis will be applied to the three companies noted above. Tesco Tesco has established a significant presence in the UK with over 2,100 stores across the country (Tesco 2008a: n.p.). According to the company’s website, 75% of group sales and profits come from the UK, where the company employs the following strategies: Building or creating new spaces; Extending existing stores with a multi-format approach; Sales of non-food items; Use of various classes of stores: Express (up to 3,000 sq. feet) Metro (between 7,000 and 15,000 sq. feet) Extra (60,000 sq. feet an above) Broad appeal through new lines of products; Customer focus; and Employee benefits. (Tesco 2008b: n.p.) Based on this information, Tesco can be entered into a SWOT matrix to distill the key issues in the company and frame an understanding for Carrefour Group to find competitive advantages: Strengths Established Mangement and Capitalization Base Extraordinary Innovation in Customer Service Product Diversity Current Market Penetration Growth Potential Branding/Market Recognition Weaknesses Exposure to Exchange Rate Risk Exposure to Global Economic Downturn Opportunities Continued Development of Scalable Market Mix Strengthen Price Leadership (Low Cost) Strategy Innovative Process Development Industry Stabilization Threats Economies of Scale Market Entry by Competitors Asda [PERFORM SIMILAR ANALYSIS FOR ASDA] Waitrose [PERFORM SIMILAR ANALYSIS FOR WAITROSE] Possible Future Influences [PROVIDE A BRIEF SECTION ON WHAT YOU SEE AS THE SHORT-TERM AND LONG-TERM MARKET INFLUENCES THAT YOU EXPECT TO BEAR ON CARREFOUR GROUP] Segmentation Analyze Target market segmentation, target and positioning. Support by examples from competitors. [RESEARCH YOUR SEGMENTS IN SOUTHAMPTON, AND OFFER THEM HERE. ALSO INCLUDE WHAT THE COMPETITORS ARE DOING] Market Communications Analysis and evaluation of competitors marketing communications strategies and tactics. [USE YOUR KNOWLEDGE OF THE LOCAL MARKET TO PROVIDE ABOUT TWO PAGES OF EVALUATION ON HOW THE COMPETITORS ARE COMMUNICATING WITHIN THE UK IN GENERAL, AND SOUTHAMPTON SPECIFICALLY] Market Communications Recommendations [PROVIDE THREE TO SEVEN SPECIFIC RECOMMENDATIONS FOR CARREFOUR GROUP TO ESTABLISH MARKET ENTRY] Here is a marketing plan that you can adapt. It is too long for inclusion in your paper as is, unless you want to create an Appendix called “Marketing Plan.” IF SOME OF THE ANALYTICAL DISCUSSION HAS NOT BEEN COVERED IN CLASS, DO NOT USE THAT PORTION OF THE PLAN. This section is NOT included in your word count: Don’t forget to update the word count and put it in the footer one the paper is completed. This marketing plan is comprised of a series of descriptions of tactical methods and specific recommendations, and the suggested budget allocation for each. Taken together, they represent a comprehensive marketing plan designed to maximize both ROI and market exposure, as well as provide the penetration necessary to bring the proposed Carrefour Group Hypermarket successfully to market. The marketing concept of building an organization around the profitable satisfaction of customer needs has helped firms to achieve success in high-growth, moderately competitive markets. However, to be successful in markets in which economic growth is emerging into new methodologies and in which there exist many competitors who will follow the marketing concept, a well-developed marketing strategy is required. Such a strategy considers a wide range of options and takes into account the anticipated moves of competitors in the market. As well as the standard four P's (Product, Pricing, Promotion and Place), services marketing calls upon an extra three, totaling seven and known together as the extended marketing mix. These are: People: Any person coming into contact with customers can have an impact on overall satisfaction. Whether as part of a supporting service to a product or involved in a total service, people are particularly important because, in the customer's eyes, they are generally inseparable from the total service. As a result of this, they must be appropriately trained, well motivated and the right type of person. Fellow customers are also sometimes referred to under 'people', as they too can affect the customer's service experience, (e.g., at a sporting event). Process: This is the process(es) involved in providing a service and the behavior of people, which can be crucial to customer satisfaction. Physical Evidence: Unlike a product, the service component of Carrefor Group Hypermarket cannot be experienced before it is delivered, which makes it intangible. This, therefore, means that potential customers need to see what a service would be like. Personalization: It is the customization of products and services to the local Southampton market that will help Carrefour Group gain market share. The product mix should be researched and implemented for maximum customer appeal. Participation: This is to allow customer to participate in what the brand should stand for; what should be the product directions and even which ads to run. This concept is laying the foundation for disruptive change through democratization of information. Peer-to-Peer: This refers to customer networks and communities where advocacy happens. The historical problem with marketing is that it is “interruptive” in nature, trying to impose a brand on the customer. This is most apparent in TV advertising. The “active customer communities” will ultimately replace these “passive customer bases.” Brand engagement happens within those conversations. P2P is now being referred as “social networking” and is likely to be the most disruptive force in the future of marketing. Predictive Modeling: This refers to algorithms that are being successfully applied in marketing problems (both a regression as well as a classification problem). These seven new P’s in addition to the standard four P's (Product, Pricing, Promotion and Place) are taken into consideration in this product launch plan for Carrefour Group. Tactical Components The purpose of this subsection is to set forth the dynamic tactical elements of the marketing strategy. These are the building blocks of the final, coordinated marketing effort. Direct Marketing – 30% of Budget There are two main definitional characteristics that distinguish direct marketing from other types of marketing. The first is that it attempts to send its messages directly to consumers, without the use of intervening media. This involves commercial communication such as direct mail, e-mail, and telemarketing with consumers or businesses, usually unsolicited. The second characteristic is that it is focused on driving purchases that can be attributed to a specific "call-to-action." This aspect of direct marketing involves an emphasis on trackable, measurable positive (but not negative) responses from consumers regardless of medium. Direct marketing should be attractive to Carrefour Group, because in many cases its positive effect (but not negative results) can be measured directly. If Carrefour was to send out one million solicitations by mail, and ten thousand customers can be tracked as having responded to the promotion, the campaign led directly to the responses. The number of recipients who are offended by the junk mail/spam, however, is not easily measured. By contrast, measurement of other media must often be indirect (such as television advertising), since there is no direct response from a consumer. The most common form of direct marketing is direct mail, sending flyers or solicitation pieces to all targeted industry participants or to all customers on a list. Any medium that can be used to deliver a communication to a customer can be employed in direct marketing. Probably the most commonly used medium for direct marketing is mail, in which marketing communications are sent to customers using the postal service. Carrefour should refine direct mail practices into a Southampton regional mailing, in which targeted pieces are sent out following database analysis to select recipients considered most likely to respond positively within each sub-sector of the target markets. Email marketing has passed telemarketing in frequency at this point, and is a third type of direct marketing. A major concern is spam, of course, but Carrefour Group could again negate this by utilizing tightly screened lists. Approved lists can be purchased from national database companies with targeted and no-spam agreements in-house with recipients. Print Media – 15% of Budget Standard print media marketing covers virtually every kind of printed matter. This is not the first and best use of Carrefour’s marketing budget, but it cannot be excluded either. Accordingly, the allocated amount reflects the minimum of investment needed to accomplish the lowest threshold of successful use and best ROI. Online Media – 10% of Budget This represents one of the most effective areas of concentration for the Carrefour product. The target market and sub-sector participants are becoming more oriented to computer functions and the Internet as an information source. SEO – 10% of Budget Part of any web-based marketing program is the Search Engine Optimization (SEO) process; it lies at the heart of successful traffic generation. By successfully using this, the initial goal is to obtain 500 unique U.K. user visits per week. As other online initiatives progress, this number should increase substantially. The core SEO marketing plan can be implemented via a contracted SEO firm or through and in-house team. Relationship Marketing – 5% of Budget It is vital to recognize the importance of building relationships with Carrefour’s customers through cost-effective means; this is why Carrefour should target part of its marketing efforts to employee training and positive customer experience. Carrefour will rely on the two fundamentals of relationship marketing; satisfaction and retention, to gain market share and increase customers. Through this marketing strategy, Carrefour simply will rely on building and further establishing a its market presence. Retention is a secondary function of satisfaction, but nevertheless important. With the expected amount of competition once the Hypermarket is profiled in the market and penetration is achieved, retention of customers will be paramount. Accordingly, Carrefour must focus on maintaining the very best customer support and retention. Press Releases – 5% of Budget With the goal of obtaining at least 100 media mentions in the first month, a professional press release service will maximize exposure at the new Hypermarket launch. Strategic Marketing – 20% of Budget There are several strategic marketing basics to be considered prior to implementing the foregoing tactics into a cohesive whole. These fundamentals include: Price/Selling Effort Strategies: A firm that follows a skimming strategy seeks to be the first to introduce a specific newproduct with very good performance, selling it to the innovator market segment and charging a premium price for it. It makes as much profit as possible, and then moves on when the competition arrives. The price is likely to fall over time as competition is encountered. Such a skimming strategy contrasts with a penetrating strategy, which seeks to gain market share by sacrificing short-term profits, and increasing the price over time as market share is gained. Competitors have certain strengths and abilities. To succeed, a firm must leverage its unique abilities, which Carrefour Group will do through branding and marketing. The competition's probable response to a firm's actions should be considered carefully. Diagnostic analysis is vital to understanding the market and the firm's current performance, and opportunity analysis should be used to define any unexploited opportunities for growth. Carrefour Group should consider the value of using at least one of the following methodologies prior to engaging its full marketing push: Semantic Scaling: This is a very simple rating of how consumers perceive the physical attributes of Carrefour’s offering, and what the ideal values of those attributes would be. Semantic scaling is not very accurate since the consumers are polled according to an ordinal ranking so mathematical averaging is not possible. This strategy is not recommended in this case. Multidimensional scaling (MDS) addresses the problems associated with semantic scaling by polling the consumer for pair-wise comparisons between products or between one product and the ideal. The assumption is that while people cannot report reliably which attributes drive their choices, they can report perceptions of similarities between brands. However, MDS analyses do not indicate the relative importance between attributes, and may not provide Carrefour with a complete picture of the market preferences management will ultimately need. Conjoint analysis infers the relative importance of attributes by presenting consumers with a set of features of two hypothetical products and asking them which product they prefer. This question is repeated over several sets of attribute values. The results would allow Carrefour to predict which attributes are the more important, as well as the combination of attribute values that is the most preferred. From this information, the expected market share of a given design can be estimated. A comprehensive review of an actuated conjoint analysis would serve Carrefour Group the best. For strategic marketing purposes, it is recommended that Carrefour consider a decision calculus. In this approach, Carrefour should ask itself this question: What would sales be with: No customer service initiatives. Half of the current effort. A 50% greater effort than currently being used. A saturation level of effort. From these answers, Carrefour can determine the parameters of the S-curve response function and use linear programming techniques to determine resource allocations. Decision algorithms that result in extreme solutions, such as allocating most of the sales force to one product while neglecting another product often do not yield practical solutions. It is highly recommended that Carrefour utilize the New Product Diffusion Curve for its Southampton project. As a new product mix diffuses into the market, some types of consumers such as innovators and early adopters buy the product before other consumers. The product adoption follows a trajectory that is shaped like a bell curve and is known as the product diffusion curve. The marketing strategy should take this adoption curve into account and address factors that influence the rate of adoption by the different types of consumers. Consumers can be grouped according to how quickly they adopt a new product. On the one extreme, some consumers adopt the product as soon as it becomes available. On the other extreme, some consumers are among the last to purchase a new product. As a whole, the new product adoption process can be modeled in the form of a bell-shaped diffusion curve similar to the following: Defining bins one standard deviation wide about the mean, five different product adoption groups can be defined: Innovators - well-informed risk-takers who are willing to try an unproven product. Innovators represent the first 2.5% to adopt the product. Early Adopters - based on the positive response of innovators, early adopters then begin to purchase the product. Early adopters tend to be educated opinion leaders and represent about 13.5% of consumers. Early Majority - careful consumers who tend to avoid risk, the early majority adopts the product once the early adopters have proved it. They rely on recommendations from others who have experience with the product. The early majority represents 34% of consumers. Late Majority - somewhat skeptical consumers who acquire a product only after it has become commonplace. The late majority represents about 34% of consumers. Laggards - those who avoid change and may not adopt a new product until traditional alternatives no longer are available. Laggards represent about 16% of consumers. The rate of adoption depends on many factors, including: Perceived benefits over alternative products Communicability of the product benefits Price and ongoing costs Ease of use Promotional effort Distribution intensity Perceived risk Compatibility with existing standards and values Divisibility (the extent to which a new product can be tested on a limited basis) Even if the Hypermarket offers high value to the customer, Carrefour nonetheless faces the challenge of convincing potential customers to come to the store and eventually to adopt it as their regular source. Misc marketing – 5% of Budget This tactic is designed to reserve part of the marketing budget for unforeseen opportunities and will allow Carrefour to be equipped to take immediate advantage of any new or novel marketing prospect. References Blair, A., & Hitchcock, D. 2001, Environment and Business, Routledge, London Box, S.B. 2008, PEST Analysis, Macscon Financial Services, Inc., Chicago, Fig. 5 p. 15 Carrada-Bravo, F. 2003, Managing Global Finance in the Digital Economy, Praeger, Westport, CT Carrefor Group 2009a, Our Stores [online], Available from: http://www.carrefour.com/ cdc/group/our-business/our-stores/ [Accessed: 22.1.2009] Carrefor Group 2009, Hypermarkets: the appeal of the new [online], Available from: http://www.carrefour.com/cdc/group/our-business/our-stores/our-stores-folder/hypermarket.html [Accessed: 22.1.2009] Huneycutt, D., Ford, J.B., & Simintiras, A.C. 2003, Sales Management: A Global Perspective, Routledge, London Johnson, D. & Turner, C. 2003, International Business: Themes and Issues in the Modern Global Economy, Routledge, London Kermally, S. 2003, Gurus on Marketing, Thorogood, London National Statistics (U.K.) 2009, National Statistic Instant Indicators [online], Available from: http://www.statistics.gov.uk/instantfigures.asp [Accessed: 22.1.2009] Tesco, plc 2008a, United Kingdom [online], Available from: http://www.tescoplc.com/ plc/about_us/map/ [Accessed: 23.1.2009] Tesco, plc 2008, Core UK [online], Available from: http://www.tescoplc.com/plc/ about_us/strategy/coreuk/ [Accessed: 23.1.2009] Read More