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Transcript of MBA 1 Marketing Management
1
TO:
HENLEY MANAGEMENT COLLEGE
FROM:
CHEUNG TSE KIN, MICHAEL
MASTER OF BUSINESS ADMINISTRATION PROGRAMME
STAGE ONE HONG KONG
SUBJECT:
ASSESSED ASSIGNMENT (No. 2): MANAGING MARKETS
March 1996
TOPIC:
Select one of your organisation’s products or services then, with reference to
the Managing Markets study materials and associated readings, present
your own recommendations for an integrated marketing plan for the
successful future development of your chosen product or service. The
marketing plan should include all the relevant strategic and operational
considerations.
2
CONTENTS
PREFACE EXECUTIVE SUMMARY
PART I CURRENT MARKET SITUATION
1.1 Introduction .............................................................. 1
1.2 Macro-Environment ................................................. 4
1.3 Market ....................................................................... 6
1.4 Product and Distribution .......................................... 6
1.5 Competition .............................................................. 6
Summary ................................................................... 7
PART II S.W.O.T. ANALYSIS and MARKETING ISSUES
2.1 S.W.O.T. Analysis ................................................... 8
2.2 Porter’s Five-Model Analysis .................................. 9
2.3 Market Research ...................................................... 10
2.4 Critical Marketing Issues ......................................... 11
Summary .................................................................. 12
PART III MARKETING STRATEGIES
3.1 Objectives ................................................................ 13
3.2 Market Segmentation ............................................... 13
3.3 Market Target ...........................................................13
3.4 Market Positioning ................................................... 15
3.5 Marketing-Mix ......................................................... 16
Summary .................................................................. 21
PART IV IMPLEMENTATION and CONTROLS
4.1 Action Programs ...................................................... 22
4.2 Projected Profit and Loss Statement ........................ 22
4.3 Controls and Evaluations ......................................... 25
4.4 Contingency Plan .................................................... 26
Summary ................................................................. 27
APPENDICES
BIBLIOGRAPHY
3
Preface
Topic
This assessed assignment of Managing Markets is based on an organisation called
Combat Karate International Inc. with headquarters based in Toronto, Canada. The
organisation is expanding its operation in South East Asia, and that this report is
concerned with the marketing issues in the Hong Kong region.
The structure of this Marketing Plan will follow the outline stated in Marketing
Management-Analysis, Planning, Implementation and Control (Kotler 1994). The
assignment question in full is :
Select one of your organisation’s products or services then, with reference to
the Managing Markets study materials and associated readings, present
your own recommendations for an integrated marketing plan for the
successful future development of your chosen product or service. The
marketing plan should include all the relevant strategic and operational
considerations.
The report consists of 5300 words in 27 pages, excluding the Preface, Executive
Summary, Section Summaries, Tables and Appendices.
Confidentiality
Please do not disclose its content to those other than the evaluating tutors at Henley
Management College.
CHEUNG Tse-Kin Michael
March 1996 Hong Kong
4
EXECUTIVE SUMMARY The 1996/97 marketing plan of Combat Karate International Inc. aims to become the
dominant market leader in the martial-arts training industry in the territory of Hong
Kong. The main business objectives include:
Minimum annual growth rate at 8%
Average annual profit increase at 11%
Takes 25% market share in 3 years
Generate a prestigious, healthy and high quality image in the marketplace.
The 3 major market targets are:
I. Sporty and wealthy male and female teenagers II. Ambitious and energetic male executives III. Law-enforcement personnel.
Three additional niche markets are also attacked: 1) kids from decent family
background, 2) professional and amateur athletes, 3) celebrities from show-
businesses.
CKI shall offer training and development programmes in recreational fighting skills
and self-defence techniques. Fees are priced slightly higher than industry average.
Promotional programs, HK$ 240,000, include heavy emphasis on public relations,
moderate advertising, with small amounts of sales promotions and direct marketing.
The marketing activities for the first 18 months of operations include a combination of
demonstrations at schools, TV stations, and charitable organisations.
The projected revenue for year 1 is HK$ 1,210,000; while all expenses totalled to
$1,003,000.
CKI’s marketing and operational activities can be controlled by 1) monitoring all
advertising and public relations programs, 2) measure market perceptions through
quantitative and qualitative researches, 3) critically evaluating projected and actual
performances.
5
‘General management plans, organises, directs and controls a group of interrelated
operations and supporting services to achieve a defined set of objectives. Strategic
management is the process of formulating strategies and strategic plans and managing
the firm to attain these goals. Marketing management, is the analysis, planning,
implementation and control of programs designed to create, build and maintain
beneficial exchanges and relationships with target markets for the purpose of
accomplishing organisational objectives.’ (Armstrong. 1993)
Applying these fundamental marketing concepts, this case study shall illustrate how
the marketing management process can assist an organisation to fulfil its mission.
PART I. CURRENT MARKET SITUATION
1.1 INTRODUCTION
Company
Founded in 1987, Combat Karate International Inc. (CKI) is the largest martial-
arts training institution in Canada. It specialises in teaching and promoting martial-
arts to individuals, in both recreational and competitive manners. Martial art refers to
the physical fighting skills for fitness, self-defence, and competition purposes. With
headquarters based in Toronto, CKI has 25 franchising schools, with 3000 students,
spreading across Canada and the United States. See Appendix A for its organisational
chart.
The head instructor (commonly the franchisee) in each school must receive rigorous
physical, mental and administrative training from the corporate management team
before its opening. The franchisee is responsible for teaching, maintenance, student
registration, and financial reporting.
Strategy
At CKI, the emphasis is on developing self-esteem, self-confidence, and respect, in a
safe and non-competitive environment.
6
Today, CKI is reputable in developing students’ physical and mental strengths. New
instructors and students must pass a series of interviews, to ensure proper attitudes
and behaviours are in place. All members are consistently reminded to be courteous,
helpful to the community, and never uses the fighting skills unethically. See Appendix
B for CKI’s corporate mission statement.
CKI is targeted to households with higher income. Prices are higher than other similar
services. It enjoys a prestigious image of high quality in teaching. The in-depth
knowledge of all instructors has led many private and public organisations to receive
its training. (Eg. the Royal Canadian Mount Police and Ontario Board of Education.)
The company has succeeded in positioning its image as high-quality, high-standard,
hygienic and healthy.
Style
Led by the Chairman and founder (a former world karate champion), CKI maintains
an open and cohesive management style. All franchisees across North America hold
meetings in the headquarters regularly. Likewise, top management also pays them
periodical visits across the continent. Communications and supports at all levels are
also positively encouraged.
Product/Service
The products offered by CKI can be broadly divided into 4 categories:
Basic, non-competitive martial-arts techniques for kids age 5-15.
Recreationally-competitive, light-contact fighting skills for age 15 or above.
Professional training for full-contact competition.
Comprehensive self-defence techniques for women, law-enforcement workers,
etc.
CKI’s revenue and operating profit have been rising steadily since its establishment.
See Appendix C for a graphical expression on its financial performances.
Benefits
In addition to gaining supreme physical fitness and self-defence ability, ‘fighting’
provides a strong sense of control over life. Repetitious practice on speed, power,
7
timing and accuracy, are physical strengths and tactics that can be transformed into
mental power. Controlling a fight is similar to manipulating one’s destiny.
Winning a match is symbolic to overcoming an obstacle. Facing an unknown
fighter generates courage to conquer fear. Therefore, CKI is teaching fighting
techniques in class; but in reality it develops self-confidence, self-mastery, and
mental force for all students. As stated:
‘Martial Art is a way of life and mental cultivation. It is a subtle art of matching the
essence of the mind to the techniques in which it has to work. The mind is trained to
direct the movement of the body. The mind wills and the body behaves. A martial-
artist aims at self-cultivation. A true master throws its emphasis in conservation of
energy, avoiding all physical extremities. It starts out as mental regimen as its basis,
where the sole object is to bring peace and calmness of mind.’ (Lee. 1962)
Demerits
Due to the nature of the industry and the geographical coverage of operations, CKI
has 3 major flaws.
1. Physical injuries, though being carefully avoided at all times, do occur. It is
often arguable to decide which party is responsible. Although participants have
a reasonable assumption of risk, customer relationship may deteriorate
occasionally when nobody admits the fault.
2. Difficult to plan and implement corporate promotional programs to satisfy
the needs of different schools situated across a wide area. Social environments
are sharply differentiated between provinces and nations. No single
advertisement can fulfil the needs in all franchisees.
3. CKI lacks an integrated information management system to consolidate
internal and external information for long-term corporate development.
The Seattle school is unaware of the student profiles in Ontario Province, nor it
is informed about the social and martial-arts trends in Eastern Canada. This may
impair overall co-ordination and information sharing in the long-run. As
explained:
8
‘An information system uses the resources of people, hardware and software, to
perform input, processing, output, storage, and control activities that convert
data into information products. We are living in a global information society
which is increasingly dependent on the creation, management and distribution
of information resources. Agricultural workers are rapidly replaced by
knowledge workers. Information system plays a major role in supporting the
strategic objectives of an organisation. It can help a firm to (1) improve
operational efficiency; (2) promote organisational innovation, and (3) build
strategic IT resources.’ (O’Brien. 1993)
1.2 MACRO-ENVIRONMENT
Political
Hong Kong (HK) became a British colony in 1842, and will return to Chinese control
in July 1997. Although the Chinese communist government ascertained to maintain
HK’s present state of prosperity, a change of sovereignty makes its political outlook
uncertain. The 1997 transitional period is expected to have impact on HK’s legal
system and economic condition. CKI is in the recreational and athletic industry, and is
unlikely to be severely affected.
Social and Demographic
With over 6 million populations in under 400 square miles, HK has the highest
population density in the world. Over 98% of the population are native Chinese with
Cantonese and English as its official languages. The male and female population
proportion is roughly 51:49; while age bracket of 25-39 occupies the largest
percentage.
The total number of reported violent crimes increased from 15,775 cases in 1985 to
17,232 in 1994; with rape, indecent assault and child abuse rank as the top 3.
Similarly, the number of persons in criminal conviction grew from 492 to 2,727;
with sharp percentage increase on those under age 21.
The number of participants engaged in martial-arts-related activities, organised by
local government, expanded from 67,800 to 513,300 between 1985 and 1994; while
9
the overall participants in recreational and athletic events, for the same period, rose
from 244,600 to 1,016,600. (HK Census and Statistics Department, 1995)
Economic
HK is a world financial and trading city. Under the British governance in the past 150
years, the territory has experienced remarkable economic growth. GDP per capita is
among the highest in East Asia. Private Consumption Expenditure increased annually
at 10% from 1985 to 1994; while expenditure on recreational activities rose at 9%.
The Composite Consumer Price Index (inflation) escalated, on average, at 11.7% per
annum. (HK Census and Statistics Department, 1995)
See Appendix D for a comprehensive summary for Macro-Environment of HK.
Legal
Martial-art was quite popular in HK during the 60s, 70s and early 80s, when different
bodies can organise and establish independent training centres for recreational and
competitive purposes. But there had always been negative association between these
‘boxing clubs’ with the ‘Triads’, which means criminal organisations (‘Mafia’ in
western term).
In 1985, the Government executed a policy to prohibit the operations of all illegal
‘boxing clubs’, to minimise triads’ exposure to the public. Since then, all martial-arts
related organisations must pass through rigid examinations by the Government, whom
would not give permission even with the slightest connection with triads. This policy
has almost made the entire martial-arts training industry extinct from the territory.
Today, one can hardly find a proper martial-arts institution that is similar to CKI in
Canada.
1.3 MARKET
As of December 1994, the population of HK is 6,061,400, in which 21% falls between
ages 30 to 39. The population is expected to grow at an average annual rate of 0.7% in
the next 10 years, reaching 6,132,800 and 6,365,500 in 1998 and 2002 respectively. A
prominent future trend is the continual ageing of the population. The median age is
projected to increase from 32 in 1991 to 37 in 2001. Also, population under age 15
10
will fall by 5% by 2001. In contrast, the proportion of age 30 to 60 shall experience a
steady rise at 2% per annum. (HK Population Projections 1992-2011, HK Census and Statistics
Dept.)
1.4 PRODUCT and DISTRIBUTION
CKI has no information on product situation and distribution for the HK market
because it has no existing operations.
1.5 COMPETITION
As of 1996, there is no well-organised martial-arts institution in HK. There are,
however, a limited number of small schools located at different districts. These ‘clubs’
were visited and researched between 1994 and 1995. The general findings were:
They have no official office hours. Phones are often unanswered.
No company brochure, advertising leaflets, class schedules, or application form.
Instructors are not internationally recognised.
Teaching contents have little ‘mental’ and ‘spiritual’ elements.
Overall, they appeared to be disorganised, non-market-driven and non-customer-
oriented.
SUMMARY
Combat Karate International is the largest martial-arts organisation in Canada,
with sound structure, system, and strategy.
Hongkong is a densely populated territory with rising economic prosperity.
Sports-related participants swell dramatically while population increases at
0.7% per annum.
There is little, if any, well-organised martial-arts-related institution founded in
HK. It is because its traditional image of association with the Triad/Mafia
makes the Government to impose strict regulations on their operations.
11
PART II. S.W.O.T. ANALYSIS and MARKETING ISSUES
2.1 S.W.O.T. ANALYSIS
‘An executive is operating on the basis of a sort of map. There are boundaries and
limits marking off the class of customers he is trying to reach, or, the trade
channels through which he is willing to sell. There are routes he can move in
attaining his objectives that are better than other routes. Strengths refer to the
competitive advantages and other distinctive competencies the company can exert
in the marketplace. Weaknesses are constraints that hinder movements in certain
directions. This framework provides a systematic scheme for an objective
appraisal of the performances and strategic moves of the marketing side of the
business.’ (Jain. 1990)
This S.W.O.T. analysis was conducted from the corporate management perspective.
Strengths
In depth knowledge and skills in martial-arts and fitness.
Corporate missions and objectives promote a total approach to long-term human
fitness.
Products are distinctly differentiated from pure physical workout.
Enjoy positive image of practising courtesy, respects, discipline and self-
confidence.
Present management is well organised; system, structure, style and strategy are
clear.
No indecorous person is ever allowed to become an instructor/student.
Weaknesses
Exposure to physical injury.
Difficult to maintain a personalised program when student number swells.
Lack an integrated information management system for overall corporate
administration.
May not possess complete local expertise in developing Asian markets.
12
Difficult to plan, implement and co-ordinate corporate-wide promotional
programs.
Opportunities
Dominate the markets in countries where similar products are absent.
Expand to other fitness training (body-building, weight-loss centre).
Be the training consultant for law-enforcement or national security (army)
organisations.
Provide training and consultations to secondary schools and Universities.
Threats
Instructors/students abuse the fighting skills unethically.
Social perception of associating martial-arts with ‘Mafia’/‘triad’.
Public fear on getting hurt in training.
May get replaced by substitutes: eg. Tennis, dancing.
Expanding internationally too fast without proper long-term management
system.
Hostile provocation from local martial-arts schools.
2.2 PORTER’S 5 MODEL ANALYSIS
A Structural Analysis, or Porter’s 5 Model Analysis, is then followed:
‘Industry structure has a strong influence in determining the competitive rules of the
games and the strategies potentially available. Competition in an industry is rooted in
its underlying economic structure and goes well beyond the behaviours of current
competitors. The collective strengths of these 5 forces determine the ultimate profit
potential. The goal of competitive strategy is to find a position where the firm can best
defend itself against these competitive forces, or, can influence them in its favour.’
(Porter. 1980)
Rivalry Among Direct Competitors
The threat from direct industry competitor is weak because no direct competition can
be founded.
13
Threat of New Entrants
The threat of new entrant is also weak because experience in teaching martial-arts
cannot be imitated easily. School reputation needs years to build up. World class
martial-artists must exist in top management: such characters have to be earned, and
can hardly be faked.
Threat of Substitutes
The threat of substitutes is high. ‘Identifying substitute products is a matter of
searching for other products that can perform the same function. Substitute products
that deserve the most attention are those (1) subject to trends improving their price-
performance tradeoff, or (2) produced by industry earning high profits.’ (Porter 1980)
It would be foolish to assume that business will rise if CKI becomes the sole supplier
of martial-arts training in HK. Consumers view martial-arts as one of the individual
sports available in the marketplace. CKI is in the recreational and athletic industry,
not ‘martial-arts’ industry. Consumers will consider CKI among all other individual
sports activities that can provide similar results.
In sum, many sports can be substitute products and are, therefore, potential
competitors. Among them, Tennis, squash, swimming and badminton are undoubtedly
close substitutes. These individual games may also provide much ‘mental benefits’,
such as self-confidence, determination and discipline, to the players.
Bargaining Power of Buyers
The bargaining power of customers is high. Simply put, in the minds of customers,
there are a wide range of substitute products to replace martial-arts training. Many
private clubs offer body-building, swimming, dancing and other ball-games facilities
at considerably low prices.
Bargaining Power of Suppliers
Lastly, the bargaining power of suppliers is low. CKI’s suppliers include training
equipments manufacturer, Public Accountants, facility maintenance workers, etc. CKI
is the client of these bodies and not satisfying CKI’s needs means no more business.
14
Based on the Porter’s 5 Model Analysis, it becomes obvious that for CKI to gain a
competitive edge in the HK marketplace, it must make special efforts to differentiate
itself from its substitutes, so that the threat of substitutes and the bargaining
power of customers are reduced.
2.3 MARKET RESEARCH
No formal market research has been done with regard to CKI’s operations in HK.
However, an informal and simple questionnaire was designed and employed by the
author, to test the general perception of martial-arts training in the territory, between
1994 and 1995. The complete questionnaire is shown in Appendix E. Sample size was
approximately 60, with various demographic, social and ethnic backgrounds. The
overall results were summarised as follow:
Many will participate for fitness and self-defence; less than 5% will practice it for
competition.
About 50% rejects it because ‘the possibility of injury is high compare to other
sports’.
Over 60% concerns with the association with the triads. But if it ‘can be proven
the school is “clean”, acceptance level will rise sharply’.
Households with higher income level, surprisingly, are more willing to allow kids
to participate, as long as ‘the training has a positive influence on attitudes and
behaviours’.
85% interviewees strongly believes that the physical and mental benefits resulted
from fighting skills training is far superior than from Tennis, swimming, dancing,
or the like.
The 4 primary factors in the buying decision process are 1) Instructor’s
knowledge, 2) attention to details in teaching quality, 3) personalised programme
for individual needs, and 4) on-site cleanness.
Secondary factors include 1) location, 2) prices, and 3) school reputation.
Inevitably, this is only an informal research with very small sample size that cannot be
treated as representative of the entire market. Nevertheless, the above findings provide
15
some important clues for formulating the marketing strategies at this point. Formal
marketing researches are required at later stage (Part IV).
2.4 CRITICAL MARKETING ISSUES
Based on the previous analysis, CKI faces 3 critical marketing issues:
1. What would be the primary and secondary market targets?
2. What company image should it generate to totally eliminate the
connection with ‘triad’?
3. How can the product be delivered to differentiate itself from substitute
product?
SUMMARY
Major strengths/opportunities of CKI include comprehensive martial-arts
knowledge, well-positioned image and decent company culture. Its
weaknesses/threats are essentially injuries, absence of integrated information
management system, and difficult to co-ordinate corporate-wide promotional
programs.
All elements in the Porter’s Five Model have low influences except 2: threat of
substitutes and bargaining power of buyers -- because fighting can be replaced
by other individual sports.
An informal market research indicated that: the general public accept the idea of
martial-arts training when proper image and safety precautions are in place.
16
PART III. MARKETING STRATEGIES
3.1 OBJECTIVES
Financial Objectives
Achieve an annual sales growth rate of 8% in first 2 years of operations; and not
less than 12% in the subsequent 3 years.
Produce an annual profit increase of 11% in a 5-year time span.
Marketing Objectives
Become the long-term dominate market leader in the martial-arts industry.
Take 25% of market share by the end of a 3-year operation.
Expand market share at an annual rate of 7% from the forth year.
Generate the best possible prestigious and healthy image across the region.
3.2 MARKET SEGMENTATION
‘Markets consist of buyers that differ in wants, purchasing power, locations, attitudes
and practices. Market segments are large identifiable groups seeking different needs.
A niche is a more narrowly defined group demanding a special combination of
benefits.’ (Kotler 1994)
HK is a densely populated territory and no geographic segmentation is needed.
However, demographic, psychographic and behavioural segmentation are applicable
here. They are more conveniently presented in tabular format in Appendix F (shaded
boxes are the target markets). In sum, focuses are on 1) higher income levels and
education standards, 2) higher social class with athletic and ambitious personality, 3)
those who seek physical and mental benefits enthusiastically.
3.3 MARKET TARGETS
3 major market targets are identified from the preceding analysis. Then, other niche
markets, although might not be as big as the first 3 in size, can also be attacked as
they are currently not being adequately served.
17
Primary Target
Age 15 to 24, male and female, teenagers and young adults, with household
income mid-high or above, intelligent and successful students. Sporty in nature,
face life challenges positively. Their parents do not want them to engage in indecent
hobbies and therefore are willing to pay for healthy recreational activities at a
premium price.
Secondary Target
Male 25 to 40, with high personal income, College graduates working at
supervisory level or above. Heavily focus on entrepreneurs. They may already be
doing other exercises regularly to improve fitness level on long-term basis. They
understand physical strength can transform into mental force, and appreciate good
teaching quality. Ambitious, forward-looking and optimistic in character.
Tertiary Market
Male and female, age 25 to 50, engaging in law-enforcement-related bodies, that
are required to be physically fit regularly. Eg. Police force, firemen, security
guards. They are probably required to be in peak physical and emotional conditions at
all times by their job nature, and regard doing rigorous physical exercises as part of
their daily routines.
Niche Markets
3 additional niche markets will be attacked:
I. Kids 6 to 14, from wealthy families, with successful school grades. They
may not appreciate the philosophical meaning of practising martial-arts, but are
active in schools and at home, have strong passion to participate in all sports.
Their parents probably understand the significance of self-respect, self-
confidence and discipline, and want their kids to develop such skills from an
early age.
II. Professional and amateur athletes, age 21 to 35, male and female,
frequently involved in athletic contests. Including players in soccer,
basketball, swimming, track and field, ball-games and body-building. They are
18
people ‘born-to-be-fit’, carry out intensive physical exercise daily as a
pleasurable habit. May not have very high income but are willing to spend the
dollar on quality instructions.
III. Male and female, age 15 to 50, engage in the show-business. Specifically,
TV and movie celebrities that are action-oriented. HK has a prosperous
entertainment industry. Action pictures, inevitably, are the most popular type of
all. To be competitive in the show business, many actors and actresses are
required to do fighting sequences elegantly. They make astronomical amount
of money and are willing to pay for high quality martial-arts training, which is
beneficial for health, career development and self-defence purposes.
3.4 MARKET POSITIONING
‘Differentiation is the act of designing a set of meaningful differences to distinguish
the company offer from competitors’ offers. Positioning is the act of designing the
company’s offer and image so that it occupies a distinct and valued place in the target
customers’ mind.’ (Kotler 1994) In line with these principles, CKI shall project the
following image:
CKI is a high-quality, high-standard martial-arts institution that only admits
students with righteous, decent and ethical attitudes. CKI pays heavy focus
toward self-discovery, self-mastery and self-improvement. All CKI instructors
are committed to bringing the very best potential out of every student, so that they
can achieve a balance in school, jobs and exercise. Nobody with a questionable
attitude and behaviour are allowed to be part of CKI: all members are
respectable, decent and probably well-educated.
A Karate master once put:
‘The goal of martial-arts is not for destruction of an opponent, but to be used as a tool
for self-growth and self-perfection. The training should be a practice of love - the love
of the preservation of your life, your body, your family and friends.’ (Inosanto 1982)
19
3.5 MARKETING-MIX
PRODUCTS
Contrary to the North American market, the HK marketplace does not have much
public martial-arts competition. Thus, the product scope will pay heavy focus on the
recreational side. The main products are:
Recreationally-competitive, light-contact martial-arts skills for teenagers and
adults.
Basic, non-competitive martial-arts forms and techniques for kids age 5-15.
Comprehensive self-defence techniques for women, law-enforcement workers,
etc.
PRICE
The pricing strategy will be higher than current market rate. A recommended price list
is shown on TABLE 1 (next page). They are set in HK dollars in accordance with HK
living standard, irrespective of the Canadian economy.
COMPETITIVE ADVANTAGE
CKI will differentiate itself from the competitors and substitute products by satisfying
various needs. Maslow Hierarchy of Needs Theory applies here: the self-defence
class fill the Safety Needs – security and protection from physical harm. Teenagers,
young adults and executives receive achievement, status and recognition to fulfil their
Esteem Needs. Self-Actualisation Needs are relevant to athletes and movie stars –
growth, releasing potential and self-fulfilment. (Robbins 1994)
Instructors shall pay careful attention to individual development, provide praise,
appraisal and encouragement to students. Practices in speed, power, timing and
accuracy are then transformed into mental forces. Individual goals are set to generate
a directive effect to breed effort and persistence. (Casio 1995) Thus a stronger and more
courageous character results. This, then, forms a concrete competitive advantage over
other similar products.
20
TABLE 1. RECOMMENDED PRICE-LIST FOR CKI HK OPERATIONS
Package Price Package Price
Class Type Training Content Targets 3-Month 6-Month
Regular Light-contact, Sporty teenagers $1,800 $3,400
recreationally- and young adults competitive with wealthy backgrounds Managers and professionals with high income
Occupational For law-enforcement Law-enforcement $2,500 $4,600 institutional needs professionals Athletes
Junior Non-contact, Kids, 6-14. $1,450 $2,600 non-competitive Managers Sporty teenagers and young adults
Practical Practical self- Athletes $2,500 $4,600 defence skills Law-enforcement professionals TV and movie celebrities
Price Per
Hour
Mini-group In small group of not Athletes $600
more than 4, on any of the above class type Law-enforcement professionals TV and movie celebrities
Private One-to-one, on any Same as 'mini- $800 of the above class type group'
21
PLACE
CKI shall establish a fixed training centre, with fixed class schedule. A recommended
weekly timetable has designed and shown in Appendix G. Having an office, private
gym and facility, yield confidence to the public that CKI is committed to the HK
market for the long-term.
To be consistent with the corporate image, the location must avoid industrial areas,
preferably at semi-commercial or semi-residential district. The entire office must be
no less than 1,700 square feet – with showers, lockers, carpets and wall-to-wall
mirrors.
PROMOTION-MIX
Promotion-Mix Expenditure
The projected annual revenue for HK operations is HK$ 1,728,000. 14% of sales, or
HK$ 240,000, shall be spent on promotion expenditures. The allocations are:
Advertising 60% HK$ 144,000
Public Relations 20% HK$ 48,000
Personal Selling 0% HK$ 0
Sales Promotions 10% HK$ 24,000
Direct Marketing 10% HK$ 24,000
ADVERTISING
The marketing objectives previously mentioned are now translated into advertising
objectives:
Generate the desired corporate image in the marketplace.
Create awareness and proper perception on martial-arts training.
Attract potential customers to visit the premise.
CKI shall not engage in expensive advertising media, such as TV, in the first 12
months of operations. It would be unwise to invest heavily without understanding
consumer’s tastes and opinions thoroughly. Nevertheless, adopting the advertising
copy and layout of the North American operations, a simple ad can be placed on
22
selected periodicals and newspapers. These will create attention, cover large number
of target market, while keeping cost down. The major steps in building an effective
Advertising Plan (Ishak 1992) are:
1. Identify profiles of market targets.
2. Collect media information, ie. ratings, readership profiles, costs per thousand on
selected target group, and nature of media.
3. Analyse the strengths and weaknesses of each potential media.
4. Match the media information with the target market.
5. Select the most appropriate and cost-effective media-mix to gain maximum
efficiency.
6. Set evaluating procedures to measure the results.
PUBLIC RELATIONS
Public relations programmes are the most critical factor in the promotional-mix. They
determine whether CKI can distance itself from being associated with the triads. In
the recreational and fitness industry, word-of-mouth reputation is 10 times more
effective than a glamorous advertising copy. CKI’s P/R strategy shall cover 4 areas:
1. Through arrangement with the Board of Education, conduct demonstrations
and provide special-day training to local schools (Primary, Secondary and Post-
Secondary). This specifically target to those at age 10 to 24. An effective way to
get audience involvement is to ask them to participate in the demonstration. These
programmes highly accelerate image building.
2. Provide free training to crime victims, such as those suffered from child abuse
and assault. There are a few social welfare organisations that specialise in mental
rehabilitation. Arrangements can be made to help these victims to regain
confidence in life: ‘to become the best person possible’: supporting the business
philosophy.
3. Offer free classes to high-ranking personnel in Police Force. At corporate level,
CKI can invite these professionals to workout for a short period to appreciate the
practicality of self-defence techniques. Such action shall totally erase the possible
23
association with criminal organisation. Plus, the candidates will spread around the
services in the law-enforcement community.
4. Participate in selective charitable activities and volunteer works. The important
aspect of this area is that not only the instructor(s) will participate, but the students
are asked to get involved too. Teaching kids and teenagers to serve the community
is part of the corporate culture.
All these align with the concept:
‘A public is any group that has an actual or potential interest or impact on a
company’s ability to achieve its objectives. The wise company takes concrete steps to
manage successful relations with its key publics, to distribute information and
communication, in building goodwill.’ (Kotler 1994)
SALES PROMOTIONS
CKI shall also be prepared to offer special discounts to different bodies and the public.
An excellent example is to make group-offer to local television stations and movie
production companies: to attract actors and actresses who are involved in action-
oriented shows.
PERSONAL SELLING
Personal selling will mainly be done internally at CKI office/gym by instructors. As
stated earlier, all instructors shall receive strict physical and mental training by the
corporate management team before school opening. Thus, they are well prepared and
aware in this area. No expenditure and new activity are needed.
DIRECT MARKETING
This area is considerably less important because such programmes cannot let the
consumers to see and feel the products/services. Basically, direct marketing/direct
mail serves as a supportive function to those promotional programmes mentioned
above.
24
SUMMARY
Objectives:
Strive for an annual sales growth rate of 8%, with profit increase at 11%.
Take 25% market share in 3 years.
Dominate the martial-arts industry.
Generate a prestigious, healthy and high quality image.
Market Targets:
Male and female teenagers and young adults. Sporty, wealthy background.
Male executives, college graduates. Ambitious, forward-looking, optimistic.
Law-enforcement personnel.
Niche Markets:
Kids, with wealthy background, active and sporty.
Professional and amateur athletes.
Celebrities from show-businesses.
Types of training offered in HK: 1) recreationally-competitive, light-contact, 2)
non-competitive, 3) self-defence techniques.
Spend HK$ 144,000 on periodicals and newspaper advertising. Conduct aggressive
public relations programmes with schools, Police Force, and charitable bodies.
25
PART IV. IMPLEMENTATION and CONTROL
4.1 ACTION PROGRAMS
This topic essentially deals with who, when, where and how the strategic plans can be
transformed into activities in achieving the marketing objectives. TABLE 2 on next
page indicates the core action programs that would take place in the first 18 months of
operations. Note that all activities shall be conducted by the instructor and an assistant.
Inevitably, the schedule is subjected to changes when special incidents arise. The
management must maintain high flexibility in response to social changes.
4.2 PROJECTED PROFIT and LOSS STATEMENT
With reference to the recommended Timetable and Price List stated before, if
maximum capacity is in place, the annual sales of one school works out to be HK$
1,728,000. However, for brand new operations in HK, full capacity is unrealistic.
Hence, discounting 25 to 30% is necessary. Thus, the conservative projected revenue
for year one is $ 1,210,000.
On the other hand, various expenses must be considered. Fixed costs, expenses
incurred regardless of output level, include 1) rent, 2) salaries, and 3) equipments and
materials. Conversely, variable costs consist of 1) light and power, and 2) promotional
expenditures.
In short, the projected Profit and Loss Statement for first year’s operations is revealed
on TABLE 3.
26
TABLE 2. ACTION PROGRAMS FOR FRIST 18 MONTHS OF OPERATIONS
Dates Actions/Programmes Duration Costs
96/6 School demonstrations at HK Island western district. 5 weeks $6,800
7 Joint promotion with Royal HK Police-western HK Island. 2 weeks $0
8 School demonstrations at HK Island central district. 5 weeks $6,800
9 Joint promotion with Royal HK Police-central and eastern HK Island. 3 weeks $0
10 School demonstrations at HK Island eastern district. 5 weeks $6,800
Demonstrations at Television Broadcast Ltd.-English and Chinese channels.
1 week $10,000
11 Joint promotion with Royal HK Police-western Kowloon. 2 weeks $0
Participate in the Annual Urban Council Fund-Raising Festival. 1 week $0
12 School demonstrations at Kowloon western district. 5 weeks $68,000
Demonstrations at Asia Television Ltd.-English and Chinese channels. 1 week $10,000
97/1 Joint promotion with Royal HK Police-central and eastern Kowloon. 3 weeks $0
2 School demonstrations at Kowloon central district. 5 weeks $6,800
Sales promotion in HK Annual Marathon Championship. 1 week $10,000
3 Joint promotion with Royal HK Police-western New Territories. 2 weeks $0
Advertising campaign in periodicals and newspapers. 2 weeks $72,000
4 School demonstrations at Kowloon eastern district. 5 weeks $6,800
5 Joint promotion with Royal HK Police-central and eastern New Territories. 3 weeks $0
Advertising campaign in periodicals and newspapers. 2 weeks $72,000
6 School demonstrations at New Territories eastern district. 5 weeks $7,000
7 Joint promotion with HK Juvenile Rehabilitation Centre-HK Island. 3 weeks $0
Direct Mail campaign to foreign companies. 1 week $12,000
8 School demonstrations at New Territories central district. 5 weeks $7,000
Direct Mail campaign to local companies. 1 week $12,000
9 Joint promotion with HK Juvenile Rehabilitation Centre-Kowloon. 3 weeks $0
10 School demonstrations at New Territories eastern district. 5 weeks $7,000
11 Joint promotion with HK Juvenile Rehabilitation Centre-New Territories. 3 weeks $0
12 School demonstrations at outlying islands. 5 weeks $9,000
Total Costs : $330,000
27
TABLE 3. Projected Profit and Loss Statement for year 1 operations of CKI in HK
Revenue HK$
Student Fees $1,210,000 Merchandise Sales $6,000
Total Revenue $1,216,000
Expenditures
Rent $660,000
Salaries
Head Instructor $19,000 Assistant Instructor $14,000
Co-ordinator $7,000 Sub-total $40,000
Equipment and Materials $24,000
Light and Power $24,000
Promotional Expenditure
Advertising $144,000 Public Relations $48,000 Sales Promotion $24,000
Direct Mail $24,000 Sub-total $240,000
Miscellaneous $15,000
Total Expenditures $1,003,000
Net Profit $213,000
28
4.3 CONTROL and EVALUATIONS
3 control techniques are employed to ensure organisational success.
1) Evaluate the effectiveness of the abovementioned promotional programmes.
To do so, CKI must answer the question: ‘How many students are derived from
the promotional programs?’ This can be done by stating a question at the
student enrolment/application form, asking for the source of reference: ‘How
did you learn about CKI?’. Replies are then consolidated to determine areas for
improvements. If, for instance, the actual amount of law-enforcement workers
registered is substantially less than the projected number, then obviously it must
rethink the P/R programs.
2) Measure the satisfaction level and perception from both students’ and non-
students’ perspectives. Identifying direct and indirect customers and
understanding their expectations are keys to gaining a long-term competitive
advantage. (Detoro and Tenner 1992) Students who actually received martial-
arts instructions from CKI will have varying needs and expectations. ‘How do
they feel about the intensity of training? Are they learning what they want?’
Likewise, non-students are those parents, spouses, families and work partners
who have an interest on the student’s development. ‘How do they feel about
their closed-one learning how to fight? Do they see any emotional and physical
improvements on the practitioner?’ Hence, ‘checkpoints must be set along the
operating process’ to ensure public perceptions are consistent with the intended
corporate image. (Imai 1991) Thus, it is recommended that market researches
are done every semi-annually. Customers are randomly selected so that a
representative sample size is collected. The medium of interviews can be by
telephone during in first 12 months, and afterwards by focus group, which is
more expensive. CKI headquarters shall assign additional budget on these
researches.
3) Match the business performances with the projected figures, quarterly. Are
sales levels progressing as predicted? If not, reasons and corrective actions are
sought. There are broadly 2 causes: internal and external. When sales are lacked
due to internal factors, CKI must consider repositioning, reorganising or
29
restructuring, depending on the problem nature. If factors are external, ‘strategic
analysis and choices are identified to result a good fit between the company and
the environment’. (Hill and Jones 1992)
4.4 CONTINGENCY PLAN
Three possible adverse scenarios and appropriate solutions are identified.
1) Public perception of associating CKI with triads persists.
Solution: Obtain decent testimonials from Government bodies and individuals (Police
Chief, athletic champions). Include this message in all advertising and P/R
programmes. Add a new class type call Anti-Triads: emphasize training for self-
defence and crime prevention. Fully enforce student admission policy to prevent
admitting indecent individuals.
2) Competition from substitute products intensifies.
Solutions:
I. Offensive action. Increase teaching quality. Add health and general fitness
consultancy services to members. Request headquarters to add research and
development on martial-arts training methods and techniques. Relate physical
workout more frequently with mental exercise to constantly remind students that
CKI empowers both body and mind.
II. Defensive action. Arrange joint-promotions with other bodies, ie. merge with
similar athletic organisations. Let customers to receive maximum benefits. Eg.
Sign up as a CKI member and get 1 week free Tennis instructions from the HK
Tennis Association. Let the consumers to pick the best for themselves. Seek
collaboration, not competition. Avoid price-war.
3) Low sales level prolongs.
Solution: Conduct internal and external analysis to identify cause-effect relationship.
Isolate irrelevant factors. Adapt internal policy to fit the external environment as far
as possible.
30
SUMMARY
Action plan involves 1) demonstrations at all Primary, Secondary and Post-
Secondary schools, 2) joint promotions with Royal HK Police, 3) advertising
campaigns aiming at CKI’s market targets, 4) together with other supportive
activities.
The projected revenue is HK$ 1,216,000 for year one, while all expenditures are
forecast to $ 1,003,000 – resulting a profit of $ 213,000.
Evaluate the effectiveness of all promotional programs by identifying how much
revenue is derived from each of those programs. Measure market perceptions by
quantitative and qualitative market researches. Critically analyse the differences
between projected and actual performances, then make appropriate corrective
actions.
31
Appendix A
Combat Karate International, Inc. -- Organisational Chart
Corporate Management Team
Europe (To be developed)
Hong Kong
Open in 1996
Macau
Open in 1997
Japan
Open in 1997
Singapore
Open 1998
Corporate Management Team
Asia (To be developed)Corporate Management Team
North America
Ontario Province X 6 British Columbia Province X 4
Quebec Province X 4 Alberta Province X 3
Manitoba Province X 3 Seatle (Washington, US) X 1
Portland (Washington, US) X 1 Newfoundland Province X 1
North West Territories X 1 Yukon Territory X 1
Training & Development Manager
Operations Manager Accounting/Finance Manager Marketing Manager - Corporate Manager - Information System
Wally Slocki
Chairman
Combat Karate International, Inc.
32
Appendix B
Combat Karate International, Inc.
Mission Statement
Combat Karate International is a martial-arts institution that aims at
developing physical and mental strengths through self-esteem, fitness and
discipline, making every student the best possible person. To realise one’s
full potential, we strive to provide personalised programmes for different
needs. All students are taught to believe they can achieve more in life.
Our instructors must receive that highest quality in training and
development. Their efforts and contributions are recognised and rewarded
appropriately.
We are also responsible to the public. We will make every effort to ensure all
instructors and students do not damage public order. We shall provide free
consultations and classes to charitable and law-enforcement organisations –
to assist those who need these techniques in this unpredictable and unsafe
world.
33
Appendix CCombat Karate International, Inc. Toronto, Canada. Graphical Expression of Revenue, Operating Profit and no. of franchises.
Years 1987 1988 1989 1990 1991 1992 1993 1994 1995
Revenue $330,000 $561,000 $987,000 $1,240,000 $1,700,000 $2,300,000 $2,530,000 $2,800,000 $2,940,000
Profits $89,000 $157,000 $276,000 $372,000 $527,000 $736,000 $835,000 $952,000 $1,000,000
No. of schools 3 5 9 11 15 20 22 25 25
Revenue & Profit Comparison
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
1987 1988 1989 1990 1991 1992 1993 1994 1995
Years
Am
ou
nts
in
Can
adia
n $
Revenue
Profits
34
Appendix D
Comprehensive Summary of Macro-environmental Information for Hong Kong.
1985 1988 1990 1991 1992 1993 1994
Participants in recreational sports (including martial arts) 104,200 161,600 188,300 200,000 208,100 250,600 593,300
Total violent crimes reported 15,775 15,340 18,820 19,560 18,570 17,450 17,230
Rape 80 97 111 114 116 103 100
Indecent Assault 801 922 1,078 1,101 1,099 1,030 1,066
Assault on Police 546 649 842 953 1,018 888 854
Child Abuse & Kidnapping 47 54 74 81 94 90 115
Total non-violent crimes reported (Eg. Burglary, theft) 71,100 63,850 69,480 69,100 65,490 65,110 70,570
Criminals arrested with age 7 to 20, ie. kids & teenagers 14,460 14,200 14,890 15,210 14,190 15,380 16,200
Total male in prisons, drug treatment & detention ctr., with age under 20 1,607 1,607 2,403 2,047 1,869 1,993 2,200
Total female in prisons, drug treatment & detention ctr., with age under 20 98 160 251 288 290 322 576
Total minor narcotic offences 9,248 5,604 2,822 3,672 6,815 7,201 8,664
Population with age 5 - 14 856,200 858,300 850,600 836,800 825,100 813,800 806,300
Population with age 15 - 24 1,052,000 950,700 896,100 882,900 871,300 872,700 879,200
Population with age 25 - 39 1,481,700 1,653,400 1,710,200 1,733,900 1,754,600 1,791,100 1,840,400
Salary Indices for Managers & professionals in all economic sectors (Jun 1983=100) 113 139 158 164 170 178 185
Value index of total retail sales (1989=100) 60 90 102 120 142 160 179
Rental indices for private offices (1989=100) 32 61 101 95 101 110 134
Composite Consumer Price Index (1989=100) 72 85 103 114 125 136 148
Expenditure-based Gross Domestic Product at constant (1990) market prices (in millions) $406,619 $549,302 $582,549 $612,016 $650,347 $692,167 $729,432
GDP Per Capita at constant market prices $74,524 $97,609 $102,121 $106,349 $111,907 $116,940 $120,341
35
Appendix E
Full version of Market Research Questionnaire conducted in 1994 and 1995
Have you ever learned martial arts before?
If yes, where and what type?
If no, why not?
Would you consider taking martial art lessons?
If yes, what would be your purpose?
If no, why do you reject it?
Have you ever been to any martial arts schools in Hong Kong?
If yes, when and which one?
Do you know any people that practise martial arts, recreationally or
competitively?
If yes, who are they and how do they behave?
What do you think practising martial arts can give you?
Under what circumstances would you consider learning martial arts?
Do you feel anything negative about learning how to fight?
Would you let your children (if applicable) to participate in it as a sport?
If yes, why?
If no, why not?
What are your factors for choosing a martial arts school for yourself / your
children?
Note:
I. The questionnaire may be conducted intermittently with other topics.
II. When necessary, the subject was discarded if interviewee(s) showed disinterest.
III. The questionnaire was done casually for purpose of information-gathering; not
as a formal market research.
36
Appendix F
Market Segmentation: Variables and Breakdowns. Shaded Boxes = Market Targets
Variables Types of Breakdowns
Demographics
Age 5-15 16-24 25-40 40-60 Over 60
Gender Male Female
Personal Income None Low Middle Mid-High High
Household Income Low Middle Middle-high High
Occupation Primary students Secondary students
College students Operational workers Supervisory
Managers Executives Professional
Entrepreneurs * Unable to provide employment proof
Education Primary level Secondary level
College/University Postgraduate Never attend
Race/Nationality Chinese Non-Chinese
Psychographics
Social Class Lower class Upper-middle class Middle class
Lower uppers Uppers uppers
Immigration status Local citizens Tourists Expatriates
Family background Decent Normal Indecent
Lifestyle Very athletic Sporty Normal Lazy
Personality Ambitious Energetic Forward-looking Optimistic
Pessimistic Dependent Passive
Behavioural
Attitude Enthusiastic Positive Neutral
Negative Hostile
Occasions Physical fitness regularly needed
Physical fitness occasionally needed
Physical fitness rarely needed
Benefits being seek Purely physical Largely mental
Physical and mental together
Note: * 'Unable to provide employment proof' refers to those triads' members.
37
Appendix G
Combat Karate International, Inc.
Recommended Weekly Time Table : Hong Kong Operations
Hours Mon. Tues. Wed. Thurs. Fri. Sat. Sun.
10:00 AM J M J M J T
11:00 AM J V J V J O M
12 NOON R O R O R M V
1:00 PM Lunch Break Lunch Break Lunch Break Lunch Break Lunch Break Lunch Break Lunch Break
2:00 PM R O R O V R M
3:00 PM T J T J R R V
4:00 PM T R T R M V V
5:15 PM R J R J T O T
6:30 PM M R M R O J O
7:45 PM R R R R R J T
9:00 PM V O V O R R
Abbreviations:
Regular (R)
Occupational (O)
Junior (J)
Practical (T)
Mini-Group (M)
Private (V)
38
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