EMBA 2016-17 STRATEGIC MARKETING: Case study on “Sudhir Telang” machinery components

Submitted by-Ruchira Panigrahy (UEMF16013) Saurav Pattanaik (UEMF16016)

Table of ContentsSITUATION ANALYSIS:..........................................................................2

SWOT ANALYSIS OF STMC...................................................................2

RECOMMENDATIONS FOR THE MARKETING STRATEGIES:..................3

COMPETITIVE ADVANTAGES.............................................................3

BEING MORE CUSTOMER FOCUSSED................................................4

STRATEGIES TO FIGHT AGIANST LOW COST RIVALS..........................4

STRATEGIES TO FIGHT AGIANST COMPETITORS :.............................6

PRICING STRATEGY...........................................................................7

MARKETING STRATEGIES TO BE FOLLOWED.....................................8

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SITUATION ANALYSIS

SudhirTelang Machinery Components (STMC) was introduced in 1973 Present business of STMC:

o Selling spares and components for Tasaku Textile machineo Deals with only casting and machining of componentso These machines were manufactured by Textile Machinery Manufacturing

Company (TMMC)o TMMC : Sales in 1976 was Rs.10 cro Tasaku Textile machine:

Total number of machines : 11000 Each of the 11000 machines had 3500 components

Business plan and target : o Be a spare and components manufacturer in the Indian market and

considering multiple marketing strategies for its new line of productso To double its sales from Rs. 15 Lakhs in 1977 to Rs.30 Lakhs in 1978

SWOT ANALYSIS OF STMC

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RECOMMENDATIONS FOR THE MARKETING STRATEGIES

COMPETITIVE ADVANTAGES

Competitive advantages are conditions that allow a company to produce a good or service at a lower price or in a more desirable fashion for customers. It provides an edge over rivals and an ability to generate greater value for a firm. There are 2 types of competitive advantages:

Comparative advantage : A firm's ability to produce a good or service at a lower cost than its competitors. Here the competitors for STMC are:

o The big market leader TMMC who sells the product directly to Tasaku Textiles

o The low-cost rivals or the small machine shops manufacturers who sell their products indirectly through established suppliers to Tasaku Textiles

o STMC’s current Pricing Strategy : Uses Cost + Margin Formula for pricing the products Single price offer for all types of buyers Sells without incurring any loss

Differential advantage : Differential Advantage is a benefit or cluster of benefits that customers value and believe they cannot obtain anywhere else.

The basic key areas on which STMC can focus on are:o Quality: The competition can be met by offering superior quality than

others. The advantages of STMC is that it manufactures “High quality” products which would mean less down time for machines, less replacements and lower labour charges for the replacement of the parts

o Price: The competition can also be met by choosing to beat the competitor by offering the lower/optimal prices depending on the type of competitor

o Service: The competition can also be met by choosing to beat the competition by offering an unforgettable customer service.

There’s always an alternative to quality; if STMC focuses on only offering the highest quality at a premium price, customers will scout around for a lower quality at a cheaper price.

There’s always an alternative to price; if STMC focuses on offering the cheapest price possible it will require that it finds a way to drive down its cost to the barest

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minimum. And this can turn out in form of low quality products or services and customers will start to complain.

STMC can complement the price or quality with its services in order to stand in the market.

BEING MORE CUSTOMER FOCUSSED

As very correctly said by-Jerry Fritz, You’ll never have a product or price advantage again. They can be easily duplicated, but a strong customer service culture can’t be copied. A customer’s perception should be made a reality by the company. In this way a company can design a well effective marketing strategy and pricing position.

STRATEGIES TO FIGHT AGIANST LOW COST RIVALS

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(With reference to HBR : Strategies to fight Low cost Rivals by Nirmalaya Kumar)

Ignoring the Low cost rival is a mistake because it would force the company to vacate from the entire market segment. Low-cost players will continue to mushroom, and some will succeed. However, there will always be two kinds of consumers:

Those who buy on the basis of price Those who are partial to value.

Therefore, there will always be room for both low-cost players and value-added businesses. How much room each will have depends not only on the industry and customers' preferences, but also on the strategies traditional businesses deploy. If incumbents don't take on low-cost rivals quickly and effectively, they can blame no one for their failure but themselves.

Companies while fighting against low cost rivals can only have 3 options:

Attack Coexist uneasily Become low cost player themselves

Price wars are not good strategies because it’ll hurt the company itself. Product differentiation is a good strategy. Differentiation works the best under the following conditions:

Tactics are not used in isolation :

o Tactics which can be used by STMC: Offer a unique product mix like that of Combo offers or the entire

assembled component Pitching on to similar product manufacturing small scale companies. Selling experiences discussing in-depth of the functioning of the

machinery components that they sold to Tasaku. Costs and benefits are aligned before implementation

o Providing Tasaku a complete package for fitting, maintenance & replacement at a subsidized price.

o Using or having a real time experience in usage of the manufactured components by themselves so as to be aware of the real time issues that company might face and providing solutions with least lead time.

o Keep track of the usage period or the running of components so as to help the company to avoid Lead time in resuming work after any issues.

Customers are persuaded well to pay for the benefits This can be done in any of the following ways:

o Acceptance of credit cards

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o Making good contracts when selling products & serviceso Making polite contacto Giving customers credit period depending upon their buying

STRATEGIES TO FIGHT AGIANST COMPETITORS

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TMMC is the major competitor. The following points it should keep in mind the following points while competing with the market leader:

Differentiation: Differentiating yourself from your competitor is the best way to compete. Approaches to differentiation include developing unique brand images, unique technology, unique features, unique channels, unique customer service or the like. In other words, the key to differentiation is obtaining an advantage that is readily perceived by the consumer. Increased costs can usually be passed on to the buyers due to the uniqueness of the product attributes.

Customer Satisfaction: SMTC has to go for CRM based strategy as its competitor has a huge Brand image and so to overpower the image STMC has to focus more on Client relations so as to stay in the race fearing no competitors. They need to respond to the customers as fast as possible. Companies can also thrive by putting customers at the centre of their business.

Positioning: One of the most important marketing strategies is to position your product or solution differently. This doesn’t need to be the features or service, but how the company markets its product or service. This is basically done through public relations strategies and many effective marketers work with the media to bring awareness to their products and the benefits their products offer. Also, in many cases where things go wrong, a good PR marketing strategy is vital. STMC should take a different approach for marketing and should be different from that of TMMC. There are plenty of opportunities to monetize through advertising. The key is in knowing who the target customers are and allocating the resources to those specific channels.

Identify Flaws and Opportunities: STMC should investigate and do more market research in order to find what is missing in the offerings of the TMMC or what market segment has been neglected. Once identified STMC can come up with approaches to compete with the market leader.

PRICING STRATEGY

Out of the multiple pricing strategies available, STMC can use the following pricing strategies for the correct market positioning depending on the type of product.

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New parts:I. Premium Pricing: Premium pricing strategy establishes a price higher than

the competitors. This pricing strategy is used when the product has a quality or has some unique features. Premium pricing can be a good strategy for STMC while competing with TMMC while introducing a new parts/ components in the market if needed by the company for any future requirements.

II. Price Skimming: Price skimming is a pricing strategy in which a marketer sets a relatively high initial price for a product or service at first, and then lowers the price over time. Businesses that have a significant competitive advantage can enter the market with a price skimming strategy designed to gain maximum revenue advantage before other competitors begin offering similar products or product alternatives. As STMC is well known for quality of the products, it can use this strategy for the new parts to be introduced in the market against TMMC.

Existing Parts:I. Penetration Pricing: Penetration strategies aim to attract buyers by offering

lower prices on goods and services. Penetration pricing does tend to result in an initial loss of income for the business. Over time, however, the increase in awareness can show results. STMC can use this pricing strategy against TMMC/ low-cost rivals to reduce the prices of the existing parts/ components thereby can capture the market and increase its sales volume and eventually the profits.

II. Economy Pricing: It is used to attract the most price-conscious consumers. With this strategy, businesses minimize the costs associated with marketing, advertisements, PR and production in order to keep product prices down. STMC can opt for a no frill very basic low cost approach to marketing, just the bare minimum to keep prices low and attract a specific segment of the market that is very price sensitive. Thereby in order to increase the profit it can search out for other buyers as well for selling its parts and components.

Both New Parts & Existing Parts : The below pricing strategies can be used for deciding on the prices of both the new parts and existing parts:

I. Bundle Pricing: With bundle pricing, multiple products/services can be sold for a lower rate than consumers would face if they purchased each item individually. STMC can bundle the services with the selling of the spares & components to Tasaku Mills.

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II. Discriminatory Pricing: It is the strategy of selling the same product to different segments at different prices. In order to meet its target, STMC can price the products based on the customer segment.

III. Market Based Pricing: It is the strategy in which the company evaluates the prices of similar products in the market. STMC can evaluate or re-evaluate its pricing strategy taking into account the competitor’s pricing for maximising sales/profit.

MARKETING STRATEGIES TO BE FOLLOWED

Planning and implementing a growth strategy to develop new markets and expand businesses before current market flattens out will not only help the businesses survive tough times, it would also give them a considerable edge in the long run.

I. Market Expansion Strategies : The total market can be expanded by any of the following ways :1. Creating new users : New users could be added through several ways:

a. Market Penetration Strategy: Convince non-users of your products to use your products

b. Aggressive strategy: Winning competitors customers

2. Discovering new users: This can be done by gaining new customers by targeting new or underdeveloped geographical markets. Any of the below 3 strategies could be followed in order to discover new ventures

a. Same Target Group, New Geographic Areab. New Target Group, Same Geographic Areac. New Target Group, New Geographic Area

The below points should be taken into account while expanding the customer base.

Target Market is the customer group that is felt to most likely want to buy your products or services. This group is defined by your customer profile.

Customer Profile is a detailed profile of your typical customer. For individual consumers, it includes information such as age, income, gender, marital status, profession and buying habits. For businesses, it includes the types of business, number of years in business, number of employees, annual revenues and products or services sold.

Demographics are the characteristics of a population such as size, growth, age, income, gender, marital status and buying habits. This information helps in

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Geographical/Expansion strategy

deciding whether this target market is large enough for your products or services in the target area.

Market Analysis is an analysis of research data that results in determinations about the marketability of a product or service in the given market.

II. Defending current market share: This strategy can be related to the theory that “Customer-retention is more profitable than customer creation”. The current market cannot be endangered at any cost. While increasing the total market, STMC must continuously defend its market of manufacturing spare parts & components for existing machines to counter the attack of rivals.

Along with playing defensive SMTC has to invest on continuous innovation, better customer service, effective distribution processes and cost cutting which would lead to increase market competitiveness. In short it can be said STMC has to maintain and continuously improve its operational efficiency to avoid losing on customers. It is always said “The best defence is a good offence”

Defence strategies that STMC can use are as follows.

o Position Defence: Position defence involves occupying the most desirable market space in the minds of the consumers, making the brand almost impregnable. By this way STMC can be successful in retaining its current market and can search for new opportunities to pitch in.

o Flank Defence: It is one of the tactics of Marketing where a market leader not only satisfies in Position defence but also puts up an outpost to defend the weak front. Here, the purpose is to protect weak sides or fronts. Flank defence consists of setting outposts to protect weak fronts that are vulnerable to be attacked.

o Mobile Defence: It is a defence mechanism used to protect the territories. STMC would stretch or expand its domain (area) over new territories that can serve as the future centres for offense as well as defence. It can be done through Market Broadening and Market diversification.

III. Expanding Market ShareOther than only defending or expanding the businesses prefer improving their profitability. But increasing market share will not always result in increasing profitability. It depends on various variables which lead to profitability after market expansion. Few are the variables which lead to the same:

Adding new product lines: In order to increase market share STMC is considering to add new and diversified products to its line of production to make it an attractive product mix. However before that STMC has to check for the demand of new machines or their parts to be used further.

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Improving existing product line: This can be a way for STMC for expanding existing product line by adding features of durability, reliability, safety, convenience etc. This strategy would definitely lead in increasing customer base.

Skimming price: To fight low-cost competitors STMC has to strategize on reducing prices of certain components so as to generate volume in sales and in turn extensive benefits from the economy.

Partnering with Allies: Partnering with competitors has always been a wise decision when the market is competitive. Here STMC has to partner with its allies so as to make sure of its long term existence. On contrary marketing alliances and partnering are cheaper to create and see success very quickly and thereby making the product visibility more.

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