As a newly appointed CEO of Minnesota Micromotors, Inc. , I am responsible for designing the company’s marketing strategy, “This includes determining all aspects of the company’s go-to-market approach and associated elements of product policy, including pricing and market positioning of the company’s orthopedic motor line. ”(Harvard Business Publishing, 2014).
MM is a member of a mature, saturated and highly competitive Orthopedic Motor market, such that every decision needs to be deliberate and appropriate, carefully assess the organisation’s competitive position that of its competitors and to get sustainable competitive advantage and provide superior customer value. This paper will use one quarter of marketing decision as example, providing the detailed reallocation of resources and analysing the result.
Before making any marketing strategic decision, it is always important to review the MM’s current go-to-market strategy, collect and analysis past and present data in order to identify opportunities and threats which may have potential impact on both short-term and long-term performance, and the financial health of the organisation. (Tadepalli & Avila 1999, p. 9-82)
After reading the foreground reading and the detailed report provided on the dashboard, my marketing strategy for MM is to basically achieve a higher level of consumer satisfaction as well as to increase market shares and profit by reallocating resources such as market-research funds and sales-force time. According to porter’s concept of generic competitive strategies, a “company could only outperform its rivals if it could establish a difference that it could preserve – by delivering greater value to its customers or by creating comparable value at a lower cost. (Porter 1996, p. 61-78).
To put it simply, i can achieve my objectives by either lowering the SG&A expense and R&D expense or providing superior value to consumer and differentiating our products from the competitors, in this case, better performance on power-to-size ratio and thermal resistance. As shown in the appendix A, for the 2013 Q3, I decided to price our product at $143 list, and remain the discount off of list for distributor at 12%,. I decided to give the large volume orders more discount, because most of MM’s revenues were generated from these segments.
For example, i assigned 13% discount off for segment A since nearly 33% dollar revenue is generated form this segment as well as the second largest market share of 19%. Then i assigned segment B at 9%, segment C at 5% and segment D at 20%. The reason i gave the smallest discount for segment C is that the customers from this segment are least price-sensitive. Oppositely, I gave the highest discount rate for segment D due to its highest price-sensitiveness.
The sales force was maintained at 11-person, nevertheless, I increase the sale force emphasis allocation for segment A and B to 37% and 38% relatively since this two segments “usually required a high level of sales support because of the customization requirements. ” (Harvard Business Publishing, 2014) I stayed with the original budget for integrated marketing communications and training at $80000 and it was necessary to keep the spending on market research as it helped me to get a better insight of the MM’s performance and the external environment.
Then I decided to increase $15000 spending on the product development of thermal resistance feature, because our product feature performance of thermal resistance was not as good as the competitors’. The power-to-size ratio spending was decreased by $30000, and i used the remaining budget of $15000 on efficiency improvement. The result of these changes were positive in some areas such as the market share of large-volume order has increased by totally 1. 7%. Appendix B) Moreover, the level of customer satisfaction increased for the four large consumer segments, as we provided a better product value through spending some of the budget on product development. Even through the increasing sales of large customer leaded to an increase of the its segment revenue, there was a significant decrease on the net income, it is due to the large decrease of the revenue from small customer segments.
The market share of small customer segments decreased by 3. % and lost revenue of $300000 comparing to the last quarter. (Appendix C) After the analysis of result in the field of both success and failure, i considered that i should have done better in the next quarter with some changes. I decided to attract those purchasers from small volume orders segment back, thus i provided a higher discount off for the distributors. The R&D expense on the development of two product features remained static, because I believed that the raise of list price would be a reflection of the better product value.
I have learned that it is necessary to decrease the SG&A expense through cutting the budget on sales force, so i reduced the next quarter’s sales force by 1 person. These adjustments of several aspects of operation, it turned out to be a better result comparing to the previous quarter. Pisano and Hitt (2012) states that the the implantation of competitive strategy provide a precise direction to a firm, it helps the firm to define its competitive position relative to its rivals which then contributes to competitive advantages.
It is important to constantly scan their environment such that the organisation would be able to understand the possible changes in the rapidly changing environment which might have an impact on their future market demand and competitiveness. In my case, i need to carefully analyse the information on the dashboard such as the changing market share, product position, financial health and the level of customer satisfactory, understand the possible outcome of any small changes in my operations, and review the result of the each quarter again and again to make the appropriate following marketing strategy.
In conclusion, the simulation helps me to understand the importance of reviewing the market research before making any marketing strategic decision. Careful and deliberate consideration is necessary as every small adjustments of my operation to the price strategy(list price and discount), product development spending and sales-force allocation could have a huge influence on the MM’s financial performance and competitive position.
