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Supply Chain Management


Posted on Aug 2017



Abstract

The two target market for Gizmo would be students and business professionals. The marketing strategy that would be employed in the case of students target market would be low-cost marketing approach, while in the case of the business professional market would be relationship marketing approach. The report also indicates that high pricing strategy would increases sales in business professionals market and reduces sales in students market. The report indicates that the exclusive use distribution would be beneficial to the company regarding increasing supply chain processes efficiency, enhancing forecasting as well as inventory control, retailer control and building dealer loyalty. However, the report indicates that main limitations of using exclusive distribution include lack of diversification and lost sales volume. In conclusion, the use of exclusive marketing has more benefits than limitation and should be embraced by partnering companies.

 

 

 

 

 

 

 

 

Supply Chain Management-Gizmo Case Study

Introduction

            Orange a company involved in the distribution of products is partnering with Random Wireless to provide exclusive distribution services for its Gizmo product. Gizmo is a smartphone product offered by Random Wireless. It is designed in a way that allows the users to access the internet, take notes, save documents, share files and listen to music. Therefore, it is a good entertainment and communication tool for any user.  Understanding the concepts of exclusive distribution is crucial for the company for it to succeed in this partnership with Random Wireless. The main objective of this report is to analyze possible markets that can be targeted by gizmo product. Then, the report will analyze the appropriate marketing strategy for the identified target markets and the implications for the supply chain processes within the company as far as these target markets are concerned. Also, the report will analyze how the pricing strategy, as well as the sales volume, is expected to changes in every target market depending on the employed pricing strategy. The last section of the report will provide an in-depth analysis of the disadvantages and advantages of having one exclusive distributor and the way the decision would be impacted by the nature of the target market to be selected.

Possible Target Markets

            There are two possible target markets for the Gizmo product that the company can target as it distributes the product on behalf of Random Wireless. One of the target markets would be business professionals. Business professional is a target market made up of individuals and group of persons in need of communication and time management tool. Most of the business professionals come from generation X, as they are older people. They would need Gizmo for purposes of using it to carry out research and manage time. Gizmo is designed in a way that would allow the users to access the internet and be in a position to search for any information they need. It also has time management application that allows a person to keep track of time at any given time.

            The second target market for Gizmo would be students. Students usually need phones for purposes of taking note of them, sharing and listening to music. Also, they make use of phone products to access the internet, especially social networks where they chat and interact with peers; for practical and entertainment purposes. Gizmo as a phone product is designed in a manner that allows these groups of customers to access the internet, take notes, file documents and allow for sharing of files, such as music files. Therefore, it suits the need of the student as a customer and it would be appropriate to target them as far as Gizmo product is concerned. Lewison and Hawes (2007) notes that when targeting student markets, it is essential to offer products that meet their preferences and needs. Given that Gizmo is designed in a way that it meets the needs as well as preferences of the students’ population, it would be appropriate to target the students as possible customers.

Marketing Strategies and Supply Chain Implications

 According to Ballou (2007), the nature of marketing strategy employed by an organization for its products has a direct impact on the supply chain processes, such as product distribution. Therefore, when selecting the marketing strategies, it is essential to ensure one take into consideration possible supply chain implications for purposes of selecting the strategies that do not have negative implications but one that ease the process of managing supply chain processes (Christopher, 2016). 

            Business professional usually value luxury as well as professionalism in the way they are served by an organization. They have the financial resources needed to purchase a product at any price as long as the customer services offered of great value. Therefore, the marketing strategy that would be appropriate for this target market would be relationship marketing. According to Oly Ndubisi (2007), relationship marketing strategy plays a central role when it comes to enabling an organization to build customer loyalty, long-term engagements, and interactions. Therefore, it focuses on having a direct response to the organization and the target customers (Hollensen, 2015). The use of relationship marketing strategy in the case of business professionals' market segment would be aimed at ensuring that the organization can maintain a close and professional relationship with these groups of customers who value professionalism and luxury in the way they are served (Hollensen, 2015).

             Richards and Jones (2008) notes that customers' usually become loyal towards a brand that offers value to them regarding trying to meet their needs and preferences at all times. The ability of an organization to meet the needs as well as the preferences of the customers is through having a direct relationship with customers. Solomon (2014) indicates that when an organization maintains a close relationship with customers, it becomes possible for it to gain feedback on their needs; thereby ensuring product features as well as customer services are geared toward meeting these needs. Therefore, the best marketing strategy for satisfying needs as well as the preferences of the business professionals would be relationship marketing. The use of this strategy would enable the company to maintain direct communication with customers, thereby understanding aspects of services and product that need improvement for purposes of fully meeting the needs of the customers (Heczková and Stoklasa, 2014).

 The use of relationship marketing strategy for the business professionals' market segment would have some implications on the supply chain processes. First, it would mean that the company will have to build a strong customer relationship management team that will focus on ensuring that direct communication and responses are maintained in the company and these group of customers. According to Jacobs and Chase (2013), customer services are critical in enhancing relationship marketing between an organization and the target customers. Therefore, having strong customer service team, which has high-quality skills in the areas of customer relationship management will be instrumental in making the relationship marketing strategy work as far as business professionals target market is concerned (Palmatier et al., 2007). Second, the relationship marketing strategy would force the supply chain management team in the organization to come up with ways of meeting the needs of customers as well as their preferences as a way of enhancing the organization's competitive advantage arising from offering services that add value to the target market. This means the supply chain management team will be actively involved in devising supply methods, such as packaging, shipment, and others that would make it possible for the target customers to feel that they get higher value for their money as far as purchasing of Gizmo is concerned (Tayur, Ganeshan and Magazine, 2012). Additionally, the supply chain management will be forced to ensure that it put in place measures aimed at creating a positive perception in the eyes of the customers regarding the overall products and services associated with it. For example, the supply chain team is supposed to make sure that that stock is always available and the order time is minimal for purposes of creating a perception in the eyes of the customers that they get high-quality services from purposing Gizmo from its retail channels. Thus, the supply chain will have to improve its processes with the aim of enhancing the process of maintaining direct relationships with the target customers. The move will be central in making the ability of the company to implement the relationship marketing strategy effectively.

 The second marketing strategy that needs to be employed by the company is one that is of being price sensitive as far as the student target market is concerned. The students are usually concerned about the price of a product, given that the majority of the students do not have adequate financial resources, they tend going for the phone brands that meet their needs and take into account their financial capabilities (Lewison and Hawes, 2007). Hence, for purposes of generating high sales in the students’ target market; it would be appropriate for the company to ensure that it offers its products at lower prices. Offering the products at lower prices would ensure that the customer feels that their needs are fully meet and would ensure that higher sales volume are generated in this target market (Pereira and dos Reis, 2010).

            The employment of low-cost marketing strategy would have some implication on the organization's supply chain processes. First, it would mean that the supply chain team is supposed to reduce operation costs, associated with transportation, distribution, and others to enable the company to offer Gizmo at a low price to the target market. According to Monczka et al. (2015), the supply chain management costs have a direct impact on the final price that is charged to customers for a particular service or product. Therefore, for purposes of the company to ensure that it is in a position to offer students target market Gizmo at lower prices, it will have to ensure that the supply chain processes can lower operational costs. The move will be a key to making sure that the firm can reduce overall operational costs, thereby, offering its phone product at low cost to students. On the other hand, the use of low-cost marketing strategy would force the supply chain management team to be innovative for purposes of coming with ways that can enhance packaging and distribution of the product at a lower cost so that the final customer can be able to benefit from low prices. Therefore, the supply chain management team will be forced to embrace innovation as part of enhancing the capability of the company to offer its products at competitive prices to the students’ market (Christopher, 2016). Therefore, in the case of the students target market, the company will be forced to employ low cost supply chain management approach, where it will minimize wastes, and try to lower costs of operations so as to manage to implement the low-cost marketing strategy as far as this target market is concerned (Wedel and Kamakura, 2012).

Pricing Strategy

 The company can employ two types of pricing strategies for the two target markets. The company can either use low pricing strategy or high pricing strategy for its product. The low pricing strategy would be the one where it offers Gizmo at a lower price compared to what is offered by the competitors (Steenhuis, Waterlander & De Mul, 2011). This means that the low pricing strategy would be sensitive to the prices offered by other phone product players within the specific target markets. When it comes to the student's target market, the customers are conscious of the cost incurred in purchasing a phone product. Students as customers prefer purchasing products that are cheap. Hence, in the case that the company will offer Gizmo at lower prices to this target market, the sales volumes will automatically increase.

            Solomon (2014) indicates that customers who prefer purchasing cheap products will be sensitive to any change in price and a decline in the price of a particular product would have a positive influence on their buying behaviors. Therefore, when the price of Gizmo is low the sales volume in the students' target market will also increase significantly. For example, if the price is a decline in a margin of $10, the sales volume in this market will increase by a margin of 10%. On the contrary, in the case that the company will offer Gizmo at a high price in this target market, the sales volume will decrease. The student's target market prefer cheap phone product, and therefore offering Gizmo at a higher price would mean that the organization would not be sensitive to the financial needs as well as preferences of the customers in this market, and they will be forced to go for alternative brands that are favorable regarding prices.

            On the other hand, when it comes to the business professionals target market, they are not cost conscious at all, as long as they get professional and luxury services and products. According to Solomon (2014), most of the customers in high-end markets relate prices of product to its quality and class. Therefore, when targeting this type of market, an organization should consider pricing its product highly with an objective of winning the confidence of the customers about the quality of the brand being offered in the market. When the price of Gizmo is high in this target market, the sales volume will increase drastically as professional business customers will view the brand as being luxurious and of high quality. Nonetheless, when the price of the product is low, the sales volumes will decline in this target market as the customers will view the brand as being of low quality and less luxurious  (Hinterhuber, 2008).

Exclusive Distribution

            Exclusive distribution is a strategy that Orange is considering using in its partnership with Random Wireless as far as it Gizmo product distribution is concerned. Exclusive distribution can be defined as a distribution approach which involves the supplier granting a particular distributor exclusivity of selling products or services under a certain contract, within a given region or particular group of clients (Gamarra and Growitsch, 2008). When a distributor is given exclusive distribution rights, legally one is not supposed to sell the products of the competitor of the supplier in the market as this would amount to the breach of contract (Lafontaine and Slade, 2014). There are various advantages as well as disadvantages that Orange will realize from engaging in exclusive distribution strategy with Random Wireless as far as its Gizmo product is concerned.

            One of the advantages of using exclusive distribution strategy is that it would allow the company to enhance efficiency in the supply chain management process. According to Buettner et al., (2009) exclusive distribution allows an organization to enter into a single contract with one distributor to distribute its product in a particular region making sure that the supply processes will not be inhibited by changes in the market issues, such as demand. The exclusive distributor will be at liberty to select the best distribution strategy to use as part of distributing the company's product at different times, and this would enhance the efficiency of the entire supply chain process. Additionally, the supplier will be in control of the retailer distributing activities, and this would help to monitor whether high-quality services are offered or not at all times. Furthermore, the use of exclusive distribution would help in enhancing the loyalty of the dealer towards the products of the company. This would make sure that the dealer focuses mainly on ensuring that the firm's product can succeed in the market at all cost, the success of the brand also contributes to the dealer success (Christopher, 2016). For example, the ability of the dealer to generate more sales from the company's brand would mean that more revenues would be generated. Thus, having an exclusive dealer would play a great role in building loyalty, which is instrumental in enhancing the ability of the company to achieve a competitive edge in the target market. The company would also be in a position to collect data on inventory movement during different periods, thereby enhancing the ability of accurately forecasting future demand for the product, thereby controlling inventory regarding production and purchasing of the needed raw materials (Christopher, 2016).

            However, one of the limitations of using exclusive distribution strategy is the fact that the company ends up losing sales volume that it could realize from using multiple distributors (Mulky, 2013). Also, the use of exclusive distributor denies the distributor an opportunity of diversifying products and the supplier diversification of sellers. Therefore, in the case of the distributor compromises on the quality of services, this has a direct impact on the sales of the supplier, leading to low sales revenues. When the students' target market is selected, exclusive distribution channel would not work effectively due to the high cost associated with it. Nonetheless, the selection of business professionals target market would allow the use of exclusive use distribution channel effectively. 

Conclusion

 Briefly, this report reveals that the two possible target markets for Gizmo would be business professionals as well as students. These two target markets are made up of customers whose needs as well as preferences in the area of communication are well taken care of by the features present in Gizmo phone product. Also, the report reveals that the best marketing strategy for the business professionals target market would be relationship marketing as it would help to satisfy the needs of the customers in this market, leading to their customer loyalty towards Gizmo brand. The use of relationship market would force the firm to build a strong customer management team in its supply chain processes to build a close and direct relationship with customers. On the other hand, the report indicates that the use of low cost marketing strategy would be effective in the case of students' target market and would force the supply chain management to enhance efficiency so as to reduce the costs of operation to enable the firm to offer Gizmo at prices that are friendly to the financial needs of the students (Solomon, 2014).

 Also, the study indicates that use of low pricing in the students market would increase sales volume but reduce them in the case of business professionals market. The use of exclusive distribution would be beneficial to the company regarding increasing supply chain processes efficiency, enhancing forecasting as well as inventory control, retailer control and building dealer loyalty (Christopher, 2016). However, the main limitations of using exclusive distribution include lack of diversification and lost sales volume. In conclusion, the use of exclusive marketing has more benefits than limitation and should be embraced by partnering companies. Stennek (2014) indicates exclusive distribution allows an organization to maintain the quality of the services offered to the final customer, as it can keep track of the existing relationship between distributor and customers, hence demanding for improvement in areas of weakness. Therefore, the activities of the distributor can be controlled for purposes of enhancing the quality of services offered to the target customers.