Phone Manufacturing Company’s Marketing Management

This report discusses the history of the company over the last four years, focusing on its marketing performance. Its primary products are mobile phones, created with a particular focus on the European and Asian markets. The company’s marketing department has worked throughout that time to understand the needs of the market and develop appropriate methods of entry and advancement in the market. Recently, the company has been taken over by a global equity firm, which is interested in continuing its activities. The business wants to understand the specifics of the company’s operations over the last four years and its plans for the future. This paper, prepared by the marketing department, consists of a marketing plan for the previous four years as well as the next two periods and a critical evaluation of that plan.

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Business Background

The company targets customers in the low and middle price ranges, creating phones that emphasize the performance to cost ratio. As Zhong (2019) notes, customers in Asia, particularly in China, are used to low prices for even high-end phones, and European customers are beginning to appreciate budget models from the region. The mission of the business is to provide customers with the best communications experience and the latest advancements combined with high reliability and friendly prices. Its vision is that of a brand that always satisfies customers and makes them think of its products first when considering the purchase of a new phone. Over the last four years, it has been expanding its business activities steadily, and the firm plans to continue this positive trend.

Performance Summary

In its first year, the company entered the European and Asian markets at the same time, trying to establish brand recognition for its name. The task of the marketing team involved entering a saturated market and convincing customers to try its products instead of those that were popular at the time. The task proved challenging, as mobile phones are significant long-term investments, and consumers tend to have high brand loyalty, preferring to choose manufacturers they know from experience (Chen, Chen, and Lin 2016). Nevertheless, the company was able to attract a small consumer base, who began recommending it to their acquaintances.

In the second year, the company was able to take advantage of this popularity and the word of mouth that it created to expand sales significantly. It began selling phones at a steady pace, but could not fully capitalize on the benefits because of its limited manufacturing capabilities. The demand was higher than the supply, and the company could not provide enough new units to satisfy the needs of the customers. As a result, though sales exceeded expectations, the brand’s phones were underrepresented in various stores. Their popularity rose less than what might have been expected due to the lack of representation.

By year 3, the company was able to use the revenue from its commercial success to increase its manufacturing capacity and release several new smartphone models that explored different aspects of the market. Sales kept growing, but eventually reached a set level and stopped growing from that point onward. It is likely that the company found its niche and struggled to grow beyond it, achieving steady sales but failing to secure a prominent position in the market. The marketing team tried to overcome these trends, but it was challenging to compete with the more popular offerings due to their established brand names. Year 4 showed similar patterns, with the company’s sales remaining stable at a level that allowed it to function and an overall lack of growth. The company’s sales declined slightly because most people do not buy new phones frequently.

PESTEL Analysis

  • Political: Low importance. Governments in Asia and Europe tend not to intervene in the smartphone market, as issues associated with these products are not numerous.
  • Economic: High importance. The disposable income that a person possesses informs his or her decision to choose a price range when considering a phone purchase, as smartphones are relatively expensive products.
  • Social: High importance. The use of specific smartphone applications or operating systems is mandatory in some businesses, and the opinions and experiences of one’s acquaintances influence purchasing decisions significantly (Elseidi and El-Baz 2016).
  • Technological: High importance. Smartphone technology is advancing continuously, and many innovative solutions from different brands emerge all the time. A company has to introduce new ideas and keep up with others to remain competitive in the field.
  • Environmental: Low importance. Smartphones do not influence the environment significantly because their assembly does not create much waste.
  • Legal: Medium importance. The company operates internationally and has to understand and follow multiple sets of regulations at once, but its activities shouldn’t violate any laws.

Porter’s Five Forces

  • Competition in the industry is high, with many different brands that have a variety of offerings.
  • New entrant potential is high, as most phones use the same set of third-party components.
  • Supplier power is high, as Qualcomm dominates the component market and might be using its reach to inflate prices (King and Mehrotra 2019).
  • Customer power is also high, as they have a vast selection of different phones competing for their attention.
  • The threat of substitution is low, as smartphones are ubiquitous in many people’s daily lives.

STP Critical Analysis

  • The business separated consumers based on their financial status, which may not have been adequate because other purchasing behaviors exist.
  • The company focused on the low to middle-income segment of the population, an appropriate approach considering the rise in popularity of budget phones.
  • The positioning of the brand as one with high value for the money was inadequate to distinguish it from other offerings, though the mix of physical and digital marketing was well-designed.

SWOT Analysis

Strengths
  • Good value proposition
  • Dedicated consumer base
  • Small and adaptable
Weaknesses
  • New and weak brand image
  • No decisive advantages over the competition
  • Fewer marketing resources than large competitors
Opportunities
  • Increasing demand for budget smartphones
  • Excellent word-of-mouth marketing
  • Consumers favor innovation
Threats
  • High brand loyalty
  • Rare repeat purchases
  • Powerful competition

Periods 5 and 6 Marketing Goals

The goal for periods 5 and 6 is to increase sales and expand the company’s market share further. The business’s growth has stalled because its products do not have sufficient appeal to distinguish themselves against the competition. As such, it is the marketing department’s goal to identify specific market needs and help the company develop goods that answer them. Buyers tend to scrutinize each potential model heavily, and they will recognize advantages and respond to them by buying the product. As such, if the firm can create some new innovative solution, it will be able to attract a significant number of consumers.

The marketing department should also attempt to explore promotional strategies that may allow the brand to secure an advantage in the market and increase sales. High-quality advertising is necessary to spread information about the brand’s existence and benefits among numerous consumers who may be interested in buying the company’s phones but are unaware of its existence. Moreover, Berman (2016) highlights the new and innovative features of marketing that result from modern technological advancements. The company may be able to find a marketing strategy that uses the Internet and social media, in particular, to obtain an advantage over its competitors.

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Marketing Strategy Selection

The company has to update its segmentation strategy to understand its consumer market and serve it better. Xia and Gan (2017) discuss the example of Huawei, a brand that is highly successful in Asia and Europe, which segments customers in China based on geographic, demographic, and psychographic factors. Europe is mostly geographically homogeneous, unlike China, and that factor is less relevant. However, it is prudent to separate people based on their age and lifestyle. In particular, young people, who may sometimes be swayed by creative marketing and innovative features, should be an audience of interest for future marketing initiatives.

The business should also evaluate its position and develop methods it can use to improve the situation. According to Hiriyappa (2015), companies can be separated into four categories based on market share and growth rate based on the BCG matrix: dogs, question marks, cash cows, and stars. Currently, the business is in the dog category, though initially, it was a question mark. The current objective is to return to that former status and eventually become a star, though the latter target is most likely not achievable within the next two years. As such, returning to the question mark state and maintaining it would be the optimal short-term plan.

Marketing Mix Tactics

The business will primarily target young adults as its consumer base and use the corresponding marketing tactics to attract their attention. As such, methods such as television and radio advertising are inappropriate due to their low consumption compared to Internet-based platforms (Pew Research Center 2017). The company will still use physical advertisements, though they will likely not be as effective as the other aspects of the strategy. Moreover, promotions at stores that feature discounts and various deals should be valid at enticing customers who look for value. Timed sale events can also capitalize on young people’s impulsiveness and fear of missing out, driving additional purchases.

The Internet will be a more important area of interest, with both advertisements and social media marketing featuring prominently in the mix. Many prominent advertising services offer targeted service, which can help the company focus on its central audience of young people. However, social media marketing is the more important aspect of the two, as it can significantly affect customer purchase intentions (Salvation and Sorooshian 2018). The company will have to hire a social media manager and create a robust online brand image that engages consumers. By establishing relationships with potential buyers without pushing them to buy the company’s phones too hard, the brand will feature more prominently in their minds when choosing a new phone.

Planning and Implementation Controls

The business’s success should be measured through the use of clear and quantifiable objectives such as KPIs and service quality controls. According to Jackson (2016), every KPI should have a timescale, a benchmark, a reason to report it, and an associated action if issues occur. Overall, total sales and market share should be the primary KPIs for the company, as they describe its performance. With regards to service quality, Khosrow-Pour (2018) recommends the usage of the SERVQUAL model. It evaluates the various aspects of customer service satisfaction and helps organizations identify issues.

The company should also begin considering corporate social responsibility initiatives. The business’s manufacturing processes do not create significant pollution, and so, it has to focus on the social aspects. It is essential that the company treats its employees well and contributes to local environmental efforts. Moreover, Altenburger (2018) suggests an initiative where old smartphones can be traded in to provide the customer with a discount for a new device’s purchase. The event will improve the company’s environmental image and possibly drive sales due to the lowered prices. As such, the initiative will contribute to the company’s objectives of increasing sales and convincing customers to use the brand over its competition.

Periods 5 and 6 Forecast

The company will focus on expanding its sales over making significant profits, aiming to increase its market share and possibly capitalize on it later on. As such, its revenue will grow at a similar rate to its costs with a small margin between them. Nevertheless, the company’s profits will increase at a steady pace, mostly due to the lowered costs of production. The forecast assumes that the company’s phones will remain at the same average price point of $400. The effects of factors such as inflation should be offset by various promotions such as the trade-in system.

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Q1 Year 5 Q2 Year 5 Q3 Year 5 Q4 Year 5 Q1 Year 6 Q2 Year 6 Q3 Year 6 Q4 Year 6
Unit Sales 20,000 25,000 30,000 40,000 50,000 60,000 70,000 80,000
Revenues $8,000,000 $10,000,000 $12,000,000 $16,000,000 $20,000,000 $24,000,000 $28,000,000 $32,000,000
Costs $7,800,000 $970,000 $11,600,000 $15,500,000 $19,400,000 $23,300,000 $27,200,000 $31,100,000
Profits $200,000 $9,030,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000

Planning Tools and Concepts Critical Evaluation

The report above uses a variety of analytical tools to evaluate the company’s current position and marketing approach. PESTEL analysis is the first of these measures, used to outline the overall shape of the industry. Its ability to create a comprehensive overview is a significant advantage, as the model provides the company with a picture of the aspects on which it should focus. With this information, the company can set its priorities accordingly and be prepared to address concerns from areas where they are most likely to arise.

However, PESTEL analysis also has issues that are related to the smartphone industry’s fast-moving nature. As Perera (2017) notes, the model’s outcome may become outdated quickly, and it is expensive to survey the market. Moreover, PESTEL analysis generally tends to be nonspecific, and further study is necessary to identify specific factors that require attention. As such, it is not self-sufficient, and a business cannot rely on the model to provide accurate results. Regardless, PESTEL is a useful tool, as shown by its popularity with various companies throughout the world.

Porter’s Five Forces model is similar to PESTEL, but it focuses on the industry and its market conditions. Its primary advantage is the ability to comprehend the company’s position in the market and the potential strengths and threats quickly based on the findings. Based on the model, a company can immediately understand whether a particular market is likely to bring in profits. This trait distinguishes Five Forces from PESTEL, as the latter only highlights areas of interest without describing the attractiveness of the industry.

However, where PESTEL may be overly unspecific, Porter’s Five Forces can be extremely focused. At different levels, a market can have different structures according to the model, requiring a separate analysis for each tier. Moreover, similarly to PESTEL, the model does not make changes that occur over time into account. Power is more prone to shifting within an industry than the overall conditions, so this issue is more prominent than in the other analysis’s case. Nevertheless, Porter’s Five Forces are highly useful for the study of specific situations due to their high immediate utility.

The STP framework is the next tool, used to understand the company’s consumers and choose an approach for the company’s marketing. Palmatier and Sridhar (2017) highlight its ability to create a holistic view of the company’s consumer audience and determine whether targeted or non-targeted approaches are better. STP can help the company distinguish its products from those of the competition and secure a safe or growing position in the market. As such, it is an essential tool for marketing, one that most companies regularly use to improve their performance.

However, there are also some issues associated with STP, mostly related to the separation of the consumer base into dehumanized segments. As a result, the service provided is less personalized and may not suit the individual needs of consumers within the category despite appealing to their general characteristics. These issues can be overcome with specific segmentation models, but the task involves significant effort. As such, the model is inefficient and potentially inaccurate, which partially offsets its advantages.

SWOT analysis is highly popular among various business analysts due to its large variety of benefits. It focuses on the company and identifies specific points to capitalize on or address. By isolating an issue, one can focus the company’s attention on them and provoke a further discussion regarding whether it exists and how it may be resolved. Overall, the tool has become popular due to its universal applicability and power to provide a framework for a detailed outlook.

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However, as with most methods that have a broad range of uses and provide useful results, SWOT analysis has significant downsides. Howson (2016) highlights its uselessness if the company is not rated against its competition, focuses on the short term, and lacks awareness of the difference between the existence and management of resources. A SWOT analysis can tell a manager that an issue exists, but not why it arose. As a result, they can misidentify the cause and apply a solution that fails to address the problem of wastes excessive resources in the process.

Demographic segmentation has the potential to succeed in a market, as Huawei’s example shows. It can provide a company with a concise and specific image of the target audience, its interests, and buying tendencies. As a result, the products it creates will take the needs of that particular consumer group into account. A targeted product will likely achieve higher success than one without any specific direction. Moreover, a company can make products that appeal to each demographic category it identifies to encompass the entire market.

However, demographic segmentation has a significant issue about precision. As Chen (2019) notes, demographic variables such as age or income are not good predictors of purchasing behavior. Categories that share particular traits that are challenging or impossible to control are often present in significantly different people. By ignoring these behavior predictors, a company can create products that do not appeal to people. However, one can mitigate these problems by researching topics that are popular with significant proportions of the target population and using them in design and marketing.

Lastly, the BCG matrix offers a simple tool based on the company’s current performance indicators that can tell whether the business is in a favorable position. It can demonstrate whether a strategic adjustment is necessary and what responses are required to address the situation. Moreover, the model incorporates responses based on a company’s or a product’s position. As a result, the model provides a simple but versatile framework that can apply to many situations and indicate the best course.

However, the BCG matrix’s simplicity also creates various issues that prevent it from being applicable as the company’s primary portfolio management tool. Grant (2016) describes real-world situations where dogs earn more than cash cows despite being in a less favorable position where the matrix is concerned. In its attempt to ignore factors other than growth rate and market share, the BCG matrix gives up the effort to understand the various factors that constitute success. Businesses should only rely on the model exclusively if the two factors that form it outweigh everything else.

Additional Theory and Concept Critical Evaluation

Other theories and approaches also see use in marketing, though they are not represented in the report above. Consumer-based brand equity and value co-creation are two of the most prominent notions. Both are considered more important for any modern company than at any prior time because, with the advent of the Internet, it is easier for a brand to communicate with its customers than ever before. As such, businesses have begun considering ways to use the improved data gathering and consumer engagement methods available to them to find the best ways to increase sales. These two frameworks emerged alongside a variety of others, such as social media marketing. They are still in development, but companies that apply them have managed to reach significant successes.

Customer-based brand equity tries to analyze a consumer’s perception of the brand and ensure that they are more likely to purchase its products. According to Heding, Knudtzen, and Bjerre (2016), the framework separates brand knowledge into awareness and image. The former is both the person’s awareness that the company exists and their likelihood of thinking of it when the general product category is mentioned. The latter consists of one’s brand associations, categorized by types, uniqueness, strength, and favourability. The consumer has to think of the company when reminded of the overall industry and see it as distinctly superior to the competition. They will then be more likely to buy its products when considering a purchase in one of these sectors. Over time, the brand may come to be associated with the industry and dominate it, with people discussing their buying decisions in terms of choosing it immediately against looking for an alternative.

The ability to create lasting associations and excellent customer relationships is a significant advantage of the approach. There are many examples of industries where a few companies dominate the perceptions of the consumers and can command higher prices for their goods despite not necessarily having superior product quality to the rest. Potential customers are likely to choose a brand they perceive as trustworthy over one they do not recognize immediately, assuming that they pay a premium for reliable quality. The smartphone industry is a prominent example of this trend, with Apple dominating a significant sector of the market despite not having a significantly superior value proposition to its competitors. The company has managed to become one of the biggest businesses in the world in large part due to the brand loyalty of its buyers worldwide.

However, customer-based brand equity approaches can also backfire when applied inappropriately or inadequately supported by other aspects of the company’s performance. Companies may cultivate a high degree of recognition but create a negative image in the consumers’ minds. This problem can occur either through overly aggressive marketing or through a consistent failure to deliver on the initial promises. Similar to enduring customer loyalty, negative perceptions can be difficult to shift and can affect a brand’s sales for a long time. The brand associations created by marketing remind consumers of the failure whenever the company or any of its products are mentioned. As a result, the business has to convince buyers to choose its products despite the negative reputation by offering more value than the competition for the same or lower prices, hurting its profits.

Value co-creation deals with the shifting communication paradigms between consumers and brands. According to Tokoro (2016), in the past, companies would create value independently, and customers would compare their offerings and pick the best one. However, nowadays, a brand can contact its consumer base directly using digital methods and consult its opinion. It is even possible to ask people for ideas regarding new products and hold a competition of ideas instead of limiting the idea generation and selection process to the teams inside the company. The value co-creation model posits that as a result, the company will be able to meet the needs and expectations of its customers better. As a result, they will obtain advantages over the competition and improve their reputation as the brand that responds to the concerns of the market.

This ability to create better products is a significant advantage of the approach. Companies that embrace the value co-creation model can avoid making unpopular products because customers would respond negatively during the design stage. The company can then use the feedback to adjust the new offering or abandon the idea, saving money. Moreover, customers appreciate having their concerns addressed and will become more loyal if they see that the company works to tailor its products to them. The concept can culminate in customers offering ideas to the companies and self-moderating them, ensuring that only the best thoughts pass through to the business. Overall, the performance of the company will improve at a significantly lower cost than a similar improvement would have cost under the old model.

However, the method only works if both parties operate in good faith and are open to a dialogue. Companies that try to engage customers but do not respond to criticism can be seen as dishonest, only willing to accept praise. Moreover, the effort can backfire significantly if the business does not have a good relationship with its consumers, as Lubin (2012) shows. The company has to establish a close relationship with its consumer base through other methods before trying to co-create value to avoid failures due to negative responses or malicious actors. Lastly, some of the company’s employees may find themselves with different responsibilities than before, ones that may be more difficult, and resent the shift. The management will have to keep both the workers and the customers satisfied while avoiding the other problems of the approach.

Reference List

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Pew Research Center 2017, About 6 in 10 young adults in U.S. primarily use online streaming to watch TV, Web.

Salvation, MD and Sorooshian, S 2018, ‘The role of social media marketing and product involvement on consumers’ purchase intentions of smartphones’, Computational Methods in Social Sciences, vol. 6, no. 1, pp. 65-81.

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