Marketing management: Quality Kraft Carpets Ltd

1.Introduction

Quality Kraft Carpets Ltd is a British company specialising in good quality woven Axminister carpets. It was founded in 1989 by William Jackson and John Turner. The company has not got high production capacity and they prefer to sale their products the contract customers such as hotels, restaurants, offices, large stores and loyal customers. After the changing market conditions they decided to enter foreign markets. However they hadn’t got any experience in international business.

In this assignment, first it will be generally discussed how Quality Kraft Carpets can enter the US market and which strategies it should be choose. Second, it will be tried to answer the question “after the initial success in the US Market what would need to be made to realize business in the Middle East and in Japan?” Finally, it will be given recommendations further market media.

2.Short/Medium/Long Term Issues

2.1 Short-Term Issue

The company doesn’t want to venture too much money in the new market. In the short term strategy, the company needs to get experience in the market which might be helpful to obtain the target market’s size structure, behaviour and profit goals sought in the first few years.

2.2 Medium-Term Issue

The company should obtain their marketing budget and try to enhance their market share.

2.3 Long-Term Issue

The company should commit more resources to get stronger in the market and describe long-run sales and profit goals.

3. Representation Issues

Once a company decide to target a particular country, it has to determine the best mode of entry. Its broad choices are indirect exporting, direct exporting licensing, joint ventures and direct investment. Each succeeding strategy involves more commitment, risk, control and profit potential.

According to the P. Kotler, indirect export has two advantages. First, it involves less investment; the firm does not have to develop an export department, overseas sales force or a set of foreign contacts. Second, it involves less risk; because international-marketing intermediaries bring know-how and services to the relationship, the seller will normally make fewer mistakes.

The company does not want to venture too much money, at the beginning. Moreover indirect exporting will be reduced the risk although profit margins would be low. In this regard, it is reasonable to recommend that the company can choose the indirect export for short-term.

On the other hand, the company can be carry on direct exporting in several way for the mid term and/or long term; Domestic-based export department or division, overseas sales branch or subsidiary, Travelling export sales representatives (Home-based sales representatives are sent abroad to find business.) Foreign-based distributors or agents.

3.1 Agents

As mentioned above choosing a proper agent might eliminate prior disadvantages when the company try to enter a new market. According to D. Jobber and G. Lancaster, companies’ overseas operations and overseas successes depend on their agents’ ability and commitment. Furthermore, once the correct agent has found, the right kind of working relation must be nurtured. Also the company should keep in touch with its agents. It will lead to a better understanding of the dynamics of the overseas market and an improvement in the overall sales strategy.

3.2 Manufacturing Subsidiary

Manufacturing subsidiaries will be helpful in the long-term strategy to reduce risks. Otherwise the company have to expose a large investment to risks such as worsening market. If the market appears large enough, and company is already gained experience, foreign production facilities offer distinct advantages. First, the company cost economies in the form of cheaper labour and freight savings. Especially it is important for the company to have a manufacturing subsidiary in the USA in the case of the company decides to get into Japan market. Second, the company can hire local people as its workers, which can help boost the local economy and promote friendliness towards the company. Final advantage is easier to control a subsidiary according to agents because it is under the parent company’s direct control.

4. Strategic Issues

4.1 Strategic Issues in USA Market

The marketing process includes designing and implementing various tactics to achieve its intended strategies. These tactics are commonly referred to as the “marketing mix”. These tactics are also referred to as the “4 Ps”: product, price place/(or market), and promotion.

When marketing their products firms need to create a successful mix of:

* the right product

* sold at the right price

* in the right place

* using the most suitable promotion.

To create the right marketing mix, businesses have to meet the following conditions:

* The product has to have the right features – for example, it must look good and work well.

* The price must be right. Consumer will need to buy in large numbers to produce a health profit.

* The goods must be in the right place at the right time. Making sure that the goods arrive when and where they are wanted is an important operation.

* The target group needs to be made aware of the existence and availability of the product through promotion. Successful promotion helps a firm to spread costs over a larger output

Otherwise the strategy is not complete.

Product

According to P.Kotler there are two ways to introduce product in the foreign market first of them is Straight extensions means introducing the product in the foreign market with out any change this is not suitable for the company because although USA market shows some similarities to UK market, fashion is an unstable function and preferences can be changeable because of this the company act local. They should design carpets for the new market. Second, this way is suitable for the company, product adaptation involves altering the product to meet local conditions or preferences. The company can produce a regional version of its product. The costs could be increase in fact the company small and flexible and can easily cope with trend designs.

Price

Is one of the most important elements of the marketing mix, as it is the only mix, which generates a turnover for the organisation. The remaining 3p’s are the variable cost for the organisation. It costs to produce and design a product, it costs to distribute a product and costs to promote it. Price must support these elements of the mix. Pricing is difficult and must reflect supply and demand relationship. Pricing a product too high or too low could mean a loss of sales for the organisation

Loss Leader Pricing

This involves lowering prices on a number of key products in order to attract a customer to purchase the products. Customers obviously like a bargain and like may be attracted to buy this item even if they had never considered purchasing this item before. Price reductions could be used to entice customers to look at your other products, and any profit lost might well be made up should the customer be persuaded to shop around and purchase other produces not reduced in price. Loss leader pricing might be used to sell off or stimulate interest in products considered to be in the maturity or decline stage of their life cycle.

Penetration Pricing

This type of pricing is used for products identified as being in the “introductory” stage of the product life cycle to enable the product to get a foothold in the market. Prices are artificially reduced to attract the largest possible audience. It is often used to prevent or discourage competitors from capturing the market and used for products that are mass-produced

Price Skimming

Where Penetration Pricing keeps the pricing below the real market price, price skimming raises the price artificially to enable it to quickly recoup costs and for immediate profit. This type of pricing structure works very well for products that are in demand or where there are few competitors – electronic equipment for example. Caution has to be used when employing this strategy as competitors may well take advantage of these high prices and enter the market quickly with a realistic price thus stealing the market. Again this type of pricing strategy might be used when the product is in its growth stage in the product life cycle as demand is high and sales are high.

Differential Pricing

This involves allowing the same product to be priced differently; this can be justified when the product is sold in areas with differing economic climates, when sold through differing distribution channels, to appeal to a different market segment. For example, you could choose to charge a wholesaler less for buying in bulk than for an individual who only bought on single card. You could also decide to charge more for your card designs in London than you would in the North of England simply because the economy is more stable in London than in the North of England.

Differential pricing strategy is highly recommended for the company because they will work with agents in short-term and price should be adjusts according to customers demands. After initial success will achieved Loss profit strategy can be trying.

Place (Distribution Channels)

According to the P.Kotler, when companies first enter a country, they prefer to work with local distributors who have good local knowledge. Quality Kraft Carpet Company should choose the right agency and set up performance goals to which they can agree.

Promotion

The company can use the following methods in USA market;

a. Public Relations (PR)

Public Relations is defined as ‘the deliberate, planned and sustained effort to establish and maintain mutual understanding between an organization and its publics’ (Institute of Public Relations). It is relatively cheap, but certainly not cheap. Successful strategies tend to be long-term and plan for all eventualities.

b. Direct Mail

Direct mail is very highly focused upon targeting consumers based upon a database. As with all marketing, the potential consumer is ‘defined’ based upon a series of attributes and similarities. Creative agencies work with marketers to design a highly focused communication in the form of a mailing. The mail is sent out to the potential consumers and responses are carefully monitored.

c. Trade Fairs and Exhibitions

Such approaches are very good for making new contacts and renewing old ones. Companies will seldom sell much at such events. The purpose is to increase awareness and to encourage trial. They offer the opportunity for companies to meet with both the trade and the consumer.

4.2 Strategic Issues for Middle East and Japan

We discussed several stages through which a firm may go as it becomes increasingly involved across borders. A purely domestic company Quality Kraft Carpets Ltd focused only on its home market, had no current ambitions of expanding abroad, and did not perceive any significant competitive threat from abroad. The company, get export to USA market, it enters the export stage, where effort will made to market the product abroad, although an increasing number of foreign orders will be filled. In the international stage, as certain country markets begin to appear especially attractive with more foreign orders originating there, the company may go into countries. In this stage the company should consider cultural factors in international selling such as; aesthetics, religion, education, language, social organisation, political, and general attitudes and values of culture. US Government gives some tips on the web site for exporters who want to enter the Middle East market which are good examples on cultural factors;

* If you compliment someone in Bahrain on one of their personal items, they may insist that you accept it as a gift.

* A man in Saudi Arabia, as a sign of friendship, may hold hands with another man in certain social settings.

* Sample all of the food that your Qatari colleague serves at a meal; this shows respect.

* The first part of a business meeting is almost invariably reserved for your Middle Eastern associate to become acquainted with you (and vice versa). It is common to have discussions about global events, politics, or religion. In some cases, it may be considered rude to launch into a business discussion or negotiation without first engaging in a conversation about these unrelated topics. In fact, these conversations may prove critical in establishing a business relationship.

* During meetings in Kuwait, there may be a man who appears to be part of the business delegation, but whose sole job is to offer and serve coffee. Try not to take too much notice, as he will not be a participant in your business discussions or transactions. His service role merely reflects the Middle Eastern custom to offer guests refreshments.

Before any decision to enter Middle East market the company should do careful market research and make effort in meeting clients’ demands. One of the biggest advantages of the company is making high quality axminster carpets which can make product differential at market. In addition most of the Middle East countries are rich and profitable sales will be manage if the steps will be correct at marketing.

According to G.Lancster’s studies on Japan Market, although the size of Japanese economy is the second largest one in the world and the way Japanese business is operating seems to be the same as that if western countries, in many ways Japanese do not respond in the same way as Westerns.

In general, it is highly recommended that the company should develop completely new marketing strategies while decided to enter the both markets.

5. Marketing Communication Issues

5.1 Sales Message

The company’s sale message should be based on high quality product. There are lots of carpet suppliers in the market and most contract carpet is oil based. In addition, Axminister carpets have good reputation and the company should use this advantage. In addition, the company should improve his business with gaining loyal customers.

5.2 Type of Media

As mentioned in the strategic issues, the company could use public relations, direct mail and exhibitions to deliver his sales message. These methods not only cheaper than other medias such as TV and radio, but also more personal.

6. Future Research

Market research is a method of collecting data which will make the company more aware of how the people, company hope to sell to, will react to its products or services. Market research will answer questions like:

* Whether your products or services are needed

* Who might want to buy your products – (you may have defined the wrong type of person)

* What age, sex, income occupation etc are the people I want to sell to

* If there are changes taking place and how this might affect what you sell – (there might be an up an coming decline in the demand for what you are about to sell)

* How well your products or services might sell – (It could be better or worst than what you predicted)

* How much demand there is for what you hope to sell – (you may need to increase or decrease your production depending on the results)

* Who wont buy what you hope to sell – (this will help your promotional plan as it enables you to target the right people)

* What price would people be prepared to pay – (this will help when you set out your pricing policy)

Questionnaires and personal interviews are one of the most common ways in which you can conduct market research, and there are many methods of gathering data this way: Direct Interview, Mail Survey and Telephone interview. Mail survey seems to be the best method for the company, considering the costs. In addition also company can be keep in touch with their loyal customers.

7. Recommendations & Conclusion

The company has some weaknesses. First it does not have any overseas selling knowledge, because of this it should not enter the US market without conduct a lot of research, otherwise they have to commit too much money to venture and still it will be too risky. Secondly, it doesn’t employ a designer, the company should employ new designer to answer high social statue client’s request. On the other hand, the company has lots of strengths, which can be a vital role in entering the market of the USA. First, it is quite profitable and financially stable. Second, it has loyal customers with much repeat business. Finally, it is expertise in the manufacture of good-quality conventionally-woven Axminster carpets that can available for product differential. In conclusion, if company will follow the ways that are indicated in the report, it will get the success in overseas market.