Customer and Market Profiles
This part of the report is still based on the real performance on the virtual marketing and firm management firm I and my group mates participated in. Basically, the game was all about managing a firm and reaching a certain set of goals such as recording more than 20 million USD worth of profits and having a certain edge over the competitors in terms of market share, the balanced scorecard computations, among other functional and performance indicators that can be used to evaluate the firm’s activities and its outcomes.
The name of our firm is MJR Inc. In the world market of computers, our firm faces two major competitors, Influtech, and Bitcomp. In order to familiarize the readers about the type of situation or the role that the players played in the virtual game of firm and marketing strategy management, we were basically selected by the corporate headquarters of the company we are representing or managing to manage its new PC Marketing Division department and to make this new division profitable by introducing a new line of microcomputers into the major markets for computers namely Asia, the United States, Canada, and Europe. MJR Inc.’s new PC marketing division was started at a time when the PC market was still in the introductory stage of the product life cycle wherein there were still no history of major developments in production and research technologies and when no major competitor or in this case, computer manufacturer, was dominating the world market for the said product.
There were three market segments that MJR Inc. targeted just like the other major firms that have their own PC marketing division and these market segments were: the Mercedes, Workhorse, and the Traveller, market segments. As an introduction and for easy referencing later, the workhorse segment simply pertains to the segment with the largest number of potential customers; these are the potential customers who are looking into using computers for office works and other professional agendas; in exchange for a reasonable or modest price.
The Mercedes market segment is composed of potential computer buyers who are looking for high performance computing machines to be used in engineering and manufacturing applications; it can be assumed that this part of the world market is composed of people who are not very much concerned about the price they have to pay to get the high performance device that they need. However, we have assumed that the operational definition of the term “high performance” in this case, pertains to a level of performance that easily tramples on the performance of the machines being offered by the competitors.
In this market segment, the market player that can offer the biggest margin to the customers in terms of performance is the one which would most likely win and not the one (market player) that offers their products for a comparatively cheaper price compared to their competitors. The third and last segment, the Traveler segment, on the other hand is the market composed of practical computer users or those who look into computing products that they can use on the road or while the people travel. Traveler segment customers are composed of customers who are members of an executive team and sales people who often make presentations and other computer-related jobs and tasks. Among the three market segments introduced in this firm management scenario, they are the most price-sensitive.
One of the major goals of our group for the firm was to occupy a considerably share of the market in all three segments. However, we realized that this was easier said and planned than done because firstly, we are on a stage wherein we do not know a lot of things about the markets that we are trying to deal with. Considering the fact that at this point, the maximum amount of market segments that we can participate in is only three (workhorse, traveler, and Mercedes market segments), which is a fairly low number compared to the max amount of market segments that potential competitors may target in real life, we can infer that things may indeed be a lot different if there is more than just one segment of the market whose needs, preferences, and ideals must be considered.
The table below shows a summary of the three market segments’ potential preferences and ideals. Based on the same table, it can be said that the Mercedes market segment for computers would most likely be the most sought segment by competitors because this is where the most serious amount of money can be found although in order to obtain a significant part of that market, MJR Inc.’s products need to be cutting edge and have the capability to easily outperform the products being offered by its competitors and in order to meet these requirements, some serious investments on research and development and not just marketing and advertising have to be made.
Threats
Competition among established players and new entrants
Competition, whether existing or potential, should always be considered as a threat. In almost any firm management cases wherein the target is to sell as many units of product as possible, competitors will always be lurking about. For more established companies, the threats that may be brought about by the entry of new players into the market or the regrouping and comeback strategy that battered down competitors have been carefully planning may not be so apparent yet. The only time that these threats would be real and noticeable would be the time when the competitors have already made their move.
Unfortunately, one of the effects of such moves would lead to the stepping down of one established but carelessly unprepared industry player. In a game where cutthroat competition is so prevalent and where some major competitors can do just about anything in order to regain control of their loss in market share and financial performance, being unprepared can be a real gateway to corporate disaster.
This threat can, at some point, be compared to a fire. In the first few stages of an outbreak of fire, the fire would only produce a blanket of white smoke, which in some cases, can be hard to see, especially if the eyes surrounding the room being burned are those of a careless person. The only time that they would discover that the room was actually on fire would be when the fire is already big—a time when they could only do little, if anything, about it. Also, at that point, there would be no choice but to exit the building and let their belongings and investments inside the building burned.
The same principle, can, in fact, be applied when running a PC marketing division. In our case, we can say that in the past six quarters that we have been selling and marketing MRJ computers, we have managed to get a hold of a significant part of the total market share for computers in our target markets in Asia, the United States, Canada, and Europe. Below is a chart that shows just how large a percentage of the total market share we were able to get a hold of compared to our competitors Influtech and Bitcomp.
Notice that across all three segments, MJR Inc. through our strong marketing, and sales and quality-driven marketing and promotional strategies, we were able to control 38% or more than one third of the entire market for computers. In the tables below, we show just how large a portion of the market we managed to obtain for each market segment (i.e. the workhorse, Mercedes, and the travellers market segments). This is important in determining which market segments MJR Inc.’s products are weakest and also in which it is the strongest.
Based on the tables above, it can be said that MJR Inc. has, for the past six business quarters or more than 1 and a half year of operations, managed to consistently control one third (or in the case of the Traveler market segment, more than one third) of the entire market. In the workhorse market segment, it managed to control 32% of the market; in the high price and high performance market segment (i.e. the Mercedes market segment).
In the workhorse market segment or the part of the market that caters to utilitarian customers, or the low performance low price market, on the other hand, the company managed to capture 39% of the market, which is the largest among its major competitors. Among the three, however, the best market for MJR Inc. appears to be the Traveler market segment because it can basically consider itself as a pioneer in that area. It controls 99% of the market. The remaining 1% is controlled by non-major competitors.
Its two competitors in the Asian, European, United States, and the Canadian computer market were simply not clever enough to position resources into a new market segment that calls for increasingly high levels of portability from computer manufacturers. Despite the huge market share in this segment of the market, however, MJR Inc.’s portably product sales can be significantly affected once their competitors such as Bitcomp, for example, begins selling their own version of products intended for the traveler segment of the market. If there is one of the three market segment where I, as an analyst thinks MJR Inc. can do a better job, that would be in the Mercedes market segment because it only comes second to Bitcomp in terms of market share (it has 32% while Bitcomp has 40% of the market). The biggest bursts of profits can potentially be made in this segment because the customers are willing to pay for a high price in exchange of stunning computing performance so it only makes sense for them to increase the level of focus and attention they are giving to this particular segment.
Intolerable and inevitable prices of raw materials by suppliers
Price is one of the major factors that customers consider whenever they buy computers and computer related products. An overly high price can definitely drive customers away. Worse, the customers that have been driven away by excessively high prices can go and buy from MJR Inc.’s instead. In that case, that would be a loss for us and a win for them because they (the competitors) would appear to be stealing our share of the market just because of price discrepancies. This may appear to be simple it can definitely make a lot of difference in terms of sales and financial performance.
This is why we included the various factors that can negatively affect the low price of our current line of products as one the threats that we want the company’s leaders to be prepared for. One of the many factors that could lead to the corporate headquarters being forced to increase the standard prices of its computers would be the intolerable and inevitable increase in the prices of the raw materials needed to manufacture computers. T
This may include but may not be limited to the silicon used to manufacture electric components, the electric components themselves, plastic, and steel. If the prices of these commodities go up, then chances are, the burden of the heightened prices of these components would be passed on to the consumers. This can be considered normal given the inflationary standards that the suppliers of these raw materials would also have to adhere to. However, in a hypothetical scenario wherein the company, MJR Inc., becomes the sole target of price increases by raw material suppliers, this can be a real and serious threat.
In that case, MJR Inc. would be the only major industry player who will be forced to gap up their prices. The most probably effect of that would be a lower share of the market especially in the traveler and workhorse market segments where price remains to be a major indicator of the customers’ buying decisions.
Promotion Strategy
A good promotional strategy in this case must be built on a thorough understanding of the target customers (i.e. the traveler, workhorse, and Mercedes market segments), and the relatively compatibility of the current line of products with those market segments’ wants, demands, preferences, and ideals . Our group’s working theory suggests that the more compatible our line of products’ features are with the preferences and the demands of the market and each individual market segments, then the chances that we will dominate the market be it in terms of market share or revenue generation becomes proportionally higher.
Since we are only allowed to have a print-media-based promotion strategy, we are going to use magazines and newspapers as our main avenue for promotions. When it comes to magazines, our main target would be the tech and lifestyle magazines. We will basically feature our products there. We will input information explaining how our products differentiate themselves from that of our competitors, what its good features are, and how we are willing to work with the customers when it comes to competitive pricing.
As mentioned earlier, some of the greatest selling points of our computer products are its high quality and competitive pricing. Our group is, in fact, very confident about the quality and price of our product that we think it would be unnecessary to spend capital for promotional and marketing campaigns. Because we are very confident about the quality of and pricing strategy we used in the release of our products in all three segments, we honestly think that the word of mouth strategy would be more than enough for us to have a considerable share of the market. At the same time, MJR Inc. should not be complacent. It should still strive to do its job no matter how unnecessary the corporate leaders think that particular part of the job may be.
The company’s products in the Mercedes and at some point in the traveler’s segment would most likely be the ones that will benefit the most from our magazine-based promotion strategy because firstly, computer enthusiasts and the middle class people (i.e. the travelers market segment) are the ones who have the extra money to burn on buying computer enthusiast and lifestyle magazines. On the other hand, our newspaper-based promotion strategy would most likely benefit our products in all three product lines because of its (the newspaper) ubiquity among the masses, the members of the middle class, and the elite people (i.e. Mercedes market segment).
Financial Report and Analysis
Revenues obtained from the division’s core and other supplementary operations can be considered as its lifeblood because without cash and other liquid assets, it would be unable to pay for its expenses and sustain its operations . The division would basically cease to exist by the time its entire capital fund runs out. The tables below outline the financial situation of MJR Inc.’s one and a half year old PC marketing division in the last four quarters (quarters 3 to 6).
It can be seen that from quarters 1 to 3, the division’s trend of financial outcomes which can be more easily seen from quarters 3 to 6, was not yet apparent. Specifically, during the first quarter, the income and expenses counters were at zero mainly because the company was just about to start its operations at that time. From the second up to the fourth quarter, the division’s profit and loss statement was on the red territory.
This may be attributed to the fact that it has not established a concrete name in the relatively new PC market at that time. It is worth taking that two of the largest contributors to the division’s expenses at that time (which is also one of the major variables that dragged down its budget from the second to the fourth quarter) were the sales force expenses and the sales office leases. It was only on the fifth quarter that the division managed to turn its losses into profits.
It can be said that the reason why the division managed to turn its three quarters of straight losses into huge profits by the fifth quarter was the revenues it got from its core operations (i.e. selling computers) which steadily grew up to the sixth quarter by huge margins which by the way can be well observed from the table above. This huge marginal increase in the revenues from its core operations may be attributed to a wide range of factors that certainly include the high quality and effective pricing strategy implemented by the division’s leaders and the effective marketing and promotion strategies (i.e. newspaper and magazine product promotions).
Possible Reasons why the 20 million USD profit goal was not reached
There can be many reasons why the 20 million USD profit goal was not reached. For one, we can see based on the division’s balance statement that the program did not really take off until the fourth quarter. So, the failure to reach the revenue target can be attributed to a slow start. Had the pacing of the entire division been faster and had it been able to turn its losses into profits by two quarters earlier, then things could have been a lot different and it would have been closer to its 20 million USD target by the end of the game. Another possible reason would be a too conservative pricing strategy.
There are numerous opportunities that the division has missed to take advantage of. For instance, it failed to take advantage of the fact that it has already monopolized the entire traveler market segment—it controls 99% of that market segment. Considering that fact, it could have set more aggressive pricing strategies on that segment because it has no competitors anyway. That way, the division could have gained more profits. Lastly, too conservative marketing and promoting strategies may have also contributed to the laggard growth in earnings over the past six quarters. Non-print-related promotional and marketing strategies could have done the trick there but unfortunately, the firm management simulation was limited to print-related strategies only.
Works Cited
Aditya, J. and E. Gimenez. "Decision-Driven Marketing." Harvard Business Review (2014): 64-71.
Challagalla, G., B. Murtha and B. Jaworski. "Marketing Doctrine: A Principles-based Approach to Guiding Marketing Decision Making in Firms." Journal of Marketing (2014): 4-20.
