Discuss about the Product Development Processes and Profitability.
The following report discusses the business-to-business marketing strategies. Any successful B2B strategies should be geared towards the lead generation. B2B (Business to business) marketing is a marketing of product to business or other organizations for use in production of goods, for the purpose of general business operation. The present report focuses on the B2B marketing of the product called Komatsu excavators PC 5500-6 produced by Komatsu Ltd, which is a Japanese multinational firm that manufactures construction, mining and military equipment. The report presents the target market of the selected product. In order to learn the efficiency of the product a SWOT analysis of the business has been conducted. Likewise, with other strategic management tools each element of B2B marketing has been presented and discussed considering the product.
Komatsu excavators PC 5500-6 is one of the largest excavators, which is costlier than other excavators because of its extended features. Moreover, the price is not the only concern in the target market, the maintenance cost is another significant factor that buyer has to consider while purchasing the product.
Geographic segmentation- PC 5500-6 is considered to be placed in the Asia-Pacific nations such as Australia, Singapore, Canada, China, Maldives and some other nations that come under Asia Pacific regions. China and Australia are certainly nations with highest economic stability in Asia and because of this economic stability, several large domestic and international firms are running the operation there. Therefore, the focus should be on the large size companies of construction and mining sector of Australia and China. These markets are apt for the proposed product because China and Singapore has the increasing record of successful construction and mining activities (Möller, 2013). Moreover, China and Australia are largely involved in the urban development projects where the construction companies are in the need of such excavator product.
Demographic segmentation- Asia Pacific nations are widely involved in the urban development products due to growing and stable economic position. Many large companies are undertaking the large construction and projects. For example, constriction contributed 37265 CNY HML in the third quarter of 2017 from 22326.30 CNY HML, which is certainly a significant opportunity for Komatsu Ltd to produce product that facilitate construction operation in China (Hong et al. 2016). As put forward by Bouchet et al. (2011), increasing in volume in the construction sector, which has been the hit on several fronts. This growth in the construction fuels up the competition from overseas.
Target market- Target market of Komatsu Ltd’s new product is Asia-pacific nations where the economic stability is high. Particularly, the firm should focus on the large size construction and mining firms that undertake long-term projects.
Certainly, in order to place and promote the product in the market, the organization Komatsu Ltd. needs to develop a partnership with another established organization in the target market-Asia Pacific. Komatsu could select a firm from the target market that has wide popularity or increasing market acquisition. For example, Komatsu and Cummins partnership could work effectively to promote and place the product in Australia. Cummins has wide presence in the market due to the categories of products such mining trucking, passenger transport, oil and gas, retail and others.
Outing the SWOT analysis for the business
· Unique and extended features of PC 5500-6 differentiate the product from other excavators (Komatsu Ltd 2017).
· Bucket breakout force and the operating weight makes it possible to conduct large digging operation
· If the purchasers of the product- large companies have strong presence in the market, Komatsu Ltd finds it easy to promote and sell the product.
· Small and medium size companies are largely involved in construction and mining projects but due to high purchasing cost and the cost of maintenance, those small and medium size firms will not be able to purchase PC 5500-6
· The target market for selling or placing the product is limited. There are many economically developed nations that undertake construction and mining projects and many large firms might need such unique product for their long-term operation. However, as the market reach is limited, the firm Komatsu might not gain the estimated profits.
· The organization might observe a strong and sudden growth in the business, as the launch of Komatsu Excavators contribute to constriction projects of residential building boom in the recent years. Moreover, the large organizations in the construction industry in Australia find a new way to continue the operation with innovative equipments, which again creates a growth opportunity for the purchasers. Eventually, there can be an effective relationship between the purchasers and the supplier.
· Mining and constructions are one of the growing sectors that extended projects. Thereby, there are several manufacturers in the market and they can produce the substitutes of the product, which can be a biggest threat for Komatsu Ltd.
Table 1: SWOT analysis
Outlining the marketing objectives for the product
The launch of a new product certainly creates operational changes in the organization (McNally, Akdeniz and Calantone 2011). Whenever, an organization is supposed to launch a new product in the market, there should be an effective purpose for the initiative. The following are some of the key objectives for the proposed product.
- To create some a strong market presence in the target market
- To increase the market share both in existing and new market
- To increase the profit margin by launching the product successfully
In order to remain active or sustainable in the market, it is necessary for every organization to give or produce something new in the market. An organization could create a strong impression in the market by launching a new service or product. The construction and mining sector in Australia are having a strong base in the recent time. Therefore, the launch of this new product could fulfill the growing needs of the market. Thus, the accomplishment of this objective could create a strong market presence.
An organization may not be able to expand the business remaining the same existing market (Dibrell, Craig and Hansen 2011). The organization has to increase the operation in a new market as well. In order to enter a new market, the organization has to produce a new product or service. Therefore, to enter new market regions Komatsu needs to produce a new product that meets the market needs. Thus, it can be anticipated that accomplishment of this objective could help the firm to maximize the market share.
To increase the profit margin by launching the product successfully
The accomplishment of this particular objective could help to increase the profit margin of Komatsu Ltd because the proposed product is expected to be embraced by the customers in the target market.
The organization Komatsu has been following an integrated global strategy for decades, which involved product diversification, price competitiveness and product quality. The proposed product Komatsu Excavators PC-5500-6 has the highest quality features such as the extend size, bucket and Digging capacity and long dimensions that certainly differentiate the product from others. Such useful product contributes to Komatsu’s long-term globalization strategy, which in turn aims at making the organization a global leader in the sector. Moreover, useful and unique features of PC-5500- 6 remains as its primary strength over the rivals’ products. Furthermore, the core competency of PC-5500- 6 excavators have been discussed with the help of VRIO Framework in the following.
Is the product able to meet the market needs and create new ways for increasing customer base? -YES
Is the capability and features of the products rarely observed?- YES
Is the product difficult to imitate? -YES and will there be any firm to create cost advantage by developing or duplicating the product? -NO
Is the firm organized, ready and able to exploit the market by launching PC-5500-6? -YES
Table 2 : VRIO Framework
According to this particular standard of the above-presented analysis, Komatsu’s internal strength, which distinguishes itself as competencies are its vertical backward integration. Moreover, the launch of the new product remains as the global long-term strategy, which certainly retains a highly competitive position of the organization in many segments against the competent rivals.
Target market: “The large organizations in the construction industry who are stuck with the traditional digging operation, now can find a new way to speed up the operation, as Komatsu Excavators PC-5500-6 provides unique features, which enables the construction and mining organizations to undertake the long-term projects. Unlike traditional excavator producer, Komatsu Ltd provides a combination of extraordinary features, which remains as the most comprehensive selection of the customers”.
Core competency: “For today’s long-term construction project, PC-5500-6 remains as the most needed machine that enables the firm. Unlike the other excavator machine, the capacity of Komatsu Excavator PC-5500-6 is having the digging capacity up to 15300 mm along with the bucket breakout force of 160000 kgf, which certainly distinguishes the product from any other excavator”.
Reasons to believe: “The organization Komatsu Ltd already has a strong presence in the market and the core principle of its manufacturing operation is innovation. Unlike other mining and construction equipments, Komatsu always produce the products that fulfil the essential needs of the market”.
Formulating the product mix
According to Das and Chowdhury (2012), product mix is also known as product assortment, which is the total number of product lines that an organization offers to its customers. An organization may have several products under the same product line as well. Likewise, there are several categories of products are found in Komatsu’ product portfolio.
Width: The width of Komatsu Ltd’s product mix pertains to two different type of product lines such as Construction, mining and Utility Equipment as well as Industrial Machinery and others. Thus, the product mix width of Komatsu Ltd is two. The construction, mining and utility equipment includes Construction and Mining Equipment, Forklift trucks, recycling equipments, tunneling machines and the forest machines.
Depth: The depth of Komatsu’s product indicates one three different variation for each product category. However, like every other organization, Komatsu’ depth of product variation includes size, capacity, power and other features.
Consistency: Komatsu’s product mix could be consistent in distribution but largely different in use. For example, construction and mining equipment of Komatsu are many in numbers but they need to be used in a different way.
Describing the service strategy for this product
Komatsu Excavators PC-5500-6 is a unique product developed for mining and construction and it can undertake any long and depth mining project. The product has two different types of engine and that are Diesel Engine as well as electric engine; therefore, the product certainly needs careful instruction when it would be used. Selling the product to the target customer is not the only job that organization has to do. To build an effective relationship with the customers and guide them about the use of the product, the organization should provide a long-term customer support. In order to implement this, the organization could establish a customer service point where the customers ask for repairing the machine if is damaged or affected. Apart from this, the organization could open up an online customer service portal, which would open for 24X7 for the convenience of the customers. The firm should provide 1 year of customer service, which should be added to the purchasing cost.
Detailing the service strategy required to meet the customer’s service need for Komatsu Excavators PC-5500-6
Offering the complete process- In this particular model, the firm could expand beyond the machinery servicing to cover the entire process in which their equipment should play a leading role. This can be done by specialized expertise to save costs for the customers.
A strategy focused on the maintenance: With the help of this particular strategy, the industry strategy can be concentrated in service contracts. Hence, the company should aim to increase the rate of penetration and loyalty of customer contracts. The strategy of the organization should be developing the customer relation providing them with a required customer service.
Outlining the marketing channels for this product
As put forward by Jiang, Henneber and Naudé (2011), marketing channels are mainly the ways that goods and services made available for the use by the consumers. All products and goods go through channels for distribution and the marketing could depend on the way goods are distributed. Thus, to distribute the proposed product Komatsu Excavators PC-5500-6 the following channels have been proposed.
Manufacturer to customers: Hence, the organization could make and sell the proposed product item to the customers directly with no intermediary such as a wholesaler agent. For example, Komatsu could directly sell the product to the end-user. This might help the firm to minimize the cost of logistic operation.
Manufacturer to wholesaler to consumer- In this channel, the consumer can directly purchase from the wholesaler. However, the wholesaler could break down the bulk packages for the resale to the customers. The wholesaler could minimize some of the cost to the consumer like sales force cost, which could make purchase price cheaper for the customers. In the case of Komatsu’s new product, the organization who buys the product from the wholesaler may have to buy a membership to purchase directly from the wholesaler.
Manufacturer to retailer to consumer: in this particular channel, the retailer should make the purchase from the manufacturer. This means the retailer buys the product from Komatsu Ltd and the sells the product to the consumers. However, this channel might not be effective for the organization as the proposed product of Komatsu Ltd is costlier than any its existing products due to the unique and extended features of the product. There could be hardly any retailer act as the intermediary when it comes to selling a large item.
Formulating the pricing strategy for this products
For the proposed product Komatsu Excavators PC-5500-6, the firm needs to design market oriented pricing strategy, in which the cost of the product should not be higher or lower than the market price. Hence, the competitive pricing or premium pricing should not developed because the maintenance cost of the product is high. Moreover, if the product is sold out to the existing market, the customers have no reason to buy the product pay high price; they rather prefer the similar one offered by other manufacturers. If the price of the product is kept similar to other in the market, the consumers might give a second thought to buy the product, as they will get some unique features at the same market price. Therefore, the market-oriented price for Komatsu Excavators PC-5500-6 could be an appropriate strategy. Unique features associated with PC-5500-6 might attract the customers when the price is fairly aligned with current market price structure of this particular product.
Integrated marketing communication strategy is considered as one of the significant marketing element developed at the time of launching or producing a new product in the market Einwiller and Boenigk (2012). Thus, for the promotion and launch of the product Komatsu PC-5500-6, the organization needs to focus on the digital media channels. The digital media presently is one of the fastest and cost-effect communication channels. Digital media channels are effective to cover wide market and millions of people are regularly involved in the channels. Following are the two significant IMC tools that can be used for promoting and selling the proposed product.
Social media tools (YouTube, Twitter and Facebook)- Presently, social media platforms is one of the fastest and largest communication medium. Especially, the social media tools such as Facebook and YouTube are widely popular and millions of people are regularly involved in these platforms. Thus, the organization could develop a video that contains the features and importance of the product- Komatsu PC-5500-6 and the content should be on YouTube and Facebook. In addition, the video can be played as the advertisement on other video content.
Printed Advertisement (Posters and Billboards)- Printed advertisement is another significant IMC tool effective for the proposed products. It is effective because in the urban areas hoarding, posters and billboards are presented digitally and the posters take wide areas, which certainly grab the attention of people. The firm could print the features of the product in a hoarding or a billboard and publish them to the construction project area ad crowded areas of the city.
Outlining the evaluation plan of the marketing plan
- 10% increase of market share
- Increase the customer base in first quarter of the launch of the new product
- Increase in market awareness
10% increase of market share- After the launch of the product, market analytics department of the organization needs to measure the growth of market share. This evaluation process would help to learn whether the market share has increased or not. The growth should be compared to existing market share of the company.
Increase in customer base can be measured comparing with the existing customer base of the company. Once the product is launched in the market, both new and existing customers can buy the products. However, the records of new customers would help to measure the increase in customer base.
This is one of the significant KPIs, which can generate new sales. Once the product is launched in the market, market analytics could observe how the market is responding to the launch of the new product.
In order to meet the above mentioned KPIs , the organization needs to measure the performance of first six months after the launch of new product. Initially, the firm might not be able to reach the desired position in the market,, which means the increase of market share will not as anticipated. However, with the implementation of promotional and communication strategies, the organization might observe the growth.
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