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Ways marketing strategies helped FMCG companies

4852 words (19 pages) Essay in Marketing

5/12/16 Marketing Reference this

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The purpose of this study is to glimpse the way marketing strategies have changed and helped company’s (FMCG) that are executing in this global world. Furthermore, the study will find out as to whether or not these strategies have helped marketing managers in improving their performance and coming up with effective marketing plans. Taking into account that the present global environment is very uncertain, Stanley and Eric (2001) have defined uncertainty as the “dissimilarity between the amount of information essential to perform the task and the amount previously possessed by the organization”. Thus, it is essential for the managers to consider different strategies to deal with this unpredictable environment. Among those marketing strategies, we would like to observe as to how managers perceive the multi-brand strategy.

Most of the multinational companies launch their brands in the category where they already have a successful brand and intend to gain the remaining market share and fulfill the diversified need of the customer. Hence, the company introduces another brand of the same category, which begins securing a good market share for the company. However, the new brand also becomes a direct competitor of the company’s earlier brand, which is already a leading brand in the market and starts consuming the market share of the same leading brand. Consequently, we need to learn the methodologies these marketing managers adapt to deal with such brand and the perception these managers have for such marketing strategies as well as to evaluate the advantages and disadvantages of implementing these strategies and the implications of executing such multi-brand strategies.

Problem statement:

To study the effects of managerial perception of implications of multi-brand strategy on its level of implementation.

Mason and Brian (1997) suggest that a large number of evidences support that managerial perception and action is strongly influenced by organizational environment. Study has revealed that the action taken by the organization in responding to its environment are consistent with managerial perception rather than with the objective characteristics of the environment. Other studies enlighten that the managerial perceptual process is independent of the environment but that the environment does provide inputs into the manager’s strategy making process.

Strategies play a very vital role in company’s performance. Bashar, Kevin and Xiang (2010) are of the opinion that a strategy is not a rigid plan, nor does it revolutionize systematically at prearranged times solely at the will of management. The dichotomy between strategy formulation and strategy execution is hard to be applied under certain ordinary conditions, because it ignores the learning that must often follow the conception of an intended strategy. Strategy formation emphasis on companies to evaluate what strengths they have so that it could help them in deciding where to seek greater advantage. For that reason the companies that are specially working in fast moving consumer good (FMCG), have to come up with different marketing strategies that will guarantee them to achieve competitive advantage over their competitive companies.

If we deliberate over the relationship between strategy and strategy making, Gregory and Kent (1990) says that it all depends on what type of organization it is. Do they have first mover advantage or if they are rector organization who are not aggressive in maintaining their establish products and takes less risks and responds only when they are forced by the external environment. Steven and Bill (1992) is of the view that strategy is more reflecting the overall direction of business that involves decision-making related to overall business issues, whereas strategy making is all about active search for new opportunities in the environment that results in growth, which is the ultimate goal for any organization.

Gregory and Kent (1990) are of the opinion that in this ever changing environment, companies are challenged to formulate marketing strategies that will guarantee them of achieving competitive advantage over other companies. Stephen and Itamar (1996) suggest that in order to position themselves on the top of the competition, many companies come up with different multi-brand strategies that are consist of line extension, multiple brand, new brands or cannibalization. K. Sridhar (1992) complements that it helps the companies in reaching to various segments of market, which could results in better market share. It also facilitates in filling up the price and quality gap, which results in satisfying customer need. It further assists in meeting different customers’ demand, which ease off in pushing out the competition.

While comparing companies with B2B industries and companies with B2C industries, Stanley and Eric (2001) underline that the companies in B2C industries have to pay more attention to consumers, as the environment is very dynamic and the purchasing decision vary from one consumer to another. According to Richard and Carmen (1993) it is difficult for a single brand to position itself in a way that it could match different consumer demand and still maintain a strong brand identity. For this very reason companies come up with diversifying brands, which help them to satisfy multiple market positions to maximize relevance to the consumer.

Hypotheses:

H1: The managers’ perception of implementing multi-brand strategy generates internal competition among managers has an effect of level of multi-brand strategy implementation.

H2: The managers’ perception of success of initial brand helps in implementing multi-brand strategy has an effect of level of multi-brand strategy implementation.

H3: The managers’ perception of multi-brand strategy helps in obtaining greater shelf space & leaves little for competitor has an effect of level of multi-brand strategy implementation.

H4: The managers’ perception to obtain greater shelf space, the company has to give higher cost has an effect of level of multi-brand strategy implementation.

H5: The managers’ perception of multi-brand strategy helps in filling the price & quality gap has an effect of level of multi-brand strategy implementation.

H6: The managers’ perception of multi-brand strategy helps in satisfying customer needs in complex & diverse market has an effect of level of multi-brand strategy implementation.

H7: The managers’ perception of multi-brand strategy helps in improving market share has an effect of level of multi-brand strategy implementation.

H8: The managers’ perception of multi-brand strategy helps in occupying the various market segments has an effect of level of multi-brand strategy implementation.

H9: The managers’ perception of multi-brand strategy works best for company with single target customers has an effect of level of multi-brand strategy implementation.

H10: The managers’ perception of multi-brand strategy is restricted because of not having economies of scale has an effect of level of multi-brand strategy implementation.

H11: The managers’ perception of multi-brand strategy works best, to come up with different price levels has an effect of level of multi-brand strategy implementation.

H12: The managers’ perception of multi-brand strategy works best, when forming a different brand image has an effect of level of multi-brand strategy implementation.

H13: The managers’ perception of multi-brand strategy works best when product comes to stagnant market share has an effect of level of multi-brand strategy implementation.

H14: The managers’ perception of multi-brand strategy is adopted when demand of product is decreasing has an effect of level of multi-brand strategy implementation.

H15: The managers’ perception of multi-brand strategy works best if company wants to push out the competitors has an effect of level of multi-brand strategy implementation.

H16: The managers’ perception of adopting new brand strategy when different brand meet different customers’ demand has an effect of level of multi-brand strategy implementation.

H17: The managers’ perception of multi-brand strategy results in competition with own brand & improve performance has an effect of level of multi-brand strategy implementation.

H18: The managers’ perception of multi-brand strategy results in competition with own brand & increase cost has an effect of level of multi-brand strategy implementation.

CHAPTER 2: LITERATURE REVIEW

This paper highlights the managerial perception and implications in devising plans for multi-brand strategy. From the literature, it appears that content and processes merge as two different but related concepts, and there appears to be no direct relationship between strategy (content) and strategy making (process) but to a certain extent a relationship arising from and attributable to the holistic nature of an open social system. A recent survey of empirical studies Eli (1987) relating to business-level strategies suggested certain relationships among strategy, strategy making, and organizational performance. Nonetheless, it is imperative to note that the middle-level managers have not been considered part of the strategy process except in providing informational inputs and directing implementation, whereas the contemporary theory and descriptions of Steven and Bill (1992) suggests that middle managers regularly attempt to influence strategy and often provide thrust for new initiatives. As ‘linking pins,’ middle managers take actions that have both upward and downward influences on strategy formation. Upward influence affects top management’s view of organizational circumstances, while downward influence, on the other hand, affects the alignment of organizational arrangements with the strategic context. Thus, the literature provides evidence that middle managers’ influence extends beyond implementation, but there are no theories or measurable constructs that rigorously describe middle management’s strategic roles.

According to Stanley and Eric (2001) marketing strategy is the set of incorporated decisions and actions by which a business expects to achieve its marketing objectives and congregate the value requirements of its customers. They further elaborate that firm performance is heightened when specific business strategies and specific marketing strategies are linked; reiterating that each of these contingent relationships is unique. Each of the business strategies requires a different marketing strategy comprised of unique combinations of marketing decisions and related practices to achieve superior performance. There is no significant difference among the business strategy types with regard to either profitability or market performance (relative to objectives and competitors) when marketing strategy type is appropriately matched to business strategy type.

Carl and Frank (1975) are of the opinion that strategy formulation process is a crucial step in “matching” internal and external characteristics of the firm. According to them, it is generally accepted that the perceptions of environmental and internal characteristics are the important properties to consider in the strategy formulation process.

Raymond, Charles, Alan and Henry (1978) suggest that strategy formation falls specifically into one of three notional groupings, or “modes”. The planning mode, comprising the biggest body of published materials and in the convention of both management science and ceremonial theory, it depicts the practice as a highly ordered, trimly integrated one, with strategies explicated designed by a focused organization. In sharp compare, the adaptive mode reflects the process as one in which many decision-makers with contradictory goals negotiate among them to construct a stream of incremental, disjointed decisions. In some of the journalism of classical economics and modern management, the process is illustrator in the entrepreneurial mode, where a dominant leader takes bold and uncertain decisions headed for the vision of the organization’s future.

Steven and Bill (1992) are of the view that all managers operating in highly uncertain (or certain) environments do not necessarily perceive the same degree of uncertainty (or certainty) and actions taken by the organization in responding to its environment are consistent with managerial perception rather than with the objective characteristics of the environment. As past research has shown, managers encounter a variety of high and low discretion environments. Given this observation, Henry (1978) has noted that a critical management skill is ‘reading’ the setting e.g. accurately perceiving when one does or does not have the discretion to act. For instance, a manager who masters this skill may be less likely to act when it is fruitless, or to refrain from acting when they can and should act. Moreover, such a skill may also be critical to the managers’ ability to successfully ‘sell issues’ to others.

Mason and Brian (1997) maintain the same concept suggesting that for the manager, the appropriateness of taking specific strategic actions, or any action at all, is therefore highly ambiguous. Indeed, even before strategic choices can be made or strategic actions are taken, managers must first determine which organizational issues are within their domain, or discretionary set, and which issues are beyond their latitude of action.

Stephen and Itamar (1996) discuss various factors related to the competitive context, marketing strategy, and social environment that influence the diffusion of innovation. Evidence has been presented suggesting that the entry of new firms varies directly with firm rivalry, typically measured by the amount of instability in the market shares of the leading firms. John (1981) studies have, however, considered entry in the conventional sense of a new firm gaining presence in a market. The impact of new brand entry by existing firms has been ignored. Evidently, it has been assumed that a new brand enters a market only when a new firm enters. According to Stephen and Itamar (1996) observation of consumer goods markets indicates that the introduction of new brands, and/or the repositioning of old brands by existing firms, is a frequently used form of non-price competition. Furthermore, the exclusive focus of previous investigators on firm market share instability, given a market environment dominated by multi-brand firms, may mask instability occurring at the brand level.

Analyses of new product introduction have drawn on psychometric methods such as multidimensional scaling to form the foundation for empirical studies of Richard and Carmen (1993) decision making under uncertainty, and the economics of industrial organization recommended by Carl and Frank (1975). Despite this apparent diversity, all these approaches assume that product evaluation depends only on perceived or actual characteristics and price, not on the brand name with which a product is associated and the competitive context within which buyers must choose. For example, Carl and Frank (1975) analysis of the role of uncertainty in creating an advantage for pioneering brands ignores perceived differences among brands other than price and quality.

New product introduction has always been a popular strategy for firms seeking growth. However, Srinivas, Susan and Subodh (1994) are of the view that 30-35% of new products fail because the strategy is risky and the consumers may not accept the product. According to Aaker and Keller (1990) a survey of leading consumer product companies found that 89% of new product introductions were line extensions (such as a new flavor or package size), 6% were brand extensions, and only 5% were new brands. Srinivas et al. (1994) developed a model that predicts whether a multi-product firm will brand a new product with the established company name. They tested and found that a firm is more likely to use the brand name if the name has not been used in the same market previously. This may imply that firms are aware of the dilution effects of using the same brand name more than once.

Richard and Carmen (1993) define that production is assumed to exhibit strong economies of scope. Vertical product differentiation provides firms with an incentive to increase profits by offering products that appeal to different types of consumers, which is reinforced by the assumption of strong economies of scope. However, if products produced by different firms are perceived by consumers as being close substitutes, a decision to proliferate products is also a decision to compete head-on with a rival firm. The optimal product selection decision depends on the degree of brand-specific differentiation relative to the potential for vertical differentiation in the products offered by a single firm. Firms that are close competitors will prefer to specialize in products that appeal to different types of consumers, thereby reducing their strategic interdependence. Specialization comes at a cost, because firms cannot discriminate among consumers by offering products with different characteristics. Nonetheless, Camillus (1981) suggests that strategic considerations can more than offset the benefits of discriminating among consumers with a larger product line. If firms are not close competitors, profits are higher when the firms produce a full product line.

Mason and Brian (1997) suggest that a competitive process in market with a dominant brand differs significantly from one where all brands are playing on a level field. Rather than “excess” profits attracting entry and price competition, thus producing fair market returns for all firms, asymmetric preferences can create competition in which a dominant brand may attract entry, but that entry places little downward pressure on the incumbent’s profits. This preserves rather than eliminates the incumbent’s competitive advantage. In short, asymmetries in consumer preference can be a source of persistent competitive advantage.

Assuming identical consumer preferences over characteristics across markets, a larger number of brands may mean that any given brand has closer perceived substitutes. That is, the cross-elasticity of demand between brands may vary directly with the number of brands. Then if, some random variation in the relative prices of the brands is injected into the market, one would observe more brand instability the more brands there are.

According to Edwin (1999), today’s consumers want variety and choice which has increased the opportunity for line extensions involving new flavors and sizes, but it has also made consumers harder to reach. Based on Edwin’s study of brand and line extensions, the fit between the extension and the brand is also considered important. Aaker and Keller (1990) define fit as the level of perceived similarity between the extension and the brand’s parent product based on substitutability, complimentarily, and manufacturability. They thus focus on physical similarity.

Mary (1992) suggests that line extensions can be used, not only to keep a brand alive, but also to reinforce or extend its position. More active and careful line extension management is needed when competition and retailer power are high. Under such conditions, line extensions’ success will erode quickly and more added values should be incorporated in the line extension. Companies with leading brands should especially pay attention to the proliferation of supply and market fragmentation. Their brands stand to lose more than smaller brands.

Sundara, Sreeram and Scott (2005) have defined product cannibalization as a process, in which a new product gains sales by diverting sales from an existing product. New product development process has a very strong influence on the performance of a company. In the same context, they state that the risk of cannibalization is a real threat for many new product introductions, while the risk becomes more significant if the new product is launched under the same brand name as an existing product.

Charlotte and George (1994) are of the opinion that product cannibalization is the extent to which one product’s sales are at the expense of other products offered by the same firm. The products with similar attributes / functionalities compete with each other for market share, which is the underlying premise in all types of cannibalization the phenomenon will not occur unless the products compete for a common market share. Although all products may have their own niche in the market, products could also compete for market share outside its niche.

According to Stephen and Itamar (1996), new products are among the most difficult to forecast and the degree of difficulty in the development process of a new product increases as the “newness” of a new product concept increases. K. Sridhar (1992) complement that it is not only important to perform new product forecasting prior to introduction into the market, but also anticipating consumer reaction after the new product has been introduced calls for a feedback model that continuously improves its performance i.e. its predictive capability.

CHAPTER 3: RESEARCH METHODS

This chapter covers the detailed information regarding instrument for data collection, method of data collection, sampling technique, sample size and the statistical technique that has been used in this study.

Method of Data Collection:

Method adopted to collect data for this study was personal survey technique and primary information, based on questionnaire. The information was gathered from different marketing managers of FMCG companies. The company was ensured that the information would only be used for academic research purposes and will be kept confidential.

Instrument of Data Collection:

A close ended questionnaire was developed and used as an instrument for data collection. It contained 20 different questions regarding effect of implementing multi-brand strategies and managers’ perception on its implementation and implications to be responded by diverse Assistant, Brand and/or Marketing Managers of different FMCG companies. Pre-testing was conducted on small sample size of 4 to delete and modify the potential problems.

Sample size:

The sample was of 35 respondents (Assistant, Brand or Marketing Managers) who were asked to fill the questionnaire. The respondents were Managers of different FMCG companies operating domestically and multinationals.

Sampling Technique:

Convenience sampling (non probability) was used, because the data collection was rapid and readily available.

Statistical Technique:

The statistical technique used for the analysis and result finding was Spearman’s rho. As our data is nonparametric or ordinal, so to find out the correction among our variables, which is ‘Managerial level of implementation of multi-brand strategy’ Dependent variable and ‘Managerial perception on implications of multi-brand strategy’ Independent variable, we applied the Wilcoxon signed ranks test to examine the Ties value, so we could know which test to apply. As the Ties values of most of the variables were less than 30% so we applied Spearman’s rho, else we would have run the Wilcoxon test in case of having the Ties values of variables greater than 30%.

CHAPTER 4: RESULTS

The effect of managerial perception of implication of multi-brand strategy on its level of implementation was determined by find out the correlation with the help of Spearman’s rho technique among the independent variable ‘Managerial perception on implications of multi-brand strategy’ and dependent variable ‘Managerial level of implementation of multi-brand strategy’, but before that we had to find out whether our data was reliable or not, so for that reason we applied the Reliability test and the results are as under.

Reliability Statistics

Cronbach’s Alpha

.605

As the reliability statistics shows that our data is reliable as the value of Cronbach’s Alpha is 60.5% which is the acceptable percentage to running the test.

The table below that is Spearman’s rho shows the correlation between the variables.

Spearman’s rho

What extent do you implement multi-brand strategy.

Internal competition among managers

Correlation Coefficient

-.255

Sig. (2-tailed)

.139

Success of initial brand helps

Correlation Coefficient

-.119

Sig. (2-tailed)

.495

Greater shelf space & less competitor

Correlation Coefficient

.628**

Sig. (2-tailed)

.000

Higher cost for great shelf space

Correlation Coefficient

.111

Sig. (2-tailed)

.525

Fills price & quality gap

Correlation Coefficient

-.318

Sig. (2-tailed)

.063

Satisfying customer needs

Correlation Coefficient

.071

Sig. (2-tailed)

.686

Improves market share

Correlation Coefficient

.321

Sig. (2-tailed)

.060

Occupy various market segments

Correlation Coefficient

.039

Sig. (2-tailed)

.825

Works with single target customers

Correlation Coefficient

-.123

Sig. (2-tailed)

.482

Restricts having economies of scale

Correlation Coefficient

.278

Sig. (2-tailed)

.106

Come up with different price level

Correlation Coefficient

-.096

Sig. (2-tailed)

.583

Forming a different brand image

Correlation Coefficient

.104

Sig. (2-tailed)

.550

Product comes to stagnant market share

Correlation Coefficient

-.183

Sig. (2-tailed)

.294

Decrease in demand of product

Correlation Coefficient

.002

Sig. (2-tailed)

.992

Push out the competitors

Correlation Coefficient

-.127

Sig. (2-tailed)

.466

Different brand meet different customer demand

Correlation Coefficient

.049

Sig. (2-tailed)

.779

Competition with own brand & improve performance

Correlation Coefficient

-.221

Sig. (2-tailed)

.201

Competition with own brand & increase cost

Correlation Coefficient

.110

Sig. (2-tailed)

.531

**.Correlation is significant at the 0.01 level (2-tailed).

*.Correlation is significant at the 0.05 level (2-tailed).

From the table above we can clearly see that, the hypotheses that have been rejected are: H1 H2 H4 H6 H8 H9 H10 H11 H12 H13 H14 H15 H16 H17 H18 because the significant values of those variables are greater than 0.05 or 5%, which shows that these variables has no correlation among them.

The acceptable hypotheses are:

H3 The managers’ perception of multi-brand strategy helps in obtaining greater shelf space & leaves little for competitor has an effect of level of multi-brand strategy implementation.

The significant value that is .000 shows that it is highly significant and the results conclude that level of implementation of multi-brand strategy and managers’ perception of multi-brand strategy helps in obtaining greater shelf space and leaves little for competitor. The positive value of correlation coefficient explains that to have a greater shelf space and little competitors the implementation of multi-brand strategy should be at lager scale or the company should have high level of implementation of multi-brand strategy to have a greater shelf space and less for competitor.

H5 The managers’ perception of multi-brand strategy helps in filling the price & quality gap has an effect of level of multi-brand strategy implementation.

The hypothesis could also be accepted if the significant value is less than 0.10 or 10%. As the significant value is 0.063, so we can say that there is a correlation among level of implementation of multi-brand strategy and the managers’ perception of multi-brand strategy helps in filling the price and quality gap, but the negative value (-.318) of correlation coefficient shows that, there is inverse relationship among the two variables.

H7 The managers’ perception of multi-brand strategy helps in improving market share has an effect of level of multi-brand strategy implementation.

As the above table shows that the significant value is 0.060 which is less than 0.10. So we accept the hypothesis and can interpret that correlation exist between the level of implementation of multi-brand strategy and the managers’ perception of multi-brand strategy helps in improving market share, as the value of correlation coefficient is positive, so the variables has a direct relationship.

Hypotheses Assessment Summary:

Hypotheses

Correlation Coefficient

Sig.

(2-tailed)

Empirical Conclusion

H1: The managers’ perception of implementing multi-brand strategy generates internal competition among managers has an effect of level of multi-brand strategy implementation.

-.255

.139

Rejected

H2: The managers’ perception of success of initial brand helps in implementing multi-brand strategy has an effect of level of multi-brand strategy implementation.

-.119

.495

Rejected

H3: The managers’ perception of multi-brand strategy helps in obtaining greater shelf space & leaves little for competitor has an effect of level of multi-brand strategy implementation.

.628**

.000

Accepted

H4: The managers’ perception to obtain greater shelf space, the company has to give higher cost has an effect of level of multi-brand strategy implementation.

.111

.525

Rejected

H5: The managers’ perception of multi-brand strategy helps in filling the price & quality gap has an effect of level of multi-brand strategy implementation.

-.318

.063

Accepted

H6: The managers’ perception of multi-brand strategy helps in satisfying customer needs in complex & diverse market has an effect of level of multi-brand strategy implementation.

.071

.686

Rejected

H7: The managers’ perception of multi-brand strategy helps in improving market share has an effect of level of multi-brand strategy implementation.

.321

.060

Accepted

H8: The managers’ perception of multi-brand strategy helps in occupying the various market segments has an effect of level of multi-brand strategy implementation.

.039

.825

Rejected

Hypotheses

Correlation Coefficient

Sig.

(2-tailed)

Empirical Conclusion

H9: The managers’ perception of multi-brand strategy works best for company with single target customers has an effect of level of multi-brand strategy implementation

-.123

.482

Rejected

H10: The managers’ perception of multi-brand strategy is restricted because of not having economies of scale has an effect of level of multi-brand strategy implementation.

.278

.106

Rejected

H11: The managers’ perception of multi-brand strategy works

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