Marketing Of A New Mobile Phone Brand
For the sole purpose of this assignment, I have chosen my company ABC to be a mobile phone manufacture, manufacturing product x which is a new type of mobile phone. Let us name the company as SAM electronics which has its Headquarters in Canada and product as SAM mobile phones. I have decided to choose this line because in the recent past there has been an increase in demand of mobile phones both in developing countries and also in developed countries.
Marketing a product that is manufactured in one part of the world to the rest of the world is an uphill task and it involves a lot of considerations. Marketing strategy that will be used is highly dependent upon the cost of producing the Product in Canada. Mobile phones have high initial costs of manufacturing considering the technical equipment, raw materials, energy and labour that are required to enhance the production of the product in a quality and efficient way (Case et al, 1999).
The product could be manufactured in all the various manufacturing plants of the company in the countries scattered all over the globe but there are associated costs that would be incurred. The cost of setting up a new plant would be substantial and this would probably result in the phones fetching higher prices than they would fetch if they were imported from mother country. This is especially true during the initial stages. Considering this, it is therefore logical business wise, at least for a start, to have the production plant of the drug in Canada and export it to other countries (Case et al, 1999).
The required raw materials for this project can be sourced either from China or Africa. This is due to their rich endowment of natural resources that are still untapped. If we source from Africa, it will be cheaper but it will require further processing. On the other hand if we source from china it will be slightly higher but the materials will be partly processed. Best solution for this scenario then is to source these materials from China and still go ahead and have the components manufactured there. This is because labour and energy are also affordable in China than in Canada. The partly finished products will then be shipped to Canada for final assembly, packaging and export. The target market in this case is US, Africa, Asia and Europe (Duetsch, 1993).
The economic state in US and Europe will be in recession but is expected to recover in second quarter of 2012. Africa and Asia on the other end are in recovery and are expecting economic boom in second quarter. Thus for a start all our marketing campaigns should be directed to Africa and Asia so as to reap the benefits of the economic state first before moving to US and Europe (Duetsch, 1993).
Mobile phones are considered to be normal good. This is because the demand rises with increase of disposable income of individuals. Even though an individual may not buy more phones because of his income, he can only upgrade a cheaper phone to an expensive one. This shows that SAM electronics has a potential market which it needs to study and exploit. The price elasticity of goods like SAM phones and other mobile phones in general can be said to be elastic. This means that quantity of phones demanded is greatly influenced by price changes no matter how small – especially in developing markets like Africa and Asia. Thus products that will be exported to these markets should be competitively priced to respond to this need (Malueg, 2008).
As pertains to income elasticity of demand for SAM phones it is expected to be positive and even more than one. This is partly due to the fact that SAM mobile phones are both normal goods and luxury ones for that matter. We want to make it top of the range mobile phone especially for the US and Europe markets (Malueg, 2008).
SAM electronics plans to enter into an already flooded market. There are many players but each one has its own strengths and weakness. For instance brands like Blackberry and iPhone are expensive top of the range products from US while Nokia and Samsung are established mid level players. In the lower end of the market we also have cheaper brands from China. SAM electronics will target mid level and high end market segment. Therefore management needs to do a thorough cross price elasticity of demand for SAM phones if they are to succeed (Kent & Monroe, 2003).
Cross price elasticity of demand of SAM phones against the available substitutes in the market can be said to be positive elasticity. This simply means that as the price of SAM phones will increase, the demand for substitutes will increase. Thus SAM electronics have to really check on their pricing strategy in comparison to other brands especially in developing markets (Kent & Monroe, 2003).
As pertains to complimentary goods, cross price elasticity of demand of SAM phones can be said to be negative. This is to say as the price of complimentary products for SAM phones decrease, the demand for SAM phones will increase and vice versa. The major complimentary for SAM phones of course are the various GSM carriers globally. In light of this we can say that we don’t anticipate any major drawback to market our product because if the recent trends in telecommunications industry is anything to go by; we are in for a great harvest. This is because in all markets whether developing or developed, telecommunications prices are drastically coming down. See the figure below (Kent & Monroe, 2003).
Cross price elasticity of cross price elasticity of two
two complementary goods substitute goods
As far as market structure of SAM mobile phones is concerned, it can be said to be monopolistic. This is to say there are many other firms in the market offering the same type of goods like SAM electronics. Therefore we expect to operate in a highly competitive environment. The current market strategy of our competitors is cost leadership. Majority of them have gained considerable market share based on this strategy. Therefore SAM electronics plans to enter the market using two major strategies, namely product differentiation and market segmentation. Under product differentiation we plan to position our brands as durable, functional and feature packed. With regards to market segmentation, we plan to market our products to mid level and high end consumers (Baker N. & Michael R. 2008).
As stated earlier the mobile phones will be supplied in Africa, Asia, Europe and the US. There is however that market segment which if given sufficient attention by the marketing team, will most likely increase the company’s income from the sales of the product (Kremer, 2000). The African countries, for example, will be a good market especially between now and the month of July. There is the likelihood of increased demand due to economic boom. Much focus should therefore be directed to this region (Baumol, 1998).
SAM phones will be entering an already flooded market. Therefore we plan to market our products as feature enriched, durable and affordable. We will target the mid class and high end consumers in the market. In Africa and Asia we will use cost-plus pricing strategy whereas in the rest of the market we will use market skimming strategy. Cost-plus pricing is about setting prices solely on the cost of production plus a desired profit margin. Skimming strategy on the other hand is about setting high price at initial stages of market entry so as to be able to recover initial investments fast. It is common with such products like electronics which SAM phones is part (Baumol, 1998).
In the short run we don’t expect to make much profit, we are only interested to break even and gain a considerable market share. If this strategy works well, we will perfect it and use it to reap more profits in the long run after our initial production costs have been recouped (Baumol, 1998).
As mentioned earlier we expect to enter the market when the economy is expected to have recovered from the recession. However if recession continues to hit one particular region we will move to the next available market so as to maintain our profitability. This is because during recession consumers tend to have less disposable income hence concentrating there will only amount to wastage of resources. The Demand of mobile phones in US and Europe is expected to grow though at a slow rate. The focus here will be competitively priced high end mobiles. In developing markets there is still a large untapped potential. Demand is still great and is expected to grow even more. Emphasis on such markets will be basic and functional phones that are affordable (Case et al, 1999).
Since mobile phones are luxury goods, we anticipate that the demand will slow down during a recession in the US. This is why we want to market our brand globally such that when there is a recession in one area we move to other markets. This will not only shield us from the recession but also propel us to profitability.
When entering new markets government policies are a must check. If you overlook them it will be hard to do business. This includes government policies on taxation, labour, imports, and general economic policies. For instance African countries offer many incentives to global firms that plan to set up plants in their countries. They even accept telecommunication equipments to enter their territories duty free. This therefore means such markets should not be overlooked (Case et al, 1999).
Baker N. & Michael R. (2008). The Strategic Marketing Plan Audit, 3rd edition. London: oxford university press. p. 27
Case, Karl, Fair & Ray (1999). Principles of Economics (5th edition). Prentice-Hall.
- Malueg, (2008) “Parallel Imports, Demand Dispersion and International Price Discrimination,” Journal of International Economics, Vol. 37, 2004. p. 167-95
Duetsch, Larry L. (1993). Industry Studies. Englewood Cliffs, NJ: Prentice Hall.
Feldstein, Paul J. (1999). Health Care Economics (5th edition). Albany, NY: Delmar Publishers.
Gregson R. & Andrew M. (2008) Pricing Strategies for Small Business Self Counsel Press.
Kent B. Monroe, (2003) The Pricing Strategy Audit, Cambridge Strategy Publications, p. 40
Miles, Raymond (2003). Organizational Strategy, Structure, and Process. Stanford: Stanford University Press
- Baumol, (1998) “Optimal Departure from Marginal Cost Pricing,” American Economic Review, Vol.39, 1998, p. 448-64
http://www.marketingthatworks.tv/marketing-explained-in-short-easy-words/definition-of-marketing-series-marketing-strategy.html MarketingThatWorks.TV Marketing Strategy.
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