International Products Ltd *.

Koojaroenpaisan, Rawiporn ; Peterson, Robin

CASE DESCRIPTION

The primary subject matter of this case concerns marketing.. It has a difficulty level of five (appropriate for senior level). The case is designed to be taught in one class hour and is expected to require two hours of outside preparation by the students.

CASE SYNOPSIS

This case deals with a Thailand producer and marketer of clothing products that is locked in a struggle to produce quality products efficiently and sell them in sufficient quantity, both domestically and abroad. One individual, the president of the company, is responsible for developing corporate strategy. He is aided in this process by the advice of a consultant whom he has retained. The firm has been in business for a considerable time period and has enjoyed some degree of success. However, management is currently involved in decisions regarding whether or not to employ a company (rather than a private) brand, how to control the channel of distribution, how to generate products which meet consumer desires, and possible additions to the product line. These decisions are complicated by somewhat unstable economic, social, supplier, competitive, and legal/political environments which confront the clothing industry in both Thailand and in other countries where the products are sold.

INSTRUCTORS' NOTES

RECOMMENDATIONS FOR TEACHING

Students are advised to carefully review and analyze the case by

A. Conducting a situation analysis, covering the firm's environment and current status.

B. Identifying company goals.

C. Assessing the firm's competitive position.

D. Identifying the major problems facing the company.

E. Generating alternative solutions to the problems which are discovered.

F. Selecting preferred alternative solutions to the problems.

F. Developing a rationale for the preferred solutions.

In undertaking the processes outlined above, it is recommended that students scrutinize the learning objectives set forth below. These objectives point to significant problem areas and to potential means of enhancing the well-being of the firm.

This case is most appropriate for a marketing management (sometimes called marketing strategy, marketing seminar, or problems in marketing) course at the senior, or MBA level. Also, some instructors of international marketing courses might find that the case is useful.

LEARNING OBJECTIVES

After analyzing this case, the student should be able to demonstrate an ability to:

1. Identify the major problem(s) confronting the firm.

2. Develop a process for evaluating the potential effectiveness of a company (versus a private) brand.

3. Recommend a branding strategy for the company.

4. Evaluate the probable success of a major change in the channels of distribution.

5. Recommend a channels of distribution strategy for the firm.

6. Assess the quality and quantity of consumer demand for the firm's products.

7. Recommend a strategy for stimulating demand for the company offerings.

8. Assess the market potential and company fit of additions to the company product line.

9. Recommend a strategy for developing an optimum product line for the firm.

ANALYSIS

This company is faced with a number of significant problems. This being the case, one major teaching goal is to have the students demonstrate their ability to prioritize the problems and to decide which ones deserve the greatest amount of managerial attention. In the opinion of the authors, the greatest obstacle to company success is the current practice of selling an unbranded product in export markets. Until the firm is able to use its own brand it will have difficulty in managing the overall marketing effort. Currently, distributors are in control of the channel of distribution and the marketing of company nightgowns. The company cannot create a comprehensive and coordinated marketing program in this environment. In turn, this makes sales forecasting difficult, forcing the company to produce only when it receives orders from the distributors-hardly an efficient means of production. Further, selling unbranded products to distributors places the company at a distance from consumers, making it difficult for management to develop an understanding of consumer behavior. This distance from consumer behavior is also disadvantageous because management is not in tune with other products that the company could produce and which consumers may desire.

Other teaching goals are for students to demonstrate an ability to make decisions on whether or not to brand, how to exert power over the channel, how to gain information on consumer behavior, how to develop a workable product mix, and how to improve product quality. These variables are reflected in the current company problems set forth in the case. The problems and possible solutions to these problems are set forth below:

1. The company does not use its own brand name for exports, at the consumer level. Distributors are the major customers of the company, so in the absence of a company brand, they exercise considerable control over prices, terms of sale, and other marketing variables.

It is suggested that the company develop its own brand for export sales. Until it does this, it will be difficult to develop a coordinated marketing program and assume some degree of control over the channel of distribution. Bringing in a company brand will facilitate handling of many of the other problems mentioned in the case. Currently the firm is essentially involved solely in production, with only moderate levels of marketing activity. Products are manufactured to the distributors' specifications and are produced only when orders are received from distributors. The company already employs the "Bed time story" brand name in Thailand, and this could be useful for export sales, provided that no legal barriers exist. Development of a brand will allow the firm to acquire brand equity. It may be able to expand its market share, achieve economies of scale and productivity benefits from continuous production, generate brand loyalty, and charge higher prices. The potential benefits are considerable. There will be costs and risks associated with such a decision, of course. The firm will be faced with the necessity of producing a sustainable marketing program. However, it appears that Mr. Pongsan has the experience and skill needed for this challenge.

2. The company has very limited control over its channel of distribution. It produces nightgowns only when distributors send in an order, making production less efficient than if it engaged in continuous production.

If the company generates its own brand this should be less of a problem. It will be in control of the marketing program and will be in a position to generate demand in a fashion that is compatible with its production and product design activities. If this is done correctly, it should be able to engage in continuous, rather than job lot production and achieve production efficiencies as a result. However, the firm will have to design an effective sales forecasting program. It might start with a relatively simple method, such as trend extension or sales force composite methods, and develop more sophisticated methods as it gains experience in this activity.

Mr. Pongsan must decide how to structure the channel of distribution. Currently, export sales are all moved through distributors. It is unlikely that this pattern will be radically changed in the near future. However, some retail customers want distribution directly from the manufacturer. If International Products Ltd. adopts this structure, it will be necessary to develop and train a sales force. Further, it may be necessary to make changes in the physical distribution system. A study should be undertaken to determine the costs and benefits of direct distribution versus distribution through the distributors. Without this information, it will be difficult for management to construct the optimal channel.

3. The firm lacks information on target consumer behavior and major trends in the target market.

If the firm produces its own brand and its own marketing mix, rather than relying upon the distributors for this activity, company employees will be in direct contact with the market. They will communicate with retailers and be in a position to learn about consumer needs and trends in these needs. The sales force can be instrumental in this effort. Sales representatives should be instructed that it is part of their job to study the market and the directions that it is taking, as well as the competitive situation, and to report the findings to management, so that marketing efforts can be guided toward consumer needs and preferences. The firm may choose to engage in marketing research and intelligence efforts, or to study the results of published research, in order to gain insights on the directions of the market place. A useful practice would be to attend several of the industry trade shows in European countries such as England and to observe the fashion trends that are emerging. Further, trade publications in these countries can be useful indicators of trends.

4. Major customers are interested only in purchasing nightgowns, although the company is capable of producing other textile products.

The company may want to consider offering products other than nightgowns. But a change in this direction should take place only after careful study. The firm should carefully analyze its mission and goals and determine what products might be compatible with these. Further, it should analyze consumer demand for various candidate textile products and the degree of competition which might be expected for each. It would be useful to go through the traditional product development process-developing ideas, screening, concept testing, business analysis, brand development, testing, and implementation, which has proven to be useful to many companies.

Management should be aware of the opportunities available through producing innovations. However, they should be cautious and should not inadvertently move into new launches which may not be successful. Currently the company is profitable and its current position should be changed only after careful evaluation.

5. The manufacturing process wastes more than 1.5 percent (the standard level of the industry) of the raw material inventory

This is not necessarily a major problem, since wastage rates of this magnitude are not uncommon in the textile industry. However, it may be possible to reduce wastage through more thorough selection and training of members of the production work force. Another possibility is to convince raw material suppliers to provide higher quality products. Mr. Pongsan is concerned about this issue. When the company has its own export brand and has been successful in expanding the market, this may provide the firm with leverage which it can impose upon raw material suppliers-convincing them that it is in their own self- interest to enhance product quality and their own sales as a result.

6. Manufacturing efficiency is less than that of producers in Europe and the United States, due to lesser technological development in Thailand.

As a means of keeping pace with competition in the industry, it will be necessary for International Products Ltd. to maintain and enhance its technological capabilities with the passage of time,. This is needed in order to attain manufacturing efficiencies and to produce high quality products. International Products Ltd. is well-advised to take steps which lead to a steady program of improvements in the manufacturing process. To some degree, this may require the replacement of existing machinery. However, before this is undertaken, Mr. Pongsan should explore other means of improving production, such as implementing superior methods of production planning, scheduling, and control and conducting additional employee training. At least in the short run, these may allow the company to increase its productivity, create less wastage, and improve product quality. However, it will be necessary to invest in new technology from time to time and the firm should establish reserves which can be used for this purpose, as the need arises. While the company is probably not sufficiently large to engage in research and development in the technology field, it can gain insights from trade shows, marketers of machinery, and industry trade journals which can provide guidelines for improvement.

REFERENCES

Fry, F. L., Stoner, C.R., & Richard E. Hattwick, R.E.. (2000) Business: an integrative approach Boston: Irwin McGraw-Hill, Chapters 12 & 13.

Peter, J. P.l & Donnelly, Jr., J.H.(2004). Marketing management: knowledge and skills. New York: McGraw-Hill/Irwin, Chapters 7 & 13.

Kotler, P. (2003). Marketing management. Upper Saddle River, New Jersey: Prentice Hall, Chapters 6, 7, 9, 11, & 14.

* The name of the company and the name of its president have been disguised.

Rawiporn Koojaroenpaisan, Chiang Mai University Robin Peterson, New Mexico State University