Research Korner: Marketing Proposal Example

THE IMPACT OF CRM SYSTEMS ON MARKETING RESEARCH PROPOSAL PAPER

THE IMPACT OF CRM SYSTEMS ON MARKETING 1) Summary             This paper discusses in detail the research proposal on the impact of CRM systems on marketing. In particular, the research will focus on the effects and influences of CRM systems in marketing activities of organisations. In this research proposal, the background, context of CRM and relevant themes are presented; the partial literature review is presented as well; the design, problems, aims and objectives are formulated; and the questions are stated. The questions presented is comprised of statements on benefits, issues, problems, challenges and conflicts the organisations experience upon implementation of CRM systems in their marketing activities. In addition, the rationale and significance of the study are provided and limitations and methodologies of the study are likewise discussed. 2) Introduction              The combination of speed and storage capabilities of computers, along with the connectivity of the Internet, provides a powerful linkage among several functions of the company. CRM systems range from the simplest contact-management systems which focus on assisting individual salespeople to most complex enterprise-wide and cross-enterprise systems. The main role of CRM systems is to connect the suppliers and the customers. CRM systems ensure that customers have a consistent experience across multiple sales channels.             An effective implementation of a CRM system meets the needs of the customer, the salesperson and the company by means of utilizing system elements in several, different ways. Such elements and its implementation mirror the success or failure of the marketing design of any organisation as the management-centered functions of CRM system (Zoltners, 2001). This study aims to explore this issue and will attempt at identifying the impact of CRM systems on the overall marketing system of the company.    3) Background What is CRM?             Customer relationship management, better known as CRM, is a set of strategic practices that purports finding, marketing to, selling to and servicing customers. CRM is a broadly used term that covers different functions and concepts of organisations in aspects of operational, collaborative and analytical frameworks. There are many benefits the company could derived upon implementation of CRM systems. These benefits are: customers, suppliers and co-suppliers linkage, access, hassle-free communication, reduction of implementation cycles, centralised and regularised systems upgrade, centralisation of maintenance and enhancement expertise and homogenisation of CRM technology (Zoltners 2001).                 The elements of the CRM system include customer encyclopedia – customer and prospect profiles, needs; product encyclopedia – product profiles, product configuration tools, references; pricing and proposals – pricing, proposals, presentations; ordering, planning and tracking – orders, results, activities; training – product, customer management, planning; administration – expense, commissions, general tools; analysis – sales analysis, forecasting, office suite; communication – electronic mail, intranet, internet, telemarketing tools; system enhancement – configuration, maintenance, upgrade; and customer support – frequently asked questions (opere citato).             The management-centered functions of a CRM system is consist of reporting and forecasting of sales, communicating with salespeople and other company personnel, capturing and disseminating best practices, reporting sales force activity, comparing actual results with forecasts, designing and managing sales territories, analysing marketing and sales programs in terms of market, territory, product, customer type, price and channel, and enhancing and streamlining work flow and processes (opere citato).      CRM and Marketing             The goal of CRM in marketing is to move C-level customers up to B-level customers and to move B-level customers up to A-level customers and to motivate A-level customers to stay in that position. CRM initiatives ensure that the company is the customer’s first choice. The role of CRM systems in marketing is to utilise the product and campaigns to reach the masses through targeting and establishing relationships. CRM embraces the idea of a highly-individualised marketing or a one-to-one marketing process. In this way, markets are carefully segmented and responded to. Likewise, this process could build a communication based on customised products and tailored messages. The concept of one-to-one marketing comes together with permission marketing. Permission marketing implies that the customer will have the final say regarding when and for what reason he or she will accept to be interrupted. Hence, there must a value for him or her for such an interruption (Dyché 2001).                 If there are management-focused CRS functions, there are also salesperson-focused. The specific functions of CRM system for this group are comprised of the following: management of accounts and distributors, tracking sales by customer, planning and reporting sales calls, automating sales plan and tactics, answer requests for product literature, track leads (management of a tickler file), manage contacts, make computer-based presentations, access competitive intelligence online, enter orders, check inventory and order status, report and check expenses, calculate incentive earnings, word processing, manage a personal calendar, get geographic information and routing, use electronic mail, access the Internet and receive training (Zoltners 2001).       4) Rationale             The issue is decided to be investigated mainly because the researches regarding CRM systems focus on general themes. However, there are many specific topics that could be explored regarding the application of CRM systems. There is need to increase the limited knowledge regarding the implications and effects of CRM systems in marketing. This study proposes to focus on marketing activities of organisations. The rationale of the study is to determine the benefits and downsides of CRM systems implementation in marketing.   5) Literature Review             According to Starkey and Woodcock, there is a correlation between customer management (CM) and business performance. The expenditure on customer relationship management (CRM) base on IT systems has increased over the years. However, many CRM systems fail. The two authors claimed that the actual performance regarding customer management is not improving. Though spending on CRM is enormous, there had been a high CRM failure rate. Many reasons are to be accounted for this such as the 9/11 attack and the changing nature of technology. Companies seemed to experience real problems in implementing CRM. Their findings proved several reasons for the decline of CRM implementation efficiency. These are the inadequacy in senior executive ownership and leadership; the misalignment in strategies and actions in CM implementation; the siloed approach in implementation; the misalignment of CM behaviours with organisational culture; shortage in expertise and skills; the unrealistic roadmaps and poor programme management.              Another research is carried-out by Mithas, Almirall and Krishnan about the effectiveness of CRM systems in one-to-one marketing. The purpose of their study is to provide an assessment of the causal effect of CRM applications on one-to-one marketing effectiveness. They use a propensity score approach to determine such causality. Their study included the discussion of the strengths and challenges of using this approach and its applicability on electronic commerce of a firm. Their finding include: firms using CRM systems have greater levels of one-to-one marketing effectiveness (2006).    6) Significance of the research             The study could provide a better understanding on the risks and costs of improper implementation of CRM systems at least. From a broader sense, this research could significantly contribute to corporate decision-making whether the application of CRM systems is the best option for the company based on actual, positive and negative implications on marketing aspect as this study proposes.             For the CRM systems-providers, the findings of this research will also contribute to the restructuring of the whole system to compensate for the limiting aspects this research could present particularly in the marketing schema of the organisations. Studying this issue may help suppliers and companies to create strategies on how to address specific weaknesses and develop courses of action based on strengths.             For the literature, the academic contribution of this research is to help students improve their learning skill regarding CRM systems and how it applies to marketing. Student can go deeply into the topic areas presented and could extract areas of improvement. These areas could be another topic of research. This study could be an important management or information technology endeavor in the academia.   7) Design             This study will adapt an interpretivism approach of research. The main aim of this approach is to understand situations and give plausible and acceptable accounts regarding the matter (Varey, Wood-Harper & Wood, 2002). The interpretivism philosophy will guide the researcher in making sense of the result of the study by providing logical interpretations. For this study, the researcher will be permitted to provide details of the situation in order to understand the reality or perhaps discover a reality that works behind them (Remenyi, et al 1998). The subjective meanings that motive the people could be further explored.     8) Research Problems             CRM technology is basically a new application. There are a lot of aspects to improve especially when it comes to marketing. In general, the problem will be addressed in the study is the degree of effectivity of CRM systems on marketing activities of the organisation that includes campaigns and campaigns response tracking, campaign analysis and reporting, event marketing, trade promotions, trade and revenue tracking, e-marketing, telemarketing, electronic mail marketing and direct mail marketing for organisations. Beyond this, the ways to measure the efficiency of CRM systems implementation on marketing proposes and how do CRM systems implementation contribute to effective management of CRM systems application in marketing are other problem areas. 9) Objectives             The main objectives of the research focuses on investigating the impact of CRM systems implementation as applied in marketing concepts of the organisations. By exploring CRM systems in marketing, the specific objectives of the study would be to identify the implications and effects of CRM systems in marketing; to explore the CRM systems implementation experiences of organisations that focus on marketing area and to determine different themes and concepts of CRM systems in marketing. 10) Research Aims             The overall aim of this paper is to explore and to investigate the impact of the CRM systems and its implementation on marketing applications. Specifically, the paper will try to reveal the general customer behaviours in existence. This will also include the exploration on patterns of customer satisfaction, retention and loyalty. Prior to this, the paper will try to present information on the recent CRM systems in use in marketing and to discover its importance. In addition, the paper will also seek to discuss the benefits and limitations of CRM systems in marketing and how it could possibly improve the overall performance and position of the organisations. Other research aims directly points at revealing the effectivity of campaigns, marketing strategies and distribution channels. To explore how CRM systems deliver different advantages and how CRM systems add value to the products and services are other aims of this research. Moreover, the research will also aspire to investigate customer information management which includes responses and relationships. Finally, the paper will aim to compare actual practices on organisations with benchmark practices.  11) Research Questions <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Do CRM systems reflect the buying behaviour of the customers?</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> What are the most recent CRM systems available for marketing?</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> How important is the implementation of CRM systems in marketing activities of the organisations?</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> What are the benefits and limitations of CRM systems in marketing?</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> How does the implementation of CRM systems in marketing affect the general performance of the organisations?</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Is the implementation of CRM systems in marketing improved the current position of the organisations?</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> What are the strategic planning activities does the CRM systems provide the organisations?</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> What are the problems encountered by the organisation in implementing CRM systems in their marketing activities?</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Is CRM systems implementation an effective tool towards achieving competitive advantage? </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Is CRM systems implementation a strategic tool towards achieving cost advantage?</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> How do CRM systems add value on products and services?</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> How do CRM systems measure the effect of campaigns?</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> How do CRM systems measure the effectivity of distribution channels?</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> How do CRM systems contribute to customer satisfaction and retention?</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%">  Are CRM systems proven ways of managing customer informations? How?</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%">  Do CRM systems assure customer responses?</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%">  Do CRM systems provide adequate information on understanding competition?</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%">  In what ways do CRM systems contribute to customers’ loyalty?</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%">  Does the implementation of CRM systems affect the supplier-buyer relationship? In what ways?</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%">  What are the best practices that emerge in CRM systems implementation as applied in marketing as compared to benchmark practices?</li> 12) Limitations of the Proposal             The general limitation of the study is manifested in the chose of area to be explored. This research greatly focuses on marketing area of the organisation. Another potential limitation of the study is the number of samples. The target number of sample is relatively small compared to the total number of companies that use CRM systems in their marketing worldwide. However, the validity of the data is sufficient in producing a general idea on the impact of CRM systems in marketing. Furthermore, a recommendation for future studies will be provided to promote a continuous investigation on this matter. 13) Methodologies             The research will utilise a descriptive method. As a descriptive research, the paper will present facts that concern that nature and status of the situation. The study could describe present conditions, events or systems based on the impressions or reactions of the respondents of the research (Creswell 1994) as well. The relationships and practices that exist, the beliefs and processes that are ongoing, the effects that are being felt or the trends that are developing could be also explore in descriptive researches (Best 1970).             The primary stage of the research will employ a qualitative research as the literature reviews will be presented as primary data. It will be obtained from published articles on business, marketing and management journals and electronic resources. Theses and related studies on CRM implementations will be also studied and explored. On the secondary stage, quantitative research will be employed. The secondary data will be the survey outcomes for 25 companies that are using CRM systems in their marketing activities. The data collected from this survey will be subjected to statistical analysis. The researcher will use percentage and weighted mean in data analysis.       14) Bibliography   Best, J W 1970, Research in Education, 2nd Ed. Englewood Cliffs, N.J.: Prentice Hall, Inc.   Creswell, J W 1994, Research design: Qualitative and quantitative approaches, Thousand Oaks, California: Sage.   Dyché, J 2001, The CRM Handbook: A Business Guide to Customer Relationship, Addison-Wesley Professional.   Mitas, S, Almirall, D & Krishnan, M s 2006, ‘Do CRM Systems Cause One-to-One Marketing Effectiveness?’, Statistical Science, vol. 21, no. 2, pp. 223-233.   Remenyi, D., Williams, B., and Swartz, E. (1998). Doing Research in Business Management: An Introduction to Process and Method. London: Sage.   Starkey, M & Woodcock, N 2001, ‘CRM Systems: Necessary, but not sufficient. REAP the benefits of customer management’, Journal of Database Marketing, vol. 9, no. 3, pp. 267-275.   Varey, R. J.; Wood-Harper, T. & Wood, B. (2002): A Theoretical Review of Management and Information Systems Using a Critical Communications Theory. Journal of Information Technology 17, 229 – 239.   Zoltners, A A 2001, The Complete Guide to Accelerating Sales Force Performance, AMACOM Division: American Management Association.

THE IMPACT OF CRM SYSTEMS ON MARKETING RESEARCH PROPOSAL PAPER

THE IMPACT OF CRM SYSTEMS ON MARKETING 1) Summary This paper discusses in detail the research proposal on the impact of C...

Principles and Practice of Marketing

1        SUMMARY OF THE SELECTED ORGAISATION – Shiseido                     3 1.1  Corporate Ideals                                                                                        3 1.1.1        Corporate Mission                                                                    3 1.1.2        Criteria for Corporate Activity                                                  3 1.1.3        The Shiseido Way                                                                    3 1.2  Product Category                                                                                       4 1.3  Global Operation                                                                                        5   2        MARKETING EFFECTIVENESS EVALUATION                                       6 2.1  Customer Philosophy                                                                                  6 2.2  Integrated Marketing Organization                                                  6 2.3  Adequate Marketing Information                                                                 7 2.4  Strategic Orientation                                                                                   7 2.5  Operational Efficiency                                                                                 8 2.6  Conclusion                                                                                     8   3        STRATEGIC MARKETING PLANNING AND       MARKETING STRATEGY                                                                              9                                             3.1  Product Life Cycle                                                                                    9 3.1.1        Introduction Stage: Men skincare products                                9          3.1.2        Growth Stage: Makeup Products                                              10 3.1.3        Maturity Stage: Skincare Products                                            10 3.1.4        Decline Stage: Hair Care Products                                            11 3.2  Michael Porter’s Model                                                                              11 3.2.1        High Competitive Rivalry Among Existing Firms                        11 3.2.2        High Bargaining Power of Suppliers                                          13 3.2.3        High Bargaining Power of Buyers                                              13 3.2.4        Moderate Threat of Potential New Entrants                               13 3.2.5        Low Threat of Substitutes Products                                           14 3.3  BCG Business Matrix                                                                                 15 3.3.1        Cash Cows: Proudia and Beneflance                                         15 3.3.2        Stars: PN and MAQUILLAGE                                                15 3.3.3        Question Marks: SHISEIDO MEN and UNO              15 3.3.4        Dogs: MIEL and SHISEIDO SUNCARE                                 16 3.4  The Ansoff Matrix                                                                          17 3.4.1        Market Penetration                                                                   17 3.4.2        Product Development                                                               17 3.4.3        Market Development                                                                17 3.5  Competitive Strategic                                                                                  18 3.6  Marketing Mix                                                                                            18 3.6.1        Product                                                                                    18 3.6.2        Price                                                                                        18 3.6.3        Place                                                                                        18 3.6.4        Promotion                                                                                18   4        GROWTH OPPORTUNITIES                                                                           19 4.1  Political                                                                                                      19 4.2  Economic                                                                                                   19 4.3  Social Analysis                                                                                           19 4.4  Technology                                                                                     19   5        CONCLUSIONS AND RECOMMENDATIONS                                            20   6        BIBLIOGRAPHIES                                                                                            21        1          SUMMARY OF THE SELECTED ORGANISATION   Shiseido is a cosmetics leader practising in marketing concept with outlets in 65 countries and regions, including affiliates employee approximately 8,500 people around the globe. Shiseido was founded in 1872, concerned with the poor quality of pharmaceuticals sold to the public, co-founder Arinobu opened the Shiseido Pharmacy to introduce western-style pharmaceuticals when herbal medicine was still mainstream. (http://www.shiseido.co.jp/e/story/html/sto50100.htm, 26 Feb, 2006)   Shiseido began forming its chain store network in 1923, until 1927 Shiseido formerly a limited partnership, became a joint stock company in Japan. In 1957, Shiseido first step to overseas markets, launched sales in Taiwan with exports to Singapore and Hong Kong following closely after. In 1962, Shiseido expanded to Hawaii and in 1965; it established Shiseido Cosmetics America to commence sales in the mainland. European sales began with Italy in 1968 and officially in Oceania with New Zealand in 1971. (http://www.shiseido.co.jp/e/story/html/sto30200.htm, 26 Feb, 2006)   1.1 Corporate Ideals   In 1989, Shiseido compiled and enacted its “Corporate Ideals” as a governing guideline for its corporate practices and employee activities in fulfilling the company mission to contribute to not only the welfare of Shiseido but to the betterment of the society as a whole. The Corporate Ideals outlined into two parts, the Corporate Mission and the Criteria for Corporate Activity.   1.1.1    Corporate Mission Shiseido aim to identify new, richer source of value and use them to create beauty in the lives and culture of customers. The mission is closely related to their customer oriented strategic. Shiseido develop their products and services by the wants of their customers.   1.1.2    Criteria for Corporate Activity Shiseido seek to bring joy to their customers and concerned with the results but not the procedures. They share frankly with each other their real priorities. Free rein to their thoughts and boldly challenge conventional wisdom and act in the spirit of thankfulness.  (http://www.shiseido.co.jp/e/e9711way/html/way00001.htm, 26 Feb, 2006)     1.1.3    The Shiseido Way Beside the two Corporate Ideas, “The Shiseido Way” was enacted in1997 and better clarifies what is expected of each Shiseido employee in his or her daily activities in regard to their customers, business partners, shareholders and society as a whole.   Through the creation of the true value and exceptional quality, Shiseido strive to help their customers realize their dreams of beauty, well-being and happiness. Joining forces with partners who share their aims, Shiseido act in a spirit of sincere cooperation and mutual assistance. They aim to win the support of their shareholders by retaining earnings for future investments and paying dividends that come from sound business results. Shiseido believe that their employees are their most valuable corporate assets. They respect and obey all laws in all regions in which they do business. Safety and preservation of the natural environment are their highest priorities. (Annual Report, 2005, p.2)     1.2 Product Category   Shiseido sales are mainly generated from its main business category of cosmetics, which makes up about 78.4% of total sales with toiletries at 10.7% and other categories such as salon products, foods, and pharmaceuticals at 10.9%. 26% of total consolidated sales were generated by Shiseido's international activities in fiscal year 2004. (http://www.shiseido.co.jp/e/story/html/sto40220.htm, 26 Feb, 2006) 1.3 Global Operation Regional breakdown in fiscal 2004 shows that Europe accounts for approximately 41.9% of Shiseido's overseas sales, followed by Asia/Oceania with 29.9%, and the Americas with approximately 28.2%. Shiseido products are currently marketed in 65 countries and regions. (http://www.shiseido.co.jp/e/story/html/sto40220.htm, 26 Feb, 2006) In the expanding Chinese economy, the cosmetics market has been growing substantially as personal incomes improve. Shiseido have positioned China as their key overseas market and aggressively expanded its business.   Fig 1 Shiseido sales overseas and global operation (Source: www.shiseido.com, Complied by the Author)   2        MARKETING EFFECTIVENESS EVALUATION   In this section, customer philosophy, integrated marketing organization, adequate marketing information, strategic orientation and operational efficiency are used to review the marketing effectiveness the China market of Shiseido. (Kotler, etal, 2003, pp 744-5)   2.1  Customer Philosophy “As part of efforts to develop and cultivate products that meet customer needs and the specific characteristics of the each sales channel, we launched new products including Sinoadore, a line incorporating research results in traditional Chinese medicine and &Face, a skincare line designed to give the impression of invigorated and refreshed facial contours Shinzo Maedo (CEO of Shiseido)  (Annual Report, 2005, p.4). From that we can see that Shiseido produce new product by the needs and wants of specific Chinese consumers.    “AUPRES” an exclusive Chinese skincare brand by Shiseido. It was researched and developed specially under the condition of Asian skin type. Production integrated ingredients of Chinese medicine, Chinese history and new technology. “ZA” another cosmetics products specially made for Asian skin type, but different to “AUPRES” it is more to the mid-range pricing and mass market.   Shiseido develops different product offerings to meet the wide-ranging needs of consumers of China market.     2.2  Integrated Marketing Organization Marketing, research and development department and merchandising work closely together, analyzing consumers’ needs and market trend. Develop new products and improve products qualities, including image and packaging.   Marketing working with sales team organize large-scale promotion campaigns, such as Road Show and exhibition.  Shiseido organized an event on February 2006 for the launching of new season makeup color, inside exhibition center. Marketing and sales teams responded the operation of the event; include the press, sales and also the decoration of the booth.           2.3  Adequate Marketing Information Recently Shiseido is doing a Customer Services Evaluation by a questionnaire card, with the data collected from customers Shiseido improve the services provide from sales counter. Also they get to know directly their customers’ need and statistics based on consumers’ skin type, which help to improve their products quality, features and functions.    Buying influences is collecting by AC Nelson research every two years. Researching the popularity of cosmetics products, including competitors’ products in the market.   With the information management may find out competitors’ sales potential products, and knows the profitability of different market segments, customers and products.     2.4  Strategic Orientation Management develops a detailed annual marketing plan and a strategic long-range plan that is updated every three years. “ Growth and advancement” is the headline of current Shiseido marketing strategic.   “We will strive to gain further trust among all stakeholders by broadening and intensifying the reforms focused on the sales counter while carrying out strategies for growth expansion and profitability improvement with the decisive execution and speed.” Shinzo Maeda (CEO of Shiseido). (Annual Report, 2005, p.2) Management states the strategic clearly, which make the operation easy to follow.   From concept of “sales-counter-focus reforms” in the pass, to “customer-oriented marketing reforms” in 2005 (Financial Interim Results & Outlook for the Full Year, 2005), marketing strategic have been revised and suit today’s market need.     2.5  Operational Efficiency Shiseido capitalized on regional distribution centers and started supply chain management in China, which improved the efficiency of their inventory control and delivery while effectively combining direct and wholesaler sales routes. (Annual Report, 2005, p.14)   Shiseido China Research Center Co., Ltd. was established in 2002. With research and development based in China, production of tailor-made Chinese market products become more efficient, which include using ingredients of Chinese medicines, products and related theories. (Annual Report, 2005, p.18)     2.6  Conclusion Over all Shiseido show a good marketing effectiveness. They have well control of the strategic from time to time, which divert them to achieve the marketing goals and effectiveness.                     3        STRATEGIC MARKETING PLANNING AND MARKETING STRATEGY   In this section models of Product Life Cycle (Kotler, etal, 2003, p.316), Michael Porter’s Five Forces Model (Jobber, 2004, p.679), BCG Business Matrix (Kotler, etal, 2003, p.89) are used to analysis Shiseido marketing planning, and Ansoff Matrix (Jobber, 2003, p.326) to state its marketing strategy.     3.1  Product Life Cycle This section is aim to discuss Shiseido current selling products in type of stage in product life cycle. Most of the company’s products are now in the growth and maturity stage, some of the products line have been chosen and highlighted in follow.     3.1.1        Introduction Stage: Men Skincare Products Shiseido Men’s Skincare products line named “Shiseido MEN” was introduced to China and Hong Kong markets in 2005.Although Shiseido is not the pioneer of the men’s care products in the cosmetics market, but seems with Shiseido branding there is still great chance to enjoy a substantially higher market share.   “Shiseido MEN”, a single men’s skincare line, unlike the other Shiseido products with a large number of different style and price range product lines. The prices of “Shiseido MEN” are set higher than the same level women’s skincare products, a skimming pricing strategy for high profit margin as there are few competitors in the market.   However, most male consumers in Hong Kong and China not used to purchase skincare products, so Shiseido should aimed to promote “Shiseido MEN” by create male consumers awareness of the importance of daily skincare. In this introduction stage the promotional expenditures are at Shiseido highest ratio to sales, therefore, the sales of “Shiseido MEN” is in a slow growth.     3.1.2        Growth Stage: Makeup Products Shiseido makeup products are in period of the growth stage. Sales of products increase rapidly as more consumers become aware of their product with its strong branding and its benefits.   Products have proven a success and consumers begin asking of the products by themselves, sales increased and more stores are opened in the market, from 301 stores in 2004 increased to 777 stores in 2005 in Hong Kong and China Market (Annual Report, 2005, p.25).   As large numbers of competitors are attracted into the makeup market with very similar products, Shiseido should increase the advertising spending to build brand preference, and maintain customers repeat purchase behavior patterns. New product lines with reduced price may introduce to the market to attract the next layer of price-sensitive buyers.     3.1.3        Maturity Stage: Skincare Products Shiseido cosmetics skincare products sales growth rate starts to decline, due to the market saturation. Products have come to the maturity stage in the Product Life Cycle.   R&D budgets have to be increased to differentiate their products from other market share by develop product qualities. New product lines with different style and improved qualities need to be launching to the market once in a short period of time to maintain the high market share and to build the brand loyalty.   Advertising should aim to promote products qualities and functions. More budgets spend on sales promotion to support the products such as coupon and magazines joint promotion, incentives to get competitors’ consumers to switch.       3.1.4        Decline Stage: Hair Care Products Shiseido hair care products are in the decline stage, because of the rapid increased domestic and foreign competitors with strong brand of hair product market, and switch of consumers’ taste. Consumers switched to prefer professional products, such as dandruff-preventing shampoo and hair protection styling gel.   The weak products offered need to be reduces and distribution locations may not at Shiseido store to hold up the valuable space but beauty or convenience stores only. The expenditure of advertisings and sales promotion of Shiseido hair products need to be minimized. Shiseido may take out the promotion cost, to transfer to other region market.     Stage Category Product Line Introduction Men Skincare Products   SHISEIDO MEN Growth Makeup Products MAQUILLAGE SHISEIDO The Makeup Maturity Skincare Products UV WHITIA AQUA Label Decline Hair Care Products SEA BREEZE Fino   Fig 2. Product Life Cycle, Adopted by Author                   3.2  Michael Porter’s Model Michael Porter’s Five Forces Analysis is used in this section to analysis the competitive environment.     3.2.1        High Competitive Rivalry Among Existing Firms The key rivalry competitors of Shiseido are Max Factor, Estee Lauder and L’Oreal.   Max Factor is an American cosmetics global brand, one of the marketing leaders in the industry. Under Max Factor production, a skincare line named “SK-II” is the best selling skincare product line in 2004 and 2005. And their makeup products have build up a professional image in the market. Price set in medium level with wide target age range.   Estee Lauder is another American cosmetics worldwide brand; selling products include skincare, makeup and fragrance. They produce advanced technology and innovative products. Price range set in high-med level, target at mature female.   L’Oreal a cosmetics group held over 20 global cosmetics brand, is one of the biggest firm in the industry. Products from mass skincare products selling in supermarket to high-class skincare and makeup products selling in beauty store. Offering different price level and product to meet the wide-ranging of consumers in market.   This force describes the intensity of competition between existing firms in an industry. High competitive pressure results in pressure on prices, margins, and hence, on profitability for every single company in the industry (http://www.themanager.org/Models/p5f.htm, 1 March, 2006).   Competition between the cosmetics firms is likely to be high because there are many firms of about the same size in the industry, and competitors are sharing very similar strategies.   There is not much differentiation between cosmetics products; hence, there is much price competition.  As the market is overcapacity, market growth rates become low. Consumers may freely switch from one product to another there is great struggle to capture customers. Barriers for exit are high, highly specialized equipment and advertise expenditure that has spent for the brand. These assets are not easy to be sold to other buyers in another industry. (http://www.ifm.eng.cam.ac.uk/dstools/paradigm/5force.html, 1March, 2006)     3.2.2        High Bargaining Power of Suppliers The term 'suppliers' comprises all sources for inputs that are needed in order to provide goods or services. (http://www.themanager.org/Models/p5f.htm, 1 March, 2006)   Shiseido supplier bargaining power seems to be at the high level, although Shiseido have its own research & development bases in Japan, China, France and the United State. Shiseido is mobilizing global research & development includes cosmetics ingredients, products and beauty-related theories (Shiseido Annual Report, 2005). The bargaining power of their raw materials and production supplier is in a very low level.   However, other suppliers like labor and landlord of their stores have a very high bargaining power. Labor such as beauty consultants, they are the front line and represent the company and are hard to get an experienced and professional employee. Landlord such as SOGO and Time Square, large-scale department stores, they increase the rent and the commission charges depend on the sales of the company.     3.2.3        High Bargaining Power of Buyers The bargaining power of buyers is high, as there is no switching cost of the consumers in the industry.   Shiseido comprises a large number of competitors with small differentiation between products. Consumers have a lot of choices, can compare similar products and become more price-sensitive. Firms should provide more consumer’s profit and product differences to remain consumer brand loyalty.     3.2.4        Moderate Threat of Potential New Entrants The threat of potential new entrants will depend on the extent, to which there are barriers to entry (http://www.themanager.org/Models/p5f.htm). It is easy to enter the industry as production in a common technology; many small firms may produce their own brand products from cosmetics and toiletry factory within China. However, the cost of branding is high; new entrants need a huge budget and time to build up their brands.     3.2.5        Low Threat of Substitutes Products The threat of substitutes products is low, as there is no similar substitute for skincare and makeup products in the market. Consumers who use skincare daily will choose to continue with skincare product. Also, ladies who concern about their appearance will continue purchase makeup products.     Fig 3. Michael Porter’s Five Forces Model, Adopted by Author 3.3  BCG Business Matrix The Boston Consulting Group (BCG), a leading management consulting firm, develops and popularized the growth-share matrix (Kotler, etal, 2003, p.89) as fig.3.     3.3.1        Cash Cows: Proudia and Beneflance  Makeup product line named “Proudia” and skincare product line named “Beneflance” have a high market share in slow growing rate.  They are typically generating cash in excess of the amount of cash needed to maintain the business. They are to be “milked” continuously with as little investment as possible (http://en.wikipedia.org/wiki/BCG_growth-share_matrix, 23 March, 2006). Proudia and Beneflance should provide the cash required to turn “SHISEIDO MEN” and “UNO” in question marks into market leaders, to cover the brand promotion cost.     3.3.2    Stars: PN and MAQUILLAGE “PN” and “MAQUILLAGE” are two makeup brands by Shiseido, generate large amounts of cash because of their strong relative market share, but also invest large amounts of cash because of their high growth rate; therefore the cash in each direction approximately net out (http://www.netmba.com/strategy/matrix/bcg/, 2 March, 2006).  They can self-finance at the current stage. When growth slows, stars become cash cows if they can able to maintain their market leadership.     3.3.3    Question Marks: SHISEIDO MEN and UNO “SHISEIDO MEN” is the only men skincare product line of Shiseido and “UNO” is a hair care product line of Shiseido. They are growing rapidly and thus the expenditure is large, but because they have a low market shares they do not generate much sales. At the result, there is large net cash consumption. A question mark has the potential to gain market share and become a star, and eventually a cash cow when the market growth slow down (http://www.netmba.com/strategy/matrix/bcg/, 3 March, 2006).     3.3.4        Dogs: MIEL and SHISEIDO SUNCARE “MIEL” a skincare product line and “SHISEIDO SUNCARE” is a body care sunscreen product line. They have a low market share and a low growth rate, thus they are unable to generate attractive cash flows on a long-term basis. Products offer of MIEL and SHISEIDO SUNCARE should be minimize.       Fig. 4 BCG Matrix, Adopted by the Author The eight circles represent the current sizes and position of eight product lines of Shiseido selling in China market.       3.4      The Ansoff Matrix In this section The Ansoff Matrix is used to understand the growth strategies that Shiseido is using currently in the market.      3.4.1 Market Penetration Shiseido increase their revenue in marketing their existing skincare and makeup products to their female customers, by TV, magazines and out door advertising promote the products and repositioning product brand name. (http://www.market-modelling.co.uk/MATRIX/MATRIX_Step02_2.htm, 3March 2006)   Advertising is the major growth strategy of Shiseido. Shiseido substantially increased the volume of advertisements, while focusing on clearly conveying product features. (Annual Report, p.3)     3.4.2    Product Development Beside the existing skincare and makeup products, Shiseido develop and innovate new skincare and makeup products to replace some existing products. Such products are still marketed to their existing customers.   “cle de peau BEAUTE”, a skincare product line was launched to the market   in 2006, with new anti-aging technology. This new product line seems going to take over the old version of anti-aging products in Shiseido.     3.4.3        Market Development Shiseido takes their men’s skincare products into the new markets, male consumers. Because they are taking products to a new market, typically has more risk than market penetration. (http://www.quickmba.com/strategy/matrix/ansoff/, 3March, 2006)                Existing Products                                   New Products     Existing Markets Market Penetration <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 150%"> Skincare products</li> <li class="MsoNormal" style="text-align: justify; line-height: 150%"> Makeup products</li> </ul>   Product Development <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 150%"> Skincare products</li> <li class="MsoNormal" style="text-align: justify; line-height: 150%"> Makeup products</li> </ul>       New Markets Market Development <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 150%"> Men’s skincare product</li> </ul> Diversification     Fig.5 The Ansoff Matrix, Adopted by the Author     3.5      Competitive Strategic As a market leader, Shiseido used differentiation to compare with their competitors, instead of cost leadership. In products, Shiseido produce innovative features and quality products. Shiseido differentiate their image as a professional Asian cosmetics brand. Unlike other American or European cosmetics brands, they know more about Asian skin, and they produce better products for Asian.                         3.6      Marketing Mix The Marketing Mix is the set of marketing tools use to pursue marketing objectives in the market. These tools are classified into four broad groups: product, price, place and promotion. (Kotler, 2003, p.16)In this section, Marketing Mix is used to find out Shiseido marketing program.     3.6.1        Product Shiseido produced quality products with innovative features and a variety choice. Consumers have choices range from mass products to high-end products. 3.6.2        Price Shiseido listed all the prices of the products. Discounts are only given to their VIP loyalty consumers.   3.6.3        Promotion Sales promotion sometimes is giving out, such as Christmas sale and anniversary sale. Shiseido have high advertise expenditure, advertising is the major growth strategy. They aim to promote their products and band in the advertisements.   3.6.4        Place Shiseido beauty store are mainly located in large-scale shopping mall, such as SOGO and Time Square. Stores coverage all the busy regions in the country.                   4            GROWTH OPPORTUNITIES     In this section, PEST is used to analysis the market growth opportunities.  PEST is an acronym for Political, Economic, Social and Technological factors, which are used to assess the market for a business or organizational unit. (http://www.businessballs.com/pestanalysisfreetemplate.htm, 4 March, 2006)   4.1  Political   ·        China have skincare product licensing for import skincare products. Shiseido held professional scale production, which will not affected by the regulation. The regulation can block some small firm to entry the industry. ·        Product labeling requirement protect the branding of Shiseido.   4.2  Economic ·        For the growing exchange rate of RMB, importing products to China market can gain higher revenue. ·        Compare to Japan and other overseas market of Shiseido, China have a lower labor costs. ·        China business cycle is now in the prosperity stage, consumers spending power is in a high level.     4.3  Social Analysis ·        Consumers’ have a great interest in foreign products; they are willing to spend more to purchase imported products. ·        Employed female is increasing, hence female nowadays have more concern to their appearance. Demand of skincare and makeup products increase.     4.4  Technology ·        Technology allowed products to be made more cheaply and better standard quality. ·        Internet selling creates a new channel for distribution.       5        CONCLUSIONS AND RECOMMENDATIONS       Shiseido is a market leader in the industry with large number of competitor. In order to complete with increasing number of cosmetics competitors amid rapid growth in the market, in short term Shiseido is recommended to expand their distribution location. Beside opening new stores and counters, Shiseido may increase voluntary cosmetics chain store network in the market. A new product line should be continually introduced to the market in every short period of time.   Shiseido men’s skincare products is new introduced to the market, advertising may need to aim to create male consumers awareness of the importance of daily skin care. Makeup products have a high sales growth rate, advertising expenditure may need to increase to build brand preference and maintain customers’ loyalty. In skincare category, Shiseido is recommended to increase the R&D budgets for develop new product lines with new style and improved qualities. Advertising expenditure of Shiseido hair care products might need to minimize, as the sales growth rate have come to a decline level. The promotion cost should take out and transfer to other region market.   As “SHISEIDO MEN” and “UNO” have the potential to gain market share, part of the expenditure budget of  “Proudia” and “Beneflance” may transfer to support the cost of branding of “SHISEIDO MEN” and “UNO”. “SHISESIDO SUNCARE” and “MIEL” have a low market share and low growth rate, Shiseido may consider to minimize the products offer or liquidate the product line.   In medium to long run Shiseido is recommended to develop new features and functions to their products, Shiseido may need to increase the budget in research and development.  To expand the number of loyal customers Shiseido should focus on advertising promote their products and branding.

Principles and Practice of Marketing

1 SUMMARY OF THE SELECTED ORGAISATION – Shiseido 3 1.1 Corporate Ideals ...