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EMBA 2015-16

Strategic Marketing:
Case Study on Sudhir Telang Machinery Components

By Group 3 :
ASUTOSH DAS
UEMF15004
IPSITA SATAPATHY
UEMF15015
SOHAM PRADHAN
UEMF15027

Contents
1. SITUATION ANALYSIS (WHERE ARE WE ?) .................................................. 2
2. WHY ARE WE THERE? .................................................................................. 2
3. Target of STMC: (WHERE COULD STMC BE?) .............................................. 3
4. PROBLEM STATEMENT ................................................................................ 3
A. What type of pricing strategy to be followed ? ......................................... 3
B. What marketing strategies to be adopted to ............................................ 3
5. RECOMMENDATIONS (HOW TO GET THERE?) ............................................ 3
FOCUSSING MORE ON CUSTOMER PERSPECTIVE ..................................... 3
DEFINING COMPETITIVE ADVANTAGE ...................................................... 4
DEFINING PRICING STRATEGY .................................................................. 4
TACKLING LOW COST COMPONENT MANUFACTURERS ........................... 6
DERIVE BENEFITS BY INCREASING THE PRICE : .......................................... 6
MARKETING STAREGIES TO BE FOLLOWED ............................................... 7

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1. SITUATION ANALYSIS (WHERE ARE WE ?):

Sudhir Telang Machinery Components (STMC) is a spare and components manufacturer


for Tasaku Textile Machines.
Deals with only casting and machining of components only.
Healthy Business growth : Sales on 1977 was Rs. 15 Lakhs which had been doubling every
year since 1973.

2. WHY ARE WE THERE?


Branding and Positioning:

STMC promoted them shelves as High Quality oriented supplier with reference to its
competitor.

Current Pricing Strategy:

The company was using Cost + Margin Formula for pricing their products.
Single price offer for all type of buyers.
Sold no parts with loss.

Competitor:

Textile Machinery Manufacturing Company (TMMC) who is the manufacturer of Tasaku


Textile Machinery.
Small machine-shops manufacturer who route their products through established
suppliers to textile mills.

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Nature of Demand:

On an average STMC sells Rs. 1000 worth of components per machine.


The demand distribution is highly dispersed in nature due varied age of machine and
quality of spare parts used.

3. Target of STMC: (WHERE COULD STMC BE?)

To double its sales form Rs. 15 Lakhs in 1977 to Rs. 30 Lakhs in 1978.
To introduce spare sand components of new textile machine being introduced to Indian
market.

4. PROBLEM STATEMENT
A. What type of pricing strategy to be followed ?

Cost Based pricing vs. Market based pricing or


Whether to enter into price war with small manufacturers
or
Whether To be price competitive with Original manufacturer of equipment or
Should meet the price level expected by the mils.

B. What marketing strategies to be adopted to

Expand Total Market


Defend Current Market Share
Expand Market Share

5. RECOMMENDATIONS (HOW TO GET THERE?)


FOCUSSING MORE ON CUSTOMER PERSPECTIVE
One Price strategy will not fit All. STMC has to work for optimal price that will based on
the value of the customer. The company should consider customers view in designing
there marketing strategy and price propositions.

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DEFINING COMPETITIVE ADVANTAGE


There are basically 3 key areas to focus on when choosing a competitive advantage;

Quality: You can choose to beat the competition by offering a superior quality than
others.
Price: you can choose to beat the competition by offering the lowest prices
Service: or you can choose to beat the competition by offering an unforgettable
customer service.

Theres always an alternative to quality; if STMC focus on only offering the highest quality
at a premium price, customers will scout around for a lower quality at a cheaper price.
Theres always an alternative to price; if STMC focus on offering the cheapest price possible
it will require that you find a way to drive down your cost to the barest minimum. And this
can turn out in form of low quality products or services and customers will start to complain.
So what STMC should do?
STMC shall pick either of the two; price or quality as your competitive advantage and
complement it with service. Without the element of service in STMC competitive strategy it
can never deliver happiness to the mill owners.
DEFINING PRICING STRATEGY :
Pricing should take into account the following factors into account:

Price sensitivity of various market segment.


Market position of the firm
Stage of Product life cycle
Economies of scale in production and distribution
Competitive price move

Accordingly STMC can opt for :


1. Discriminatory Pricing: Charge different prices to different segment for essentially the
same product if the segments are sufficiently insulated for each other and some
differentiations in product or service can be made.
2. Market Based Pricing : Maximising revenue or profit , by taking demand factors in to
consideration.
An organisation can adopt a number of pricing strategies, the pricing strategy will usually be
based on corporate objectives.

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1. FOR EXISTING PARTS :

Penetration pricing strategy should be used by recalculation to reduce the prices. It will
enable to capture market share by entering the market with a low price relative to the
competition to attract buyers. The idea is that the business will be able to raise
awareness and get people to try the product. Even though penetration pricing may
initially create a loss for the company, the hope is that it will help to generate word-ofmouth and create awareness amid a crowded market category.
Economy pricing: STMC can opt for a no frill very basic low cost approach to marketing,
just the bare minimum to keep prices low and attract a specific segment of the market
that is very price sensitive.

2. FOR NEW PARTS :

Premium PricingPremium pricing strategy establishes a price higher than the competitors. STMC can
effectively use this strategy when there is something unique about the component or
when the component is first to market and the business has a distinct competitive
advantage. Premium pricing can be a good strategy for companies entering the market
with a new market and hoping to maximize revenue during the early stages of the
product life cycle.

Price Skimming
As STMC is well known for quality which is competitive, it can enter the market with a
price skimming strategy designed to gain maximum revenue advantage before other
competitors begin offering similar products or product alternatives.

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TACKLING LOW COST COMPONENT MANUFACTURERS :


( With reference to HBR : Strategies to fight Low cost Rivals by Nirmalaya Kumar)

DERIVE BENEFITS BY INCREASING THE PRICE :


Company need to increase the price of the components which TMMC has priced higher than
STMC.
The current total price for these components priced by STMC is Rs 426 and by TMMC is
709.50. STMC can derive benefits by bridging the gap of Rs 280 atleast.

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MARKETING STAREGIES TO BE FOLLOWED


1. Expanding Total Market:
The Total market share can be expanded by:
I.

Add New Users:


STMC must try to add new users. They must try to attract new buyers who are either not
aware of the product and its benefits or are resistant due to high price and lack of desired
features.
New users can be added in several ways:
a. Convincing non-users to use the product (market penetration strategy).
b. Adding more users in user-class (new market strategy)
c. Winning competitors customers (aggressive strategy).
d. Selling product in other markets (geographical-expansion strategy).
II. Discover New Uses:
Another option to expand the total market consists of discovering and promoting new
uses of the existing products. The strategy can be applied to industrial products as well as
consumer products. A wise firm can get idea regarding new uses of product from
customers tactfully. Users are encouraged to suggest the new/innovative uses of the
product. In the same way, the companys sales wing can also contribute in discovering the
innovative uses of the product.
2. Defending (Maintaining) Current Market Share:
This strategy is based on the theme: Customer-retention is more profitable than
customer- creation. At any cost, the current market share must not be endangered.
While expanding total market, STMC must continuously defend its current market share
of manufacturing spare parts and components for existing machines against rivals
attacks.
Continuous innovation, better customer service, distribution effectiveness, and costcutting can increase competitiveness. It has to plague holes to keep the enemy away. In
short, it must continuously monitor its operations to avoid weaknesses that can attract
rival attacks. Sometimes, leading firm has to apply the military principle The best
defence is a good offense.
Defence strategy that could be used:
I.

Flank Defence:

Here, the purpose is to protect weak sides or fronts. Flank defence consists of erecting/setting
outposts to protect weak fronts that are vulnerable to be attacked. Such protection attempts
serve as invasion base for counterattack, if needed. Introduction of low-price products or
(discrimination pricing of existing products), aggressive sales force who could pitch in the
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benefits of having a high quality STMC spare part and generate sales, etc., makes sense for
STMC if it wants to improve.
II.

Mobile Defence:

Mobile defence also called shifting defence is much more than simply protecting the
territories. STMC would stretch or expand its domain (area) over new territories that can
serve as the future centres for offense as well as defence. STMC would deploy its resources
in such a way to avoid the future invasion and create an impression in mind of competitors
that STMC is capable to safeguard its territories.
Approaches to Mobile Defence:

Market Broadening: It involves shifting firms focus from the current product to
forthcoming new technology and concentrating more on research and development
activities. However, too much focus on the future at the expense of the present is not
advisable. Company must maintain its strengths today to fight in the future. It must
go for reasonable broadening.

Market Diversification: Market diversification calls upon moving quickly into


unrelated industries to strengthen its position.

3. Expanding Marketing Share


Instead of expanding total market and defending current market shares, sometimes, the
market leader prefers to improve profitability by increasing market share. The extent to which
the increased market share results into improved profitability depends on a lot of variables.
Here, company must do something to snatch the market share from the pockets of
competitors.
Several ways are:

Adding New Product Lines:

In order to expand market share, STMC is considering to add new and diversified product lines
to make the product mix comprehensive and attractive. However, there must be adequate
demand for new product lines. Looking at the introduction of a new textile machine in the
market, STMC is looking at introducing components for those machines.

Existing Product Lines:

It calls upon expanding current product lines by adding new models, varieties or items with
attractive features and superior qualities (durability, reliability, usefulness, safety,
convenience, etc.) This strategy may attract more customers.

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Increasing Promotion Efforts:

Heavy advertising, aggressive sales force, effective sales promotion, and attractive publicity
efforts can help expanding market share faster relative to competitors. STMC can use few
intermediaries to make the product available or acceptable to those customers for whom
relationship plays a role in cracking the deal.

Improving Distribution System:

Market share can be expanded via better distribution system. Both direct and indirect
channels and overall physical distribution system must be modified so that customers can
avail the products with the least difficulties. Similarly, effective distribution system can bring
down overall selling costs which can further improve profitability. For STMC, having few
intermediaries could help to increase sales and raise market share.

Deploying Aggressive Sale Force:

Effective personal selling efforts could also have positive impact on sales volume, market
share, and profitability as well.

Applying Price-cut:

To attract price-sensitive customers, leader can practice price-cut strategy. In order to target
Rs 15 Lakhs from the existing product line and Rs 15 Lakhs from the spares of the new
machinery, the company should reduce their price on certain aspects so as to generate
volume in sales and thus benefit from economies of scale.

Improving Production Efficiency:

A leader must improve production efficiency to reduce overall costs. Due to improved
production efficiency, STMC can sell better-quality products even at low price.

Partner with allies.

Marketing partnerships have a number of benefits to push a marketing campaign. For


starters, when you collaborate with someone else, you tend to deliver better content. On top
of that, marketing partnerships are cheaper to create, see success more quickly, and expose
your brand to a new audience.

Collaborate with influencers.

Another way to gain a new audience and extend brand awareness is by collaborating with
the top influencers in your industry.

Get employees involved.

STMC can have their employees be their biggest champions and brand advocates.

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Don't forget about existing customers.

It is important to obtain new customers if we want our business to grow. But we should not
forget about the customers we already have.

STMC can employ few experienced resources which could help them have a better
youngster versus experienced resource ratio.

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