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Marketing-Business Plan
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1. Executive summary
This is a market plan for the high-tech color TV, namely, Plasma-Display-Panel (PDP) TV of TCL Corporation. The purpose of this marketing plan is to plan for how to increase existing market share and profit. This will be done through more focus on existing market segments, marketing orientation approach and future strategies.
This plan includes ten parts. They respectively are corporation background, situational audit, SWOT analysis, objectives, strategies, actions program, controls, contingency plans, and a short conclusion. To increase the market share and profit, TCL is advised to expand existing market segments and add new products with warranty to attract more customers. More effort in different marketing mix strategies, are suggested to improve TCL. To summarize the plan, several vital points should be highlighted, namely, (1) the environment features influence corporation developing. (2) The aspects of SWOT should be paid more attention while the firm tends to expand. (3) The proper strategies are the warranty to facilitate the company.
2. Corporate background
TCL Corporation is a comprehensive large-scale state owned enterprise, established in Shenzhen city, Guangdong province in 1981. The chairman of the Board and President is Mr. Li Dongsheng. TCL is well known from home to abroad, and has developed in many areas such as Multimedia electronics, Home Electronics appliances, Telecommunication Equipment, Information Components, and Electronics Components. Mainly, it provides TV, refrigerator, mobile, VCD & DVD to the market.
TCL is the biggest color TV manufacturer in China, which holds about 24 percent of market shares in China in 2002. Meanwhile, TCL Group had total sales of RMB 31.9 billion and export revenues came to US$1.16 billion. TCL also generated a profit of RMB 1.5 billion in 2002, and paid RMB 1.9 billion in taxes. Through 10-year’s relentless efforts and taking the leading position of market, TCL established an extensive nationwide sales and distribution network with a computerization progress that reaches across the whole country incorporating over 320 branches, and has set up overseas sales offices or business representative offices over 10 countries. TCL is currently expanding his brand color TV operations in Vietnam, India, and Germany. As a whole, TCL is ranked four in a rating for the China 100 prestigious Electronics & IT enterprises and TCL brand value in 2002 reached RMB 18.769 billion (http://www.tcl.com/english).
3. Situational audit
3.1 Market Analysis
The demand for high-tech color TV in China is growing. Statistics from the State Information Industry Ministry shows that there were 350 million TV users in China in 2001(http://www.friedlnet.com). Statistics from the State Statistical Bureau released that the upper middle class constitutes around 100 million people and the new middle class constitutes around 200 million people in China. Those families with an annual income exceeding RMB 40,000 per annum, which gives a potential market for high-tech products (http://www.cei.gov.cn). Especially, PDP TVs has become a status symbol in China; this change of consumer intention gives the opportunities to the large screen TVs that provide an excellent market place. The expected purchase of large than 38 inch TVs is expected to be 11.7 percent in the coming five years (See Figure 1). Therefore, the advent of PDP TVs caters for the strong demand of consumers.
Besides, urbanization, housing reform, and the increase in living space as well as the replacement demand should create an extra demand for about 20 million the high-tech TVs market (http://www.english.mediachina.net). In addition, the digital TV scheme slated for 2005 will bring new opportunities for the industry. China plans to have all analogue TVs replaced by digital ones by 2015, which will translate into a market of RMB 300 million (http://www.chinatrade.com).
Figure 1 Consumers’ s preferences changes in Purchasing color TVs
(Source: http://www.e-brain.com)
3. 2 Product analysis
When China color TV industry entered the third period in the middle and the end of 1990s, the production technology had become the special focus to pursuit among the competitors. Undoubtedly, the technical revolution brings ideal products to the customers. Currently, China has an annual color TV production capacity of 40 million sets (http://www.welcom-to-china.com). Most of them are made based on the analog technology. They probably account for 87% of total color TV production capacity. By contrast, High-Definition TV such as PDP TV seems like an emergence to be preferred by the customers in the TV field.
At present, the main 69 firms provide 132 kinds of TV sets to the market. However, there are only about 13 types of PDP TVs to be offered in China. The major brands are TCL, Haier, Changhong, Hisense, Konka etc.
3. 3 Distribution analysis
Companies have to decide on the number of intermediaries to use at each channel level (Kotler, 2000, p496). Distribution network and reach are vital factors for the success of the brands in the TV sets market. The distribution structure of TV industry in China is undergoing broad but gradual change. However, market is always fragmented. Faced with a nationally fragmented market structure, large TV companies (both domestic and multinational) seek to divide the country into regions and distribute their products in multiple channels.
Some of TV firms in China tend to employ the intensive distribution strategy in order to achieve the maximal market share. They utilize all of wholesalers, intermediates, and many retailers to sell their products. Changhong for example, which is one of the largest TV suppliers in China, it established more that 3000 retailers across the home country market. Besides, some of TV companies implement the selective distribution strategy. For instance, Haier is apt to control the wholesalers and intermediates only. In addition to the two types of distribution structures, several companies also have their agents to deliver the products to the distributors, who further distribute to the retailers.
3. 4 Competitive analysis
The competition in TV field in China is most fierce. Especially recently, the comprehensive brand competition has formed in TV market and the brand effects have become more centralized and the trend that the main brands monopolized the market appears. The major suppliers of TV products include large domestic and foreign producers. Small and medium-sized local businesses also manufacture a significant range of products that lead to intense competition. TCL, Changhong, Hisense, Haier, and Konka are the top 5 brands, which share a majority proportion in color TV market. Figure 2 (next page) shows the China color TVs market share values.
Undoubtedly, TCL is the leader in color TV market. By contrast, the challenger is Changhong, which is the largest TV (including black-white TV) supplier in China. The company was founded in the beginning of 1982 and located in Sichuan province. By now, it established well-known reputation and intensive distribution network. Hisense is a powerful TVs supplier. It is integrated with Hitachi and obtains the technology support from overseas. Although it was founded for a short period, it expands rapidly and persists
Figure 2 The color TVs market share in China in 2002
(source:http://www.china-asean.net)
to adopt new technology. Therefore, it brings more press to TCL. Konka is very strong in the capital and human resources because it is private firm and has flexible management policies. Haier is also a state owned company, its management skills is famous both in domestic and overseas management field. Besides, many foreign competitors are increasingly moving their production lines to the mainland, or setting up joint ventures with mainland companies so that the competition become more and more. For example, a joint venture between Japan’s Fujitsu and Hitachi, the largest manufacturer of plasma screens, spent $40 million in its plasma business in 2003 (http://www.manufacture.com.cn).
3. 5 Macro-environmental situation
3. 5. 1 Political features
Generally, the political elements tend to create benefit or crisis on the economy. Recently in China, political environment is greatly stable in the domestic market. Communist Party of China 16th National Congress clearly put forward encouraging the electrical industry and reinforcing the government investment in this field. At the China High-tech Fair 2002 (CHTF), the State Development Planning Commission (SDPC) announced that the Chinese government has funded high-tech commercialization program in order to improve the high-tech industry such as electric industry. Official statistics show that the China invested some 10 billion RMB of the seed fund in the programs, which attracted more than 130 billion RMB of nongovernmental investment. Wang Yang, vice-minister of the SDPC, said these programs helped push forward the growth of high-tech industry in China, adding impetus to and accelerating the strategic restructuring of the economy (http://www.setc.gov.cn).
3. 5. 2 Economic features
Since the adoption of the policy of reform and opening up, China’s economy has shown a sustained and rapid growth, various social undertakings developed fast, the overall strength of the country was intensified constantly and the standard of living of the people improved notably. China ranks seventh in terms of total supply and demand and first in terms of economic growth rate. From 1979 to 1997, China’s average annual growth rate was 9.8 percent. In addition, the rate still remained about 7 percent from 1998 to 2002. (http://www.englisn.mediachina.net).
Therefore, China is becoming the world number one consumer world with a population of 1.3 billion. The foreign exchange reserve reached 200 billion US dollar, the citizen’s deposit reached RMB 10 billion. With the improving of living standard, the domestic demands are greatly strong (http://www.china-asean.net). In addition, the Olympic Games in Beijing 2008 and the success of entering WTO will further stimulate private demand. Consequently, TV industry will get a favorable perspective in China in future.
3. 5. 3 Technological features
TV industry is typically to be influenced by the technology. Fortunately, the technological environment in China develops very fast. Especially the electric science, China has established 48 Research Centers in different province. In addition, more than 300 state owned universities initiated the electric program. In order to enhance the science, China’s government adopts two strategies to improve, one is investment heavy in the science and technology field annual, and another is to encourage the technology alliance with foreign firms. Therefore, the TV firms could conveniently utilize the new and high technology under this situation.
4. Strengths and weaknesses
A useful approach for gaining an understanding of the situation an organization is facing at a particular time is called SWOT analysis (Peter & Donnelly, 2001, p224). The strengths and weakness portion of SWOT refers to the internal condition of a firm.
4. 1 Strengths
As for a successful corporation, TCL certainly has unique strengths that are differentiation from others. The main strengths of TCL are introduced below.
(1) Advanced instrument and equipment. In 1997, TCL introduced 3 automatic production lines from Germany. Until now, the lines still the leader position in China color TV industry. Besides, TCL set up more than 300 computers to monitor production press. In addition, the accuracy of its checking machine can be kept on 99.982%.
(2) Well-known brand. TCL is one of the most famous brands in color TV industry. According to the report of survey, TCL brand value in 2002 reached RMB 18.769 billion (http://www.tcl.com/english). It is ranked the first 3 TV brands in 2002.
(3) High quality employees. The entire employees have a good knowledge background. Among the employees, 47 percent of people hold a bachelor degree; approximately 7 percent of employees hold a master degree in science or management major. Besides, each employee could be trained once every two years.
(4) Widespread distribution network. At present, TCL has founded 12 wholesalers and 71 intermediates across the mainland China. Besides, 325 supermarkets have begun to sell their products from 1996.
(5) Efficient management structure. TCL employed the direct management structure, which facilitates the information flow to deliver. Despite the problem happens in anywhere and anytime, the top manager can master it in time.
4. 2 Weaknesses
While its strengths facilitate the firm development, the managers of TCL should realize its weakness. The main weaknesses of TCL are as follows:
(1) The operation costs and expenses of the distribution network are quite high. The main reason is that some problems exist in finical control system.
(2) The investment in advertising and promotion is relative less compare to other major competitors. In 2002, TCL was only ranked the seventh according to the investment of advertisement and promotion.
(3) To compare the competitors, TCL’s warranty system is not completed at present. Sometime, the customers complained that the problem cannot be solved on time.
(4) TCL operates in four industries at the same time. This condition will distract its power to fight with rival firms in TV industry.
5. Opportunities and threats
With the SWOT analysis, opportunities and threats are environmental conditions external to the firm. The managers should pay more attention in order to seek the development chance and avoid the crisis.
5. 1 Opportunities
Undoubtedly, TCL will face many opportunities in China market. Following, the major opportunities will be listed.
(1) In 2001, China has been success to join in WTO. Generally, it will improve the economy and therefore enhance people’s living standard level. Consequently, the domestic demand will go on. In addition, it is golden opportunity to push national color TVs into the overseas market.
(2) The new generation has grown up and gradually marries. Most of them born in 1980s and are influenced by Western culture. They are apt to purchase the high-tech TV. Therefore, a new special market will emerge in China.
(3) 2008 Olympics Games will further stimulate private demand. It not only attracts the foreign investment, but also stimulates the personal spending.
(4) Most of small and middle-size scale firms tend to integrate with famous company. It provides an excellent opportunity to make TCL expansion.
(5) By 2010 the State Administration of Radio, Film and Television will finish setting up its network of digitalized broadcasting systems, resulting in a surge in demand for new digital equipment.
5. 2 Threats
Recently, China’ TV firms will suffer series threats that come from both domestic environment and global environment. The main threats are as follows:
(1) TV industry will be most affected by China’s WTO membership. China’s TV industry will eventually have to give up certain policies that have protected it in the past.
(2) The advertisement costs continue to rise recently. The cost is almost twice of previous fees. This situation will destroy the profits of TCL.
(3) Foreign companies, especially Japan’s firms are flooding in China TVs market, which make the competition more intense.
(4) Due the development of technology, the industry barrage lowers to considerable low level. Therefore, the new entrants reinforce the competition.
(5) The domestic competitor growth fast and they become stronger because they tend to introduce foreign advanced technologies in their production lines.
6. Objectives
There are different form of goals, like strategic and operative goals (Kotler, 2000, p79-81). TCL needs objectives for the organisastion as a whole, and for all departments. Objectives need to be measurable, realistic and attainable (Kotler, 2000, p93).
6. 1 Financial objectives
– Achieve PDP TV sales revenue of 2.38 billion in 2004.
– Earn an annual rate of return on investment over the past year of 12% after taxes.
– Produce net profit of RMB292 million in 2004.
– Increase profitable sales of the products from on-line market by 20%.
6. 2 Marketing objectives
According the Product Life Cycle (Kotler, 2000, p303-304), TCL is in the growth phase. Its market objective is to maximize the existing market share. Based on the situational audit and SWOT analysis, new market objectives can be made for TCL:
– Increase 5% of market share in China in 2004.
– Expand consumer awareness of the TCL brand from 36% to 42% in 2004.
– Increase the number of dealers by 20 %.
– Obtain 30% market share from on-line market.
– Establish a widespread warranty network in accordance with local situation.
7. Strategy
The Product life cycle (PLC) is an important concept that provides insights in to a product’s competitive dynamics. (Kotler, 1999) As a planning tool, the Product Life Cycle concepts help TCL to characterize the main marketing challenges. TCL’s PDP TVs has entered a growth stage marked by rapid sales growth and increasing profits from 2002. Hence, TCL has to implement an appropriate strategy in order to capture the market share from the competitors.
7. 1 Product strategy
TCL seeks strategies to extend their growth stage and capture the market share by improving the product qualities, diversifying its products and building favorable product awareness.
7.1.1 Market penetration
One of the main tasks of TCL is to achieve deeper market penetration in high tech TVs marketplace. Therefore, TCL has to increase its usage by current customers and attract customers of other brands, especially penetrating business and commercial buyer and industrial consumers segments.
7.1.2<Tab/>Product Development
– Develop the design so that the product extensions can meet the different demands of the market. Aim at different application like presentations, home video and computer uses to add new features and function so that differentiating TCL PDP TVs from other competitors.
– Develop the new technologies of PDP TVs, such as incorporating speakers into the plasma frame, enlarging screen size, etc.
– Change the package of some products. The firm willingly invites famous designers to
work out the new and attractive package in order to cater the customers.
– Consolidate our basic and dominant product–PDP TV through establishing the
warranty system.
7. 2 pricing strategy
The major pricing objectives for TCL in its PDP TVs are to gain a market share of the market, to maximize profit and meet competition. Therefore TCL has to employ promotional pricing strategy in order to penetrate market.
– Setting price around or somewhat below domestic competitor brands. Although TCL’s PDP TVs are high quality in China, but reasonable price will attract lots of customers in order to increase its market share.
– Setting price properly below foreign competitor brands, because of some foreign producer can provide more advanced products to the consumers, and their strong brand image can attract most of consumers.
– Offering discount and allowance to wholesaler and middleman. TCL has the option of offering quantity discounts, trade discount, cash discount and other types of deductions so that promoting its PDP TVs sales.
7. 3 Placing strategy
Although TCL has established relative complete distribution network, such as supermarket chain, household appliance stores, and TCL monopolist shops, however, this situation is not suitable with the development of TCL. Due to TCL stays at the growth phase and the customers’ behaviors in China, TCL should employ the intensive distribution strategy in order to found a widespread network.
The first stage is to establish wholesalers in each capital of province. According to the current economic situation, at least 20 wholesalers should be added. The second stage, encourage the wholesalers to expand the intermediates to above 260. Third stage, across the mainland including the cities, towns or rural place, TCL should choose lots of shops as its agents in order to cover any profitable market. More over, TCL should continue to complete its supermarket chain, so that they could gratify the valuable customers conveniently. In addition, with the rise of on-line marketing, TCL should found the Internet Center in order to deal the on-line purchase. By doing so, TCL basically complete its distribution network. Figure 3 shows its basic framework.
Figure 3: The framework of TCL’s distribution network
7. 4 Promotion strategy
At present, PDP TVs are being at the growth stage of product life-cycle in market place, TCL should build awareness and interest in the market in order to remain the existing customers and attract the potential customers. Thus, TCL can achieve its advertising goal through practice the following promotion actions.
– Launch series advertising campaign through television, radio, magazines and Newspapers. Through this action, the favorable brand reputation and products awareness will be obtained by TCL.
– Target business-to-business ad campaigns to large nationwide supermarkets or department stores like Baixin, Baihuodalou, Wal-Mart and its affiliates.
– Participating in industry trade shows and conventions in order to establish the leader position and reinforce customers’ impression.
– Choosing the 2008 Olympics Games and WTO as theme to sponsor special contests and sweepstakes so that people will pay more attention on TCL.
–Choosing a well-known person as TCL symbol in order to attract the new generation.
8. Action program (The figure 4 draws out the detailed action in 2004)
9. Controls
Once TCL’s marketing plan is implemented, it is important to control, evaluate and monitor the progress of achieving TCL’s objectives. TCL needs to set standards and criteria for evaluating the progress (Hamper & Baugh, 1998, p188). Some possible control activities are shown in the table below.
Figure 5: TCL’s possible control activities
TCL’s control activities:
<Tab/>Monitoring performance of TCL’s employees to determine progress towards TCL’s objectives
<Tab/>Monitor that performance matches the desired results and take action to correct performance. Adjustment of objectives can be needed to match attainable performance levels.
<Tab/>Quality control of DPD TV and warranty system
<Tab/>Sales and profit monitoring
10. Contingency plans
TCL’s contingency plans will ensure that TCL is prepared if something unexpected happens from competitors, or from other external factors. TCL contingency plans are developed related to the contingency objectives. TCL’s contingency plans are shown in the figure below.
Figure 6: TCL’s contingency plans
Contingency objectives<Tab/>Contingency plans
If the turnover after 6 months is lower than RMB 1 billion, the pricing strategy will be evaluated to increase the number of customers and the market share.<Tab/>Evaluate pricing strategy to optimize the objective of maximum market share. If the turnover is low, this is an indication that competitors have attractive prices and capture many customers.
If the increase of the on-line market share to 30% fails after 9 months, the alternative is to increase 8% of actual market share. <Tab/>TCL wants to expand to new markets. To increase the share in other companies requires resources. Therefore, TCL must adjust the strategy once it falls in on-line marketing.
If the sales turnover is less than RMB 2 billion in 2004, the DPD TV market will be put on hold in 2005.<Tab/>If the turnover is too low, TCL will loose money. The plan is to wait until the market is ready for the new products.
11. Conclusion
The rapidly changing business environment makes existing products and marketing strategies obsolete. Companies have to become faster, more flexible, more innovative and capable of forging new partnership with customers and suppliers. Success is most likely to be achieved by an appropriate strategy and effective implementation. Enterprises should be able to correctly identify their target markets and formulate marketing strategies accordingly.
This plan is a preparation and direction of TCL future development. What we need to do is trying our best with team spirit to fulfill the goal of company. If all of the staff cooperates well, gain a successful position among the intensive marketplace is not impossible. Let us expect to see a more prosperous future for TCL and its DPD TVs.
References:
Hamper R.J and Baugh S.L, (1998), Strategic Marketing Planning, Contemporary Publishing Company, United States of America.
Peter, J. P. & Donnelly, J. H., (2001), Marketing Management, 6th edn, Irwin/McGraw-Hill, Singapore.
Kotler, Philip, (1997), Marketing management, 9th Edition, Prentice-Hall, Inc., Upper Saddle River, New Jersey
Kolter, P., (2000), Marketing Management, 10th edn, Prentice Hall International, Inc., U. S. A.
Http://www.english.mediachina.net
Http://www.welcom-to-china.com
Bibliography:
Aaker, David A., (1998), Strategic Market Management, 5th Edition, John Wiley & Sons, Inc.
Calingo, Luis Ma. R., (1997), Strategic Management in The Asian Context, John Wiley & Sons (Asia) Pte Ltd, Singapore
Doyle, Peter, (1998), Marketing Management and Strategy, 2nd Edition, Prentice-Hall, Europe
Hamper R.J and Baugh S.L, (1998), Strategic Marketing Planning, Contemporary Publishing Company, United States of America
Kotler, Philip, (1997), Marketing management, 9th Edition, Prentice-Hall, Inc., Upper Saddle River, New Jersey
Kolter, P., (2000), Marketing Management, 10th edn, Prentice Hall International, Inc., U. S. A.
Peter, J. P. & Donnelly, J. H., (2001), Marketing Management, 6th edn, Irwin/McGraw-Hill, Singapore.
Taylor, James Walter, (1997), Marketing Planning: A step-by-step guide, Prentice-Hall, Englewood Cliffs, New Jersey
Http://www.english.mediachina.net
Http://www.welcom-to-china.com
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