“The creation of a
marketing strategy for C-C BeffServ”
"That's one small step for a company, one giant leap for all C-C bottlers and FMCG- companies
in emerging markets worldwide"
Author: Herman van Ark
Supervisors C-C BeffServ, South Africa:
Jonathan Jooste & Barry Taylor
Supervisors University of Groningen:
Mr.Drs.H.A.Ritsema & Dr.W.Westerman Groningen, The Netherlands
7 November 2003
Preface
“C-C, het merk met het bekendste logo van de wereld. C-C, één van de bekendste woorden van de wereld.
C-C, voor mij, als student met de afstudeerrichting Marketing, natuurlijk een fantastisch bedrijf om mijn studie met een onderzoeksstage af te ronden. En dan ook nog in Zuid-Afrika. Het land van blank en zwart, The Big Five, Kaap de Goede Hoop, Apartheid en natuurlijk Nelson Mandela”
This was the introduction of an article I wrote for “Markant”, magazine of the Marketing Association Rijks University Groningen, while I was doing my internship in South Africa. During this seven-month period I did a research project for C-C BeffServ, created in January 2003 by C-C Sapco through the outsourcing of consulting services that were previously provided by the head office of the C-C Sapco group. This research project finally leaded to a marketing strategy, which is given in this research thesis.
Now, several months after my return in Holland, I still think the seven months of my internship were the most wonderful and interesting of my life so far. I never learned so much.
From a marketing point of view it was interesting to find out that South Africa’s history created two worlds and how the differences between these worlds influence the marketing of a consumer good. The differences make the market not only interesting, but complicated as well. It was a privilege to do my internship in an organization, which can be seen as one of the bigger players in the complicated South African fast moving consumer good market: C-C Sapco.
It was strange to find out how insecure most of the South African people are about the country they are living in. In my opinion South Africa is one of the most friendly, most beautiful, most divers and most interesting countries in the world. It was also strange to see that South Africa’s bad image, as we know it, is mostly incorrect. This document issues the creation of a marketing strategy for a South African company, but South Africa as a whole could use new a marketing strategy as well….
My thanks go to the following people for giving me this opportunity:
• Ute, Nina and Martin, for letting me live like a king in South Africa and who took care of me like I was their own son / brother. I really enjoyed the diners, the movies, the gym and the soccer. You belong to the most special people I met in my life so far!
• Jonathan and Tandy Jooste, Garth and Erin Truter for taking and inviting me everywhere and giving me a comfortable feeling from the first day I arrived in South Africa.
• Andries Welgemoed and Chantel Pretorius for guiding me through the country they are so proud of and for showing me the South African C-C market. As I promised: I will soon invite you in Holland.
Then it is my turn to show you my country. Please, let me earn some money first.
• Vuyani for being my best friend at the head office, for telling me about the South African culture and for all the squash matches.
• Barry Taylor and Jonathan Jooste for being my supervisors at BeffServ. Although it was a hectic time for both of them, they always had time for the Dutchman. Their knowledge and constructive feedback made my research project much easier.
• All other colleagues at C-C Sapco, for giving the Dutchman the time of his life.
• Mr. H.A. Ritsema for being my first supervisor at the University of Groningen. His patience, constructive views and feedback guided me through the research process.
• Mr. W. Westerman for the feedback on my report and the feedback on my English grammar. The enthusiastic way in which he speaks about South Africa is the kind of enthusiasm the country deserves.
Last but not least special thanks to my familly who have always supported and encouraged me. They stimulated me to go for the “Bedrijfskunde-study” in Groningen and gave me the opportunity to experience a fantastic student-time that resulted in this wonderful internship.
It was great!
Herman van Ark
Groningen, November 2003
Management Summary
Reason for the survey
This thesis started with the mission of BeffServ:
“We will become a world class services company providing value-adding services & business solutions at market related prices to C-C Sapco operations, C-C bottlers and other Fast Moving Consumer Good companies in emerging markets worldwide”
Looking at this vision, the management of BeffServ decided that BeffServ first needs a stronger position on the market on which consulting services and business solutions are provided to African C-C bottlers. This strong market position, measured in terms of market share, should finally lead to enough experience, manpower and clients to move up towards serving broadly the FMCG market. However, at this moment there is no visible strategy to reach that stronger market position on this African market. Therefore the management of BeffServ asked the following question:
“Which marketing strategy leads to a stronger position on the market on which consulting services and business solutions are provided to African C-C bottlers?”
Problem definition
The phrasing of the problem definition is based on the management question and subjective questions raised by preliminary research. The objective was to recommend and formulate a marketing strategy, which possibly leads to a stronger position on the market on which consulting services and business solutions are provided to African C-C bottlers. To achieve this objective the survey answered the following question
“Which marketing strategy will possibly lead to a stronger market position for BeffServ and can be recommended taking into account the relevant issues?”
Theoretical study
As can be seen from the central question relevant issues were very important in this survey.
These relevant issues are a result of the strategic marketing planning process, as discussed by Aaker, Alsem and Kottler. In line with this planning process an internal and external analysis were used to find out which issues (strengths, weaknesses, opportunities and threats) were important for the creation of the marketing strategy. A creative process combined the issues, which finally leaded to strategic options and the choice of a marketing strategy. During the strategy creation process the line of reasoning was based on the strategic growth matrix of Ansoff.
Conclusion
The strategic marketing planning process consists out of different strategic steps. Below each step is explained and results of each step for BeffServ are given.
Step 1: Identification of the mission and vision of BeffServ and define BeffServ’s market
The current vision of BeffServ and a mission creation process leaded to the following mission for BeffServ:
“BeffServ will become the best value-adding service provider for African C-C bottlers, for this BeffServ can count on 60 years of experience of its mother organization C-C Sapco, the only bottler in Africa accorded the Anchor Bottler status by The C-C Company.”
The current vision, the created mission and a theoretical framework leaded to the following market definition:
“BeffServ is active in the market that provides value-adding consulting services and business solutions to support the strategy and business needs of African C-C bottlers.”
Step 2: identification of relevant strengths and weaknesses
The second step of the planning process is the analysis of the current strategy and the analysis of the internal strengths and weaknesses, which are interesting from a marketing point of view. The following strengths and weaknesses have been found:
Strengths:
• High-qualified management/employees, with experience in and knowledge of the African emerging market bottling industry.
• Good relationship with The C-C Company, because BeffServ creates a profitable volume growth across the African Bottling system.
• Relationship with C-C Sapco, because:
1. This relationship leads to relatively low costs for BeffServ in comparison with consulting companies, which don’t have such a relationship. The low costs result from the economies of scale and the lower costs structures. BeffServ does, for example, not have its own staff/support department, but can make use of the departments of mother firm Sapco.
2. Mother firm C-C Sapco is prepared to invest, because BeffServ will create additional revenues and profits for the C-C Sapco shareholders. Besides that, BeffServ obtains and retains expertise, skills and technologies from C-C bottlers all over Africa, which can improve the operating performance of the C-C Sapco bottlers.
3. The potential customers might think that they receive the knowledge and experience, which made Sapco the best C-C bottler of Africa.
• BeffServ provides a customer-orientated product. The services BeffServ provides are designed especially for the bottling industry.
Weaknesses:
• It is hard to find and keep experienced, motivated and classified consultants.
• The incapability of the consultants to offer several services out of the product range, which decreases the production capacity and the production flexibility.
• There are no financial consulting services available: the service package of BeffServ is incomplete.
• The firm relationship with C C Sapco: the potential customer might be afraid that Sapco uses BeffServ as a take-over instrument.
• The product quality doesn’t satisfy the customers and the perceived product quality is low in comparison with the product quality offered by the competitors of BeffServ.
• There is no sales-experience among the consultants. Most of the consultants don’t have the entrepreneurial flair and experience to exploit the opportunities provided under the new initiatives.
• The low brand awareness of BeffServ, which does not stimulate potential customers to use the services of BeffServ.
• BeffServ has no experience with the distribution of services by the Internet.
• Most of the consultants working for BeffServ only speak the English business language.
Step 3a: Analysis of the customers
Step 2 discussed the strengths and weaknesses which are a result of the internal analysis and which can be influenced by BeffServ. Step 3 consists of three sub-steps. Each sub step analyses a particular external factor and found out opportunities and threats from the environment, which are hard to control for BeffServ. The analysis of the customers was the first part of the external analysis. Sending questionnaires to the African C-C bottlers leaded to the names and details of 26 of the 44 potential customers and also gave new information of the current customers. All this information, which can be found in appendix 3, did not only support the strategy creation process, but can be used as input for a database as well. This database can help identify possible services, which may add value to the customer in the future. An important conclusion from the analysis was that the bottlers are interested in financial services, but unfortunately BeffServ does not provide this kind of service. Another conclusion was that relevant experience of the consulting company and the price of the service are the most important customer values.
Step 3b: Identification of opportunities and threats from the macro environment, the market and the industrial structure
The second part of the external analysis gave insight in the relevant opportunities and threats from the market, the industry and the macro environment. Beside that it gave insight in the attractiveness of the market BeffServ is active in. The following opportunities and threats have been identified.
Opportunities:
• The growing African economy.
• The possibilities created by the Internet, which will lead to lower costs and higher customer value.
Threats:
• 50% of the African countries doesn’t recognize the English language as its business language. This means that in most cases the consultants of BeffServ are not able to communicate with the non-English speaking bottler-employees.
• The low Internet development level in Africa.
• Relatively high amount of war on the African continent, which leads to instability.
The points that influence the attractiveness were subdivided in points that have a positive influence and points that have a negative influence.
Positive influence:
• There exists a small amount of internal rivalry in the industry.
• BeffServ is not depended of suppliers.
• There is still a high amount of market share to win for BeffServ.
Negative influence:
• Threat of potential entrants (other African C-C bottlers, fast moving consumer good companies or former C-C employees, who start up a consulting company) on the market.
• The bargaining power of customers is relatively high.
• The threat of substitute products is relatively high. This is especially true for the technical division of BeffServ.
Step 3c: Analysis of the competitors
The third part of the external analysis gave more insight in the current and potential competitors of BeffServ and showed if the strong and weak points of BeffServ are also true for these competitors. Therefore a list of companies was provided. This list showed companies that are able to provide value-adding consulting services and business solutions to support the strategy and business needs of African C-C bottlers. Subsequently these competitors were subdivided into 6 divisions and strong and weak points of each division were given. Subsequently the strong and weak points of BeffServ were compared with the strong and weak points of the different competitor divisions. The conclusion was that the strengths and weaknesses, found for BeffServ are relevant, because most of the strong and weak points of BeffServ do not count for the competitors This part of the external analysis also showed that relevant experience can be seen as a defensible competitor advantage for BeffServ. Cooperation with an appropriate cooperation partner is an opportunity for BeffServ if the strengths of this cooperation partner compensate the weaknesses of BeffServ.
Step 4: Creation of strategic alternatives
The previous steps of analysis leaded to strengths, weaknesses, opportunities and threats for BeffServ. In this first strategy creation-step the relevant issues were used as input for the SWOT matrix. The SWOT matrix (see appendix 10) connected the relevant issues and finally leaded to different strategic alternatives. The alternatives were sorted and arranged and umbrella strategies were created. These umbrella strategies were combinations of the separate options that intensify each other. The management of BeffServ intends to develop (the services provided by) BeffServ.
Therefore the line of reasoning in this step was primarily based on the strategic growth matrix of Ansoff (1984). This growth matrix includes the following four strategies of development: market
penetration, market development, product development and diversification. These strategies of development were used to create the following umbrella options:
• Market penetration: try to increase the sales of the current services, by convincing the customers that the services of BeffServ are unique, are customer orientated, have high customer value, are worth the price and won’t be used as a take-over instrument of C-C Sapco.
• Market development: Forget (some parts of) the African market and focus with the same service on a new target group: emerging markets outside the African continent or only certain African countries.
• Product Development: the following sub strategies have been created o Cooperation with competitors
o Providing services by the internet o Reduction of the price
o Creation of financial services beside the current services.
Step 5: strategy and selection
The following three decision criteria were used to evaluate the three umbrella alternatives:
suitability, feasibility and acceptability. The conclusion was that the product development options
“cooperation with competitors” and “creation of financial services” would give better results than the current strategy and that the implementation of both strategies will generate opportunities for BeffServ. This leaded to a combination strategy, which indicates that BeffServ has to provide a comprehensive range of professional services (including financial services) to support the strategy and business needs of African C-C bottlers. BeffServ can execute this strategy in cooperation with an appropriate co-operation partner.
Step 6: Implementation of the marketing strategy
This step worked out the chosen marketing strategy. The marketing strategy is the strategic direction of a product, containing the desired positioning and the related marketing policy. Taking into account the positioning it can be said that BeffServ has to use the undifferentiated marketing approach, which means that BeffServ approaches all its potential customers with one strategy.
BeffServ’s relevant experience and knowledge of the market, BeffServ’s especially designed services and BeffServ’s comprehensive ranges of services are values, which should have a central position in this undifferentiated marketing approach. The discussion of the marketing policy for this product development strategy resulted in the following important marketing policy aspects:
• The enlargement of BeffServ’s product mix with the providing of financial services.
• The providing of services for a market related price.
• The cooperation with an appropriate consulting company that compensates the relatively weak points of BeffServ.
• The improvement of the perceived product quality in the short term.
• If the policy aspects above are implemented BeffServ should start up a campaign that improves the brand awareness among the African C-C bottlers and shows the strong points of BeffServ and the value of those strong points for the bottlers.
Recommendations
This research project leaded to recommendations for further research and in recommendations for the firm. The following recommendations are given:
Recommendations for further research
• BeffServ should start up a survey to find the most appropriate cooperation partner.
• BeffServ should start up a survey that examines the advantages and disadvantages of cooperation with C-C Sapco’s financial department and the advantages and disadvantages of cooperation with a consulting company for providing financial services.
• BeffServ should start up a survey that examines strategies, which can be created to approach the different customer segments.
• BeffServ should develop strategies to close possible gaps between customer’s expectations and perceptions, which should result in the improvement of the quality.
Recommendations for the firm
• BeffServ should discuss the brand name.
• BeffServ should discuss the logo and the brand mark of the company.
• All services should be provided under the same family / umbrella brand and individual sub-brands should make the distinction between the services.
• BeffServ should continue careful managing the physical evidence since it can have profound impact on customers` impressions.
• BeffServ’s management should discuss the salaries of the employees.
Index
1) Introduction and organization...10
1.1 Introduction ...10
1.2 C-C Sapco...10
1.3 BeffServ ...11
1.3.1 Vision and Objectives ...11
1.3.2 Time plan ...11
1.3.3 Services Provided ...12
1.3.4 Internal Structure...12
2) Research Design...13
2.1 Introduction ...13
2.2 Reason for the research ...13
2.3 Problem definition...13
2.3.1 Objective...13
2.3.2 Thesis question ...14
2.3.3 Definitions ...14
2.4 Strategic plan, research questions and theories ...15
2.4.1 Step 1: identification of the mission, vision and market definition of BeffServ...15
2.4.2 Step 2: identification of relevant strengths and weaknesses ...16
2.4.3 Step 3: identification of external opportunities and threats...17
2.4.4 Step 4: the creation of strategic alternatives...19
2.4.5 Step 5: strategy selection ...19
2.4.6 Step 6: Implementation of the chosen strategic alternative...19
2.5 Research model ...21
2.6 Research Conditions ...22
2.7 Research Methods ...22
2.8 Summary...23
3) Mission, Vision & Definition of BeffServ’s Market ...26
3.1 Introduction ...26
3.2 Mission and vision of BeffServ ...26
3.3 Definition of the market for BeffServ...26
4) Identification of relevant strengths and weaknesses...29
4.1 Introduction ...29
4.2 Evaluation of the strategy so far...29
4.2.1 Segmentation ...29
4.2.2 Positioning ...29
4.2.3 Implementation...29
4.3 Strenghts/Weaknesses...30
4.3.1 Innovation ...31
4.3.2 Production...31
4.3.3 Finance and access to capital...32
4.3.4 Management and organization...32
4.3.5 Staff ...32
4.3.6 Marketing and position on the market ...32
4.4 Summary...34
5) The (potential) Customers ...36
5.1 Introduction ...36
5.2 Customer details ...36
5.3 Segmentation ...37
5.4 Customer value ...38
5.5 Summary...38
6) Opportunities and threats from the macro environment, the market and the industrial structure ...40
6.1 Introduction ...40
6.2 Macro environment factors ...40
6.2.1 Demographical factors...41
6.2.2 Economical factors ...41
6.2.3 Technological factors...41
6.2.4 Political/juridical factors ...41
6.3 Market factors...42
6.3.1 The market size...42
6.3.2 Market Growth and Product Life Cycle...42
6.4 Industrial structure factors...43
6.5 Summary...45
7) The competitors...47
7.1 Introduction ...47
7.2 The current and potential competitors. ...47
7.3 Relatively strong and weak points...48
7.4 Competitor (dis-) advantages for BeffServ ...49
7.5 The competitor as enemy or as cooperation partner...49
7.6 Summary...50
8) Creation of strategic alternatives...52
8.1 Introduction ...52
8.2 Recapitulation ...53
8.3 Sorting and arrangement of the strategic options ...55
8.4 Summary...56
9) Strategy and selection ...58
9.1 Introduction ...58
9.2 The selection criteria ...58
9.3 Selection criteria and the alternatives...59
9.3.1 Market penetration evaluated ...59
9.3.2 Market development evaluated...59
9.3.3 Product development evaluated...60
9.4 The choice...61
9.5 Summary...62
10) The marketing strategy ...64
10.1 Introduction ...64
10.2 Positioning...64
10.3 Marketing Policy ...65
10.3.1 Product...65
10.3.2 Price...65
10.3.3 Place / Distribution...66
10.3.4 Promotion...66
10.3.5 Quality:...67
10.3.6 People:...68
10.3.7 Physical evidence...68
10.4 Summary...68
11) Conclusion and Recommendations...69
11.1 Introduction ...69
11.2 Conclusions...69
11.2.1 Analysis of the situation ...69
11.2.2 The strategy process ...70
11.3 Discussion of the conclusions ...70
11.4 Recommendations...71
11.4.1 Recommendations for further research ...71
11.4.2 Recommendations for the firm ...72
References...74
Appendix ...77
1) Introduction and organization
1.1 Introduction
From October 2002 till April 2003 I did my internship for C-C Sapco in Port Elizabeth, South Africa. After the internship, which had the form of a research, I could answer the question which marketing strategy the consulting department (BeffServ) of C-C Sapco has to follow in the future.
This chapter is the introduction of the research project and the purpose of the chapter is to introduce to the reader both the C-C Sapco organization and the consulting department of C-C Sapco: BeffServ.
The chapter gives a description of both organizations. Paragraph 1.2 introduces C-C Sapco: The history of the organization, the business the organization is active in, the area the organization is active in and the products C-C Sapco produces.
Paragraph 1.3 introduces BeffServ: The connection between C-C Sapco and BeffServ, the business BeffServ is active in, the products the company provide and the structure of the organization.
1.2 C-C Sapco
In 1940, William Donald Hyde obtained the C-C franchise-rights for Port Elizabeth, Bloemfontein and Pietermaritzburg. The SA Bottling Company (Sapco) was formed in that same year and was managed by Mr. Hyde. The bottling operations commenced in Port Elizabeth.
In 1956 Mr. P.R. Gutsche was appointed as Managing Director of the company and became shareowner.
In 1960 Mr. Hyde died and Mr. P.R. Gutsche was able to purchase the balance of the shares. In 1995 Mr. P.R. Gutsche retired and his son, Mr. P.H. Gutsche became chairman.
In 1995, Sapco merged its South African and Mozambique franchises with those of the C-C business in Namibia, Kenya, Uganda and Tanzania to form the joint venture company, C-C Sapco. The C-C Company now owns 24% of the shares, while Gutsche Family Investment owns the other 76%.
Today, C-C Sapco operates the Eastern and Northern Cape and the North West territories of South Africa. In these areas they own 4 operations and 14 sales service centers. This gives them a market share of 25% in South Africa. (ABI is the biggest C-C bottler in South Africa with about 60% of the total volume.)
Besides the plants in South Africa, C-C Sapco owns a number of bottling and canning plants on the African continent. These include the following:
• The Namibia bottling and caning plants in Windhoek and Oshakati.
• The Mozambican bottling plants at Maputo, Chimoie and Nampula.
• The Tanzanian bottling plants at Dar-Es-Salaam, Mbeya and the island of Zanzibar.
• The Ethiopian bottling plants in Addis Ababa and Dire Dawe.
• The Ugandan bottling plants in Kampala and Mbarara.
• The bottling franchise area of the Kenyan capital, Nairobi and Nakuru.
C-C Sapco bottles the brands of the C-C Company, which include the core brands such as C-C, Fanta and Sprite as well as other brands owned by the C-C Company such as Schweppes, Sparletta and Krest. C-C Sapco sells the products it produces to dealers, who in turn sell them to the final customers.
The C-C Sapco Group is the only bottler in Africa, and one of the few in the world, accorded Anchor Bottler status by The C-C Company. This is in recognition of its past performance, its commitment to excellence and the long-term development of business on the continent.
1.3 BeffServ
BeffServ (referred to as BeffServ), which started its business in January 2003, has been created by C-C Sapco through the outsourcing of services that were previously provided by the head office of the C-C Sapco group. This outsourcing process created a separate company that is able to provide consulting services both internally and externally. BeffServ expects that by providing its value adding services & business solutions to C-C Sapco operations (internally), its services will become valuable for other C-C Bottlers & other Fast Moving Consumer Good companies active in the emerging markets worldwide (externally). The management of BeffServ expects that the organization will be able to sell services to C-C bottlers and fast moving consumer good companies and in this way develop a sustainable business.
1.3.1 Vision and Objectives
The above also appears from BeffServ’s Business Plan 2003-2005, which gives the following vision of BeffServ:
“We will become a world class services company providing value-adding services & business solutions at market related prices to C-C Sapco operations, C-C bottlers and other Fast Moving Consumer Good companies in emerging markets worldwide”
As shown in figure 1.1 BeffServ subdivides this vision in three destination objectives
Figure 2: BeffServ over time plan
Figure 1.1: BeffServ’s vision and the destination objectives (BeffServ’s business plan 2003-2005)
1.3.2 Time plan
As shown in figure 1.2, the first customers for BeffServ will be within the C-C Sapco group. Over time, when the level of experience and number of customers grows, the services will be provided to other bottlers in the C-C Africa group, with longer-term opportunities available to service emerging market C-C bottlers in other parts of the world. Eventually BeffServ intends to provide services to Fast Moving Consumer Good companies active in the emerging market worldwide.
Vision: “We will become a world class services company providing value-adding services & business solutions at market related prices to C-C Sapco operations, C-C bottlers and other fast moving consumer cood companies in emerging markets worldwide”
Destination Objective 1:
Provide customers with services and solutions which support their strategy & business
Destination Objective 2:
Generate increased revenues and profits for the C-C Sapco group.
Destination Objective 3:
Develop distinctive capabilities and motivated employees with a passion for customer service
In line with this vision BeffServ has created the roll out plan as given in figure X.
Figure 1.2: Time Plan
1.3.3 Services Provided
BeffServ can provide four key areas of service, namely:
1 Technical Services comprises an integrated group of highly trained Engineers, Equipment installation, world-class manufacturing system implementation, asset maintenance and quality systems.
2 Human Resources Services provides a wide range of customized services in Sales, Leadership Management, Marketing and Finance training, as well as Behavioural and Psychometric Assessment, Change Management, Labour Relations, Executive Development, In-house HR Surveys and Accelerated Development Programmes.
3 Supply Chain Services offer cost effective solutions aligned to Customer Service Policies in the areas of Warehousing, Distribution, Territory Networking and Demand &
Operational Planning.
4 Sales and Marketing Services provide a health check of the Sales and Distribution function, through market based surveys, which identify opportunities for improvements in market execution effectiveness and efficiency, and then provide innovative solutions appropriate to the local market environment.
1.3.4 Internal Structure
BeffServ is structured using the four services areas that are described above. With each service area forming a separate business unit, BeffServ will initially comprise of services already provided by the Sapco group office. Therefore, all employees involved in providing these services are moved to BeffServ, affecting approximately 35-40 C-C Sapco Group office employees. Each employee is active in one of the business units. See for the current organogram of BeffServ appendix 1. As the customer base expands and the number of services increases, there should be opportunities for other employees within the C-C Sapco Group to join BeffServ.
+
Other
Fast Moving Consumer Good Companies E
X P E
R Other
T C-C
I Bottlers
S E
C-C Sapco
-
South & East Africa Other Emerging Markets
2002 worldwide 2005
2002
2) Research Design
2.1 Introduction
This chapter first discusses the background and reason of the research. Based on this background a problem definition, including the central research question, is given. The following paragraph gives theories, strategies and sub questions, which will be used to obtain the answer to the main question. At that moment it is possible to create a conceptual model. This research model will be followed during the research project. The next paragraph gives research conditions, which indicate the restrictions for the research methods and the research results. Finally this chapter discusses the research methods, which will be used to obtain the answer to the main question.
2.2 Reason for the research
According to the C-C Sapco annual business plan for 2003-2005 BeffServ will become a world- class services company providing value-adding services & business solutions at market related prices to C-C Sapco operations, C-C bottlers and other fast moving consumer good companies in emerging markets worldwide. As described in figure 1.2 a low level of experience and a limited number of customers require that BeffServ positions itself to serve African C-C bottlers first. Only if the market share of BeffServ on this specific (African C-C) consulting market grows, the organization will have enough experience, manpower and clients to move up towards serving broadly the FMCG market.
The Sapco Business Plan mentions three destination objectives to reach this vision:
• Provide customers with services and solutions, which support their strategy & business needs.
• Generate increased revenues and profits for the C-C Sapco Group.
• Develop distinctive capabilities and motivated employees with a passion for customer service excellence.
The C-C Sapco Group uses business plans to reach the objectives and visions for the different business units. Part of the business plan is the marketing strategy, which can be followed to reach the objectives and visions. Although BeffServ started business in January 2003 no marketing strategy has been created so far.
The first step for creating the marketing strategy is the collection and analysis of relevant information. This information is necessary to determine the strategic direction. This direction includes the desired positioning and the related policy. Alsem (2001) defines this as the marketing strategy. This explains this survey can be seen as the development of a marketing strategy, which can be used to get a stronger position on the African C-C consulting market.
2.3 Problem definition
The previous paragraph showed the background of the research project. This paragraph will show the definition of the problem. According to De Leeuw (1996) a distinction can be made between the objective, the presentation of the question and the boundary conditions of the research.
According to Verschuren (1996) the problem definition has to start with the bottlenecks the researcher wants to solve. The bottleneck is the information necessary to solve the main problem of the organization. Therefore two questions are important: “the why” and “the what” of the assignment.
2.3.1 Objective
The objective has two purposes. Firstly the objective mentions the bottleneck of the organization.
The introduction described that the development of a marketing strategy for BeffServ is necessary in order to get a stronger position on the market on which consulting services and business solutions are provided to African C-C bottlers. The stronger market position should
result in enough experience, manpower and clients to move up towards serving broadly the FMCG market. The marketing strategy, which possibly leads to a stronger position on the market on which consulting services and business solutions are provided to African C-C bottlers, can be seen as the bottleneck of this research project. Secondly the objective describes the knowledge necessary for the organization. It describes “the why” of the research. “The why” of this research is the fact that BeffServ wants to reach its vision. Before BeffServ can reach its final vision, the organization first needs a stronger position on the African C-C consulting market. Taking the above into account, the following objective can be formulated:
The purpose of this research project is to recommend and formulate a marketing strategy, which possibly leads to a stronger position on the market on which consulting services and business solutions are provided to African C-C bottlers.
2.3.2 Thesis question
The thesis question shows “the what” of the research. “The what” of the research describes what knowledge is necessary to reach the objective. This knowledge is the target of the research project. The thesis question is a result of the analysis of the objective. Central in the objective is the marketing strategy. The marketing strategy is created with a process called “strategic marketing planning”. This process uses an internal and external analysis to find out which issues (strengths, weaknesses, opportunities and threats) are important for creating the marketing strategy. Then a creative process combines the issues, which finally leads to strategic options and the selection of the most appropriate marketing strategy out of the options.
Therefore the knowledge necessary to design a marketing strategy is twofold:
• Which relevant issues are results of the internal and external analysis?
• Which strategic choices can be made after combining the issues?
At this moment BeffServ does not know exactly the strengths, weaknesses, opportunities and threats of the organization. Logically the management of BeffServ does not know the strategic options, which can be created taking into account the relevant strengths, weaknesses, opportunities and threats. As a result the knowledge target of this research project will be created by these two kinds of knowledge. The following thesis question can be created:
Which marketing strategy will possibly lead to a stronger market position for BeffServ and can be recommended taking into account the relevant issues?
2.3.3 Definitions
Many concepts in this survey are concept definitions, which can be interpreted in different ways.
To make sure everyone has the same clear understanding of what is meant with the different concepts, definitions of the concepts and bounders of the concepts will be given in this paragraph. These definitions will define what will be researched and what not. 1
Services: The management of BeffServ has identified initially four key areas of service offering, namely technical services, human resource services, supply chain services and sales and marketing services.
-Technical Services comprises an integrated group of highly trained Engineers, Scientists, Project Managers, Consultants and Technicians providing cost effective solutions and specialist services in the field of Turnkey Factory and Equipment installation, world class manufacturing system implementation, asset maintenance and quality systems.
-Human Resources Services provides a broad range of customized services in Sales, Leadership Management, Marketing and Finance training, as well as Behavioural and Psychometric Assessment, Change Management, Labour Relations, Executive Development, In-house HR Surveys and Accelerated Development Programmes.
-Supply Chain Services offer cost effective solutions aligned to Customer Service Policies in the areas of Warehousing, Distribution, Territory Networking and Demand & Operational Planning.
1 Baarde & De Goede, 1990
An understanding of the key drivers of cost effectiveness is through providing training and use of AB costing
-Sales and Marketing Services provide a health check of the Sales and Distribution function, through market based surveys, which identify opportunities for improvements in market execution effectiveness and efficiency, and then provide innovative solutions appropriate to the local market environment
BeffServ: Short for BeffServ, part of The C-C Sapco group, situated in Port Elizabeth, South Africa.
African C-C bottler: A (consumer driven, customer orientated) manufacturer, sales & distribution company that markets the products and brands of The C-C Company for countries situated on the African continent
The management: The management team of BeffServ consists of 5 managers: one general manager and four business unit leaders. Each leader is responsible for one service area (see appendix 1 for the organization chart of BeffServ).
Marketing Strategy: The choice for a specific target group in a chosen market. The organization targets this group in this market because of a chosen competitor advantage and a chosen positioning.2
Stronger position: BeffServ now owns 13% of the market on which consulting services and business solutions are provided to African C-C bottlers. This market share should grow rapidly.
Only in that case BeffServ gets enough experience, manpower and clients to move up towards serving broadly the FMCG market in a couple of years.
2.4 Strategic plan, research questions and theories
The environment of organizations becomes more and more turbulent. Technological developments, conjuncture developments and other developments are responsible for the fact that the environment of the organization is uncertain. This uncertainty makes a strategic planning necessary. Strategic planning and strategy realization affect all different functional areas in the organization: marketing, finance, human resource, purchase and production.
This paragraph gives strategic steps, which can be followed for the creation of a marketing strategy for BeffServ. Each strategic step automatically leads to a research question, which will be introduced in the paragraph as well. The answers to all these research questions provide an insight to the answer to the main question. Furthermore this paragraph introduces theories, which will be used to get a scientificly funded answer to each of the research questions.
2.4.1 Step 1: identification of the mission, vision and market definition of BeffServ.
The identification or creation of a mission, a vision and a definition of the market are important aspects for the creation of a marketing strategy. Firstly, the mission of an organization shows which business the organization is active in. Therefore it is an important part of the strategic planning process. Secondly, the mission of the organization has an internal function: it can be used to motivate the employees. Therefore the mission should contain targets, which should be achieved by the employees. Thirdly, the mission of the organization has an external function: the creation of an external image.3
According to Hooley et al. (1998) it is important to make a distinction between a mission and a vision. Krijnen (2000) also makes this distinction. A mission is what the organization is doing at the moment. A vision is what the organization intends to reach in the future. According to Weggeman (1997) the mission of the organization should show the raison d’étre of the
2 Alsem, 2001
3 Alsem, 2001
organization. The vision of the organization should show the intended long-term results of the organization. Weggeman describes the targets as the measurable results the organization intends to reach at a certain moment. The mission and the vision have a strong relationship. The vision is the difference between the current mission and the mission in the future. The vision gives an indication of the adjustment of the mission in the next couple of years.4 This relationship is shown in figure 2.2.
Figure 2.1: The relationship between mission and vision
Market dimensions can be used to define the market. According to Alsem (2001) these market dimensions are: products, target groups and needs. Abell (1980) uses the same dimensions, but gives them other names: customer technologies, target groups and customer function. The dimension “customer technology” indicates in which way and by using what products the organization tries to fulfill the desires of the customers. The dimension “target group” is about the demand site of the market and indicates for what kind of customers the products are meant to be.
The dimension “customer function” shows which need the product fulfills for the customer: the link between supply and demand.
The above leads to research sub questions 1 and 2:
1) What is the mission and what is the vision of BeffServ?
2) What is the definition of BeffServ`s market?
2.4.2 Step 2: identification of relevant strengths and weaknesses
Insight in the internal strengths and weaknesses of BeffServ and the services BeffServ offers is necessary for the creation of a marketing strategy. To get these strengths and weaknesses two approaches are used in this survey. The first approach is the evaluation of the strategy used by Sapco’s service department so far. The purpose of this first step is to find and recognize problems and successes: Which strengths and weaknesses can be derived from the evaluation and what are the causes of these strengths and weaknesses?5 The second part of the internal analysis can be seen as a general strengths and weaknesses research. The purpose of the strengths and weaknesses identification is to find competitor advantages. Day and Wensley (1998) have divided competitor advantage in three components. The model of Day and Wensley (figure 2.3) will be used for the analysis of the strengths and weaknesses. According to Day and Wensley, who use the resource-based view, competitor advantages consist of sources of advantage, which leads to position advantages and in better results of the brand. For example a higher brand loyalty, which will result in a higher market share.
Competitor advantage should be based on strong points of the organization. These sources of advantage can be a result of superior skills or superior resources. As described in figure 2.3 Day and Wensley give two categories of position advantage: higher customer value and relatively lower costs in comparison with the competitors. These two advantages are comparable to the two competitor advantages of Porter (1980): differentiation and cost leadership. After the translation of superior skills into higher customer values, the organization should try to communicate this to the target group. Besides this, it is important that the competitors don’t react;
otherwise the advantage doesn’t exist anymore. The customers will be satisfied if the organization succeeds in communicating the position advantage to the target group. The result of these satisfied customers will be brand loyalty, higher market share and eventually lead to a higher profit.
The above leads to the third research sub-question:
3) Which strengths and weaknesses affect the formulation of strategic alternatives for BeffServ?
4 Alsem, 2001
5 Kottler, 1991
Current Mission Vision/Ambition Future Mission
Figure 2.2: Elements of competitor advantage. (Day & Wensley, 1988)
2.4.3 Step 3: identification of external opportunities and threats
Strengths and weaknesses are only valuable if they can be compared with the external opportunities and threats. Therefore after the internal analysis more insight in the opportunities and threats from the environment of BeffServ is necessary. In this case these opportunities and threats result from aspects of the external environment (market, industrial structure and macro environment) BeffServ is active in, the (potential) customers of BeffServ and the competitors of BeffServ. That`s why the external environment, the customers and the competitors of BeffServ will be analyzed.
The main purpose of the analysis of the market, industry and macro environment is to get an insight in the attractiveness of the market BeffServ is active in. This attractiveness has consequences for the future strategy of BeffServ.
The main purpose of the customer analysis is to get more information about the African C-C bottlers and find out what the determinants of values for these customers are.
Bottlers buy the services of BeffServ to satisfy particular needs. Kotler (2000) states that customers buy those products from those suppliers who will offer them the most perceived value.
The delivery of value is important for an organization, because suppliers depend on the sales of products and services. Biemans (2000) states that the supplier receives the rights to exist, because it creates superior value for the customer. Kotler (2000) describes in the customer value concept that customers are looking for value- maximization. The customer value concept is shown in the figure 2.1 Customer delivered value takes a central position in the theory of customer value. Customer delivered value is the perceived value for the customer and a result of the difference between the expected advantages of the product/service and the expected costs of searching, obtaining and using the product or service (total customer costs). The total customer value is created by the product value, the service value, the personnel value and the image value.
The total customer cost is created by the monetary costs, the time costs, the energy costs and the psychical costs. If the total customer value becomes higher for the customer and the total customer costs stays equal, the delivered value will grow. According to Kotler (2000) customers will buy those products or services that have the highest customer delivered value.
Identification of success factors
Sources of advantage:
-Superior skills -Superior resources
Position advantages:
-Higher customer value
-Lower relative costs
Results:
-Satisfaction -Brand-Loyalty
∇ -Market share -Profit
Invest the profit to keep the competitor advantage
Figure 2.3: Customer Value (Kotler: 2000)
This indicates that BeffServ should create value for the customer. A detailed insight in the determinants of value is necessary for the focus on value creation. By using these determinants BeffServ can adjust the product/service till the product has the highest value for the African bottlers. Before this adjustment can be made the organization needs to know what is important for the African bottler, what influence the environment has, what other consulting companies offer and what the organization is able to do
The main purpose of the competitor analysis is to get more information about the competitors and find out if BeffServ’s strengths and weaknesses count for the competitors as well.
According to Alsem (2001) two points of view can be used for the analysis of competitors:
1) The competitor as an enemy.
The main idea behind this point of view is that the competitor must be destroyed. After the analysis weaknesses should be identified. These weaknesses should be used by the organization to destroy the competitor.
2) The competitor as a cooperation partner.
The main idea behind this point of view is that the competitor can be used as a business partner.
This point of view is a result of the internationalisation. Many organizations can only survive if they work together with competitors. For this point of view counts that the organization should not only try to find the weaknesses of the competitor, but they should try to find starting points for cooperation as well.
In this survey the results of this external research will be combined with the results of the internal analysis. After this combination the results of the internal and external analysis form the base for the creation of the strategy for BeffServ.
The above leads to the research sub-question 4,5,6,7 and 8:
4) Who are the (potential) customers of BeffServ and what are needs and determinants of values of these customers?
5) Which opportunities and threats from the macro environment affect the formulation of strategic alternatives for BeffServ?
6) Which opportunities and threats from the market affect the formulation of strategic alternatives for BeffServ?
Product value Services value Personnel Value Image Value Monetary Cost Time Cost Energy Cost Psychic Cost
Total Customer Value
Total Customer Cost
Customer Delivered Value
7) Which opportunities and threats from the industrial structure affect the formulation of strategic alternatives for BeffServ?
8) Who are the (potential) competitors of BeffServ and do these competitors have the same strengths and weaknesses as BeffServ?
2.4.4 Step 4: the creation of strategic alternatives
The strengths, weaknesses, opportunities and threats are combined in a SWOT analysis, which results in strategic alternatives for BeffServ. These alternatives should be sufficient to reach and realize the development-objectives of BeffServ. Four strategies of development are given by Ansoff (1984). These strategies can be seen as options and are created in order to let the organization and the activities of the organization grow. The four strategies, which have a product and a market dimension, are given in figure 2.4.
Figure 2.4: Growth strategies (Ansoff: 1984)
Market Penetration is the improvement of the sales with current products on the current market. If the market grows a rise in the sales can be reached by keeping the current market share. If the market is stable an enlargement of the market share can reach a rise in the sales. Market penetration can only be reached by using the market instruments in an efficient way.
Market Development often happens if the market has reached the saturation point. In that case the company is looking for possibilities to grow. Growth is realized if new customers are found for the current products.
Product Development is the introduction of new products, which are created for the current customers and which take the place or exist beside the current products. Product development can be reached in two different ways: the adjustment/the modification of the current product or the creation of a second brand new product for the same group of customers.
Diversification is the introduction of a new product for a new group of customers.
The above leads to research question 9:
9) Which strategic alternatives can be created, taking into account the results of the previous sub questions?
2.4.5 Step 5: strategy selection
In this step the alternative objectives and strategies are evaluated and adjusted and a decision for the most optimal alternative has to be made. This decision has to be made with care. Therefore the identification of appropriate decision criteria is necessary. After the evaluation of the alternatives with the decision criteria the choice for the definitive marketing strategy can be made.
Research sub-question 10 and 11 can be created:
10) Which criteria can be used for judging the different strategic alternatives?
11) Which of the formulated alternatives can be used to solve the thesis question, taking into account the criteria given in sub question 10?
2.4.6 Step 6: Implementation of the chosen strategic alternative
An intended strategy doesn’t have any value if that strategy is not really worked out and executed. 6 Therefore this step develops the chosen marketing strategy. The marketing strategy is the strategic direction of a product, containing the desired positioning and the related marketing policy.7 According to Kotler (2000) positioning is the act of designing the company’s offering and image in such a way that they can occupy a meaningful and distinct competitive position in the target customers’ mind. Alsem (2001) created the positioning triangle (see figure 2.5), which
6 Frambach, Nijssen, 1999
7 Alsem, 1998
Product Market
Present New
Present Market Penetration Product development
New Market Development Diversification
shows the three elements of positioning and the relation between the elements. Important in this triangle is the creation of value for the customer, based on the relatively strong points of the company and the relatively weak points of the competitors.
Figure 2.5: Positioning triangle, (Alsem: 2001)
Besides the desired positioning the marketing strategy is also about the marketing policy and the related marketing instrument decisions. Marketeres usually address four basic elements: product, price, place and promotion. Collectively, these four categories are often referred to as the 4Ps of the marketing mix. However, the distinctive nature of service performances (like consulting services) requires that other strategic elements should be included.8 Therefore this survey uses the ‘8Ps’ model of integrated service management. This model highlights the eight decision variables facing managers of service organizations:
Product elements: Features of the core product (service) should be selected and bundled with the supplementary service elements, with reference to the benefits desired by the customers and how well competing products perform.
Place and time: Delivering service elements to customers involve decisions on the place and time of delivery, as well as the methods and channels employed.
Process: Creating and delivering product elements to the customers require the design and implementation of effective processes.
Productivity and quality: These elements, often treated separately, should be seen as two sides of the same coin. No service firm can afford to address either element in isolation. Productivity relates to how inputs are transformed into outputs that are valued by customers, while quality refers to the degree to which a service satisfies customers by meeting the customers needs, wants and expectations.
People: Many services, like BeffServ, depend on direct, personal interaction between customers and the firm’s employee. The nature of these interactions strongly influences the customer’s perception of service quality.
Promotion and education: No marketing program can succeed without effective communications.
This component plays three vital roles: providing needed information and advice, persuading target customers of the merits of a specific product, and encouraging them to take action at specific times.
Physical evidence: The appearance of visible cues provides tangible evidence of a firm’s service quality. Service firms, like BeffServ, need to manage physical evidence carefully, since it can have profound impact on customers` impressions.
8 Lovelock, 1996
Brand (Company):
Current image and strong points
Competitor:
Weak points Target Group:
Customer Value
Positioning
Price: The costs incurred by customers in obtaining benefits from the service product. Service managers should seek to minimize costs that customers may bear in purchasing and using a service.
The above leads to research sub-question 12:
12) Which consequences does the chosen strategy have for the positioning and the marketing policy of BeffServ?
2.5 Research model
Taking into account the strategic marketing steps, the related sub questions and the related theories a conceptual research model can be created. Each block can be connected with one (or more) sub question(s). The model shows which aspects are important during the research and in which way these aspects are connected. The model (figure 2.5) can be seen as the guideline during the research project and will be given at the beginning of each chapter.
Figure 2.6: Conceptual model Identification of
relevant strengths and weaknesses
Analysis of the customers
Strategy and selection Creation of strategic alternatives Identification of the
Mission and Vision of BeffServ
Define BeffServ’s market
Identification of relevant opportunities and
threats from the macro surrounding,
the market and the industrial structure
Analysis of the competitors
Identification of criteria for judging
strategic alternatives
Implementation of the marketing strategy
2.6 Research Conditions
Different conditions are connected to the research project. These conditions give the restrictions for the research methods and the research results. De Leeuw (1996) makes a distinction between process- and product-conditions. Process conditions affect the process and methods of the research and product conditions affect the results of the research project.
Process conditions:
• The research project focus on African C-C bottlers and leaves out all other companies.
• The field research will take place from October 2002 till May 2003
• The managers of BeffServ must be kept up-to-date about the progress of the research project on a regularly base.
• The mentors of the university must be kept up-to-date about the progress of the research project on a regularly base.
Research conditions that affect the result of the research project (Product conditions) include:
• The research project should provide BeffServ with new business knowledge and should give an answer to the main research question.
• The management of BeffServ will receive the results of the survey in the form of a research document.
• The results of this research project are confidentional, for two reasons:
1. The researcher ensured the interviewed bottlers that all the information they give would stay confidentional. Otherwise the bottlers would never answer the questions put in the questionnaire sent to them.
2. The management wants the results to be confidential: BeffServ is a unique new business. The results of this research project may help other companies to start up the same kind of business and in this way destroy the uniqueness.
Confidential means that besides the management of BeffServ, only the first and the second mentor of the University of Groningen are allowed to read the final document.
2.7 Research Methods
To get an answer to the main question different kinds of research methods can be used. This research project uses two kinds of research methods. Firstly desk research, secondly field research. For desk research written documents are used and for field research the experiences in the field are used.
Desk Research
According to De Leeuw (1996) three kinds of sources for desk research can be distinguished:
research after relevant scientific literature and research after internal documents and external documents. The following internal documents have been used during this research:
• Internal documents about The C-C Company
• Internal documents about C-C Sapco
• Internal documents about BeffServ
• Internet pages of The C-C Company and BeffServ
The following external documents have been used during this research project:
• Web pages of competitors
• Databases considering the environment variables of African continent
• Documents considering the bottling industry.
Literature about strategic marketing management was the most important literature used during this thesis. SCrs who wrote about this specific part of the marketing are Aaker on “Strategic Market Management”, Kotler on “Marketing Management: analysis, planning, and control.”
Frambach on “Marketing Strategie” and Alsem on “Strategische Marketingplanning: Theorie, Technieken en Toepassingen”
Field Research
According to De Leeuw (1996) field research is a research without interference in reality.
Interviews and questionnaires are the main elements of field research.
Internal interviews with relevant employees (managers and consultants) of BeffServ were held to get an insight in the organization. The results of these interviews showed strengths and weaknesses of the organization. In a later stage of the research project these strengths and weaknesses were compared with the strengths and weaknesses of the competitors. As a result of this comparison the relative strengths and weaknesses became available.
All companies on the African continent, that produce the products of the C-C Company received a questionnaire. In total 44 questionnaires were sent and 26 were completed. This questionnaire contained 29 questions in total. Half of the questions issued company information in general and were used as input for a database, which helps to identify relevant services for the specific bottlers. The other half of the questions was used to identify relevant strengths, weaknesses, opportunities and threats and formed a more specific input for this research project. Besides the potential customers the current customers (the C-C Sapco bottlers), who are regarded as external customers during the survey, received a questionnaire as well. This questionnaire contained 16 questions. General company information of Sapco bottlers was already available within the Sapco organization; therefore all 16 questions were used to identify relevant strengths, weaknesses, opportunities and threats.
Potential competitors of BeffServ received a questionnaire as well. The consulting market is an enormous market, therefore only consulting companies active in the African continent and that provided demonstrable services to FMCG companies in the past have been sent questionnaires.
The completed questionnaires of the competitors formed an input for competitor analysis.
Interviews with Sapco’s country managers were held if the information provided by the country managers was not specific enough. These interviews can be seen as external interviews, because the Sapco country managers are customers of BeffServ.
2.8 Summary
The purpose of this research project is to recommend and formulate a marketing strategy, which possibly result in a stronger position on the market on which consulting services and business solutions are provided to African C-C bottlers. This stronger market position should lead to enough experience, manpower and clients to move up towards serving broadly the FMCG market in the future.
To reach this stronger market position a marketing strategy will be created with a process called
“strategic marketing planning”. This strategic marketing planning process consists out of different strategic steps. Each strategic step leads to a research sub question and in most cases the step can be connected with a theory, which is used to get a scientifically funded answer to each of the research questions.
The definition of the market is the starting point of the strategic marketing planning process. The definition of the market results from the mission and vision of the organization. According to different authors it is important to make a distinction between a mission and a vision. The creation/identification of the mission, vision and definition of the market will be the starting point of this research project.
The second step for the creation of an appropriate strategy for BeffServ is the identification of relevant strengths and weaknesses. These strengths and weaknesses can be potential issues or result from the strategy used so far. The resource based view will be used in this step. After the internal analysis more insight in the opportunities and threats from the environment of BeffServ is necessary. Therefore the external environment, the customers and the competitors of BeffServ will be analyzed. The main purpose of analysis of the external environment is to get an insight in the attractiveness of the market BeffServ is active in, because this attractiveness has consequences for the future strategy of BeffServ. Perceived value and value maximization take a central position during the customer analysis. The main purpose of the competitor analysis is to get more information about the competitors and find out if the strengths and weaknesses of BeffServ count for the competitors as well. Two points of view can be used for the analysis of competitors: The competitor can be seen as an enemy or as a cooperation partner.
