Zhuhai Speed
International Logistic Co. Ltd will be based in Zhuhai, China and will be
providing import and export cargo transportation services. The company will
originally be designed as a small business with only 7 employees. The modes of
transport to be used shall be road transportation, air transportation, and sea
transportation. The initial target market for the company shall be the foreign
manufacturing companies that operate within Zhuhai. These are reputed as
manufacturers with strong connections outside China and are therefore very
likely to have international customers to export products to.
The objectives
of Zhuhai Speed International Logistic Co. Ltd are as follows:
1. To achieve
sales of CNY 500,000 within the first year
2. To achieve
an annual growth in sales of 100% for the next 3 years
3. To emerge
as a leader in the industry in Zhuhai within 6 years
The business
will seek to capitalise on its low cost advantages. With only 7 employees, the
company’s fixed costs will be low and this will enable price competition to be
used effectively. The company’s main marketing approach shall be relationship
marketing as well as the use of referrals. This report outlines the marketing
strategy in light of the product mix, environmental challenges, and goals of
the organisation.
China (and its cities) has been
attracting foreign investors due to its low cost advantages (Guang et al, 2014). Many of these investors
view China as a low cost production site and set up operations to be able to
price competitively. This means that demand for cost effective transportation
services is likely to be on the rise.
The second factor that enhances demand
for export and import cargo services is the strengthening of the China brand.
From being a symbol of poor quality in the past, Chinese products are now
growing in popularity worldwide (Cui, Su and Hertz, 2012). It is a factor that
has made Chinese companies to experience surge in demand for their products,
hence the rise in demand for export/import cargo services.
To facilitate ease of
exportation/importation, the government of China has strongly liberalised the
market; essentially making it easy for cargo service providers to operate
cost-effectively (Guang et al, 2014).
The Chinese economy is export-based and government has been keen to put in
place infrastructure which facilitates cross-border trade. This is an
opportunity as well as a threat. It provides Zhuhai Speed International Logistic Co. Ltd with the opportunity to
start and penetrate the market. However, it is also a potential threat as it
would allow new entrants to come in and set up operations with great ease.
Economically,
China has traditionally been a low labour cost location enabling companies to
manufacture at a fraction of the price (Cui, Su and Hertz, 2012). This is in addition to low cost of materials. It
is the main driver for many international investors seeking to operate from
China. However, this advantage may be short-lived as the economy develops and
cost of living rises. In fact, China has on several occasions been forced to
adjust the minimum wage rates upwards hence reducing this cost advantage. For
Zhuhai Speed International Logistic Co. Ltd, this could be an opportunity.
Higher labour costs are likely to prompt organisations to seek other avenues of
cost reduction such as minimisation of in-bound and out-bound logistics. This
can create greater demand for import/export cargo services.
The
opportunities and threats can therefore be summarised as follows:
|
Opportunities
-
Pro-investment
political climate that can facilitate ease of operations
-
Increase
in the number of manufacturers hence high demand
-
A
strengthening China brand making Chinese products more marketable
internationally
|
Threats
-
Ease
of market entry likely to facilitate entry of more industry players
|
The target market for Zhuhai Speed International Logistic Co. Ltd will be
foreign manufacturers. These comprise of investors who have set up operations
in Zhuhai for a number of reasons including the need to tap into the low cost
advantages or even to capture the Chinese market.
The rationale
for segmentation is that it enables the organisation to develop capabilities
that uniquely serve a certain market segment (Singh and Sidhu,
2012). The organisation can have a high competitive
strength in serving a specific target market without necessarily having to grow
to the level of its more established rivals in the market. Segmentation is
based on the theory that organisations benefit more by concentrating on
targeting the market segment that is most likely to need its products. This is
the Pareto rule which states that 80% of an organisation’s revenues tend to
come from 20% of the market (Singh and Sidhu, 2012).
The main
characteristics of the target customers is that as new comers to the Chinese
market, they are unlikely to have developed strong networks that comprise of
suppliers and logistics service providers. Business contacts within most
Chinese companies are sourced through referrals and strengthening of existing
business networks (HSBC, 2013). Such contracts tend to be quite strong and
difficult to overcome as a service provider that is new to the market. On the
other hand, foreign investors tend to be more receptive to the concept of open
sourcing where there’s more openness to engaging new service providers.
Besides, foreign companies are more likely to demand for import/export cargo
transportation services as they are more likely to explore international trade
than their local counterparts. This is in addition to them being keen on
involving local service providers who understand the market better and are able
to price more competitively than the cost to be incurred through in-house
logistics operations.
The service proposition will be quick
delivery at low costs. The target customers shall be captured by providing
customised services. The customisation will be in terms of choice of
transportation, modification of transportation means as appropriate, and
provision of value added services. A relationship marketing approach shall be
used where focus will mainly be on incrementally providing more services to the
organisations already being served. The strategy shall therefore be in the
customisation of services as well gradual increase in the services provided per
company; including growing through their networks. To guarantee future
business, the company shall focus on entering into contractual arrangements
where cargo services for specific companies are served for a period of time.
Such contracts will strengthen the bond with such customers and provide
exposure to their networks; hence ease of marketing and growth within the
networks.
The
import/export cargo transport sector has been booming in China. Its status as a
world manufacture sector has greatly improved the demand for organisations to
import and export products and supplies (HSBC, 2013). The industry competition can be evaluated under
the Porter’s 5-forces factors as below:
Supplier power: Suppliers include providers of transportation services where the
service is outsourced (JCtrans Logistics Network, 2014). They could also include suppliers of computers
and logistics applications. Most suppliers provide specialised applications,
meaning that they can certainly influence prices. However, they are many and
unlikely to create a price control regime. Supplier power is therefore
moderate.
Buyer power: The buyers are the manufacturers who wish to import or export cargo
and supplies (Fung Group, 2013). Since most transportation services are leased
through long term contracts, the buyers have a considerable amount of power in
influencing prices and service specifications. Besides, buyers can easily
integrate backwards and handle their transportation services in-house (Fung
Group, 2013). Buyer power is therefore strong.
Threat of substitutes: Substitutes to cargo transport services include
internal logistics. Some companies may opt to handle these logistics operations
to boost their competitiveness. However, smaller players are likely to be faced
with high unit costs if since they can only transport products in small
quantities. Threat of substitutes is therefore moderate.
Threat of entry: The government regulations in the sector are investor-friendly, making
it easy for new start-ups to be introduced (Guang et al, 2014). The set-up costs are also relatively low. This
means that the threat of entry is high.
Rivalry between industry players: The sector has a mix of large and small players
(Fung Group, 2013). Many of the more established logistics companies in China
serve the entire country; a factor that gives them greater competence in
handling bulk transportation of products and supplies. The services are also
quite similar with the price range being similar. However, some level of
differentiation is possible where industry players try to conform to their
customers’ business models and deliver as appropriate. In some cases, industry
players integrate their functions with those of their customers and this
facilitates coordination while strengthening the bond between them and the
customers.
At Zhuhai,
some of the main competitors will include: Easygo International Logistics (HK)
Co. Ltd, New Era (Zhuhai) Transportation Services Co, Shanghai Amass Freight
Int'l Co.,Ltd, Zhuhai Free Yang Logisitics Co., Ltd., and Zhuhai HONGFA
International Freight Forwarding (Zhuhai Free Yang Logisitics Co., Ltd, 2014; JCtrans
Logistics Network, 2014). The
services offered range from serving the local manufacturers to a range of
foreign companies. Some like Shanghai Amass Freight Int'l Co.,Ltd are well
established with offices in the USA and Europe. These competitors are already
well-known in the industry. However, an assessment of their pricing approach
indicates that penetration pricing strategy can be implemented profitably while
customising services to suit the customers’ operations.
The marketing strategy shall be focused
on relationship building and not necessarily on driving sales (Granot and
Madhavaram, 2014). The focus will be on displaying the competence of the
business and inspiring the target customers to enter into a contract with the
company. Relationship marketing is known
to be very effective in building the bond between the customer and the service
provider. It capitalises on an understanding of the customer to determine what
other services or products that the company can offer (Catoiu and Tichindelean,
2012). This means that as the relationship strengthens, the customer becomes of
greater value to the organisation. Moreover, strong relationships have been
established through empirical studies to contribute to the level of referrals.
This means that with successful relationship marketing, the company is likely
to attract more customers through referral.
The emphasis on referrals is based on
the fact that word-of-mouth marketing is the most effective approach to
marketing (Wisaeng, 2013). This is based on its ability to inspire trust among
prospective customers. The word of a third party tends to be more credible than
official company sources because marketers are generally expected to exaggerate
the services offered by the company (Xi, 2013; ). This means that when the
third parties commend a company for their services, it is likely to be true
that they provide the excellent services. The referrals shall be through
physical word of mouth and through online product reviews.
As has been mentioned, the marketing
strategy to be used shall focus more on building trust and relationships rather
than on aggressively promoting sales. The company shall maintain a website that
is fully integrated with the communication team where employees will be able to
respond to queries in real time. In addition, it shall provide an opportunity
for the current customers to give feedback on how they have found the company’s
services. Negative feedback shall be followed up to rectify the cause of
dissatisfaction and strengthen the relationship with customers.
Direct marketing shall be the preferred
promotional strategy. Direct marketing can either be face-to-face or through
non-personal means such as using mail or even the internet. The face-to-face approach
shall be the direct marketing strategy for the company (Rimlinger, 2013). Its
choice is based on the fact that face-to-face communication tends to be high
context and is likely to be more effective. The target market will be
organisations; meaning that the direct marketing approach will need to target
the main decision makers. The focus shall also be on strengthening
interpersonal skills of marketers to boost the effectiveness of the marketing
approach.
References
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MARKETING - THEORETICAL CONSIDERATION, Annales
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http://www.funggroup.com/eng/knowledge/research/china_dis_issue113.pdf (Accessed 28 November 2014)
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283
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November 2014)
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Available at: http://www.freeyang.com/en/aboutus.asp (Accessed 28 November
2014)
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