Aschalew Degoma Durie
College of Business and Economics, Bahir Dar
University, Ethiopia
E-mail: aschalewde@yahoo.com
Getie Andualem Imiru
School of Commerce, Addis Ababa University, Ethiopia
E-mail: get_aiwo@yahoo.com
Submission: 11/11/2017
Revision: 06/03/2018
Accept: 15/03/2018
ABSTRACT
The objective of the study was to
examine the marketing strategies of Ethiopian medium and large textile
companies. The textile sector became the focus of this study because it has
performed far below expectation, despite the government‘s unreserved support to
the sector and the country‘s comparative advantage in the sector. To attain the
stated objective, qualitative research approach with case study design was
employed. The cases were selected based on two criteria; production of finished
textile products and operation in both local and global markets. Accordingly,
nine companies qualified these criteria and all of them were used as cases. The
RBV was the theory employed to explain the differences in performances among
firms’ in similar environment. Furthermore, within and cross case analyses were
employed to get in-depth understanding and to explain about the marketing
strategies of the firms. The major findings of the study indicate that the
emphasis given to marketing strategy and the marketing resources and
capabilities commitment thereof were found to be so low that the companies
seemed to equate marketing strategy with selling strategy. Furthermore, the companies
failed to link their marketing enabling environment with their marketing
strategy. Similarly, such weak link was reflected between the firms’ marketing
strategy and their market performances. Generally, both empirical and
conceptual conclusions were drawn from the findings. Thus, the cross-case
findings indicate that marketing resources commitment is linearly linked to
marketing strategy which in turn is linked to export performances. Therefore,
it can be understood that the link between enabling environment and marketing
strategy is direct and the link between marketing strategy and marketing
performances is linear. Hence, it can be understood from this transitivity that
there exists a link between firms’ enabling environment and their marketing performances.
Keywords: marketing strategy, marketing
strategy formulation, marketing strategy implementation, marketing
capabilities, marketing resources, resource based view, marketing performance,
marketing enabling environment, marketing, strategy.
1.1.
Conceptualization of Marketing
Strategy
Literatures
in the area of marketing strategy lack depth and pervasive investigation on the
constructs of marketing strategy formulation and implementation (COREY, 2003).
The major problem is their inability of identifying the major and supporting
variables that constitute marketing strategy formulation and implementation and
the tendency to see them as separate processes (EL-ANSARY, 2006).
Some
literatures define marketing strategy implementation variables with the same
variables they use for defining marketing strategy formulation. However,
El-Ansary (2006) makes explicit account of marketing strategy literature for a
period of 16 years (from January 1990 to April 2006) and comes up with better
taxonomy and framework of marketing strategy formulation and implementation.
The
variables and frameworks that are used for this dissertation are based on this
in depth study and with adjustment of some of the constructs based on the
pertinent literatures that have been published from 2007 to date (2016).
As getting a single definition for strategy is difficult so
it is for marketing strategy, whether one considers the literature on the
subject, or the use of term by executives in the business arena who are familiar
with the practice (JAIN, 2000).
For
example, Corey
(2003) defines marketing strategy as the creation of a unique and valuable
position, involving a different set of activities; while business dictionary
defines marketing strategy as a strategy that integrates an organization's marketing goals into a cohesive whole.
Similarly, Cravens (2000) argues that marketing strategy
provides concepts and processes for gaining a competitive advantage by
delivering superior value to the business’ customers. However, key issues
remain similar among the different definitions in that they view marketing as
the creation of unique offer that the market needs so that profitability of the
company and customer satisfaction could be achieved simultaneously as an
outcome.
Businesses exist to deliver products and services to market
and according to Corey (2003), to the extent that they serve this purpose well
and efficiently, they grow and profit. The
process of implementing business strategies is largely concerned with how
marketing activities are accomplished (SLATER; OLSON 2000; MENON et al., 2015).
The
gist of this statement implies that although marketing strategy is a sub set of
the overall business strategy, it (marketing strategy) is the key for its
realization. Thus, marketing strategy translates the business objective and
strategy into market terms and marketing activity.
The
practical success of the organization’s business objective and strategy will
depend on the quality of the marketing input right at the top (FIFIELD, 2009).
Hence, the business strategy is as good as the marketing strategy which an
organization formulates and implements.
Furthermore,
Bogdam (2015) argues that at the heart of any business strategy is its
marketing strategy which makes marketing strategy to be big but yet poorly
approached. And according to Vargo and Lusch, (2004), marketing’s service
dominant approach implies that marketing strategy should be placed at the core
of the firm’s strategic planning.
Consequently,
appropriate marketing strategy formulation and implementation is critical for a
business organization and without it, profitability and customer satisfaction
remain for mere chances.
1.2.
Marketing Strategy Models
According to Corey (2003), there are three key constituents
(corporation, customer, and competitor) that enable us to define marketing
strategy appropriately. These constituents serve as bases to devise marketing
strategy and any tactical plans that follow should well address it.
Similarly, in terms of these three constituents, marketing
strategy will be well defined as an endeavor by a corporation to differentiate
itself positively from its competitors, using its corporate strengths to better
satisfy customer needs in a given environmental setting.
El-Ansary (2006) further agrees with the three constituents
of marketing strategy in a sense that any marketing effort should consider and
simultaneously satisfy the requirements of these three “pillars of
marketplaces”, for effective and efficient marketing strategy formulation and
implementation.
However, El-Ansary (2006) looks at the marketing strategy
formulation and implementation processes more exhaustively and
appropriately, and through exhaustive literature review, he has developed a model which clearly integrates marketing strategy formulation and
implementation processes. Due to the exhaustive and pervasive nature of the
model, the latter will be adapted in this study and greatly depend on it almost
in many parts of this dissertation.
To formulate an appropriate and dynamic marketing strategy,
a company should consider the three important pillars; company, customer, and
competition (MANDAKE; DESHUMKH;
MANDAKE, 2016). Considering the needs of consumers will enable firms to segment
and target them so that the company will have better information to position
the product.
Understanding the competitors is an important consideration
to differentiate their offers from their competitors. And finally, considering
these pillars is important for firms to consolidate their limited resources in
profitable and customer preferred offers.
The following figure shows how a company can formulate its
marketing strategy based on the three constituents: company, consumer, and
competition.
Figure 1: shows
how a company can formulate its marketing strategy
Source:
Author’s modification from the work of El-Ansary (2006).
Hence, marketing strategies implementation should be
considered as an integral part of formulation in this dynamic market because
when formulation is designed it is clear that the implementation variables
should be defined and aligned in such a way that which formulation objective
needs the deploying of which marketing mix.
Similarly, Menon et al., (2015) argue that in the face of a high level of turbulent
global market there is a need for a dynamic approach in which strategy
formulation and implementation are carried out simultaneously. And such
integration should be continuous and if change is required in formulation, it
is inevitable that there must also be change in implementation strategy because
if the firm touches one it touches them both.
This
integration and continuous improvement in marketing strategy formulation and
implementation process is giving rise to new collaborative capabilities and
business models that will empower the proactive firm and destroy those that
fail to adjust (TAPSCOTT; WILLIAMS, 2006).
2. DATA
ANALYSIS
The data were analyzed based on the conceptual framework
presented earlier. Hence, the themes
merged for analysis are the following:-
2.1.
The company consideration (RBT)
RBT
is conceived in this research in terms of marketing assets and capabilities.
Marketing asset refers to the resource endowments which a firm has accumulated
for factor costs and managerial support. In connection to this, Day (1994)
argues that marketing assets consists of investments in the scale, scope, efficiency
of facilities and systems, brand equity, and the consequences of the location
activities.
On
the other hand, capabilities are the glue that brings these assets together and
enables them to be deployed advantageously (DAY, 1994; HUNT; ARNETT, 2006) and they
can also be difficult for management to identify. Therefore, the basic
difference between the marketing assets and capabilities is the inimitability,
intangibility, and non-tradability of capabilities which instead is deeply
embedded in the organizational routines.
The marketing assets were examined in terms of the budget
allocated to marketing and top level management emphasis to marketing strategy.
Accordingly, the investments allocated for customers’ service, developing new
product, build strong brand image, promotion and customers’ education,
improving distribution channels, marketing research, and the like are included
in marketing assets (RAMANI; KUMAR, 2008).
Thus, almost all of the key informants (except in case
four) stated that marketing assets are poorly conceived and treated in their
organizations. In addition to this, the marketing plans of the case companies
substantiate such claim in that the plans are better referred to as sales plan
without budget.
To most of them, marketing research is a rarely done
activity and if at all conducted, it is only once a year and even mostly
unsatisfactorily. Besides, the level of emphasis and perception given to
marketing strategy is very narrow; as a representative statement by the key informant
in case five indicated;
Both claims in the above statements
imply that the level of asset commitment given to marketing strategy is
minimal. On the other hand, the companies’ investment on marketing assets such
as investment on marketing research reduces the possibility of failure and
increases possibility of success in the market as the relative prediction of
marketing research to the actual market is significant and higher (KOTLER;
ARMSTRONG, 2012).
This is further supported by (DAY, 1994)
arguing that marketing assets encompasses investments in the scale, scope, and
efficiency of facilities and systems brand equity and the consequences of the
location activities all of which are enabling and supporting conditions for
companies to develop competitive advantage. Hence, failure to invest in
marketing assets reduces competitiveness and may lead to failure at the end.
The relevance of marketing asset
commitment increases more when a company competes at the international level.
To this end, the case companies (except case four) have lower base of marketing
enabling environment which in turn attributes to their poor design and
execution of their marketing strategies.
Therefore, the findings clearly indicate
that the reasons for not investing on marketing assets are broadly categorized
as perceiving them as costs, emphasis on short term return and poor perception
about marketing in general.
These reasons are against the lived
realities of the current global market which dictates that investing on marketing
assets is essential and even mandatory for long term survival. In connection to
this, literatures claim that investing on marketing assets should be viewed as
investments rather than costs by a company (MORGAN; KATSIKEAS; VORHIES, 2012).
Furthermore, if the objective of a
company is to be competitive in the long run, it should not be tapped by short
term profit trap (MORGAN et al, 2004). As competitiveness is developed by
choosing one of the cost, differentiation, or focus strategy (PORTER, 1985),
the decision to chose the one should be based on market information and
considering the company’s internal strength which both call for investment in
marketing assets. And the companies’ internal strength is nothing but required
level of skill, technology and capability all of which can be built with
investing in marketing assets.
Regarding
marketing capabilities, the findings indicate that the case companies are not
aware or recognizing their capabilities hence failed to capitalize on them in
their attempt to be competitive in the market. In this regard, the key
informant in case five explained that;
Like it is the case in marketing assets, it is true for
marketing capabilities that the case companies paid little or no attention to
it. The finding further indicates that the need for profit on the one hand and
being ignorant for marketing assets and capabilities on the other hand are the
two non reconciled objectives of the case firms.
The main theme in this discussion is that marketing assets
and capabilities are the people's skills and knowledge, intangible resources,
the company's tacit knowledge, processes and activities that enable the company
to implement its marketing strategy and achieve its objectives which the case
companies fail to make use of it. To elaborate it more, the case firms are not
currently using their advantage of pure cotton product and other inimitable
advantages which the country’s geographic environment is endowed with.
In support of the significance of marketing assets and
capabilities, literatures argue that the integration of marketing assets and
capabilities is the challenge of modern managers in the globe because those
resources which are made up by the combination of assets and capabilities are
cultivated slowly which sometimes limit the ability of the firm to adapt to
change.
Hence, management’s task in the dynamic market is to
determine how best to improve and exploit these firm specific resources (MAHONEY;
PANDIA, 1992). Such an argument leads to the claim that to the extent
managements are optimally integrating these firms’ specific resources, their
businesses become competitive and relevant in the market. As a result, the
findings provided strong evidence that the case companies failed to integrate
their resources which results in weak marketing strategy execution and
subsequent weak export performances (except for case company four).
As has been noted above, although investment on marketing
assets and capabilities can undoubtedly increase companies’ ability to internal
strength and hence competitiveness, the case companies (except case four)
failed to do so. Such low or none investment on those critical factors laid a
fragile base for marketing strategy formulation and implementation. Hence, the
inside out perspectives of the case companies are better referred to as non
strategic and technically stubborn.
2.2.
Marketing Strategy Formulation
and Implementation
Marketing strategy was conceived in this research as the
total sum of the integrating the process of segmenting, targeting,
differentiating, and positioning strategies designed to create, communicate,
and deliver an offer to a target market. And the ultimate purpose of
integrating those activities is to deliver customer satisfaction for profit.
However, for better in depth understanding, marketing strategy is viewed in two
parts as marketing strategy formulation and marketing strategy implementation (VINCENT,
2005).
Again marketing strategy formulation is applied in this
research as the process of creating, communicating, and delivering customer
values (EL-ANSARY, 2006; KOTLER; ARMSTRONG, 2012). While marketing strategy
implementation is conceived and used in this research as deploying the
marketing mix to create, communicate, and deliver the value. The details of
marketing strategy formulation and implementations are presented independently
as follows.
In effect, marketing strategy formulation implies the
process of segmenting, targeting the market in which to operate, and
positioning and differentiating the product in the customer’s mind using
effective branding strategy. Besides, marketing strategy formulation should be
built around the three pillars of the market places such as; customers,
company, and competitors (EL-ANSARY, 2006). Hence, the research findings are
presented in detail in terms of those four activities which the three pillars
are blended within.
The research findings indicate that there is no clear set
of segmentation criteria implemented by the case firms so far; except for case
company four. The less emphasis given to marketing on the one hand and the
traditional of assumption of ‘what is produced can be sold’ on the other hand
result in poor conception and formulation of market segmentation.
In addition to this, it was also possible to understand
from the cross case examination that the responses of the respondents can be
summarized as absence of clear set of definition and application of market
segmentation strategies.
Regarding this, the findings indicate that the case firms
failed to apply effective market targeting criteria.
The finding may further indicate that the companies are
still in the production era of marketing where the assumption is to sell all
what is produced. However, this philosophy is too old to hold true to today’s
market even to other products let alone to textile where fashion is the driving
force and aggregating different customers’ need is hardly possible (ZHANG et
al.,1999).
Thus, targeting is at the very heart of
any marketing strategy formulation since it is hardly possible to meet the
needs and wants of the market in the world by a single or two offers. Hence,
the starting point for this involves examining each segment’s size and
potential for growth. Obviously, the question of what is the ‘right size’ of a
segment may vary greatly from one organization to another. With regard to the
question of each segment’s structural attractiveness, the marketing
strategist’s primary concern is profitability (ZHANG et a., 1999).
Regarding this, the findings indicate that the efforts made
by the case companies in the domestic market are encouraging. The companies
have made interesting efforts to identify themselves from competing products.
This is evidenced by the key informant in case one saying;
This claim is also further substantiated by the cross case
examination when respondents refer their own products in terms of some unique
features like quality, neatness, and comfort.
The way in which an organization or a brand is perceived by
its target markets is determined by a number of factors including the product
range, media used, performance, prices, distribution networks, promotion,
customer profiles, word of mouth, and customers’ experience (WILISON; GILLIGAN,
2005). From these factors, the positioning strategies implemented by the case
companies are mostly word of mouth in the local market as the key informant in
case five explained; “people have good
attitude about our product that it is of good quality and usually new customers
consult the existing ones before they decide from which to buy.”
This implies that the companies have still more options to
use to position their products and integrating more options can make a better
result as customers may prefer different means of getting information about the
product they want to buy.
However, all of the case companies except case company four
agree that they have made little efforts to position their products in the
international markets. In connection to this, the cross case evidence
examination indicates that the international customers know the textile
companies by their generic name called Ethiopian companies not by the
companies’ specific identity.
Hence, the positioning strategies made by the case
companies can be characterized as fair in the domestic markets but poor in the
international markets. Thus, the textile companies need to focus on getting a
fair share of the customers’ mind in the international markets if they want to
be competitive.
This implies that positioning should be a fundamental
element of the marketing planning process, since any decision on positioning
has direct and immediate implications for the whole of the marketing mix (BONOMA;
CRITTENDEN, 1988).
In the same way, the marketing mix can be seen as the
tactical details of the organization’s positioning strategy. Where, for
example, the organization is pursuing a high-quality position, these needs to
be reflected not just in the quality of the product that is to be sold, but in
every element of the mix, including price, the pattern of distribution, the
style of advertising and the after-sales service (KALAFATIS et al., 2000; HOOLEY
et al., 1998).
2.2.1.
Marketing
Strategy Implementation
Marketing strategy implementation processes is
conceptualized in this study as the process of deploying the marketing mix to
create, communicate, and deliver the value. In effect, it is the process of
executing product development, pricing, placing, and promotion.
In connection to this, the effective marketing strategy
formulation is the pre-requisite for effective marketing strategy
implementations as it is the tactical activities of achieving the formulated
strategy (VINCENT, 2005). Therefore, the findings regarding marketing strategy
implementation are discussed in terms of the marketing mix in detail, in the
following ways.
A customer’s order can be one of the sources of information
for new product development but cannot be the only as it is the case in the
selected companies. Besides order based new product development is a reactive
strategy for which the current dynamic market may not lend itself.
Hence, the cross case examination indicates over
utilization of reactive product development strategy and the case companies
have stuck to it as if none other base exists. However, in the turbulent
market, which characterizes the current textile market, need assessment is the
appropriate strategy for product development.
Regarding the branding issue, most of the case companies
brand their products claiming that their products’ are better in the domestic
market. However, clear branding strategy is absent in the international
markets. The cross case examination and the findings from the textile
development institute indicates that branding has become very challenging for
Ethiopian textile companies in general and it may take even more time for
branding Ethiopian textile products relative to the competing textile products
in the international markets.
Therefore, the findings indicate that the product quality
issue has become very challenging in the international markets. The apparent
perceived good quality in the domestic markets may be attributed to low level
of competition and existence of only few variety products.
Regarding customers’ feedback for product improvement, a
mixture of opinions was obtained. Some of the firms actually use the feedback
to improve their products as per the customers’ feedback
The cross case examination of the findings indicate that
the companies use costs of production as a primary factor to determine price
for the domestic market. Hence, the cost of production is determined first and
a certain mark up is added as the key informant in case five indicated;
Regarding the pricing strategies for the international
markets, going price and customers’ willingness to pay are the major factors
which companies consider to price their products. Accordingly, the case
companies unanimously agree that their export pricing is neither profitable nor
controllable at the same time.
This finding is similar to (PARRISH et al., 2006) who
explained that China’s ability to produce quality products efficiently at lower
comparative costs is threatening the textile and apparel industries hence those
companies from developing countries are unable to compete only based on price.
Furthermore, one of the surprising findings in this research is that export
textile products are sometimes priced lower than the product’s price in the
domestic market.
Theoretically, customers may pay for higher prices for a
competing product if they perceive that the difference in the prices is offset
by the quality of the product and the difference is communicated well to them.
Furthermore, customers’ perceptions of the product’s value set the ceiling for
prices. This means, if customers perceive that the product’s price is greater
than its value, they will buy few or none of the products.
On the other hand, production costs set the floor for
prices. Thus, in setting its price between these two extremes, a company must
consider several internal and external factors, including competitors’
strategies and prices, the overall marketing strategy and mix, and the nature
of the market and demand (KOTLER; ARMSTRONG, 2012).
Thus, the case companies need to consider a number of
factors in addition to their current bases when they set their prices for both
local and international markets. With this intention, the pricing strategy is
directly influenced by the branding strategy which may call for an integrated
branding campaign by the case companies and the government.
3. DISTRIBUTION
STRATEGY
Distribution is the other important marketing mix which
bridges the gap between place of production and place of consumption or
use. The distribution function is also
referred to as marketing channels to include a set of interdependent organizations
that help make a product or service available for use or consumption by the
consumer or business user.
Regarding the distribution strategy, respondents were asked
to explain the type of distribution channel they use for the domestic and
international markets, their perception and practices of the distribution
function, the challenges they faced and possible recommendations to withstand
their perceived challenges.
Accordingly, the distribution strategies of the case
companies are different for domestic and international markets. For the
international markets, the case companies (except for case company four which
uses its partnership outlets) use direct exporting. Such direct exporting is
characterized as the early stage of international marketing practice and hence
the case companies may be considered in that stage.
The exporting strategy is preferred to any other
international market entry strategies when the focus of the company is domestic
market and exporting is practiced to discharge the excess supply. Similarly,
when a company is dependent on export, its opportunities to understand the
complexity and dynamics of the international market will be limited.
However, the primary objective of the case companies is to
export, as the country is desperately in need of export and textile is the way
out. However, simple export alone is not the preferred mode of entry to the
case companies simply because they are expected to produce exclusive products
for international markets. And, this is the very reason why the government paid
a particular attention to the sector and implement different incentive packages
for exporting companies alone.
For the domestic market, differences in distribution
strategies have been observed. For-example, one of the case companies (as it
was explained in the within analysis) uses sole distributor for its domestic
markets. This sole distributor has different outlets in different parts of the
country and hence distribution becomes easier and efficient for it.
Two other companies use their own distribution outlets in
major market centers of the country for the domestic market which may call for
strong internal strength to manage the channels. In the domestic markets, the
companies have used a mixture of advertisements and public relations. The case
companies use television advertisements mainly to create awareness in the local
markets through usually explaining the type of product they produce and where
their products are found by portraying their different locations.
Besides, the differentiation and positioning strategies in
marketing strategy formulation is only possible through promotion as what is
known and preferred is what was communicated and persuaded. Hence, this key
element of competition is found to be weak in the case companies which in turn
may be attributed to low brand image particularly in the international market.
4. CONCLUSION
As presented above, the RBV explains
that the firm’s inside out perspective is the ultimate source of its
competitive advantage in the market. This is so because firms are exposed to
similar macro environment and being affected by it similarly. The policy
framework, for-example, gives equal opportunity for firms in the textile sector
through different incentive packages indicating that all exporting textile
firms are eligible to get that benefit. Other macro environmental factors have
similar opportunities and threats to the firms.
However, it was found significant
difference among firms in their export performance (critical performance
measures for the Ethiopian textile companies as all of them need and are
encouraged to export). This can be elaborated by considering two cases in the
research. While case four exports much of its total production, it has also
forward sales of its future production, getting more demand than what it can
sell its current production.
On the other extreme, case company
two exports only few of its total production but yet unable to sell all of its
export products. In connection to this, it should be borne in mind that the
domestic market is not the preferred market for this company, but its inability
to compete in the international market forced it to be confined in this market.
Thus, it is true that the companies’ competitiveness is better explained by
their internal strengths which strongly justify the proposition of RBV.
The RBV further claims that
capabilities should be there for resources to be converted into outputs by
means of strategy formulation and implementation of operations. And resources
are found to be the significant descriptor of marketing strategy. Hence,
marketing strategy formulation in this context needs to base from effective
deployment of marketing assets and capabilities.
Generally based on the findgs
presented, the following logical conclsuons are drawn
The findings of the study indicate that the emphasis given to marketing
strategy and the marketing resources and capabilities commitment thereof were
found to be so low that the companies seemed to equate marketing strategy with
selling strategy. Furthermore, the companies failed to link their marketing
enabling environment with their marketing strategy.
Similarly, such weak link was reflected between the firms’ marketing
strategy and their market performances. Thus, the cross-case findings indicate
that marketing resources commitment is linearly linked to marketing strategy
which in turn is linked to export performances. Therefore, it can be understood
that the link between enabling environment and marketing strategy is direct and
the link between marketing strategy and marketing performances is linear.
In sum, this research extends
earlier work of El-Ansary (2006) ‘marketing strategy taxonomy’ by adding
resources into picture and advances other propositions in the existent
literatures which have attempted to relate marketing strategy and resources
based view by recasting their implications to firms’ performances.
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