3 Cases Global Marketing Hollensen: Senseo, Harley Davidson, Nokia

Assignment Global Marketing Block 2 – 2010/11 Lecturer: Jan Koghee

Group: Doris Mulleder 1591183 Franziska Philipp 1591198 Anne Vroegindeweij 1592728 _____________________ _____________________ _____________________

Table of content:

Case Senseo ............................................................................................................................. 2

Case Harley-Davidson.............................................................................................................. 5

Case Nokia ............................................................................................................................... 10

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Case Senseo

1) What are the key success factors in this industry?

As mentioned in the case private labelling is of great importance in the coffee industry. More and more customers trust private labelled products and buy them instead of a well known brand which is mostly more expensive. E.g. the discounter Aldi plays a major role in the coffee industry, especially in Germany, by being the leader in selling coffee pods. Only when it comes to fresh coffee, Kraft Foods and Tchibo are still ahead of Aldi. Supported is this success by the rating of Aldi coffee pods in the “Stiftung Warentest”, a consumer magazine who tests all sort of products. They rated the Aldi pods as “very good” on top of the rating and followed by all premium and more expensive brands.

So obviously the price is one of the key success factors. But it’s not the cheapest product which is bought most but the one where the cost/performance ratio is best. Especially when it comes to coffee the quality gets more and more important. The companies that offer highquality coffee achieve better sales and reputation than companies with lower quality. If cheep coffee is coincidental also good (Aldi!) the success is nearly predictable.

Above all is to mention that a company whose reputation in the market is generally good, will do easier do launch a new product and create demand for this new product. A collaboration between two companies can even gain more profit because they can benefit from each other’s reputation and experience. This is what happened when Philips and Douwe Egberts decided to launch a product together. Not to forget good marketing activities done by people who know their job and are able to make a co-branding strategy as it is the case with Senseo to a success.

2) Explain how the competences represented in the Senseo concept can create international competitiveness?

According to Hollensen a firm creates and develops competitive advantages in the international market interactively with the environment. They must be able to listen to their

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customers, competitors and public authorities. To show the international competitiveness the firm must use their existing resources, competences and relations and establish a competitive basis. That’s what Senseo did and does.

They showed great understanding of the market by opening up their pods and machines to be also used with machines and pods from other brands. This offers great flexibility for the customer which is exactly what she/he wants.

For the competitors of Senseo, as they were also retailers like Aldi or Wal-Mart who tried to rebuild the Senseo machines, it was quite difficult to keep pace with Senseo as their main success doesn’t come from selling their machines but from selling good coffee. And Douwe Egberts as one of the leaders in the coffee market stands for quality that the customers have trust in. This alliance works although more profit comes out of the pods sales because Philips also gets a part of the profit from these sales and not only from the machines.

Instead of creating two brands they decided to set up a new brand “Senseo” for which they created a co-branding strategy which was very successful by launching a product- innovation and creating a totally new segment where they managed to shift consumer behaviour to.

Nevertheless Philips and Douwe Egberts have to be aware of the emerging competition since the patent for coffee pods was evoked. It will therefore be necessary to further develop the Senseo by adding new product features and continue to offer high quality coffee with a reasonable price. And to obviously pay high attention to the immediate competitors to see if and how their products can be better.

3) Which threats is Senseo facing in the future sales of its product concept?

As mentioned above the competition is not sleeping. Especially when the European Patent office revoked the patent for coffee pods the competitors saw their time coming. They were now able to produce cheaper coffee pods which are still suitable for the Senseo machines as well as similar machines that could also use the Douwe Egberts coffee pods.

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So it will be of great importance to put a lot of effort in further product development concerning the Senseo coffee machines as well as the coffee pods. At the same time it is inevitable to watch the competitors closely. How and if can their products be better than the Senseo and the Douwe Egberts coffee pods? What can Philips and Sara Lee do to keep their market share on the same level or even increase it?

Marketing activities will be important as well. Such a strong collaboration like Philips and Sara Lee developed and maintain profit from their high knowledge and well skilled employees who know which marketing activities work best to hold the competitors in bay.

4) Which new markets are relevant for Senseo to enter?

As mentioned in the case the coffee pod systems are pretty good on their way in Western Europe, especially in Belgium or the Netherlands where pad-filters have already a market share of about 40 per cent. But single-serve coffee pod systems are also of increasing popularity in the rest of Europe.

A market, where this sort of coffee machines is still in their early stages, is the US. Which might also result in the fact that if you offer coffee pod machines you also have to offer coffee pods everywhere. Flexibility will be one of the key success factors and can be a great competitive advantage. The availability of coffee pods has to be guaranteed otherwise the customers will be unsatisfied. You want your coffee purchase to happen very easily and quickly and not travelling around for that one shop that offers those or only be able to order them in the internet. So to be really successful in the US market Philips and Sara Lee have to think about the distribution first. The product is already good and might also be really suitable for the American customer but if they are not able to offer easy access they might not succeed.

When we take a look at the whole retail volume for coffee machines worldwide there is still also a wide market e.g. in Eastern Europe or in Australia and New Zeeland. The markets are probably not exactly the same like in Western Europe so to have success there might be some adaptations necessary, but they should at least be kept in mind.

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Case Harley Davidson

1) Describe the HD’s general pricing strategy. What does the company’s positioning have to do with its pricing strategy?

Question one clearly asks for a general pricing strategy for HD. However, in the book ‘ Global Marketing’ by Svend Hollensen, general pricing strategies are not described, since the book focuses only on international pricing strategies. That’s why we used a different reference (Pride, 2008).

In North America, the homeland of Harley Davidson, the pricing strategy that has kept them on top is Premium Pricing (Pride: Pg. 389). This has a lot to do with their mission statement: ‘Fulfil dreams through the experience of motorcycling, by providing to the motorcyclist and general public an expanding line of motorcycles, and branded products and services, in selected market segment’. HD fulfils dreams, it represent desire, freedom, adventure and individualism. Their target audience wants to purchase the dream, a dream naturally does not come cheap, it comes in the best quality, and the highest price. The high price and quality of the HD product, also gives it the (illusion) of reputation and status.

Pricing related to positioning HD has positioned itself as a quality brand that stands for the fulfilling of dreams, through the experience of riding an all American motorcycle. Because of this, HD can adjust their pricing to the desired profit margin; their loyal customers will pay any price for the premium products. The HD products can be considered luxury goods, which automatically means, that the market segment they target and attract are middle and upper class males, who are willing to spend, for the reputation and the ‘dream’.

2) Should Harley Davidson alter its price, given strong price pressure from rivals?

Notes: Should HD change their pricing strategy in Europe? We think they should not. Considering the following:
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The competition is almost only Japanese firms. The overall Japanese mentality is one of more patience. When they enter a foreign market, they do so with a long term plan. Keeping the prices low, building a brand name abroad, setting up a good distribution and servicing network and expecting to make profit in a long term, rather than in the short term. Western firms however, have a less patient, more short term result oriented, business culture. This is not an advantage for HD, as they are a western firm, and their competition is offering almost the same quality for a much lower price, patiently awaiting their empire to build in Europe, to gain trust and status. (Hollensen: Pg. 477)

Also, as stated in the case, HD is an all American Icon. Generally, Americans are more willing to pay high prices for this icon, than Europeans. So the strongest weapon against competition, being an icon of all American quality and freedom, is not as strong in Europe, as it is in the US. Although, also Europeans do like that what HD symbolises. The question is: are they willing to pay as much?

In Hollensen’s book, Nagel (1987) mentions’ nine factors that can reduce price sensitivity (Hollensen: Pg. 479). Including: greater perceived quality of product, distinctive product, and product associated with another product; making it possible to price additional or replacement product high. All three of these factors apply to HD. This may also work in Europe.

Another reason for HD not to lower its prices is the loss of status. HD runs on the concept of status and reputation. This is something they may lose if lowering prices to same level as Honda or Suzuki, who do not have the same status label. What else can set HD part from their competition if it is not status? (Hollensen: Pg. 481)

The practise of price standardisation will give HD a consistent price image across markets (Hollensen: Pg. 485). This gives HD a stable image worldwide and an equal reputation. However, price differentiation is tempting if you consider that the European market is less willing to pay a high price, like the Americans are. But we do not think it a good idea for HD to practise price differentiation in their global marketing plan, as it will damage their consistent

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and quality brand name. It will also encourage grey market practise, which is also bad for HD name and reputation.

The challenge for HD in Europe will be to maintain standard pricing. Because Europe is becoming one market, with this, pricing is becoming more and more Global. (Hollensen: Pg. 490). Customers are expecting prices to be globally equal and as low as possible. Japanese suppliers, are producing at lower cost, and can therefore meet this expectation. HD can’t, if they want to maintain their image.

So HD needs to use all their weapons in the competition struggle. To practise standardised pricing, they need to be unique. Rather than lowering the price, HD could consider the practise of BUNDLE PRICING in Europe (Hollensen: Pg. 484). If they keep prices on the same level, but offer service for free in their 1300 resale points (and increase the sum of these service points). This would add extra value to the products. Additionally, it would enhance their reputation as high quality brand, with a strong and loyal customer base.

HD has one huge weakness: it cannot always meet demand. The Japanese producers however can, and they produce faster. This means that in the experience curve (Hollensen: Pg. 482) HD would have to lower prices but increase production, as this would lower the cost per unit. How to go about this, without losing their status and quality image, will be discussed in the next section.

3) What should HD do to improve its market share in Europe?

If HD wants to continue to be who they are, and also want to increase their European market share, they will have to somehow differentiate their product to meet European needs, without losing their image.

For example, in the case it is stated that HD successfully attracted a younger market segment in America by introducing a young professional bike Buells. They could do something similar in Europe by introducing a European line of bikes that are simpler, less costly to make, but yet not less qualitative, and has the explicit HD look. The European buyer is generally expecting

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lower prices (like Japanese brands) and she/he may be more attracted to consider the HD as it has the attractive rough motorbike image.

Additionally, they could expand their market segment by trying to boost the interest of women as customers. This is now only 11% of the consumer population. Maybe in Europe, the interest in motorcycles by women is increasing.

Also, they should continue to target younger audiences in Europe also by promoting the Buells there.

Another thing that might reduce cost (of export) would be to set up a production centre in Europe and distribute the bikes from there. This would allow HD to reduce cost at least slightly and producing European customized bikes. HD is popular in Europe for its cruise, heavyweight look. But if Europeans are not willing to pay the price, maybe a more European customized look could be produced in the European production centres. This could also take away another big weakness of HD: not being able to meet demand. And the experience curve would go up: they could lower the cost per unit.

With all this HD should not lower their prices to the level of competitors. They should remain the more expensive brand, to preserve their image and status, which is what sets them apart!

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Case Nokia

1) Prepare illustrations of the distribution channels of mobile phones from Nokia to its end consumers in the United States.

In the US mobile phone market distribution channels are different from the distribution channels we know in Europe for example. The big difference is that consumers buy their mobile phone together with the telecommunications service. That is why the channel members following after Nokia are wholesaler and retailer and not the end consumer. There are two different distribution channels of mobile phones in the US: a. Nokia – wholesaler - telecommunications retailer – end consumer

WHOLESALER

TELECOMMUNICATIONS RETAILER

b. Nokia – carrier (wireless network operator) + outlets – end consumer

CARRIER + OUTLETS

2) What are the reasons for the global leadership of Nokia in mobile phones?

According to the description of the case study Nokia is known for producing cheap and reliable mobile phones. One reason for that may be that Nokia has a long history and has been producing mobile phones since 1990s. They have been one of the first international companies in this business and the end user trusts them as a result of tradition and experience. In other countries except the USA the end users decide for a mobile phone by themselves and have a broad range to choose from, regardless the provider they choose.

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3) Why is Nokia the market leader in mobile phones on the world basis, but not in the US market?

However in US market things look differently. In the US the distribution channels are different than in other countries where users buy their mobile phones themselves. In the USA Nokia has to manage its distribution channels differently by not concentrating on marketing towards the end users only but to please other members of the distribution chain. Nokia has to please the wholesalers, retailers and carriers as they decide which mobile phones they offer to the end users (as stated in question 1). Therefore it is crucial that Nokia builds up and nourishes relationships with most important carriers in the US market. Another reason is that other mobile phone producers, e.g. Motorola early began to differentiate and to offer special designs like very thin mobile phones. But not only differentiation regarding design is important but also concerning special and new features and functions especially as most people already own a mobile phone. That is why they needed to be offered a special appeal to buy another mobile phone. What makes the situation even more difficult is the high concentration of Apple users in the USA. They first introduced the mobile phone software shop in the US and it is very difficult for Nokia to keep up with Apple 's offers.

Last but not least North America has a different dominant wireless standard, the CDMA (code division multiple access) whereas Nokia 's mobile phones are designed to operate on the global standard, GSM (global system for mobile communications). This is a big drawback when aiming at high selling numbers in the US market.

4) What can Nokia do to recapture the number 1 position in the US market?

In order to get the market leader position back Nokia has to work out a number of problems. First they should pay attention to their channel management in the US market. As the wholesaler, retailer and carrier play an important role they should absolutely work on their relationships with them and try to please them, because they are deciding which telephones are available to end consumers as end consumers buy their telephones together with their telephone service.

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Further, regarding design, Nokia already made a step in the right direction by introducing the Nokia E71 which finally offers a trendier and thinner design. With new designs they are able to keep up with their main competitors e.g. Motorola and Apple. Another crucial point are innovations and new features. In the past years Nokia did very few in this field and that is why competitors could easily outrun Nokia. Further Nokia has to work on the wireless standard as this is a crucial point for mobile phones. In our opinion the US market is big enough to make it worth some efforts in order not to lose even more market share.

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Bibliography

Pride, William M. (2008), Business, Cengage Learning

Hollensen, Svend (2007 & 2010), Global Marketing: a decision orientated approach, Pearson Education

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Bibliography: Pride, William M. (2008), Business, Cengage Learning Hollensen, Svend (2007 & 2010), Global Marketing: a decision orientated approach, Pearson Education 12