Potco and the New Slow Cooker Essay

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PotCo Case Study; Considerations for Bringing the Product to Market

Pre-Launch

Production

Distribution

Positioning

Market Position

Target Market

Marketing

Pricing

Placement

Promotion

PotCo have developed a brand new product; a slow cooker which uses a heat exchanger rather than a heating element. This creates a new version of an existing product which differs greatly from those already on the market; the running costs are much lower, which can create a significant advantage but the cooking time is extended as the heating method can take up to two hours to heat two litres of food. The product, which is envisaged as having a retail price of A$150, appears to have a great deal of potential but prior to launch there are a number of issues the company should consider. These include prelaunch considerations included production and distribution, determination of the positioning and target market, and setting up of the marketing strategy. This report has been produced to examine these issues.

2. Pre-Launch

Before launching a product to market, essential that the upstream supply chain is reviewed in order to ensure that there is sufficient coordinated production capacity, of an appropriate level, at a suitable quality level (Nahmias & Olsen, 2015). During the early stages, especially for a new product, a company has the potential to gain the competitive advantage of a first mover (Mintzberg, Quinn, & Goshal, 2003). However, in order to gain and leveraged a first mover advantage, the product need to be available to the target market, and fulfil its marketing promises (Mintzberg et al., 2003). Therefore, the first consideration with the issues associated with the production of the complete unit.

2.1 Production

PotCo is utilising an outsourcing strategy, with the components being manufactured in China, providing a lower production, compared to Australia (Wang, Signh, Samson, & D, 2011). Outsourcing production in this manner provides a potential for a number of problems, which should be recognised in order to manage and contain. For example, in a study of 35 Australian firms outsourcing components to Chinese manufacturers, it was found that the main problems related to the quality of the components, and delays in supply (Wang et al., 2011). However, these are problems which could be rectified or minimised through a number of strategies building long-term relationships with suppliers (Wang et al., 2011). Where long-term relationships exist between buyers and suppliers, suppliers are more likely to be committed to that relationship, and seek to satisfy not only contract terms but customer expectations (Hill & Hill, 2012). Therefore, it is unsurprising that the research by Wang et al., (2011) found that the implementation of proper control procedures, as well as improved communications with potential upstream suppliers, would often alleviate the problems. Therefore, it is recommended that PotCo undertakes strategic development of the relationship with their suppliers. The firm may also wish to consider contractual terms to ensure accountability for potential breaches, provide increased incentives for compliance product specifications and requirements, which may reduce the potential for cultural misunderstandings (Shenkar, Luo, & Chi, 2014)

There are also challenges associated with the logistics of manufacturing, as the cast iron pot is manufactured in Zhejiang and the heat exchanger element in Guangzhou. This indicates not only the need for very clear and accurate product specifications, as well as strict control to ensure specifications satisfied to make sure the components fit together, it also creates a fragmented supply chain, requiring additional effort into coordination (Hill & Hill, 2012). These components need to be brought together in an efficient manner to be prepared for sale, packaged and then distributed. Therefore, control not only over the components themselves but supply chain management is also essential. This latter element may be supported through the utilisation of supply chain technology, especially useful for tracking requirements and progress in real-time, facilitating communication between supply chain members in different time zones (Fawcett, Fawcett, Watson, & Magman, 2012). This may also be utilised to manage the relationships with the downstream retail elements of the supply chain (Ayers & Odegaard, 2007).

2.2 Distribution

The production of the product is only the first logistics consideration; the products also have to be distributed. The first issue is the movement of the goods from China to Australia, either as to component parts to be packaged in Australia, or as a final product. When any Australian entity, even individual, corporation, imports goods into Australia, there are potential duties payable (Britney Bowes, 2016).

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The shipping contract undertaken between PotCo and the suppliers in China will determine the various responsibilities for the export of the products from China to Australia (Ramburg, 2011). There are numerous types of contract, which goes beyond the scope of this paper, the most common is Free On Board, (FOB), will give the responsibility of the seller to send the goods to the ship and remains the owner of the goods until they are unloaded at the dock (Ramburg, 2011). However, with many types of contract, essential that PotCo understands their responsibilities and liabilities with reference to the shipping contract. With reference to the contract, they would then make arrangements for transportation, as well as insurance from the point where they gain title to the goods (Ramburg, 2011).

The goods, regardless of the shipping contract, and the strategy whether they are components, office products, will need to be delivered to the appropriate location. The company may wish to deliver products directly to large retailers in order to avoid their own storage costs and increase efficiency in the supply chain. This is utilised by a number of firms, for example, Apple often send products directly from the Apple suppliers to their downstream retailers (Lashinsky, 2012). However, this may be problematic where the organisation is adopting a fragmented distribution strategy, including using a temporary pop-up shop. Furthermore, initial demand may be uncertain, and importing goods from China may result in distribution delays (Slack, Chambers, & Johnston, 2010). This may be due to the import procedure, with the goods traversing customs (Ramburg, 2011), but it was also noted by Wang et al., (2011) that a potential problem could be delays in the supply chain. Therefore, to ensure supply, it may be advisable to hold a suitable level of product in Australia, ready for distribution. Therefore, there is also a requirement to consider suitable distribution hubs, which will provide access to the main Australian markets. The company may wish to undertake this themselves, but may also choose to utilise major wholesalers, which will reduce their own infrastructure requirements for distribution, but may also require additional price discounts as wholesalers will also want to make a profit (Ayers & Odegaard, 2007).

Therefore, there are a number of decisions which will need to be considered in terms of distribution, including the contracts from the upstream suppliers, the practicalities regarding rotation and insurance, as well as placement of the products in an area to ensure a reliable distribution to the downstream supply chain elements.

3. Positioning

When a product is developed, it is essential to determine a suitable marketing position, in order to help identify the potential target market as well as support the marketing strategy. The market position may be partly determined by the development of the product, and the source of differentiation, as well as the target market (Thompson et al., 2013). As this is a product that is ready, a consideration of the strategic fit within the existing marketplace should be considered. This may then help identify the potential target market. However, while these are being presented separately, these considerations should take place, currently rather than consecutively.

3.1 Market Position

To assess a market position, it is necessary to consider the product, and how it fits in with the current market. The product has already been described as benefiting from differentiation. Porter, (2014) identified two sources of competitive advantage; differentiation and cost advantage. Differentiation occurs where a product is able to offer features, functionality, or characteristics, which are desirable to the target market, but are not present in competing or substitute products (Porter, 2014). The advantage may be tangible, which may be protected by patents, or intangible, such as brand value. For example, in the example already used in this paper Apple, there are specific design features which are unique Apple and protected by patents, as seen with the recent court cases between Apple and Samsung (Lashinsky, 2012), as well as the intangible associations with the Apple brand (Ferraro, Kirmani, & Matherly, 2013). Cost advantage can only be obtained by one firm in each sector, and is seen when organisation is able to produce goods at a lower cost compared to their competitors, and benefit from superior profits which may then be utilised to support other aspects of the operation (Porter, 2014; Thompson et al., 2013). For PotCo, there is the competitive advantage of differentiation, as the.....

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