IN
DEGREE PROJECT INDUSTRIAL ENGINEERING AND MANAGEMENT,
SECOND CYCLE, 30 CREDITS STOCKHOLM SWEDEN 2020,
Challenges with Successful Marketing
A study to identify challenges and opportunities with introducing services of value-added-sales to customers within the prevailing steel
manufacturing industry
AMANDA EDLUND EVELYNNE GEIGER
KTH ROYAL INSTITUTE OF TECHNOLOGY
SCHOOL OF INDUSTRIAL ENGINEERING AND MANAGEMENT
..
Challenges with
Successful Marketing
A study to identify challenges and opportunities with introducing services of value-added-sales to customers within the prevailing steel
manufacturing industry
by
Amanda Edlund & Evelynne Geiger
Master of Science Thesis INDEK 2020:296 KTH Industrial Engineering and Management
Industrial Management
SE-100 44 STOCKHOLM
Examensarbete INDEK 2020:296 KTH Industrial teknik och Management
Industrial ekonomi och organisation SE-100 44 STOCKHOLM
av
Amanda Edlund & Evelynne Geiger
En studie för att identifiera utmaningar och möjligheter med att introducera tjänster mer mervärdesförsäljning till kunder
inom den rådande stålindustrin
Utmaningar med
Framgångsrik
Marknadsföring
Master of Science Thesis INDEK 2020:296
Challenges with Successful Marketing
A study to identify challenges and opportunities with introducing services of value-added-sales to customerswithin the prevailing steel manufacturing industry
Amanda Edlund Evelynne Geiger
Approved
2020-06-08
Examiner
Cali Nuur
Supervisor
Frauke Urban
Commissioner Contact person
Abstract
Marketing is an essential part of the overall organization when it comes to introducing a company’s new offerings to the market. Therefore, customers need to be informed and aware of the company’s entire portfolio to be able to make correct decisions that benefit them. From a company’s perspective, an extended portfolio provides opportunities to explore new markets and improve the scope of its operations. The growing demand of additional services enables development of a more service-oriented business with value-added-sales for the industry.
Consequently, the importance of finding an appropriate marketing strategy that promotes communication and long-term relationships with customers is relevant. Value-added-sales may be introduced to a greater extent, in order to maintain competitiveness among others.
The purpose of this study is to contribute to an increased understanding of how marketing affects steelmaking companies to provide and inform customers with value-added-sales. Opportunities and challenges have been identified from employees’ point of view concerning the process of introducing value-added-sales, to later mitigate them with support factors to promote favorable marketing.
To fulfill the research purpose, a case company was used, which is an official global steel company that traditionally provides product-based services based in Sweden, however, now focusing on extending their portfolio with value-added-sales, e.g. with supplementary services. The thesis has a qualitative approach by including internal interviews with the case company’s employees, as well as employees from an additional company that has a strong connection to the case company.
Furthermore, a literature study was conducted to analyze existing theories in the research field to
obtain suitable results. The results have emphasized the importance of education and training as
well as decent relationship with the customers. The main findings contributed to factors concerning
challenges with providing value-added-sales, which aimed to be mitigated: Cost-focused customers,
Time-consuming, Internal knowledge, Outperform the customers, Internal support, and Sales focus. Accordingly, appropriate support factors were proposed to promote marketing of selling value-added-services.
Keywords
Marketing strategies, steel manufacturer, value-added-sales, upgrading a customer, product-based, service-oriented,
marketing, sales performance, communication.
Examensarbete INDEK 2020:296
Utmaningar med framgångsrik marknadsföring
En studie om att identifiera utmaningar och möjlighetermed att introducera tjänster med mervärdesförsäljning till kunder inom den rådande stålindustrin
Amanda Edlund Evelynne Geiger
Approved
2020-06-08
Examiner
Cali Nuur
Supervisor
Frauke Urban
Commissioner Contact person
Sammanfattning
Marknadsföringen utgör en viktig del i den övergripande organisationen när det gäller att introducera ett företagets nya erbjudanden på marknaden. Därför måste kunderna informeras och vara medvetna om företagets hela portfölj för att kunna fatta korrekta beslut som gynnar dem. Ur ett företags perspektiv, ger en utökad portfölj möjligheter att utforska nya marknader och förbättra företagets omfattning. Den växande efterfrågan på ytterligare tjänster möjliggör utveckling av en mer serviceinriktad verksamhet med mervärdesförsäljning för branschen. Således är det av vikt att hitta en lämplig marknadsföringsstrategi som främjar kommunikation och långsiktiga relationer med företagets kunder. Mervärdesförsäljning kan införas i större utsträckning för att upprätthålla konkurrenskraften på marknaden.
Syftet med denna studie är att bidra till en ökad förståelse för hur marknadsföring påverkar stålindustriföretag för att förse och informera företagets kunder med mervärdesförsäljning.
Utmaningar och möjligheter har identifierats ur medarbetarnas perspektiv när det gäller att införa mervärdesförsäljning, för att senare mildra dem med stödfaktorer för att främja en gynnsam marknadsföring.
För att uppfylla forskningsändamålet användes ett fallföretag, som är ett officiellt globalt stålföretag i Sverige, men som nu fokuserar på att utöka sin portfölj mervärdesförsäljning, t.ex. med kompletterande tjänster. Avhandlingen har ett kvalitativt tillvägagångssätt genom att inkludera interna intervjuer med fallföretagets anställda, samt anställda från ett ytterligare företag som har en stark koppling till fallföretaget. Vidare genomfördes en litteraturstudie för att analysera befintliga teorier inom forskningsområdet för att erhålla lämpliga resultat. Resultaten har betonat vikten av utbildning och anständigt förhållande till kunderna. De viktigaste fynden bidrog till faktorer som rör utmaningar med att tillhandahålla mervärdesförsäljning, som syftade till att mildras:
Kostnadsfokuserade kunder, Tidskrävande, Intern kunskap, Överträffa kunderna, Internt stöd, och
Försäljningsfokus. Följaktligen föreslogs lämpliga stödfaktorer för att främja marknadsföring av försäljning av mervärdestjänster.
Nyckelord
Marknadsföringsstrategi, ståltillverkare, mervärdesförsäljning, uppgradering av kund, produktbaserad,
serviceorienterad, marknadsföring, försäljningsutveckling, kommunikation.
Abbreviations
CEO – Chief Executive Officer CMS – Content Marketing Strategy
CRM – Customer Relationship Management HMS – Horizontal Marketing System OEM – Original Equipment Manufacturer VAP – Value-Added Partnership
VMS – Vertical Marketing System
Table of Contents
1.1 Background ... 1
1.1.1 An Overview of the Steel Industry ... 1
1.1.1.1 Steel Market ... 2
1.1.1.2 Competitive Dynamics ... 3
1.1.2 Importance of Marketing ... 4
1.2 Problem Formulation ... 6
1.3 Purpose and Research Questions ... 6
1.4 Disposition ... 7
2. Literature Review & Theoretical Framework ... 8
2.1 Strategy Implementation ... 8
2.1.1 The Content of Strategy... 9
2.1.2 The Context of Strategy ... 10
2.1.3 The Process of Strategy ... 12
2.1.4 The Outcome of Strategy ... 13
2.2 Marketing ... 14
2.2.1 Direct Marketing ... 14
2.2.2 Relationship Marketing ... 15
2.2.2.1 Marketing Channels ... 16
2.2.2.2 Vertical- and Horizontal- Marketing System ... 17
2.2.3 Sales Performance ... 19
2.3 Upgrading Opportunities ... 20
2.4 SWOT ... 21
2.5 AIDA Model ... 24
2.6 Porter’s Five Forces... 25
2.7 Marketing Mix ... 30
3. Method ... 33
3.1 Research Design ... 33
3.2 Research Process... 34
3.3 Data Collection and Analysis ... 35
3.3.1 Interviews... 35
3.4 Data Analysis ... 39
3.5 Ensuring Quality of Research Design ... 39
3.6 Ethical Considerations ... 40
4. Results and Analysis... 42
4.1 Challenges and Opportunities... 42
4.2 Mainstream Sales... 44
4.2.1 Challenges ... 44
4.2.2 Opportunities ... 45
4.3 Services Sales ... 46
4.3.1 Challenges ... 46
4.3.2 Opportunities ... 47
4.4 A Marketing Perspective ... 48
5. Discussion ... 50
5.1 Emerged Themes ... 50
5.1.1 Education to Gain More Knowledge ... 50
5.1.2 Improve Customer Management System ... 52
5.2 Marketing Support Factors ... 55
5.2.1 Porter’s Five Forces ... 56
5.2.2 Marketing Mix ... 58
5.3 Proposal for Successful Marketing ... 60
5.4 Sustainability Implications ... 61
5.5 Ethical Implications... 61
6. Conclusion ... 63
6.1 Main Findings ... 63
6.2 Relating the Findings to Previous Research ... 65
6.3 Contribution to Knowledge ... 65
6.4 Limitations ... 66
6.5 Future Recommendations and Implications ... 66
References ... 68 Appendices ...
Appendix I: Questions asked in the interviews ...
Appendix II: The Number of Challenges and Opportunities Mentioned in the Interviews. ...
List of Figures
Figure 1. The Swedish Industry Carbon Emissions 2018. ... 2
Figure 2. Categorized steel products. ... 3
Figure 3. The process including the factors of implementing a strategy. ... 9
Figure 4. Visual elements of McKinsey’s 7S model. ... 11
Figure 5. The Service Marketing Triangle. ... 15
Figure 6. Communication in a B2C-business. ... 16
Figure 7. Vertical Marketing System (VMS). ... 18
Figure 8. Horizontal Marketing System (HMS). ... 19
Figure 9. The external and internal factors in a SWOT analysis. ... 21
Figure 10. Important internal and external factors while using SWOT analysis. ... 23
Figure 11. The formal advertising model AIDA. ... 24
Figure 12. Porter’s five driving forces for industry competition. ... 26
Figure 13. Different distribution channels... 27
Figure 14. Factors that affect the power of suppliers according to Porter’s Five Forces (1980). .. 28
Figure 15. Factors that affect the power of buyers according to Porter’s five forces (1980)... 29
Figure 16. The 4 P’s model and the extended 7 P’s model. ... 30
Figure 17. Research design of the thesis. ... 34
Figure 18. The extended version of the AIDA model. ... 49
Figure 19. A CRM diagram including essential functions within the organization. ... 53
Figure 20. The potential threats and rivalry among competitors with regard to the case company and Porter’s Five Forces. ... 58
List of Tables Table 1. The relationship between the factors in a SWOT analysis. ... 21
Table 2. An overview of the interviews. ... 35
Table 3. Details of the interviews done during the research process. ... 37
Table 4. Summary of the interviews from Company B. ... 38
Table 5. The results based on the interviews. ... 42
Table 6. A summary of the identified challenges and its themes. ... 43
Acknowledgements
This report was written in 2020, however, solely during spring, as an MSc master’s thesis in Industrial Management and Engineering at the Royal Institute of Technology, KTH, located in Stockholm, Sweden. Firstly, we would like to express our gratitude to the steel company that has allowed us to carry out this thesis. More specifically, we would like to thank our supervisor at the company who has provided engaging and valuable inputs with her knowledge and motivation when needed. Also, we would like to thank everyone at the Swedish office that helped us make this thesis doable.
Secondly, we would like to thank our supervisor at KTH, Dr. Frauke Urban, who has provided valuable guidance throughout the process by contributing support and assessments to the formation of this report. Her inputs to this thesis have been helpful, and we are sincerely appreciated and gratefully acknowledged.
Finally, we would like to thank all interviewees who offered us their time and provide valuable input that contributed to the findings of this study. Relevant areas of marketing, along with the perceived challenges and opportunities, when providing a customer with value-added-sales have been discussed between us and the interviewees to come up with conclusions.
Thanks to everyone who contributed their time to make this research possible, and foremost to the five years of education!
Amanda Edlund & Evelynne Geiger
Stockholm, June, 2020
1
1. Introduction
This chapter presents the purpose by providing the reader with sufficient material to understand the context of this thesis, due to what will be investigated. Although, an overview regarding the topic of interest is performed in this part of the thesis. The chapter is distributed with sections as follow; background, problem formulation, purpose and research questions, and disposition.
1.1 Background
This thesis aiming to investigate one of Sweden’s largest incumbent steel manufacturer which producing high-premium-quality steel, such as strip-, plate-, and tube- products. They are known for close collaborations with customers, due to their ability to design customer-specific solutions by superior manufacturing technologies. They aim to deliver sustainable and efficient products in order to enhance long-term relationships, thus, very traditional and conservative activities.
Therefore, incumbents need to outperform and meet the competitors by finding profitable solutions by involving potential investments to stay competitive at the current market because of the increased demand for high-strength steel. Hence, the steel manufacturer of high-premium- quality steel are in need of eye openers for innovative solutions and suggestions, as well as marketing development.
1.1.1 An Overview of the Steel Industry
The traditional steel sector belongs to an incumbent industry. The technology that enabled mass production of steel was first introduced in 1850. Previous aim has been towards incremental innovations focusing on development of the existing core products to meet customer needs (Worldsteel, 2020). However, the focus has, somehow, changed since 1850. Nowadays is the climate a priority, not only within the steel sector but for all companies with carbon footprints. EU has, recently, set a goal to decrease carbon emissions with 40% in the year 2030 compared with 1990. The foremost actions to contribute to the requirements concerns changes within nuclear power and energy-intensive industries, amongst the steel sector. (Jernkontoret, 2018)
Nevertheless, the Swedish steel sector invested in development to stay competitive at the steel
market. To maintain the global position, of which the Swedish steel sector possessed, have Swedish
steel companies increased the specialization and, therefore, aimed the production to generate more
advanced steel qualities. Approximately 85% of Sweden’s total export share comes from the steel
sector, where 60% of the production is alloy steel. An amount of 60% is high since the rest of
Europe, the U.S., and Japan produces around 10-15% alloy steel each. It is due to the production
of alloy steels that Sweden can stay competitive among others. (Jernkontoret, 2018) Thus, it is
important to understand that China is beyond other steel producers in terms of producing crude
steel. China’s steel production (exported 94,5million tone steel, which is 20 times the total steel
2
production in Sweden) has increased copiously since 2000 and are now competing against the rest of the world (Jernkontoret, 2018; Worldsteel, 2020). Therefore, Swedish producers must develop new ideas and expand their market shares by finding new innovative solutions.
1.1.1.1 Steel Market
The steel industry is considered as an essential factor in the EU economy and has further promoted growth, new employments, and innovation. According to the European Commission (2020) does the European steel production manufactures more than 177 million tons per year, accounting for 11% of the global output and is, therefore, the second-largest steel producer in the world after China. Furthermore, the distribution of steel production in Europe stands for 23 EU countries among a total number of 500 production sites.
The Swedish Environmental Protection Agency, Naturvårdsverket (2019), estimated in 2018 that the iron- and steel- industry represented 33% of Sweden’s total amount of carbon emissions, see Figure 1. Although, steel is an essential component in almost everything that exists, is the need for development crucial in order to decrease carbon emissions. Therefore, incumbent steel producers could expand their product portfolios and attract new customers to stay profitable and, consequently, decrease their steel production. Alternatively, changing fuel sources can contribute to reduced emissions, however, it will cause a huge economic and cost issue.
Figure 1. The Swedish Industry Carbon Emissions 2018.
According to the European Steel Association, Eurofer (2020), is the steel sector of fundamental importance for the competitiveness of the European manufacturing industry. The construction sector, automotive industry, mechanical industry, appliance industry, etc., are dependent on steel
33%
19%
18%
9%
8%
6% 5%
2%
Carbon Emissions in Sweden 2018
Iron- and Steel- industry Mineral industry Refineries
Chemistry industry Others
Paper- and Pulp- industry Metal industry
Food indusrty
3
components to produce their products. Therefore, the core foundation of the European manufacturing industry is, hence, crucial for future growth and prosperity.
Bell (2019) has, currently, discovered that there are over 3500 different qualities of steel with various physical and chemical properties and are continuously developing to offer more sophisticated products to a specific application. In essence, the properties are determined by the amount of carbon as well as the impurities and additional elements of each steel quality. Further, the steel products can be categorized according to their shapes and applications, see summarized description in Figure 2.
Figure 2. Categorized steel products.
1.1.1.2 Competitive Dynamics
Most industries are dynamic, meaning that they are dependent on several factors that affect the outcomes and results. There exist two perspectives of which determine dynamicity, either at a macro- or micro- level. The macro-level perspective highlights the impacts on the whole industry cycle, mainly the customer’s power of dealing and new market entrants, while individual business transactions stand for the micro-level perspective. (Grundy, 2006) The dynamicity causes consequences as the cycle processes. In one way does the dynamic impact on factors which are favorable for the industry, thus, in another way boosting other factors which are unlikely unfavorable. There is, at one point, at a specific time, when the favorable factor meets the unfavorable factor in equilibrium. The equilibrium is the optimal option, however, not always possible to maintain because of the dynamic industry. Considering both evolutional and ecological aspects as the industry’s market develops due to its influence on the natural competition among companies (Soberman & Gatignon, 2005). It is, however, difficult to determine whether something evolutionary or ecological affects the natural rivalry. Dynamicity has been a huge concern for the
•Plates
•Coils
•Strips
Flat Products – Commonly used in the manufacturing and automotive industries with higher quality requirements
•Rods
•Wires
•Shapes
Long Products – Commonly used in lower quality considerations
•Valves
•Flanges
•Fittings
Other Products – Mainly used as pipe material
4
steel industry because of its sensitivity of being affected by external factors, such as politics, governance, etc.
1.1.2 Importance of Marketing
Recently, customer-experience-values have brought greater importance and, therefore, are an essential element concerning company’s marketing function. Prior research has shown that marketing is important and affects the overall business performance in a positive way (O’Sullivan
& Abela, 2007). In order to enhance the function of marketing and promote innovation by, alternatively, expanding the product portfolio, must firms embrace the ability to upgrade with e.g.
value-added-sales. However, providing value-added-sales is considered to be crucial due to customer loyalty and satisfaction since entering new markets often are complicated (Oh et al., 2007;
Shobeiri et al., 2013). Companies within industries that offer products and services can benefit from customer experience to create and improve sustainable competitive advantage (Srivastava &
Kaul, 2014).
Currently are incumbent traditional businesses that produce commodity-oriented products, like steel companies, facing increased global competition. Companies are, therefore, forced to upgrade their offerings to meet customers’ unique needs (Skarp & Gadde, 2008; Toften & Hammervoll, 2013). The upgrading of offerings can be mitigated by developing and extending current product portfolios, entering new markets or encourage long-term customer relationships, etc.
Furthermore, appropriate marketing enables companies to identify customers’ needs and, thereby, anticipatable and, further, possibly meeting them. The correct development of a fundamental marketing strategy emphasizes business success, due to achieving set goals regarding budget and other activities. (Grönroos, 1991) Generally, a business marketing strategy consists of a mix of different frameworks combined with integrated tools. Previous research has studied the concept of marketing (Burton, 2008), however, not directly appropriate to the steel industry. On one hand, the extension of products and how to apply suitable marketing strategies have been studied by Skarp and Gadde (2008) with regard to the steel industry. On the other hand, it has not covered the transition towards more service-oriented offerings, solely the issues with upgrading existing products, hence, there exist drivers to investigate the certain area. Mainly, the content of marketing is widely studied in literature and applied in general contexts.
Currently, it appears to be a gap in research concerning appropriate marketing focusing on how
services influence the actual sales function. Mainly, the degree of impact the sales performance has
to provide service-offers (Reinartz & Ulaga, 2008). The reason is the recent focus, which has been
towards product-oriented businesses instead of service-oriented businesses (Ettlie & Rosenthal,
2012; Kindström & Kowalkowski, 2009). Indeed, the literature lack depth in knowledge regarding
marketing and sales in order to contribute to understanding the selling process, as well as the
interference and desire of services-orientation. Therefore, it is essential to investigate the possibility
of improved marketing promotion concerning the industry of interest and study the opportunities
with product portfolio extension with value-added-sales. It will benefit both the case company and
other companies within the field to investigate the opportunities and challenges with service-sales.
5
Recent research shows that different factors can be applied to support marketing and encourage the choice of the steel manufacturer’s way of market new offerings. There are a plethora of different models and suggestions that can be applied, but this thesis has chosen to investigate two different frameworks with different applicable tools. The framework will be presented later in the thesis and more in-depth explained. Although, the two frameworks concern a company’s competitive position with regard to the market it concerns. This thesis will, therefore, cover both to compare them, find similarities and dissimilarities, to later built up enough knowledge and understanding to be able to propose the best model and, thus, answer the research question.
Moreover, the intention to determine market plans by a comprehensive evaluation of the business brand and products to identify the brand’s position at the market. To access an as wide community as possible does several aspects need to be evaluated, such as gender, age, ethnicity, etc., thus outside the scope of this study. Companies run greater chances to successfully enter new markets if they have an established marketing strategy. Typical frameworks for vital marketing strategies are Porter’s Five Forces or Marketing Mix. Some, among several, tools that often is included are e.g.
SWOT-analysis, alternative communication channels, and customer relationship management (CRM). (Kotler, 2000b) Hence, the framework depends on recent outcomes and improvements to achieve future success. Although, all tools basically determining opportunities (positives) and challenges (negatives) with entering established, or new, markets.
Nevertheless, there exist different types of marketing, not only different types of strategies.
Marketing has, recently, experienced a transition shift where traditional marketing has move towards digital marketing. Digital marketing has become a normative appearance in individual’s daily lives. Digital technologies are continuously used, and advertisings display all the time compared to traditional mass media marketing. Innovative marketing methods enable companies to reach out to an unpredictable audience. (Todor, 2016) Therefore, digital communication channels are advantageous for companies in order to stay competitive since it permits companies to develop direct contact and dialogues with customers, however, this thesis will not cover that concern.
This thesis discusses the prevailing situation regarding the current marketing situation at a particular steel company. It has been found that the marketing situation is, somehow, undeterminable.
However, creating value and making customers understand the value of additional sales has been problematic. Hence, the role of salespeople in value creation has, recently, been explored in addition to the essential role of marketing functions within organizations (Haas et al., 2012).
Previous research has shown that long-term relationships with customers require value-added
commitment from the seller (Liu & Leach, 2001; Blocker et al., 2012). Hence, the focus has changed
from communicating the company’s value to creating value for the particular customer. At present,
this concept is unexplored regarding the prominent role of creating value-added-sales concerning
customer behavior.
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1.2 Problem Formulation
Manufacturing companies within the steel industry are undergoing competitive and accelerated changes at a global level, which challenges companies to frequently develop their global production, service, and distribution network. Therefore, companies need to respond by including key stakeholders in their systems, such as customers, suppliers, and distributors within the organization (Olhager et al., 2015).
In a traditional steel manufacturing company, the main focus has been to deliver optimal physical products to the customer. Hence, the existing customer segment is familiar with the offered products and the received support concerning the initial purchase. Therefore, the customer may not be familiar with extended range of additional services that the company provides, due to e.g.
indistinct marketing communication channels, etc.
Services offered, additionally to the core product, will require a high degree of service commitment, as well as close customer relations to facilitate the daily performance of the customers’ tasks (Baines
& Lightfoot, 2013). The offered services are regularly a part of the manufacturing process and including e.g., processing of the steel, engineering support, ready-made parts, kit solution, etc. A distinct marketing strategy with relevant communication channels is required to enhance a company’s ability to inform and provide customers with additional services. Thereby, companies can profit from broadening their offerings to more value-added features to create customer value after the initial purchase of a product. Consequently, if the competence and usage of communication channels are lacking, it affects factors such as the competitive edge, customer loyalty, added upgrades and up-time promises, etc., negative. A challenge, thence, is to find a solution how to manage challenges with an appropriate marketing strategy which encourage promotion of favorable value-added-sales to a customer.
1.3 Purpose and Research Questions
This thesis aims to investigate how a manufacturing company within the steel industry can benefit from improved communication in order to supply more value-added-sales. A fundamental focus on marketing strategies within the organization is required to succeed with propositions of additional services. The customer-value and profit will increase by redefining a business from being preliminary product-centric to include more service-oriented sales.
By, rigorously, suggesting how marketing can support and be developed within the business, a higher level of value-added-sales can be promoted, along with a greater insight concerning customer demand. Based on the purpose has the two following research questions been defined in order to accomplish successful promotion:
RQ1: What are the main challenges and opportunities, for a traditional steel manufacturing company, when providing a customer with additional value-added-sales?
RQ2: How can the identified challenges be mitigated with support factors to promote marketing?
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1.4 Disposition
The thesis is distributed and divided into six chapters, structured as follows:
Chapter 1 – Introduction: The first chapter delivers a brief introduction to the area, which the thesis covering. Also, generating an understanding of the problem and purpose of the investigation. The introduction includes the research questions and, ending by executing the delimitations and disposition of the thesis.
Chapter 2 – Literature Review and Theoretical Framework: The second chapter covers the explored literature and theories used, which are grounded on the frameworks ought to be developed in the thesis. Mainly, covering previous research within the concerned field. The frameworks presented are: Porter’s Five Forces and Marketing Mix.
Chapter 3 – Method: The method represents the methodology of the thesis. It is motivated and in detail described. The chosen research design, approach, and process are presented along with the methods used in order to collect empirics. It does also include and discussing the quality of the research and ethical considerations.
Chapter 4 – Results and Analysis: This chapter presents the results from collected interviewed data.
The empirical findings are, basically, from qualitative data and primary sources. The results will cover be presented according to the two research questions. Furthermore, it will include an analysis of the presented results.
Chapter 5 – Discussion: This chapter will discuss the main results in contrast to the findings from the literature. Different alternative frameworks and tools are going to be discussed in order to present a suitable conclusion.
Chapter 6 – Conclusion: The last chapter concerns the conclusion. The conclusion concludes all the key findings. The conclusion will be rigorous, dependent on the literature and findings in the thesis.
The chapter and thesis will end with suggested recommendations for future research combined
with implications based on the study.
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2. Literature Review &
Theoretical Framework
This chapter presents an overview of existent recent research and the body of knowledge concerning the area of interest.
The literature review assists the operation of constructing the thesis, hence, short descriptions concerning relevant subjects are presented. It will, also, be the ground for the discussion in relation to the empirical findings.
Furthermore, the purpose of the two last sections in this chapter is to provide knowledge concerning literary marketing frameworks, based on literature, to later be able to develop identify improvable factors for the industry of interest. The theoretical frameworks covered are Porter’s Five Forces and Marketing Mix. The frameworks are the basis and core of the discussion and conclusion later on.
2.1 Strategy Implementation
To accomplish long-term relationships, within both an organization but also to the customers, execution of plans and strategies are required (Kotler, 2000a). Due to obstacles in implementing a strategy, companies need to obtain a profound understanding of how to achieve and adapt the changes created by environmental forces, e.g., physical and uninfluenced nature forces. These environmental factors are mainly influenced by the strategic management that supports and manages the company’s ability to remain profitable and to create optimal positioning in the current competitive environment. Strategy implementation translates the actions, where else the undecided and future positioning of the strategy formulation turns into actions.
Previous research has shown that more than 70% of organizations failed to implement new strategic initiatives. Hence, shifting focus towards essentials of the achievement of executing instead of the formulation of a strategy. (Okumus, 2003) Moreover, according to McKinsey &
Company is the construction part of a strategy only one out of seven dimensions that the company
exhibits (Baishya, 2015).
9
Consequently, several implementation factors have been suggested when considering implementation of a strategy, including strategic content, strategic context, process, and outcome, see Figure 3. The key letters below describe the factors (Okumus, 2003, p.876);
(a) Changes in the external environment influence the strategic context and force organizations to deploy new initiatives
(b) Problems and inconsistencies in the internal context require new initiatives
(c) The strategy is implemented in the internal context, and the characteristics of organizational structure, culture and leadership influence the process factors
(d) Having an organizational context that is receptive to change is essential for the successful implementation of strategy
(e) The process factors are primly used on a continuous basis to implement a strategy and manipulate the internal context
(f) The characteristics of the context and process factors and how they are used directly influence the outcomes
Figure 3. The process including the factors of implementing a strategy.
2.1.1 The Content of Strategy
Erin Kissane (2011) explains the importance and background of content strategy in her book:
”Content is perfectly appropriate for users when it makes them feel like geniuses on critically important missions, offering them precisely what they need, exactly when they need it, and in just the right form.
All of this requires that you get pretty deeply into your users’ heads, if not their tailoring specifications.”
Furthermore, considering the strategic content as the consistent overall strategic direction for
designing and deciding new, clearly defined initiatives by a content marketing strategy, CMS, within
the company. The first step refers to the importance of why and how a strategy is initiated. Moreover,
an effective strategy takes cognizance of critical factors in delivering a strategy such as; demand,
behavior, expectations of the customer segment, actions, strengths, and strategies of competitors
to define the target audience. (Okumus, 2003) Concluding, a content strategy is essential to
accomplish aimed objectives. Hence, it is vital to develop the content strategy in order to move
forward in the implementation process.
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2.1.2 The Context of Strategy
The strategic context refers to the uncertainties and circumstances which influence the crucial organizational process and the content of strategy that affects the ability to create and implement a strategy in an effective way. There is a distinct difference between two components in the strategic context, namely the external context and the internal context. The external context involves the uncertainties derived from the environment. Hence, adopting the new strategy to market conditions trends and development before the implementation of the strategy is complete.
Moreover, the internal context comprises the internal structure within a company, including organizational structure, organizational culture, and leadership. (Okumus, 2003)
Organizational Structure – The organizational structure requires to continuously adapt to the strategic initiatives to ensure quick and successful implementation, as it is crucial to achieve the strategic outcome. Organizations need to adopt a more flexible and less hierarchical structure in order to achieve successful implementation (Burnes, 2011). Thus, authority and responsibility tend to be affected in flattered hierarchy (Senior, 2002). Indeed, less hierarchical organizations encourage continuous improvisation and innovation, and are, therefore, more likely to keep their positions in the competitive environment (Brown & Eisenhardt, 1997).
Organizational Culture – The effect of organizational culture has recently had a more significant impact as awareness among the population regarding how it affects the employees and organizations increases. (Ahmadi et al., 2012).
The organizational culture is a collection of intangible phenomena such as sharing norms, values, and attitudes that determine the quality of an organization’s habits and natural relationships.
According to McNeal (2009), a culture is formed within the organization to answer the challenges a company counter. Constant changes from external factors force the organizational culture to adapt to the external environment to survive. Employee-related variables also play a significant role in confronting the challenges, such as satisfaction, commitment, cohesion, and performance.
Before implementing the strategic initiative, the organization must consider different aspects of
which can generate a higher degree of success (Ahmadi et al., 2012).
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Prerequisites for a company to be successful require adopting changes to increase demands from the outside world. McKinsey 7’s framework is a compelling tool that refers to seven internal aspects that need to be embraced within an organization (Baishya, 2015). The seven elements are: shared values, style, staff, skills, structure, strategy, and systems, as illustrated in Figure 4.
Figure 4. Visual elements of McKinsey’s 7S model.
A possible way to define the different elements is to classify them into separated segments, soft or hard, where four are considered soft as they represent the direction an organization should take.
Furthermore, the soft elements are the basis for considering the three hard elements, structure, strategy, and system, which possess the ability to change and create a more comprehensive strategy.
(Khiew et al., 2020) However, the thesis does not execute this model, due to the thesis aiming to face the challenges not find a particular strategy. Indeed, highlighting the importance of understanding the implementation of strategies.
Leadership – Although, the implementation of a strategy involves all members within an organization, the chief executive officer (CEO) is responsible for the final performance and outcome of the strategic initiative of the organization. (Okumus, 2003)
Leadership involves the overall responsibility, from leaders at all levels, of strategy implementation, and defines as the ability to influence a group of members to achieve the main objective. However, good leadership enquires involvement of behavior consistency. The definition of leadership is, somewhat, not yet common determined. Existing literature has discussed whether a definition is clear or not; thus, several approaches have been discovered (Rost, 1993). Scholars agree that leadership possesses relevance in the manner of achieving success within an organization.
Shared Values Strategy
Systems
Style
Staff Skills
Structure
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2.1.3 The Process of Strategy
The process of strategy refers to activating necessity within an organization to implement strategic initiatives and including operational planning, resource allocation, people, communication, and control and feedback.
Operational planning – Operational planning defines the process for the initiation of new initiatives and involves a comprehensive detailed plan of activities, such as time-limited adoption of all involved steps and elements needed to trigger the process towards achieving the objectives of the integrated strategy. (Fridrich et al., 2015) Therefore, members involved, both require obtaining a profound implication of the new strategy and further, fully understand and undertake the right actions to maximize the potential of successful implementation (Speculand, 2009).
Resource Allocation – In this part of the implementation process, all necessary resources arise from an economical-, physical-, human-, and organizational- point of view need to be considered. In addition to these factors, knowledge, time, and expertise must be available to delegate responsibility to enhance the activities. (Okumus, 2003)
Prior research revealed that implementation of new strategies usually exceeds the expected time frame resulted from a lack of rigorous assessment of planning or due to wrong priorities during the execution. Therefore, it is beneficial to determine which activities that have the highest priority to obtain the resources needed right in time. (Beer & Eisenstat, 2000)
Consequently, the resource allocation process is crucial as an asymmetrical depiction arises if the actualized strategy referring to the unaligned resource allocation with the overall strategy to enhance strategical positioning. Therefore, it is of importance that the allocation is decided, at several levels within the organization and, also, monitored to control purposes of the process.
(Bhasin, 2018)
People – The activity “people” account for people’s perspectives and their driving force to encourage the success of the strategy (Zafara et al., 2014). Furthermore, motivated people of different interests should be taken into consideration to counteract diversion or delay that can interrupt the process of implementation. Guth & MacMillan (1986) observed employee’s eventual reduced motivation as a probable consequence of jeopardized interest.
Communication – As in various concepts, communication is an imperative prerequisite for establishing healthy personal relationships where all individuals included, together strive towards the common goal (Bucăţa & Rizescu, 2017).
Before adopting any strategy, the staff members must fully understand and feel motivated to pursue
the concept to complete the implementation. Implementation of a strategy is impossible unless it
is thoroughly understood and cut down into detailed action steps. As the top managers design a
new initiative, the strategy is implemented from the bottom up within the organization. Therefore,
the communication is considered as essential and contributes to increased motivation for the
foundation and importance of new initiatives. (Speculand, 2009) With a transparent strategy,
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everyone within the organization, can notice changes and later, adapt accordingly, to the new directive. (Rapert et al., 2002)
Internal communication is a significant factor when implementing new strategies within an organization. Indeed, communication between the organization and the surrounding world, such as customers, suppliers, and partners are essential in strengthening the brand by establishing healthy relationships. (Argenti et al., 2005)
Furthermore, communication has a crucial role in transferring knowledge, education, and learning to understand the complex process of organizing processes, organizational context, and its implementation. (Li et al., 2008)
Control and Feedback – During the final phase of the organizational processes, efforts are compared to the predetermined goal. Within the organizational design communication channels are crucial for proper implementation during, and after, implementation through proactive management.
Highlighting the various phases in order to be able to detect and locate potential issues, above all, that have arisen during organizational planning and communication before it is too late to make necessary correction. (Band & Scanlan, 1995)
Lastly, monitoring all activities, also the external environment, requires to be established to provide feedback on whether the strategy is succeeding or not. As a result, organizations can evaluate if the current strategic plan and standards are obsolete if the external conditions have significantly changed. (Ittner & Larcker, 1997)
2.1.4 The Outcome of Strategy
When implementing a strategy aimed at serving the individual demand of the customer, it is beneficial to divide customers into separate groups with familiar requirements or characteristics.
To not mislead or waste resources when the organization attempts to reach an entire market and not a specific target group. In other words, marketing strategies aim to help companies build long- term relationships with customers and, thereby, increasing profitability. (Kotler et al., 2008) It is essential within large homogeneous organizations to categorize buyers into smaller segments because of requirements, resources, locations, etc. Hence, the company streamlines the ability to communicate with customers, thereby, can the unique needs be mitigated with customized offers.
Identifying customer demand ought to be done by complementing the segment strategy, along with
the product differentiation strategy, which refers to the company’s unique and competitive
offerings. (Smith, 1956)
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2.2 Marketing
The marketing department at steel companies, is responsible for the focus concerning necessary components to create and fulfill satisfactory exchanges between the company and the consumer.
Furthermore, the task and function of marketing is to define the target group at the market to develop a suitable marketing mix for certain target segment (Crittenden, 2005). As the marketing department promotes the business and drives the sales of delivering products and services, does it hold an essential function within a company, especially regarding development of the business performance (Johnson, 2019). Previous research has covered a wide range of different marketing strategy tools, some of them will be covered in the next coming sub-sections.
2.2.1 Direct Marketing
Traditional incumbent companies can use direct marketing to, in a simple way, determine the willingness a customer possesses to buy a product or service. The degree of willingness can be described as the willing to buy, able to buy, and ready to buy, etc. By using this type of marketing is a complete understanding of the customer’s needs acquired. Mainly, firms can customize a suitable customer value according to the significant customer (Orme, 1999). Using direct marketing can either be aggressive or more sensitive. Attracting new customers is the way of being more aggressive, while focusing on customer retention is to be more sensitive. However, traditional general marketing has solely maintained the function to attract new customers, thus, controlling and embracing the existent customer segment is as essential. Marketers can gain in-depth knowledge regarding the customers’ needs due to analyzing existent data concerning previous purchases. Individualized advertising can, thereby, be promoted and delivered. Steel companies are considered as traditional and, therefore, need to develop more sensitive direct marketing.
To achieve acquiring new customers and, at the same time, attract new once, is it essential for
marketers to provide product- or service- advertising at the exact right moment. This is important
for steel makers, especially, due to their way of producing material. Hence, their batches are often
high and require to be stored in stocks which eventually cannot always be an option. Customized
direct marketing will lead to more valuable advertising and efficient results. A third party may use
such results, meaning that a company which possesses information about a customer can
collaborate with another actor to be profitable. This kind of sharing information may, in the end,
be profitable for all parties (Orme, 1999). However, sharing customers’ information is not always
appreciated, thus, considered as sensitive sharing.
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Figure 5, The Service Marketing Triangle, gives an overview of the relationship between company, employees, and customers. Direct Marketing concerns external communication between the, as already explained, company and customer, hence business-to-business (B2C) services. Kotler (1994) claims that there are four different marketing communications with regard to direct marketing: Advertising, Sales Promotion, Public Relations, and Personal Selling. He also indicates that direct marketing can be used in a greater or lesser extent. However, the triangle indicates that all parties need to cooperate to stay profitable.
Figure 5. The Service Marketing Triangle.
2.2.2 Relationship Marketing
Relational marketing refers to influencing the customer to choose a specific company for the purchase of a product or service. However, this study will focus on the Nordic School Approach Perspective, developed by Berry and Parasuraman in the late century of 1900. Relationship marketing aims to increase customer focus through relationships, networks, and interaction. In this way, returning customers can recommend the company to others. Hence, the importance of creating a long-lasting relationship to generate maximized profitability. (Gummesson, 2002)
Grönroos (1997) cites marketing, from a relational perspective, accordingly:
“The process of identifying and establishing, maintaining, enhancing, and when necessary terminating
relationships with customers and other stakeholders, at a profit, so that the objectives of all parties
involved are met, where this is done by a mutual giving and fulfillment of promises.”
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Consequently, if the companies do not consider customer relationships as important, a competitor might do instead which results in loss. Previous research has shown that reduced customer turnover improves the company’s profits. Hence, it costs more to build new contacts than to retain existing once. (Söderlund, 1997)
Additionally, with relationship marketing, the company knows the customer’s long-term needs and demands and can, therefore, offer an extended range of offerings. The customer not only requires product and service, but the execution takes place credibly and reliably to increase loyalty and hence, remain a satisfied customer. (Grönroos, 1997) Loyalty is based on the relationship which the marketer creates. Further, Grönroos claims in the book Handbook of Relationship Marketing (1999), that marketers need to implement and use service to keep the competitive advantage.
Hence, continuous product development is not enough. Enhancing this service is required for sustainable advantage due to not be forced to play the “price card” to stay competitive.
The correlation between openness and trust has previously been discussed by Kim & Kim (2016), whom believe that improved transparency strengthens the business relationship, which also generates a positive impact on customer satisfaction. Thus, open communication promotes relationship and increases chances of continued eventual future purchases. If the customer is not given the opportunity to get information about the extended services offered, the risk increases that they instead go to a competitor who performs similar services.
2.2.2.1 Marketing Channels
Different marketing channels are necessary to include when using a marketing strategy to reach a particular target group. To accomplish with a plan, do businesses, firstly, decide what and who the target market is. Secondly, determine the target customer. Companies need to identify the targets to apply appropriate marketing channels. Kotler (2000a) defines different marketing channels as: communication channels, dialogue channels, monologue channels, distribution channels, trade channels, and selling channels. Figure 6 below present a normative way of typical communication within a B2C-business.
Figure 6. Communication in a B2C-business.
Information
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Communication channels are those who are information about offerings, as well as receiving information and messages from the target buyers. These are newspapers, magazines, radio, television, mail, telephone billboards, posters, flyers, and internet, etc. Thus, communication channels are divided into two sub-channels, dialogue- and monologue- channels, which counteract each other. Dialogue channels cover e-mails, and monologue channels include ads and other non- communicative commercial tools. Moreover, products and services, which a firm provides, need to be distributed. Usually are distribution channels used to supply and deliver offerings to the customers. They can either be physical, such as through warehouses and vehicles, but also trade channels, such as wholesalers and retailers. To ease parts within the value chain and streamline transactions with buyers, does a company possesses the ability to utilize selling channels. (Kotler, 2000a)
Furthermore, there exist some complications while choosing and combining the channels.
Managers need to engage time in research due to providing a suitable mix of combined channels.
The combination must facilitate the offerings and might, therefore, require improvements as time develops.
2.2.2.2 Vertical- and Horizontal- Marketing System
Marketing is a surrounding sphere within the business environment. Yet, it is confirmed that marketing and distribution channels need to develop and, hence, cannot stand still (Kotler, 2000a).
Systems need to cooperate, conflict, and compete in order for companies to embrace their marketing accessibilities. By investigating improvements and opportunities about vertical- and horizontal marketing increases firm’s possibility of profit growth.
Mature industries, such as the steel industry, have complex decision-making processes with supply chains and many sellers and buyers. Hence, various communication channels are used within the organization to streamline marketing to different decision makers in the supply chain. (Albert, 2003)
Vertical Marketing System (VMS) – Vertical marketing has recently experienced an increased degree
of development. A system, which focuses on vertical factors, has a primary focus on cooperation
between different actors within a particular business, especially when developing complex products
(Wuyts et al., 2004). Kotler (2000a) claims that by assembling the producer, wholesaler, and retailer to
collaborate as a consolidated unit, instead of independent, probable conflicts decrease as the
members are striving towards the same goal. Developing a more dependable vertical marketing
channel intensifies a more stable economic position by extension in size, bargaining power, and
exclusion of multiplied services. According to recent research, vertical marketing systems have
become majority concerning distribution modes for the consumer marketplace in the U.S. (Kotler,
2000a)
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The vertical marketing system involves three different types, see Figure 7. It can either be corporative, or administrative, nor contractual. Corporative systems refer to a combination of production and distribution. This type of integration benefit companies which have a desire to control their channel to a greater extent. Meanwhile, administrated systems coordinating the production and distribution by the size and power of one of the involved. This type of integration benefits manufacturers that possess a leading position through a creditable brand image since it assures support and trade cooperation. The third type of system is contractual, which refers to individual firms’ and their different levels of production and distribution combined with ability to integrate programs on a contractual basis, due to attain an increased economic or sales influence in relation to their capacity. This system of connected firms and communities are called value-adding partnerships (VAPs) according to Johnston and Lawrence (1988). (Kotler, 2000a)
Figure 7. Vertical Marketing System (VMS).
Vertical Marketing
System (VMS) Corporate
VMS
Administrated VMS
Contracual
VMS
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Horizontal Marketing System (HMS) – A horizontal marketing system explains how two or more unconnected companies, explained in Figure 8, experimentally, emerging marketing possibilities by putting resources or programs together. Hence, companies need to seek better capital-, know-how- , production-, or marketing- resources due to in a profitable way exploit horizontal marketing systems. Consequentially, more excellent venture opportunities arise since companies working together temporarily, permanently, or creating a joint venture company. Adler (1966) named this phenomenon as symbiotic marketing. (Kotler, 2000a; Adler, 1966; Varadarajan & Rajaratnam, 1986) Symbiotic refers to how nature creates natural habitats where one feeds on another to prevent harm caused by external factors.
Figure 8. Horizontal Marketing System (HMS).
2.2.3 Sales Performance
Marketing involves promotion of activities to reach out to a particular target market. The activities circulate to communicate the company’s value proposition, products, services, and ideas to inform and convince customers that the company’s offerings are the optimal option. Personal sales are responsible to generate individual presentations to create sales and build relationships, indeed, to promote additional sales (Kotler et al., 2008). The seller is the direct link between the specific customer and the market, which requires expertise, knowledge, and capacity to understand the value of particular offerings from a customer perspective. Rogers (1983, p.84) claims that different communication channels play different importance dependent on the concerned field.
Nevertheless, the sales performance participation and engagement play an essential role when promoting innovations, according to Rogers (1983, p.84) and the theory about Diffusion of Innovations.
Therefore, to build relationships, personal interaction between buyers and sellers is of interest to customize presentations according to the customer’s specific needs, regardless if the marketing aiming to affect at the end-consumer or another company. Therefore, it is more or less useful to
Company A (Industry 1)
Company B (Industry 2)
Company C (Industry 3)
Symbiotic Marketing
Horizontal
Marketing
System (HMS)
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use personal sales as it requires time and money to assemble the resources at one customer.
However, marketing and sales in B2C, where trade shows are an essential activity, companies have the opportunity to demonstrate the products and, thereby, reach out to an audience of new, along with, existent customers (Hutt & Speh, 2012). However, the uncertainty of ensured customer participation is high, indeed, the cost for such event. Additionally, based on employees’ expertise, it consists some difficulties regarding measuring the efficiency of trade shows compared to other marketing activities, such as digital marketing.
2.3 Upgrading Opportunities
Traditional industries, such as the steel industry, have previously focused on developing their core products. But to ensure long-term growth and remain competitive in the EU market, efforts have partly shifted to include the development of services. (Jacob & Ulaga, 2008)
Previous focus, based on research by Lee-Kelley et al. (2002), has been on process improvements, new technology, and new material implementation to create a competitive barrier. Yet, steel industries are forced to look for new ways to add more value beyond their technical qualities. By upgrading the company’s offerings from standardized products to a customized solution with a more advanced functionality enables differentiation from competitors. Therefore, to ensure long- term growth and remain competitive at the EU market, efforts have partly shifted to include development of additional services. (Jacob & Ulaga, 2008).
Furthermore, product development at companies which producing core products and services solely as an add-on, indicates the quest of becoming a more attractive business partner with customers. Hence, provided add-on-offerings can improve usability and, thereby, generate more sales opportunities (Stump et al., 2002). These product development projects can be described as a package of problem-oriented activities that form a basis of technological development that generates increased efficiency of problem-solving behaviors within organizations (Iansiti, 1994).
Thus, suppliers need to understand the role of products in the customers operations to be able to integrate the add-on solution in the context, and to ensure added perceived value of it.
Furthermore, the manufacturers need to realize the outcome of value creation, which can be
divided into received value and desired value. The received value is the actual value that the
customer perceives when exchanging the specific offer, which represents the efforts the supplier
puts in creating the value. The desired value refers to the customer’s requirements when purchasing
a product or service. Therefore, it is crucial that the value received aligns with the desired value to
reduce the risk of creating incongruity that might cause customer searching for other alternatives
from competitors (Flint & Woodruff, 2001).
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2.4 SWOT
It currently exists several different methodological tools in order to analyze a company’s strategic position relative to the market. A tool works, initially, to fundamentally plan strategies to achieve set goals genuinely. SWOT analysis is one, out of many, the foremost straightforward (Hill &
Westbrook, 1997). The SWOT analysis determines and questioning organizations strengths, weaknesses, opportunities, and threats. Furthermore, the result from a SWOT analysis enhances support according to decision making, which helps companies to prioritize strategically necessary decision making by putting up a set of critical variables and analyzing the relationship between them (Weihrich, 1982). SWOT favors the probability of future actions from which the company can benefit. The method of using SWOT is, therefore, dependent on recognitions from earlier work and outcomes within the environment of the company. Thus, crucial to develop optimal strategies.
(Kajanus et al., 2012; GÜREL, 2017) Table 1 shows the typical relationship between the different factors in a SWOT analysis; see below:
Table 1. The relationship between the factors in a SWOT analysis.
Positives Negatives
Internal Factors Strengths Weaknesses
External Factors Opportunities Threats
Additionally, general strategic planning, such as SWOT, has its influence by making a suitable fit between the external situation and, internal characteristics and qualities. Firms are facing both external- and internal- factors. The externals are threats and opportunities, where else, the strengths and weaknesses are the internal once, see Figure 9. (Leigh, 2010; Kajanus et al., 2012)
Figure 9. The external and internal factors in a SWOT analysis.
Furthermore, there exist several approaches according to matrix analysis. It is, therefore, essential to highlight that the SWOT analysis is not considered as better or more sufficient compared to another matrix analysis. However, the fact that SWOT is involving and matching the external and
AnalysisSWOT
External Factors
Opportunities Threats
Internal Factors
Strengths Weaknesses
