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Case Study 1: The Marketing Environment: Questions

Household spending in the UK amounted to over £500 billion in 1997, accounting for 63% of GDP. Marketers must be able to understand how the macroeconomic environment affects demand for goods and services. In 1998, consumer goods prices fell but household expenditure also fell, contrary to economic theory. A possible explanation was rising consumer uncertainty from reports of an impending global economic crisis. Consumer confidence affects purchases of high-value items. Even when consumers were pessimistic about the economy but optimistic personally, accurate environmental understanding is important for companies to avoid surpluses or shortages. However, getting this understanding right can be difficult.

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82 views

Case Study 1: The Marketing Environment: Questions

Household spending in the UK amounted to over £500 billion in 1997, accounting for 63% of GDP. Marketers must be able to understand how the macroeconomic environment affects demand for goods and services. In 1998, consumer goods prices fell but household expenditure also fell, contrary to economic theory. A possible explanation was rising consumer uncertainty from reports of an impending global economic crisis. Consumer confidence affects purchases of high-value items. Even when consumers were pessimistic about the economy but optimistic personally, accurate environmental understanding is important for companies to avoid surpluses or shortages. However, getting this understanding right can be difficult.

Uploaded by

ujjal das
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Case Study 1: The Marketing Environment

Household spending by all UK households amounted to over £500 billion in 1997, or 63% of gross domestic
product. This level of expenditure is very closely related to conditions in the country's macro-economic
environment. For marketers, it is crucial to be able to read the macro-economic environment and to predict the
effects of change in demand for their goods and services. Identifying turning points in the economic cycle has
become a work of art as well as science, as consumers frequently confound experts by changing their
expenditure levels in a way which could not have been predicted on the basis of past experience.

Throughout 1998, prices of consumer goods had fallen significantly, with consumer durables down in price by
an average of 2% in a year and clothing by 5%. Economic theory would have suggested that lower prices
would have resulted in higher sales, especially considering the other favourable elements of the macro-
environment. However, this did not appear to be happening. What else could have been happening in the
marketing environment to explain falling household expenditure? At the time, the media was full of reports of
an impending global economic crisis, triggered by difficulties in the Asian economies. Consumer confidence is
crucial to many high value household purchases such as houses and cars, with consumers reluctant to commit
themselves to regular monthly repayments when their source of income is insecure. Even this may be only a
partial solution, as a survey of consumer confidence carried out in October 1998 by GFK on behalf of the
European Commission showed that although consumers were pessimistic about the state of the national
economy, they were quite upbeat about their personal financial situation. For companies who need to commit
resources a long while in advance in order to meet consumers’ needs, an accurate understanding of the market
environment is crucial if stock surpluses and shortages are to be avoided. But this case shows that getting it
right can still be very difficult.
Questions:
a) Identify all of the environmental factors that can affect the demand for consumer durables and assess the magnitude
and direction of their impact.
b) In what ways can a manufacturer of consumer durables seek to gain a better understanding of its marketing
environment?
c) How can a manufacturer of consumer durables seek to respond to environmental change as rapidly as possible?

Case Study 2: Vikasa Steel Tubes Ltd.


Vikasa Steel Tubes Ltd. was a medium-sized engineering company. In order to maintain the leadership in the
existing business of manufacturing and marketing “precision steel tubes”, there was a need to manufacture a
new product called “Cold Rolled Cold Annealed” (CRCA) steel coils, which was a backward integration.
CRCA steel coils were used as a raw material for manufacturing precision steel tubes. Although the company
had been procuring the CRCA steel coils from Bokaro Steel Plant of Steel Authority of India Ltd. (SAIL), the
quality of the raw material was not consistent and the deliveries were uncertain. Besides, other major
competitors such as Tube Investment Ltd. and Tata Steel (tubes division) had their own Cold Rolled (CR)
plants, which gave them a competitive edge in terms of the quality and delivery of precision steel tubes.

The marketing department supplied the samples against trial orders from the automobile and bicycle customers.
There are certain suggestions from the customers on the technical parameters of CRCA coils since samples
supplied were partly acceptable. In the meantime, the marketing department worked-out the marketing plan for
the new product. The target market segments were initially identified as bicycle manufacturers and 2-wheeler
automobile manufacturers. Product catalogues were made, pricing and other commercial terms were decided,
sales engineers from branches were given training for the new product.

Questions:
a) What strategies marketers adopt to launch product in consumer market.
b) Why would a marketer want to segment a market?
c) What strategies would you adopt for segmenting consumer market, if you were head of marketing
department?

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