DEVELOPING PARALLEL SALES AND MARKETING CHANNEL STRATEGIES IN ESTABLISHED MARKETS IN THE CHEMICAL INDUSTRY IN THE MENA REGION
Table of Contents
Abstract
1.0 CHAPTER ONE: INTRODUCTION
1.1 Background
2.0 CHAPTER TWO: LITERATURE REVIEW AND CONCEPTUAL FRAMEWORK
3.0 CHAPTER THREE: METHODOLOGY AND RESEARCH INTRUMENT
3.1 Introduction
3.2 Research Purpose ….
3.3 Research Approach …
3.3.1 Type of investigation
3.3.2 Data collection methods
3.3.3 Research Paradigm
3.3.3.1 Paradigm Framing
3.4 Data Collection
3.4.1 Types of data collected
4.0 CHAPTER FOUR: RESEARCH FINDINGS AND DISCUSSION
4.1 Results of the quantitative study
5.0 CHAPTER FIVE: CONCLUSIONS AND RECOMMENDATIONS
5.1 Limitations of the paper
5.2 Recommendations and Future Research Directions
Reference List
Abstract
The Middle East-North Africa region (MENA) could be one of the emerging and established markets which produce chemistry such products as, construction chemical industry, petrochemical, fertilizers, plastics, and pharmaceutical industry. The chemical industry in MENA has become the focal point of attention given the fact that it has taken a critical position in the development strategies of the region as a whole. As such, the existing and the emerging chemical industry companies in the region are at the forefront of holistically changing the chemical industry. This has largely been due to the fact that the region is at a prime location to take advantage of the emerging chemical markets in Africa and regions beyond the continent. Whenever companies are planning to launch a product, they do a survey about the potential of this product in the market, data collection which related to the selling price, costing, expected margins, and sales and marketing strategy. This paper will propose different product launching plan and check the possibility to sell those products to the customer and determine which sales channel will be adequate – direct and indirect. The paper will as well focus on developing a parallel sales and marketing channel strategy in established markets by looking into the internal cultures issues, challenges, and customer behavior.
1.0 CHAPTER ONE: INTRODUCTION
Background
The broad chemical industry in MENA essentially comprises the companies that are involved in the production of industrial chemicals. Being central to the contemporary world economy, the industry entails the conversion of such raw materials as natural gas, minerals, metals and oil into more than 70,000 various products. The industry makes us of such polymers and plastics as polyvinyl chloride, polycarbonate, polypropylene, polystyrene, polyethylene and terephthalate (Klein, Frazier & Roth, P.204, 2010).
These materials are in most cases converted to the fluoropolymer tubing products which are used in the industry to transport highly corrosive products. The chemicals that the industry produces are used in various consumer goods; they are also used in such other sectors as: manufacturing, agriculture, service and construction industries. The sales of the industry could be divided into such categories as basic chemicals (about 30- 37 % of the dollar output in the MENA region), specialty chemicals (25%), life sciences (32%), and the consumer products which makes up about 13% of the total sales of the industry. This would mean that more than 70% of the products of the industry are used in the production of different products by other including and other branches of the industry itself (Heide, P.76, 2014).
The basic chemicals could further be divided into chemical derived from petroleum, called petrochemicals, polymers and basic inorganics. Basic chemicals are produced in huge volumes and are mainly sold within the industry among other industries before being released to the hands of the final consumer. For example, ethanoic acid is sold to produce esters which are mostly sold to make paints after which it is sold to the final consumer. In addition, Ethene is produced in big quantities and sold to the plastic industry to make plastic products (Kogut, P.210, 2013).
The specialty chemicals cover a spectrum of such products as pesticides, weed killers, inks and paints as well as the colorants (pigments and dies). The category also includes the chemicals that are used by such industries as paper, textiles engineering among others. Many chemical industries concentrate on this category since with satisfactory research and development, the specialty chemicals have proven to deliver better with a substantial profitability margin. In this regard, the MENA region prides in the fact that new products are being invented to meet both customer demands as well as remain on the right side of the environmental laws. A very good example would be the fact that the household paints have evolve from just being organic-solvent based to water-solvent based. The invention of the contemporary ink used in the ink-jet printer is just another indicator of the many inventions currently in play at MENA (James, P. 24, 2008).
The consumer chemicals are the products that could be sold directly to the consumers. These products include toiletries, soaps, detergents among other products. In MENA, research on more efficient and eco-safe detergents has soared over the last two decades. This has been in the form of creating surfactants that have the capacity to cleaning just about anything ranging from big industrial machines and to a sensitive skin. Parallel to this invention, there has been more research work to produce an array of chemicals for cosmetics, fragrances and toiletries (Kumar, Scheer & Kotler, P.136, 2010).
The chemical industry is a significant contributor to the economy of a country and/or a region. For instance, it has contributed to over 2% of the Gross National Product (GNP) of the MENA countries. This percentage has been reported to be over 8% of the total GNP produced by the manufacturing industries in these countries. As a matter of fact, the personnel of the chemical industry in MENA, are the most highly remunerated of all other industries in the region. This is because the industry absorbs highly qualified labor force and it is essentially the most productive among other industries. With the increased competition in the industry on a global scale, innovations are crucial in searching for new methods in which the players in the industries could satisfy the demanding, environment sensitive and sophisticated customers. As such, it would be worthwhile to develop parallel marketing and sales channel strategies in the contemporary chemical markets which operate at a cut-throat competition. Anyway, before acting to this effect, it would be worthwhile to understand the chemical industry economic background of the greater MENA region (Swartz, P.798, 2003).
The economy of the Middle East and North Africa (MENA) continues to expand at an average on the diverging market trends of the chemical industry; as the oil producing constituent countries of the region get the feeling of the impacts of the oil-importing countries reap benefits from the resilient local demand and the improving chemical market dynamics world over. Research show that the region posts a 2.2% year-on-year fiscal increase (Webster, P.27, 2008).
The economic glimpse for the Middle East and North Africa (MENA) however, continues to be affected by the structural inequality as well as the geopolitical perils across the constituent countries. Nevertheless, the region is expected to grow by 4% this year. In addition, the GDP growth is expected to take an upward trajectory, in the wake of the 2009 financial crisis. In this regard, the monthly financial projections of the region reveal that the region will have made a 3.1 % growth in 2018 (Kogut, P.199, 2013).
The next chapter (literature) review presents the answers to the research questions as set out at the onset of the research as a whole. The section will provide in-depth illuminations to these research questions. These research questions include: What is marketing, how are markets constituted, how are the market shares grown, what goes into the development of a parallel sales and marketing (what is required), how do customer behaviors, their cultural values and the prevailing market challenges affect the establishment of parallel sales and marketing strategy, how does the law of supply and demand affect market price of commodities as well as what will be the effect of increased chemical products in the world market.
2.0 CHAPTER TWO: LITERATURE REVIEW AND CONCEPTUAL FRAMEWORK
Marketing is the process of management that is responsible for the identification of, estimating and satisfying the requirement of the clientele base of a business organization. In other words, it is the management process that seeks to optimize the shareholders returns through the development of relationships with its valued customers and designing a competitive advantage in the process. Marketing has for the longest time now been associated with the advertising, distribution and selling of products. Marketing entails such concepts as broad market research and reports, market segmentation, market targeting, the price and promotion modalities, development of communication modalities and long-term visioning of market development objectives (Klein, Frazier & Roth, P.201, 2010).
Given the centrality of the satisfaction of customers, the marketing concept suggest that for the organizational objectives to be satisfied, the organization ought to make the necessary estimations with regards to the wants and needs of their customers and satisfy them in a manner that outshines its competitors. As such, marketing essentially entails the advertising, selling and delivery of products to customers. In this regard, the process of marketing tries to catch the attention of target customers base by using packaging designs, slogans, celebrity and endorsement as well as the media in its entirety. In other words, marketing is everything that an organization does to acquire and maintain customers. The ultimate goal of marketing is therefore to match the services and products of an organization to the people who want and/or need them which ensures profitability for the organization in question (Heide, P.84, 2014).
Even then marketing would not make any sense without the market itself more so the factors that constitutes markets. In this regard, there many factors that constitute the market. To start with is the demographic factors. These are the factors that are related to population. This factor is important because people are the backbone of the market and its them who constitute population. This factor provides the customer profiles which are at the core of market segmentation as well as the selection of a market. Over and above, this factor gives the ideas with regards to the type and number of the population to be served as customers. Secondly is the ecological factors which are concerned with the ecological market environment. These factors are closely related to the efforts of saving the environment from degradation and/or pollution. These efforts may lay restrictions natural resources utilization, the cost of raw materials, production process and the quality of the products produce. An organization may therefore understand that the provision of quality goods does not mean compromising the lives of people through environmental pollution. Third, is the economic factors which consists of the economic forces that may affect the costs, profits and revenues of an organization. They are also related to the purchasing powers of the customers as well as their willingness to buy. Fourth is the legal and political factors which affect the economic policies of an organization. In this regard, every marketing decision made by an organization is affected the political factors of a region or a country. Lastly in this case is the international factors where an organization will have to satisfy and deal with the wants and needs of a cosmopolitan clientele base around the world. In reality, an organization is expected to act locally but think globally. Every organization is thus affected by the international political and economic forces (Kumar, Scheer & Kotler, P.140, 2010).
With these factors that constitute the market added to the equation, a need arises to grow the market shares of organizations. An organization’s market is the fraction of the total market it controls in as far as its products are concerned. Many organizations increase their market share through: strengthening their relationships with their clients, innovation, applying smart hiring market practices and acquisitions of competitors. Growing the market is important for any organization since the more the share the more the competitive advantage the organization in question will have. With the intention to have substantial market shares comes the need to have an effective market strategy (Swartz, P.819, 2003).
A marketing strategy is the strategy of an organization that combines together all its marketing objectives into one complete marketing plan. Market strategies are created in five steps: conduction of a situation analysis, description of the target audience, listing of the marketing objectives, development of the marketing communication tactics and strategies and setting of the marketing budgetary specifics. There are various marketing strategies: close range marketing, relationship marketing, scarcity marketing, call action marketing, viral marketing among others. Even then, the most applicable marketing strategy in the chemical industry is the relationship marketing. In this regard, it is the ultimate goal of the industry to build personal relationship with its customers even as it sells its products to them. This is because it is a common belief in the industry that customers who personally love the stakeholders in the industry are likely to buy the chemical products five times more than those who don’t have such a relationship with the industry (Cavusgil & Zou, P.19, 2004).
Drawn from a substantial market research, a marketing strategy is never without challenges. These challenges include lead generation where an organization is unable to appeal to the future needs of its prospective and actual clients. This would mean that such organization is on the verge of losing its sales. Secondly is the target audience in which an organization has to reach its target audience (customers) but does not have the least idea as to who will be the target customers. Third is content marketing where an organization seeks the kind of marketing content that provides a fair first impression to a customer. This is becoming a challenge with regards to ensuring that the marketing content makes the right communication in as far as the products of an organization are concerned. Fourth is the use of the social media as a marketing tool where many organizations make the mistake of just selling their products instead of balancing between connecting with its customers and selling its products to them on such a social platform. Lastly in this case is latest marketing trends where many organizations are not able to remain relevant with the ever-dynamic marketing trends (Ottman, 2003).
Specifically, because of the large size of the chemical industry, the main challenges include the inability to identify its target customers given the dynamic global customer preferences. The industry therefore finds it challenging to identify a target customer base. Secondly, the industry also faces the challenge of updating its marketing strategy to align it with the contemporary marketing trends. In other words, the industry is not able to have a technology that enhances its marketing strategies to reflect the most modern marketing modalities. To sum up, the industry is also unable to strike a balance between marketing its products and maintaining a warm relationship with its customers. This has seen it go off base in as far as marketing in the social media is concerned. Such are the market strategic challenges that bedevil the chemical industry (Douglas, 2005).
To overcome these challenges, the chemical industry ought to redesign most of its marketing strategies. Marketing strategies in the chemical industry should be designed in a manner that will give them a contemporary marketing trend. This will be achieved through the digitization of the marketing strategies of the industry. Such a design add value with regards to high efficiency and/or efficacy in the chemical industry. In addition, such a trend in the chemical-industry-marketing- strategies will see most companies cement their relationship with their customers (Berthon et al, P.263, 2012).
The dynamics of technology, competition and markets have rendered many new products irrelevant in many industries including the chemical industry. The monumental dynamism has seen many industries rethink the style in which they get new products in to the market whether product, customer or technology-oriented. The best way in which a new chemical product should be introduced into the market will be ensuring it will be a hybrid of all the three styles. In other words, the chemical industry should introduce into the market the kind of products that will be of top-notch innovation and focus more on satisfying the needs of the clients. Such will be the best way of introducing the new chemical product into the market (Webster, 2005).
This chapter will present hypothetical information with respect to how different scholars and researchers have responded to developing a parallel sales and marketing channel strategy in established markets. More so, the chapter will focus on those who have focused on the internal cultures issues, challenges, and customer behavior. This will be in light to the chemical industry in the Middle East and North African region.
The chapter gives a comparison of the sentiments and insights from different authors and scholars in regard to the aforementioned issue. While a good deal of authors, researchers and scholars have made attempts to review this field, only a few of them have made considerable progress. Among them, the following have succeeded in providing valuable information in an aim to shed light on developing a parallel sales and marketing channel strategy in established markets specifically in the MENA region.
These researchers include: Aaker and McLoughlin in their work, Strategic market management: global perspectives, Kogut in his book, designing global strategies: profiting from operational flexibility and Heide in his work, Inter-organizational governance in marketing channels. Other researchers who have made considerable contribution in this area include: Kumar, Scheer and Kotler in their work, From market driven to market driving, Webster through his book, The rediscovery of the marketing concept, Klein, Frazier, and Roth, through their A transaction cost analysis model of channel integration in international markets and Cravens, Piercy and Shipp through their New organizational forms for competing in highly dynamic environments, featured in the British Journal of management. Other researchers whose works will be shed light on include Glazer, Swartz and James M.
According to (Aaker and McLoughlin 2009, 34), developing a parallel sales and marketing channel strategy in established markets in the MENA region requires strategic market management. This is because most countries in the MENA region have experienced rapid population growth over the recent past. This has as well raised the dependence ratios with some countries having higher rates than those in other economies with similar real per capita income. For this reason, the authors suggest that employing the rational entrepreneurial approach would then be necessary to develop a parallel sales and marketing channel strategy in such markets. The rational entrepreneurial approach analysis involves identifying the strengths and opportunities available in the industry and capitalizing on the strengths and to come up with much better results for the company. The process involves analyzing the business stand point and the trends in the industry to take note of the company strengths and match them with the available opportunities in available that can help so much in improving the state of the company performance.
On the other hand, (Kogut 2013, 195-213) claims that for a parallel sales and marketing channel strategy to be established in established markets in the MENA region, there needs to be a more in-depth analysis of the customer behavior, internal cultures and the prevailing challenges in regard to the chemical industry that exist in the region. According to him, the world chemical supply, as well as demand forecasts, have been adjusted significantly for the year 2016/17 marketing season since the month of July (Kogut 2013, 195). This follows sharp upward revisions to the production forecasts of chemicals in several countries in the region. Basing on the latest updates, it is likely that the global supply and demand situation of this year will be more comfortable compared to last year and the predictions at the beginning of the season. Thanks to the extensive chemicals industry and the favorable environments and workforce. Large chemicals production is on-going and are expected to pile up in large various countries across the region. According to the author, the worldwide chemicals production is expected to record 743 million tons (Kogut 2013, 201). This is an increase of about 1.37% of chemicals production globally (Kogut 2013, 201).
Even so, what are the likely implications of this increase in the chemicals industry in the MENA region on the prices of the commodity. The law of supply and demand explains how market prices for a good is set. The demand of the good initiates the process of setting the equilibrium price rather market price. When the demand is high, the producers tend to charge high prices for their product and the motivation to earn high profits inspires them to produce more to meet the demand. Nonetheless, with the law of demand which states that when the prices of a commodity are too high few consumers will be able to purchase the good and therefore demand will go unmet. For the purpose of meeting the demand created, the producers will have to reduce the price and charge at a price that will result in sufficient generation of profit as well as the optimal sale of the commodity.
Therefore, the increased chemicals yield in the world will subsequently lead to lower prices in the market. Such an effect has already been felt by Iran with its stocks having declined by 20.05% to the present day. This is as a result of increased supply resulting in the buildup of the chemical inventory. Equilibrium point will be reached where the consumers will be willing and able to meet the prices offered by the producers of the chemicals.
3.0 CHAPTER THREE: METHODOLOGY AND RESEARCH INTRUMENT
3.1 Introduction
3.2 Research Purpose
3.3 Research Approach
3.3.1 Type of investigation
3.3.2 Data collection methods
3.3.3 Research Paradigm
3.3.3.1 Paradigm Framing
3.4 Data Collection
3.4.1 Types of data collected
4.0 CHAPTER FOUR: RESEARCH FINDINGS AND DISCUSSION
4.1 Results of the quantitative study
5.0 CHAPTER FIVE: CONCLUSIONS AND RECOMMENDATIONS
5.1 Limitations of the paper
5.2 Recommendations and Future Research Directions
Reference List
Aaker, D.A. and McLoughlin, D., 2009. Strategic market management: global perspectives. John Wiley & Sons.
Berthon, P.R., 2012. Marketing meets Web 2.0, social media, and creative consumers: Implications for international marketing strategy. Business horizons, 55(3), pp.261-271.
Cavusgil, S.T. and Zou, S., 2004. Marketing strategy-performance relationship: an investigation of the empirical link in export market ventures. The Journal of Marketing, pp.1-21.
Cravens, D.W., Piercy, N.F. and Shipp, S.H., 2016. New organizational forms for competing in highly dynamic environments: the network paradigm. British Journal of management, 7(3), pp.203-218.
Douglas, S.P., 2005. Global marketing strategy. McGraw-Hill College.
Glazer, R., 2011. Marketing in an information-intensive environment: strategic implications of knowledge as an asset. The Journal of Marketing, pp.1-19.
Heide, J.B., 2014. Inter-organizational governance in marketing channels. The Journal of Marketing, pp.71-85.
Heide, J.B., 2014. Inter-organizational governance in marketing channels. The Journal of Marketing, pp.71-85.
James, M., 2008. A supplemental distribution channels? The case of US parallel export channels. Multinational Business Review, 6(1), p.24.
Klein, S., Frazier, G.L. and Roth, V.J., 2010. A transaction cost analysis model of channel integration in international markets. Journal of Marketing research, pp.196-208.
Kogut, B., 2013. Designing global strategies: profiting from operational flexibility’. Readings in International Business, The MIT Press, Cambridge, MA, pp.195-213.
Kumar, N., Scheer, L. and Kotler, P., 2010. From market driven to market driving. European management journal, 18(2), pp.129-142.
Ottman, J.A., 2003. Green marketing: challenges and opportunities for the new marketing age (p. 10). Lincolnwood, IL: NTC Business Books.
Peter, J.P., Olson, J.C. and Grunert, K.G., 2009. Consumer behavior and marketing strategy.
Swartz, D. L. (2003). From critical sociology to public intellectual: Pierre Bourdieu and politics. Theory and Society, 32(5), 791-823.
Webster, F.E., 2005. Industrial marketing strategy. University of Texas Press.
Webster, F.E., 2008. The rediscovery of the marketing concept. Business horizons, 31(3), pp.29-39.