Assignment Question A Examine the scope and activities of your own country of residence, or one that you are very familiar with. 1. Identify and examine the key social-cultural trends, including demographic and lifestyle developments that have taken place within your chosen country over the past decade. 2. From your answer to (1) above, choose one example of ‘change’ for (a) a manufacturer and (b) a service organization and examine: i. ii. How this change has affected demand for the existing product / service. How the provider has reacted to this change in demand Response to Question A – Part 1
The social-cultural environment affects how and why people live and behave as they do (McCarthy, 1993). It is made up of numerous variables including education levels, food consumed, clothing styles and awareness on global issues. The socialcultural environment is one that keeps evolving and can have far-reaching effects on customers’ buying behaviour. Drawing from how changes in buying behaviour is based on changes in the various external stimuli exerted on the buyer (Wilson, 1994), we can assume that changes in the social-cultural environment is also based on changes in the various external stimuli impacting it as illustrated in Diagram1.
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External Stimuli Demographics Economy Changes in the Social-Cultural Environment Social-Cultural Environment Political/Regulatory Environment Technology Diagram 1: Drivers of Social-Cultural change. Adapted from Wilson 1994, Strategic Marketing Management In the following paragraphs, we will use this model to detail changes in external stimuli that have impacted the social-cultural environment in Malaysia over the past decade and the corresponding trends, i. e. hange which has momentum and durability (Kotler, 1996). Marketing Strategy – Assignment 1 – Aug/Sept 2009 Page 1 Calvin Ronald R. Jacob – University ID : 7525813 Assessment Reference: MS/July 2009/1 Demographics The Malaysian population stands at 28. 31 million and consists of multiple ethnic groups; speaking a myriad of languages and practicing various religious beliefs (refer Diagram-2). The last 10 years has seen few changes as far as these components are concerned. Ethnic Groups Religious Beliefs Languages Malay Language official National language • English widely spoken and used for business • Chinese dialects mostly Mandarin, Cantonese & Hokkien • Indian languages mostly Tamil, Telugu, Malayalam, Punjabi • East M’sian indigenous languages mostly Iban and Kadazan Malays & Other Natives (65%) Chinese (26%) Indians (8%) Others (1%) Islam (60%) Buddhism (19%) Christianity (9%) Hinduism (6%) Others (6%) Literacy • Definition : can read and write at age 15 • total population: 88. 7% male: 92%; female: 85. 4% (2002) Diagram-2: Selected demographic components in Malaysia
The key demographic component impacting the social-cultural environment in Malaysia today is the increasing prominence of the large younger population specifically the Gen-Ys/Millennials who have started to gain employment and have higher purchasing power. Malaysian Gen-Ys have been able to socialise with peers globally via opportunities to study abroad and on-line networks. This has seen them starting to question many of the Malaysian norms e. g. special rights for the Bumiputeras (Malays and other natives), ethnic and religious compartmentalisation (allowing mixed marriages, etc) and being ore outspoken. More importantly they are driving global issues in Corporate Malaysia, e. g. sustainability and climate change issues which affect their purchasing and career choices (2009 PricewaterhouseCoopers survey on millennials at work). *Reducing size of households was not discussed as it was more prevalent in the 1980s to 1990s. Economic Situation Malaysia is a growing economy with GDP per capita (PPP) of US$14,000 at growth rate of 5. 7% (2008 – Department of Statistics Malaysia). The government plays a key role in development via macroeconomic plans.
Steady economic growth has increased disposable income for Malaysians who are seen opting for better lifestyles/higher standards of living. Luxury brands and fine Marketing Strategy – Assignment 1 – Aug/Sept 2009 Page 2 Calvin Ronald R. Jacob – University ID : 7525813 Assessment Reference: MS/July 2009/1 cuisine in ‘high-end’ malls (e. g. Pavillion, and The Gardens) are increasingly available. Youths who used to ‘hang-out’ in stalls now do so in cafes such as Starbucks. Malaysian are also travelling more and assimilate elements of foreign cultures in Malaysia.
Rural folk are also seen adopting higher standards of living albeit in different forms, e. g. upgrading to cars from motorcycles. Higher standards of living initially enjoyed buy a small portion of society has created a want for these standards amongst the larger community resulting in an overall increased competitiveness in the country. Malaysians are now seen putting more effort and time into work; women are also focusing more on their careers and playing a more prominent role in ‘Corporate Malaysia’ – this (as with in many other societies) has started urbanisation of society and atomisation of families.
Political/Regulatory Environment Although Malaysian politics has been relatively stable, the 2008 elections saw the ruling government (which has retained power since independence in 1957) loosing their two-thirds majority in parliament and control over 5 out of 12 states. This is said to result from growing discontent over rising inflation, lack of transparency and an economic policy that favours the Malays. It also shows how society in Malaysia who are traditionally conformists, are starting to challenge the ‘status-quo’, speak up for causes they believe in and drive change.
Technology Technology, especially the Internet – a key component of mass-media today, drives social-cultural change by increasing access to information thus creating awareness on various matters. The past decade has seen a tremendous increase in Internet penetration in Malaysia (refer Diagram-3) as a result of better affordability (lower rates and higher income) and availability of infrastructure. The Internet has reduced personal interaction but has increased connectivity on a broader scope especially across borders.
Another technology that has improved access to information is the introduction of multi-channel satellite television that was available to Malaysians just before the new millennium. Malaysians, who previously only had access to 5 terrestrial channels, now have access to over 30 channels (albeit via satellite-subscription). Marketing Strategy – Assignment 1 – Aug/Sept 2009 Page 3 Calvin Ronald R. Jacob – University ID : 7525813 Assessment Reference: MS/July 2009/1 Access to Information in Malaysia 8000000 16000000 14000000 Subscribers / Users 12000000 10000000 8000000 6000000 4000000 2000000 0 2000 2008 2000 2008 Satellite-TV Subscription Internet Penetration Diagram-3: Key changes in Malaysians’ access to information www. astroplc. com; State of the Internet Report – www. akamai. com Lifestyle topics prevalent in Malaysia today such an increased focus on health and fitness, corporate responsibility and environmental awareness can be linked to the messages conveyed via these two mediums.
Summary The topics discussed do not represent all social-cultural trends in Malaysia exhaustively but provides an overview of factors driving social-cultural change and corresponding trends in the past decade only. Topics discussed are summarised in Diagram-4 below. External Stimuli / Drivers Demographics •Increasing prominence of Gen-Ys/Millenials Economy •Increasing disposable income Political/Regulatory Environment •Rising inflation, unfair policies and poor transparency •Ruling government loosing 2/3 Parliament majority Technology •Better access to information ? ncreased awareness Social-Cultural Environment Social-Cultural Trends • Status-quo and norms of society being challenged/questioned • (Drive for) Higher standards of living • Reduced work-life balance • Urbanisation of society • Increased role of women in society • Atomisation of the family institute • Increased connectivity • Lesser personal interaction • Increased focus on health and fitness • Demand for more transparency • Demand for better corporate responsibility, sustainable practices and environmental awareness
Diagram-4: Summary of social-cultural change drivers and trends in Malaysia over the past decade. Marketing Strategy – Assignment 1 – Aug/Sept 2009 Page 4 Calvin Ronald R. Jacob – University ID : 7525813 Assessment Reference: MS/July 2009/1 Response to Question A – Part 2a (Manufacturer: Nestle) Nestle S. A. is a Swiss multinational food and beverage manufacturer founded in 1905 – initially focusing on infant milk but has since diversified its range of products and associated brands (refer Diagram-5).
Diagram-5: Some of Nestle’s global range of products and brands This discussion focuses solely on Nestle’s “Maggi” range of instant-noodles and cooking-seasoning in Malaysia, how new trends discussed in Question A – Part 1 has impacted demand (locally) and how Maggi has adapted its marketing mix. Ten years ago, Maggi’s range of instant-noodles and cooking-seasoning were driven primarily by demand for: ? Cheap and easy to prepare meals – Consumers occasionally needed an alternative to rice (Malaysian staple diet) which was time-consuming to prepare. Conveniently packed seasonings – Malaysian generally had time (albeit less then before) and know-how to cook. They however needed conveniently packed seasonings to complement some of the other ingredients they used. Many of the Malaysian social-cultural trends discussed in Question A – Part 1 have altered the above demand patterns in one way or other. We will however only focus on Malaysian’s drive for higher standards of living here. In pursuing higher standards of living and improving earning capacity, Malaysians are spending more time at work and commuting.
The need for instant-food inherently increased but consumers required it “on-the-go”. Maggi’s instant-noodles satisfied the increasing demand for quick-meals but consumers had to use their own utensils to prepare it – which wasn’t an “on-the-go” solution. Marketing Strategy – Assignment 1 – Aug/Sept 2009 Page 5 Calvin Ronald R. Jacob – University ID : 7525813 Assessment Reference: MS/July 2009/1 Women who set-out into the corporate world at younger ages to pursue careers and contribute towards household incomes lost out on ‘inheriting’ home-making skills from their mothers, e. g. cooking.
A market emerged for quick-and-complete cooking solutions for corporate woman who are still expected to provide a wholesome meal for her family. Maggi’s seasoning range didn’t really satisfy this demand. Following is Maggi’s adapted marketing mix in response to the changing demand: ? Product ? Modification to an existing product – new packaging for instant-noodles Instant noodles are now packaged for ‘on-the-go’ consumption, i. e. in durable plastic cups. ?Extension of existing product range Seasoning range now includes complete pre-mixed seasoning which made cooking much easier for the ‘clueless in the kitchen woman’. Place ? Products were primarily available in hypermarkets but are now available in most 24-hour convenience stores which come with hot-water dispensers. ?’Instant’ range is increasingly available from vending machines at offices. ?Pre-mixed seasonings are sold at spice racks in most hypermarkets. ?Promotion ? Promotion was mainly traditional media advertising and sponsorship of ‘cook-shows’. ?Promotion has now extended to the web which also provides recipes to aid the corporate woman. ?Price ? Changes in price have not been strongly driven by social-cultural trends but by economic reasons, e. g. nflation, hence not discussed in this context. Maggi also extended product range in response to other social-cultural trends such as its ‘healthier’ range (low-fat, no MSG, herbal, etc) to satisfy the increasingly health conscious Malaysian. Marketing Strategy – Assignment 1 – Aug/Sept 2009 Page 6 Calvin Ronald R. Jacob – University ID : 7525813 Assessment Reference: MS/July 2009/1 Diagram-6: Some of Maggi’s new range of products adapted based on social-cultural trends Summary Social-cultural trends did not present a clear cut increase or decrease in demand for Maggi’s range of instant-noodles and seasoning.
Movements in demand patterns presented Maggi with opportunities which Maggi successfully pursued. Diagram-7 summarises key points discussed. “Then” (1999/2000) Demand Pattern for instant -noodles and seasoning • Cheap and easy to prepare meals • Conveniently packed seasonings to complement other ingredients used. Social-Cultural trend impacting demand pattern Marketing Mix Products • Instant-noodles – in packets • Bottled seasoning – thick & light soy • Stock cubes – chicken, fish Place • Hypermarkets – Giant, Tesco Promotion • Traditional Media Advertising • Sponsorship of ‘cook-shows’ • Drive for higher standards of living ?
More time spent at work ? Women are less familiar in the kitchen “Now” (2009) New Demand Pattern instant-noodles and seasoning • Cheap, easy to prepare and can be consumed ‘on-the-go’ • Make cooking ‘super-easy’ • Quick-and-easy but healthy New Marketing Mix Products • Instant-noodles – in plastic cups/bowls with fork included • All-in-one/Pre-mixed seasoning • Low-fat, No MSG and Herbal range Place • 24-hour convenience stores • Vending Machines in offices Promotion • Web-based – provides recipes and cooking tips Diagram-7: Summary of changing demand pattern and how Maggi has adapted its marketing mix.
Marketing Strategy – Assignment 1 – Aug/Sept 2009 Page 7 Calvin Ronald R. Jacob – University ID : 7525813 Assessment Reference: MS/July 2009/1 Response to Question A – Part 2a (Service Organisation: Astro) Astro All Asia Networks (“Astro”) is operates a direct-to-home “DTH” satellitetelevision network currently broadcasting in Malaysia and Brunei. Key points to note on Astro’s progress to date: ? Began operations in 1996 with 22 channels; currently has 116 ? Initial operations involved aggregation and distribution of third-party content but have vertically integrated into content development ?
Obtained 500,000 subscribers by year 2000; currently has 2. 6 billion ? Grown revenue from RM781million in FY02 to RM2. 9billion in FY09 This discussion looks Astro’s TV business in Malaysia and how it has developed its marketing mix and its target segments in line with a key social-cultural trend discussed in Part A – Question 1. Astro was launched on the back of the following Malaysian demand pattern: ? GDP was consistently growing and disposable income was increasing ? Only 5 TV-channels were available airing primarily local content ? All channels stopped transmission by about midnight. Malaysians spent most of their after work weekday hours at home Astro’s marketing strategy when launched: Target market ? From launch until early 2000s Astro targeted urban folk who were willing to pay a nominal fee for more television variety – concept of paying to watch television was new to Malaysians and was an ‘easier-sell’ to urbanites. Marketing-mix ? Product -The bulk of its programs targeted mature-urban audiences. Most programs were in English. ? Price – Minimum subscription rate was RM85/month. Rates increased with selection of more packages (up to RM120/month). ? Promotion – promoted in various ways (e. . billboards and road-shows) ? Place – satellite-transmission could be received throughout Malaysia. Marketing Strategy – Assignment 1 – Aug/Sept 2009 Page 8 Calvin Ronald R. Jacob – University ID : 7525813 Assessment Reference: MS/July 2009/1 Astro’s Market Segmentation and Targeting @ Launch Astro’s Marketing Mix @ Launch Product • Targeted primarily at mature-urban audiences • Vernacular language programs were aimed at a possible rural folk market Price • Subscription was set at minimum of RM85/month. • Rates increased with selection of more packages and could reach RM120/month.
Promotion • Banners, billboards, road -shows, flyers throughout target market areas. Place • services could be received throughout Malaysia Urban • StarMovies • MTV • Nickelodeon • Channel-V • Cartoon Network Young • HBO • Cinemax • BBC • StarWorld • CNBC • CNN Mature • ESPN • Discovery • Disney • Animal Planet • Prima* • Vanavil* • AEC* Target Segment *Vernacular language channels Rural Diagram 8 – Astro’s target segment, corresponding products and marketing mix at time of launch By the mid 2000s, on the back of targeting urban folk alone, Astro’s penetration rate had reached 30% of TV households.
Compared to international markets, this was high relative to GDP per capita indicating a potential plateau in growth. Urbanisation of society as discussed in Question 1 was a key opportunity for Astro. While disposable income for rural folk was increasing, the trend for higher standards of living saw them wanting more of what urban folk had watching satellite television included. Furthermore, the concept of paying to watch television had become a norm in Malaysia by now. While having strategies to retain urban subscribers, Astro expanded target segment to include rural folk.
Astro’s marketing mix was adapted accordingly as follows: Product ? Expanded range of vernacular language programs – while most Chinese and Tamil programs were sourced from China and India respectively, Malay programs had to be developed, hence Astro’s vertical integration into content development. ? While number of channels increased, a repackaging exercise reduced number of channels per package thus allowing subscribers to better tailor packages to their needs. Price ? Minimum subscription rate was reduced to RM58 – providing a lower entry point especially for rural folk. Promotion & Place were not significantly affected by this trend.
Marketing Strategy – Assignment 1 – Aug/Sept 2009 Page 9 Calvin Ronald R. Jacob – University ID : 7525813 Assessment Reference: MS/July 2009/1 Summary The social-cultural trend discussed provided an opportunity for Astro to continue growth by expanding target segment and aligning its marketing mix accordingly. Diagram-9 summarises points discussed. Launch Phase (slightly more than a decade ago) Target Segment @ Launch • Primary : Mature urban audiences (Decision makers) • Secondary : Young urban audiences “Now” (2009) Target Segment Now • Retention Strategies : Urban • Growth Strategies : Rural
Marketing Mix Products • Primarily foreign programmed content • Mostly English language; some in vernacular languages Price • Minimum RM85/month Place • Throughout Malaysia Promotion • Billboards, road-shows, flyers to target market areas Social-Cultural trend impacting demand pattern • Urbanisation of society and the drive for higher standards of living New Marketing Mix Products • Increased number of vernacular language programs • Repackaged to allow subscriber to better tailor choices Price • Minimum RM58/month Place • Throughout Malaysia Promotion • Billboards, road -shows, flyers to target market areas
Diagram-9: Summary of Astro’s evolving target segments and marketing mix in line with a key socialcultural trend. Summary on Part A – Question 2 Whilst trends can increase or reduce demand for an existing product/service, it may also present opportunities for product and/or market expansion as seen in the case of Maggi and Astro. Decisions to react will then depend on resource constraints of the organisation (Ansoff, 1968). Marketing Strategy – Assignment 1 – Aug/Sept 2009 Page 10 Calvin Ronald R.
Jacob – University ID : 7525813 Assessment Reference: MS/July 2009/1 Assignment Question B Consider the organisation that you work for, or one that you are very familiar with. 1. Examine the activities (formal and informal; internal and external) that your chosen organisation undertakes to scan / monitor its marketing environment. 2. Using relevant examples, evaluate how successful the organisation’s environmental scanning strategy is. Suggest how this strategy can be improved. Response to Question B Part 1 & 2 are collated in the following text
The marketing environment has traditionally been referred to as the sectors and forces outside the firm’s marketing function which infringe upon the ability of management to develop and maintain relationships with the firm’s target (Kotler, 1988). These sectors outside the firm can be further defined into two distinctive components – the micro and macro environment. Marketers are increasingly looking at a third component which is the firm’s internal environment. There are various academic models which further categorise elements of the internal and external environment which can be used as a guide for good practice, e. . looking at the micro, macro and internal environment; macro environment then conducted based on the PEST/PESTLE analysis. The marketing environment is a significant determinant of organisational performance and ‘the ultimate constraint upon the firm’s strategy’ (Baker, 1985) and hence must be monitored and acted on as necessary. For this discussion, we will look at how the Malaysian practice of a multinational management consulting firm “Company X” (name cannot be disclosed due to information confidentiality) conducts its marketing environment analysis.
Macro-environment Analysis Company X conducts a formal macro-environment analysis on an annual basis in line with its annual strategy review session. As relevant know how resides within the organisation, it is done internally. The analysis is used by senior management either for strategy development (usually conducted on a 3-year cycle) or to review strategy (annually). Ad-hoc changes in the macro-environment are identified and dealt with only as and when information comes to bear. Marketing Strategy – Assignment 1 – Aug/Sept 2009 Page 11 Calvin Ronald R. Jacob – University ID : 7525813 Assessment Reference: MS/July 2009/1
Whilst some of the indicators impacting Company X’s strategy are rather obvious, e. g. declining economy would potentially result in declining advisory fees, Company X should institute a formal macro environment monitoring mechanism to be conducted at least weekly. This may not have to be an extensive exercise but someone needs to be assigned to collate key information and news headlines from available sources (e. g. key economic indicators and business headlines) and communicate internally either via email or the firm’s intranet. Management can then decide when or whether to react to some of this information.
This information also helps in the nature of Company X’s work, consultants/Directors can leverage off this information to improve on the quality of their client engagement. Macro environment trends could also help Company X develop new lines of advisory business – e. g. regulatory push for Corporate Responsibility (“CR”) practices is an area that companies are going to need assistance on – identifying this early could help Company X gain a first mover advantage. Micro-environment Analysis The micro-environment is only analysed by Company X on an informal basis with a focus on customers and competitors.
Analyses on customers are centred on their satisfaction levels with firm and is usually done on an ad-hoc basis via verbal interaction at the end of every assignment – usually by the ‘Engagement Director’. Monitoring of competitors and their market maneuvers are done less frequently – mostly, it is based on feedback from ‘clients-close-to-the-firm’ who inform Director’s when a particular competitor approaches them to solicit business. Critical information obtained about competitors and clients are communicated during monthly director’s meeting. Analysis on the micro-environment especially customer’s satisfaction levels hould be made a formal practice and conducted not only at the end of an assignment but during assignments as well. This ensures that any issues are identified and dealt with before things get out of control. There have been some instances where dissatisfied clients hold back comments and communicate it only when a project is over – this impacts the firms reputation and possibility for repeat business. Also by not conducting a formal micro environment scan, Company X recently missed out on the opportunity to provide advisory services on setting of a shared service centre for a large Malaysian government linked conglomerate.
Competitors Marketing Strategy – Assignment 1 – Aug/Sept 2009 Page 12 Calvin Ronald R. Jacob – University ID : 7525813 Assessment Reference: MS/July 2009/1 sent in proposals based on a news report where this conglomerate indicated their intention to set-up such a shared service centre. Because they received proposals upfront, an RFP was never issued. Company X may have lost out on the tender process but would have at least stood a chance. A micro-environment analysis especially on competitors could be done in tandem with a macro-environment analysis based on major news reports
Internal-environment Analysis Company X’s only form of internal analysis is an annual employee engagement survey which provides management with information on staff satisfaction levels and how employee engagement could be improved – thus indirectly improving many other areas of the firm. Being a service based organisation, Company X’s key asset is its people. Identifying issues that affect them are to an extent as good as identifying issues that affect a client. Company X believes that by keeping employees engaged they will ultimately keep clients happy. Apart from some isolated ases this strategy has worked effectively – a survey conducted a couple of years ago indicated strong dissatisfaction on remuneration practices. Management used this information to conduct and industry benchmark and make salary adjustment where necessary. Subsequent surveys have shown improved sentiment with regards to remuneration – if the issue was left unattended, overall productivity and quality of work could have been affected. Summary Company X’s key area for improvement would be to increase frequency of macroenvironment analysis, formalise micro-environment analysis and maintain efforts on internal monitoring.
A macro-environment analysis need not be a significant exercise but one to capture quick and available information and disseminate it throughout the organisation. The focus should not be just in obtaining information but more importantly on disseminating information obtained and acting on it where necessary. Marketing Strategy – Assignment 1 – Aug/Sept 2009 Page 13 Calvin Ronald R. Jacob – University ID : 7525813 Assessment Reference: MS/July 2009/1 Macro-environment • Formal analysis of trends on an annual basis What is being done
Micro-environment • Feedback is sought from clients at the end of engagements on an informal basis (i. e. may not always be done) • Competitor feedback is obtained from ad-hoc sources – usually clients Internal environment • Annual employee engagement survey (key asset of the firm) What else can be done • Weekly monitoring of key economic indicators and headlines from major publications – summarised and communicated throughout the firm. • Formal feedback to be obtained from clients during and after engagements. An avenue (possibly anonymous feedback side) should be developed and communicated to clients for them to raise issues encountered with engagements as and when things happen • Ensure all issues raised are addressed (either explained or taken up) Diagram-10: Existing marketing environment scanning at Company X and areas for improvement. Marketing Strategy – Assignment 1 – Aug/Sept 2009 Page 14 Calvin Ronald R. Jacob – University ID : 7525813 Assessment Reference: MS/July 2009/1 References Academic references ?
Richard MS Wilson, 1994, Strategic Marketing Management, First Edition: Butterworth Heinemann ? McCarthy EJ (1960) Basic Marketing: A Managerial Approach. Homewood IL: Irwin. ? Philip Kotler; Swee Hoon Ang; Siew Meng Leong, 1996, Management: An Asian Perspective, Prentice Hall ? Ansoff, 1968, Corporate Strategy, Penguin Books ? Kotler, 1988, Marketing Management: Analysis, Planning, Implementation and Control, Prentice Hall, 6 th Edition ? Baker, 1985, Marketing Strategy and Management, Macmillan Malaysian Demographics and Social Cultural Trends ?
Department of Statistics Malaysia, www. statistics. gov. my ? www. indexmundi. com ? 2009 PricewaterhouseCoopers survey on millennials at work, http://www. pwc. com/my/en/publications/index. jhtml ? State of the Internet report, www. akamai. com Nestle/Maggi ? www. nestle. com. my ? www. maggi. com. my ? Nestle Malaysia’s Annual Reports Astro ? www. astro. com. my ? www. astroplc. com ? Astro’s Annual Reports ? Media Partners Asia – Asia Pacific Pay-TV & Broadband Markets Report Marketing Strategy – Assignment 1 – Aug/Sept 2009 Page 15