Goods Dominated Logic in Marketing free essay sample

Although when this logic is extended into services it results in reducing service offerings into man hours, information and other ‘exchangeable’ units. Whereas recently, literature has proposed the concept of a Service Dominated (SD) logic where the customer and the firm are involved in co-creating value-in-use, rather than value-in-exchange, within a service system (Vargo et al 2008). In this SD logic Vargo amp; Lausch (2004) suggest that a business’ offering of a value is merely a proposition for the customer to realise at point of use, and until this point what is being offered is only potentially valuable described in FP7 of the 10 â€Å"Foundational Premises† offered by Vargo and Lausch (2008). They do this by reaching into a pre-industrial past to find a more holistic marketing logic suited to the more open, dynamic and global markets than the control-orientated resource allocation model most commonly represented as the 4P’s (Ballantyne amp; Varey 2008). And it has been suggested that, through this SD logic, marketing literature has seen a paradigm shift as more attention is being paid to the intangible resources of a firm due to the impact they have on the co-creation of value between suppliers and customers, rather than simply exchanging their good or service for a pre-determined price as even Kotler (1977) notes that the â€Å"importance of physical products lies not so much in owning them as in obtaining the services they render†. Instead it is now believed the strategic role of the supplier is to support the customer’s value creating purposes with both service activities and goods that render service (Gummesson 1993). One of the main differences between GD and SD logic is their retrospective way of handling resources, especially that of Human Resources. In light of this it is evident that SD logic places much greater importance on different areas of the business strategy, such as relational marketing where GD focuses on transactional. And through effective managing of models such as â€Å"The Six Markets† model (Christopher et al 2002), firms can effectively use Relationship Marketing to emphasise the relationships between the organisation and all of its stakeholders in each of the six â€Å"markets†. And therefore can more effectively assist in instilling the SD logic of co-creation in the organisation as a â€Å"holistic approach to the value-creating space without the boundary constraints of ‘product’ and ‘service’† (Ng and Briscoe 2011). And linked closely with this is an intangible resource that is also seen to have a high level of importance with the SD logic, that of Internal Marketing, due to the importance of human interaction within aspects such as value creation. Internal Marketing is a concept first proposed by Berry, Hansel and Burke (1976) and was originally developed within Service Marketing as more of a philosophy that, since employees play a large part in how a company is perceived, due to their interaction with customers, the employees’ needs should also be satisfied, viewing them as â€Å"internal customers† (Berry 1981). Then in turn, as employees are more positive in their work, they are in a better position to satisfy the â€Å"external customers† as demonstrated by the Service Marketing Triangle (King and Grace 2006). An example of this in practice can be seen through the Swedish firm, The Ericsson Group, who in 1983 installed their Internal Marketing ‘Ericsson Quality’ program with the main justifications behind it being that â€Å"quality was to become the most important weapon in marketing warfare† (Gummesson 1987). And this could be argued in line with the general SD logic in which quality takes even more credence than GD logic as, with the equal role of consumers in value creation, a stronger service will need to be provided in order to successfully market. And the results of the EQ program can be seen to support this as, with the company instilling IM techniques such as job rotation by allowing all employees to take part in training programs, productivity rose by 40% whilst â€Å"error points† fell from 100 to 30 as mployees were more motivated to undertake different tasks and this focus on quality led to higher customer satisfaction and therefore a higher co-created value, as the true value of the offering is only realised in consumption (Ballantyne amp; Varey 2008). And so in conclusion while Goods-Dominated logic creates a distinct separation between producer and consumer until the point of exchange (Vargo et al 2008). In G-D logic the customer was considered as an ‘operand’ resource that must be acted upon to be useful and was considered to be passive and outside of the value creation process. Information had to be targeted towards the customer as they were unknowledgeable but could be encouraged to purchase and â€Å"consume† the firm’s output or production. Thus, he was the â€Å"destroyer† of value. Whereas in contrast to that, the consumer plays an active, if not equally central, role in S-D logic and is a key part of the value creation process. He is now considered as ‘operant’ resource that is capable of acting and producing effects in other resources. As FP6 states, â€Å"the customer is always a co-creator of value† (Vargo amp; Lusch, 2008a). Not only consumers but also supply chain partners are viewed as endogenous to value creation and as a source of expertise and knowledge from which the enterprise could and should benefit (Lusch amp; Vargo, 2009). In fact, according to FP4, operant resources that serve with their knowledge and expertise are the fundamental source of competitive advantage. Although it must also be considered that if customers can be considered co-creators of value, then due to factors such as misinterpreting information available to them, they also have the potential to be ‘co-destroyers’ (Ple and Chumpitaz 2009). Part 2 Introduction As the worlds largest manufacturer and distributor of non-alcoholic beverages, Coca-Cola is certainly no stranger to global marketing, as this report will review. Established in the US, Coca-Cola initiated its global expansion in 1919 and now markets to more than 200 countries worldwide. It is one of the most recognizable brands on the planet and also owns an ever increasing portfolio of other soft drink brands including Schweppes, Oasis, 5 alive, Kea Oar, Fanta, Lilt, Dr Pepper, Sprite and Powerade. Despite this, Coca-Cola still battles fierce competition, especially from their main rivals PepsiCo. Standardisation vs Adaption strategies While supporters of adaption stress the cultural differences that exist between nations and so urge that international companies such as Coca Cola must take these into account (Nielsen 1964). Supporters of standardisation focus on consumer similarities, proposing consumers will be satisfied with similar products (Levitt 1983). Levitt goes on to argue that the adaption philosophy has mainly been an outcome of the lack of vision on the part of multinational firms, and for that reason the multinational corporation is designed to disappear and being replaced by a truly â€Å"global corporation† (Rau and Preble 1987). And, as a result, Porter (1984) recognises two distinct strategic options for multinational companies – a global strategy and a country-centered strategy. Reviewing this, the likely best option for Coca-Cola would be a continuation of their standardised approach, as the Coca-Cola brand is known for its universal global image, although to maintain a geocentric ideology so that the company can maintain this universal whilst being able to react and adapt if necessary, such as their soy alternatives in Asian markets. And this â€Å"Think globally, act locally† is already evident in much of Coca-Cola’s global activity, such as its â€Å"Live on the Coke side of Life† adverts in 2006, which varied slightly in some countries to include elements of local culture. And by using this standardisation of the marketing mix when available for the entire global market, the company is able to benefit massively from economies of scale of production and marketing for the â€Å"mobile consumer† (Levitt 1983) and also offers a coordination of activities as well (Mintzberg 1990). New Product Development NPD is the process by which a new product idea is conceived, developed and ultimately brought into the market. New product introduction in today’s technology-driven markets carries significant risk and failure rates can be s low as one out of every three products (Antil, 1988). Yet, without the introduction of new products, deterioration of a firm’s market position is inevitable, as without new products, firms will inevitably stagnate and fall behind to competitors, reiterated by Kotler who states that failure to respond to competitive new product introductions with appropriate speed can result in late market entry, a permanent loss of market share and dissipated profits (Kotler, 1988). So a company such as Coca-Cola is constantly coming up with new innovations in order to maintain its market dominance, with the company’s innovation centre in Brussels, one of many centres globally, constituting 40% of Coca-Cola’s business operations and producing 500 innovations a year (Hei. eas. ee). With innovations in the works including â€Å"on-the-go† (re-sealable) drinks cans, coffee and the POP-cooler Coca-Cola is able to maintain its competitive advantage. Although due to the risk associated with such product developments the company must maintain a definitive idea of its strengths and weaknesses, generally created through a SWOT analysis. Strengths * Popularity * Brand Awareness/Recognisability * Customer Loyalty * Strong Financially| Weaknesses * Un-healthy * Element of ‘taken for granted’| Threats * Constantly emerging health conscious society * Competition (PepsiCo)| Opportunities * Economies of Scale * Edible products – confectionary etc| And by constructing such an analysis the decision makers at Coca Cola would be able to ascertain what areas they should be cautious of and where they can find opportunities to further advance and strengthen the brand. One such idea on the basis of this table could be to try and tackle the health issue that seems to be one of the few factors working against the brand, and a factor that if left untended can weaken the strongest of companies. Therefore, due to the fact that Coca Cola could not realistically make a ‘healthy’ product due to the ingredients needed to make â€Å"That Great Coke Taste†, one possible NPD could be to finally move into the confectionary market, and create and energy bar i. e ‘Cocalate Bar’. In doing this the company could simultaneously run a ‘Get Healthy’ initiative promoting the new product as well as reducing the pressure from health organisations on the firm. Channel amp; Sales Management Strategies Channel Management process by which a producer or supplier directs marketing activity by involving motivating parties comprising its channel of distribution. And, if successfully done, the company will find a solid compromise between what is ideal from the customers’ point of view and what is practical for the company to use. Therefore choosing the right channel of distribution depends on a variety of issues, such as whether to sell directly to retailers or through distributors, the current and future selling environment and the product limitations to name but a few. In order to ascertain what these issues will be, the company needs to formulate an idea of what the consumer will want, and so in terms of Coca Cola, it would be expected that the average consumer would want to buy the product locally and in person, rather than having to travel or order over the phone due to the simplicity and convenience style of the good. And so, due to the size of the market and the geographical limitations as a result, the Coca Cola Company would clearly need to move their product through a number of distributors, meaning that Channel members would need to be added. And by doing this the firm would create greater efficiency in making their goods available to the consumer, and also benefit from the experience, specialisation and customer service offered by the channel member highlighting how â€Å"supplier relationships are considered as assets in the strategic planning of the company† (Johnson 1999). Ethical amp; Social Issues More than ever firms are being held to strict guidelines and expectations to produce excellent goods of or services and to maintain a good relationship with society and the environment. Consumers expect organisations to act legally and ethically, and any failure to act socially responsible can have serious repercussions for any firm, as all business are perceptive to a social windfall due to the level of communications in today’s society maning that information travels faster than ever before. Social Marketing is â€Å"The application of marketing principles and practices to help with the resolving of health and social problems. This involves the use of marketing †¦ to change public behaviour and practices considered to be harmful to health and societal well-being. † (West, Ford and Ibrahim, 2010). As a result of such social marketing campaigns companies that do not live up to their Corporate Social Responsibility can be targeted to disastrous effects such as Coca Cola’s Belgium crisis in 1999 when School children reported feeling ill after they drank Coca-Cola (Taylor 2000). Obviously a corporate nightmare leading to the replacing of the CEO due to his â€Å"arrogance† in dealing with the dilemma as any damage to a company’s brand image can be catastrophic and impossible to regain. Therefore modern businesses must create and maintain a strong corporate ethicality, as a poor one can undermine the ethicality of the business leading to the public possibly perceiving their operations as corrupt or wrong. In order to create this corporate ethicality the company would need to generate effective ethical guidelines and/or corporate codes that can be effective at all levels. When reviewing Coca Cola it is evident that the company has learned since disasters, such as Belgium ’99, by ensuring this ethicality through avenues such as an Ethics and Compliance Committee, a cross-functional senior management team that oversees all ethics and  compliance programs  and determines Code violations and discipline whilst also ensuring that associates worldwide receive a variety of ethics and compliance training  courses  administered by the office. (Coca Cola Company). Control amp; Evaluation Methods Marketing Metrics are measurements that can be used to measure a company’s performance so that they can assess exactly where they are in relation to a wide variety of aspects. Performance measurement has been a major concern in marketing and remains a vital issue in many companies, supporting the research  priorities  established by the Marketing Science Institute (MSI) during last decade. The term â€Å"performance† is widely used in all areas of management. In virtually all disciplines we use metrics to explain phenomena, diagnose causes, find relationships, make predictions, and allow comparisons. Ford and Schellenberg (1982)  identify three conceptual approaches for defining organizational performance. The first is the objectives approach, assuming organizations pursue the achievement of defined goals. The second is the resource systems approach, enhancing the relationships between the organization and its environment in terms of the ability to secure scarce and relevant resources. The third is the process approach, defining performance in a way that stresses the behavior of its components. In terms of Coca Cola, the soft drinks multinational will be concerned with metrics primarily concerned with factors affecting its growth, capital invested and future predictions due to it already being well established and so looking to maintain its dominance, and so would be following the objectives approach. Therefore metrics such as ‘return on marketing investment’ would be used, and so give a clear indication of how successful the company’s marketing has been and so realise if it there needed to be any altering to their current style. Conclusion Therefore, in conclusion, it is evident that Coca Cola is one of the foremost brands in the world for a reason. I believe the company has adopted the correct approach for global marketing by maintaining a predominantly standardised approach, meaning that they benefit from a global recognition, massive economies of scale and easier coordination of their activities, but with a readiness for adaption Coca Cola is able to react quickly and efficiently to any problems that may arise as result of culture differences, and despite Levitt stating that adaption is a poor choice as it gives way to a â€Å"Global Corporation† (Levitt 1983), this seems another benefit as it allows for the ‘glocalization’ of the brand. Furthermore, with the scope that Coca Cola has for New Product Development as well as the channel distributions available to it, there is countless opportunities for the brand to penetrate new markets, build on existing ones and so further cement its place as the dominant drinks brand. And lastly, despite slip-ups, such as the Belgian contaminated drinks, which ultimately businesses should expect and be able to handle effectively, the continuing focus on the level of corporate ethicality and upholding Coca Cola’s Corporate Social Responsibility through developments such as the Ethics and Compliance Committee highlights the MNC’s commitment to maintaining a solid relationship with society through efficient Social Marketing, a massive asset to be able to call upon. And these qualities would be reflected in Coca Cola’s marketing metrics, highlighting the strength of the position of the company, and the likely continuation of its steady solidification one of the world’s most recognised global brands. Word Count: 2,877