Competitive Edge Marketing Blog

GLOBAL CITIES PROVIDE A VIABLE CITY-CENTRIC EXPORT

GLOBAL CITIES PROVIDE A VIABLE CITY-CENTRIC EXPORT OPPORTUNITY THAT WILL HAVE A MAJOR IMPACT ON EXPORTS IN THE NEXT 20 YEARS

1. Statistics show that 20 mega cities in the world account for 75% of the carbon emissions of all cities.

2. Mega cities will become increasingly larger in the future because the world is becoming more heavily urbanized.

3. A recent projection in Australia alone shows how urbanized cities will be. The NSW Govt has announced that Sydney will have approx. 9.2 million people by 2036. This is half of today’s population in Australia, and it will happen in the next 28 years.

4. The world population is moving from rural areas to urban areas. The rate is 30,000 people a day. In the next short term, 500 million people will move into cities in the world, and many of these will be into mega cities.

5. In the past, we used to talk about populations in countries, populations in provinces, states or regions. This will change because the major consumer demand will be in cities.

The implication to exporters is obvious. Over the last 30 years of working with exporters, they tend to concentrate on country populations to carry out their estimates and viability estimates. They tend to look at growth in terms of country growth, and they tend to look at large populations as major draw cards for launching products or expanding their local domestic product or even their international or export products.

This type of thinking has always been a problem for consultants because we always have to “hose down” how people think about markets in order to reduce the target market to a manageable size, and one that can be attacked in terms of traditional and online marketing strategies.

A typical example is America. Many Australians see the market as the USA. Another is China. When they think about going to emerging markets, they will nominate China. Only in some cases will they nominate Beijing, Shanghai, Fujian, Szechwan or Kumming. Even then, they tend to group 2-3 cities together, without realizing the total demand that will be created if they are successful in that market, and the large costs associated with building a marketing channel, and targeting the market in an efficient and cost effective way.

Obviously large markets take up a great deal of marketing funding, and they have to be well thought out if they are to be harnessed correctly, and if they are to be opportunistic for the exporter.

The new figures on urbanization are therefore sobering and welcome.

1. What they suggest is, that while in the past many exporters have been lucky in terms of going to “countries” or large “regions”, this will no longer be viable or practicable. The large cities themselves represent huge target markets, and they provide a huge challenge in terms of distribution, market reach, communication strategies, consumer adaptation etc. They, themselves, will pose a huge challenge for emerging exporters.

2. On the other hand, it is great news for those who want to plan and execute a proper Export Plan. These individuals or companies will be able to nominate 2-3 large cities in what was an unwieldy and often daunting marketing task, such as “going to the USA”.

They can now concentrate their thoughts, processes, funding, strategies and effort around a more controllable, and more defined market built around a major metropolitan city center. Once they get to understand the distribution, the role of middlemen, the supply chain, how logistics and transport work to and from ports or airports, and how online and information systems work, they are in an excellent position to be able to penetrate these markets without huge costs, with concentrated marketing activities, and with the ability to track and monitor their success or failure more accurately.

From an export point of view, it means that more and more of the teaching and thinking about exports for emerging new technologies, elaborately transformed manufactures, and consumer products, as well as value added agribusiness based products such as wine, dairy etc., can be more properly channeled into these markets.

This represents a great opportunity for the smarter exporters. Taking the US for example, they can choose 2-3 cities that are very close in proximity, and they can choose a region where there is high population growth and movement to the urban cities. They can also isolate those metropolitan cities that have re-defined the bottom line in terms of sustainability, product usage, air quality etc., and they can identify those areas where not only will the product be consumed and be a viable export, but they can identify those where there is truly a contribution to the reduction in carbon emissions, air quality etc. – something which will favour Australia as a country that has always been able to be on the “clean and green” list.

In addition, the economies of having more concentrated distribution systems, direct flights to the major cities so there is not huge costs in meeting distributors and agents over long periods of time, etc. etc., creates greater economies, and with it great opportunities through concentrated consumers in a small areas that reduce distribution, handling costs etc.

Together with the ability to reach the world, markets and individual contacts via Google and other search engines, the cost of planning and executing export development for SMEs is realizable. With the concentration of large export markets in major cities, the vision of exporting is becoming more manageable, and attractive to the more entrepreneurial SME managers.

Web based strategies and platforms, apart from being necessary in today’s world, are a great investment because you are targeting major urban areas with fast broadband capabilities and educated/online focused customers at all levels in the supply chain.

TRADE MARKS FORCED TOWARDS GRAPHIC FORMULATION

In past years the Australian Trade Marks Office has worked closely with patent attorneys and other legal professionals to make the cost of trade marking very prohibitive for Australian companies. This not only worked against the interests of trade marking in this country and the work of the Trade Marks Office, but also made it very difficult for Australians to protect their trade marks internationally because of the expense, and length of time and considerations undertaken by the trade marks examination process.

In recent times, with the growth of the Internet and online practices, the system has become streamlined, and it became very easy to carry out trade marking activities to assist companies to support their business names and branding with proper trade mark registration that increased their intellectual property control, management and wealth.

Recently we have noticed that the Trade Marks Office has started on a process of “knocking back” nearly every trade mark where there is a market name or generic name in the actual trade mark registration. For instance, if you engaged in innovative gardening and you wanted to trade mark the name “Innovative Gardening Activities” or “Innovative Gardening Practices”, or Innovative Gardening Landscaping”, there is a very good chance that the first report that results from the $120 fee from the Trade Marks Office will immediately say that you cannot claim a trade mark and a monopoly through the trade mark of the word “innovative”.

They may even say that the words “gardening” and “innovative” together give you a monopoly, which seems ridiculous given that you probably have the trade name registered in one or more States, and even if you don’t have it registered in all the States, then someone else will register it in another State anyway.

In addition, the practice of registering trade names through the States has become so much out of control that a name such as “Innovative Gardening Landscaping” could be changed to “Innovative Gardening Landscaping WA”, “Innovative Gardening Landscaping NSW”, etc. With a name like Competitive Edge, we have noted the number of “knock offs” that go on at the registration level.

We are now advising clients in our practices to cease putting forward words or names as a basis for trade marking because of the lengthy process and the build up to another costly system involving patent attorneys and the legal fraternity.

Instead we are suggesting that our clients put in graphics that are more eye-catching and visual, closer to modern branding technology and techniques, and avoid reference to words that can be refused by the Trade Marks Office using the pretext that you are trying to monopolise a particular area at the expense of competition.

This means that when you consider trade marking in the future, you are best to try to look for a graphic change that may involve one or two letters in the word, or the way in which you present the wording of the business name.

This could include boxing the wording, changing the slant on the wording, adding a graphic such as a leaf outline or something else, so it has a unique characteristic and cannot in any way be considered to be:

1. Monopolising the wording at the expense of the competition, because there is a graphic involved that is distinctive and unique.
2. Restrictive in that other people cannot develop a different form of graphics that will give them unique branding and as a result, a unique positioning and trade mark in the market place.
3. Preventing others from seeking alternative ways of representing their trade mark in the market place.
This also avoids the costly fee hikes that an examination by the Trade Marks Office and possible legal involvement entails.

Trade marking is an important part of modern business, just as it has always been an important part of ancient business. The signature, through the signature ring (signet ring) carried by early merchants, was their “mark” or their trade mark, and this was used to sign off documents, important shipping papers etc., and to seal deals as far back as the Merchant of Venice-type transactions referenced by Shakespeare.

Today everybody has a trade mark, and this is their signature.

Making it difficult and expensive for companies to trade mark their signature, especially when they have been operating and have a legal trading name in Australia, is restrictive and not to the benefit of Australian business both here and in a globally connected world.

It is unfortunate that this has now become a practice. We know that as the wheels of evolution turn, this will eventually be overturned and there will be a return to normality, and a clear distinction in “fee for service” roles and direct blatant revenue-raising from a registration monopoly, restored to the benefit of globally competitive Australian businesses.

In the meantime, it is a good idea to consider the use of graphics, and to tie these closely to the packaging of your branding, and your unique positioning in the market place.

PORTFOLIO ANALYSIS OR CONSULTING GRID

1. INTRODUCTIONThe Boston Consulting Group is credited with taking a concept of product life cycles, and graphing these notionally into four distinct grids which all have a relationship to each other.

The Boston Consulting Grid, which is attached, shows the four notional product life cycle positions of a product at a point in time, and this is a “snapshot” of an organisation.

It shows:

1. Cash Cows or products that have reached maturity in a no growth or slow growth market, but yet have high market share, and are major contributors through margin and volume to the welfare of the company in terms of cash flow, cash generation, and future profit as well as current profit.

2. Stars or products that are currently running fast in a fast growing market and taking high market share. This growth is relative to their competitors’ success, and they are amongst the leaders in a growth market.

As such, they contribute cash flow, but they take extraordinary amounts of management time and they take a lot of cash if future market share is to be realised by further enhancing market penetration, and by reinvesting the product to achieve excellent results.

3. Problems or complicated products where the market is growing quickly, but for some reason, the company’s products are not assuming a strong position in either cash flow or market share. As a result, they consume large amounts of cash, large amounts of management time, and sometimes it is desirable for the company to divest themselves of the brand or products, rather than continue to manage them in adversity.

On the other hand, they may present opportunities for solving problems, and they could move forward to become cash cows or stars, depending on what happens in the market.

4. Dogs or products that have, at one stage, been cash cows, possibly stars or even problems. At this point in time, they are not growing, in fact they have a downturn in sales and contribution to the company.

Sometimes dogs are products that have gone through the full product life cycle, and as a result they have ended up being an extended product, or a product that the customer still desires, but there is not enough volume of customers to make them profitable. Customers have turned to other products or traded onto other systems, and only a minority of customers remain to use the product.

These products take time, contribute little money, and they complicate such areas as stock holdings, production runs etc.

The beauty of the Boston Portfolio Matrix is that it shows the effect of market share and margin.

It also shows the importance of early breakeven – that is, reaching a position where your variable and fixed costs are covered completely by margin in a short period of time. At a time when product life cycles are decreasing and product life cycles of 3 to 6 to 9 months can be experienced in some technological products, it is important that companies concentrate on early breakevens.

Merely showing that a product can break even over time, without due respect for the changing product life cycles in a market, is like carrying out a theoretical exercise.

At the end of the time, you breakeven, but the market moves without you, and in fact, the breakeven does not occur in reality, and you are left with huge costs for invested R & D, product launches, etc.

The other advantage of Portfolio Analysis is that it shows that the most valuable product in the company is a mature product that stays in maturity as long as possible, and contributes maximum volume and margin.

In this sense, the role of marketing is to create mature products, and to concentrate on holding products in maturity so they achieve high returns. This dispels the theory that all marketing is about new products and new customers.

Another advantage of the Boston Grid is that it shows the relationship between products. It acknowledges that at any point in time, some products will be earning good money, while others will be growing, some will be in problem areas, and some will be dogs.

As such, not all managers and not all groups can be in a high profit product area. Some will be in R & D projects taking on a risk, and introducing a launch of new products, whole other will be trying to turn old products around, or substitute old products for new, more adventuresome products, and others will be involved in solving problems.

Not everyone can manage the cash cow, and it is important to reward people with different reward systems and acknowledge that all of the processes of getting rid of yesterday’s product, managing those that go “off the rails” and introducing new products, is part of the total marketing of the organisation.

The next important consideration is that the cash cow is recognised as the one source of cash for a business. Stars need funds, as do problem products, and dogs quite often take rather than contribute funds.

If new product development and R & D is not an ongoing basis for the company, then the company must gain new products that will become tomorrow’s cash cows by:

1. Merging with other companies.

2. Buying products on the open market that have already gone through commercialisation, or are at early R & D stage.

3. Taking over licences or making other arrangements for new products.

4. Going to the bank once the cash cows run out of money, because there are no new product developments, and there are no new stars.

Managing the business is therefore like running a portfolio of shares in which there must be growth stocks, investment stocks and blue chip stocks. As a result of these two “asset sides” of a business, there must be liabilities in terms of some problems with some products at points in time, and some products that never make it, or in terms of market, “bomb out”, or eventually die.

New product development is risky as Booz-Allen, and several others in marketing have described through various studies. It is unusual to have even a 50% success rate with new products, and in a service industry where products are constantly changing (eg curriculum for tertiary studies), or where there is new technology (eg video, CD Rom), it is possible that while the new products themselves are viable and strong, that the technology can take the “carpet from underneath them”.

The Boston Consulting Group brings a good dimension to a company, and makes a company think about the whole process rather than one product, one division, or one market segment. It creates balance within the management.

2. R & D

In many organisations, it is important that R & D is clearly focused on where the gaps are in the market, not only from a product point of view, but also from a marketing portfolio viewpoint.

It is important that criteria such as margin and volume are examined thoroughly so that when products are chosen in the R & D program for their potential success based on criteria, the criteria also accentuates:

1. Where the gaps in the market are, and where the markets are in those gaps.

2. What kinds of margins must be achieved by the new product in order to sustain the portfolio of products, profitability and return on investment.

3. What kinds of volumes must be sustained.

4. Whether the product will be complementary or competitive within the production or delivery system.

5. Where it will have economies in the distribution system, and where it may use a totally different distribution system, thus accentuating costs and changes in launch and variable cost components.

6. Where it will alter the positioning of the company, and as a result, affect the business definition of the company. In this case, the product and resultant R & D can actually change the focus of the company if the company is not focused on what kinds of R & D they require.

7. Other Areas?

3. FURTHER DEVELOPMENT OF THE GRID

The grid can also be used to map, in a notional sense for management purposes, the following:

1. Markets – i.e. particular geographical markets such as states and overseas markets, as well as different market segments.

2. Consumer groups, in terms of user target markets.

3. Divisions in a company.

4. Competitors’ products as a basis for estimating your cash flow and future cash flow position in relation to competitors’ portfolio.

The grid can also be used to analyse a company’s ability to trade in the future. As all trading results in sales revenue and margin, if you can analyse a company’s trading position ahead of time, then you can fairly accurately predict the future accounting position, and anticipate shortfalls or profits.

Mapping products over time is similar to graphing a share portfolio. It lets you anticipate future markets and product development shortfalls.

PORTFOLIO ANALYSIS

1. Best Product is a mature product – Cash cow.
2. Best future growth products will come from Stars.
3. Should delete Dogs using pricing policy.
4. Should divest if Problems ‘if possible’.

PORTFOLIO ANALYSIS SUMMARY

1. Uses Product Life Cycles to categorise product groups or products/markets for ease of analysis.

2. Categorises the status of products/product groups by their position in growth markets and their position in relation to competitive products – market share.

3. Is based on the concept of cash and management time as major inputs that determine how products perform after they have been launched and viable markets penetrated.

4. Discusses the trade-offs between management time and cash flows dedicated to some products/product groups over others, depending on their Product Life Cycle position.

5. Works on the basis that the best product in a company is a mature product which continues to generate cash flow.

6. Acknowledges the role of New Product Development as essential for future corporate growth. But balances this against management and cash flow support for existing products, whether they be struggling or mature.

7. Acknowledges that products can change position within markets. They can also move position in terms of their status in the product/product group portfolio.

8. Provides an asset and liability side to the corporation based on product positioning, Product Life Cycle, resource needs, and market share (industry strategies). As such, it is a predictor of future statements of position for lenders.

9. Opens our eyes to the need to understand industry groups, industry strategies, and a company’s market position in relation to products, in addition to current static liabilities and assets.

10. Is a time management system. Do we over-invest management in product/product group areas which can ultimately bring down a company’s financial position?

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