Operations Management Problems at Nike

Operations management is a vital business function that remains a very important field of study in both academia and the corporate world. Operations is concerned with the transformation of inputs into outputs, and how this transformational process is managed determines the efficiency and profitability of a company. Operations can be viewed as the central core of an organization through which all other functional areas interface. Functional areas such as finance, marketing, and human resources each serve specialized roles that support an organization’s operations. The central dependence on operations in regards to the purpose of an organization’s existence highlights the importance of effective operations management.



In a global market, managing operations is no small task. With factories, offices, stores, and distribution centers dispersed throughout the world, multinational organizations are responsible for coordinating operations across a global supply chain. Supply chain management is a field of operations management that is concerned with the flow of information, products, and services across a network of customers, enterprises, and supply chain partners. While coordinating this web of operations, organizations must minimize costs, maintain and improve quality, manage processes and human resources, and continuously seek innovative ways to compete in a highly dynamic global marketplace.

Nike Inc

For the purpose of exploring concepts and tools used to effectively manage operations, let us consider an organization that has encountered problems with the management of their global supply chain in the past. Nike is an iconic footwear and apparel manufacturer that operates in over 180 countries with reported revenues of $25.3 billion in 2013. Nike currently has 719 factories, employing 990,325 workers in 44 countries around the world. It is the world’s leading manufacturer and seller of athletic apparel and sports equipment. It takes its name from the Greek goddess of victory, and is branded by the highly renowned swoosh logo and “Just do it” company slogan.

Global Supply Chain

Nike’s global supply chain is an extremely complex network that impacts a wide range of stakeholders around the world. The supply chain was initially built through the outsourcing of manufacturing directly to suppliers. In 1975, the company introduced the Future Program which divided Nike’s operations into 5 geographical regions with the goal of improving operations. Due to the ineffectiveness of this program, by the 1990s the company’s supply chain had many problems such as ineffective forecasting and an inability to keep up with changing consumer trends. As a result, Nike launched the Nike Supply Chain (NSC) project in 2000 with goals of implementing enterprise resource planning (ERP) and customer relationship management (CRM) software into an integrated platform. This project proved to be a disaster for Nike.

i2 Technologies

In 2001, Nike reported significantly lower earnings that expected, which the company blamed on i2 Technology’s demand-forecasting and supply chain management software. Nike officials claimed that the software resulted in shortages of some stock and excess of others. The inventory upset reduced Nike’s fiscal third-quarter sales by about $100 million. Nike and i2 worked to track down the problems and develop new software and operational procedures, but before the changes could be made the inventory problems had already significantly affected Nike’s bottom-line. Additionally, the company’s ordering and scheduling system was causing shortages and overstocks which had a huge impact on inventory and logistics costs. Nike was forced to quickly fill back orders and dispose of excess inventory through discount distribution channels.

Identifying Key Problems

In order to devise a plan of action to address the problems discussed in this case study, it is necessary to identify the problems faced by Nike during this challenging time. The primary issues outlined are inventory management, scheduling, and demand forecasting. To address inventory and scheduling, it is necessary to consider the company’s supply chain management strategy and design. Additionally, we will need to consider ways that Nike can improve their operations as originally intended back in 1975 with the Future Program. We will explore strategies, tools, and software that Nike can implement to effectively reverse its growing problems through the realization of an objective global operations strategy.

Demand Forecasting

One of the most important components of efficient supply chain management is accurate demand forecasting. This is because procurement, production, distribution, ordering, scheduling, and inventory are all determined based on predictions of what demand will be. While forecasts are never completely accurate, there are a variety of tools and techniques that Nike can use to improve the accuracy of their predictions. Since i2 Technology’s forecasting software proved to be ineffective, Nike should consider a variety of quantitative methods utilizing in-house data to generate insights.

One common and useful method of forecasting demand is linear regression. By relating demand to time and studying the linear trend line, the company can project the slope into the future and make predictions based on past behavior. Seasonal adjustments should be made and forecast error calculated to improve accuracy. Forecast error can be calculated using techniques such as mean absolute deviation (MAD). By monitoring forecast error over time, Nike can implement forecast control and calculate a tracking signal to determine if predictions are consistently high or low. This will allow the progressive refinement of their predictions from one period to the next.

Inventory Management and Scheduling

With today’s dynamic demand fluctuations, inventory management is paramount to ensure that a company has enough inventories on hand to satisfy demand while minimizing the many costs associated with maintaining large inventories. The first step to efficiently managing inventory is generating accurate demand forecasts. Next, Nike should utilize their recently implemented ERP software and coordinate this with their suppliers. Considering Nike’s supply chain, it would likely be very beneficial to consider vendor managed inventory (VMI) and a continuous replenishment program (CRP). The combination of these two strategies could have a significant positive impact on both Nike and its suppliers; improving the entire supply chain starting farthest upstream at the procurement of raw materials.

As explained by IBM, “Getting enough of the right product to the right outlet at the right time is the secret of success in supply chain management. That’s why these days more and more companies see the benefits associated with VMI/CRP.” Vendor managed inventory and continuous replenishment makes the supplier responsible for inventory management and product replenishment. The effective implementation of VMI/CRP would be dependent on Nike successfully implementing their ERP software and integrating it with their suppliers to share point-of-sales data and demand forecasts. It would require a strong relationship between Nike and its suppliers where information is exchanged daily. This would allow the manufacturer to accurately schedule its operations according to demand forecasts and inventory requirements rather than producing arbitrarily as Nike places order.

Supply Chain Management Strategy and Design

A supply chain encompasses all activities associated with the flow and transformation of goods and services from the raw materials stage to the end user (customer), as well as the associated information flow. This means that Nike’s supply chain begins where their manufacturers source the raw materials for the production of Nike’s apparel. The fact that Nike outsources their manufacturing implies that the company has little or no control over procurement or manufacturing processes. These are major operational areas that could help to minimize costs and improve quality and efficiency if managed properly.

Nike could consider acquisition of its suppliers to gain full control of their operations; otherwise the company is limited to its supplier selection and whatever influence it has as a third-party. The implementation of VMI/CRP as previously discussed would help to improve Nike’s operations upstream because it would give the manufacturer greater control in the production process by having the data to procure and produce only what is needed. This would mutually benefit both Nike and its suppliers because both parties will have the ability to mitigate costs and maximize efficiency. Good communication and the consistent flow of accurate data are vital for this strategy to be effective.

Conclusion and Recommendations

In recent years, Nike has made great strides in improving their supply chain management. This assessment has been based on past conditions of which many have been resolved in the past decade. The goal of this paper was to outline a strategy to allow Nike to recover from the downward slide that resulted from forecast errors projected by i2 Technology’s software. During this time, Nike’s supply chain was in a state of chaos that resulted in huge earnings decline. The primary areas that needed improvements were demand forecasts, inventory management, and scheduling. Each of these areas are interrelated, as demand forecasts determine inventory requirements which sets the tone for scheduling.

Because of the interrelatedness of these three problems, a major strategy that Nike should consider is VMI/CRP which could effectively address all three problems provided successful implementation and integration of ERP software. Additionally, Nike should consider various methods for forecasting demand and continuously refine their predictions over time. This data as well as point-of-sales data generated by the ERP software needs to flow smoothly between Nike and its suppliers to ensure the effectiveness of VMI/CRP and to allow the manufacturing facilities to mitigate waste and maximize efficiency.

References

Russell, R., & Taylor, B. (2011). Operations Management (7th ed.). Hoboken, NJ : John Wiley and Sons, Inc.

Nike, Inc., Manufacturing. (n.d.). NIKE, Inc.. Retrieved June 24, 2014, from http://nikeinc.com/pages/manufacturing

Goel, P. (2009, December 27). Supply chain management Disaster at Nike. Scribd. Retrieved June 24, 2014, from http://www.scribd.com/doc/24540648/Supply-chain-management-Disaster-at-Nike

Wilson, T. (2001, March 1). Nike: i2 Software Just Didn't Do It. . Retrieved June 24, 2014, from http://www.corvelle.com/library/ebuscouse/caseStudies/Nike_i2.doc

IBM. Vendor Managed Inventory (VMI), Continuous Replenishment Program (CRP). (n.d.). IBM -. Retrieved June 25, 2014, from http://www.935.ibm.com/services/be/en/it-services/vmi-crp.html

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Data Privacy: A Deontological Perspective

The information age has brought forth conveniences that were unimaginable less than a century ago. It is unprecedented for society to have access to seemingly unlimited information that is accessible from almost anywhere in the world. The internet has networked millions of databases and personal computers around the world into a fully integrated information platform. The emergence of this platform along with contemporary data management techniques has transformed the way that companies do business, making consumer data a hot commodity. The contemporary trend of gathering, managing, and interpreting data has provoked much debate regarding the ethical boundaries of the collection and dissemination of personal information in regards to privacy.


Because of its key role in collecting, analyzing and interpreting data, many of the problems, and opportunities, of big data are also those of market research. The use of personal data for marketing purposes “has become a defining social feature of the internet. “ This technology has created unprecedented opportunities for marketers to culminate and interpret information to generate more timely and relevant insights. It is a major challenge to leverage this wealth of information within an ethical framework.

Information privacy can be defined as “the desire of individuals to control or have some influence over data about themselves." Considering the vastness of the internet as well as the obligation to provide personal information to companies to use their services and order their products, maintaining any control over our personal information is becoming increasingly more difficult. Once the information is out there, it can be impossible to get it back and individuals have little or no control over how that information is used and disseminated.

The purpose of this article is to explore this issue from a deontological perspective to consider the rights that individuals have in regards to information privacy, as well as the source of this right and the corresponding duties that individuals and companies must pledge to uphold this right. I will argue that information privacy should be a legal right only to the extent that society values privacy and upholds a mutual duty to contribute to the academic process of discovering weaknesses in current information privacy protection and suggesting better alternatives for the establishment of more relevant laws and regulations.

Big Data and Market Research

Big data is a term used to capture the process of “storing, securing, and analyzing” the massive incoming data being gathered by large organizations. Organizations can cultivate a wealth of insight through the management and analysis of collected data. Because of modern web services such as web 2.0 technologies, consumers are more willing to share personal information. Firms collect information about customers through their websites to capture their needs and strategically use the information for customized promotions. New technologies allow organizations to use this abundance of personal information to refine target demographics, predict market trends, and cater to consumer needs like never before.

Information Privacy

Information privacy refers to the concept of controlling how one’s personal information is acquired and used. Conflict between appropriate use of personal information and individuals’ right to information privacy is one of the most serious ethical issues of the information age. Paul Pavlou discusses four distinct dimensions of privacy: Privacy of person, behavior privacy, communication privacy, and data privacy. For the sake of the issue at hand, communication privacy and data privacy can both be classified as information privacy. This information is used for a variety of reasons. Data such as email addresses, phone numbers, credit card numbers, physical addresses, etc. are generally used for advertisement and commerce purposes. Part of the information privacy concern is related to protecting this form of information from being used in ways other than those disclosed such as selling it to third parties. There are also frequent cases of security breaches which are more common for small e-commerce retailers with limited security features to protect customer information.

Information such as age, ethnicity, geographical location, etc. is generally used for evaluating consumer trends within specific demographics. Communication privacy and data privacy can be culminated and intelligently processed to analyze consumer behavior. For example, companies monitor consumer shopping behavior to make ads more relevant. Social media communication also provides behavioral information directly from the source and allows companies to monitor current trends. Another privacy concern is regarding the plethora of sensors that surround us in our technological devices that can be used to spy on unsuspecting users. This is an issue that could perhaps be beyond the scope of regulations and be more of an issue of security software to protect users from such threats.

Privacy Self-Management

Privacy self-management has its origins in the Fair Information Practices, which appeared in a 1973 report by the U.S. Department of Health, Education, and Welfare to address concerns about the increasing digitization of data. The principles included: Transparency of record systems of personal data, the right to notice about such record systems, the right to prevent personal data from being used for new purposes without consent, the right to correct or amend one’s records, and responsibilities on the holders of data to prevent its misuse. The Fair Information Practices failed to specify what data may be collected or how it may be used. Instead, most forms of data collection, use, and disclosure are permissible under the Fair Information Practices if individuals have the ability to self-manage their privacy – that is, if they are notified and provide consent.

The guidelines established by the Fair Information Practices only offer a framework to enable people to manage their own privacy. This means that it is the responsibility of the individual to thoroughly read disclosures that they sign online and protect and manage their own information. Privacy self-management envisions an informed and rational person who makes appropriate decisions about whether to consent to various forms of collection, use, and disclosures of personal data, but empirical evidence and social science literature demonstrate that people’s actual ability to make such informed and rational decisions does not even come close to the vision contemplated by privacy self-management. This illustrates a severe problem with the idea of data self-management.

Very few people actually read the disclosures that they sign online and with the plethora of software used today, it would be near impossible to have time to read them all. Even if one did, they are often filled with legal terminology that the average person does not understand. Many people even lack the technical knowledge to modify their privacy settings on websites. The lack of ability for the average technology user to understand and manage their own technology calls for a need for more concrete regulations in regards to how organizations can collect, use, and disseminate data.

A Deontological Perspective of Information Privacy

For the purpose of understanding the ethicality of information privacy, it is necessary to contemplate the issue within an ethical framework. Deontology, or rights and duties, focuses on doing things that are right in themselves, rather than right because of their consequences, establishing the moral act as “the act which recognizes the rights of others and the duties that those rights impose on the actor." This ethical approach is appropriate for the assessment of information privacy because for one to claim a right to privacy of information there must be corresponding duties. Joseph Gilbert asserts that “a right is worthless if no one has a corresponding duty."

To determine the duties that must be imposed to protect information privacy, one must first consider the source of any right that individuals have to this privacy. Gilbert establishes four basic sources through which rights can be derived: human rights, legal rights, position rights, and contract rights. It could be difficult to establish information privacy as a human right, and even if one did manage to devise a compelling argument to convince us that it is, it would do little to aid in the protection of this right. To protect a human right would require legislation and regulation which would make it a legal right, but as previously discussed our current legislation has limitations. Information privacy could be viewed as a contract right, but only in specific cases where contracts exist to establish such rights. Finally, the last source of rights, being those obtained through position, is not applicable to information privacy. This reasoning would suggest that any rights that we have to the privacy of our information would need to be established as legal rights to determine appropriate duties that facilitate the protection of such rights.

As previously discussed, the guidelines established by the Fair Information Practices only offer a framework to enable people to manage their own privacy, but this is insufficient. Due to our need for more relevant legislation and regulations, we must establish duties that would bring forth relevant protection according to the needs expressed by the people. Information privacy is a complex issue, and so to impose laws too hastily could result in more laws that do not effectively accomplish their purpose. This is why it must be a duty of the people to come to a consensus regarding what rights we should have to information privacy and work to establish a more appropriate framework for protecting these rights. The initial duties are imposed on academia to establish the duties that must be upheld by government as well as individuals to facilitate the rights agreed upon through consensus.

Conclusion

I have argued that information privacy should be a legal right only to the extent that society values privacy and upholds a mutual duty to contribute to the academic process of discovering weaknesses in current information privacy protection and suggesting better alternatives for the establishment of more relevant laws and regulations. Information privacy is a complex issue that requires constant vigilance to protect, for technology is rapidly changing along with means for acquiring personal data. This means that there is a progressive academic duty to revise information privacy material to maintain relevance in contemporary issues. There is also a duty on the individual level to contribute to the democratic process of establishing laws and regulations that correspond to society’s value of privacy and academia’s progress in establishing the best means of delivering this privacy.

Resources

Nunan, D., & Di Domenico, M. (2013). Market research and the ethics of big data. International Journal Of Market Research, 55(4), 2-13.

Solove, D. J. (2013). Privacy self-management and the consent dilemma. Harvard Law Review, 126(7), 1880-1903.

Bélanger, F., & Crossler, R. E. (2011). Privacy in the digital age: A review of information privacy research in information systems. MIS Quarterly, 35(4), 1017-A36.

Pavlou, P. A. (2011). State of the information privacy literature: Where are we now and where should we go?. MIS Quarterly, 35(4), 977-988.

Smith, H., Dinev, T., & Xu, H. (2011). Information privacy research: An interdisciplinary review. MIS Quarterly, 35(4), 980-A27.

Gilbert, J. (2012). Ethics for managers: Philosophical foundations and business realities. New York, NY: Routledge.

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Working as a Database Administrator

As the applications of databases have grown within the organizational environment, so too has the need for specialists to manage the growing complexity; and thus the database administrator (DBA) came into existence. The roles fulfilled by the database administrator vary from one organization to the next, as does the position of the DBA within the organizational structure. This is because database technology changes so rapidly that organizational style must change as well. The basic functions of the database administrator are as follows:


· Physical design of the database and implementation
· Operations, maintenance, troubleshooting, installation, etc.
· Defining and enforcing standards and procedures
· Logical and transaction design
· Testing and debugging
· Training and support
· Managing data integrity and quality
· Implementing and maintaining database security
· Tuning and performance monitoring
· Maintain backup and recovery policies and procedures
· Plan growth and changes
· Data distribution and use management

Roles

The roles of the database administrator can be divided into three categories: Operations, development, and data administrator. It is possible for one person to fulfill all three roles, but each is unique. Let’s look at each respectively:

Operations DBA: This role involves ongoing maintenance, and is generally characterized by scheduled checklists. The maintenance tasks are related to detecting, preventing, and resolving problems. By nature, this is a role of routine.

Development DBA: The architect develops the software architecture for the database design and really has nothing to do with operations. Some of the tasks of the development DBA are table design/redesign/modification, security design, impact design, etc.

Data Administrator: The primary function of this role is the management of metadata. This is a critical role is a data warehouse context because good metadata improves the quality of the data flow and shortens project time. As Mohit Sahgal of Andersen Consulting explains: “Metadata is the connective tissue of information” (Cox, n.d.).

Security

Security is a vital feature of a database, and so we should consider the role the DBA has to ensure the organizations data is secure. Security falls into three categories: Confidentiality, integrity, and availability.

Confidentiality is about making sure that all data is protected from any unauthorized access. The position if data security officer is held to ensure that the database remains in compliance with the organization’s desired level of confidentiality.

Integrity is keeping the data free of anomalies and errors. “Maintaining data integrity is a process that starts with data collection and continues with data storage, processing, usage, and archiving” (Coronel, Morris & Rob, 2013, p. 663).

Availability is ensuring that data can be accessed by authorized users when needed. To ensure that the data is available the DBA must protect the system from interruption and degradation.

Pay

Here are some figures retrieved from the BLS website to give you an idea of the pay you can expect as a database administrator. 

Conclusion

Since data is an extremely valuable organizational asset, the role of the database administrator is not to be taken lightly. It is said that good data produces good information, which is the foundation for business intelligence in the corporate world today. Primarily, databases are a vital component of organizational operations and so effectively managing data flow is critical for the success of any organization.






References:

Coronel, C., Morris, S., & Rob, P. (2010). Database Systems: Design, Implementation, and Management (10th ed.). New Jersey: Cengage Learning, Course Technology, Inc.

Cox, T. (n.d.). White Paper: The role of the database administrator. Computer Weekly. Retrieved from http://www.computerweekly.com/feature/White-Paper-The-role-of-the-database-administrator

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Online Analytical Processing (OLAP) vs Online Transaction Processing (OLTP)

Information technology systems can be broadly classified as either transactional (OLTP) or analytical (OLAP). Let’s take a look at each of them individually.

Online Analytical Processing (OLAP)

OLAP is characterized by a lower volume of transactions than OLTP, generally dealing with historical and archival data. This data is collected over a long period of time from OLTP transactions that are collected from everyday business and stored in a data warehouse. OLAP applications are used for data mining, and often require very complex queries and extensive processing time. The application is used to help make informed decisions and solve problems in an organizational environment.


Online Transaction Processing (OLTP)

OLTP is characterized by a very large number of short transactions such as INSERT, DELETE, UPDATE, etc. and is built for fast query processing, unlike OLAP. OLTP places high emphasis on data integrity due to the high volume of transactions. As stated in the OLAP description, OLTP is the original source of data from daily business transactions. While OLAP is for mining data for information, OLTP is operational in nature, managing fundamental business processes and recording all of the events. OLTP reveals a snapshot of the ongoing business activity with very low storage space requirements compared to OLAP. OLTP is typically highly normalized unlike OLAP, and requires frequent backups to ensure that the company does not lose highly valuable operational data.

Summary

OLTP collects the data by managing daily operations and OLAP stores the data over a long period of time for the purpose of data mining to reveal information to support decisions. OLTP is built for speed and data integrity while OLAP is built to store massive amounts of data at the cost of very slow processing speed. Both are vital features of the modern day business intelligence. 

References:

Coronel, C., Morris, S., & Rob, P. (2010). Database Systems: Design, Implementation, and Management (10th ed.). New Jersey: Cengage Learning, Course Technology, Inc.

Bose. (2012, March 8). Oracle Business Intelligence: OLTP VS. OLAP. Oracle Business Intelligence: OLTP VS. OLAP. Retrieved , from http://allaboutobiee.blogspot.com/2012/03/oltp-vs-olap.html

Differences between OLTP and OLAP. (n.d.). JKInfoLine. Retrieved , from http://www.jkinfoline.com/oltp-vs-olap.html

OLTP vs. OLAP. (n.d.). Datawarehouse4u. Retrieved , from http://datawarehouse4u.info/OLTP-vs-OLAP.html

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Ziba: Experience Through Design

“It is estimated that nearly 80 percent of all products introduced to the marketplace just don’t make it.” This may come as no surprise considering the diversity of products that exist today. As the market becomes more convoluted, it becomes more difficult to introduce a new product that catches the consumer’s eye, sometimes regardless of innovation. Sometimes it seems as though it has all already been done and now companies are only looking for another gimmick to sell. However, there are companies that continue to successfully introduce new products to the market. A design and innovation consultancy called Ziba helps companies learn about their customers and design products that will be successful in a dynamic marketplace. 

Ziba’s team is made up of a diverse group of specialists from all around the world, and they credit this diversity for their ability to gain a 360 degree view of the consumer. Ziba’s design and development is centered around understanding consumers in a deep and profound way. Rather than starting product development in R&D, Ziba begins with extensive consumer research. They examine both the market and the competition, followed by thorough market research which is then turned into valuable customer insights. Their approach to new product development is unique in the sense that they begin their development by studying the targeted consumer.

Sohrab Vossoughi, the founder and president of Ziba, explains that “people are in search of meaning these days. We have enough stuff to choose from. We have enough companies that can give us whatever we desire. It’s got to be meaningful, and to be meaningful you’ve got to understand your customer." Vossoughi asserts that market share is no longer the point; it’s customer “mind share” that you really care about. He explains that “you’ve got to create something that is meaningful to the customer and authentic to the brand." Ziba believes that to have a successful product today, it must connect with consumers on a deep emotional level. An emotional experience with the product and brand is what creates true brand loyalty.

As holistic marketers recognize the emotional power of design and the importance to consumers of how things look and feel as well as work, design is exerting a stronger influence in categories where it once played a smaller role. Ziba uses this emotional power to their advantage when working with their clients by ensuring that the design is in line with the targeted consumer as well as the brand. Design is a great way to differentiate a product and grab the attention of the target consumer. The advantages to the company that Ziba serves is that a well-designed product is easy to manufacture and distribute, and to the customer a well-designed product is pleasant to look at and easy to open, install, use, repair, and dispose of; all playing into the experience that the customer has with the brand.

The first question that Ziba asks a new client is whether they know their customer. They assert that a company must know what motivates their target customer; what drives them. Additionally Ziba inquires about the company’s values and how these values are incorporated into the messages that are sent out to the customer. According to Ziba, all designs and products should be made within context. The context that a company operates in is the market, the consumer, current trends, economic factors, etc. With the strategic target customer in mind, Ziba begins their integrated process of creating a meaningful customer experience. Design must be in line with the brand, and it must speak directly to the targeted customer.

Ziba believes that every project needs to tell a story which creates more of a holistic experience for consumers. Experiential marketing not only communicates features and benefits but also connects a product or service with unique and interesting experiences. Most eloquently stated, the idea is not to sell something, but to demonstrate how a brand can enrich a customer’s life. As earlier stated, consumers want meaning in their products, and the best way to give a product meaning is through experience that connects with consumers on an emotional level. A survey revealed that four out of five respondents found participating in a live event was more engaging than all other forms of communication.

Another important factor considered by Ziba is timing and whether or not the market is ready for a particular product. This is based on trend analysis and synthesis as well as trend application. Jeremy Kaye, the creative director at Ziba, explains that it’s all about “the right time for the right product for the right consumer from the right company." Steve McCallion, Ziba’s Executive Creative Director, explains that “one of the things that [Ziba] has to do is to be ‘archeologists of the future,’ and so [they] are not trying to make up the future but trying to understand the patterns that exist today that will manifest themselves in the future."

Ziba is an extremely successful design and innovation consultancy because of their ability to identify the target consumer, determine their needs, and design products and promotions in way that speaks directly to that consumer on an emotional level. Ziba stresses the importance of knowing the customer before moving into product design because products should be made to fit the customer rather than making a product and trying to make the customer fit it. For a truly rewarding emotional experience that creates solid brand loyalty, companies need to do their research and determine current trends within the target market and find ways to innovate within the context that exists.

References

Kotler, Philip, and Kevin Keller. (2012). Marketing Management. 14th ed. New Jersey: Pearson Education Inc., Print.

Ziba Design. (2009). Pearson Education. Retrieved from
http://wps.pearsoned.co.uk/ema_uk_he_hollensen_globmark_5/170/43546/11147834.cw/ content/index.html

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General Electric: An Emotional Buying Experience

In the past, General Electric’s appliance business was struggling with declining prices throughout the industry. This is because people generally only purchased new appliances in the event that their old appliances stopped working. Rather than accepting the trend and watching their company decline, General Electric decided to invest in new product innovations and comprehensive brand repositioning. By adjusting the brand positioning strategy, General Electric was able to create new demand in a declining market. As a result, the home appliance market today is thriving as consumers seek to upgrade to trendier models with innovative features and modern aesthetic appeal. Additionally, consumers often decide to upgrade their entire kitchen to match rather than buying a single appliance. The home appliance market has changed dramatically in just the past decade, influenced by innovative thinking and careful strategy on behalf of General Electric. 

Dave McCalphin, Chief Marketing Officer at General Electric, explains that “consumers are willing to step up and buy higher end products, to spend more for appliances if you can appeal to their aspirations - if you can appeal to them on a more emotional level - if you can offer them innovation that’s different from what they have had before."  This is exactly what General Electric accomplished by overhauling their Profile and Monogram product lines to appeal to a more affluent homeowner. These product lines started as a very narrow offering of mainly refrigerators. The product lines were in a ten year slump, lacking differentiation and unique brand positioning; making them indistinguishable from the competitors. General Electric made several significant changes to these two product lines that would change the future of home appliances.

The overhauled Profile and Monogram product line featured a broader offering, now with a full package of products positioned at the higher end of the marketplace. General Electric was able to move upstream in price by offering new styling, innovative features, and unprecedented quality. The company implemented a limited distribution strategy by carefully choosing who they allowed to carry their products in order to protect the very delicate brand experience that they offer their customers. McCalphin explains that “the way we really want the profile brand to be represented to consumers is in a very elegant, upscale setting." The combination of an elegant setting, innovative features, modern aesthetic appeal, and the projected perception of luxury evokes an emotional buying experience for the consumer. McCalphin asserts that innovating their products was the best decision that General Electric has ever made.

There are several key factors to General Electric’s success with their Profile and Monogram product line. Perhaps the most important quality of their overhaul was differentiation. Kotler and Keller explain that “although marketers assume well-known brands are distinctive in consumers’ minds, unless a dominant firm enjoys a legal monopoly, it must maintain constant vigilance. A powerful product innovation may come along: a competitor might find a fresh marketing angle or commit to a major marketing investment."  This is exactly what General Electric did. Their unique product offering expanded total market demand by introducing new ways to use the brand. New features meant that an appliance could do more than its original intention, and new styling created an upscale trend of renovating the kitchen based around new, aesthetically pleasing appliances. General Electric created a demand that did not exist prior and tapped into a higher end market allowing them to curve the prices of their product line upward along with the consumers’ perception of luxury.

Just as it seemed that General Electric was moving into the decline stage, carefully planned product and marketing program modifications allowed the company to successfully recover sales in the home appliance market. Companies can stimulate sales through product modifications to include quality improvement, feature improvement, and style improvement. General Electric applied all three modifications during their brand overhaul and also modified their marketing program by limiting distribution and increasing the price to position an element of luxury to their brand. During a marketing program modification the company should assess the likely success of any changes in terms of effects on new and existing customers. It was the goal of general electric to tap into new customers by making their products more upscale, which they successfully accomplished.

The result of the evolution of General Electric’s Profile and Monogram brands has been astounding for the company. Consumer perceptions have changed dramatically resulting in much higher profits for the company. The average retail price for General Electric’s appliances has increased over 15% which has “delivered five years of double-digit earnings growth." Through product innovation, differentiation, and focusing on creating an emotional buying experience for the customer, General Electric managed to turn a declining market to their advantage. Rather than accepting market and economic dynamics as the end of the line, innovative companies must look to the future to predict and sometimes create demand to keep their enterprise afloat. This is achieved through good marketing.

References

Kotler, Philip, and Kevin Keller. Marketing Management. 14th ed. New Jersey: Pearson Education Inc., 2012. Print.

General electric [Web]. (2009). Pearson Education. Retrieved from http://media.pearsoncmg.com/ph/bp/bp_akamai/kotler/General_Electric.html

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Wal-Mart's Mid Life Crisis: Restoring Public Perception

After decades of successfully maintaining a golden reputation as a “good corporate citizen,” Wal-Mart’s image began to take a turn for the worse. From sexual discrimination accusations to the hiring of illegal immigrants, Wal-Mart faces a plethora of accusations that have tarnished their public image. Attacks from local communities opposing Wal-Mart’s expansion plan and disputes over wages and benefits have added to their bad publicity and further changed the way that we think about this retail giant. Wal-Mart grew to such success by offering a wide diversity of products at low prices that the average person can afford. For consumers on a tight budget, it is a store that offers most everything that one could need at prices smaller retailers cannot compete with. For years, budget conscious consumers have enjoyed the benefits of this affordable one-stop shop, but now the implications of what it takes to maintain such a competitive advantage have come to light and Wal-Mart faces some very difficult decisions to restore consumer confidence in their brand.



Wal-Mart’s competitive advantage of offering extremely low prices has been the key to their success, but now many of the issues that they face threaten their ability to offer such low prices. Eliana Dockterman explains that Wal-Mart is the country’s largest private employer, and “has been the target of labor protests and congressional criticism in the past for its low wages."  Research at the University of California showed that Wal-Mart employees in California are forced to rely on public assistance programs which end up costing the U.S. taxpayers $86 million per year. Finding a solution to this issue is not as clear as it might seem. Offering more generous wages and benefits packages would certainly satisfy employees that struggle to get by financially, but it would also increase the company’s overhead expenses requiring product price increases to sustain profits. Since Mal-Mart targets low-income families, price increases effect demand which decreases revenue, more of which would be needed to be profitable with the new higher overhead. To appease critics, Wal-Mart would need to reconsider their entire corporate strategy and risk losing valuable market-share in their moment of vulnerability.

Changing consumer attitudes have affected the way that many companies conduct business today. Wal-Mart’s mid-life crisis is reflective of these changing attitudes as consumers are becoming more socially and environmentally conscious, expecting companies to adopt a sense of social responsibility. A recent global survey shows that “76% of executives believe that corporate social responsibility contributes positively to long-term shareholder value, and 55% of executives agree that sustainability helps their company build a strong reputation."  Perhaps many of Wal-Mart’s current problems could have been avoided with more proactive marketing measures that adapted to these social trends as they developed rather than moving forward as usual and responding to problems as they arose. Continuing to market based on the competitive advantage that brought success without continuously consulting the market will only work for so long, as consumers are constantly changing.

Moving forward, it is vital that Wal-Mart develops a comprehensive plan and adopts a holistic marketing approach with a “broad, integrated perspective."  This complex approach would encompass various marketing activities to include internal marketing, integrated marketing, performance marketing, and relationship marketing. Vital to the success of any marketing plan includes good internal marketing to hire, train, and motivate “able employees who want to serve customers well."  For Wal-Mart, this plan must also address satisfying compensation and benefits demands to ensure that employees represent the brand appropriately. This could be achieved by offering more generous wages that the company can afford without losing profitability and establishing an in-house wellness facility to mitigate employee healthcare expenses. Wal-Mart should also emphasize customer satisfaction and encourage employee support of charitable organizations to create an internal awareness of the company’s mission to adopt a socially responsible reputation.

Relationship marketing would focus on restoring the company’s brand image through building solid relationships with people and organizations that influence the success of the company. This would be achieved by reaching out to key constituents, admitting past mistakes, and displaying a genuine concern to address the needs of those affected. Wal-Mart marketers should segment these key constituents into separate groups in order to send relevant messages and offers that address the needs of each group or individual. Broad messages displayed on television advertisements and billboards should incorporate a message of corporate social responsibility alongside the companies low price competitive advantage in order to maintain current market-share while positioning new company values into the brand perception. Mal-Mart is currently featuring an ad campaign to show “The Real Mal-Mart” to customers by demonstrating how Wal-Mart helps customers save more money, how it provides opportunities for employees, and how it keeps prices low by creating efficiencies. These ads end with a tag-line, “That’s the real Wal-Mart,” aiming to undermine negative claims against the brand as being a false representation of what the company is all about.

Integrated marketing is the process of creating, communicating, and delivering value through each individual marketing activity having all other activities in mind. Wal-Mart should ensure that all marketing activities are integrated and communications deliver a consistent message so that each contact reinforces and improves the effectiveness of all others. The results of marketing efforts should be anticipated and closely monitored for improvement through performance marketing. This means examining not only financial performance but also “market share, customer loss rate, customer satisfaction, product quality,” as well as the “legal, ethical, social, and environmental effects of marketing activities."  This would mean reaching out to collect both quantitative and qualitative data through surveys, questionnaires, social media and discussion forums, offering physical and digital feedback mechanisms, focus groups, etc. Wal-Mart and all of its constituents should perceive the company as being a customer-oriented organization with customer interest at the heart of its decisions and operations.

For decades, Wal-Mart has been perceived as a company that delivers high customer value by offering a wide range of products at extremely competitive prices. The company went stagnant as its reputation has been damaged by several claims regarding the social impact of its practices and the ethical implications of its operations. To recover its brand image, Wal-Mart must empower the customer by listening closely to their concerns and needs while making adjustments as necessary through a holistic marketing approach. The company must focus on each segmented group of constituents to address the needs of each in order to build loyal, long-lasting relationships. Interacting with the customer is vital to understanding market needs and maintaining a competitive advantage in a dynamic marketplace that is constantly changing. Wal-Mart should strive to position itself as a socially responsible company that cares about its customers and employees, as well as its greater social impact as a multinational corporation that directly and indirectly affects the lives of millions of people all around the world.

References

Kotler, P., & Keller, K. L. (2012). Marketing Management (14 ed.). Upper Saddle River, NJ: Pearson, Education Inc.

Maich, S. (2004). Wal-Mart's Mid-Life Crisis. Maclean's, 117(34), 45.

Zwiebach, E. (2013). Ad Campaign Seeks to Boost Wal-Mart's Image. SN: Supermarket News, 61(24), 30.

Dockterman, E. (2013). Walmart and Protestors Clash Over Wages. Time.Com, 1.

Torelli, C. J., Monga, A., & Kaikati, A. M. (2012). Doing Poorly by Doing Good: Corporate Social Responsibility and Brand Concepts. Journal Of Consumer Research, 38(5), 948- 963. doi:10.1086/660851

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