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Executive Summary
A depth understanding is being made about the product especially the company itself. York, a multinational enterprise is, of course, without its flaw as well as its success story. York is the trading firm where it receives the product form aero master, the Sister Company as the manufacturer as well. The product line that I have decided to select is the Unitary Product Group which consist the various types of mini-splits, use for both residential and commercial market. Objectives, the purpose of the company are being stated although some of the parts are confidential and cannot use in this report. This is the case for many of the parts in these reports, so I tried to write as much as was allowed by the company.
In order to stay competitive and gain competitive leverage, some of the strategies the company uses concentrate on customer-based oriented. To achieve in this current dynamic market environment, it is essential to analyze what the customers or consumer needs are and find out ways that our products can deliver those desired needs.
Careful analysis of the five forces which determines the well being of the company are done in order to derive the SWOT analysis which is later used to develop our marketing strategies which are analyzed according to the element of marketing mix for more clarification. Recommendations will made according to what has been analyzed in our strategy analysis to better serve the customers by providing such tactics as provide attractive incentives such as high percentage of sales rate to induce those customers, namely the wholesalers, retailers or contractors to carry and try to sell our products. This will support the third objectives of the company and that is to increase the distribution outlet of 15% each year.
York Company profile
York International
York International was formally established in 1874 in the United States. The company was firstly successful in China and Britain, while the growth rate was rapidly increasing in the Asia-Pacific regions. For more than 10 years that York has expanded and developed to be the leader in the cooling system technology, nowadays, York is number one in the manufacturing, marketing and servicing the air conditioning system in the world market. There are evidences of these claims. York has designed and installed the air conditioning system in the most important places such as Empire State, World Trade Center New York, Opera House Australia, NASA, and many famous international airports. Moreover, since 160, York’s air conditioning system was installed during Olympic Games, also the recent Olympic Games at Sydney, Australia in the year 000.
York International is the largest independent supplier of heating, ventilation, air conditioning and refrigeration (HVAC&R) products in the United Stated and leading competitor globally. York designs, manufactures, sells and services heating, ventilation and air conditioning systems, and compressors for residential and commercial markets; gas compression equipment for industrial processing; industrial and commercial refrigeration equipment; and compressors for air conditioning and refrigeration applications.
The Unitary Products Group designs manufactures and distributes a full line of cooling and heating systems which can be found in private homes, apartments and small commercial facilities. Products include ducted central air conditioning and heating system (air conditioners, heat pumps, and furnaces), light commercial heating and cooling equipment, ductless mini splits, and reciprocating and scroll OEM compressors (for original equipment manufacturers and for sale by wholesale distributors). The company emphasizes operating efficiencies and compactness in its highly reliable products and systems. Products, parts and systems are sold through independent distributors and company-owned branches. Compressors are sold directly to other OEM manufacturers.
Engineered Systems Products group include cooling and heating system which are custom engineered to meet specific customer needs and applications. This group of products include air-cooled and water cooled commercial chillers, central air handling equipment, variable air volume units and control equipment to monitor and control cooling systems, marine systems (chilled water systems for use on U.S., British and French naval vessels), and after market services (retrofit and replacement of systems and routine, emergency and performance improvement services.
Much like Engineered Systems products, the products in the Refrigeration Products Group are custom designed to meet specific needs and applications. The wide range of products include crew and reciprocating compressors, condensers, evaporators, heat transfer equipment and pressure vessels, spiral, tunnel and plate freezers, packaged refrigeration systems, hygienic air handling and distribution systems and distribution system, and automated plant control systems, as well as gas compression and Co system for the oil, gas and petrochemical industries. Refrigeration systems are essential in textile, electronic, pharmaceutical, petrochemical, food and beverage, and much other process cooling operations, and in maintaining these products in warehouses, distribution centers and retail outlets. York supplies a substantial portion of the vital refrigeration systems used in industrial and food processing applications throughout the world.
At present, the head office of York International is at Pennsylvania, USA. And there are the manufacturing bases in more than 0 countries worldwide. Furthermore, there are more than 700 office branches in more than 10 countries.
York Thailand
As York noticed Thailand as one of the potential markets in Asia, therefore, the company expands another branch in Thailand under the name “York Air Conditioning and Refrigeration Inc.,” in 11 where it is the distributing and servicing center. The management and administration are organized by all Thai people who are well trained in each particular function. All the new technologies are transferred form the head office in the States. Therefore, the quality control and product improvement would be as good as the international standard. Nowadays, York Thailand is famous and well-know in product quality and the best services as responding to Thai market.
Current Market Situation
The company started selling in Thailand since 11. Its competitors “Mitsubishi” who is market leader hold 0% of the market share, “Carrier” hold 1% of the market share and “National” hold 10% of the market share.
In 001, Air-Conditioner market contained about 50,000 units, value 7,000 million Thai baht that decrease from last year 0%. In the Air-Conditioner market, the portion of large-scale air-conditioner is 1,400 million baht, Medium scale air-conditioner 800 million baht and small-scale air-conditioner at 5,800 million baht. The large scale and medium scale was decrease by 0-80% this year. However the small scale Air- Conditioner only reduces by 10%.
The major factor for the decrease in air-conditioner is Economic crisis and every manufacturer have to mark up the price 5-0% more from the value added tax and the increase of raw material price from the devaluation of baht. All these lead to lower purchasing power.
Customer’s needs
Customer needs air conditioner at lowest price possible with qualified specification according to their needs. As in Thailand, there are increase air pollution and increase in temperature so; customers are looking for air-conditioner that has air filter and high speed of cooling the room.
Buying Behavior
Customers that buy their own house usually have air conditioner. Number of air-conditioner in their place depends on the number of people in the household. Non users of air-conditioner they give reason that it’s unnecessary and some said that it is too expensive for them as these people have low income and did not have their own house. They give important to price, promotion and brand image have effect on perceive price of the product.
Perceptions
Customer perceives the product according to their image or reputation of the brand. They are willing to pay higher price for reliable product that suits their needs. But consumer doesn’t have full information and understanding about BTU of air-conditioner. They match the brand image with price and quality of the product.
Product Situation
Currently, in the Unitary Product Group in which we are focusing on minisplite that is for a commercial and residential market, various features and models are provide to the consumers, each delivering different features which are preferred by the consumers. Such features would include remote control based to control the functions of the Air conditioning as well as an improvement in package to convey to the consumers, the cleanliness and environmental friendly Air Conditioning, which helps, preserve the environment. York offers quality product in terms of durability and reliability with constant maintenance check and repair. Even though Air Conditioning is more or less a homogenous group differentiating the product through features or attributes would have little impact on the consumers. Therefore, the use of brand name is the corporate image is a useful tool in gaining leverage against competitors.
Their company’s policy is to work in honesty with sincerity to maximize the consumer relationship, building them into clients with the use of market-orientation, the trading firm, which is York can maximize customer satisfaction.
Nowadays, more customers concerned about electricity saving products, with Thai may lead the company to produce more energy saving models to serve the customers’ needs as well as use environmental friendly raw material, components, and parts in the company production to serve those customers who are environmental alert the market also interested in the new technology as well as the product durability. The company has to find out what the customers really want and try to produce the product to satisfy their wants.
Mitsubishi
Kanyong Wattana Company Limited. Is the dealer of the Mitsubishi “Heavy Duty” Mitsubishis’ air conditioner has gain 0% of the market share and is the brand which has gained probably the most customer brand awareness in the market . Their target group is people who are quality alert in term of aspect. The company has prepared their marketing strategy emphasize on durability with years guarantee while the others have only 1 year or not more than years guarantee. They introduced the aspect of durability to differentiate Mitsubishi from the others.
Positioning
Most of their customer relies on the company‘s quality standard, especially in terms of durability. They positioned their product as the most durable product and their product is mainly targeted to the high-income customers. This level is suitable for logical thinking people who have high education. Accordingly, the price does not affect their purchasing power. Most of customers have well known to their brand through the use of mass media therefore it is unnecessary to send salesperson to customer place. This show Mitsubishi is using pull strategy.
Carrier
Carrier air conditioner was distributed by Carrier (Thailand) Company Limited. They have the second highest market share in the market. Their market share is about 1%. They position their product in terms of the most quite air conditioner, which widely used. They have been the leaders of air conditioner sales in the big size model, which have the market share of 45% from the total market value of 10 billion baht. Carriers have been U.S. products.
Positioning
Carrier positions itself with high quality in term of quite. They advertised Carrier that most airports used which also to promote the durable aspect of the product. Recently they emphasized their service on sales-service be provide more spare parts to customers. They invested to improve all service centers in year 18.
National
AP National Sales Company Limited is the distributor of National appliances including air-conditioner. In 000, National has used to be the third of the total market share or 10% from the whole market. The company hoped to be the first of the net sales in the next 5 years. They did marketing research about purchasing achieves in how consumers making a decision to buy air conditioners and discovered that consumers were interested in quite of air conditioner first, then cleanliness and then electricity saving aspect. After that they have launched advertising for the product brand awareness in terms of “Clean and quiet”. They targeted in the middle to high modern family who concerned with the technology and health.
Positioning
They position their product as the standard in quality appliance and focus in the quiet of the product, they also have emphasized on the after sales services by setting the after sales services center named “National Information Center” which allows customers to call directly. Nowadays, National have developed the dealers to be “Air Conditioner Service Dealer”
Opportunity and Issue analysis
Strengths and Weakness
Strength
The major strength of the Company would be it’s corporate image as well as brand image since it has been established for more than a century and has the technological know �how for they are the first Company to specialize in this field. The corporate policy is based on honesty and sincerity. The symbol itself explains the strength of the Company. The York “Sun flake” signifies a contemporary interpretation of sun and snow in their simplest forms. Together, they symbolize the elements of fire and water and the transformation of hot to cold. The York Sun flake is a strong, vital and cohesive image designed to convey a sense of unity, trust and an orientation to the future. As an American brand the Company has earned itself, strong trust and acceptance from customers all over the world, especially for attributes such as durability and reliability.
York offers wide ranges of product lines as well as various systems. The three main types of systems are Unitary Product Group (in which our report is focusing on), Applied System where the system where the systems are installed for large projects such as an office buildings, airports, or even the U.S. Submarine. Its strength would mainly lie on the Applied System (their main foci) which is technological intensive and less on the commercial and residential markets.
Furthermore, York is a multinational enterprise where the management is of professional international style, focusing on customer-oriented. Skilled employees within the Company, not only at the headquarters support this but its affiliates all over the world. These employees, both blue and white collars are constantly trained to up-date their skills and technological know-how to better serve the customers.
In physical distribution, York utilizes its own warehouse, which gives the Company high level in controlling over warehouse operation. Air Conditioning needs to be inventoried carefully to reduce any risk of spoilage or damage from mishandling of the products. Since York is using private warehouse, looking after the product would not be too difficult or risky. The line of communication becomes clearer and critical information is available thus lessen the errors that may occur which will reduce the cost for the Company. York’s product requires careful handling to reduce any damage or spoilage, which occurs from poor handling. The warehouse is situated near the market, using the market-oriented strategy to best serve the target market a maximizing customer’s satisfaction. Added on to this maximization of customer’s satisfaction, York uses two types of transportation. Delivering products within the metropolitan and the Suburban area, York uses its own transportation, while greater distance such as provinces beyond the suburban area, York will make use of the transportation (freight) service to reduce the cost of transportation which would have been otherwise incurred by the Company if it was to acquire containers and trucks for this. These transportation services companies possess special skill in handling and delivering products. Not only will this save the cost of transportation, but it will also save the total cost of physical distribution.
The major strengths are
1. York emphasized on product quality; in addition it received certificate of Europe which can guarantee in its product that meet the world standard.
. York provided 5 years product warrantees while the others provided only 1 year.
. York also provided high standard service to its customers such after sale service and system installation.
4. Product model FRCH 1, FRCH 1, and FRCH 5 have received number 5-label electricity saving certificate.
Weakness
Air Conditioning is reckoned as homogenous products delivering the same basic functions even though the attributes or the features may vary slightly from on another. Besides the brand image, differentiating our product from our competitors is very difficult. This results in low brand awareness because the product is homogeneous and the only way to create brand awareness is to heavily advertise. Another factor that results in low brand awareness among consumer is that York’s point of convergence is on the Applied System, which handles large projects, and very little on Unitary Product Group.
Another weakness of York is that they are the Trading firm and not the manufacturer of the product therefore, producing products that best serve the local market is very difficult. Not only this, the quality control is difficult as well.
The major weaknesses are
1. York air conditioner has small number of dealer & has low market coverage so it is inconvenience for consumer to contact with York dealer. Consumer perceives York as industrial goods that used only in office, hotel & apartment.
. York air conditioner is expensive when compared with other domestic air-conditioner & electric fan.
. York has few number 5 labels, which may lead to lower attention for those who concern about electricity saves.
4. As York imported some part & RM used in the production. Its price may not stable during currency fluctuation. And York may receive less attention for those who concern in localization.
5. York does not have certificate of International Organization for Standardization (ISO).
Opportunity and Threat Analysis
Opportunity
With the increase in worldwide interest on the global warming or the green house effect, more and more of the people are becoming environmentally conscious. With our technological know-how, the Company can set up a CFC retrofit program in order to convey the message that the Company is environmentally conscious and cares for the preservations of the natural resources.
Another opportunity would be the seasonally as a result of the El Nino. Because of this, the temperature in the hot and tropical climate countries may see a rise in demand for Air Conditioning in the residential market.
The major opportunities are
1. High-income people are mostly in Bangkok. Most people in Bangkok have higher discretionary income compared to any part in Thailand. There is a higher potential when entering the households in Bangkok.
. Most of the people are now concerned about their expenses so they want to choose air-conditioner that perform efficiency and save cost. And we provide air conditioner that meets the user need.
. Due to geographic of Thailand, which located near the Equator, with high temperature may lead to an increasing in demand of air-conditioner. And the temperature is likely to increase every year.
4. Thai people are increasing concern about saving environment. York air-conditioner is concern for environment by using non-CFC coolant system.
5. With The Electricity Generation Authority of Thailand (EGAT) held campaign to encourage sale of air-conditioner with number 5 by giving back money to the customer 10,000 baht in cash and later the customer have to make installment, pay money back to EGAT each month for 0 months.
Threat
Due to the economic recession in Thailand, this pose as a threat to this type of industry since the price of Air Conditioner is moderate to high price. Following the economic recession, the inflation rate plummets to a considerable high figure resulting in decrease in purchasing power as well as the consumer’s discretionary income.
This industry is highly competitive with easy entry barrier, thus the competition among brands are very aggressive. More brands enter the market, both local and foreign brands; consumers are given more choices in purchasing this type of product.
Government regulations concerning custom tax on components (in which it was stated before that 50% of our components are imported) may result in increase in cost incurred by tax in which some of this coast may be passed on to consumers.
The major threats are
1. Presently, Thai people have lower purchasing ability due to the economic recession. Because of the resulting high cost, decision of purchasing air-conditioner is also effected.
. Due to economic crisis that Thailand has now face, which affect business activity especially luxury item. People are likely to buy less on this item because economic down turn, their buying behavior has change and their purchasing power is decreasing. Unemployment has been increasing since many companies in Thailand were bankrupted.
. Consumers are less awareness about York air-conditioner because York does only little sales promotion. They didn’t advertise on television, and they have only few items in the product line that have number 5, which mean save electricity. So consumers are less prefers to buy York.
Objectives
Company mission
Build on the York tradition and innovative technology to become the worldwide leader of environmentally responsive heating, ventilation and air conditioning designed to improve the quality of life. York served the need of the community by providing products and services of superior quality affair price to our customer. To do these so as to earn and adequate profit which is required for the total enterprise to grow and by so doing provide the opportunity for our employees and shareholders to achieve the reasonable company and personal goal.
Objective
In 00, the estimated air conditioner industry value is 7,000 million. This is reduced from last year industry value 1.5%.
Sales Volume 1,050 million
Market Share 15%
Company Market Objective Plan
1. To be the leader in consumer market by year 004
. To increase consumer awareness of York air-conditioner
. To increase 5% market share by year 004
Financial Objective
1. To maximize our shareholder wealth through careful implementation of financial strategy and policy.
. To achieve profit margin by 1.5% by year 00
Marketing Strategy
• Target Market
The target market of consumer is who age above 40 years old and have income above 50,000 baht.
• Position
York positions the product to be environmental friendly Air Conditioner, which helps preserve the environment. York also positions quality product in term of durability and reliability with constant maintenance check and repair. Nowadays people concerned more about their health, therefore we introduce a new feature to the market that is killing bacteria air conditioner to serve those health conscious customers.
• Product’s Unique Selling Attributes
The unique selling point of our product is as follows
- The company provides service such as one-year free cleaning service.
- The company offers 5 years guarantee compressors.
- High quality product.
- Offer air conditioner that kill bacteria.
• Price Pricing Objective, Pricing Strategy, Pricing Method
Pricing objective Product quality leadership builds high-quality air condition and prices them a few hundred dollars more than competitors’ air conditioners.
Pricing strategy According to company’s objective so our price strategy is “product-line pricing” as we offer a different version of its product lines. We use price steps to establish price along amount of BTU. And we also price it with different feature. The price step should take into account cost differences between the air-conditioners, customer evaluations of the different features and competitors’ prices. We need to establish perceived the quality difference that justifies the price different.
Pricing method A company set the price by using mark up on price method. Markups vary considerably among different goods. Markups are generally higher on seasonal items. So we can cover the risk of not selling.
• Distribution Coverage, Channel, and Number of Outlets
Distribution Objectives
1. Motivate channel members to perform target sales efficiently.
. Create good image by channel members.
. We increase intermediary to serve customers efficiently
4. To increase dealers 15% every year
Coverage
The coverage strategy is multiple regions, which include
1. Chiang Mai (North)
. Khon Khen (Northeast)
. Chonburi (East)
4. Songkhla (South)
5. Prajuabkrikhun (West)
Distribution Channel Strategy
The company used direct and indirect marketing. We use direct marketing which are Internet and toll-free number in the television and newspaper advertisement. The company used indirect marketing strategy. By this distribution, the company can penetrate market effectively
Manufacturer Wholesaler Retailer Customer
Manufacturer Dealer Customer
The indirect marketing channel means that our company sells through intermediately. We use this channel of distribution because our company believes that intermediary can reach customer more effectively and intermediary can persuade customer to buy the product. We focus on three major distribution outlets, which are in Bangkok, other distribution provinces, and in the suburban.
The company used direct and indirect marketing. We use direct marketing which are Internet and toll-free number in thee television and newspaper advertisement.
Number of Outlet
We have 65 outlets nationwide.
Action Program and Financial Projection
• Advertising
Objectives
1. To create the brand awareness of York among the customers from .% to 100% in year 00
. To build company’s image by emphasizing York Air conditioner as the American made product
. To build brand preference by advertising more on durability attribute and Certificate of Europe which is our competitive advantage.
4. To convince customers that York is the quality-emphasized brand.
5. To encourage the customer to use York.
Media Selection
In order to get high number of reach of the target market, we decide to use Television as our major medium and supported by newspapers, magazines and Billboards.
Budget
Television 0,558,750
Newspaper 47,887,500
Magazine 64,000
Billboard 16,800,000
Total 155,510,50
• Sales Promotion for Consumer and Outlets
Objectives
1. To increase sales volume from 1,050,000,000 in year 00 to 1,87,41,480 in year 00.
. To accelerate the purchasing behavior of customers
. To motivate salespersons to perform sale function effectively by using the sales contest.
Tools
In order to achieve the objectives, company has selected the following tools to be used in promotional program.
Consumer Promotion
1. Exhibition Company will organize the exhibition throughout the region of Thailand; North, Northeast, South and Bangkok. In the exhibition will inform customers about the general knowledge of our products. This is expected to draw traffic of customers to the exhibition and create awareness.
Product Warranties We provide 5 years guarantee on compressor.
. Premium We are going to give microwave as premium to the customer who buys “York” during the exhibition.
After-Sales Service We will open a service center in Bangkok at Rachada area and open one branch each year.
. Maintenance According to our marketing research, we decide to give years free maintenance, which is the second choice that customers preferred. The reason why we ignored discount 10-15% is because it could decrease our brand image.
Sales Force Promotion
• Sales contest We set the salespersons’ motivation by giving them 7 days packaged tour to USA if they can reach company’s target sale volume.
• Commission the salesperson will get % of sales that they can make.
Dealer Promotion
• Cash Discount We will give the dealers /10,n/0 in order to generate sales
• Incentive program The company set the target sales volume for the dealers. And if the dealers can get to that sale volume, we will give them 5 days packed tour to USA.
We have set budget for sales promotion, direct marketing and Public Relation by allocate 1% from sale volume.
Budget
Exhibition Baht 44,000
Product Warranties (spare parts) 500,000
After Sale Service .000,000
Maintenance year 15,000,000
Sales Contest (10 Persons) 800,000
Premium (16,070000) 48,10,000
Commission % 1,000,000
Cash Discount % 1,000,000
Incentive Program (10 dealers) 700,000
Miscellaneous Expense 1,000,000
Total Baht 118,154,00
• Direct Marketing
Objectives
1. To achieve direct response rate 5% from prospect customers.
. To make it convenience for customers to order the product.
. To educate the customers before making their decision to buy York air conditioner.
Tools
Internet We decide to make a homepage therefore the customers can have a detailed information at their fingertips. They can get answer to their queries by sending us e-mail and hence, clear their doubts sitting right in their home without making much effort.
TV Put toll-free number in the advertisement.
Newspaper and Magazine Put toll-free number in the advertisement.
Budget
Operator salary (1 person) Baht 6,000
Training expense ,000
Telephone expense 6,600
Internet expense 18,000
Total Baht 86,600
(Newspaper, Magazine and television expenses already included in advertising expense)
• PR and Publicity
Objectives
1. To inform the activities of our company.
. To communicate good will with the customers through sponsorship of the “HARN ” program.
Tools
In order to achieve the objectives, company has following to be used in public Relation and Publicity program.
Implementation Control
Our company has proposed marketing tactics for our two year action plan starting from Mar 1, 00 to Feb. 8, 004. Our objective is of disposing 5,500 unit of air conditioner by the end of year 004
• Pricing implementation Plan
As our price of Air Conditioning has perceived in moderate to high level, we will not lower down our prices that might, in turn, hurt the image of the company. In stead, we will try to convince customer to accept this price. The higher price the customers pay is compensate with their images and loyalties of using York Air Conditioning.
• Distribution Implementation Plan
Our company use indirect distribution. The company will use selective distribution for indirect distribution method. We will continue developing good relationships with our intermediaries. By doing this, the feedback will be more easily obtained.
• Promotion Implementation Plan
The objective of customers’ promotional program for the year
- To create product and brand awareness of the company within the first quarter of the year.
- To boost sales.
- To attract non-users of air conditioner.
Conclusion
York International has entered into Thailand since 11. The objective of the company is to gain 5% market share by year 00. To achieve this objective, they have set up strategies by emphasizing on “high-quality, high-price”. This strategy did not suit with Thai market since there was economic crisis and most consumers are price-sensitive. This leads to slow market growth, because the market demand is not as company forecasted. Another problem facing our company is low level of consumer brand awareness. With this, the Thai market did not know even the company’s product quality. The company has to adjust its strategy to coincide with the current market situation. That emphasizes more on public relations as well as product advertising to stimulate brand awareness.
Another important factor affecting the company’s performance is the high degree of competition in air-conditioner industry. Competitors have higher market share because they have intensive advertising and lots of sales promotions that can attract customer’s interest. They gain large market share because they have been long into Thai market. This makes the market hard to penetrate.
Therefore, the company has to set up new strategy to emphasis move on advertising and attractive premium in order to gain customer interest in order to achieve the York market objective.
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