chapter ii literature study - binus librarylibrary.binus.ac.id/ecolls/ethesisdoc/bab2/bab...
TRANSCRIPT
6
CHAPTER II LITERATURE STUDY
2.1 Furniture
Furniture is the mass noun for the movable objects which may support the
human body (seating furniture and beds), provide storage, or hold objects on
horizontal surfaces above the ground. Storage furniture (which often makes use of
doors, drawers, and shelves) is used to hold or contain smaller objects such as
clothes, tools, books, and household goods.
Furniture can be a product of artistic design and is considered a form of
decorative art. In addition to furniture's functional role, it can serve a symbolic or
religious purpose. Domestic furniture works to create, in conjunction with furnishings
such as clocks and lighting, comfortable and convenient interior spaces. Furniture can
be made from many materials, including metal, plastic, and wood. Furniture can be
made using a variety of woodworking joints which often reflect the local culture.
7
2.2 Marketing
The American Marketing Association (AMA) states, "Marketing is an
organizational function and a set of processes for creating, communicating and
delivering value to customers and for managing customer relationships in ways that
benefit the organization and its stakeholders."
Marketing deals with identifying and meeting human and social needs. One of
the shortest definitions of marketing is “meeting needs profitably”. Marketing
practice tends to be seen as a creative industry, which includes advertising,
distribution and selling. It is also concerned with anticipating the customers' future
needs and wants, which are often discovered through market research (Kotler and
Keller, 2006).
In the early 1960s, Professor Neil Borden at Harvard Business School identified a
number of company performance actions that can influence the consumer decision to
purchase goods or services. Borden suggested that all those actions of the company
represented a “Marketing Mix”. Professor E. Jerome McCarthy, also at the Harvard
Business School in the early 1960s, suggested that the Marketing Mix contained 4
elements: product, price, place and promotion.
• Product: The product aspects of marketing deal with the specifications of the
actual goods or services, and how it relates to the end-user's needs and wants.
8
The scope of a product generally includes supporting elements such as
warranties, guarantees, and support.
• Pricing: This refers to the process of setting a price for a product, including
discounts. The price need not be monetary - it can simply be what is
exchanged for the product or services, e.g. time, energy, or attention.
• Promotion: This includes advertising, sales promotion, publicity, and personal
selling, branding and refers to the various methods of promoting the product,
brand, or company.
• Placement (or distribution): refers to how the product gets to the customer; for
example, point-of-sale placement or retailing. This fourth P has also
sometimes been called Place, referring to the channel by which a product or
service is sold (e.g. online vs. retail), which geographic region or industry, to
which segment (young adults, families, business people), etc. also referring to
how the environment in which the product is sold in can affect sales.
These four elements are often referred to as the marketing mix which a marketer
can use to craft a marketing plan (Perreault, Cannon and McCarthy, 2008).
2.3 Business Marketing
Industrial or B2B marketing must account for the long term contractual
agreements that are typical in supply chain transactions. Relationship marketing
attempts to do this by looking at marketing from a long term relationship perspective
rather than individual transactions.
9
Business Marketing is the practice of individuals, or organizations, including
commercial businesses, governments and institutions, facilitating the sale of their
products or services to other companies or organizations that in turn resell them, use
them as components in products or services they offer, or use them to support their
operations
In the broadest sense, the practice of one purveyor of goods doing trade with
another is as old as commerce itself. As a niche in the field of marketing as we know
it today, however, its history is more recent. Industrial marketing has been around
since the mid-19th century, although the bulk of research on the discipline of business
marketing has come about in the last 25 year (Dwyer and Tanner, 2006).
For many years business marketing took a back seat to consumer marketing,
which entailed providers of goods or services selling directly to households through
mass media and retail channels (Morris, Pitt and Honeycutt, 2001).
2.4 Business Marketing Vs Consumer Marketing
Although on the surface the differences between business and consumer
marketing may seem obvious, there are more subtle distinctions between the two with
substantial ramifications. Business marketing generally entails shorter and more
direct channels of distribution.
While consumer marketing is aimed at large demographic groups through
mass media and retailers, the negotiation process between the buyer and seller is
10
more personal in business marketing. Most business marketers commit only a small
part of their promotional budgets to advertising, and that is usually through direct
mail efforts and trade journals. While that advertising is limited, it often helps the
business marketer set up successful sales calls (Hutt and Speh, 2001).
Marketing to a business trying to make a profit (Business-to-Business
marketing) as opposed to an individual for personal use (Business-to-Consumer, or
B2C marketing) is similar in terms of the fundamental principles of marketing. In
B2C, B2B and B2G marketing situations, the marketer must always:
• successfully match the product/service strengths with the needs of a definable
target market;
• position and price to align the product/service with its market, often an
intricate balance; and
• Communicate and sell it in the fashion that demonstrates its value effectively
to the target market (Hutt and Speh, 2006).
2.5 The Customer in B2B Industry
While "other businesses" might seem like the simple answer, Dwyer and
Tanner (2006) say business customers fall into four broad categories: companies that
consume products or services, government agencies, institutions and resellers.
The first category includes original equipment manufacturers, such as
automakers, who buy gauges to put in their cars, and users, which are companies that
11
purchase products for their own consumption. The second category, government
agencies, is the biggest. In fact, the U.S. government is the biggest single purchaser
of products and services in the country, spending more than $300 billion annually.
But this category also includes state and local governments. The third category,
institutions, includes schools, hospitals and nursing homes, churches and charities.
Finally, resellers consist of wholesalers, brokers and industrial distributors (Dwyer
and Tanner, 2006).
2.6 The differences between B2B and B2C marketing
A B2C sale is to an individual. That individual may be influenced by other
factors such as family members or friends, but ultimately it’s a single person that
pulls out their wallet. A B2B sale is to an organization. And in that simple distinction
lies a web of complications that differ because of the organizational nature of the sale
and which vary widely by firm graphic (i.e., “demographic” for segmenting
businesses) such as business size, location, industry and revenue base.
The marketing mix is affected by the B2B uniqueness which includes
complexity of business products and services, diversity of demand and the differing
nature of the sales itself (including fewer customers buying larger volumes).[2]
Because there are some important subtleties to the B2B sale, the issues are broken
down beyond just the original 4 Ps developed by McCarthy (Perreault Jr, Cannon,
and McCarthy, 2008).
12
2.7 Organizational Buyer Behavior
Figure 2. 1 Reward Measurement Theory
Reward-Measurement Theory is an expectancy theory of organizational buyer
motivation, similar to expectancy theories you may have been introduced to in
management. It points out that buyers are motivated by both intrinsic rewards, and
those rewards they give themselves (feelings of satisfaction, for example), and
extrinsic rewards, or rewards given by the organization (e.g., salary, promotion).
Valence or the degree of importance or value attached to a reward. Perceived
probability or the perception of effort on a particular set of tasks will lead to
accomplishment of performance outcomes that will in turn lead to the desired
rewards.
13
Figure 2. 2 Behavior Choice Theory
Behavior choice theory states that buyers go through a choice process to
arrive at decision of how they will buy, as opposed to the choice process of what will
be bought, modeled as part of the buy grid.
Role theory suggests that people behave within a set of norms or expectations
of others due to the role in which they have been placed. When a person makes a
14
purchase decision alone for an organization, the decision is said to be autonomous.
When more than one person involved, the group of participants in the company are
called the buying center or decision-making unit (DMU). Role theory helps us to
understand how those participants interact because it defines the roles people take
when involved in purchases.
Buying determinants theory describes behavior as due to the combined effects
of four factors: environmental factors such as government regulations and
technology; market factors, such as size and number of competitors; organizational
factors, including company size, corporate culture, and policies; and individual
factors, like age, experience, and education of any individual person involved in the
decision.
15
Figure 2. 3 Buying Determinants Theory (Dwyer and Tanner, 2006)
2.8 SWOT Analysis
SWOT analysis is a simple framework for generating strategic alternatives
from a situation analysis. It is applicable to either the corporate level or the business
unit level and frequently appears in marketing plans. SWOT (sometimes referred to
as TOWS) stands for Strengths, Weaknesses, Opportunities, and Threats. Because it
concentrates on the issues that potentially have the most impact, the SWOT analysis
16
is useful when a very limited amount of time is available to address a complex
strategic situation.
The following diagram shows how a SWOT analysis fits into a strategic
situation analysis:
Situation Analysis
/ \
Internal Analysis External Analysis
/ \ / \
Strengths Weaknesses Opportunities Threats
|
SWOT Profile
Figure 2. 4 SWOT Analysis
The internal and external situation analysis can produce a large amount of
information, much of which may not be highly relevant. The SWOT analysis can
serve as an interpretative filter to reduce the information to a manageable quantity of
key issues. The SWOT analysis classifies the internal aspects of the company as
strengths or weaknesses and the external situational factors as opportunities or
threats. Strengths can serve as a foundation for building a competitive advantage, and
weaknesses may hinder it. By understanding these four aspects of its situation, a firm
17
can better leverage its strengths, correct its weaknesses, capitalize on golden
opportunities, and deter potentially devastating threats.
2.8.1 Internal Analysis
The internal analysis is a comprehensive evaluation of the internal environment's
potential strengths and weaknesses. Factors should be evaluated across the
organization in areas such as:
• Company culture
• Company image
• Organizational structure
• Key staff
• Access to natural resources
• Position on the experience curve
• Operational efficiency
• Operational capacity
• Brand awareness
• Market share
• Financial resources
• Exclusive contracts
• Patents and trade secrets
The SWOT analysis summarizes the internal factors of the firm as a list of
strengths and weaknesses.
18
2.8.2 External Analysis
An opportunity is the chance to introduce a new product or service that can
generate superior returns. Opportunities can arise when changes occur in the external
environment. Many of these changes can be perceived as threats to the market
position of existing products and may necessitate a change in product specifications
or the development of new products in order for the firm to remain competitive.
Changes in the external environment may be related to:
• Customers
• Competitors
• Market trends
• Suppliers
• Partners
• Social changes
• New technology
• Economic environment
• Political and regulatory environment (Kotler and Keller, 2006)
19
2.9 The Five Forces of Competition
Figure 2. 5 Five Forces of Competition
2.9.1 Rivalry in the Industry
Not all business faces the same amount of price pressure from their
competitors in the same business. Like the lodging business, other industries are
partitioned by natural boundaries or customer purchasing constraints. If industry
rivals offer relatively undifferentiated products or if demand is significantly less than
20
overall capacity, firms will tend to find intense rivalry. Price competition frequently
intensifies in declining markets because firms try to grab market share to cover fixed
expenses that can’t be shrunk as rapidly as the market.
2.9.2 Powerful Customers
Their abilities to contract for large purchases make large customers attractive
to many business markets. The seller’s risk is that large buyers may press hard for
price concessions, effectively squeezing out profit opportunities. Another possibility
is delayed payments or returned products, both of which can sink an undercapitalized
firm.
2.9.3 Powerful Suppliers
A manufacturer that relies heavily on a unique input for its products becomes
vulnerable to price hikes or other means of “holdup” from the supplier. Of course, the
unique input may provide a means of differentiation for the manufacturer. The buying
firm must carefully weigh the benefits from depending on a powerful source of
supply. A key question may be what the future supply situation looks like. Perhaps
there will be alternative suppliers when patent protection expires or when another
source – maybe even one internal to the firm – has been brought up to speed.
2.9.4 Threat of Substitutes
Industries are typically defined by their channel position and their output. Are
they manufacturers or distributors? Do they sell chemicals or rolled wire? Notice that
user considerations get no mention. But clearly, if a buyer regards the products from
21
two different industries as substitutes, the makers of those products must be
considered competitors. The competitive pressure from products in a different
industry can affect prices just as well as substitutes within the industry. A trucking
firm will vie for business from some shippers that can also ship the commodity by
rail or plane. Soft-drink bottlers can use corn syrup or cane sugars as sweeteners.
Frankly, this competitive force has been the cornerstone of competitive
analysis in marketing since the infancy of survey research. A hospital purchasing
manager may not only compare prices and capabilities of different makers of
diagnostics equipment, she may also examine the services of independent
laboratories. But, while marketing research has long aimed to describe competition in
terms of customer perceptions of substitutes, we may have underplayed the
importance of some of these other structural dimensions of competition.
2.9.5 Threat of Potential Entrants
Rapidly growing or profitable markets tend to attract new sellers. And
newcomers can change the competitive landscape in several ways. First, new
participants in the market increase the productive capacity serving the market;
therefore the existing demand from customers has to cover more fixed costs. Second,
a new rival will fight to increase market share, perhaps displacing incumbents in the
assortments of resellers or underbidding the established firms. Third, new rivals can
bring new or substantial resources to the fray. Resources might be a reputable brand
name brought to a new arena (e.g. 3M in fertilizers) or could include technical
22
expertise (Samsung in the Asian auto market) or financial muscle (Wal-Mart in food
service) (Dwyer and Tanner, 2006)
2.10 Stages in Consumer Decision Making Process
Figure 2. 6 Consumer Decision Making Process (Solomon, 2006)
23
2.10.1 Problem Recognition
Problem recognition occurs whenever the consumer sees a significant
difference between his current state of affairs and some desired or ideal state. Need
recognition can occur in several ways. The quality of the person’s actual state can be
diminished simply by running out of a product, by buying a product that turns out not
to adequately satisfy needs, or by creating new needs. Opportunity recognition often
occurs when a consumer is exposed to different or better-quality products. This
happens because the person’s circumstances have somehow changed. As the person’s
frame of reference shifts, he or she makes purchases to adapt to the new environment.
2.10.2 Information Search
Once consumers recognize a problem, he or she needs adequate information
to resolve it. Information search is the process by which the consumer surveys the
environment for appropriate data to make a reasonable decision.
2.10.3 Evaluation of Alternatives
Much of the effort that goes into a purchase decision occurs at the stage in
which we must make a choice from the available alternatives. After all, modern
consumer society abounds with choices. So, how do we decide which criteria are
important, and how do we narrow down product alternatives to an acceptable number
and eventually choose one instead of others? The answer varies depending on the
decision making process we are using. Consumers engaged in extended problem
solving may carefully evaluate several brands, whereas someone making a habitual
decision may not consider any alternatives to his or her normal brand. Furthermore,
24
some evidence indicates that more extended processing occurs in situations in which
negative emotions are aroused due to conflicts among the choices available. This is
most likely to occur where difficult trade-offs are involved, as when a person must
choose between the risks involved in undergoing a bypass operation versus the
potential improvement in his or her life if the operation is successful.
2.10.4 Product Choice
Once a person has assembled and evaluated the relevant options from a
category, he or she must choose among them. Recall that the decision rules guiding
choice can range from very simple and quick strategies to complicated processes
requiring much attention and cognitive processing. Integrating information from
sources such as prior experience with the product or a similar one, information
present at the time of purchase, and beliefs about the brands that advertising has
created can influence the choice.
2.11 Organizational Decision Making
Many employees of corporations or other organizations make purchase
decision on a daily basis. Organizational buyer behavior are people who purchase
goods and services on behalf of companies for use in the process of manufacturing,
distribution or resale. These individuals buy from business-to-business marketers,
who specialize in meeting the needs of organizations such as corporations,
government agencies, hospitals, and retailers. In terms of sheer volume, B2B
marketing is where the action is: Roughly $2 trillion worth of products and services
25
change hands among organizations, which is actually more than end consumers’
purchase.
Organizational buyers have a lot of responsibility. They must decide on the
vendors with whom they want to do business and what specific items they require
from these suppliers. Obviously, there is a lot at stake in understanding how they
make these important decisions.
A number of factors influence the organizational buyer’s perception of the
purchase situation. These include the expectations of the supplier (e.g. product
quality, the competence and behavior of the firm’s employees, and prior experiences
in dealing with that supplier), the organizational climate of the company (i.e.
perceptions regarding how the company rewards performance and what it values),
and the buyer’s assessment of performance (e.g. whether the believes in taking risks).
Like other consumers, organizational buyers engage in a learning process in
which members of the firm share information with one another and develop an
“organizational memory” consisting of shared beliefs and assumptions about the
proper course of action. Just as buyer is influenced by “market beliefs” when he or
she goes shopping with the family on the weekend, the same person is also an
information processor at the office. He or she (perhaps with the fellow employees)
attempts to solve problems by searching for information, evaluating alternatives, and
making decisions.
26
2.12 Organizational Decision Making Versus Consumer
Decision Making
Many factors distinguish organizational and industrial purchase decisions
from individual consumers’ decisions. Some of these differences are as follows:
Purchase decisions companies make frequently involve many people,
including those who do the actual buying, those who directly or indirectly influence
this decision, and the employees who will actually use the product or service.
Organizational and industrial products are often bought according to precise
technical specifications that require a lot of knowledge about the product category.
Impulse buying is rare (industrial buyers do not suddenly get an “urge to
splurge” on lead pipe or silicon chips). Because buyers are professionals, their
decisions are based on past experience and a careful weighing of alternatives.
Decisions often are risky, especially in the sense that a buyer’s career may be
riding on his or her demonstration of good judgment.
The dollar volume of purchases is often substantial, dwarfing most individual
consumers’ grocery bills or mortgage payments. One hundred to 250 organizational
customers often account for more than half of a supplier’s sales volume, which gives
the buyers a lot of influence over the supplier.
27
Business-to-business marketing is often involves more of an emphasis on
personal selling than on advertising or other forms of promotion. Dealing with
organizational buyers typically requires more face-to-face contact than is necessary in
the case of end consumers (Solomon, 2006).