Marketing in a hostile environment: The British textile industry

Marketing in a Hostile Environment: The British Textile Industry D. Jobber G. Hooley S. Sanderson Durmg the early 1980’s most Brtttsh textile companies have faced declmmg demand m primary markets The extent of the problems facing the textile mdustry can be gauged by reference to the fall m productton and employment In the carpet Industry, for example, output m 1981 was only two-thuds of that m 1977, and was stall falling Man-made fibres suffered even worse traumas with employment falling from 29,600 m December 1978 to 12,700 m December 198 1, a fall of over 60% These stattsttcs are mdtcattve of the capactty cutbacks and cost savmg exerctses whtch texttle compames have undertaken m order to Improve mternal effrcrency But they do not show the approaches to marketmg which these companies have taken m order to survtve m a parttcularly hosttle environment In order to shed light on this vital area of company actrvtttes, a survey of a large

Address correspondence tu D Jobber, Lecturer m Marketmg, Management Centre, BD9-4JL,

Umverstty

of Bradford,

EMM

Lane,

Bradford,

England

Indusrrral Marketing Mana~emenr 14, 35-4 I ( 1985) 0 Elsewer Sctence Pubhshmg Co , Inc , 1985 52 Vanderbdt Ave , New York, New York 10017

West YorkshIre,

sample of textile firms was camed out presents a summary of the mam fmdmgs RESEARCH

This article

OBJECTIVES

The primary objective of thts research was to tdenttfy areas of texttle marketing management which require strengthening m order to cope with the complextty and dynamtc nature of the busmess envu-onment To accomplish this, three specific subobjectives were set To establish the degree to whtch marketing procedures and practices have been used by Brtttsh textile fums m order to momtor and respond to a changing envuonment To Identify the perceived Importance of marketmg mtx variables In parttcular, to compare the perceived tmportance of price versus nonpnce competition To determme rf there are srgmftcant dtfferences m marketmg mtx strategy, and the use of marketing procedures and practices between the mdustrtal and consumer sectors of the Bnttsh texttle industry 35 0019-8501/85/$03

30

RESEARCH

METHODOLOGY

FINDINGS

A questionnaire was malled to 800 randomly selected textile firms during 1982 The sampling frame, which was used, was a list of textile companies found m the most recent edition of Kompass (Section 23, Textiles) The envelope was addressed to the “Marketing Dlrector” for those textile companies who appeared m “The Times Top 500” British mdustrlal companies, and to the “Managing Director” for the rest since expenence mdlcated that the latter group of companies were unlikely to have a Marketing Director-the marketing function being largely m the hands of the Managing Director The questionnaire, itself, requested respondents to mdlcate how important a number of marketing mix vanables was m the marketing of their products A five-point scale was used for each variable, one mdlcatmg that the variable was “not important at all” to five which mdlcated that It was “very important” Respondents also were asked whether or not their company carried out a series of marketing procedures and practices, and classlflcatory mformatlon was gathered concerning number of employees, number of people employed m management and marketing, the major products made, and exports as a percentage of annual sales A follow-up questlonnalre was sent approximately four weeks after the mltlal mailing to nonrespondents This yielded a total response rate of 57%

TABLE 1 Responses

to marketmg

mix variables

percewed

importance Mean

Vanables

Mix Strategies

Table 1 shows the mean scores of the perceived lmportance of the marketing mix variables The vanable which IS perceived to be the most important IS meeting customers face to face (4 6) This reflects the personal nature of commumcatlons m this predommantly mdustrlal sector Also, of high importance are being price competltlve (4 3), having a range of products to sell (4 3) and offering better quality than competitors (4 2) Thus, while price competition is important in recession, textile firms perceive other nonprlce factors alongside price-notably personal commumcatlon and product range and quailty-as being equally important The use of advertlsmg and exhlbltlons m the commumcatlons mix IS perceived to be of limited or no importance to the majority of firms The importance of product mnovatlon IS recognized by most firms and the mtematlonal orlentatlon of many textile firms IS reflected m the high score (4 1) given to selecting a good export agent In summary, textile compames perceive persona1 commumcatlons, price and product range and quality as being most important m their marketing mix strategies, with such factors as advertlsmg, attending exhlbmons, offering competltlve credit terms of much less lmportance While this analysis provides an overall perspective of

of Score”

(All Companies) PromotIonal

Marketing

(353) 46

Clusters

($9)

(1205,

(936) 48

(& 29

21

II

25

16

22

19

41

41

39

27

42 3 I

46

41

42

27

2x

23

27

Offermg better dehvery thdn competitors

39

42

39

34

43

Hdvmg Ftock dVdlldble

3.5

41

18

22

40

Selectmg d good dgent (export)

41

46

37

41

36

43

45

4 0

43

4 0

37

44

22

4.5

33

Innovdtmg new products

37

44

26

40

13

Offermg better qudllty thdn competitors

42

44

41

39

45

48

46

29

2x

23

30

4 0

Bemg Prvze Competmve

41

Compctltlve Credit terms

Meetmg

Customers

Advertlvng Attendmg

fdce to face

your Product Appropriate

ExhIbItIons

Usmg Company Representdtlve\

to cdl1 on

cwtomerb Prlcmg

Vdrlabk

Dl\trlbutlon

Product

Vdrldbles

VdrldblC5

Hdvmg d rdnge of products Offermg

wpenor

<‘Mean xores on d

36

to sell

dcslgns

I to 5 pomt

xdle

marketmg mix emphasis It may mask slgmficant dlfferences of approach adopted by groups of firms within the total sample In order to identify, wlthm the sample, subgroups of companies that placed similar importance on specific elements of the marketing mix, companies were clustered according to response to the marketing mix questions (see Appendix I for methodology) The clusters represent dlstmctly difference approaches to marketing m the textile industry (see Table 1) Cluster 1 (37% of the sample) IS a group of companies who place relatively high importance on all aspects of the marketmg mix compared to other clusters (they may be labeled the “generalists”) In terms of promotion, they place exceptionally high reliance on personal commumcatlon but their perceived importance of advertising and exhlbltlons IS relatively high, too They do not perceive price competitiveness to be as important as Cluster 2 but value competltlve credit terms more strongly than other groups as a tactical weapon Their high rating of the selectlon of a good export agent implies that they are mtematlonally oriented and they place very high importance on all of the product variables They are dlstmctly more mnovatlve than other groups, and an analysis of the number of employees revealed that companies m this group tend to be larger than those m other groups Cluster 2 (30% of the sample) place relatively high emphasis on personal commumcatlons and being pnce competltlve A possible danger slgnal which IS mdlcated m their responses IS the low importance given to product mnovatlon This 1s a relatively large cluster contammg 105 companies who appear to base their marketing emphasis on low prices and heavy personal sellmg Cluster 3 represents 27% of the sample They tend to resemble Cluster 1 except that they attach a very low

TABLE 2 Marketmg practices and procedures

Plannmg formal marketmg strdtegles Plannmg for marketmg

I

year dhead

Planning for marketmg more thdn 1 yeat

and thetr relatIonship

importance to the use of advertising as a communications tool Their marketing mix strategy seems to be to place emphasis on personal selling, design and mnovatlon with product quality, stock avallablhty, delivery and price being less important than for other groups These companies tend to be large, but there are fewer large companies m this cluster compared with Cluster 1 Cluster 4 comprises a small group of companies (6% of the sample) who perceive advertising to be much closer to personal sellmg m importance m the marketing mix However, both scores (2 5 and 2 8) are low and so this group appears to adopt the “let the customer fmd me” philosophy However, having been found, they appear to place more importance on offermg better quahty products and better delivery than competltlon The size of these companies tends to be small This analysis allows a more sensitive appreciation of pnce versus nonprlce competltlon within the Brltlsh textile industry Cluster 2 IS, manifestly, more reliant on pme as a marketing weapon than other groups Cluster 1 places more importance on the product and personal commumcatlon elements of the mix Cluster 3 tends to stress personal contact plus superior design Cluster 4 regards price as more Important than many of the other marketmg variables but not quite as important as product quality and delivery

Use of Marketing Procedures and Practices The second objective of this research was to establish the degree to which marketing practices and procedures have been adopted m order to identify and respond to a changmg environment Table 2 demonstrates the degree to which certain practices and procedures have been adopted by respondent companies With regard to mar-

with marketing

mix clusters

Overall

Cluster 1

Cluster 2

Cluster 3

Cluster 4

59

67

45

63

39

65

74

52

12

52

24

22

18

28

26

ahedd Profit plannmg

81

X6

76

78

61

Sales forecdstmg

82

91

74

85

61

Mdrketmg resedrch

49

61

44

43

35

Formal dnalysls of past sdles

78

85

71

75

52

Test marketmg

34

43

31

28

48

Advertwng

25

33

18

16

44

cdmpalgns

37

ketmg plannmg the results of this survey compare adversely wtth those of a similar survey of marketing practice throughout all sectors of British industry [l] In that survey, only 7% of respondent companies conducted “little or no” marketing planning, while m the textile industry 35% of respondent companies do not plan for marketing one year ahead, and 41% do not plan formal marketmg strategies In the survey across all British industry, 50% of companies produced an annual marketmg plan and a long range plan This compares with only 24% of textile companies who plan for marketing more than one year ahead Although a high percentage of respondents use profit planning, sales forecasting, and formal analysis of past sales, only half of the respondents use market research Although the small size of many of the respondents’ companies may mean that the establishment of a market research department may be uneconomic, the lack of formal momtormg of the environment through market research, and the lack of marketing planning m many textile companies suggests acute vulnerabthty to changmg economic, social, technological, and competitive environments Analysis by cluster reveals differences m practices and procedures between the groups identtfied earlier Cluster 1 appears to make most use of planning procedures and sales forecastmg and market research practices This may be a functton of their bemg the larger companies Cluster 3 has also heavier mvolvement m these activities than average but differs from Cluster 1 m that a higher propor-

Overall, Cluster 1 seems the most sophisticated m terms of marketing activities Compames m this group tend to place greater importance on product mnovation, marketing planning, and market research than other groups and, therefore, seem m a better position to survive m a hostile environment Cluster 3 also seem aware of the importance of marketmg with a higher than average score for product mnovation, and marketing planning (particularly longer term plannmg) It would appear that m Clusters 2 and 4 a high percentage of companies are not marketing orientated with relatively low appreciation of the importance of product mnovation and a relatively low percentage of companies conducting marketmg plannmg and market research It would be reasonable to hypothesize that a greater proportton of companies m clusters 2 and 4 than clusters 1 and 3 would be unable to compete successfully m a contmumgly hostile envuonment

Differences in Marketing Mix Emphasis between the Industrial and Consumer Sectors of the British Textile Industry Analysis of differences m perceived importance of marketing mtx variables between the mdustrial and consumer sectors of the textile industry was not clear cut due to company size differences A sigmftcant (0 05 level) relationship was found between industry sector and firm size-a greater proportion of consumer firms having more than 100 employees than mdustrial firms In order to compare responses to the marketing mtx variables m a

“most firms lacked market research and market planning. ” tion of companies use longer term planning but constderably fewer companies conduct market research In Cluster 2 only about half the compames conduct annual marketing planning, and less than half plan formal marketmg strategies Only 18% plan for marketing more than one year ahead and less than half use market research Cluster 4 appears to be making least use of marketing procedures with only 39% planning formal marketing strategies, 52% planning for marketing one year ahead and 35% using marketing research 38

valid manner, it was necessary to control for this difference in sample composition Three-way cross tabulations were then computed and Chi-squared analysis conducted to test association between industry sector and the perceived importance of marketing mix variables An example is given m Appendix 2 In only one case, mvolvmg the perceived importance of advertising among firms with less than 100 employees, was there a statistically significant difference

(0 05 level) between mdustrtal and consumer companies In this case, small mdustrtal companies perceived advertrsmg to be more important than small consumer comparries With this single exception the evidence does not support the hypothesis that perceived importance of mix varrables differs according to whether the textile company IS operating m a consumer or an mdustrral market

“Approaches

to marketing in a turbulent industry. ‘I

Differences between the Use of Marketing Procedures and Practices between the Industrial and Consumer Sectors of the Textile Industry Table 3 clearly indicates more intensive use of marketmg planning procedures by larger textile firms workmg m the consumer sector compared with those operating m mdustrral markets Differences m planning formal marketing strategies, planning for marketing one year ahead, and profit planning were stgmfrcantly different (0 05 level) between larger mdustrral and consumer companies One thud of larger textile companies operating m mdustrral markets admitted to not planning formal marketing strategies, and almost one quarter said that they did not plan for marketing one year ahead Only two out

TABLE 3 Tests of assoclatlon

between marketmg

of five larger textile firms m both sectors claimed to plan for marketing more than one year ahead Predictably, the use of all procedures and practices was lower for smaller firms than larger ones Only about half of the smaller firms planned formal marketing strategtes, or planned for marketing one year ahead and less than 15% planned for marketing more than one year

procedures

ahead Surprtzmgly, over twice the proportron of smaller mdustrtal firms claimed to use market research as smaller consumer furns but for both sectors less than half the respondent companies used market research The lack of a formal analytical approach to sales and marketing on the part of many smaller consumer and mdustrtal textile companies was indicated by the fact that three out of ten drd not conduct a formal analysis of past sales

Managerial Implications Drucker [2] has stated that “because It IS tts purpose to create a customer, any busmess enterprise has two, and only these two basic functtons marketing and mnovanon ’ A primary objective of this study was to identify the extent to which textile companies practtse these fun-

and practices and Industry sector Less than 100 Employees lndustrlal Companies Percent

Plannmg formal marketmg strategtes Planmng for mdrketmg

I

Planning for mark&q

more than I yedr dhead

year dhedd

Prottt plannmg

More than 100 Employees

Consumer Companies Percent

lndustrlal Companies Percent

46

50

66

87”

52

63

78

91”

Consumer Companies Percent

I4

IO

38

72

80

85

IOOU

40

Sales forecabtmg

13

77

94

98

Market research

45

20“

62

58

Formdl analysis of past sdlea

68

70

88

93

Test mdrketmg

31

31

41

41

Advertlung

21

21

28

35

cdmpalgns

c’slgmficant at 0 05 level

39

damentals In terms of marketing, there appears to be a dlsturbmgly low level of formal marketing planning evldent m a large number of textile companies This IS not confined to small companies Only 66% of mdustrlal companies with over 100 employees planned formal marketing strategies, only 78% of them planned for marketmg one year ahead, and a mere 38% of these larger companies planned for marketing more than one year ahead The lmphcatlons of these fmdmgs are particularly acute since a recent cross-sectional study [l] of British industry, which measured both marketing practice and company performance, found that “the extent of formal planning IS closely associated with both profit margins achieved and performance relative to competitors The presence of a long range plan 1s much more common m companies earning higher profit margins and among those performing relatively better than their competitors” This positive relationship between formal marketing planning and performance m Britain 1s consistent with the fmdmgs of Armstrong [3] m his review of studies conducted essentially m the United States A possible explanation for the lack of strategic marketing planning might be that it reduces flexlblhty to respond to unexpected events This, however, IS contrary to the fmdmgs of Giuck, Kaufman, and Walleck [4] who found that Increased commitment to strategic planning actually increased the flexlblhty of orgamzatlonal response Drucker’s second basic managerial function, mnovatlon, also appears to be neglected by many textile companies The low Importance rating given to Innovating new products by some companies (notably those m Cluster 2) suggests extreme vulnerability to changing environmental condltlons Clearly, then, there 1s scope for Improved managerial practice m terms of marketing planning and mnovatlon m many British textile companies Finally, managerial declslon-making may be improved by an increased apphcatlon of “the basic tools of modern marketing market research, and market analysis” [2] Many textile companies, both industrial and consumer, large as well as small, do not use market research, nor do they conduct basic formal analyses of past sales Even though some textile managers may claim that they have personal informal knowledge of then customers, and their requirements, such relatlonshlps are not an adequate substitute for a wider environmental scan which embraces the measurement of the potential of new markets, and the ldentlflcatlon of possible threats to existing markets Nor will they be m a prime posltlon to create differential advantages with new products, designs, and services It 40

IS little wonder that this sector of British industry finds itself m the dlfflcultles that It does today Not only are they facing an mcreasmgly hostile environment but they also lack the tools, sophlstlcatlon, and basic marketing orientation to cope with it The road to survival and revival must begin with the basic marketmg skills and approaches fmdmg wider acceptance and lmplementatlon m this sector APPENDIX

1

Cluster Analysis

Methodology

Prior to the cluster analysis, the Importance data was factor analysed to ensure that no undue weight was attached to specific items due to lop-sided mcluslon m the importance scales [5] The analyses conducted are presented m Figure 1 The factor analysis, using prmclpal components analySIS with varlmax rotation, revealed 5 factors accounting for 53.2% of the variance m the ongmal data Subsequent factors had an elgenvalue below I 0 mdlcatmg they accounted for less variance m the orlgmal data than any of the orlgmal variables The 5 factor solution was, therefore, selected usmg the Kaiser criterion The factor scores of each respondent on the five factors obtamed were used as the basis for measurement of

Importance ratng of 17 flemcnts of the marketing m1x

on 5 main factors marketing mix

FIGURE 1

of the

Multivariate

Analyses

slmllanty m a cluster analysis to ldentlfy groups of companies placing similar importance on specific aspects of the marketing process The cluster analysis was performed using Ward’s method of hlerarchlcal clustermg The method seeks distinct “spherical”, clusters of respondents m the Sdlmenslonal space defined by the factors [6] From the increases observed m the fusion APPENDIX

coefficient at each step m the clustering process, and exammatlon of the effect of merging clusters on the mean factor score and standard devlatlon within the cluster (measures of external heterogeneity and Internal homogenelty), the four clusters ohtamed demonstrated marked differences m the importance they attached to the various elements of the marketing mix

2

Cross-tabulation

of perceived

Importance

of hawng stock available and Industry sector (company

Less than 100 Employees

size controlled) Greater than 100 Employees -

lndustrlal Companies

Perceived Importance

Consumer Companies

Total

lndustnal Companies

Consumer Companies

Total

la

27

8

35

30

12

3

39

I

46

21

10

31

4

46

8

54

26

10

36

5

58

7

65

17

14

42

31

_ Total

“Note

170

Level

30 Skgnlficdnce = 0 4557 Cramer’s V = 0 I142

200

100

46 Slgmflcance = 0 3310 Crdmer’s V = 0 1531

146

I of pelcelved Importance IS d recorded value combmmg orlgmal values I and 2

REFERENCES

4

Hooley, G J , West, C J , Lynch, J E , “Marketmg m the UK-A Survey Institute of Marketmg, Cookham, of Current Practtce and Performance”, England 1984 Drucker, P F England 1963

, “The Prdctlce of Management”

Hememann,

London,

Armstrong, J S , “The Value of Formal Planning for Strategx Decwons Revtew of Empmcal Research”, S~ratq~c Management Journal, 3 (1982)

Gluck, F W , Kaufman, S P , and Walleck, A S , “Strdteglc Management for Competltlve Advantage”, Harvard Busrness Revrew, (July-August 1980) J A , “Cluster Analysts for Market Segmentation” European of Marketq. 14, 422-435 (1980) WIshart, D , “Clustdn User Manual” Edmburgh Umverslty Program LISaunders,

Journal

brary Umt, Scotland 1978 (Inter-Umverslty/ReTearch

Councils series, No

47)

41