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Chapter 14: Competing in Marketing and Supply Chain Management
Chapter Outline
LO1: Articulate three of the four Ps in marketing (product, price, and promotion) in a
global context.
1. Key Concepts
Marketing is crucial for firm performance. Exhibit 14.2 shows the four Ps that collectively
consists of the four Ps: (1) product, (2) price, (3) promotion, and (4) place. Even for a single
category, product attributes vary tremendously. Basic economic theory of supply and
demand suggests that when price drops, consumers will buy more and generate stronger
demand. Such strong demand, in turn, motivates firms to expand production to meet this
demand. Marketers face a strategic choice of whether to standardize or localize promotional
efforts. In international marketing, country-of-origin effect refers to the positive or negative
perception of firms and products from a certain country.
2. Key Terms
3. Discussion Exercise
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Chapter 14: Competing in Marketing and Supply Chain Management
LO2: Explain how the fourth P in marketing (place) has evolved to be labeled supply chain
management.
1. Key Concepts
2. Key Terms
LO3: Outline the triple As in supply chain management (agility, adaptability, and
alignment).
1. Key Concepts
2. Key Terms
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Chapter 14: Competing in Marketing and Supply Chain Management
3. Discussion Exercise
In order to reduce inventory, many firms now use the trucks, the ships, and the planes of
their suppliers and carriers as their warehouse. In their quest for supply chain speed, cost,
and efficiency, many firms fail to realize the cost they have to pay for disregarding agility.
What measures should firms take in order to react quickly to unexpected shifts in supply and
demand? What sort of preference should firms give to agility when it comes to supply chain
management?
LO4: Discuss how institutions and resources affect marketing and supply chain
management.
1. Key Concepts
LO5: Draw three implications for action.
1. Key Concepts
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Chapter 14: Competing in Marketing and Supply Chain Management
Debate: Emerging Markets/Ethical Dilemma
IKEA’s Marketing Challenge in Saudi Arabia
1. Key Concepts
In October 2012, Swedish furniture company IKEA was criticized on the BBC World
Service radio for air brushing women out of IKEA’s catalogs distributed in Saudi Arabia.
IKEA felt pressured to issue an apology, stating that the marketing catalog was inconsistent
with its culture and did not reflect its approach to equality of women in society.
What went wrong? From the perspective of a marketing manager of the IKEA store in Saudi
Arabia, the decision seemed to be straightforward: to distribute a catalog, it needed to
comply with the law of the land. Any picture of women who were not totally covered would
be illegal, per Saudi Arabia censorship rules.
One of the basic points in international marketing is the need to adapt products and
marketing strategies to local contexts. Given that Saudi Arabia censorship rules dictated that
using the original Swedish pictures would not be an option, editing the pictures became
inevitable. Most pictures in advertising are heavily Photoshopped anyway. One side of the
debate argues: What’s wrong?
Another side of the debate claims that what the Saudi marketing manager overlooked—and
what IKEA as a multinational organization overlooked—was an ethical challenge of an
interconnected world: local practices must also be acceptable to stakeholders back home—
even though they may not understand the local context, and why local institutions (in this
case, formal censorship regulations) would not accept the original pictures. How would you
participate in this debate?
Closing Case Discussion Guide
Online Shop Number One
Online shopping has become the new normal in urban China. Rather than heading for a local
supermarket, many consumers in Shanghai turn to the web, click, and pay. One of the latest
entrants into the market is Yihaodian. Founded in 2008, it became the third largest online retailer
in China—after Alibaba and JD.com. At present, it operates over 200 distribution centers in 40
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Chapter 14: Competing in Marketing and Supply Chain Management
cities throughout China, and employs 10,000 people, mainly in the “last mile” delivery.
Yihaodian’s strategy is supported by the latest marketing and supply chain management
practices. The company does all its technological development in-house, and controls its
information systems, including supplier relationships, warehouse management, and delivery
stations. With the spread of smartphones and tablets in China, the mobile sector has become an
important part of e-commerce in China, accounting for 10 percent of all e-commerce in 2013 and
predicted to reach 20 percent in 2016.
In 2011, Wal-Mart acquired 51 percent of the equity of Yihaodian, but the two companies
operated largely independently—apart from cooperating in sourcing and supply management.
Both believed they could learn from each other. Wal-Mart had long been famous for its
capabilities in supply chain management, yet it had not been successful in translating that
expertise to e-commerce. Yihaodian thus became a source of new ideas and inspirations. So
impressed was Wal-Mart that in 2015, it went ahead to acquire all the remaining 49 percent of
the shares of Yihaodian at $760 million.
Additional Discussion Material
(From Prep Cards)
Critical Discussion Questions
1. Luxury athletics and yoga apparel retailer Lululemon Athletica has had great success in its
less than 20 years of operations. With more than 200 retail locations, the company netted a
51.4 percent growth in revenue for the fiscal year 2010 to 2011, and it projected a more
than 10 percent growth in the first quarter for the fiscal year 2012. While the company has
made its name in high-quality, high-cost apparel for fitness enthusiasts, a manufacturing
error shook consumer confidence and gave rise to quality control problems in the company
supply chain. How might Lululemon address this problem going forward and instill
confidence with their customers?
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Chapter 14: Competing in Marketing and Supply Chain Management
2. You have 50 potential products that you will be launching in the upcoming year. In the
process of launching those products, you will need to be cognizant of the four Ps of the
marketing mix and the triple As of supply chain management. Make a table that has six
columns: new-to-the-world products, new-product line, addition to existing product line,
improvement/revision of existing product line, repositioned product, and lower-priced
product. Once the table is created, place each product in one of the six categories. All of
the products should be evaluated under the VRIO criteria of supply chain management.
Please be ready to discuss your reasoning.
3. Pick a product with which you are very familiar or that you anticipate being able to
research easily. Map the supply chain of your product as far back as is feasible. Identify the
mode of transportation used between each stage in the channel. Identify by name and
location the component parts of the product, if any.
Review Questions
1. Name three ways in which the market can be segmented.
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Chapter 14: Competing in Marketing and Supply Chain Management
2. Name the four Ps of the marketing mix.
3. What are the “triple As” in supply chain management?
4. What does VRIO stand for when discussing resources that affect supply chain
management?
5. List three facets of supply chain management that are “musts” for marketers and supply
chain managers.
6. What four activities make up the role/process of supply chain management?
7. What are the four categories that can globally be used to segment consumers?
8. What is the technical/more common term for the word “place” when discussing the
marketing mix?
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Chapter 14: Competing in Marketing and Supply Chain Management
9. What does the abbreviation “3PL” stand for, and provide a prime example.
10. What is a common example of a firm that would not be considered “rare” in the VRIO
model?