PARKER PEN
A Case Analysis
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Student Name: Mariani Kornain
Student Number: 935 755
Due Date: Friday, 03 September 1999
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1. Should the merits of global marketing be judged by what happened
at Parker Pen Company?
Global marketing should not be judged from Parker Pen’s incidences
because there are myths and misunderstanding about globalization that caused
many companies to fail (Figure 1). Uncritical acceptance of these myths
prevents Parker from taking full advantage of global opportunities.
| Figure 1: Globalization Myths
#1. That global is synonymous with international, meaning simply having a presence in other countries whether or not there is any connection among activities across countries. #2. That global strategy means doing everything the same way everywhere. #3. That globalizing means becoming a stateless corporation with no national or community ties. #4. That globalization requires abandoning country images and values. Source: Kantler and Dretler, 1998. |
On the contrary, global marketing strategy involves thinking in an integrated way about all aspects of a business -- its suppliers, production sites, markets and competition, not just selling the same product internationally. The company must truly understand the local and cultural differences, have the ability to listen and learn in locations far away from the headquarters, be an expert at forging cross-boundary relationship (Keegan, 1999). Therefore, global thinking is what is vital for companies, not just counting international sales.
2. Was the globalization strategy sound for writing instruments? If
yes, what was wrong in the implementation? If not, why not?
Yes, globalization strategy can be used for writing instrument, but
Parker made some wrong implementations according to the globalization myths'
theory (Kanter and Dretler, 1998).
1. Parker lets the country operations have poor communication links
between them, while all the power and influence concentrate at the headquarters.
The company fails to include international outposts as the key resources,
preventing itself from creating effective global strategies, i.e., Parker
UK lost its employees’ morale because of the feelings of lost autonomy.
Parker must integrated the communication between the headquarters and overseas
operations on all business decision-making (listen and learn from overseas
experiences). This integration may take time, but it can create a sustainable
competitive advantage in the long-run (Porter, 1986).
2. Parker implements the centralized marketing concept by assuming
all markets are the same and no adaptation is needed. In reality, although
global brands are made with virtually the same formula and with a logo
and brand identity, each global product is handled differently in each
market (Keegan, 1999). Even the greatest universal brand, Coca Cola, has
some local variations such as taste and names (Coke Light instead of Diet).
Parker USA must learn the best practices from its overseas divisions, e.g.,
Parker Japan successfully fought Cross, and marketed products with
60% mark-up (Kishi and Russel, 1996). Thus, slight adaptations are often
needed to succeed in the global market.
3. What marketing miscalculations were made by the advocates of the
globalization effort at Parker Pen?
There were two major marketing miscalculations at Parker Pen:
Parker used the ideas from its headquarters to create and market
its product worldwide, and employed its US expatriates in the overseas
divisions. This is dangerous because they are not familiar with global
market situation and their judgement may be the result of Self-Reference
Criterion (Cateora, 1997). For example: selected name did not have the
relevant association in all countries, and the common pricing and advertising
are ineffective. In order to be effective, Parker must adopt the ‘corporate
citizenship’ approach - it must become an insider in all markets.
Parker utilized the new product development strategy and concentrated
on cost/price strategy instead of using the market penetration and development
strategy (Lehmann and Winer, 1994). Parker shifted its focus from a single-brand,
high-end market to go after the low-end market because it wants more profits.
This has caused a conflicting brand image because Parker Pen is an expensive
status symbol, but suddenly it sells cheap disposable pen. The company
also decreased its advertising and promotion efforts without considering
the competitors’ reaction. Parker must realize that it does not sell a
$1500 pen, but it sells an image (status symbol). Therefore, the differentiation
on brand identity is essential.
4. The Task is to “fix it or close it.” What should be done?
Statement of Problem
Parker US has a tremendous loss and has one year to fix the problem
or close. The company has to find solution to regain its market position
and stop the financial loss.
Factors Causing the Problem
Changes in the external environment, e.g., consumers’ trend of modernization:
computers and disposable pens, and fluctuation in exchange rate.
Internal problems, e.g., poor management, and the misunderstanding
of globalization concept (inflexible centralized decision-making).
Examine Possible Solution and Its Implication
There are several factors to consider when trying to asses which
objectives to pursue.
1. The stage of Product Life Cycle
In the US market, Parker is in the maturity stage.
2. The competition and SWOT analysis
The competition among the remaining product is high. This competitive
rivalry stirs the combatants to market share wars (Parker vs. Montblanc).
As the market declines, brands may be milked for profit or cash to put
in more attractive products. Parker’s act of pursuing profits, by shifting
its focus from high-end market to low-end market, has given an opening
for more aggressive rivals. As soon as Parker vacates the $10-and-up market,
the competitors move quickly and dominate the market. The SWOT analysis
can be seen in Appendix 1.
3. Corporate decision
The company wants to reposition its brand back to the high-end market
in order to stop the declining market share and financial losses by obtaining
higher sales and profits.
4. Corporate or brand resources
Parker has limited financial resources due to the heavy losses, but
the raw material and labor are readily available.
5. Long-run objectives
Parker wants to regain its original position as a brand leader in the
US market.
Evaluation and Selection of Strategic Alternatives
Appendix 2 represents the economic objectives in a tree-like
structure emanating from “long-term profits”. It is assumed that the long-run
objective of any product is to maximizes profits. The options available
to Parker depend on the objective selected. If Parker chooses growth, the
three main ways to achieve the growth are market penetration, market development
strategy, and introduction of new products or extensions. If the
profitability is chosen, the primary focus is on either increasing outputs
(sales revenue from existing units sold), or decreasing inputs (the factors
of production). The choice of objectives is also depending on time
frame. Figure 2 shows the advantages and disadvantages of each strategy.
| Figure 2: Evaluation of Strategy Options
A. Objective: Increasing Sales/Market Share
B. Objective: Increasing Profitability
|
After analyzing different strategies and the SWOT analysis, decreasing the inputs is not recommended because Parker must spend on advertising and promotion to protect its market share. Currently, Parker spends much less in advertising than its competitors do.
It is recommended that Parker combines a market penetration strategy with an increase in the outputs because of the short time frame. After Parker is able to resolve its financial troubles and obtains more resources, it must proceed with the market development strategy because the US market is mature. As Parker has limited financial resources, the market penetration is cheaper than the conversion costs of noncustomers. The inputs can be increased by abandoning unprofitable activities (i.e., trimming the product line) concentrating the investment on both old and new winners, and improving the distribution channels. Parker’s premium line can be used to convince the customers that Parker is still the status symbol of expensive writing instruments and to avoid the association of mass-selling disposable pen.
The brand positioning strategy will position Parker Pen as a differentiating accessory that customers are able to show their discerning taste in a subtle way and distinguish themselves in a society. Customers are encouraged to perceive Parker as a status symbol that suggests sobriety and sound judgment than fast-lane thrill and easy money.
To be able to do this, the marketing mix must be aligned with the main strategy. Parker will focus in promoting the top-of-line products to establish a reputation that affects all price level. It will use non-price strategy by creating a differentiation advantage - real or meaningless differentiation (Levitt, 1986). Flexibility in production and management is needed to keep up with changes in consumer tastes and competition. Parker must also offer increased levels of personal services to the customers of premium product, i.e., currently it offers a custom-ordered hand-crafted Parker Pen and after-sales service (Porter, 1986).
Parker will improve its distribution, i.e., sells in various retail outlets from luggage and jewelry stores to mass-merchandisers. Advertising and promotion must be integrated, i.e., new P-O-P or packaging/design, advertisement in the People magazine and USA Today. Heavy promotion, during back-to-school and graduation seasons to encourage people to buy Parker pens as gifts. Selling Parker pens is mainly about the image, not just the product quality. Therefore, the advertisement has to give the potential buyers an emotional reason to purchase the premium products.
Clearly, Parker will be able fix its US division within one year by
following the strategy and recommendation above.
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Bibliography
Aaker, D., 1998, Strategic Market Management, John Willey and Sons, New York.
Cateora, International Marketing, Irwin, Boston.
Cote, K, “Parker pen finds black ink”, Advertising Age, v.58, 13 July 1987, p.49.
Ebenkamp, B., “New products: drawing a new frontier”, Brand Week, v.38, 5 May 1997, p.17.
Freeman, L., “Parker pen dropping its global plan”, Advertising Age, v.56, May 1985, p.66.
Kanter, R.M., and Dretler, “Global Strategy and its impact on local operation: lessons from Gilette Singapore”, Academy of Management Executive, v.12n.4, November 1998, p.60.
Keegan, P., 1999, Global Marketing Management, Pretince hall, New York.
Keerin, R.A., and Peterson, 1990, Strategic Marketing Problems: Cases and Comments, Allyn and Bacon, Boston.
Kishi, and Russel, 1996, Successful Gaijin in Japan: How Foreign Companies Are Making It in Japan, NTC Publishing, Illinois.
Lehmann, D.R., and Winer, 1994, Analysis for Marketing Planning, Irwin, Boston.
Levitt, T., 1986, The Marketing Imagination, Free Press, New York.
Marcom, J., “Penmanship with a flourish”, Forbes, v.143, 3 April 1989, p.152.
Miller, R., “Cultural barriers in cross-border marketing”, Direct Marketing, v.58, March 1996, p.66.
Porter, M., 1986, Competitive Advantage, Free Press, New York.
Walker, R., “How Parker’s past become its future”, AdWeek, v.30, 12 June 1989, p.58.
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APPENDIX 1
PARKER’S SWOT ANALYSIS
1. Strengths
1. One of the brand leaders in the US
Signed up contracts to supply the US government market
2. Prestigious brand image
Consumers perceive Parker Pen as imported products (in overseas
market), and expensive gift items
3. High quality craftsmanship (hand-made), durability, novelty, and
after-sales service
4. Strong position in overseas markets, especially in the UK and Japan
2. Weaknesses
1. Younger consumers view Parker as old-fashion (fountain pens are
messy and difficult to refill)
2. Centralized decision-making causes marketing difficulties
and unwise market moves
· New product development strategy for cheap products failed
· Weak competitive intelligence -- lost its market position
· Declining employees’ morale
· Conflicting image: $2000 vs. $0.50 pens
· Global pricing and advertising is bland and ineffective
3. Opportunities
1. Define the target market carefully to identify new sales potentials:
· New Brand Users (age between 20s-30s)
· Favorable Brand Switchers
· Brand Loyals
2. Use market development and penetration strategy to gain market share/sales
3. Adopt product-development strategy on expensive products (Ebenkamp,
1997)
· Create a product attribute identification, add a novelty factor
(e.g., “meaningless differentiation”) and improve the product usage (i.e.,
find a new way to refill the ink - in small disposable containers).
4. Adjust the marketing mix to revive Parker’s upscale brand image
· Brand image is reestablished by promoting the top-of-line
product to establish Parker’s quality reputation that affects all price
level.
· More creative latitudes for local unit and adapting the marketing
according to local markets, i.e., use historical theme of advertising where
the US General McArthur and other well-known figures signed an agreement
with a Parker pen.
4. Threats
1. Parker has limited resources to cure itself. It is susceptible to
acquisition and merger due to its heavy financial loss.
· Major revenue comes from its overseas operations which depends
on fluctuating exchange rate
2. Fierce market competitions because Parker’s Product Life Cycle is
in the maturity stage and the entry barriers are low (Freeman, 1985).
· Direct competitors
AT Cross (Signature US$250-and-up) targets chief executives by sponsoring
business seminars, and it uses nostalgia advertisement
Waterman, a French company, (US$50-and-up) uses emotional advertisement
Montblanc (US$100-and-up) sponsors art exhibitions
· Indirect competitors (a global trend of modernization)
Manufacturers of cheap ballpoints in the US and overseas markets
Electronic word-processors and personal computers
Adapted from: Aaker, 1998, Strategic Market Management, John Willey
and Sons Incorporated, New York.
APPENDIX 2
STRATEGIC ALTERNATIVES
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Source: Lehmann and Winer, 1994, Analysis for Marketing Planning, Irwin,
Boston.