Bosch Marketing Strategy Analysis

James King (1851), Hamilton Smith (1858), William Blackstone (1874), Alva J. Fisher (1908) and Robert Bosch (1886) must have been thinking ahead of their time when they begun the process of inventing the washing machine. And they must also have been thinking about the modern woman/man, changing times and global evolution in the marketing scenario.

This report based on Robert Bosch GmbH (one of the world’s largest distributors of electronics) is taken from different perspectives and brings out clearly the role of the washing machine in the African context today. In the SWOT analysis my report found some gaps that the company should have considered in entering the market. Their distribution network in the region appears lacking and possibly with new marketing strategies they may penetrate deeper.

Having taken an in depth investigative analysis of the strategies that LG has used and is using to push their product in this market and changes in marketing strategies shows the extent to which they have succeeded or failed in meeting their objectives.

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In the heart of my report I have recommended strategies and given my own ideas that I think LG should have used or should consider in the future to give the company a niche against its main competitors and to reach an untapped market.

I have shown reference and information from the great inventors, authors, researchers and writers of our time in bringing out the importance of Marketing Strategies to LG and other players in the market and today the washing machine has revolutionized from the scrub board invented in 1797 to the electrical powerhouse of many homes.

1. INTRODUCTION

1.4 Background to the problem

I grew up when our folks taught us to be responsible and do our own chores including washing our clothes. If you didn’t mum knocked some unforgettable senses into your head. That was almost 20 years ago and today the world has evolved; we have many choices and the power to make the one that suits us.

Studies have shown that mainly due to poverty labour in Kenya is cheap and that most homes have maids to do the chores (Nordic Journal of African Studies, 2001). The middle class in Kenya is growing (World Focus, 2008) and after talking to a few of my colleagues in the office none of us own a washing machine yet we have the purchasing power to do so. The question is why and what are the players in the market doing to break through this problem.

I made my way to Nakumatt Westgate (Nakumatt Supermarkets) and Hotpoint Appliances to gain some insight on washing machines. I discovered various brands, makes and models. Being a lover of German technology I decided check on the Bosch brand. To my utter surprise there was only one Bosch brand among a multitude of other competitors. Another problem cropped up; why is Bosch not up there with the likes of LG and Samsung and take the Kenyan market by storm?

Terms of Reference

With the above in mind this report has been prepared to give the reader an introduction to BOSCH and to the Maxx 6 varioPerfect washing machine model. From information gathered I will give an analysis on where the company stands today globally and in the Kenyan context by and what gives it an edge against the competition. This part also analyses Bosch’s internal policies and their effectiveness in achieving its objectives.

My report will then recommend strategies based on the changing Kenyan market diversity that will give this company and its products a bigger market share, profits and a distinct differential advantage against its competitors and recognition by its consumers within the region. The last part will summarize the main aspects of my report giving the reader a clear and concise conclusion that will make even the most skeptical make an informed decision.

1.1 History

The origins of the Bosch Group dates back to 1886 when Robert Bosch founded the “Workshop for Precision Mechanics and Electrical Engineering” in Stuttgart Germany. Today the company is one of the world’s largest supplier of automotive, technological and consumer products (Bosch, 2010)

1.2 Georgraphical Spread

The group comprises Robert Bosh GmbH and has a representation in roughly 150 countries including sales and service partners.

1.3 Businesses

Robert Bosch GmbH is divided into 3 sectors: –

13%

25.4%

61.6%

Sales figures from CSR Report 2007/2008

1.4 Structure

Franz Fehrenbach heads the company as Chairman, Siegried Dais is the Deputy Chairman. From information gathered from its website Bosch appears to have a tall organization structure in that processes flow from top to bottom. (Bosch, 2011)

1.5 Importance

My report is based on Washing Machines under Consumer Goods and more specifically on the “Maxx 6 varioPerfect” model.

The importance of this report is three-fold (1) to answer the question “is a washing machine a luxury or a necessity today?” (2) to show how the various Marketing strategies that Bosch has used to market their washing machines in Kenya with emphasis contemporary marketing tools has gone a long way in realizing the company’s organizational goals and objectives and (3) to recommend other strategies that the company can use to give it a niche against the other players in the field

2. SITUATIONAL ANALYSIS – Where is Bosch today?

2.1 Product Situation

According to Kotler Bosch “needs to think about their products on three levels; core product which addresses the question: What is the buyer really buying? Then build an actual product around the core product that will appeal more to the buyer; finally build an augmented product around the core and actual by offering additional services (Kotler, Marketing An Introduction, pg. 239-240)

Fig 2.1 – Levels of Bosch product

Actual Product

Core Product

3 Years Warranty

Bosch Maxx 6

speeedPerfect – saves time

WASHING MACHINE

Benefit = Convenience

Home Delivery

Front Loader

ecoPerfect (saves 20-30% energy)

Augmented Product

Kotler says “A company’s marketing environment consists of actors and forces outside marketing that affect marketing management’s ability to develop and maintain successful relationship with its target customers” (Kotler, 2005).

2.2 Internal Environment

From information collected from its website (CSR Report 2009/2010), Bosch abides by the following: –

Mission

Its mission is represented in the word BeQIK which stands for ‘greater speed in everything they do, Quality (Q), Innovation (I) and Customer orientation (K) for the German word Kundenorientierung’

Vision

The Vision of the company is centered on their shared image for the future which is Creating value – sharing values. Their strategic slogan “Invented for Life” stands for the company’s innovative strength and quality.

Policies

The company also abides by laws, Articles of Incorporate and common rules and regulations based in the spirit of “House of Orientation” which consists of its Vision, Mission, Values, Core Competencies and Business System.

2.2 External Environment

Micro Environment

According to Kotler (2005), these are forces close to Bosch that will have a direct impact on its strategies and affect the company’s ability to serve its customers. They include: –

Employees

Who need to feel a sense of security and belonging to improve overall production

Suppliers

Good relationship to ensure prompt deliveries of raw materials and services and negotiate lower prices

Customers

household owners, Hotels, Re-distributors, International markets (ensure satisfaction)

Competitors

LG, Samsung, Whirlpool as well as cheap substitutes.

Stakeholders

Financial institutions, shareholders, Governments who have a vested interest in the company

Macro Environment – Kenyan Scenario

Hollensen (2010) describes the macro environment as the societal forces that affect the whole micro-environment. Based on collected information I have analysed here below some of those forces that I believe would affect Bosch operations in Kenya: –

POLITICAL

The 2007 elections unrest and its profound effect on the country and the upcoming 2012 elections

Kenya Government regulation of taxes on imports

New Constitution – what are the changes affecting imports, new entrants

In 2010 Consumer Price Index (CPI) increased from 107.86 to 109.38 (increase in purchasing power)

The Kenyan economy grew to 6.1% by the 3rd quarter of last year.

Inflation decreased from 4.36 to 4.08

The Kenya vision 2030 gives Bosch hope for a better environment to trade in

ECONOMICAL

Increased economic growth and purchasing power in Kenya gives Bosch the opportunity to maximize its presence so that Kenyans embrace luxuries.

Urbanization growth rate of 4% and the rise of the middle class

SOCIALOGICAL

TECHNOLOGICAL

SWOT

Hollensen (2010) describes this as a technique specially designed to help identify suitable marketing strategies for the company to follow and based on the above situational analysis and information from different sources I would summarize Bosch’s SWOT analysis as follows: –

Opportunity to expand more in the African market

large market share making it easy to expand

The distribution network has the opportunity to push new products into markets

Changes in perception and buying power of the African market

One of the worlds leader’s in electrical appliances

Strong brand name (Bosch) and advertising strategy “Invented for Life”

Good differentiation strategy

Wide range of products in many categories

Wide distribution network

STRENGTHS OPPORTUNITIES

Competitors

Bosch products highly priced compared to competitors

Entrance of cheaper substitutes especially from the Indian market.

Lack of expert operators for more complex machines

Difficulty in penetrating markets such as the African context where labour is cheap

Distribution in Africa not extensive as main depot is in South Africa

Lack of network with resellers and agents in the international market

WEAKNESSES

THREATS

External to Bosch

Internal to Bosch

With this analysis I believe BOSCH is able to strategize and position its brand using its strengths as the backbone to maximize the opportunities at hand while improving on its weakness to drive out its threats.

DIFFERENTIAL/COMPETITIVE ADVANTAGE

The Bosch Group is built on a group of interrelated core competencies that allows the company to maintain a competitive edge. Their many years of experience allow them to foresee changing technological and business trends. The driving force of the company rests in its innovative strength allowing them to generate new technological ideas and deliver high quality products.

The achieved efficiency in its processes has led to cost leadership and differentiation. Quality is at the core of its mission BeQIK. The company’s expanse global roots helps them to exploit opportunities and benefit from a wide distribution network. The company has also invested well on its workforce and ensures a corporate culture that promotes commitment.

Even though it may appear as a weakness especially to foreign markets Bosch headquarters is highly centralized in Germany. This allows them to keep a firm control over its operations, production and strategies in R&D (Bosch 2010)

The USP for the Maxx 6 varioPerfect is based on its durability, reduced noise reduction, ease of use and thus a value for money spent.

Significance

Based on the above situational analysis it appears that Bosch have made great efforts to position themselves in the global arena, but not so much has been done in Africa. SHL in Kenya import the machines from South Africa and they then re-distribute to the supermarket and a few other household stores. Information shows that they have not done a lot of advertising Africa. South Africa enjoys the presence of the company in Capetown. While Bosch delivers quality the complexity of the machines and the lack of service/repair outlets in Kenya is a major weakness.

SEGMENTATION, TARGETING & POSITIONING – where does Bosch want to be?

According to Kotler (2005 pg. 201), “Organizations that sell to consumers and business markets recognize that they cannot appeal to all buyers . . . rather than trying to compete in an entire market against superior competitors each company must identify the parts of the market it can serve best”.

Bosch has used multiple segments to gain competitive advantage: –

Geographic – Bosch is located many different countries through representation, agents and re-sellers. In Kenya SHL are the official distributors.

Demographic – The Maxx6 varioPerfect based on its price is aimed at the upper middle class earners with families thus its specifications.

Psychographic – SHL supplies the Bosch washing machines to Supermarkets and other upper class household shops such as Hotpoint, this is based on an upper social lifestyle.

Recommendation – Whilst largely based on income the company should pay a bigger attention on the Gender and Single people segment. As women who work, go for evening school; have children etc our lifestyles are very demanding. Bosch should appeal to me and all other women in this category. Bosch should also appeal to the single ladies and gentlemen who have busy lifestyles and are constantly on the move

Secondly changes in technology brings about behavioral changes too. Gadgets have become the in thing. From the Iphone to the Ipad to the flat screen I am inclined to include the washing machine in my household. C’mon Bosch bring out the advert that will make me buy the Maxx 6 varioPerfect and wrap it in a package so neat that even my grandma will not hesitate to buy it.

Finally there are other women like me in other towns in Kenya. While Salute Holdings mainly distributes to the Nairobi market, the Bosch machines should be more accessible to other larger towns like Mombasa, Kisumu, Nakuru and Eldoret.

Kotler (2005) continues, after segmenting the marketing “. . the company must decide which and how many segments to serve”, this is targeting. Kotler brings out 3 strategies (1) Undifferentiated -going after the whole market; (2) Differentiated – targeting of several market segments and (3) Concentrated – going after a small share.

From information gathered on its washing machines Bosch has adopted a Differentiated target marketing where it targets several market segments and offers different types of washing machines. This is illustrated here below from information gathered from their website: –

Bosch ecoLogixx 7 targeted towards the energy saving conscious market

The Maxx 6 varioPerfect a more basic washing machine fit for small households

Exxcel washer dryer is targeted for larger families who have small drying space

Kotler breaks down positioning strategies into three; (1) on specific product attributes, (2) directly against a competitor and (3) for different product classes.

Bosch has positioned its washing machines based on product attributes. They advertise the Maxx 6 varioPerfect as a time saving machine and the ecologixx 7 as an energy saving, environmentally friendly machine. The Exxcel washer dryer is positioned as a two in one; washer and dryer that is also an time and energy save.

Recommendations – I believe that the undifferentiated targeting based on product attributes is working for the company but Bosch should also take on the challenge of going head on with LG & Samsung which appear to be the more popular brands in Kenya possibly due to price. If this is the case then the company needs to develop that washing machine that will challenge competitors. Also the company should also place itself against the cheap labour and position the washing machines not to replace the house helps passé but more as way of increasing efficiency in the running of the households.

OBJECTIVES & GOALS – the direction

In order to get where they want to be the company prepares Specific, Measurable, Achievable, Realistic and Timely objectives that will act as a directing arrow on their strategy.

Short Term

To immediately start increasing awareness on Bosch brands through advertising campaigns especially on the Maxx 6 model by 2012

To increase visibility in the current outlets by insisting on a Bosch corner with sales representatives who are well versed on the products by 2011

To add another distributor in Nairobi to work hand in hand with SHL to increase distribution by 2013

Mid Term

To increase investment opportunities and the size of our operations in Africa by including Nairobi as a centre by 2018.

To develop and produce a less complex washing machine suitable for the African market by 2015.

Increase profit margins for washing machines through price penetration by 20% by 2015

Long Term

To gain a 75% share of the Kenyan market by 2030

MARKETING MIX – How will Bosch get there?

The aim is for Bosch to penetrate the Kenyan market and be ahead of the competition

(short summary here)

Product – With high investments on innovation, research and distribution Bosch should bring to the Kenyan market a less complex washing machine that will meet the basic needs of the selected segments and as put by hollensen (2010) also offer good services that assures consumers that the company stands behind its products. The current machine seems more developed for the European market and not the Kenyan one.

Price – Hollensen (2005) states that this is the part of the mix that will generate revenue. After developing the above product for this market Bosch should use market penetration pricing strategy. Considering the machine will be less complex it will also have involved less cost in production. This strategy will allow the company to penetrate the market quickly, attract a large number of buyers and in the long run gain market share against competitors (Kotler, 2005).

Place – SHL are the main distributors in Kenya and they import from South Africa (Fayaz, 2011). Africa is a hub ready to be tapped. It’s about time that Bosch took advantage of this by opening a Bosch office in Kenya for its consumer goods. Nairobi hosts the United Nations and is developing at a fast rate (citation needed). By having the company’s presence here they will be able to deliver effectively to greater East and Central Africa. If having a Bosch office in Kenya is not feasible then a sole distributor is required. One who will concentrate on pushing the company’s products to the consumers. SHL today deals with many other brands and seem not to be doing a good job on Bosch.

Promotion – Little if no advertising is done currently. If I had not made my way to the supermarkets, I would not have been aware of what is out there. Advertising should be at the core of the company in Kenya. Media, Brochures, Posters, Billboards etc that will bring out the benefit of owning a Bosch machine. Awareness is key!

CONCLUSION

Robert Bosch said “I would rather lose money than trust”. This is a powerful statement but it goes to show the emphasis he put on getting the best products out there that would put little or no doubt on the company. This is the backbone that has catapulted the company in the global arena.

My disappointment in the preparation of this report is that Africa has received little attention. The continent is developing and opening up to embrace things that were considered luxuries as necessities. The way forward for the company is to appeal to me and those in the same bracket. Gone are the days that washing machines were considered for the white man or for the rich. We are becoming technologically savvy as the years go by; let us get bury this perception.

Bosch needs to honour King, Smith, Blackstone and even Robert Bosch by placing that trust in the heart of Africa.

From the pricing of the washing machines seen at Nakumatt supermarkets, the Maxx 6 was at a Price of Kshs. 71,000 while the LG and Samsung ranged from 36,000 – 41,000.

In Kenya when anyone mentions Hotpoint they immediately think LG. That means LG have brand awareness. This is one recommendation I would suggest for Bosch. The company should establish an outlet that will soley or mostly distribute its products to East and Central Africa. This is a large market waiting to be tapped. The outlet should also offer periodic maintenance of the washing machines especially the more complex ones.