THE POSITION OF MARKETING WITHIN A MACRO-LOGISTIC MODEL OF THE COMPANY

Transcription

1 POLISH JOURNAL OF MANAGEMENT STUDIES 2015 THE POSITION OF MARKETING WITHIN A MACRO-LOGISTIC MODEL OF THE COMPANY * Abstract: There exist many concepts of corporate management. Contemporary approaches heavily emphasize marketing and logistics aspects. Hence the logistic model of an enterprise was selected for the analysis as a dynamic system of interrelated flows and chains of information, material and financial. Three levels, namely macro-, micro- and nano-logistics can be identified in any hierarchical logistic system. Effective corporate management demands making decisions that strictly reflect the market, in which the company operates. The customer, who must be taken into consideration at each of these levels, becomes particularly significant. Marketing, which thus plays a huge role in business management ought to permeate all spheres of the business. The objective of the article is to identify the position of marketing in the activities that form constituent parts of the macro-logistic model of production companies. The framework of this model is made up of decisions and actions that are long-term in nature, whose impacts are noticeable over long periods of time. Keywords: marketing, logistics, macro-logistic business model Introduction Corporate management can be viewed from several perspectives. One of these is the logistic model of corporate management, according to which a company is viewed as a flow and chain of interrelated activities. A company may, in certain circumstances, be perceived as a hierarchical, dynamic logistic system at three levels: macro logistic model of a company and nano-logistic model of a department, production line etc. Effective corporate management demands taking decisions that strictly relates to the markets in which the company exists. Customers, who form the cornerstone of any business, thus become very significant. Consequently, this may lead to the conclusion that marketing which ought to permeate all spheres of business plays a significant role in corporate management (Kot and Brzeziński, 2015). The objective of the paper was identifying the position of marketing in activities that constitute the macro-logistic model of a production company. The structure (framework) of this model is made up of decisions and activities that are long-term in nature, whose impacts become visible over a prolonged period of time. The constituent parts of a macro-logistic model of a company include the following (Malindžák et al, 2007): company location, product strategy, * Beata Zatwarnicka-Madura, PhD, Prof. Eng. Dušan Malindžák, CSc., Rzeszow University of Technology, Faculty of Management corresponding author: bezat@prz.edu.pl dusan.malindzak@tuke.sk 209

2 2015 POLISH JOURNAL OF MANAGEMENT STUDIES organization of production processes, production strategy, company organization organigram, production capacity strategy, pattern and parameters of the planning system, distribution and supply networks, etc. The article presents elements related in particular to the production. Location of the Production Company The choice of location for a production company is of key significance to its success. It can, in the corporate logistics system, lead to the restrictions in the creation of time and place utility. The company s location is more often described as the most significant component of a company s marketing activities. It may have impacts on the following aspects (Gurbała, 2015): In respect of consumption /suppliers/ market, local labour marketproximity of the consumer and employee, Transport availability, speed, preferred means of transport this is in reference to the point of delivery to key customers as well as from largest suppliers, Environmental preferred conditions of the location, attitudes of local authorities the physical as well as social localization of a company, Size of investment referring to the existing infrastructure / the need to create a suitable infrastructure in the form of access roads for the company s activities. Three factors, namely production, commercial and social have according to D.Malindzak and A.Gazda (2011) impacts on the location of a production company. The factors of production include sources of raw material, energy availability, transportation possibilities, workforce and its classification (Brzezinski et al., 2015). Commercial factors, as the mentioned authors postulate include: tax levels, market, communication possibilities, and price etc. The social factors on the other hand include unemployment and traditions in production. The choice of a location is a decision taken prior to the setting up of a new company or in the event of company expansion, through investments in new markets. The decision of the location of a company depends on many factors and may depend on a huge territorial decision-making process. Product Strategy The next component of the corporate macro-logistic model is the product strategy. Product is one of the key elements of the marketing-mix. Decisions regarding the product are pivotal in the process of designing marketing strategies. A product s market success depends on several factors of varied significance for the customer and the company. A significant role is played by the identification of key elements, 210

3 POLISH JOURNAL OF MANAGEMENT STUDIES 2015 which from the position of the customer, ought to translate into customer satisfaction, and consequently into the company s profits. A company takes decisions concerning the type of product offer, their diversity and assortments. The three dimensions of the product-mix, namely width, depth and product similarity may decide the strength of the product strategy adopted by accompany (Pilarczyk and Mruk, 2007). Managers make use of various portfolio methods (e.g. BCG matrix) to analyse and appropriately shape the structural range of products included in a company s offer. An important aspect of the company s product strategy is guiding the product development, which involves analysing the product s life cycle. The model of a product s life cycle is a concept based on the theories of diffusion and innovation acceptance. It most commonly consists of four phases: product launch phase, during which demand and sales grow slowly and require strong stimulation, growth phase, during which sales dynamics is very strong, maturity phase, when sales are peaked, decline phase, where declines for a particular product is observed. A product s life cycle is time limited and depends on various micro- and macroenvironmental factors of marketing. There is a general trend to shorten the product s life cycle. The rapid introduction of innovations by manufacturers make products become obsolete much faster than in the past. The number of products in the various phases of the product s life cycle is also important. For the proper development of a company, the product portfolio ought to be balanced. The sharing of products in-between the phases depend on specific situations as well as on the internal and external conditions of the company s activities. It is accepted that it ensures a balance of resources and needs of the company with the product launch phase being allocated 5-10% of overall products, the growth phase 15-20%, the maturity phase receiving 50-60% of the total while the decline phase gets the rest. A purposeful sharing of products between the various phases requires the need to take timely actions for the purpose of developing and introducing new products into the market. If the process is delayed in time, while existing products are in the product s life cycle decline phase, the company could soon experience financial difficulties, whose size and time duration are a function of delays in innovative activities and change in the production and sales program (Garbarski et al, 1996). Organization of Production Processes Another key issue of the macro-logistic model of enterprise is defining the structural type of productions processes. The structural types could be functional, instrumental or mixed types. In the functional type of structure, also referred to as technological, equipment is adapted to perform technological operations according to the same method of processing. Its benefits, among other things, is the high flexibility which is due to the possibility of using the equipment for different 211

4 2015 POLISH JOURNAL OF MANAGEMENT STUDIES ranges of products, ease of continuing production even in cases of machine failure, lack of raw material or personnel. Its drawbacks, on the other hand include prolonged production cycle, a large amount of product documentation, and cumbersome planning, a plurality of work in progress due to lack of regularity and the need to have increased stock to sustain the continuity of production and rhythm of the assembly line. The flow of items is, in the instrumental structural type, predetermined, while machines are adapted to the type of products being manufactured. Its advantages include rapid flow of objects, short transport routes in-between operations, minimum inventory, and short production cycles, and simplified planning process. The drawbacks, in contrast, are usually less flexibility of the system due to the narrow specialization of equipment, greater difficulty in continuing production in case of machine failure, lack of raw material, etc. In the technological-instrumental (mixed) structural type there exist instruments besides the technological slots, for example the production of parts is organized according to functional patterns while assembly is instrumental in approach. The choice of form of production system is determined by the range of products, program of production and technical specification of the production machinery. It is claimed that the use of the technological structure is reasonable in case of unstable production with very high diversity of products and labour intensity of various operations. It is suitable for unit, short or medium series production, which are usually unstable. The instrumental structure is, on the other hand, used in mass, huge or medium series production which is stable. This structural pattern applies to products that are of high degree of uniformity and typical. The choice of structure should also in this case be determined by marketing issues, in other words customer satisfaction. Production Strategies Two strategies of production are commonly identified in companies, namely production on demand (ETO engineering-to-order) and production for the warehouse (MTS make-to-stock). The production on demand is, according to D. Malindzak, undertaken in the PULL system, according to the JIT (just in time) principle, which means that on a given date, specified in the order (the Due Date) a progressive calculation is began, starting from the last concluded operation, the finishing time of preceding operations to look as if the product was being pulled (PULL) off the production process. This strategy uses the popular Kanban method. The production for the warehouse, on the other hand, uses the PUSH system in which the product production is planned from the first to the last operation, in accordance with the technological sequence. Advantages of this approach include greater opportunity of production optimization, higher production volumes, less dependence of production on demand, better assurance of timely and quality delivery as well as shorter delivery periods, given that the specific product is available in the warehouse (Malindžák, 2007). 212

5 POLISH JOURNAL OF MANAGEMENT STUDIES 2015 Based on the differences between a product s place of production and the point of delivery of customers orders, six different production environments can be distinguished, namely engineer-to-order (ETO), buy-to-order (BTO), make-toorder (MTO), assemble-to-order (ATO), make-to-stock (MTS) and ship-to-stock (STS) (Fechner 2007). Several categories of ETO are contained in publications. This distinction is marketing driven as each category is associated with a different level of product customization to customer requirements. Both Bozarth and Chapman had observed that products manufactured in ETO can vary in their standardized numbers and designs due to the customer s demands in respect of components and finished products (Bozarth and Chapman, 1996). The degree to which these demands are applied in product designs differs according to the order. There exist a lot of key differences between companies making use of ETO and MTS in respect of their operational activities (Rahman and Bash, 2003; Matusek, 2013). Customers requirements as well as interactions between the customer and producer are crucial from the marketing perspective. Customer requirements in an ETO production environment are very specific, while their interactions are intensive. Information exchange begins right from the moment a customer enquires about a product. In implementing the product requirements, it is necessary to precisely state its specifications, settle details regarding its conception and technical designs. Customized production is characteristic for unit, small batch productions, geared towards a market s individual needs, which calls for the production of small quantities of products that are very diverse in nature. In an MTS production environment on the other hand the customer s requirements are general for all potential customers, while their interaction with producers is at a very low level. In the production destined for the warehouse the flow of materials in the form of inventory of finished goods in the warehouse is initiated based on demand forecasts and completed prior to the receipt of the customer s order. Consequently, the customer lacks any influence on the form of product. The MTS environment is characteristic of stable production (large volumes, multi batch). Its operations are based on relatively stable and predictable demand for standard goods in a large-scale production that is less diversified. Company Organizational Structure A company s organizational structure is the overall of determined functional and hierarchical dependencies between organizational constituents grouped into cells or organisational units to enable the attainment of company objectives. The determinants of organizational structures include its strategy, technology, employees, size and its organizational environment. Various types of organigrams can be identified, including linear, Staff, Staff and linear, functional, matrix as well as divisional. Three types of organigrams are currently in use, namely functional, matrix and product. The corporate organizational structure depends to a large extent on the organization of production processes. If production is organised along functional 213

6 2015 POLISH JOURNAL OF MANAGEMENT STUDIES lines then the organizational type is also functional. In such type of organization, the members are grouped into functional departments, such as marketing, production, finance, etc. (Griffin, 1996). The smooth functioning of such organizations relies mainly on the level of coordination between the separate departments. In a centralized organization all the operation and marketing activities are concentrated in one functional sphere, i.e., marketing. This function occurs in independent sections besides the core functional departments, including logistics. Both departments, marketing and logistics, are in such cases treated equally and similar to other functional areas, impacting significantly on the company s strategic management. There, however, exist structural organizations, where the concentration of logistic functions in a department that is subordinated to an existing core functional department i.e., marketing (Blaik, 2010). The product organizational structure is also applied in companies where production processes are organized along product lines. The system does not replace their functional forms, but exist as the next level of management, where product managers positions are created for each product type. The managers tasks, amongst others, is to design product strategy, prepare annual marketing plans, collate information on products sales, customer attitudes, as well as making decisions concerning product improvement. An advantage of this type of structure is its swift response and adaptation to prevailing market situations and the taking of well-informed decisions concerning their products. The matrix structure is considered modern and yet the most difficult to apply in practice. The structure consists of columns and rows. The most often repetitive functions are placed in columns, while the unusual, often changing tasks are in the rows. The employee in a matrix structure has two heads, in line with the principle of dual subordination. This structure is thus, often referred to as a system of multiple subordination. Advantages of this structure include the substantive support of managers in task implementation, possibility of comprehensive project management, reducing channels of information flow as well as high flexibility in adapting organizational activities to changing environments. Its drawback, on the contrary, is the possibility of role conflicts between managers due to the dual subordination of employees and the huge implementation costs involved. Marketing is, in corporate practice, treated traditionally, i.e., as one of the functions being implemented by a company, it is limited to specialized functions of sales and promotions. It is hardly centred on other significant marketing functions such as product, price development and other instruments. Designating marketing as one of corporate management s function contributed to adverse effects, including those with other departments. There is growing emphasize in literature on managements to depart from the narrow, instrumental and functional understanding of marketing in preference for corporate marketing management, in which the entire company is viewed from the customer s perspective (more detail: Bajdor and Brzeziński, 2013). 214

7 POLISH JOURNAL OF MANAGEMENT STUDIES 2015 Strategic Production Capacity A company s strategic production capacity defines its long-term relationship between its production capability and requirements regarding production capacity due to demand forecasts for the company s products. Whenever production capabilities exceed market demands fixed costs per unit of product increase. If, on the other hand, production capability falls lower than market demand, the realisation of all orders become impossible, which eventually leads to lose of customers and orders. Three basic types of production capacity strategies are identifiable, namely Wait and See, Preempt of Competition, Snake (Malindžák et al, 2007). The first is a conservative strategy, when production capabilities are changed only in case of long-term higher demand than the company is able to produce. This strategy is a bit risky, because it can result in part of orders not being realized and the customer may decide to purchase from the competitor. Preempt of Competition strategy is based on the idea of early creation of production capabilities in order to be able to respond to increased demand. The strategy is an aggressive method of acquiring new markets that is characteristic of dynamically developing sectors of a market. Increasing production capabilities in hope of future demands might result in risks of non-utilisation. The compromise in such circumstances is the Snake strategy. It involves a systematic, continuous change in production capability that oscillates around demand values. The strategy is applicable only in situations when production capabilities can be altered in small steps, almost continuously although this is not always possible in companies. Slight deviations in these changes are compensated for by measures for aligning production capabilities (Malindžák et al, 2007). What seems to be definitely ideal, from the marketing management point of view, is the Snake strategy, which should neither lead to customer loss (due to production incapability) nor to the application of aggressive methods characteristic of sales strategies, not necessarily marketing. There exist several possibilities (decision options) in the area of production and marketing for achieving a balance between forecasted market demands and level of available production capability (medium-term planning). The options in the marketing area, whose aim is an attempt to change demand models include the following (Zbroja, 2015): price differentiation (higher prices in periods of high demands, but lower in periods of depressed demands), promotion differentiation (intensified promotions, including advertising in periods of depressed demands, down-playing such activities or their complete elimination in periods of high demand), backorders (encouraging customers to move delivery dates to later planning periods), 215

8 2015 POLISH JOURNAL OF MANAGEMENT STUDIES managing supplementary demands (utilizing productive resources for the production and sales of ancillary products during periods of depressed demands). The main advantages of the marketing option include lower costs in relation to production options and better or rather more uniform capacity utilization. The drawbacks worth mentioning include the loss of potential profits in the peak demand periods as well as worsening quality of services (loss of company s prestige during peak demand periods). The options, aimed at changing production (supply) capacities in the area of production include the following (Zbroja, 2015): employing or retrenching staff, making use of overtimes or applying reduced work times, increasing production capacity through the employment of seasonal workers, production for storage to supplement supplies in later planning periods, using diminished orders (underproduction) for periods of overstressed production process. The main advantages of the production option include increased quality of service as well as further profits in peak periods of demand. The drawbacks include higher costs relative to the marketing option, worse (uneven) capacity utilization. The application of any of the possibilities, be they in the area of production or marketing, is characterized by a certain level of costs, which is crucial in determining the appropriate planning strategy and choice of the ultimate alternative plan of production. Summary Existing links between marketing and constituents of the macro-logistic model of enterprises were identified in the article. The role of marketing seems very significant in each case as it stems from the mutual penetration of both marketing and logistic spheres. The desire to be competitive in contemporary markets demands for the application of varied solutions relative to the customers preferences within a company s scope of activities. Logistic management is currently the most dynamically expanding field of management in several countries across the globe. Consequently, there is the need for further, in-depth studies on the role of marketing in logistic models of enterprise management. References Bajdor P., Brzeziński S., 2013, Cause Related Marketing as One of the Sustainable Marketing's Dimensions - the Essence and Practical Examples, Polish Journal of Management Studies, 7. Blaik P., 2010, Logistyka, Koncepcja zintegrowanego zarządzania, Warszawa, PWE. Bozarth C., Chapman S., 1996, A contingency view of time-based competition for manufacturers, International Journal of Operations & Production Management, 16(6). 216

9 POLISH JOURNAL OF MANAGEMENT STUDIES 2015 Brzeziński S., Grabara J., Kot S., 2015, Outsourcing Performance in the Power Plants. Proceedings of the 8th International Scientific Symposium on Electrical Power Engineering, Elektroenergetika Fechner I., 2007, Zarządzanie łańcuchem dostaw, Poznań, Wyższa Szkoła Logistyki. Garbarski L., Rutkowski I., Wrzosek W., 1996, Marketing, Punkt zwrotny nowoczesnej firmy, Warszawa, PWE. Griffin R.W., 1996, Podstawy zarządzania organizacjami, Warszawa, Wydawnictwo Naukowe PWN. Gurbała K., 2015, Zarządzanie strategiczne w firmach produkcyjnych, zarzadzanie -strategiczne-w-firmach-produkcyjnych. Kot S., Brzeziński S., 2015, Market Orientation Factors in Sustainable Development and Corporate Social Responsibility, Asian Journal of Applied Sciences, 8(2). Malindžák D. i in., 2007, Theory of Logistics (definition, paradigms, principles, structure), Kosice, Karnat. Malindžák D., Gazda A., 2011, Podstawy teorii logistyki w przedsiębiorstwie, Rzeszów, Oficyna Wydawnicza Politechniki Rzeszowskiej. Malindžák D., Logistyczny model zarządzania firmą, 2007, [in:] Zarządzanie finansowe i logistyczne, Zbiór referatów z konferencji międzynarodowej Malenovice, 7-8 czerwca 2007, Warszawa. Matusek M., 2013, Rozwój nowego produktu w przedsiębiorstwach środowiska produkcyjnego konstrukcja na zamówienie (Engineering-To-Order ETO), Zeszyty Naukowe Politechniki Śląskiej, Organizacja i Zarządzanie, 63. Pacana A., Pacana J., 2005, Analiza systemu jakości zgodnego z ISO 9001 w PBPiO RESBUD S.A., Машиностроение и Τехносфера XXI Века. Сборник трудов XII международной научно технической конференции, Том 5, Донецк. Pilarczyk B., Mruk H. (red.), 2007, Kompendium wiedzy o marketingu, Warszawa, Wydawnictwo Naukowe PWN. Rahman A.A.R., Bash M.S.N., 2003, The need for a new product development framework for engineer-to-order, European Journal of Innovation Management, 6(3). Zbroja T., 2015, Zarządzanie produkcją i usługami, pracownicy/skowron/images/zpiu%20wyk%c5%82ad%20-%20temat%203.pdf. 217

10 2015 POLISH JOURNAL OF MANAGEMENT STUDIES POZYCJA MARKETINGU W MAKRO-LOGISTYCZNYM MODELU PRZEDSIĘBIORSTWA Streszczenie: Istnieje wiele koncepcji zarządzania przedsiębiorstwem. Współczesne podejście w dużym stopniu akcentuje aspekty marketingowe i logistyczne. Z tego powodu do analizy wybrano logistyczny model przedsiębiorstwa jako dynamiczny system wzajemnie powiązanych przepływów oraz łańcuchów (informacyjnych, materiałowych i finansowych). W hierarchicznym systemie logistycznym można wyróżnić trzy poziomy: makrologistyczny, mikrologistyczny i nanologisticzny. Skuteczne zarządzanie przedsiębiorstwem wymaga podejmowania decyzji ściśle odpowiadających rynkowi, na którym firma działa. Szczególne znaczenie mają, zatem klienci, którzy muszą być brani pod uwagę na każdym z wymienionych poziomów. Ogromną rolę w zarządzaniu przedsiębiorstwem odgrywa, zatem marketing, który powinien przenikać wszelkie sfery działalności przedsiębiorstwa. Celem artykułu jest zidentyfikowanie pozycji marketingu w działaniach wchodzących w skład makrologistycznego modelu przedsiębiorstwa produkcyjnego. Strukturę tego modelu tworzą decyzje i działania o charakterze długoterminowym, których efekty są widoczne przez długi czas. Słowa kluczowe: marketing, logistyka, makro-logistyczny model przedsiębiorstwa 營銷的公司內部的宏觀 - 物流模型中的位置 摘要 : 目前存在著企業管理的許多概念 當代的方法很大程度上強調營銷和物流環節 因此, 一個企業的物流模式被選定為分析相關流程和信息, 物力和財力鏈的動態系統 三個層次, 即宏觀, 微觀和納米物流可以在任何層次的物流體系來識別 有效的企業管理需求做出決定, 嚴格的市場反映, 該公司運營的 客戶, 誰必須在每個這些級別加以考慮變得特別顯著 營銷上, 從而起到在企業管理中的巨大作用, 應該滲透到企業的各個領域 本文的目的是確定在形成的製作公司宏 Logistic 模型的組成部分的活動營銷的位置 該模型的框架是由屬於長期性的, 其影響是顯著的過長時間的決定和行動 關鍵詞 : 市場營銷, 物流, 宏觀物流業務模式 218