Chai Chalermvatcharaporn is a man with intensive expertise in the rubber manufacturing domain and he has developed a new product to assist rubber plantations. The problem generated by the new product regards the means of placing it onto Thailand’s market.
The producer might find it difficult to persuade customers into investing in the new product, moreover when the natural rubber industry seems to be taking a downfall. The rubber industry has reached maturity and is now heading towards its decline. It is expected that in 10 or 15 years, the natural rubber will be entirely replaced by synthetic rubber.
Furthermore, in designing the campaign to promote the Rubber Tech Purifier, Chai has to consider five factors: the supplier power, the barriers to entry the market, the threat of substitutes and the buyer power, all of these establishing the degree of rivalry.
Based on these considerations, a SWOT Analysis of the RTP was developed, and it established the following:
Strengths: the RTP was developed by an experienced team of engineers and it prides on numerous qualities such as the possibility to replace 5 workers and the increased quality of the rubber (over 95% accuracy);
Weaknesses: rather high price and a short life cycle (after one year, the RTP has to be replaced);
Opportunities: no other similar product exists on the market; the natural rubber market will still function for another 15 years, period in which such a product would be useful;
Threats: instability of the natural rubber market, potential competition from an Indian company.
Detailed problems and strategies
Prior to launching the RTP, the producer has to consider potential causes for failure, the target audience, the features of the product, the pricing and the promotion strategies.
Among the possible causes for the failure of the RTP could be the existence of cheap workforce in Thailand; consumers’ reticence to a new technology that implies additional costs of maintenance and personnel training; fear that the product might not satisfy the demands and the necessity to reduce personnel. The personnel problems remain to be solved by the rubber producers, but the problems regarding the new technologies could be solved by offering buyers additional services. The two sales representatives in charge of the RTP would offer “on-site assistance during the first year: training, troubleshooting and customization,” each serving 10 plantation at a yearly cost of $30,000.
The new product is focused on improving the overall quality and speed of the rubber manufacturing process. The RTP has the ability to process 5,000 tons a year, 3,500 tons more that the capacity processed by the manual labour. The disadvantages of the product are however its short warranty, of only one year, and the higher price that the one proposed by the Indian competitor. Chai established a price of $10,000, whereas the Indian manufacturer would sell its similar product for only $8,000. The price difference can easily be explained by the higher quality of the RTP and its increased processing speed. The RTP is able to process 5,000 tons of rubber per year, whereas its competitor can only process 4,000 tons. Furthermore, compared to his competitors, Chai has the advantage of Thailand’s experience and good reputation in regard to rubber production. This comparative advantage could aid Chai boost his product to other foreign countries, as well as Thailand.
Given that the small and middle size plantations could be persuaded into accepting a higher price, but the larger plantations would not pay a cent above $10,000, the RTP’s price should remain unchanged. However, the company ought to consider investing more money into sales, so to increase the number of sold RTP, and also in research and development, in order to further improve the quality of the RTP and its life cycle. Also, separate funds should be allocated to the R&D department as to allow them to continue their research for technologies applicable to synthetic rubber. Given the actual trend of replacing natural rubber with synthetic rubber, Chai’s company has to develop and maintain an increased level of adaptability and find the ability to change the features of the RTP so that it meets the demands of the coming years.
The new product is generally designed for the large rubber producers on the high grade market, but it not limited to them. The large rubber producers have a better chance of resisting on the market, as they register the lowest closing rate (5%). These companies generally afford to pay the RTP’s price and can be convinced that purchasing the product brings about long-term benefit of significant cost reduction.
For instance, the RTP purchased, for $10,000, would process 5,000 tons a year at an accuracy rate of 95%. On the other hand, to process this amount of rubber at the given accuracy rate, the manufacturer requires about 7 employees. (Exhibit 3: 2 workers process 1,500 tons a year at an accuracy rate of 95%. As such, one worker produces 750 tons a year.) 7 full time workers, working 300 days a year for 10$ a day add up to $21,000, more than double of the RTP’s price.
The promotion campaign should take the form of advertisements published in the rubber industry Journal, periodical designed for medium size and large rubber producers. The advertisements and articles should focus on the benefits of the RTP, such as the significant reduction in costs and the large amount of processed rubber. Small rubber plantations will be left out of the promotional strategies, as they have not been selected as target markets and their inclusion would only increase the producer’s costs.
For the near future, Chai Chalermvatcharaporn should focus on implementing the developed RTP business plan, and in case of failure, in two years time he would add it to the Siam’s portfolio.
Bibliography
Porter’s Five Forces: A Model for Industry Analysis, 2007, QuickMBA.com, http://www.quickmba.com/strategy/porter.shtml, last accessed on September 28, 2007
Rubbertech, Marketing Parts 1 to 3
Porter’s Five Forces: A Model for Industry Analysis, 2007, QuickMBA.com
Rubbertech, Marketing, Marketing Part 2
