Case Study One

“Prestige” is a local manufacturer/retailer of household furniture. Established during the early 1980s by a
local craftsman/entrepreneur, the company started as a small furniture workshop in down town Amman,
selling its products through specialized furniture retailers. As the company grew in resources, it
established its own showrooms. Currently, the company owns one fully automated furniture factory in
Amman’s industrial zone in addition to three showrooms in Khelda area and Mecca Street. For almost 30
years, the company has witnessed considerable success, however, since 2011 things have been noticeably
on the downturn.
Since 2011, the regional political turmoil has imposed considerable effects on the Jordanian economy,
and the continued unrest in some of the regional countries still casts doubts and high levels of uncertainty
over the short and medium term economic prospects. Despite the fact that Jordan remains relatively
stable, open, and safe in comparison to other countries in the region, Jordanian economy has been
struggling during the past several years with high energy prices, a shortfall in foreign grants, budget cuts
and a significant influx of Arab refugees, putting a considerable strain on resources. Real GDP growth
has maintained relatively low levels of 2.6% in 2011 and 2.0% in 2018. Inflation rate has increased in the
past several years and one of the main causes is the removal of fuel subsidies. This has influenced
consumers’ income levels and purchasing power, which led to decreasing the size of domestic demand for
furniture products by some market segments, particularly “middle” and “lower” income level segments.
Prestige never had a proper segmentation process to the furniture market. The company’s owner always
had a firm belief that “customers want quality furniture”. Such belief has resulted in Prestige producing
furniture pieces of both high quality and price. In addition to the showrooms locations, those attributes
had attracted customers with high income prior to 2011. Nevertheless, customers who are currently within
the “high-income” segment are more knowledgeable when it comes to furniture designs; they usually
prefer customized, hand-made, furniture and demand high quality and finishing of furniture items. They
do not prefer ready-made designs even if they were of high quality. Recently, however, and due to
economic conditions, the “high-income” segment has been shrinking to the benefit of lower segments.
“Lower- income” customers usually seek commercial type of furniture items and look for price as a key
factor that influences their buying decision. Whereas “middle-income” customers are increasingly
interested in affordable modern furniture styles and straight-cut designs that suit their limited budgets.
In general, local customers of all segments consider Jordanian furniture products to be of higher quality
and durability than most imported products in the market (particularly Chinese and Malaysian furniture).
However, furniture products imported from these countries come at a lower cost compared to Jordanian
products, even after taxation. Furthermore, furniture imported from FTA countries (e.g. US) are exempted
from taxes, whereas some of the industry’s vital production inputs (e.g. wood, production lines) are
subject to custom duties. This had negative impacts on Jordanian furniture manufacturers’ ability to
compete price-wise with imported furniture products, especially when considering that the Jordanian
furniture market is getting more price-sensitive.

To cater for such realities, some Jordanian furniture manufacturers have incorporated modern production
technologies in their plants, which made them able to produce in mass quantities with lower costs.
Interestingly, and despite the seemingly tough conditions of the industry, some Jordanian furniture
manufacturers have started considering environmental performance as part of their planning and
operational procedures. Those manufacturers believe that adopting eco-efficient business practices will
not only benefit the environment, but will also improve business operational efficiency and reduce costs.
It is expected that “eco-efficient business practices” may be a trend that will affect the furniture
manufacture sector in Jordan in the long term.
As if external changes were not enough, Prestige’s problems have extended also to its internal
environment. The company has been involved in a damaging confrontation between management,
represented by the owner, and employees. Factory’s staff and showrooms’ sales persons have been
demanding a raise to their salaries in addition to healthcare insurance, whereas management has resisted
any potential increase to fixed costs. This has resulted in a climate of distrust between both parties, which
eventually resulted in the intervention of labor unions in an attempt to reach a satisfactory solution to the
crisis. Further, the constant mistrust between the Prestige and its suppliers of raw materials has caused the
company a lot of money in legal fees and delays due to contracts cancelations and failures in committing
to contract conditions on the part of Prestige and/or its suppliers.

Internal problems, in addition to lack of proper marketing practices, have resulted in the
company’s failure to adapt to changes taking place in its markets. Despite the fact that the
company had the potential to reduce the costs and quality of its products, Prestige continued with
manufacturing furniture pieces of high quality, yet outdated traditional taste, since that designs
were made based on what the owner felt fashionable. Further, the produced furniture pieces were
priced high to reflect the quality and craftsmanship. Such facts might have also contributed to the
current slump in Prestige’s sales.
(Ref: http://etvetreform.gov.jo/wp-content/uploads/2014/02/Furniture-Manufacture-Sector-plan-Jordan-2014.pdf.)

Case Questions and Requirements:

1. Conduct a thorough, organized, analysis of Prestige’s marketing environment, and underline

the general trends it suggests in terms of consumers’ wants.

Reference to the above case we can conduct the marketing environment of Prestige as follows:
1.1. Task Environment/ entities: including competitors, suppliers, employees and other departments.

 The relationship between the employees and the top management were full of stress and
distrust as the management refused to increase their salaries which affect their
performance, satisfaction, motivation and the whole work environment. There was also a
distrust between the company and its suppliers which caused the company a lot of
money.
 Their furniture products that was imported from Chinese, Malaysian and FTA had a
negative impact on Prestige work environment even after taxes as they were in a lower
cost.
 Prestige didn’t understand the market and the consumer wants as the company’s owner
always had a firm belief that “customers want quality furniture” but in reality, they were
focused more on the price due to economic issues that were occurred in 2011.

1.2. Broad environment/ forces: including Demographic, economic, cultural, natural, technological
and political.
 In respect to demographics; the influx of refugees who entered Jordan led to a massive
increase in population and putting a considerable strain on local resources and at the
same time it affects the culture according to the mixing of cultures, traditions,
preferences and values.
  Natural: adopting eco-efficient business practices have a great impact on the
environment, improve business operational efficiency and reduce costs.
 Technological: produce in mass quantities with lower costs.
 Political: taxes on row materials and exempted taxes to FAT countries.
 Economic: high energy prices, low GDP with high inflation due to the entered refugees
affect the consumer’s income level & purchase power, shrinking of high income level
people and removal of fuel subsidies.

1.3. General trends: adopting eco-efficient business practices which improve business operational
efficiency and reduce costs, high-income segment has been shrinking to the benefit of lower
segments and middle-income customers are increasingly interested in affordable modern
furniture styles and straight-cut designs that suit their limited budgets.

2. Based on the case, what philosophy does the company’s owner adopt towards the market?
Explain your answer. What philosophy should the company adopt? Justify your answer.

 The company’s philosophy is Product concept as they are producing high quality
products with high prices, but the consumers focused more on the price so that they
should change this philosophy and to go with the flow depending on the consumers
wants.
 They should adopt the Holistic marketing as everything is matters in marketing; this will
let them be able to look into the whole parts of the market and to fix the relation with the
Task environment; in addition to

3. In relation to Porter’s generic strategies, what strategy did Prestige apply? Why doesn’t this
strategy work for the company anymore?

Prestige applied differentiation strategy as they believed that the consumers wants quality
furniture without looking to the changes that happened in 2011 and which affected the
consumer’s purchase power and preferences.so it doesn’t work because the high-income segment
has been shrinking to the benefit of lower segments and middle-income customers are
increasingly interested in affordable modern furniture styles and straight-cut designs that suit
their limited budgets.

4. If prestige adopts the segmentation process underlined in the case (i.e. three income-level
segments), and assuming that the company has substantial resources, what targeting approach
do you suggest for prestige to adopt? What strategy/strategies should the company apply in
targeted segment(s)? Justify your answers.

Prestige should adopt Holistic marketing concepts as everything is matter in marketing and use
single segment targeting for the middle-income level segment because its expected to increase after
the shifting of the high-level income to the middle one.
 5. As a supplier of heavy manufacturing equipment, your company has been chosen as the
preferred supplier by Prestige. However, prior to the finalization of the contract, Prestige’s
representatives still pressure you to introduce more cuts to your asked price. What options do
you have to deal with such pressure?

I will stay on my point to not reduce the price but in order to gain the deal I can offer them free
training for their employees, 2 years guarantee, special payment terms and/or risk and gain
sharing.
 Case Study Two

In the supermarket wars, the loyalty battleground is where the bullets fly thickest. And the grocer thought
to have the most potent loyalty weapon is Tesco. Yet one of the great mysteries of the data world is just
how customer insights mined from Tesco Clubcard’s data mountain help make it the UK’s biggest (and
most profitable) grocery chain. Tesco faced the following difficult market conditions in 1992;

1. Low population growth

2. Well developed and relatively saturated supermarket market in the UK

3. Increasing difficulty in getting planning permission for large green fields sites

4. Three strong competitors (Sainsbury, Asda& Safeway)

One possible solution to address such conditions was to increase sales to the same customers Tesco had.
Tesco’s Clubcard provided to most useful tool to apply such a solution. In early 2001, six years after
Clubcard’s launch, Tesco bought a majority share in dunnhumby, its data analysis supplier. The word in
data land was that something big was on the cards. So it proved. Until 2001, Tesco and dunnhumby had
typically restricted analysis samples of customers to around 10 per cent, in order to control the cost of
data storage and transmission. The sea change came with lowering costs of technology, and Tesco’s
growing desire to dig deeper into the data for consumer insights. The challenge was to make sense of the
104 billion rows of data stored at any one time. Tesco Lifestyles was the result – a segmentation and
modeling system based on customer shopping behavior. “Lifestyles is ultimately about trying to
understand factors that drive shopping behavior, for example price, attitudes or healthy eating, together
with measurement of customer’s incomes, marital status, and Tesco’s share of a their wallet or purse,”
says dunnhumby chief executive Edwina Dunn. “We wanted to capture more spend from each customer,
and nudge them into buying products from Tesco that they might buy elsewhere.” Results of data analysis
and customer segmentation resulted in six distinctive segments. Tesco then launched different brands
(under the original Tesco brand), and different strategies to suite each of those six segments. The purpose
was to increase sales growth within the same segments through effective targeting and better market
offerings. Table 1 underlines the six segments in addition to the different brands/sub-brands and strategies
used with them.

segment Tesco brand Applied strategy

Finer foods (9% of Tesco Finest - Directly address Marks & Spencer
Tesco’s customers) - Super-premium product and price
- Limited to high-value added items
Healthy (7% of Tesco’s Tesco Fair Trade - Targeting specialty niches with pure organic
customers)* assortments of products and healthy solutions
- Super-premium products/solutions and prices
Traditional (15% of Tesco - Same quality as national brand
Tesco’s customers) - To be the brand to choice
- Increase margins vs. branded
Convenience (9% of Tesco - Same quality as national brand
Tesco’s customers)* - To be the brand to choice
- Increase margins vs. branded
Mainstream (24% of Tesco - Same quality as national brand
Tesco’s customers) - To be the brand to choice
- Increase margins vs. branded
Price sensitive (36% of Tesco Value - Directly address limited assortment competitors (e.g. Aldi)
 Tesco’s customers) - Cheap and basic
- Limited to low-value added items

Table 1. Tesco’s segments, brands and strategies (modified from original text for academic
purposes).

Tesco realized that focusing on grocery/convenience products alone, Tesco’s original and main product
lines, was not enough to achieve targeted levels of sales and growth. So, Tesco introduced different and
distinctive types of goods and services. Table 2 shows some of the new services introduced by Tesco.

Product Partner(s) Year Details

Launched
Tesco Financial Royal Bank July 1997 Created a 50/50 joint-venture with a major
Services of Scotland bank Targeted Tesco Clubcard holders
initially

Travel services Travelcare December Focused on low-cost packages and travel

2002 deals Online travel sold through
tesco.com Joint-venture with the UK’s
largest independent travel agent.

Mobile Phones O2 May 2003 Created a 50/50 joint-venture with major

UK mobile phone network. Operated as a
stand-alone business. Initially pre-pay
only; contracts later launched
Table 2. Some of Tesco’s added (new to the organization) services.
Questions:
1. Referring to Table 1, and after segmenting its market, Tesco decided to target all resulting
segments. Some segments were targeted with completely different sub-brands in addition to
different marketing strategies and mixes (i.e. Finer foods, Healthy, Price sensitive). Other
segments were targeted with the same/ original brand and the same marketing strategies
and mixes (i.e. traditional, mainstream, convenience). What types of targeting has Tesco
applied? What would be the advantages and drawbacks of such types?

Tesco applied super segment; its advantage and disadvantage can be summarized as below:
Advantage: reaching more segments of consumers which we lead to increase the sales.
Disadvantage: Diversifying the firm’s risk and high cost.

2. Table 1 exhibits an example of a super segment. Explain it what is meant by super segment
and how it was manifested in Tesco’s case.

Super segment is a set of segments sharing same similarities and have the same marketing
strategy and marketing mix.
Belong to table 1; Tesco applied super segment when it founds that there is similarities between
(traditional, mainstream, convenience) so Tesco targeted this segments with the same/ original
brand and the same marketing strategies and mixes.
3. “Tesco’s case represents a great example of how Porter’s generic strategies can be applied
by the same organization in different segments”. Explain this statement through
underlining porter’s strategies and how they were applied by Tesco.

Tesco applied all porter’s generic strategies in their business as follows:

- Overall cost leadership: Tesco introduced “Tesco Value” to achieve the lowest
production and distribution costs and win the market share (36% of Tesco’s customers).
“Tesco value” focusing on the price and not the quality as its strategy going beyond
produce Cheap and basic products and Limited to low-value added items.

- Focus: Tesco focused on two narrow market segments “Tesco finest & Tesco fair trade”
in which they are focusing on the quality with high prices covering Finer foods (9% of
Tesco’s customers) & Healthy (7% of Tesco’s customers) respectively.

- Differentiation: Tesco differentiate their original brand form other brands and
concentrate on achieving superior performance to the original brand.

4. In relation to Table 2, what type of strategic growth opportunities did Tesco decide on?
Further, what types of strategic alliances did Tesco undergo to facilitate such strategic
growth? Explain your answers.

Tesco strategic growth opportunity is diversification as they established new strategic business
units which offers different products/services from the original one.
Their alliances are as follows:
Product/Service alliance: Tesco financial services created 50/50 joint venture with Royal bank of
Scotland as Tesco will provide the customer details via the clubcards and the RBS will
target them with the financial services.
Price collaboration: travel services with travel care; visitors of tesco.com will have the benefits
of low prices on the tickets.
Promotional alliance: mobile phones with O2, Tesco will sell the package of the
network service with their mobile products.