E.T. Phone Home, Inc. Forecasting Business Demand

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Introduction

The cellular radio service is the subject of rapid and relentless change. The cellular radio products are constantly trying to increase their coverage of the web; and to improve their functionality. E.T. Phone Home requires efficient marketing strategy to compete on the market and sustain its strong brand image. Marketing professionals therefore need to work extremely hard to keep up to date with developments in order to ensure that they are up to speed. The case of E.T. Phone Home shows that the company uses resource-based strategy which helps it to develop strategic capability.

Similar to its market philosophy, valuable resources of E.T. Phone Home allow the company to meet high demands of customers and deliver exceptional quality to end consumers. E.T. Phone Home in particular seems to have already undertaken a number of major initiatives such as the indexing of radio services. But the reality is that individual radio service does not cover the whole of the visible space. So the prospect of there being a single cellared service which has complete coverage is some way off.

Current Market Situation

Principles of the Firm

Imperfectly Imitable resources are created by “unique historical conditions, causally ambiguous, social complex”. It is possible to say that these resources have a great impact on the brand name and market position of E.T. Phone Home. E.T. Phone Home was the first mover in the industry. It is possible to assume that a strong brand name helps the company to obtain a large market share. Non-Substitutable resources are not strategically equivalent valuable resource.

Thus, these resources allow E.T. Phone Home to break down organizational barriers that block the sharing of data across functions. Design, sales, and manufacturing departments must work together (Johnson and Scholes 76). The use of appropriate technology in properly planned systems can have dramatic effects on operations. Organizations are becoming flatter and leaner because top management are able to monitor operations more directly and computers are now taking many decisions previously taken by middle management. E.T. Phone Home relies on an efficient market system and product improvement.

Marketing communication plays a crucial role in successful market performance as it influences brand image and product recognition. For E.T. Phone Home, effective marketing communication depends upon effective marketing system and ability to evaluate target market and economic conditions. Technological factors/resources Innovation in production technologies and computerized system of supply chain is the main opportunity for E.T. Phone Home marketing communication. The threat is that investment in new technologies requires additional finance. Intellectual property and licensing protect business operations (Doyle and Stern 44).

From the vendor’s perspective, the high replacement rate of mobile phones reflects the pressing need to build brand loyalty which can only be developed from a continually positive customer experience. Understanding consumer behavior is the basis for marketing strategy formulation (Cespedes 4). Marketers need to acquire consumer insight before they can devise persuasive marketing strategies in promoting consumer acceptance of a new product or service. Consumer insight can be defined as an understanding of consumers’ expressed and unspoken needs and realities that affect how they make life, brand, and product choices (Hollensen 32).

Market Conditions

E.T. Phone Home operates on a static market. The main competitors of the company are Ohio Bell Telephone Company and RCC, Cleveland Mobile Telephone. Ohio Bell Telephone Company has 57, 4 % of market share while Cleveland Mobile Telephone has only 25,8%. The main drivers of market include competitive and strong position on the market. View allows E.T. Phone Home to achieve competitive advantage in relations to rivals in a given industry.

It is important to note that rare resources reflect quality requirements of customers, their needs and expectations. A primary concern of the company like Google is to seek to innovate through service development, and to strive to enhance competitive performance. In this case, it is only by placing the customer at the centre of service that success can be achieved. Competitive advantage is achieved by E.T. Phone Home when the demand sets the quality standard and gives firms a better picture of buyer needs at an earlier time than is available to their rivals. This advantage is enhanced when buyers pressure the firms to innovate quickly and frequently.

In general, E.T. Phone Home has competitive advantages being one of the biggest companies within the industry. In organizations, noticeably in service industries, the personnel function can also be closely associated with a task function. Human resources have a great impact on profitability and position of E.T. Phone Home on the market (Doyle and Stern 65).

Product Demand

In order to evaluate the quantity of product demand, E.T. Phone Home follows forecasting model. The model calculates the historical and forecasting employment rates, it calculates percentage demands, and it takes into account total number of business customers, number of units per customer, total potential units and the level of adoption. The sales forecast is concerned with evaluating market and sales potentials.

It is the basis for matching marketing resources with future opportunity to achieve company objectives. It affects almost every other phase of business operation and is used in establishing marketing controls, budgets, policies, and directions. Sales forecasts determine the limits of management programs and decisions. Sales forecasting is a means of providing information about the size, nature, and trend of various market segments, and hence, the anticipated profitability of markets. In reaching opportunity estimates, management has two types of information available: information about the past and information about the future.

Information about the past is provided by various feedback mechanisms, such as marketing research, accounting, various corporate records, surveys, published statistical data, and experiments. This information is referred to as factual and is available from either the company itself or such secondary sources as governmental bureaus, universities, and trade associations. Also, the market penetration depends upon such factors as estimated market demands, market share for ETPH and estimated number of units (Cespedes 3). The counterpart of past information is future information.

Future information is available through the sales forecasting process, just as past information is available through the feedback process. Sales forecasts are, of course, based on past data, and result from the application of predictive techniques to past information (Walker 62).

Pricing and Cost Structure

In order to determine the price level and cost structure, the company uses past data and demand analysis. It is estimated that “construction costs and first year operation expenses would amount to at least $10 million” (Cespedes 9). Future data are anything but factual, and are really based on assumptions. Forecasts reflect expectations; as a result, varying degrees of error are bound to occur. Sales forecasts may be short run (usually designated by a period of up to a year), intermediate (one to five years), or long run (more than five years).

Usually, the longer run the forecasts, the greater the error. Regardless of the sophisticated techniques used for forecasting purposes, and the records available, future conditions will always deviate to some degree from those predicted by forecasters, and management must expect this (Cespedes 8). For the purposes of evaluating market opportunity, future information, even though nonfactual, is extremely important. It guides the destiny of a company (Walker 28).

Today’s marketing plans and decisions are based on executive expectations of what will occur during some future period of time. To quantify expectations, probability techniques are often used. When sales forecasts furnish marketing managers with information about probable expected market conditions, management can use this knowledge as a basis for planning both company goals and the strategies and resources to achieve them. The potential volume and profit targets resulting from sales forecasts, and the budgets established from them, guide the company toward the cultivation of market opportunity. The cultivation of opportunities in turn affects sales forecasts (Doyle and Stern 87).

To make it forecast sales management must be concerned with three environments: the noncontrollable, the partially controllable, and the controllable. The noncontrollable environment includes such factors as demographic trends; domestic and international economic trends; and sociological, psychological, and cultural forces that management cannot influence significantly. The partially controllable environment refers to factors such as technology and competition that management can influence to some extent (Cespedes 6).

The controllable environment relates to internal factors, including finances, image, production, facilities, personnel, and others that management can determine over time. The second phase of the forecasting process is concerned with evaluating and projecting the data. Various analytical tools are used to determine the patterns and relationships, the result being the prediction and definition of sales opportunity. Following this, the sales forecast must then be applied operationally (Doyle and Stern 62).

Globalization and Possible Risks

Globalization creates for E.T. Phone Home bow opportunities and risks. The benefits are low price and exceptional services, high quality and customer support. Improved technologies like mobile phones and Internet banking makes it possible to take market segmentation to another level, by providing an economical means by which E.T. Phone Home can deliver individualized products and services to each and every customer based on feedback and interaction with the customers. Relationship marketing strategies embrace this idea of treating each customer in an individualized way (Cespedes 5).

Behavior segmentation is focused on whether or not people buy and use a product, as well as how often and how much they use or consume. Specification in E.T. Phone Home is determined as a result of an organization’s policy, which in turn resulted from decisions on its market policy, which in turn resulted from its consideration of the market or customer needs, requirements, and the activities of competitors (Doyle and Stern 45).

If customers cannot afford premium services, where the prices are too high for them, they can choose quality services at low price. Target market is divided into two broad categories: foreign and domestic customers. Psychographics segmentation includes values and attitudes of potential passengers. The main attitudes are truly high standards of services and excellent support services at comparatively low price (Fill 41).

The risks are associated with increased competition and products available for global consumers. This results in the establishment of specific targets that are translated into operating programs such as sales programs, advertising programs, and inventory programs. The reverse procedure is sometimes adopted, whereby management derives a market target and then specifies a sales forecast — hopefully, it is realistic.

Both long- and short-range forecasting are part of opportunity assessment. The major difference is the time dimension, the degree of specificity of factors, and the tendency to give more immediate problems greater attention. Long-range forecasting is particularly relevant for growth considerations and general concern with adjustment and survival. It is geared more to future opportunity (for which companies can adjust and prepare), whereas short-range forecasting tends to be more concerned with the immediate operational elements (Doyle and Stern 61).

Industry Fundamentals and Historical Data

Historical data and key drivers of the industry allow to say that E.T. Phone Home uses market segmentation in such spheres as advertising, applications and search engine services. A major strength of E.T. Phone Home market is that it can generate specialization. At the same time, industry fundamentals involve costs, risks, and possible weaknesses in some cases, especially where accessibility is not easy.

In international marketing a common way of defining and describing markets is in terms of export countries. E.T. Phone Home market segmentation is based on behavior and psychographics characteristics. E.T. Phone Home focuses on whether or not people buy and use its services, as well as how often, and how much they consume. Also, marketing communication is based on psychographics characteristics which group people in terms of their attitudes, values, and lifestyles (Doyle and Stern 87).

E.T. Phone Home uses the following variables to segment the market. Each of the factors plays a role in determining the nature and development of marketing communication. But the relative importance of each depends upon the product/service category E.T. Phone Home is dealing with. For instance, in advertising and desktop applications, the market is divided between individual and business customers, small and large companies, national and international companies.

There is no great impact of age and gender differences. Still, the core of users consists of young professionals and students. E.T. Phone Home proposes a great number of services for diverse customer targets. Virtual companies like E.T. Phone Home, are becoming more and more interlinked on a world-wide basis. Advertising and search engine industry that deals in large transactions for companies are becoming increasingly globalized (Fill 87).

E.T. Phone Home follows differentiated strategy oriented on diverse customer groups with different offerings. Product and price differentiation allows E.T. Phone Home to attract diverse customers proposing unique services and products. Clearly there are advantages in following this approach based on the business efficiency. Those products which lend themselves to a standardized approach are those for which there is a sufficiently large global market segment and cultural differences do not impose the need for adaptation.

To an extent, then, the greater potential for raised profitability resulting from more efficiency in business functions is undermined by the additional costs required to market the brand on a broad scale. In E.T. Phone Home, the price of the product conveys much more to the consumer than simply the amount of money required to make the transaction. Price plays a powerful role in product positioning as it indicates to customers the ‘value’ of the product, that is, both the actual and perceived value.

Forecasting Management Tools

E.T. Phone Home demand analysis refers to the volume of sales that would occur under various conditions for a product during a period of time. It has several dimensions, such as the demand for a product, the demand for a brand, or the demand of a specific market segment. Market demand, which refers to the demand for a group of products that represent an industry, is distinguishable from company demand and the demand of a control unit.

Company demand refers to the demand for a company’s products and relates to market opportunity. Although it is affected by the industry demand level, it is also affected by the use of marketing tools and techniques by a firm to gain a market share. Let us note that corporate effort may also shape the industry demand. E.T. Phone Home uses control-unit demand which can be defined as demand at the level of the particular unit utilized for control purposes. The unit may be a product line, specific product, brand, group of consumers or wholesale, or retail outlet. Here, demand refers to purchasing actions of a significant unit.

Several economic concepts are useful in appraising opportunity (Doyle and Stern 82). Elasticity of demand is usually used to describe price-sales relationships -the change in sales proportionate to a change in price. Elasticity, however, is a broader concept and applies to a relationship between any demand determinant and sales. For example, the promotional elasticity of demand would refer to the percentage change in sales related to percentage change in expenditure on promotions — such as advertising or personal selling. Elasticity is useful in analyzing components of the marketing mix (McDonald and Christopher 82).

The assessment of market opportunity may be viewed essentially as a balancing operation in the firm. It balances marketing and company resources to bring them into line with potential profit. For performing this balancing activity, economic analysis has provided us with the useful tool of marginal analysis. The marginal approach relates production schedules, investment planning, new plant and equipment, and personnel needs to market opportunity. The marginal-cost principle is a guiding criterion. Marginal costs refer to changes in total costs resulting from producing an additional unit in either the physical or marketing sense.

These are but a few of the concepts relevant to the assessment of opportunities. Regardless of the techniques used, marketing management must recognize the pivotal position of this function in shaping and guiding the direction of the total company. Assessment of marketing opportunity, the first of the systemic functions of marketing (those functions necessary to manage the mobile phone marketing system), is also the most critical. It deals with both the identification and the means of attaining marketing and corporate goals. It furnishes a perspective for current and future operations (Doyle and Stern 73).

Opportunity assessment requires a good intelligence system, a sense of corporate mission, and management sensitivity to changing environments. Sales forecasting is related to both market opportunity and innovation. It is a key component or driver in designing coordinated marketing systems. The elements of a total sales-forecasting program include assembling information, evaluating and projecting data, operationally applying the forecast, and, finally, performing an audit. Marketing opportunity is related to both stages in the product-development cycle and the nature of competitive environments (McDonald and Christopher 77).

Financial Analysis

Ratio analysis allows to perform time-series analyses that portray the association between prices and sales over time; this method is widely used in estimating elasticities. Regression and correlation analysis are its major tools, and the analysis ignores factors other than price that affect demand. The magnitude of buyer response to price change in E.T. Phone Home is represented by the price elasticity of demand.

It is a ratio, the percentage change in demand related to the percentage change in price. Percentage analysis statement pertains to a point in time. Examples are interviewing buyers, using panels, simulating price situations, and conducting pricing experiments. Often, companies conduct experiments by increasing or decreasing prices in test cities and analyze the impact on sales, market share, and profits.

Operating and financial analysis shows that E.T. Phone Home has enough financial resources and operating resources to increase sales and introduce new strategic approach. Trend cyclical analysis allows to say that costs and revenues can be estimated accurately, that price is the significant marketing variable, and that immediate profits are to be maximized on each product. Given such theoretical conditions, an optimal price may be established (see appendix).

Conclusion

Resources based approach and behavior and benefit segmentation help E.T. Phone Home to obtain a strong market position. Behavior segmentation principles are used for new services and products which attract diverse target audiences. It consumers can be categorized according to brand loyalty. These activities reflect the ability to get along with other people, and are important attributes at all levels of interaction. The degree of technical competence required varies according to the type of information provided. Dozens of radio service operators worldwide have launched 3G services, but uptake among consumers has been poor.

It was partly due to limited and expensive handsets, poor network coverage and image problem as indicated by market analysts. The biggest challenge that mobile phone operators are now facing is how to introduce mobile phones to new market as successful as its predecessors. From the marketing perspective, one critical step is to target the right consumers with services tailored to meet real consumer needs with speed and efficiency in order to outperform their competitors.

Despite the inherent problems with the technology that are yet to be improved, there has still been a set of early adopters or trendsetters envisaging taking up radio services. A clear understanding of the needs and expectations of such consumer group is a prerequisite to attract the mass-market. The case study suggests that E.T. Phone Home needs effective marketing and advertising campaign in order to resist increased global and national competition and meet customers’ demands.

Works Cited

Doyle, P., Stern, Ph. Marketing Management and Strategy. Financial Times/ Prentice Hall; 4 edition, 2006.

Cespedes, F. V. E. I. Phone Home Inc.: Forecasting Business Demand. Harvard Business School. September 1983.

Fill, C. Marketing Communication: Contexts, Contents, and Strategies 2 edn. Upper Saddle River, NJ: Prentice Hall, 1999.

Hollensen, S. International Marketing: A Decision-Oriented Approach. Financial Times/ Prentice Hall; 4 edition, 2007.

Johnson, G., Scholes, K. Exploring Corporate Strategy. Hemel Hempstead: Prentice Hall, 1998.

McDonald M., Christopher M. Marketing: A complete Guide. Palgrave Macmillan. 2003.

Walker, O. C., H. W. Boyd J. Mullins and J-C. Larreche, Marketing Strategy: a Decision-Focused Approach, 4^th ed., McGraw-Hill, Boston, 2005.

Appendix

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