PotCo Slow Cooker: Go-to-Market Strategy Case Study

Introduction

PotCo has developed a brand new product: a slow cooker that uses a heat exchanger rather than a conventional heating element. This creates a novel version of an existing product that differs significantly from those already on the market. The running costs are considerably lower, which can provide a meaningful competitive advantage; however, the cooking time is extended because the heating method can take up to two hours to heat two litres of food. The product, envisaged at a retail price of A$150, appears to have considerable potential. Prior to launch, however, the company should consider a number of issues.

These include pre-launch considerations covering production and distribution, determination of the product's positioning and target market, and development of the marketing strategy. This report examines each of these issues in turn.

Pre-Launch Considerations

Before launching a product to market, it is essential to review the upstream supply chain in order to ensure sufficient, coordinated production capacity at an appropriate quality level (Nahmias & Olsen, 2015). During the early stages — especially for a new product — a company has the potential to gain the competitive advantage of a first mover (Mintzberg, Quinn, & Goshal, 2003). However, in order to gain and leverage a first-mover advantage, the product must be available to the target market and fulfil its marketing promises (Mintzberg et al., 2003). The first consideration therefore concerns the issues associated with production of the complete unit.

PotCo is utilising an outsourcing strategy, with components manufactured in China, providing lower production costs compared to Australia (Wang, Singh, Samson, & D, 2011). Outsourcing production in this manner creates a number of potential problems that should be recognised and managed. For example, in a study of 35 Australian firms outsourcing components to Chinese manufacturers, the main problems related to component quality and delays in supply (Wang et al., 2011). These problems can be rectified or minimised through strategies such as building long-term relationships with suppliers. Where long-term relationships exist between buyers and suppliers, suppliers are more likely to be committed to that relationship and seek to satisfy not only contract terms but customer expectations (Hill & Hill, 2012). It is therefore unsurprising that Wang et al. (2011) found that implementing proper control procedures and improving communications with upstream suppliers would often alleviate these problems.

It is recommended that PotCo undertake strategic development of its relationships with suppliers. The firm may also wish to consider contractual terms to ensure accountability for potential breaches, provide increased incentives for compliance with product specifications and requirements, and reduce the potential for cultural misunderstandings (Shenkar, Luo, & Chi, 2014).

There are also challenges associated with the logistics of manufacturing, as the cast iron pot is manufactured in Zhejiang and the heat exchanger element in Guangzhou. This fragmented supply chain requires not only very clear and accurate product specifications and strict quality control to ensure components fit together, but also additional coordination effort (Hill & Hill, 2012). These components must be brought together efficiently, prepared for sale, packaged, and then distributed. Control over both the components themselves and the broader supply chain is therefore essential. This may be supported through the use of supply chain technology, which is especially useful for tracking progress in real time and facilitating communication between supply chain members across different time zones (Fawcett, Fawcett, Watson, & Magman, 2012). Such technology may also be used to manage relationships with the downstream retail elements of the supply chain (Ayers & Odegaard, 2007).

Production is only the first logistics consideration; products must also be distributed. The first issue is the movement of goods from China to Australia, either as component parts to be packaged in Australia or as a finished product. When any Australian entity imports goods into Australia, potential duties are payable (Bowes, 2016). The shipping contract between PotCo and its Chinese suppliers will determine the respective responsibilities for exporting goods from China to Australia (Ramburg, 2011). Among the numerous contract types, the most common is Free On Board (FOB), which makes the seller responsible for delivering goods to the vessel and retains the seller's ownership until the goods are unloaded at the dock (Ramburg, 2011). It is essential that PotCo understands its responsibilities and liabilities under its shipping contract, and makes appropriate arrangements for transportation and insurance from the point at which it gains title to the goods (Ramburg, 2011).

Regardless of the shipping contract or whether goods are imported as components or finished products, they will need to be delivered to the appropriate location. The company may wish to deliver products directly to large retailers in order to avoid storage costs and increase supply chain efficiency. This approach is used by a number of firms — Apple, for example, often ships products directly from its suppliers to downstream retailers (Lashinsky, 2012). However, this may be problematic where the organisation is adopting a fragmented distribution strategy that includes a temporary pop-up shop. Additionally, initial demand may be uncertain, and importing from China can result in distribution delays (Slack, Chambers, & Johnston, 2010), whether due to import and customs procedures (Ramburg, 2011) or supply chain delays noted by Wang et al. (2011).

To ensure reliable supply, it may be advisable to hold a suitable level of stock in Australia ready for distribution. This creates a requirement to identify suitable distribution hubs that provide access to the main Australian markets. The company may manage this itself or utilise major wholesalers, which would reduce its own infrastructure requirements but may also necessitate additional price discounts, since wholesalers will need to earn a profit (Ayers & Odegaard, 2007).

In summary, a number of decisions must be made regarding distribution, including the terms of upstream supplier contracts, the practicalities of insurance and inventory rotation, and the placement of stock to ensure reliable fulfilment to downstream supply chain members.

Conclusion

There are many considerations before a product is launched. By addressing issues such as production management and capacity and control over the supply chain before the product becomes available, the company is well placed to fulfil the demand generated by its marketing efforts. The marketing strategy outlined in this report should help to raise awareness and stimulate demand within the target audience. However, as with any marketing strategy, it should be monitored and refined throughout the implementation phase.