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MTS groupO1 was established in 1930. In 1950, three different product lines were created after successfully distribute its products during the 1st 10 years: water heating and storage appliances, gas storage cylinders and domestic electrical appliances. Nowadays, MTS is one of the world leaders in the manufacture of water heaters, boilers, burners, components and baths.

Since the 1970s, the MTS has expanded globally, opening new branches, production plants and acquiring established factories across the globe, specialize in and concentrate on sanitary and heating products.

'ARISTON' brand was launched in 1960, destined to became one of the greatest trade and consumer brands in its sector, and took an international notoriety (in Greek language: ARISTON = the best).

MTS (China) Co., Ltd was born in 1992. The production range (BUO2) covers small and large electric-water heaters, storage gas-water heaters and instantaneous gas-water heaters, fitness and sanitary ware products, combi-boilers and air conditioners.

Business Mission & Goal

Every organization exists for certain targets, as addressed in Peter Drucker's classic questionsO3: What's our business? Who is the customer? What is of value to the customer? What will / should our business be?

In the earlier 90's, MTS Group set-up its new strategic mission: entering China market, build -up its global largest production & export base and take the China market leadership.

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This mission will take place in 4 levels: corporate, division, business unit and products (Figure 2.1).

Statistic reports showed, China market was engaged in a torrential change in the earlier 90's, national GDP keeps on raising quickly, Engel's coefficient decreases to below 50%, peoples tend to spend more money on high-standard and durable consumptions.

When at its first stage of entering China market, external environment changes not only brought MTS great opportunities to grab the increasing $12 million market, but also give a signal of fierce market competition, Heier, Litter Swan, Macro, A.O.Smith, YORP, both domestic & imported brands seek to obtain market-share. Furthermore, preferential treatments from China governments, economical and political, were offered to those national brands, which make them stand in a strong competition position.

After scanning external opportunities and threats, MTS China listed its own strength:

1. Mature technology which had already been developed for forty years. Chinese customers are shifting their energy consumption behaviour GWH to EWH, the safety issues are essentially considered, MTS group is proud of its previous good quality control experience

2. Advanced products which are quite successful in Europe. The leading production developing skill enables MTS to launch new products every year

3. World-wide famous brand, good reputation in China market. One twin-brother company of Melorni group, a refrigerator producer, had already made the brand 'ARISTON' well known to China market years before

4. Wide products range, able to satisfy different customers' requirement

Meanwhile, the company also realised its major weakness was: the complexities of energy source in China calls for big investment on R&D, so as to enhance products' adaptations, while those long-existing domestic local competitors were much more familiar with that.

Based on SWOT analysis, MTS formulated its goal: Aims to provide warm and comfortable life, 'ARISOTN means making life better', the company will commit to high standard & distinctive technology, simple but gracious product style, high quality products and high level services. MTS China will become its largest production base and the largest profitable market in Far East and Asia.

Mission statement focus on a limited number of goals, stress the major policies and values the company wants to honour, and define the major competitive scopes within which the company will operate O4.

Marketing Strategy Developing

Market is a battle area. Mission statement is the declaration of what to fight for, and marketing strategy is a plan for how to fight in each of the battles included in this mission. Segmentation, targeting and positioning are the next steps to carry out the 'war'.

Positioning is the act of designing the company's offering and image to occupy a distinctive place in the mind of the target market. The end result of positioning is the successful creation of a customer-focused value proposition, a cogent reason why the target market should buy the product.O5

Market researches were carried out in some selected cities (more than 1 million populations and those with fairly prosperous income level), results show the following customer behaviour:

1. EWH with capacity larger than 100 litres are generally welcomed in international market, water-heaters are used both for supplying hot water and house heating. On the contrary, a normal Chinese family consists of 3 persons (83% out of total been interviewed), hot-water for shower and washing is the mainly purpose)

2. Purchasing activities usually take place in big department stores and electronic appliance shop, exclusive shop is still in earlier browning stage

3. The increasing of income level leads to a increasing on house selling market. Over 75% of buyer are willing to spend around $150 for a new EWH to be installed

4. Most of the Chinese people trust in 'international brand', 'imported from abroad' With the famous 'ARISTON' brand name, the company has a powerful market presence in the field through national representation and after sales service.

Also considering of its great successful business in Europe, MTS positioned itself as 'World-wide water heater professional'. Along with its famous ARISTON mark, a warm, fragrant small house with funnel, MTS marketers decided to deliver customers such information: best quality, best design, safest and durable.

Then, MTS targeted its financial objectives:

* Earn an annual ROI of 1% after taxes over the next ten years

* Produce net profits of $300,000 in the 1st financial year with a target profit margin of 10 percent on sales revenue

* Achieve 1st year total sales revenue of $3 million, based on an average price of $100 per unit

MTS's marketing objectives are to:

* Achieve a 1st year unit sales amount of over 300,0000, with galvanized EWH in product line

* Increase market share to 40% by the end of the 4th years, launch new enamelled products

Solving the positioning problem enables the company to solve the marketing-mix problemO5. The same as multi-branches of service coordinating with each other in a war, to translate marketing strategy into action program, marketing mix are the core subjects in MTS's marketing plan:

1. Product, the basic tool: MTS has a wide range of water heaters, from 10 litres to 200 litres, enamelled inner-tank & galvanized inner-tank, horizontal & vertical, EWH & GWH. The company decided to focus on 50 litres to 100 litre enamelled EWH, emphasis multi-functional, safety and durable.

2. Price, a critical tool: MTS decides price structures on different level of wholesales, including rebate, discount, allowance, and credit terms. As a term of commercial discount, MTS also provide certain advertising economical support to big distributors. Meanwhile, a similar price structure also been designed with after-sales service sub-contractors

3. Place: MTS make his products widely accessible to customers, they are displayed in shopping centres, department stores, supermarket, specialist shops

4. Promotion: MTS hires, trains and motivates salesperson, while all the contracted distributors using their own promoters. Each year, the company spend around $5 million (which is over 10% of sales revenue) on advertising, sales promotion and public relations.

Marketing Strategy Implementation

As most of the companies, MTS has a multi-channel sales network. A brief market map can be given as following (Figure 3.1):

MTS continuously find and develop his distributors, agents and commercial users in different regions and cities, those prospects are provided with:

* Economical advantages, including commercial discount, rebate, and adequate margins

* Product training. Every 3 month, MTS offers technical training to them

* Promotional support. Most of them can apply for advertising support from MTS, the company also send its own promoters to reinforce their sales team

To customers, the channels are the companyO6. 'The use of intermediaries largely boils down to their superior efficiency in making goods widely available and accessible to target markets. The most important functions performed by intermediaries are information, promotion, negotiation, ordering, financing, risk taking, physical possession, payment, and title O7'. When selecting a contractor, MTS considers its previous business experience, reputation in local area, financial strength, growth and profit record, cooperativeness and other lines carried. Continuously, the company evaluates his channel members. Standards as sales-quota attainment, average inventory levels, customer delivery time and service quality. For instance, the company summarize the top 10 distributors every month, those who represent always good achievement will be considered a reward. In terms of motivation, the rewards can be carried out as annual bonus, advertising support, distributors overseas travelling, etc.

Meanwhile, MTS China does not neglect the growing direct marketing. In 1996, the 1st 3 exclusive shop were established in Shanghai, Nanjing & Wuxi; by the end of 2000, a wed-site had also been set-up.

Within the 1st 3 years, MTS China gained a big success in this market. His won the 1st market place, brand name awareness reached 80%, and production volume almost doubled. But, his competitors were also growing, Heier took the 2nd market place, which is only 3% lower; Marco took the leadership in GWH market. MTS China thus put great efforts on advertising, sales promotion and sales force management.

Considering his leading position, the company defined advertising objective as Persuasive advertising O8. $5 million's investment was spent through out each year on different media, in different area. TV, newspaper, out-door, soft advertising, ... all aim to create liking, preference, conviction, and purchase of a product or service; The company started to provide free service to those customers who had used EWH over 10 years; In order to maintain a long-term customer relationship, the company also invited hundreds of customers to attend its annual banquet.

MTS has more than 10 branches and rep office all around China. Basically, they are structured with a regional sales manager and assistant, a regional CS manager and assistant, and their staffs. The manager has to prepare monthly work plan at the beginning of each month, and submit accomplished statements like: sales report, expense report, project processing report and others.

The most important controlling tool for the company is annual budget. There are 2 major concerned topics in the company's budget, which are sales budget and expense budget:

* The sales budget give a yearly target in terms of piece and unit price, divided by month, region and products

* The expense budget are divided into variable commercial cost, which includes logistic cost, installation & warranty, promoter commission; and fixed commercial cost, which includes daily running costs and advertising budget.

In the 1st working day of each month, the company starts to review performance result of last month, analyses the gap between actual and budget, then take the appropriate action.

Conclusion: critical analysis

Having been operated in China market for nearly 10 years, MTS China is still not a 'perfect winner':

* The company is successful in developed area of China market, east, south and north. The developing of west China has a great increasing potential market, where the company sales force has not been activated yet

* Wide product lines bring complicated decision making process, rough information can not support precise product positioning. For example, it takes too long time to make classified annual sales budget, and the gap between actual and budget is predicted but 'uncontrollable'. This increase the risk for leading the company to selling orientation, instead of marketing orientation

* Sales team is increasing, sales expense is increasing, but still call for integrated activities. Marketing department only keen on advertising activities. Besides annual budget, there is even not a formal marketing plan. The company is operating as what 'it was doing'

Regarding the above issues, the company has many selections to be taken:

* Develop new product for the new market. The purchasing force in west China is not as strong as east China, but the government is accelerate the developing speed, meanwhile, west China has plentiful natural resources. MTS China can develop lower-price, high quality GWH and solar energy EWH to enter the market

* Segmentation, targeting and positioning are the 1st step of value delivery chain, marketing information must be adapted to the different requirements of each production line. Information feed back from sales branches, rep office should be integrated and formulized to meet managerial requirement

* Marketing strategy plan is an official guide for all the related departments to consider 'Market & Customers'. As Eisenhower once said: In preparing for battle, I have always found that plans are useless but planning is indispensable', Marketing department should take his responsibility.