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Nylon was introduced in the textile industry back in 1930 and Polyester introduced in the market in 1970 which is still flourishing in the present market for its special attributes, but polyester is a plastic which is non-bio degradable and during the production process harmful chemicals are used and if not treated properly it affects the environment. PLA (Poly Lactic Acid) is a Bio-Based product (PLA) which is environment-friendly, biodegradable and compostable. PLA in the present market is being looked up as an alternative in the textile industry and making slow progress.
So the idea is to introduce Bio-Based textile products (e.g.: - shirts, pants, shorts, t-shirts) in the market and have an increase in sales. To achieve this we will be looking into the strategies involved in the marketing and sales of the bio-based product. (Basu, 2012)
When a new product is introduced in the market it is very difficult to enter the market and we aim to replace a well-established product with another.
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The concepts of marketing and sales are important as they can mean the difference between success and failure. Marketing techniques and strategies help us to identify the customers, identify the right product mix and the price of the product.
Due to the current world scenario, the use of polyester and nylon in the textile industry is in jeopardy. Nylon and Polyester are synthetic fabrics which during the production process emits out chemical resins which is harmful to the environment and both being plastic it is non-bio degradable.
Polylactic Acid (PLA) is being looked up as an alternative in the market because it is a bio-based product, is biodegradable and .compostable under controlled conditions. PLA is similar to polyethene and polystyrene which is a special type of aliphatic polyester. PLA is produced from corn starch and sugarcane undergoing the fermentation process, then the lactic acid produced from the fermentation process undergoes polymerization process to form PLA. During the PLA production process, many by-products are formed which are used widely in the environment. PLA then is melted and spun into fabrics when heated further gives dimensional stability. The processed PLA can be compared to PET. PLA has a low degradation rate and low abrasion resistance. (Sabale, 2019)
As the Marketing Manager of a medium-sized company, I'm responsible for an increase in sales of the product and have a good profit margin. To enter a market few marketing tools have been used in this paper, namely Porter's Five Force Analysis, Monopoly Price Calculation, Price Elasticity Calculation and Skimming Strategy. This following method helps us in finding our competitors, substitutes available in the market and helps in pricing of a product. These methods help us overcome some marketing difficulties faced when a new product is launched.
Porters Analysis Method is an effective tool used to enter the market, it examines the other factors that affect the market environment. Using this method, it would help us know our competitors, threats and behavioural pattern of suppliers and buyers. (Porter, 1979)
When business commences, this process helps identify who our rivals/competitors are in the market and comparison between products and services are analysed. Rivalry in the market helps attract customers due to low pricing and marketing campaigns. (Porter, 1979)
The power of the supplier affects the market because of price fluctuation which cannot be controlled due to external factors. The more supplier to choose, the easier it is to switch to another supplier with a lower price. When there are few suppliers present in the market, the supplier has the upper hand to control the price. (Porter, 1979)
When a strong group of buyers increase pressure on business, it impacts an organizations decision by providing quality products and services at a lower price. Any product launched in the market, the success rate of the product is determined by the buyers. (Porter, 1979)
The number of entrants in the market increases annually. It takes time to find a fixed customer and supplier base because of less knowledge about the market. Investment is quite high during the early stages. Market environment plays an important role for all products to enter and sustain in the market. (Porter, 1979)
The Market is a huge environment and there is always a possibility there is a direct substitute in the market. A substitute product available at a cheaper price can always hamper your profit. (Porter, 1979)
When a product is launched in the market, the pricing factors determine how successful the product is going to be in the market. The better pricing of the product, the better is the market share of the product in the market environment.
In a monopoly market, the aim is to increase profit since there is very less competition in the market. Since PLA doesn't have any substitutes in the market for manufacturing sportswear products, the pricing equation used results in high profits by increasing the selling price and increasing market growth. (Hall, 2019)
To derive Static Optimal Price, We use Static Cost Function:
C(x)=FC+VC(x)
Where:
The Price Demand Function:
P = a – (M × X)
Where a = Highest possible Price in Market
M = Slope of Straight Line
X = Quantity of Production
Turnover Function:
T(x) = P × X
Profits are calculated from the income received after costs are calculated from the profit:
R(x) = T(x) – C(x)
The profit equation is derived by (x), the first order of equation is 0 and is resolved by (x). Optimal Quantity is derived by this method a. This equation is substituted in the Price Demand function to derive the Optimal Static Price. (Fredrich, 2019)
Skimming method is a product pricing strategy often used when a new product is launched at the highest initial price in the market with a certain customer willing to pay and the price is lowered over some time. This strategy is considered to be proven successful because there is no proven competition or substitutes for the product in the market. High-profit margin is obtained over a short duration of time. Skimming strategy is used to recover the cost of development and does not attract competitors due to high pricing. (Fredrich, 2019)
This method is used to determine how supply and demand act according to change of price in the market. Some products prices do not vary much regarding the change in supply or demand, these products are termed inelastic. When the price of a product varies a lot and has an effect on supply or demand are termed as elastic. (Kenton, 2018)
According to Porter's Five Force Analysis Method we have analysed each of the methods and taken all threats and risks into consideration. Below is each analysis in little detail. On the scale, the total average calculated in this method is 4.8. This average suits us to introduce the PLA based sportswear products in the market, but it may not be that accurate due to market changes.
PLA being new to the textile industry, there isn’t much competition in the market. The technology used to manufacture sportswear using PLA as the raw material needs heavy investment. Being one of the players in the market helps and competitive rivalry is 1.
PLA being the main raw material, the suppliers for bio-based products are very few in the market. The process of producing PLA and other bio-based products is complicated because it's organically produced and takes time. The prices of the increase and suppliers of the raw material have the upper hand, due to the above factors the bargaining power of supplier is 7.
Since manufacturing sportswear using PLA is comparatively new in the market, the buyers would be confused about the new product. So a little time is needed to educate the buyers and let them know the raw material used (PLA) is not harmful to the environment and human health. As the product is established in the market the buyers would have the upper hand and bargaining power of the buyer is 4.
PLA made Sportswear being new to the market and the fashion world, the products might be accepted at the beginning because there isn’t a fixed customer base. Heavy investments are made on technology and to find a supplier source. Being new to market also helps because we are the first to launch PLA made sportswear product and face no competition and threat of new entry is 5.
Bio-Based products used in the industry help in controlling environmental surroundings because it's even compostable. The threat is because of bio-based fabrics slightly more expensive then polyester fabric, the consumers might shift back to the other and threat of substitute is 7.
A medium-sized company in Heidelberg of annual company sales of 100 million euros per year. The selling price of sportswear products (shirts, pants, t-shirts) is sold at € 16 per product.
To find No. products sold a previous year,
No. of units sold = Annual Sales/ Selling Price
No. of Units Sold = = 6,250,000.
Due to change of raw materials used to manufacture sportswear products to bio-based products mainly being PLA, the costs of the product increase but being in a monopoly market and eco-friendly product there might be an increase in profits. Let’s assume 10 million sportswear products are sold annually at € 32. After a survey was conducted people were willing to pay € 36 for the product because of its advantages.
Example 1
Considering the function
P = a – m × X
36 = a – m × 0
a = 36
Now, 32 = 36 – m × 10,000,000
m = 4 ×
Hence, Price Demand function is
P(x) = 36 – (4 ×) × X
Maximum Turnover Price, P (T)
FOC (T(x)) = d (P × X)
T = P × X
T = (36 – (4 ×X)) × X
T = 36X – (4 ×
FOC (T(x)) = 36 – (8 ×
X = 4.5 ×
P (T) = 36 – (4 ×) 4.5 ×
= 18 per product
Considering Maximum Profit Price
FOC (R) = 0
R = T(x) – C (x)
Where, 4,000,000
C(x) = FC+VC(x)
T(x) = P(x) × X
0 = d (T(x)) – d(C(x))
0 = (36 – 4 × x – (12x + 4,000,000)
0 = 24 – 8 × –
= 3 x
P (T) = 36 – (4 × × 3 ×)
P (T) = 24€ per product
Skimming helps in increasing the profits dynamically. Producing PLA based manufactured sportswear products in the market would benefit the company because there be control over product pricing for some time period. From example 1, we can understand the static optimal price is 18€ per product. Price higher than this is profitable. According to survey, a certain customer group is willing to pay 36€ per product. So the product is launched at that price and price would gradually decrease. This is continued till we reach the maximum profit of 24€ per product. The business of the company is good until it has reached this point which is higher than static optimal price. If the business need expansion, the price can be set at static optimal price to achieve a turnaround of 4.5 million Euros.
After a small survey conducted,
P1 = 16 Euro P2 = 32 Euro
X1 = 6.25 million X2 = 10 million
After substituting the values we get a Price elasticity of In this case, the price elasticity of the product is above 0.
In this paper, we have used four different marketing strategies to introduce sportswear products made from bi based materials. According to Porter's five force analysis method, the risk of entering the market is low with a score of 4.8. Since we are entering a Monopoly market there is no competition from close rivals. The skimming strategy helps attain maximum profit in a short duration of time if used effectively. The price is calculated with a static optimal price of 18€ per product and 36€ per product is the price a certain customer group is willing to pay (WTP). Using the skimming strategy the price slowly decreases in the market and continued until the maximum profit of 24€ per product is achieved. The above methods would help make sportswear products successful in the market. If the medium-size company needs an expansion the price of the products can be set at a static optimal price to have a total turnaround of 4.5 million Euros.
In this paper, you would have read about the challenges faced by a medium-sized company entering a relatively new market. Introducing a new product is always a difficult task, but using the right marketing tools will guide you in the right direction. The product introduced in the market is sportswear made from bioplastics, which is a new idea but may benefit from the ongoing concerns regarding the environment we live in. These bio-based products are compostable, biodegradable and offer the same characteristics as polyester made sportswear. Some of the marketing tools used to launch our new products is summarized by Porter’s Five Force Analysis Method, Monopoly Pricing Strategy followed up Skimming Strategy and Price Elasticity of the product in the market.
Sales-Inducing Marketing Planning for Bioplastics-Based Sportswear Products. (2024, Feb 22). Retrieved from https://studymoose.com/document/sales-inducing-marketing-planning-for-bioplastics-based-sportswear-products
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