CHAPTER 2: SITUATION ANALYSIS ON THE MARKETING MIX
2.2. The actual situation Marketing Mix of Gatexco 20
2.2.1. Main product and service of Gatexco 20
Before 1992, Gatexco's products are defense products that are all kind of uniform of the officers and soldiers. Entering the market mechanism, especially from 1993 onwards, Gatexco has invested to renew the equipments to improve production capacity and diversification of the product including both defense and civil products to serve domestic consumers as well as abroad markets.
So far, the range of products of Gatexco 20 is quite diverse with many kinds of officer and soldier uniforms, ceremonial uniforms and also supply uniforms for some
customers reagrding railroads, taxation and police agencies. Gatexco 20 also supply many kinds of warm clothes as Jacket, bundle, sportswear, motorcycle racing jacket to abroad markets (mainly in the European market) and school uniforms, knitwear products (knit tops, towels, curtain tulle, socks, etc.), fabric for national defense and the economy.
Gatexco's products have continuously been improved, in term of quantity and quality of the product. Defect rate are gradually reduced. However, we can not say that the quality of company's product is quite good. As the unsynchronized technology, unguaranteed and unstable quality of materials and the skill of the employee so the quality of some products is still lower than the imported goods in many aspects.
Moreover, the size and style of the product are still very poor. The quantity of defense products are still dominated in comparison with civil products. This is a difficulty of Gatexco to dominate the market and it requires Gatexco to continue improvement the type and quality of the products.
a. The types, models and brands of the product:
Regarding garment products: Types of garment products are quite diverse, serving various type of customer groups such as adults, children, men and women, workers and office staff ... Meanwhile the range of the type of garment products are narrow, mostly the product line consist of only one or a few brands such as shirts, trousers, skirts .. . Each customer will have only a few brands to choose with few styles of products. For example, a male client who need to buy a trouser but he will have only two brands to choose. Due to the rapid changes in tastes, technology, and the competitive situation, Gatexco can not rely on only few available model and type of products. The consumers always look for, expect new and perfect products in the market. The competitors also maximum its effort to provide to consumers with new products. Therefore, Gatexco must have their own program to design new products and goods by themselves. So far, Gatexco 20 has not had their own private label of the shirts, making the difficulties and confusion to customers for identify, defining the product’s quality and selection the right products. Gatexco’s logo embroidered on the shirts is still not well and not eye-catching.
b. Packaging of the products:
Regarding the goods, their packaging always plays a very important role. It also contributed to the promotion of consuming of the products.
Because the customer is always to desire for high-quality products such as beauty products but the packaging is also required to be pretty and impressive. On the other hand, the development of the brand image of Gatexco, everything should be professional. Therefore, for each type of product, Company has its own type of packaging.
Currently, Gatexco's apparel products are packaged in hard and transparent plastic box. However inside and outside of the plastic box, it is not decorated with all kinds of patterns with the extra details or colorful. This packaging method enable to customers to observe the products easily but it does not improve the image and quality of the product, no creating good chance for advertising products and the implementation of Marketing intentions that are interested in packing issues.
In generally, the packaging sample that Gatexco is applying are very monotonous, less attractive, less vivid and have not been seriously study to continually improve to suit the requirements of the markets, creating the attention of customers.
c. Requirements for product and service quality
Gatexco 20 is always to pay attention to product quality issues and give the priority to handle it. As we know, in our country today, at first, the product quality should be good enough to satisfy the needs of consumers and make progress to be competitive with goods made by other countries in the region and in the world. This is the challenge to the enterprises: either Gatexco will grow, expanding the market or shrinking market, weak production.
In fact, the competitiveness of an enterprise depends largely on the quality of goods and services of that enterprise. However, as the limitation in term of manpower, equipment, machinery and technology, new management methods and equitization in recent years, so the quality of the product of Gatexco 20 are still not really high and stable.
Regarding the type and fashion of the products for the civilian market, it is very few and less diverse because Gatexco 20 is not active and have not given priorities for the appropriate investment of the fashion design with diverse tastes and changing of the customer. In term of the export markets, Gatexco has mainly receipt the garment processing orders of the importers with their designed style and fashion.
So far, Gatexco 28 has not set up the department in charge of research on modeling, fashion, consumer tastes and trends of the market according to the seasons of the year to year.
The technological equipment for production have been invested strongly in recent years. However, as the spreading investment with no focus items, it should remain inconsistent works.
Especially for the input materials, Gatexco 20 still has to buy from other companies and abroad so it is difficult for them to take the initiative in controlling the quality of the input materials.
On the other hand, the organisation of production has not paid attention for improment technology process, applications the fixtures and tools, without a comprehensive breakthrough regarding the labor productivity, quality of the products and it is the direct cause of reducing the competitiveness of textile products in the domestic market.
After-sales service is an extremely important factor in boosting the reputation of the brand of the business, retaining the traditional customers, making them to become loyal customers and also attract more new interested customers to purchase Gatexco's products. Currently in Gatexco 20, with more than 50% of orders are generated from traditional army customers who have humble requirements of models and quality so after-sales service of Gatexco 20 is still weak, lacking of professional and has many shortcomings. On the other hand, due to the distribution network of Gatexco is still narrow with only few of dealers, stores so their service really has not been focused, interested and have no specific processes in the management of after-sales service applied to dealer and store network. For example, process of change errors, corrupt,
incorrect specifications of the products, it is not clearly defined in any cases, which is the barter and the costs incurred in the process of changing the error product, the scope of the power of handling the error products of the stores, dealers and branch. There are no clear hierarchy for classification customers so that Gatexco can not give the priority to large customers with large orders in handling problem, faulty, damaged, incorrect specifications of the product quickly and conveniently.
2.2.2. Thecosts and prices of products and services (Price) a. The costs of products:
Currently, the production costs of Gatexco 20 are still relatively high due to the management of production costs is not yet effective. The cost of revenue is relatively high, especially for production cost of products. The major causes are:
- The ratio between cost of good sold and net sales is still relative higher than other competitors, leading the EBIT of Gatexco 20 is only around 5.6%. In which, the management of cost of good sold are still limited.
- In 2011, the textile market got many difficulties due to the fierce competition, despite the increasing of processing unit prices higher than previous years but it has not kept pace with the increase in input materials costs, affect the business performance and productivity, income of the workers.
- Due to rising inflation and great fluctuation of the market prices of raw materials, fuel, electricity, water, gas, staple commodities especially at the end of 2010 and 2011, it have caused significant impacts on Gatexco's production costs.
- The downsizing in some indirect working positions of Gatexco is still not implemented thoroughly, the policy of transfer and rotation the staff, hiring and firing the empolyee are still affected and subjected under the guideline and instruction of the superiors.
- Gatexco has not cut off the cost for security defense, cointaiing the 30%
athough Gatexco 20 has become joint-stock company. The psychology of workers still rely on the army’s support. Therefore, it made the labor costs of Gatexco account a higher proportion in comparison with their competitors in the same industry.
- Some main materials account for a large proportion in the price as Gatexco must buy the materials of Company 28, Company P7 as instruction of the Ministry of Defense in term of quantity and price. These preferences price is still higher than market price, making of the completed products is often than the competitors.
- Some other input materials used for export orders are still imported while exchange rate is volatility in recent years.
b. Price policy:
For the goods, the price is a very important factor. Price is very sensitive marketing tools to impact to the demand and customer’s acceptability. The price is also the crucial issue to the final decision of the buyers. Every company has very different way to determine prices of their products . There are some companies, the determination of prices are decided by Gatexco’s leadership. Meanwhile, a number of other companies it is decided by the board of directors of the branch and product manager.
Regarding Gatexco 20, the determining the selling price of the product are decided by the Board of Directors. The price is determined based on the following basis:
- Cost of the production and other related costs: This is the simplest pricing method and it should include an increase in the price of goods by the related costs.
- Expected profit per unit of product is relatively low, around 5-10% of the sale price as the cost of the production is relatively high. This is a pricing method for ensuring a minimum target profit. Gatexco always try to define the price that ensure of achievement of the desired profit. Formation method for calculating the price to get target profit is built on the basis of breakeven graph. In general, Gatexco has applied the most effective methods of pricing to their products and goods. The method that calculate the price based on relevant costs and expected profit is possible for Gatexco to know how much profit Gatexco will get once they produce the goods.
- In addition, Gatexco is based on the price of competitors for pricing. This way of pricing helps the Companies to know the quality of the product and the position of competitors’ product from which to know Gatexco’s quality and position and then finding out a suitable price to get maximum profit for Gatexco.
- To be able to dominate the market, meet the needs of the majority customers with different income levels, Gatexco has not had a flexible pricing policy applied in a range around the standard price. For example, Companies can increase profits over 10% to the best selling goods. In contrast to the slow consumption products, Gatexco can proactively reduce the price, accept the margin less than 5% to boost consumption of the product, avoiding the large amount of inventory. Gatexco has also not developed a flexible price policy with different levels such as applying different prices for a type of product. For example, a lots of the products that have the same design but are made of irregularity fabrics, different color and types of guys ... so just some beautiful color will be good sold. Therefore, these products should be sold at higher prices. The colored product can be undesirable will be applied thediscount and promotion policies.
- In addition, Gatexco has not yet built the price list with different discount rate that are calculated based on the net cost of finished goods and refer the discount rates of the competitors, applied to their distribution system and large customers. Flexible payment policy to client has not been interested.
- Gatexco has not clearly identified strategic goods and not defined the target customer group, market segmentation should be medium or high classes so Gatexco’s price strategy is not clear for defining that it should be high or low or average price for accordance with Gatexco's inherent strengths and meet the needs of the market at present and in the future.