The marketing communications mix of Bank of China in UK

1. Academic literature review

1.1 Introduction This part covers broad reviews in relation to the corporate strategy, corporate planning, marketing strategy, and marketing communications mix and business performance. These topics are directly related to the business management in this case study. The purpose of the academic literature review, according to Saunders et al (2007), is to establish a theoretical framework for a research topic. In addition, researches can define key topic, terminology and definition. Because this case study is focusing on bank of China, it is necessary to understand the business knowledge background from strategy to planning, to marketing and to business performance. The author of this research report have read through relevant academic books, publications, journals and so on, and summarize all the readings by presenting the key findings in this chapter.

1.1 Corporate strategy and planning There is no agreed definition of strategy in theory, but it is a holistic approach to answering these questions: where are we now? Where do we want to go? How do we get there? It is a process of thinking, deciding and implementing change or solving problems. Strategists should acknowledge the

disagreements and encourage thinking about the value of each of the different schools of thought about strategy (De Wit & Meyer (2004); Whittington (2000)).

Strategy is a course of action for achieving an organization purpose. (De Wit and Meyer, 2004, p. 105). Thompson et al (2007) definition for strategy is managements action plan for running the business and conducting

operations. They relate strategy to a managerial commitment to pursue a particular set of actions in growing the business, attracting and pleasing customers [...] and improving the companys financial and market

performance.

Corporate strategy is defined as a pattern of minor objectives, purposes or goals and essential policies, plans for achieving objectives, and a statement which defines what business we are in or wish to be in, or what kind of company we are or wish to be.(Andrews (1971) (cited by Lynch, 2003:8).

Farmer (1975a) defined planning as for the majority intuitive sporadic and unsystematic and a basic part of management. In looking at the specifics of Corporate Planning and strategy Farmer (1975b) refers to Druckers definition of corporate planning. Corporate long range planning is a continuous process of making entrepreneurial decisions systematically and with the best possible knowledge of futurity, organizing systematically the effort needed to carry out these decisions and measuring the results against expectations through organized systematic feedback.

From the research and study of strategy and corporate planning, it is rather clear that strategy and corporate planning have different definitions. The understanding helps the author of this research report to collect data and conduct effective analysis in the case of the Bank of China.

Strategy emphasizes on thinking and answering big questions regarding future, and it mainly focuses on the future objectives of an organization that the organization would like to reach. Strategy does not emphasize on step-by-step planning and detail data/information comparison and analysis. On the contrary, corporate planning emphasizes on systematically planning and

decision-making. It also emphasizes on the details of how to systematically

organize various resources to reach targets. Moreover, corporate planning needs to use detail data/information to draw up the workable plans for the functional departments within the organization to follow. It should utilize more detail information than strategy should in the whole process.

Besides the difference between strategy and corporate planning, they have some overlapped areas with regard to the characteristics of planning and process. Both corporate planning and strategy are related to specific process when an organization wants to implement them in its business. Strategy has its process to carry out the strategic plans, and the same applies to corporate planning. And they are correlated within an organization. Without strategy, corporate planning has no guidance. Without corporate planning, strategy cannot become realities in the future. They both exist for the same purposes of an organization.

2.2 Core competencies and capabilities According to Thompson et al (15thedn.), competence is defined as an activity that a company has learned to perform well. These authors consider core competencies as proficiently performed internal activity that is central to a companys strategy and competitiveness. In addition, competence is a firms fitness to perform in a particular field. The firms fitness to perform is determined by its knowledge, which includes insight, intelligence and experience, attitude which includes mindset, culture and paradigm, and capability which includes potential and quality (Durand, 1996).

Competences i.e. knowledge, capabilities, attitude are the roots of competitiveness and therefore the sources of superior performance (Prahalad & Hamel, 1990; Rumelt, 1996). And tests of core competence cover the following activities. Firstly, it provides potential access to a wide variety of markets. Secondly, it makes a significant contribution to the perceived

customer benefits. Thirdly, it is difficult for competitors to imitate. Finally, it is source of dynamic synergy.

Capability refers to the potential to carry out value adding activities; and the quality of combining and coordinating skills i.e. abilities in order to gain competitive advantage (De Wit & Meyer, 2004, p.243). In addition, Day (cited by De Wit & Meyer, 2004) argues that capabilities are complex bundles of skills and collective learning, exercised through organizational process, that ensure superior coordination of functional activities.

2.3Marketing strategy Kotler and Keller (2006) state that marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stake holders (p. 6) The online business dictionary defines marketing strategy as a written plan (usually a part of the overall corporate plan) which combines product development, promotion, distribution, and pricing approach, identifies the firm's marketing goals, and explains how they will be achieved within a stated timeframe. Marketing strategy determines the choice of target market segment, positioning, marketing mix, and allocation of resources.

(http://www.businessdictionary.com/definition/marketing-strategy.html) From the above, it is obvious that marketing and marketing strategy focus on the process and the value to customers. Each business organization should have its own marketing strategy that allows it to effectively utilize its resources to create value for customers, to increase sales and to achieve competitive advantages. (Fill, 1999) It is critical for business organizations to have a

marketing strategy with a goal of fulfilling the customer satisfaction, which in turn, reflects the purpose of a marketing strategy. According to Fifield (2007), a marketing strategy covers broad meanings, including new product development, product pricing, promotion, distribution and other key elements ensuring that a company can utilize to achieve its marketing goals. The role of marketing strategy is so critical that all businesses have continuously developed effective marketing strategy to enhance their competitive advantages in the market. The case study in this research also demonstrates the important role of the marketing strategy of Bank of China in developing its business in the UK market. One of the important role of marketing strategy is that a company should have an effective marketing strategy in order to properly choose its target market segments, market positioning, marketing communications mix and resource allocation. (Kotler, 2000) Most importantly, if a company can effectively integrate all components of its overall corporate strategy and marketing strategy so that it can successfully sustain its competitive position in the market, this is a company that has a winning strategy system. As Kotler (2000) argues that a firms marketing strategy should be in line with its corporate strategy and mission statement. Based on a marketing strategy, a companys marketing plan can be developed. A marketing plan should serve the goal of the marketing strategy. Different from a marketing strategy, a marketing plan consists of detailed and specific actions that are required in order to effectively implement a marketing strategy. (Hollensen, 2003) From this, it is very clear that a marketing strategy is the basis of a marketing plan. 2.4 Marketing communications mix

In the field of marketing, there are numerous books, publications and journal that have discussed and explained about the meaning and the role of marketing communications mix, which is critical for all business organizations in terms of how to effectively communicate with customers.

McCarthy (1960) has developed the traditional marketing that is based on the 4Ps. The business world at the time is different from what we are living in now. The traditional marketing is more product-oriented. (Fill, 1999) Because of this, the communications mix with the traditional way of marketing does not really focus on understanding or interacting with customers. In addition, the traditional way does not have precisely defined target markets, and its key focus is on the products. (Lindgreen et al. 2004, pp. 679-680) In the old days, there was no marketing communications mix; instead it was called promotion mix. (Fill, 1999, p.599)

In our modern business world, the way has changed and there are more meanings in the marketing communications. Although the name promotion mix is still existed, the most common name marketing professionals use now is marketing communications mix or integrated marketing communications. (Crosier, 200 pp. 719-720)

Fill (1999) argued that the marketing communications mix should include advertising, sales promotion, direct marketing, public relations and personal selling. (p, 221) Business firms use these five tools to exchange information with the target market segments and customers through vary kinds of ways. According to Fill (1999), the marketing communications mix is a way to re-assure customers by promoting a companys products and/or services.

It is true that marketing communications mix is a system with a structure covering various communications tools. Other than Fills theory (1999), Kotler

(2000) also states the importance of marketing communications mix in the integrated marketing strategy. Kotler defines it as consists of a specific blend of advertising, personal selling, sales promotion and public relations tools that the company uses to pursue its advertising and marketing objectives.

Although Smith and Taylor (2004) further presented their study of marketing communications mix by adding more elements, such as sponsorship, the author of this research report feels that Fills (1999) and Kotler (2000) have more concise understanding and systematic structures on the communications mix. Thus, the author will use the five major types of promotions defined by Fill (1999) and Kotler (2000) in this research report. And these five promotions are:

Advertising: any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor.(Kotler, 2000, p.540)

Personal selling: Personal presentation by the firms sales force to make sales and build customer relationships.(ibid)

Sales promotion: Short-term incentives to encourage the purchase or sale of a product or service. (ibid)

Public relations: building good relations with the companys publics by obtaining favourable publicity, building up a good corporate image, and handling or heading off unfavourable rumours, stories, and events. (ibid)

Direct marketing: direct communications with carefully targeted individual consumers to obtain an immediate response the use of mail, telephone, fax, emails, and other non-personal tools to communicate directly with specific consumers or to solicit a direct response. (ibid)

Each type of promotion has its own tools, according to Kotler (2000). Advertising includes print, broadcast, outdoor, and other forms. Personal selling includes sales presentations, trade shows, and incentive programs.

Sales promotion includes point-of-purchase displays, premiums, discounts, coupons, specialty advertising, and demonstrations. Direct marketing includes catalogues, telemarketing, fax transmissions, and the Internet. Furthermore, communication goes beyond the above specific promotion tools. The products design, its price, the shape and colour of its package, and the stores that sell it all communicate something to buyers. (p.540) Therefore, it is easier to understand that in order to achieve the greatest communication effect, the promotion should coordinate with other 3Ps, i.e. product, price and place.

2.5 The promotional plan

In real business world, all companies have their uniqueness. This is also true when it applies to the marketing communications mix. They have their own marketing communication strategies and promotional objectives based upon their companies resources and marketing structures. Thus, there is no such model that can fit all different companies. The most effective way to develop a promotional plan is to conduct in-depth analysis of the internal and external environment of a company. And then it is possible to come up with a plan that fits into the companys marketing communications strategy. (Gurau, 2008, p. 172)

Fill (1999, p. 618) actually proposed a model that can be used to conduct analysis of a company and then to develop effective promotional plan. There are seven steps in Fills model.

Firstly, it is to identify the target audience. By doing so, the company can define it and further understand the audience needs and its characteristics. In addition, the company can understand how the audience thinks about the company, the products and services, and how they react to all of these. Based

upon the identification results, the company can then design and select appropriate channels to send out its marketing messages. (Fill 1999, p. 618-622)

Secondly, it is to define the objectives of marketing communications. By doing so, the company should be able to evaluate the possible outcomes of the marketing communications strategy with regard to the awareness of products or services and to the desire for brand recognition or potential buying. (Fill 1999, p. 618-622)

Thirdly, it is to define the communications messages. From the objectives of marketing communications, the company can then develop marketing communications messages for the targeted audience so that the strategy can be ensured. The defined communications messages should pay attention to the content and the format, i.e. what needs to be said and how to say properly. The communications messages should send out the feeling of benefits that the targeted audience can receive and is interested in. (Fill 1999, p. 618-622)

Fourthly, it is to choose effective communications channels. By doing so, the company can make sure the consistency of communications messages and channels. According to Fill, the channels can be categorized into two, one is the personal channels and the other is non-personal channels. Obviously, the personal channels can allow company staff to interact with targeted staff. And the non-personal channels include various media that helps communications messages to reach targeted audience. For instance, TV, newspaper and radio are all non-personal channels. (Fill 1999, p. 618-622)

Fifthly, it is to prepare the budget. It is an important step because no any company has unlimited resources. By properly budgeting on the promotional

plan, a company can effectively allocate its resources so that the pre-set goals and objectives can be achieved effectively. (Fill 1999, p. 618-622)

Sixthly, it is to design the promotional mix. This step is based on the completion of previous steps. When deciding on how many elements of the mix should be chosen, the company should combine all previous information, such as audience expectations, available budget and the communications messages, and then develop an appropriate mix. Based on these, the company can allocate its resources to select the specific mix, which includes sales promotion, personal selling, advertising, public relations and so on. (Fill 1999, p. 618-622)

Finally, it is to measure the results. This is also very critical for a company to ensure that the promotional plan has effectively implemented and desired results have been generated. One of the ways to measure the results is to continuously monitor the sales performance and analyze it accordingly. (Fill 1999, p. 618-622)

From this model developed by Fill (1999), a company can follow the seven steps and effectively develop its own unique promotional plan. Each step in this model is critical and necessary so that all elements are critically analyzed and evaluated to maximize the outcomes of the promotional plan.

2.6 Business performance and the marketing communication mix

It is sure that many professionals and managers are aware of the importance of the marketing communications mix in the business operations. But the question of how important it is may puzzle these professionals and managers in the real business world. Managers many know how to develop a promotional plan and how to implement it, but they often forget about the

measurement of the effectiveness of the marketing communications mix. (Snoj et al, 2001) As a matter of fact, the effectiveness and efficiency of the marketing communications mix and the measurement of its effect should be as important as the communications mix per se.

Over the years, there have been some articles discussing the relationship between the business performance and the marketing communications mix. Some drew a conclusion that there was no specific relationship of any kind between the two elements, while some found that there was some correlations between the business performance and specific communications activities, such as advertising, sales promotions and personal selling.

For example, Kapil and Shoemaker (2004) proposed that the marketing communications activities led to positive sales effects. From the perspectives of customer satisfaction, there are also many researchers who have analyzed the relationship between the marketing communications mix and the customer satisfaction. Lewis (2004) is one of them. In addition, some other researchers have analyzed the relationship between a specific marketing activity and the marketing communications mix, such as Xueming and Naveen (2001)

In the field of sales promotion, there have been some researchers with regard to the promotional pricing strategies. For example, Varian (1997) has conducted an analysis of information products, such as software, and he found that there was a relationship between the changing versions of the information products and the product prices and perceived quality level.

In addition, Fishman and Rob (2002) conducted another analysis in the field of durable goods, such as cars and refrigerators, and these authors found that there was relationship between the sales results and the changing models, which implies that certain communications activities have driven customers to

purchase the products. And there are other researches with similar situations have also proven this relationship, such as servers, computer mainframes and so on.

When it comes to the advertising, there are also many theories and articles discussing the effects of advertising on the business performance, such as sales increase. In fact, the major aim of advertising is to stimulate the

demand and to encourage new purchase for the customers, which in turn can lead to the increase in total consumption. (Friedman 1976)

Among all reviewed articles and papers, the author of this report has found that the analysis conducted by Snoj et al (2007) has more meanings and more accurate in terms of the relationship between the marketing communications and business performance. These authors have used different statistical tools and techniques to evaluate almost every element of business performance and the marketing communications mix. Thus the results are resourceful. The followings are some key findings and results from their work.

These

authors

found

out

that

between

the

number

of

marketing

communications activities and overall business performance, there was no direct correlation. But when they broke down the overall business performance to many different elements, such as net sales, return on investment, market shares, customer satisfaction and customer loyalty, they found there were some correlations shown. One is that net sales have a correlation with the number of marketing communications activities. The other one is that customer loyalty has a correlation with the number of the marketing communications activities. From these findings, it can be said that in general, a company cannot increase its overall business performance by simply increasing the number of its marketing communications activities. However, a company can increase the net sales by increasing the number of the marketing

communications activities. This helps us to understand why many companies have implemented various marketing communication activities to promote their products and services, which in general, can lead to the increase in net sales. (Snoj et al, 2007)

Unlike the positive correlation between the net sales and the number of marketing communication activities, the correlation between the customer loyalty and the number of the marketing communication activities is negative. This result implies that the more loyal customers a company have, the less marketing communication activities it uses in its business operations, and the opposite is also true. Therefore, it is concluded that it may not be effective for many companies to use more marketing communication activities to increase the customer loyalty.

In addition, these authors also studied the relationship between the frequency of implementing certain marketing communication activities and the overall business performance. And they found out that there is very strong negative correlation between the frequency of implementing promotional

pricing-reductions and the overall business performance. On the contrary, there is a strong positive correlation between the frequency of advertising on newspapers and the overall business performance.

Moreover, the authors also study the relationship between the frequency of implementing certain marketing communication activities and certain specific business performance indicator. And they found out that again, the frequency of advertising on newspaper has positive correlations with several specific business performance indicators. This implies that if a company use advertising on newspapers frequently, the net sales will increase more than if the company does not use.

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