Essay: Positioning and product portfolio decision

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1. Introduction:

1.1 Content

The study describes the effects an engineering solution provider faces, when in one of its business segments, it loses substantial market share by the introduction of an innovation. It describes how a company pioneered in a certain segment becomes a follower due to a certain disruptive innovation brought in by competitors over a period of time resulting in substantial loss in market share. The make or break situation called for some analysis on the market behavior and a possible way forward, is to bring in its own innovation while keeping its existing product in the portfolio for varied offering. It describes the concept of pioneer vs. follower, the different types of market entry strategies, marketing strategies for late to market products, brand positioning, planning and implementing brand marketing program, designing and implementing brand strategies, introducing new products, brand extension, agility required by late entrants in tapping the loopholes etc. with a real life example of an Indian engineering company and its journey curve from being market leader in the segment of hot water generator to loosing substantial market share to a certain innovation and how well it could introduce and position its own innovation product into the market without abolishing its existing successful product with careful consideration of its product portfolio.

1.2 Aim

To investigate the positioning strategies according to various market requirement and its product portfolio decision in various business ecosystems, of once a market leader to regain its market share and profit by the introduction of new technology known as the heat pump.

1.3 Objectives

a. To evaluate how a company makes positioning and product portfolio decisions.
b. Pioneer versus late arrivals and how a company can grow in a market in spite of not being the first mover.
c. To evaluate the make or buy decision of a product and also to evaluate strategies based on cost and differentiation leadership.
d. Justify the positioning and product portfolio decision by cost analysis.
e. To gain a broader helicopter view of the market and the product positioning from experts of the industry.

1.4 Structure

The study is divided into eight chapters including introduction and conclusion. The introduction outlines the basic content of the study, its aim and objectives and summarizes the structure of the study.

Chapter two defines the industry of hot water generators. The subchapters’ divide chapter two into market potential, basic industry of hot water generator, application details and the major suppliers of the product in the concerned market.

Chapter three introduces the company Thermax Limited (Thermax) and describes its make or buy strategy in details. In this chapter the author gives a detailed concept of outsourcing and how, when and why it should be done.

In chapter four, the author analyzes the market in the subchapters based on business literature on targeting, segmentation for industrial products, positioning strategies based on Porter’s model, marketing mix and its implementation in B2B market and how it affects innovation and lastly the SWOT Analysis of the concerned product.

Chapter five describes the industry analysis of heat pumps, the nature of participants, perceptual mapping of Thermax’s product in comparison to its major competitors, buyer behavior and buying process in the industry, the power of suppliers, threat of new entrants and threat of substitutes. The author also gives a brief account of the key success factors of the product, the current industry trends and the long term prospect of the product.

The chapter on testing of hypothesis analyzes the two hypothesis based on concrete calculation of operational and capital expenditure of the heat pumps and the hot water generating boilers of Thermax. It justifies the hypothesis based on concrete data and calculations and gives a clear understanding on the positioning and product portfolio decision and strategy the company should embark upon.

Chapter seven describes the qualitative method of data collection based on five semi structured interviews from market experts and analysis of the data based on the study.

Chapter eight presents the conclusion of the main findings, provides recommendation on action to introduce the product and also throws light on the field for further research and study and outlines the limitations.

Chapter nine and ten comprises of the list of references and the appendices.

2. Hot water generators
The study shall steer along the lines of investigating the various hot water generators, their use, the industry and market potential and structure.
2.1 Approximate market potential
Eastern India and Nepal promises to be an extensive and prominent market for heat pumps as it hosts a varied number of hotels, army camps and hospitals throughout its topography. As per field data, Eastern India has an annual market potential of INR 25 Million (Approx. 350,000 Euros) (Samik Roy, personal communication, January 12th 2017, Refer Appendix A) and Nepal as a country has a market potential of 150 numbers of heat pumps with an approximate value of INR 24 Million (Approx. 345,000 Euros) (Sanjay Tulshyan, personal communication, January 27th 2017, Refer Appendix A).

2.2 Introduction to hot water generators
Water heating is a process which is associated with thermodynamic heating and finds varied application in domestic and industrial uses. Thermodynamics can be described as a process where thermal energy is converted to and from other forms of energy. The basic concept is the use of some external energy source to heat water which in turn is used for various domestic and industrial applications (Lucas, 2015). From day to day activity and experience it can be said that typical domestic applications are cooking, cleaning, bathing, space heating etc. whereas industrial application includes various steam applications like food processing, painting, dairy, drug and pharmaceutical etc. (Full System Engineering Company, n.d).
The coil type conventional boiler hot water generators use gas and liquid fuel whereas the heat pump runs on electricity. In this article we shall discuss both the coil type as well as the electricity driven heat pumps with product example from Thermax (Thermax Limited, n.d).

2.2.1 Conventional coil type hot water generators

Figure 1 Conventional hot water generator (Aetom Engineering Technologies Private Limited, n.d)
It’s a compact hot water heater closed loop system which can provide water at a maximum outlet temperature of 90 degree Celsius. It comes with a multitude of benefits: single button start, high efficiency (92%), low electrical load, easy to operate and maintain. It also comes with an option of an external unit called Calorifier which can be mounted without any foundation and to save space can also be erected in the basement (Thermax Limited, n.d)

2.2.2 Heat pump
Heat pump is a new electric hot water generator system which works on the principle of refrigeration cycle. Working Principle: AquaNexa’ works on refrigeration cycle, absorbing heat from ambient air to generate hot water.

Figure 2 (Thermax Scope of Supply, product profile manual, Refer Appendix E)
‘Heat from the ambient air is absorbed & transferred to refrigerant in an evaporator. Refrigerant changes phase from liquid to vapor. The evaporated refrigerant passes through compressor, where its pressure is increased. High pressure & high temperature refrigerant passes through condenser, where latent heat is transferred to incoming cold water. Condensed refrigerant is then passed through expansion valve. High pressure refrigerant expands into low pressure. Now, low pressure & low temperature are again circulated through evaporator section to repeat the whole cycle’ (Thermax Scope of Supply, product profile manual, Refer Appendix E). It can also be explained as an equipment which works on the principle of compression as found in refrigerators and can extract heat from heat sources like air, water, sewage and ground to another location. Recently it has caught the attention of governments and also is endorsed as a practical energy saving option for the country’s hotels like is identified by Singapore government (Chan, Yueng, Chan, & Li, Hotel heat pump hot water systems: impact assessment and analytic hierarchy process, 2013).

2.3 Application details of heat pumps
Heat pumps are exclusively used throughout all forms of industries both in the commercial as well as in the domestic sector. ‘Based on thermodynamic refrigeration cycles, heat pumps use a process fluid and electricity to extract thermal energy from a low-temperature source and provide heat to a higher temperature sink (and refrigeration of the heat source). Heat sources (in heating applications) or sinks (in cooling applications) include outdoor/indoor air, river/lake/sea water, ground heat and waste heat. Common applications for heat pumps are air-conditioning, refrigeration and space heating in both residential and commercial buildings. Other applications include hot water supply in commercial buildings, cold storage warehouses and process heat and steam for industrial applications’ (The International Renewable Energy Agency(IRENA), 2013).
Few basic examples of heat pump applications include space heating, sanitary water heating, de-humidification and heat recovery. To authenticate the testimony of successful use of heat pumps, a few published real life examples are stated below:

2.3.1 Case: Real life domestic application example
Heat pumps are considered to have lower running cost when used in certain off gas grid areas compared to direct electric or oil when considered for normal housing projects. Here in this context, a real life example of Mr. and Mrs. Cornwall published on the website of Heat pump association could be stated. As per the case, the family had already experienced the benefits of solar and electric heating and would like to replicate a similar process of modern renewable heating in their new bungalow. Daikin Altherma specialist, provided them with the solution of heat pumps with a CoP averaging over 4.0 throughout the whole year. The benefits that came along with the installation of heat pump was, the family experienced 50% less energy running cost and substantial savings in the long run for a period of 20 years (Heat Pump Association, n.d). To quote Mr. Cornwall, ‘We anticipate energy savings of well over 50% compared to the equivalent electric or oil fired system. Daikin Altherma has low maintenance requirements and is as operationally safe as any heating and hot water system could be’ (Heat Pump Association, n.d).

2.3.2 Case: Real life commercial example
Here we can state an example of a 5 star hotel named Chewton Glen Country house hotel which was to be built near the New forest national park and was scheduled to be opened just before the London Olympics in 2012. The plan comprised of mainly tree house suits at the edge of the forest and demanded a sustainable renewable solution for electricity and hot water. The makers of the hotel turned to a supplier of heat pump. A 16kW high temperature split heat pump along with 260 Liters of hot water cylinders were installed. The installation was capable to a regular supply of hot water throughout the day at a temperature of 75 degree Celsius(C) and an under floor heating of 45 Degree C (Heat pump Association, n.d).

Case: Real life special application example: One stop environmental control
With more than 300,000 visitors flocking a popular pool at Hertfordshire leisure complex, the authority was facing huge energy bills and maintenance cost with 8 air changes per hour to maintain the pool side conditions. After much deliberation they turned into heat pumps (Heat Pump Association, n.d). ‘An energy-efficient HRD heat pump system will remove moisture from the atmosphere, collect its latent energy and re-use it to assist water and air heating, creating a self-perpetuating heat cycle that ensures energy costs are kept to a minimum’ (Heat Pump Association, n.d). It also helped facilitating major savings in CO2 emissions and cuts down drastically on the running cost (Heat Pump Association, n.d).

2.4 Suppliers of the product
There are many large, medium and small sized suppliers of the product both overseas as well as pan India. The most dominant ones other than Thermax in the region are as follows:
Name of the company Brief description
Lombardyne Industries Pvt. Ltd. Established in 1989, the Pune based company expertise in producing heat pumps and industrial chillers. They produce and sell their product mostly pan India, Sri Lanka, Nepal and Dubai (Lombardyne Industries Pvt. Ltd., n.d).

Bluestar India Limited ‘Blue Star is India’s leading air conditioning and commercial refrigeration company, with an annual revenue of over INR 3500 Cr. (over US$ 510 million), a network of 35 offices, 5 modern manufacturing facilities, 2300 employees, 2200 dealers and 600 retailers’ (Blue Star Limited, n.d).

Suntec Energy Systems An ISO 9001 company, Suntec energy systems is the flagship company of Sambhav group. They are the exclusive distributors of Riello (Italian) burners in India (Suntec Energy Systems, n.d).

Venus Home Appliances Pvt. Ltd. Manufacturers of Venus Water Heaters for more than 50 years is a market leader and pioneer in the Water heater industry. Venus is one of the leading brands of water heaters in India and stands for Quality, Reliability and Performance (Venus Home Appliances Pvt. Ltd., n.d)

A O Smith ‘A. O. Smith Water Products Company is headquartered in Ashland City, Tennessee, home of the world’s largest water heater factory. The A. O. Smith network includes five manufacturing facilities in North America, plus plants in Nanjing, China and Veldhoven, The Netherlands. For millions of consumers, business owners, property managers and engineers worldwide, A. O. Smith has delivered innovative hot water solutions for over 70 years’ (A O Smith, n.d).

Racold Thermo Pvt. Ltd. ‘Racold Thermo Pvt. Ltd. (erstwhile Racold Thermo Ltd.), an ISO 9001:2008 company, is a fully owned subsidiary of Ariston Thermo Group ‘ Italy, one of the leading players worldwide, in manufacturing and marketing of water and space heating products and their components. The Indian operations include India’s largest and fully integrated water heater plant in Chakan near Pune, Maharashtra that has been operational since 1999. Ever since its inception, Racold Thermo Pvt. Ltd. (erstwhile Racold Thermo Ltd.) went on to change standards in the Indian water heater industry by bringing in new technology, enhancing the aesthetics, quality, durability and performance of the product’ (Racold Thermo Pvt. Ltd., n.d)

Cristopia Energy Systems Pvt. Ltd. ‘Cristopia Energy Systems (I) Pvt. Ltd. is an ISO 9001:2008 certified, specialist Engineering Group which manufactures large and small scale cooling, heating and energy management solutions, such as Air Cooled & Water Cooled Screw Chillers, Scroll Chillers, and Thermal Energy Storage (TES) systems, in India. In addition to supplying its wide product range to the local marketplace, the Company also exports to a number of countries’ (Cristopia Energy systems pvt. ltd., n.d).

Celcius ‘Celsius, born in 2001, specializes in Tailor-made Solutions in HVAC&R Industry. (Heating, Ventilation, Air-Conditioning & Refrigeration) Celsius Solutions & Products help attain specific Temperature & Humidity conditions’ (Celcius, n.d).

Table 1. List of major suppliers of the product (Refer Appendix F )

3 Introduction to Thermax Limited
Thermax Limited is a leading Indian energy and environment engineering company which pioneers in providing various engineering solutions. Its product portfolio has a varied range of products like boilers, steam equipment, hot water generators, chillers, water and waste water solutions, air pollution control equipment, chemicals and auxiliary engineering solutions (Thermax Limited, n.d).
Thermax group is an INR 5516 Cr. (Approx. $ 1 Billion) company headquartered in Pune, India and operate globally through 19 international offices, 12 sales and service offices and 11 manufacturing facilities (Thermax Limited, n.d).

3.1 Introduction of the company current positioning and its product mix
Thermax has a strong infrastructure in heating system and steam engineering. In so far as the range of boilers and heating equipment are concerned, Thermax manufacturing facilities produce boilers ranging from 50kg to 1000 tons per hour steam boilers. Boilers range from large supersaturated industrial boilers, waste heat recovery and process boilers, fossil-fuel fired heaters, solar thermal heaters and packaged steam boilers (Thermax Limited, n.d).
Hot water generators: Thermax manufactures varied capacity of hot water generators, in the range of 50,000 kcal to 90, 00,000 kcal per hour. These hot water generators are designed to operate on various types of fuel such as heavy and light oil, gas, duel fuel, coal, husk and other agro waste fuel. Thermax manufactures three types of hot water generators by the product names Aquamatic (AMW), Aquatherm (ATHM) and Thermocontainers (Thermax Limited, n.d). Thermocontainers are specific application product which are designed to provide low cost heating for low temperature application (Thermax Limited, n.d).
The discussion will be on heat pumps and hot water generators with special emphasis on the product portfolio of Thermax in terms of hot water generator systems. AMW and ATHM are relatively old technology boiler hot water generators which experienced a substantial market share in this segment (Arnab Rahut, personal communication, 3rd February 2017, Refer Appendix A). Over the period of time various small and mid-scale suppliers entered the market with an innovation technology called the heat pump. AMW and ATHM works on the technology of liquid and gaseous fuel firing which are touted hazardous to the environment (The International Renewable Energy Agency(IRENA), 2013) and the whole positioning of the product depends on the availability and the viability of a specific kind of fuel around the specific industry belt (Thermax Limited, n.d). Heat pump on the other hand is not dependent on the type of fuel nor is it dependent on the availability of fuel in a certain area. The heat pump comes in a completely packaged, ready to use condition and is just a plug and play operation for the users. Some of its product features are high COP- low running cost, high efficiency heat exchanger, corrosion free operation and longer life, low noise, pollution free operation and uses environment friendly refrigerant (Thermax Limited, n.d).

3.2 Sourcing plan of the product
When a company is late to enter a market, without core competency on the specific product or service, behaving like a follower of the market, while planning, is most likely to plan an outsourcing strategy of the product. Maximize its benefits in the market, learn from it and then stretch its limits over a period of time (Quinn & Hilmer, 1994).
In the present competitive world where the market is extremely demanding and price sensitive, being a follower can be a bit challenging. So managers, to leverage its company’s skills and resources beyond its limitation combine the following approaches:
i. Concentrate the firm’s own resources in a set of core competencies in order to achieve maximum benefits (Quinn & Hilmer, 1994), like leveraging Thermax’s well spanned out dealer network, state of the art manufacturing facilities and research and development.
ii. Strategically outsource a few activities (including the ones, traditionally inherent to the company) which has neither a critical strategic need nor special abilities (Quinn & Hilmer, 1994). Like how Thermax can make use of its global sourcing partners to gain expertise in the product and overshadow their lack of core competency in the product (Manoj Purohit, personal communication, 7th February, 2017, Refer Appendix A).
Managers leverage their company’s resources in four ways. Firstly, maximize resources by concentrating efforts into what the company does best. Secondly, having core competencies, shields against the threats the company may experience in the future by competitors. Thirdly, full utilization of external supplier’s infrastructure, knowledge and investment to its own advantage. Lastly, in a rapidly changing market place, a joint strategy decreases risk, shortens cycle time and lowers investments. In this context we can consider the following 2 examples. Nike, being a market leader in the industry outsources 100 percent of its shoes features and only manufactures certain special parts which requires specific Nike expertise. Nike trains its foreign based suppliers with specific training programs and even outsource its advertising component of marketing to a company called Wieden and Kennedy. Another example can be of Apple where it outsource around 70% of its components due to its lack of core competency in making chips, printers, keyboards etc. (Quinn & Hilmer, 1994).
We shall discuss about the various strategies to consider towards outsourcing:
Core competency strategy: In the 60’s and 70’s after many conglomerates failed, investors and financers started shifting their focus on more specific concentrated companies. This meant companies to follow a certain pattern which could be identified as ‘sticking to your knitting’. However research suggests that still at that time Japanese companies like Mitsubishi, Yamaha and Sony had diverse portfolio as did American companies like 3M or Hewlett Packard. Companies like Honda and Sony used comparable strategies leveraging a few core skills against multiple markets through extensive outsourcing. However these are just a few examples of companies who have been successful with an expanded portfolio. On the contrary Foster had to wind up its diversification into finance, forest products and pastoral businesses and had to concentrate more on its core beer business after dealing with a blow for non-expertise in the field. Rest of its distribution, transportation, maintenance and computing where contracted where they had no core competencies (Quinn & Hilmer, 1994).
Preeminence: Key strategic barrier: Companies must surround its core competencies with defensive strategies both upstream and downstream. Managers should continuously concentrate on developing its core competencies in order to block its competitors. Honda for example does all its core motor parts in its facilities and outsource the other essentials and keeps competition at bay. Intellectual leadership tends to attract the best minds into business and as a result make the core product expertise of the company even stronger, whereas peripherals can always be outsourced for cost benefits (Quinn & Hilmer, 1994).
Strategic outsourcing: Supplier markets are not always completely reliable and poses a threat between supplier and buyer in terms of price, quality, time etc. Moreover outsourcing entails major transaction cost in terms of contract, treaty etc. Marks and spencer’s can be considered as a critical example where they rely mostly on suppliers and exercise a lot of control on its vendors (Quinn & Hilmer, 1994). As in the case of Thermax, they can benefit from outsourcing the product through its global outsourcing partners with strong governance (Manoj Purohit, personal communication, 7th February 2017, Refer Appendix A).
Competitive edge: Whether a company should go for insourcing or outsourcing completely depends on its core competencies. The part which the company expertise in, should be manufactured in house and the rest could be outsourced, based on the situation. Outsourcing should only be considered if it regularly fetches better price, better competency and delivered in a more timely fashion. Insourcing should not be considered just based on demand that a product is required to be manufactured internally. In the process a company may lose out on its competitive edge as competitors may have better expertise in the product and later one realizes that it would have always been better to outsource the product. A New York bank while introspecting why its Federal express costs were soaring found out that its internal mail department was taking two extra days than normal mail (Quinn & Hilmer, 1994). So, this implies to Thermax in a way that, in spite of having state of the art manufacturing facility and expertise to manufacture capital equipment, they can introspect whether they have the core competency for the particular product. Else, outsourcing can be considered as the best option (Manoj Purohit, personal communication, 7th February 2017, Refer Appendix A).
Transaction cost: In all calculations, analysts must consider the internal cost as well as the outsourcing costs. If a company is to produce something it must continuously invest into its R&D in order to maintain the competitive edge over others. Plus a regular coordination between all its offices and the head office also attracts a lot of transaction cost. In all probability, organizations often fail to foresee the promise the product brings and its future market potential. Whereas in many cases, it is seen that outsourcing reduces executive time, decreases peripheral costs and let the top management invest time, money and energy into the core business. Marketers often fail to analyze and identify the transaction cost involved in insourcing and thus biasing happens. (Quinn & Hilmer, 1994)
Vulnerability: In case where the market is steady and there are many market standards, a potential buyer is more likely to be not so efficient compared to its existing suppliers. Again on the contrary if the potential individual suppliers are weak and less in numbers plus if they fail to innovate in every step then it is always advisable for potential large buyers to produce in house and grow expertise in the product. Another case of vulnerability could be where a large scale monopoly supplier exercises its goodwill and core competency in charging high prices. This in one way may still be less expensive than to do the product in house. Sometimes the whole structure of information could militate for or against the process of outsourcing. For example, in old days computing was strictly an in-house thing as there were many data that companies didn’t want external suppliers to get access to. But in today’s world companies outsource computing quite easily (Quinn & Hilmer, 1994).
Degree of control: Where there is high vulnerability and a high potential for competitive edge, there is requirement of tight control (Quinn & Hilmer, 1994).
Flexibility vs. control: There is always a constant tradeoff between flexibility and control. One of the main purpose of outsourcing is to have suppliers assume certain class of investment. Mc Donald’s yearly growth of 10% have devised the labor demand in such a way that they often need to call up part time and casual workers for huge demand at work, as a result they have created a pool of people available on call. On the contrary IBM since they have started losing their business through various disruptions, have started laying off their existing personnel (Quinn & Hilmer, 1994).
Strategic benefits vs. Risks: Too often companies considered outsourcing as a means to lower short term direct costs and tend to overlook strategic benefits if implemented properly can lower long term investments like Nike and Apple has done. They also negate many types of risks and unwanted management problems. An example can be stated of Gallo- the largest producer and distributor of wines in USA outsources most of its grapes pushing the risk of weather, land prices, labor problems on to its suppliers (Quinn & Hilmer, 1994).
Strategic risks: Outsourcing creates great opportunities for growth but at the same time poses a threat of strategic risks in the organization by the following means:
Loss of critical skills or developing the wrong skills: This can be described with a small example where US computer manufacturers outsourced some of its products like semiconductors and printers to its suppliers and also taught their suppliers how to produce them. Eventually due to lack of expertise of the suppliers they couldn’t innovate with time and keep up the pace with the fast moving world. By then, the major buyers had lost touch of the nitty-gritties and eventually they lose out on the expertise (Quinn & Hilmer, 1994).
Loss of cross functional skills: When a product is outsourced it is often seen that the buyer’s employees are in constant touch with the supplier. As a result there is a constant exchange of ideas and innovation. If a product is made in-house then that interaction among two absolutely different brains is unlikely (Quinn & Hilmer, 1994).
Loss of control over the supplier: By overexposing the market and business strategies and by being too lenient to the supplier, buyers often end up losing control over the suppliers and in some cases the suppliers turn out to be direct competition to the buyers at a later stage. Giant Manufacturing of Taiwan, a supplier of bicycle frame became direct competition to Schwinn. Also the seller may learn as much as possible from the buyer and sell the knowledge to the various competitors of the buyer (Quinn & Hilmer, 1994).
The above gives a detailed account of the various strategies to consider while considering outsourcing plans of industrial products. Now, discussing the plans and the strategies which could be beneficial to Thermax while considering its outsourcing strategy we should first understand why and how Thermax wants to bring the product into the market. As is evident from the previous discussion, Thermax was losing considerable market share in its hot water generator business and eventually dealt with a blow in its sales especially in its hospitality segment (Arnab Rahut, personal communication, 3rd March 2017, Refer Appendix A). The disruptive innovation brought in by its competitors in form of heat pump made Thermax explore opportunities in getting the innovation product into its portfolio. The point to understand here is, does Thermax has the expertise to insource the product in its own factory or do they outsource it? Thermax is not a conventional retail trading company and has its own R&D and state of the art manufacturing facilities in India as well as around the world (Arnab Rahut, personal communication, 3rd March 2017, Refer Appendix A). It may appear at the first instance that Thermax’s strength lies in manufacturing and with its existing infrastructure they can actually produce the heat pumps at a very low cost and thus gain competitive advantage over its market disruptors. But, as is mentioned earlier in the literature, there should not be any compulsion in manufacturing a product in-house just because one needs to cut down on the cost of production or one has the infrastructure. In that way the competition with better core competency could gain competitive advantage over the incumbent or in this case a bigger firm. So, Thermax’s decision to outsource its product from an external vendor (name withheld for confidentiality in business) with a certain expertise in the product could be beneficial. Thermax in this way, could gain expertise on the product, understand the market and also in a myopic view can make the product act as a shielding product to its hot water generator in some markets and reduces chance to lose market share to other competition. The strategy as it appears is rather simple: outsource the expertise, run a pilot operation for a few years, understand the market and the product and at a later stage think about developing it in-house (Manoj Purohit, personal communication, 7th February 2017, Refer Appendix A). As per Mr. Manoj Purohit (Product Manager- Heating, Thermax Limited) ‘Thermax has manufacturing facility of Oil/Gas/ Solid fuel fired Boilers, heaters & Hot Water Generators in India. AMW & ATH are products under HWG category which are mainly used in Hospitality & Industrial segment. Recently, heat pump technology has become popular in Hospitality segment due to various advantages over fired systems like ‘ high COP, no emission, lesser footprint etc. Considering industry demand, Thermax has introduced Aquanexa catering to hospitality sector. As a part of Global manufacturing & sourcing strategy, we are utilizing our global set-up to introduce competitive solutions in the market’ (Refer Appendix F). It should also be mentioned that in order to gain back market share, Thermax must exercise certain degree of control over its vendors and also involve on a strategic level with the vendor personnel, exchange ideas about the product and market (Manoj Purohit, personal communication, 7th February 2017, Refer Appendix A).

4 Market Analysis
One of the key challenges of a market analysis is defining the market. According to popular economics theory an industry is defined as a group of firms that supply to a market. So, the big question here is, what is the difference between analyzing industry structure and market structure? The basic difference is that an industry analysis looks at the industry profitability from two perspectives: Profitability in product market and profitability in input markets. Everyday usage defines industry as a broad sector whereas markets are related to specific products. From an economists point of view, the term, ‘US Automobile industry’ would refer to the aggregation of all the auto companies competing in the US market whereas in common terms it would refer to the number of companies based in the USA (Grant & Jordan, 2015).
So, to define an industry one should start with the idea of market. The basic question to be asked is, which firm competes to supply a certain product or service? (Grant & Jordan, 2015).
In this article we will discuss about the industry domain of heat pumps in the eastern part of India and Nepal. The major application of heat pumps are in hotels and villas, hospitals, hostels/residential complex, canteens and kitchens, schools, boarding, factories etc. where there is requirement of space heating and hot water.

4.1 Target Market
The use of heat pump is to heat water and in space heating. The industry structure is based on supply of hot water to institutions like hotels and hostels, hospitals, residential complexes, canteens and kitchens, schools etc. A paper published, suggest that water consumption in a 5 start hotel is 462 liters per guest per night. It also mentions a 199 liters and 292 Liters of water consumption in 3 star and 4 star hotels respectively (, 2012).
We will extensively discuss about the application of each and every institution and their average water consumption in details which are as follows:
Type of building Consumption per occupant Peak demand per occupant Storage per occupant
Liters/day Gal/day Liters/day Gal/day Liters Gallons
Factories (not process) 22 ‘ 45 5 ‘ 10 9 2 5 1
Hospitals, general 160 35 30 7 27 6
Hospitals, mental 110 25 22 5 27 6
Hostels 90 20 45 10 30 7
Hotels 90 ‘ 160 20 ‘ 35 45 10 30 7
Houses and Flats 90 ‘ 160 20 ‘ 35 45 10 30 7
Offices 22 5 9 2 5 1
School, boarding 115 25 20 4 25 5
Schools, day 15 3 9 2 5 1
Table 2. Consumption of hot water per person or occupant (The Engineering ToolBox, n.d)

Hotels, offices and schools: To explain the feasibility in using hot water generators in hotels and hostels we can consider a hypothesis test conducted. The purpose of the test was to estimate the energy consumed and emission associated with different hot water systems, to identify the decision’making criteria in selecting hot water systems. The decision making criteria is based on payback period, net present value, energy conserving potential, reduction potential of emission, reliability and shelf life. A total of 24 hotels which accounted for 22% of the hotels in Hong Kong used heat pumps. The study clearly showed that using heat pumps to heat water, substantial energy savings, economic savings and deduction of air pollutants was observed compared to conventional boilers. (Chan, Yueng, Chan, & Li, Hotel heat pump hot water systems: impact assessment and analytic hierarchy process, 2013).

Figure 3 Daily usage of water (The Engineering ToolBox, n.d)

As is evident from the hypothesis test conducted by Emerald group clearly (Chan, Yueng, Chan, & Li, Hotel heat pump hot water systems: impact assessment and analytic hierarchy process, 2013) proves a point in favor of use of heat pumps in hotels and it can well be one of the reasons why Thermax in spite of its successful conventional boiler hot water generator in the product portfolio were losing substantial market share in hospitality segment.
Swimming pools: In another example the energy cost analysis of heat pump application for hotel swimming pool was conducted. ‘A roof top pool in a city hotel was investigated. The energy requirement for maintaining the pool water temperature was analyzed in terms of the energy loss through four major processes, namely evaporation, radiation, convection and water refill. It was found that substantial energy savings could be achieved. Compared with conventional electric boilers and condensing/non-condensing gas fired boilers, the total energy savings during a 6 month (mid-October to April) heating season ranged from 39.9 to 46.3 MW h. A life cycle of 10 years was used to calculate the net present value of the energy cost. Over a 10 year life cycle, the energy cost could be reduced by HK$ 275,700 if a heat pump (with a mean seasonal coefficient of performance of 3.5) were used instead of a conventional electric boiler or condensing boiler’ (ResearchGate, 2001).
Hospitals: The hospitals are responsible for major consumption of hot water. The minimum requirement of hot water consumption by any hospital shall be in accordance to National Building code (NBC) and they are tabulated as follows (Kunders, 2008):

Figure 4: Hot water requirement in hospitals (Kunders, 2008)

So, as per the above mentioned account, Hotels and Hospitals remain to be lucrative target markets for heat pump. The capacity of the product Thermax deals with, can mostly be targeted towards 3 star and 4 star stand-alone hotels where there are less number of rooms. Also, another prospective target market is the military bases spread extensively across the eastern Indian geography. This market can be targeted through MES (Military Engineering Services) consultants. The only constraint in this case is that, as this segment is more of a replacement market of stand-alone boiler hot water generators, it poses a weakness where customers may be reluctant to buy a new product because they have already incurred substantial auxiliary investments towards erection and interconnecting pipe line costs (Arnab Rahut, personal communication, 3rd February, 2017, Refer Appendix A).

4.2 Market Segmentation
‘The process of defining and subdividing a large homogeneous market into clearly identifiable segments having similar needs, wants or demand characteristics. Its objective is to design a marketing mix based on expectation of customer in the target segment’ (BusinessDictionary, n.d). In todays’ world there are a handful of big companies who supply to the needs of the entire market; most must break down their market based on certain factors and requirement. Four basic factors that affect market segmentation are as follows:
i. ‘Clear identification of the segment
ii. Measurability of its effective size
iii. Its accessibility through promotional efforts
iv. Its appropriateness to the policies and resource of the company’ (BusinessDictionary, n.d)
Market segmentation is a marketing term coined to aggregate prospective buyers into various groups or segments that have common needs and responds similarly to a marketing action. Market can be segmented in a number of ways: geographically by region or area; demographically by age, gender, family size or life cycle; psycho graphically by social class, lifestyle or personality; or behaviorally by benefit, uses or response. The objective is to enable the company to differentiate its products or message according to the common dimension of the market segment (Investopedia, n.d).

4.2.1 Types of segmentation
The various types of market segmentation can be described as follows:
Demographic segmentation: In demographic segmentation the market is divided into variables like age, gender, family size, lifecycle, income etc. Demographic segmentation is often associated with consumer needs and wants and are easy to measure. Here is how some marketers have used certain demographics to segment the market: AGE AND LIFE CYCLE: With age consumers wants change. Toothpaste brands like Colgate and Crest offers three main lines of product targeted to kids, adults and older consumer. Pamper also divide its market into various segments based on age. LIFE STAGE describes a condition where people on the same stage of the life cycle differs in their life stages. Like people going through a divorce generally will have different choices in life than people getting married. GENDER: Men and women have different attitudes and behave differently based on socialization and genetic makeup. According to studies in US itself women controls 80% of consumer goods business. Marketers can reach women consumers via media like lifetime, oxygen etc. whereas men can be reached via ESPN, Comedy central, through many Men’s magazines etc. INCOME: It’s a long standing practice in industries like automobiles, clothing, cosmetics, financial services etc. Levi Strauss has various product line based on income of consumers. GENERATION: Generation X (influenced by rock music), Baby Boomers (huge population of consumers born between 1946 and 1964), Silent generation (born between 1925 and 1945) all have different demographic preferences LGBT (Lesbian, Gay, Bisexual and Transgender), African Americans etc. to name a few demographic variations showcased by various section of people (Kotler & Keller, Marketing Management, 2012).
Behavioral Segmentation: Marketers divide the buyers into groups on the basis of their knowledge, attitude, use or response to a product. Need based segmentation is a widely based approach. To state an example from the US wine industry, the market is segmented based on the behavior of the consumers as: ENTHUSIASTS which comprises of about 12 percent of the market mostly skewing female. IMAGE SEEKER comprises of 20 percent market share skewing male of the age of 35. SAVVY SHOPPERS comprises of 15 percent market share and who doesn’t mind shopping a lot. TRADITIONALIST comprises of 16 percent, SATISFIED SIPPERS comprises of 14% who doesn’t have much knowledge about various wines and tend to buy the same tested brand and OVERWHELMED which constitutes of 23% market share find buying a good wine confusing (Kotler & Keller, Marketing Management, 2012). To state a real life example one can use the example of mobile phones.
Psychographic segmentation: It is the science of combining demographics and psychology to better understand the buying pattern of consumers. Here buyers are segmented into various groups based on personality traits, lifestyle or values (Kotler & Keller, Marketing Management, 2012). Zara markets itself as the lifestyle brand and people who want latest and differential clothing can visit Zara stores whereas Arrow markets itself as a premium office clothing which attracts the bosses and super bosses of corporates (Bhasin, 2016).
Geographic Segmentation: Geographical segmentation divides the market into geographic segments such as country, state, continent, region etc. The company can operate in a few areas and also can operate in all the areas and pay differentiated attention to specific regional concentration. A common example would be of Nike where they make its consumers used to its products by advertising and sponsoring school and junior club teams (Kotler & Keller, Marketing Management, 2012). The fast food giant McDonalds serves beer in their German outlets whereas they don’t have beer in their menu in the USA. This is geographic segmentation based on culture. Also the same organization has also adopted local food in their menu. For example they have introduced McVeggie in India, McArabia in the Middle East and Banana Pie in Brazil based on the preference of the local market (Nair, 2016).
New segmentation approach: In today’s world where the technology is changing every day and competition is getting fiercer certain changes need to be brought in to be updated:
‘ Deploy an integrated segmentation approach: Think beyond the conventional demographic approach and consider the attitudinal and emotional inputs of the target audience as well.
‘ Employ emotional motivation and attitudinal drivers to win over customer minds.
‘ Ensuring optimal use of rebates and incentives to encourage the drive.
‘ Investing in marketing and sales capabilities and in customer insight efforts through basic surveys (Frankel, Heck, & Tai, 2013)

4.2.2 Segmentation of industrial products
It is always difficult to segment the market for industrial products. The layers begin with demographics and then gets into increasingly complex criteria such as company variables, situational factors and personal characteristics. Industrial customers in B2B business differs greatly and it’s difficult to figure out which differences are trivial. Demographics: Nested approach should have demographics to form the outermost shell. It gives a broad description of the company and includes industry, company size and customer location. Operating variables: It comprises of the second nest segmentation which enables more precise identification of potential customers within specified demographics. They are intrinsically stable and includes company technology, brand usage status and customer capabilities. Purchasing approaches: The middle segmentation comprises of purchasing function, power structure, nature of buyer-seller relationship, general purchasing policies and purchasing criteria. Situation factors: It strongly resembles operating variables but requires a more detailed knowledge of the customer which includes urgency of order fulfillment, product application and size of the order. Buyers’ personal characteristics: Industrial marketers like consumer goods can segment the market based on buyer preferences, motivation, individual perception and risk management strategies. The ‘Nest’ approach (Refer Appendix G) may not be used in a cookbook fashion but requires careful consideration and intelligent judgment (Shapiro & Bonoma, 1984).

4.2.3 Thermax’s segmentation of heat pump
In case of Thermax, the nest approach can be considered while segmenting its heat pump market. The outer most shell (demographics) will comprise of the size of the market which is roughly in the range of US $700,000 (Sanjay Tulshyan, personal communication, 17th January 2017 and Mr. Samik Roy, personal communication, 12th January 2017, Refer Appendix A) which is shared by big, medium and small suppliers and the geographic location ranges from developed urban hotels to remote military camp locations. So, the topographical extent is diverse. Also the region is divided into various heat zones. Since, most parts of eastern India enjoys a tropical weather, requirement of hot water is restricted to the use of electric geezers for a substantial number of small budget hotels (Arnab Rahut, personal communication, 3rd March, 2017, Refer Appendix A). As a whole, the topography and climate in Nepal and North Eastern India encourages use of heat pumps. Operating variables like brand name, goodwill plays an important role in product selection which supports Thermax’s cause as the company is well reputed (Prashant Singh, personal communication, 11th February, 2017, Refer Appendix A). The purchasing approach of the customers are mostly influenced by operating cost and space saving. Also in certain areas, the pollution control board has standardized norms which prohibits fossil fuel (solid, liquid, gaseous) firing mainly in the urban areas which encourages the business (Samik Roy, personal communication, 12th January, 2017, Refer Appendix A). Also, it is forecasted that the hotel industry is set to grow at a steady rate of 9%-11% which resulted in growth of new hotels along the vicinity of picturesque North-Eastern India and Nepal (India Brand Equity Foundation, 2017). So, the requirement of hot water generator is high in this area and the urgency of project fulfillment is at its highest. So considering situational factor, Eastern India and Nepal shows great promise of project completion under strict delivery guidelines. The market is inclined towards price as a deciding factor but there is value for the brand by individual perception to minimize risk of operation. Thermax being a renowned name, is expected to win over buyers’ personal characteristics and preferences (Sanjay Tulshyan, personal communication, 17th January, 2017, Refer Appendix A).

4.3 Targeting
Targeting or target market can be defined to be a group of customers a business decides to aim its efforts into. In all good marketing strategies, a well- defined target market is the first step towards success (Kerr, n.d).
In this context a very important concept should be explained. What is target marketing? After segmenting the market, marketers decide which segment pose the greatest opportunity. For every target market firms develop a strategy which it positions in the minds of the buyers. Volvo develops its cars for people whose primary concern is safety, whereas Porsche aims at pleasure and excitement of buyers from driving fast. The targeting can be done through offering and brands, by setting up a value proposition which indicates the benefits of the product, have a well informed and well-connected marketing channel and spread a word through paid, owned and earned media (Kotler & Keller, Marketing Mangement, 2016).
Now, the next step towards targeting is how to identify the target market based on the standard segmentation variables. In today’s world, marketers are increasingly combining several variables in order to get a deep understanding of the market and distinguish certain segments in terms of various variable like age, income etc. This has led to need based market segmentation approach which can be tabulated as follows:
Steps in segmentation Description
1. Needs-Based Segmentation Group customers into segments based on similar needs and benefits sought by customers in solving a particular consumption problem
2. Segment Identification For each need-based segment, determine which demographics, lifestyles, and usage behaviors make the segment distinct and identifiable (actionable).
3. Segment Attractiveness Using predetermined segment attractiveness criteria (such as market growth, competitive intensity, and market access), determine the overall attractiveness of each segment.
4. Segment Profitability Determine segment profitability.
5. Segment Positioning For each segment, create a ‘value proposition’ and product-price positioning strategy based on that segment’s unique customer needs and characteristics.
6. Segment ‘Acid Test’ Create ‘segment storyboard’ to test the attractiveness of each segment’s positioning strategy.
7. Marketing-Mix Strategy Expand segment positioning strategy to include all aspects of the marketing mix: product, price, promotion, and place.
Table 3 Steps in segmentation (Kotler & Keller, Marketing Management, 2016)

In this context a real life example could be discussed from the wireless industry. Wireless industries generally provide nice specimens of growth with niche markets and target marketing. The biggest players like AT&T, Verizon and Sprint are all big providers and focusses on the business in the biggest markets where they have shareholders to answer to in every quarter no matter what they do in their business. It is seen in most of the occasions that these big companies don’t employ multilingual support lines in order to provide support services or offer competitive rate on specific region based plans. They came up with a solution of selling the rights of their wireless to small businesses who in turn run after the niche market whose business interest are so far ignored by these big giants. So, in that way both the markets are catered. (Kerr, n.d).
In case of Thermax’s targeting approach, the primary target are the hotels and their future projects in the pipe line. The segment is identifiable because of the fact that FDI investments in the region is increasing and tourism is expected to grow at a rate of 9%-11% (India Brand Equity Foundation, 2017) which is encouraging. Though the market is price sensitive still it gives special recognition to known brands. Hospitality being a close knit industry, a good reference in one of the best hotels can act as a leverage to breakthrough future projects. The unique customer need in this segment is mostly price but customers do tend to appreciate brand and good service. Thermax can target the customers with its goodwill, service and quick availability of spare parts with the help of its extensive dealer network (Manoj Purohit, personal communication, 7th February, 2017, Refer Appendix A).

4.4 Positioning
Positioning can be defined as the act of designing the company’s offerings to occupy a distinctive place in the target markets mind (Kotler P. , Marketing management, 2001). Positioning describes where a product stands compared to other similar products and services in the market place as well as in the minds of the consumers. A good positioning provides a product with a USP. In a market place where there are many similar products and brands, a good positioning ensures that the product gets a higher rating in the minds of the consumers and stands out in the crowd of similarly positioned products. (The Economic Times, 2016).

4.4.1 Positioning in a Marketing plan
Positioning is a marketing concept that outlines what and how a company should make a place in the minds of the consumers so that whenever in a market place full of similar products, the specific product always stands out in the mind of the consumers. The concept is explained by the use of the 4P’s (product, price, place and promotion). A good positioning strategy helps a buyer move from product knowledge, price etc. but actually buying the product in reality. There are certain steps which should be maintained to execute a successful positioning strategy based on positioning through advertisements, sales locations, price etc.
Developing and communicating a positioning strategy: Most of the products can be differentiated to some degree but not all brands are distinguished. A difference has to be clearly defined as to from the buyers perspective it has to look important, distinctive, superior, preemptive, affordable and profitable. So, positioning is not what one does to the product. It is what one does to the mind of the prospects, with the product. (Kotler P. , Marketing Management- Millenium Edition, 2000).
How many differences to promote: Marketers have to select as to how many differences of the product to promote. In today’s world most of the companies don’t stick to only one attribute like Aquafresh toothpaste offers three benefits; anti cavity, better breadth and whiter teeth. (Kotler P. , Marketing Management- Millenium Edition, 2000)
Communicating the company’s positioning: Once a company has zeroed down on the positioning strategy, it must communicate the positioning effectively along all facets of the marketing mix and every point of contact. For example, a well-known frozen food company lost its premium status by frequently putting its product on sale. A new product maybe the lifeblood of a growing firm but they need to be properly positioned and differentiated to be successful. (Kotler P. , Marketing Management- Millenium Edition, 2000)

4.4.2 Five Terrific positioning strategy example
In this context we can discuss about 5 terrific positioning strategies by real life companies.
i. Simple vs. Bank of America: Simple focused on tech savvy youth and created an easy to use customer friendly mobile app which attracted a lot of people compared to the conventional banks who in spite of their huge number of branches failed to produce the best technology friendly apps. (Roberts, 2015).
ii. Prius vs. Tesla: At the time when in the business of electric vehicles, market valued economy more than form and function, Tesla got their disruption into the market and competed in the high end segment without getting into the normal competition with Chevy Volt or Toyota Hybrids (Roberts, 2015).
iii. Delta vs. JetBlue Branding: Delta stopped the complimentary peanuts and reduced the leg rooms in economy classes in order to accommodate more people, JetBlue came up with their customer friendly services of snacks serving and big leg room. Every part of their branding pushed to communicate the hospitality and fun of flying while big airlines like delta continued to push their message towards business travelers (Roberts, 2015).
iv. Chipotle vs. Taco Bell: Taco bell enjoyed more market share for years for their cheap Mexican fast food until Chipotle came in who competed mainly on quality and attracted the niche customers with great ambience and cup jokes (Roberts, 2015).
v. Gillette vs. Dollar shave club: Gillette is a very recognized name in the industry for its professional and masculine razors. When Dollar shave club came into the market, they played mainly on price and at a later stage differentiated their product by creating humorous messaging on advertisements which made them attract a certain segment of consumers and do well alongside the likes of Gillette (Roberts, 2015).

4.4.3 Thermax’ positioning of heat pump
In order to gain back market share Thermax embarked on a strategy to outsource its heat pump by using its global sourcing strategy through its vendors for a couple of reasons: 1. Lacking in core competency of the product and 2. They lacked elaborate understanding of the market and the detailed application of the product as their existing competitors do. So Thermax can position the product based on two variables: i) Product and ii) Market positioning. (Arnab Rahut, personal communication, 3rd March 2017, Refer Appendix A).
Product positioning: The term can be defined as the act of designing the image of firm’s offering so that the target customers understand the product and appreciate what the product stands for, in comparison to its existing competition (Kohli & Leuthesser, 1993). The big question to ask here for Thermax is, who is the competition? What is Thermax’s relative market share compared to the competition? Why Thermax? Thermax doesn’t manufacture the product and the existing competitors are reputed, having years of experience with a list of satisfied customers. Heat pump works on the principle of reverse Carnot cycle. In this field Thermax has very little expertise compared to competitors like Bluestar. So, as is evident from the questions raised above, Thermax clearly doesn’t have the core competency. So, the next best possible solution is to outsource the product from a vendor who has technical expertise of the product and understands the competition better. As of now, in the pilot stage, the product can be positioned and special efforts are to be made to reach out to customers. On top of it, Thermax also experiences a possible threat in service. As the company doesn’t have any major expertise in the product, it is likely that the service part of the business will not be at its best either, especially in the initial days and also the well spanned dealer network of Thermax doesn’t have much hands on experience of the product. Overall product positioning is critical and the initial positioning could well be the deciding factor (Arnab Rahut, personal communication, 3rd March 2017, Refer Appendix A).
Market positioning: Thermax is most likely to follow a market follower strategy as the product and its core features are very new to Thermax and its more of a ‘me-too’ product than innovation. ‘Me too’ product can be defined as the product which is similar in function and action to that of the competition and brought in by a company to draw a certain market share from a dominant innovator. Common examples would be Microsoft Zune vs. Apple Ipod, Android vs. IPhone, Barnes and Noble vs. Amazon etc. (Brown, 2011). So here, it can be seen that the product Thermax is introducing, is no innovation of sorts but just replicating an existing innovation through outsourcing. Also, there is no competitive edge of Thermax here in the market in terms of being first in the market. If we consider the prices of the same capacity product of competition and Thermax, there is hardly any difference and in a few cases Thermax is actually asking for a premium price. Here also getting a competitive edge seems unlikely. (Arnab Rahut, personal communication, 3rd March 2017, Refer Appendix A). So, to position the product, Thermax has to measure its steps very carefully and it is advisable to start off by leveraging its goodwill in the market, cross sell the heat pumps along with its other divisional product, where Thermax has a very successful water and waste water division, tap in and sell to loyal existing customers with regular checkups in their premises to ensure positive word of mouth marketing to spread awareness of the product (Prashant Singh, personal communication, 11th February, 2017, Refer Appendix A). Presentations to governing bodies like Indian military, hotel and hospital associations, plumber association etc. (Samik Roy, personal communication, 12th January 2017, Refer Appendix A).
So, it can be concluded that the product should be positioned considering all the points above to avoid confusing the customers (Arnab Rahut, personal communication, 3rd March 2017, Refer Appendix A). Confused positioning can be defined as the positioning error which leaves customers with a confused image of the company, its products or brands etc. (Oxford Reference, n.d). It is evident that Thermax needs to embark on a positioning strategy where they introduce the product in confidence with various governing bodies and leverage its wide spread dealer network which also acts as a quick source of spare parts. Goodwill, in time service, one stop solution should be the USP of the product (Samik Roy, personal communication, 12th January 2017, Refer Appendix A). The positioning should be done which highlights the fact that Thermax is a global brand with engineering excellence in product and service and also buying from Thermax ensures that the buyer will have some control over the company and its service in case there is some break down. The above positioning strategy is expected to attract customers towards buying Thermax product as none of its competitors have the industrial expertise or can be a one stop solution to the buyers (Manoj Purohit, personal communication, 7th February, 2017, Refer Appendix A).
Porter’s generic business strategy: The early scholars of strategy recognized that there are various aspects to business strategy. Porter successfully encompassed the different variables by incorporating various strategic variables like product market environment, circumstances and managerial choices into his framework. He also changed the perspective from industry to firm. A major flaw in the structure is that the variables are mutually exclusive and combined use of the variable may need to be effected simultaneously (Moon H. C., 2015). Porter suggests that for long term profitability firms must consider one of the three generic strategies or else they will end up being ‘stuck in the middle’ (MindTools Limited, n.d).
A basic matrix of Porter’s generic strategy looks like the following:

Figure 5 Source of competitive advantage (MindTools Limited, n.d)
Cost Leadership: The strategy focuses on gaining competitive advantage by having the lowest cost in the industry. In order to achieve this an organization must have low cost leadership, low cost manufacturing and workforce committed to low cost strategy. Companies are supposed to discontinue any activities in which they don’t have a cost advantage and for that matter outsource certain products if necessary to achieve low cost. Typically to achieve cost leadership, firms must have a large market share and through mass production, mass distribution, economies of scale, technology etc. companies can achieve cost leadership. Low cost advantage results from process innovation, learning curve benefits, economies of scale etc. It can also be achieved through access to cheap raw materials, superior proprietary technology etc. Here it should be noted that firms do not lose out on revenue to be market leaders, instead through large volume supply they achieve economies of scale and as a result can create huge demand of the product in the market which the company can supply. Also, it makes the entry barriers difficult for new entrants as any new entrant will require huge capital to counter such a competition. It doesn’t have any significant disadvantage but it creates minimum customer loyalty and if any firm drops its revenue substantially, the incumbent is prone to lose out on revenue (Allen & Helms, 2006).
Differentiation strategy: By using this strategy a company focuses on producing a unique product and thus creates good customer loyalty. Product differentiation fulfills a customer’s need and its benefits draws customers to be loyal to the product or service. The quality of the product may be real or perceived depending on the brand name or image. The differentiation strategy appeals to a sophisticated or knowledgeable customer segment who are willing to pay a premium for it. Factors like market sector, quality of work, size of the firm, image, graphical reach, involvement, product, delivery system, quality of service or distribution channel etc. all adds up to creating a differentiation strategy. Some key concepts for establishing differentiation include, speaking about the product to select panels, writing on certain attributes to magazines, be involved in the community, adding flair or drama to packaging, adding e-commerce, using company size, in depth training, quality service, use of facilities etc. all add up to making the product or service unique (Allen & Helms, 2006).
The focus strategy: In focus strategy a firm targets a specific segment and can chose to focus on a select customer group, product range, geographical area or service line. Focus aims are growing market share by operating at niche market or operating at unattractive markets where competition is not very dominant. These niches arise from various factors like geography, buyer characteristics, product specification and requirement. A successful focus strategy is the one where the industry segment is large enough to have good growth potential but at the same time the competition’s presence is not very dominant. Large and mid-sized firms generally use focus strategies along with one of the other two. They are most effective when consumers have distinct preferences and the niche is not very attractive to the rival firms (Allen & Helms, 2006).
Combination: It is not alien that organizations chose more than one strategy which gives them the unique opportunity to offer a unique proposition. (Allen & Helms, 2006)
Drawbacks of the generic strategy: As it is static, it fails to explain how to start by choosing one strategy. Also, it doesn’t show the evolutionary movement of one strategy to the other. If the above mentioned constraints could be taken care of, then, for the new entrants, it becomes easier to shift from one strategy to the other. The changes help to distinguish the major player with the minor. Lastly it has been seen that many companies use more than one strategy, so Porter’s claim that only one strategy is to be used is questionable. (Moon, 2015)
Thermax’s positioning of heat pump: Thermax is most likely to position the product based on a combination strategy. Like most of its products, Thermax heat pump is priced higher compared to industry average. Thermax can leverage its goodwill and extensive dealer network to get the word out (Prashant Singh, personal communication, 11th February, 2017, Refer Appendix A). Thermax being the latest entrant into the market is expected to embark on a strategy of late entrants in the market. They shall consider strategies related to pioneer vs. late arrivals (Gurumurthy & Kalyanaram, 1998) and strategies related to late-to-market products (Paul, 2010). Also Thermax should consider the fact that throughout its operation, it has always been a company which enjoys majority of market share in its defined markets. So, the positioning of the product has to be in a way that its ultimate goal rests in achieving the maximum market share. If not initially but in the long run it has to understand how to estimate profitability and risk as a function of market share and how to find out the optimal level. Thermax can also embark on a policy of product pacification with which with their capital strength can promote the product more than its specific brand. Thermax supplies a lot of its hot water generator products to the MES (Military Engineering Service) (Arnab Rahut, personal communication, 3rd March, 2017, Refer Appendix A) so they can take the Dependence and Legislation strategy where they make the government good reference to the product and the brand. Lastly, the product is more of a diversification in terms of Thermax’s core competency. Diversification often leads to continuation of steady profits in spite of certain sudden break in operation in its existing products happen (Kotler & BloomPhilip, 1975). This is pretty low in terms of the magnitude of the business of the product.
So, overall Thermax shall be largely depending on its price, service and reach to get the product in place. In so far as the product differentiation and attributes are concerned, except for a few changes, there is not much of a differentiation that is evident. Thermax through its global sourcing strategy and its research and development, should try to upgrade according to the future demand of the industry. So, it can be summarized as the approach taken by Thermax is expected to be more of a cost leadership and differentiation leadership in terms of service, reach and quick availability of spares (Arnab Rahut, personal communication, 3rd March, 2017, Refer Appendix A). Also, one major differentiating factor of Thermax is, it has hot water generating boilers (AMW and ATHM) in its portfolio which is a very useful and viable alternative in certain situations and conditions. The hot water boiler can race out competition in many situations and is also touted to be a tried and tested, reliable technology for years. It will also concentrate on focus strategy to the extent that it shall specifically target the hospitality segment and certain geographies where tourism is appreciated (Manoj Purohit, personal communication, 7th February, 2017, Refer Appendix A).

Figure 6 Key differentiating factors of heat pump (Refer Appendix A, Interviews)

4.5 Marketing Mix: The Four P’s
The marketing tools that elicit the desired responses from the target markets to the marketers are popularly known as the marketing mix. McKarthy classified these tools into 4 broad forms which he called the 4 P’s of Marketing: product, price, place and promotion. Marketing mix decision must be formulated in such a fashion so as to influence both its trade channels as well as its consumers. Typically, firms can change its price, sales force size, advertising expenditures in the short run in a myopic view and develop new products and modify its distribution channels in the long run. The following figure describes a typical 4 P components of the marketing mix (Kotler P. , Marketing Management, 2000):

Figure 7 Marketing Mix (Kotler P. , Marketing Management, 2000)

According to Robert Lauterborn, winning companies are the ones who meets customer needs economically and conveniently with proper communication (Kotler P. , Marketing Management, 2000). He devised the concept of 4 C’s which are related to customers unlike the 4 P’s related to the sellers and are as follows:

Four P’s Four C’s
Product Customer solution
Price Customer cost
Promotion Communication
Place Convenience
Table: 4 The 4 C’s (Kotler P. , Marketing Management, 2000)

4.5.1 4P’s in Business to Business Market
Marketers and sales team often tend to stress more on product technology and quality as per the definition of the conventional 4 P’s. Product technology and quality are no longer differentiators but are simply the cost of entry into a market. These often distracts buyers from being a trusted source of diagnostics, consultant advice and problem solving. In today’s competitive market the meaning of the terms have shifted. Product to solution, place to access, price to value and promotion to education. It has been observed that many engineering companies fail to come out of their ‘technologically superior product and service’ zone and be more customer centric and more towards helping the customer attain the perfect solution to the problem. Management must ensure that the sales and marketing group must reinforce a customer centric organization. Also, the functional boundaries should not determine the firm’s solution. There has to be a certain degree of coordination among the division of sales, marketing, product development, service and packaging to complete the triangle and serve the market better. Companies who are still locked into the conventional 4P mindset are likely to be locked into unproductive technological race which makes them ignorant towards new solution- selling strategy and eventually stops growth in the long run (Ettenson, Conrado, & Knowles, 2013).

4.5.2 4 P’s in innovation
Any marketer can quickly jot down the 4 P’s as can the innovators that might capture their ideas potential in terms of population, penetration, price and purchase frequency. Companies looking at a certain revenue can simply multiply the penetration, price and purchase frequency to get the desired revenue. In today’s competitive market there is no guarantee that the end results will be as per any calculation. So, it is always helpful to be more precise about the target population based on its market analogies. The deceptively simple calculation can help clear out a few answers like, does the idea target a niche or a mass population, is it an occasional or a regular purchase, what channel is used, what kind of after sales support will be necessary etc.
The one way to quantify the actions of 4P would be to add another P by the name Profit margin. This shall most likely shift the focus to finding systematic ways to whether the findings behind the assumptions have any chance of being true.
So, in the process of innovation, marketers must ask themselves the following questions:
‘ How big does the opportunity have to be to arouse a company’s interest?
‘ What is the simple calculation that crosses the bar?
‘ What leads you to believe that the calculation is plausible?
The above questions will have an impact in quantifying the assumptions and give a proper direction to the assumptions (Anthony, 2010).

4.5.3 Marketing mix of Thermax heat pump
Thermax could possibly start with educating the customers about their new product and dish out products as per customer needs. Thermax in its way of selling has always been a consultant to the customer than a revenue generating push selling company. The sales representatives are specially trained to be technically sound and have thorough knowledge about the various applications in the industry. That’s one of the big reasons that they are successful in creating a niche for themselves in Business to Business selling. Thermax sales representative are reputated to be trained to provide the best, convenient solution at the right price (Arnab Rahut, personal communication, 3rd March 2017, Refer Appendix A).
Discussing in details about the 4 P’s of heat pump, the following observations can be made: Product: There is not much of a differentiating edge in the product compared to competition product and for that matter it can be produced in house or outsourced based on the expertise required towards manufacturing the core product. It’s more of a ‘Me too’ product and there is not a huge scope of differentiation in terms of product technicalities (Arnab Rahut, personal communication, 3rd March 2017, Refer Appendix A) So, product may not be the most popular factor. Price: Price wise, Thermax has always been high on price for all its products and this is no exception. Plus the import duty that the product attracts makes it even more expensive (Sanjay Tulshyan-TAS, personal communication, 17th January, 2017, Refer Appendix A). It is true that some of the customers are willing to pay a premium for Thermax but again not all (Manoj Purohit, personal communication, 7th February, 2017, Refer Appendix A). So, to leverage the price factor, Thermax need to do a more competitive pricing (Sanjay Tulshyan-TAS, personal communication, 17th January, 2017, Refer Appendix A). Otherwise they are high on price in a fairly price sensitive market where there is very little product differentiation. Place: The lion share of the concentration shall be on hospitality segment. In addition to that, Thermax is expected to push the product in the Military segment through MES. Also the product can be positioned in temperature specific applications like hot bath, swimming pool, textile and diary industries (Arnab Rahut, personal communication, 3rd March, 2017, Refer Appendix A). Promotion: Certain promotional activities is underway through active participation in trade shows, seminars and industry forums. There are also substantial efforts put in to strengthen the bond with Mechanical Electrical and Plumbing (MEP) consultants etc. Also regular presentation with the hotel and hospital bodies are underway and it has been welcomed in a fairly satisfactory manner so far (Manoj Purohit, personal communication, 7th February, 2017, Refer Appendix A and Samik Roy-BCG, personal communication, January 12th 2017, Refer Appendix A).

4.6 SWOT Analysis
The concept of SWOT (Strength, Weakness, Opportunity and Threat) can be described as the overall evaluation of a company’s strength, weakness, opportunity and threat. It can also be described as a way of monitoring the internal and the external marketing environment of the company. A business unit in order to be a profit making organization must look into and monitor its key macro environment forces and micro environment factors. (Kotler P. , Keller, Brady, Goodman, & Hansen, 2016).
Marketing goals are set to be the art of finding, developing and profiting from the internal and external sources (Kotler P. , Keller, Brady, Goodman, & Hansen, 2016). ‘A marketing opportunity is an area of buyer need and interest that a company has high probability of profitably satisfying’ (Kotler P. , Keller, Brady, Goodman, & Hansen, 2016). There can be two types of market opportunity that can be exploited by the marketer. The first kind is to supply something that is short in supply and therefore requires less marketing and the other one is to supply goods and services to a market in a new and superior way. Marketers are expected to be very good at spotting major changes in the market and innovate the product and service as per the latest trend or customer requirement. It could help a company with a huge database to give away information (Wikipedia compared to Encyclopedia book series), customize market offerings, offer new capabilities (Apple’s introduction of iWatch), making the delivery services better (DHL delivers faster than the conventional post) etc. (Kotler P. , Keller, Brady, Goodman, & Hansen, Marketing Management, 2016).
An external environmental threat is a challenge that is posed by an unfavorable trend or development which if ignored or not detected can lead to substantial drop in growth, profit and sales of an organization (Kotler P. , Keller, Brady, Goodman, & Hansen, 2016).
Internal environment (Strength-Weakness analysis) is a very important part of market analysis where each business is responsible to evaluate its internal environment. A common example where a company failed to evaluate its internal environment is of IBM where the company enjoyed substantial market leader status for some time till the counterfeits got to the market and got IBM into testing times. Their response time was slow as the company management was very bureaucratic (Kotler P. , Keller, Brady, Goodman, & Hansen, 2016).
Critiques of conventional SWOT: SWOT analysis is for a very long time considered a very important tool for marketers to understand the ecosystem. On the hind side there are certain short comings. It generally provides description of conditions whereas strategies define action. They can present findings uncritically in a simplified way which may not define the gravity of the situation or problem. For example, weak opportunities may pose to balance strong threats. Clearly it’s not possible for a business to completely get over with all its weaknesses, neither its right for the business to gloat about its strengths, as the big question here is whether one should concentrate on just stating the strength or formulate a strategy to guideline the strength in a better way so that it becomes profitable. Many companies fail to produce the best output in spite of having a very good team strength. They fail to work and come together for a bigger long term cause. In many companies the interest of marketers are restricted towards short term goals. This myopic view often hinders growth (Kotler P. , Keller, Brady, Goodman, & Hansen, 2016).
A typical SWOT analysis template for Thermax heat pump shall looks like the following:
Figure 8: SWOT Analysis (Arnab Rahut, personal communication, 3rd March 2017, Refer Appendix A)

Now, a possible way to develop a strategic planning process with the evaluation of external and internal environment for a business unit can be formulated as follows:

Figure 9. The business unit strategic planning process (Kotler P. , Keller, Brady, Goodman, & Hansen, 2016)

5 Industry Analysis
The industry analysis of hot water generators can be discussed in details based on the type of products offered in the market and the technology used. There are overall four different technologies used in the domestic and commercial hot water generator industry. They are commonly known in the industry as EWH (Electric Water Heater), SWH (Solar Water Heater), GWH (Gas water heater) and FSB (Floor standing boilers) (Prashant Singh, personal communication, 11th February 2017, Refer Appendix A). In the following section we will discuss about the various companies involved in various water heater technologies:
‘ Electric Water Heater structure in India:

Suppliers Racold, Venus, Bajaj, V-guard, A.O Smith, Crompton, Sunpoint, Exotica, Havells, Eterna, Radiant, Haier, Solitaire, Usha etc.
Business model Sales focus: domestic and export, have both national and international presence, select companies have outsourcing capabilities.
Table 5 Suppliers of electric water heaters in India (Indiamart, n.d)

‘ Solar water heater structure in India:
Category 1 Category 2
Suppliers Racold, Emmvee, Tata BP Solar, Nutech, Supreme, V-Guard, Sun Energy Systems, Rashmi, Sudarshan.

GP Tronics, Pearl, Phoenix, Solaris, Rose, Enolar, E-sharp, Vijaya, Sundrop.
Business model Sales focus: domestic and export, have national presence, Manufactures hot water storage tank and balance of plant in house. Have strong regional presence. Some components of the system are outsourced but performance guarantee lies with manufacturer.
Table 6 Suppliers of steam water heaters in India (Ministry of New and Renewable Energy, 2011)

‘ Gas Water heater structure in India:

Prominent companies Racold, Bajaj, Lords, Olympus, Aeon, Polar, Ujala, Bosch, Apex, AO Smith, Spherehot, Nahata, Flagro, Venus, Electrolux, Jaguar, Hotstar etc.

Business model Sales focus: domestic and export, have national presence, strong channel sales.
Table 7 Suppliers of gas water heaters in India (Indiamart, n.d)

‘ Floor standing boiler water heaters:

Suppliers Thermax (Thermax Limited, n.d), Shanti Boilers (Shanti boilers and pressure vessels pvt. ltd., n.d), Isotex (Isotex Corporation Pvt. Ltd., n.d), Maxtherm (Maxtherm Boilers Pvt. Ltd., n.d), Forbes Marshal (Forbes Marshall, n.d) etc

Business model Thermax manufactures both water generators and steam boilers. Have in-house state of the art manufacturing facility, string domestic and global presence (Thermax Limited, n.d). Forbes Marshall and others have their products restricted to steam boilers mostly.
Table 8 Suppliers of floor standing boiler water heaters in India

5.1 Industry structure of heat pumps:
The industry structure can be divided into 3 components which are as follows:

Table: 9 Industry structure of heat pumps (Refer Appendix F)

5.2 Nature of participants
Based on the rivalry among competition, target market, sensitivity of the market and number of competitors and their product attributes, one can define the actual point of difference (POD) and point of parity (POP). Point of difference, POD’s are the attributes of the brand which customers believe that they cannot find, in the same extent in the competition brands. For example, POD’s for Apple would be design, ease of use and irreverent attitude and POD’s of Nike would be associated with Performance, innovative technology and winning. Point of parity or POP can be defined as the benefits or attributes associated with the brand which are common for the brands in its competition. These are attributes or benefits which customers consider as essential and legitimate for a certain product offering (Kotler & Keller, Marketing Management, 2012). So, in order to do perceptual mapping and positioning of a product in accordance to its competitors the POP’s and the POD’s of the product are relevant.

5.2.1 Perceptual Mapping
Perceptual Mapping results in a geometric comparison as how competitive product are perceived by consumers generally. Product positions are typically represented as circles or dotted points. A product position on the grid is determined based on the attribute it possesses. The closer the products are positioned, the more intense is the competition and vice versa. One of the widely used technique of perceptual mapping is Multiple Discriminant Analysis (MDA) which is used extensively to identify differences among various marketing segments. MDA finds the weightage combination of attributes which discriminates products based on customer perceptions (Sinclair & Stalling, 1990).
Interpreting positioning map gives a company the liberty to understand the flaws in the positioning of the product and clear out the fog that shroud the competitive landscape. It also helps valuing intangible benefits as is evident from the fact that Harley Davidson in spite of having a lesser powerful engine compared to some of its Japanese contemporaries like Honda, Yamaha managed to reach a cult status in the baby boomer generation. However a 2004 perceptual map revealed that through Harley Davidson motorbikes demanded higher premiums but it was leaving money on the table and other American companies where earning premiums in the range of 41%. This made Harley Davidson complacent, thus ended up losing money to new generation Japanese and American bikes. Later in 2006, understanding the problem, they modified their campaign and got back the lost glory through a face lift, making women merchandise and appealing to the new generation who had a different take of America. It also helps anticipating shifts in the value of benefits and help executives decide on which feature to invest upon. It also helps finding path of least resistance and throws light on areas of improvement and investment. Price benefit maps also help understand rivals and their strategies better and find ways to preempt them. The perceptual mapping also helps companies understand the shift in the value of benefits over time and value intangible benefits without giving away freebees. (D’Aveni, 2007).

5.2.2 Perceptual Mapping: Industry structure of heat pumps
Thermax being the latest entrant in to the heat pump industry i.e. late arrival into the market (Gurumurthy, 1998) makes it open to a very competitive market in terms of price and demand of the customer. Here we shall be dealing with the following companies in 2 dimensional criterion of service and price and where they stand on the matrix. As per the interview data and the price list, manual coding of the individual ratings of the companies based on price and service was done Based on weightage for every attribute of every brand and taking the mean of them, we have the following table:

Brands Price Service
Range (1-5) (1-5)
Thermax 4.6 4.6
Bluestar 4.3 3.3
Cristopia 3.3 3
Lombardyne 3 2.6
Suntech 2 2.6
Table: 10 Data from Interview ratings and price list (Refer Appendix A, Interviews and Appendix D)

Plotting the above mentioned data of service and price rating, the perceptual map matrix is as follows:

Figure: 10 Perceptual map of renowned brands in the heat pump business

As is evident from the perceptual map above, Thermax and Bluestar hold a similar position on the grid in terms of price. The listed price of both the companies are more or less the same (Refer Appendix D) but Thermax scores higher in terms of service. As a matter of fact, Thermax has better pan India reach as a result of its wide spread dealer network who are well equipped with the best in class, updated to industry standards sales and service personnel. Thermax also conducts regular training of these indirect Thermax representatives. So, by the virtue of the perceptual map it can be concluded that Thermax has a product which is positioned well above its small and big competition in terms of price but again at the same time, Thermax has a well spanned out, dealer service network who are both competent as well as reachable for any breakdown or troubleshooting. It may be noted from manual coding of interview data and industry experience that Bluestar in spite of having a good chain of dealer network have only largely restricted themselves to air conditioning and cooling systems and have not been extremely successful to put together a team which is as strong as that of Thermax’s in terms of industrial and commercial business. The rest of the competition like Cristopia is slowly spreading its distributor network but is yet to reach a level where they can provide smooth un-hindered services on a pan India basis. Lombardyne and Suntech are fairly low on price and are into scattered business in India and Nepal with limited resources. Special mention has to be made of Midea (Midea group, n.d) heat pumps who are doing good business in parts of Nepal and is touted as a promising new entrant (Sanjay Tulshyan-TAS, personal communication, 17th January 2017, Refer Appendix A).

5.3 Buyer behavior
Most of the industries sell their product to a range of buyers which makes selection of buyer an intrinsic property of competitive analysis. From a structural point of view, it can be said that the buyer group is homogeneous. Many producer good firms sell their products to a wide variety of businesses which in turn use those products for varied applications. An industry buyer also differs in their purchasing needs. Different buyers require different level of customer service, product quality, durability etc. So it clears out why buyers have different structural bargaining power. Buyers also differ in their growth potential as is evident from the fact that selling a product to a growing digital company where the market in digital business is on a rising scale that selling to an almost dead market of black and white television. Also in certain specific markets, selection of buyer largely depends on servicing buyers who orders components in small quantities than servicing the buyers who orders in bulk. So, selection of buyer becomes very important while strategizing a product to the market. Ideally it’s required that the product be sold to the most suitable customer to the extent it has any choice. One theory of strategic implication also suggests that a firm can create ‘good buyers’. (Porter, 2004).

5.3.1 Framework for buyer selection
There are four broad criterion required to make a suitable buyer selection:
I. Purchasing needs versus company capabilities:
II. Growth potential
III. Structural position
o Intrinsic bargaining power
o Prosperity to exercise the bargaining power in demanding low prices.
IV. Cost of servicing (Porter, 2004)
In case of heat pump all the points stand true and applicable to the situation. Company capability is important and should be checked for solvency to ensure smooth business transaction. Heat pump will attract buyers where there will be an intrinsic need of the product. A buyer who has future projects in the pipeline will always be a valuable account for the seller. The industry of heat pump is very price sensitive with very little product differentiation. So, the bargaining power of a buyer will play an important role. Cost of servicing should always be considered, no matter which industry one is dealing with.

5.3.2 Buyer growth potential
The growth potential of a buyer in an industrial market depends of the following conditions:
o The growth rate of its industry
o The growth rate of its primary market segment
o Its change in market share
It should be noted that buyers with a possibility to gain market share in a declining or mature market holds a strong position in terms of buyer selection preference. (Porter, 2004)
While targeting the hotel segment, it can be considered that big or growing brands of hotel will have better bargaining power by the amount of business they can promise to a supplier.

5.3.3 Intrinsic bargaining power of buyers
The intrinsic power of a buyer holds a very important position in considering the bargaining power of a buyer. Before discussing the intrinsic powers we should try and identify the buyers without much intrinsic bargaining power who can be termed as ‘good buyers’.
Small volume buyers don’t get the leverage to demand price concession, freight absorption and other likely concessions.
Lack of alternative sources often lead to less negotiation powers of buyers.
They face high transaction, negotiating cost then the buyers lose out on bargaining power.
They face high fixed cost of switching suppliers. (Porter, 2004)

5.3.4 Relative bargaining power of buyer
It can be considered that the bargaining power rests ultimately on the refusal to deal with the other party. The following factors influence the bargaining power of buyers relative to its sellers:
‘ Size and concentration of the buyers relative to its suppliers: Buyer concentration lowers prices in a market.
‘ Buyers’ information: The better informed buyers are about the product of the suppliers, the better position they are in to bargain.
‘ Ability to integrate vertically: It is often seen for bigger organizations that instead of going out in the market to find out an alternative supplier, they tend to manufacture the product by themselves. For example, Heinz and Campbell soup have reduced their dependency on the can manufacturers and make their own can. (Grant & Jordan, 2015)

5.3.5 Price sensitivity of buyer
There are certain markets where the price sensitivity affects the buying behavior of buyers. Also, there are certain markets where the buyers are willing to trade price for performance characteristics of the product. They are usually ‘good buyers’ and largely care for the product attributes than negotiate on small price changes.
Buyers who are not sensitive to small price changes tend to fall into one of the following:
‘ The cost of the product constitutes a very small part of the budget of the final product to the buyer.
‘ The penalty for product failure is high and a lot depends on the perfect functioning of the product. In that case a buyer is not so price sensitive.
‘ If the effectiveness of the product is responsible for major savings and performance improvement. To cite a few popular example, prescription drugs and electronic items.
‘ When a buyer requires a customized design and variety.
‘ Highly profitable buyers tend to be less price sensitive.
‘ The buyer is ignorant about the specifications of the product.
‘ The motivation of the decision maker are not narrowly defined and thus it doesn’t largely affect the decision of the inputs. For example, in many companies there is compensation towards cost savings of a purchase by the purchase manager and again on the other hand a plant maintenance manager will look at a situation in a more long term basis. In these cases and in different situations, buyer’s sensitivity differs. (Porter, 2004).
As is mentioned earlier, the industry is extremely price sensitive since there is not much of a product differentiation among competitors and also there are many competitors in the industry. So, the buyers are spoilt for choice and thus price sensitive. Also it can be considered that Thermax is likely to enjoy some preference from its existing users on its products, in terms of its goodwill and service capabilities and cross sell advantage in the market (Manoj Purohit, personal communication, 7th February 2017, Refer Appendix A).

5.3.6 Cost of serving buyers
The cost of serving various customers in various ways can vary greatly based on order size, direct selling vs. distributor selling, lead time requirement, shipping cost, selling cost, need for customization etc.
Many of the costs involved in serving buyers varies to a great extent depending on the type of buyer and the amount of service expected. A common practice is to consider the cost in the overhead cost. (Porter, 2004)

5.3.7 Buyer selection and strategy
The choice of buyers may differ along various dimensions and so they are a very important variable in the selection criteria of a buyer. Though in many cases the selection of buyers is possible along the industry line but in some of the cases it’s not possible to select the buyers for certain firms. The selection of best buyers may vary depending on the buyer selection dimension as is mentioned under the buyer selection. The criteria mentioned above in point 5.3.1 may yield conflicting implications for the attractiveness of buyer. A buyer with the maximum growth potential can always be very price sensitive at the same time as well. A plausible argument to buyer selection shall be, different firms will be in different positions to select buyers. A firm with a much differentiated product shall not be affected to a great extent by price sensitivity and also firms which are way too big in size and volume may not be affected by the size and potential of a buyer. So, in a way it can be said that the most favorable buyers to sell to depends on the position of the individual firms.
There are a number of strategic implication of buyer selection as well which are as follows:
‘ Firms with low cost position can sell to buyers who are very powerful and price sensitive and still be successful. It is because of the fact that these sellers need to attain volume and in that way they can maintain average with the industry standards and its competitors.
‘ The firm without a cost advantage and no significant differentiation in the product must be selective of the buyers if it desires an above average result. The firms must focus on buyers who are not price sensitive to reach the industry average in terms of revenue.
‘ Good buyers can be created through strategy. A firm can differentiate its product but molding its product design that completely suites the buyers requirement, train and assist customer personnel to the product and in that way reduce the switching cost of the buyer. Clever selling often can turn an individual decision maker from being price sensitive to being less price sensitive. Certain customer specific services can be offered to brick wall the customer for future orders (Porter, 2004).
Here it can be said that to pitch in the product which is relatively new in Thermax’s portfolio, they can strategize to introduce the product through the consultant, plumber or the civil contractor of the concerned project and convince them in getting all the pipelines and the structural done according to Thermax’s product requirement. In that way, by a large extent the company can win over competition and possibility of bagging the order increases manifold (Arnab Rahut, personal communication, 3rd March, 2017, Refer Appendix A).
High cost buyers can possibly be eliminated. In this context it must be noted that rarely the cost of servicing an individual customer is calculated. It is crucial to recognize the cost incurred to high cost buyers which eventually makes them extremely price sensitive and thus in a way affect the bottom line of the business. But before one comes to a conclusion to eliminate high cost buyers (which in some cases may come good for the business) one must check all the four dimensions of buyer selection strategy. (Porter, 2004)

5.3.8 Buying process
In industrial equipment, the consumer tend to follow a basic pattern of buying based on past experience and research. In case of Thermax products as well, it is no different. The following table which is based on literature and some industry inputs gives a general illustration of the buying pattern and the decision makers involved:
Purchase process (stepwise) Role of stakeholders Decision makers involved
Need identification Requirement set out by the maintenance team. ‘ Chief Engineer
‘ Maintenance
‘ Dean- Hostels
‘ Owner (Marriage Hall)
Specification development Specification developed and provided by maintenance ‘ Purchase Head
‘ Maintenance Department
‘ Administration
Involve interested parties through information search(references, personal contact, recommendations) The purchase team identifies a few vendors and ask for quotations. ‘ Purchase Manager
‘ OEM’s
‘ Dealers
‘ Administration
Request for quotation Quotations submitted ‘ Purchase Manager
‘ Administration
Performance evaluation All quotations are evaluated and efficiency and price of the equipment is mapped which matches the requirement. ‘ Maintenance GM/Owner
‘ Purchase/Admin head
Identify, shortlist and confirm the best based on factors like quality, deadline meet, flexibility, dependability etc. Details of the shortlisted companies sent to the top management, price and technical negotiation done with the shortlisted companies. ‘ Maintenance
‘ Purchase head
‘ Owner
Final purchase and installation Purchase order placed. Installation carried out at the site by service team. ‘ Purchase
‘ Owner
‘ Dealer
‘ Local plumber
Table 11 Buying process (Fitzsimmons, Noh, & Thies, 1998)

5.3.9 Buying process in B2B landscape
For ages the buying process was restricted to a pattern as is mentioned in the above table as well which is known as AIDA (Awareness to interest to desire to action) and then followed by a series of absolutely standard funnel operation. But according to a latest research by Gartner, buyers can actually work on 4 parallel streams to make a purchase decision:
Explore: Here buyers identifies a need and look for best possible solution in the industry.
Evaluate: Buyers take a closer look and evaluate possible options.
Engage: Buyers initiate contact with provider and further discussion follows.
Experience: Buyers use a pilot or proof of concept and develop a perception about the product. So, as per the latest trend, the ‘sales force’ is said to be very influential as personal interaction is more reliable than anything else in influencing buyer’s decision and are not yet replaced by online selling activities completely. Buying and selling is not a one shot deal but a dynamic physical process which continues over a period of time (Cespedes & Bova, 2015).

5.4 Power of suppliers
The analysis of the determinant of the relative power between a producer and supplier can be compared to the relative power that exists between a buyer and a producer. The only difference is that the producers of inputs are the suppliers and the buyer is the company concerned. It is often seen that when small companies supply a raw material to a big firm, they often lose out on the bargaining power. For the reason mentioned, these small companies unify to make a community through cartelization (Ex. OPEC, labor union etc.). Conversely, when it comes to specialized, technically sophisticated and complicated item, the suppliers often hold a substantial power of bargaining as is evident from the dismal profitability that we see in the computer industry where a dominant supplier like Microsoft can demand higher bargaining power (Grant & Jordan, 2015).

5.4.1 Purchasing strategy
Although there are many aspects of purchasing strategies and procedures various companies use as a part of their purchasing strategy but a few basic ones can be discussed as follows:
‘ Supplier pool competitiveness
‘ Optimal degree of vertical integration
‘ Allocation of purchases among qualified suppliers
‘ Creation of maximum leverage with chosen suppliers
It is always better to have a supplier pool which is competitive in itself. In that way it becomes easier for buyers to purchase a certain product from the suppliers. The buyer can be assured of having a supplier who constantly tries to improve its products in a bid to stay in the market. Optimal degree of vertical integration can only happen in companies which are relatively large in magnitude and in a bid to get rid of the hassle to find a new supplier and to avoid the transaction cost involved, they get into manufacturing of the part or raw material by themselves. Allocation of purchase among qualified suppliers can be explained by the concept of Spread purchase. Spread purchase can be defined as the kind of purchase where the purchase is distributed among many suppliers, so that there is some control of the buyer in terms of its bargaining power. In this matter it must be noted that the business given to each supplier has to be of substantial magnitude so that the supplier fears of losing an account and at the same time the whole supply should be divided among credible suppliers so that the purchaser never gets too dependent on one supplier. If a buyer completely gets dependent on one supplier then the supplier gets the upper hand and can exercise drawing heavy volume discounts on the purchaser taking advantage of the situation that the purchaser shall avoid the switching cost incurred to change the supplier. Many firms, in order to get the best out of its suppliers even go to the extent of going overseas, qualify new suppliers and get them to business. Standardization is another mechanism where the purchaser can curb down the power of a supplier. The policy helps reduce the supplier’s product differentiation charges and undercuts the erection of its switching costs. Use of tapered integration often helps to curb down the power of suppliers by getting a bulk of its supply from external suppliers. It poses a real time threat to the existing suppliers (Porter, 2004).

5.4.2 Vertical integration
The biggest question here is when and when not to vertically integrate. ‘A strategy as risky as vertical integration can only succeed when it is chosen for the right reason’ (Stuckey & White, 1993). So, the big question here is when to and when not to integrate as a wrong decision can be costly to a company to fix.
When to integrate: Vertical integration is simply coordinating the various stages of industry chain when the bilateral integration is not helpful. Though it reduces some risk and transaction costs but eventually in most occasions requires heavy set up cost and its coordination effectiveness is often dubious. Criteria for vertical integration depends on capital, system development and training. There are mainly four reasons to vertical integration which are as follows:
‘ The market is too risky and unreliable.
‘ Companies in the adjacent stage have more market power than the one in your stage
‘ Integration will help exploit market power or allow price discrimination
‘ The market is young and companies must forward integrate; or when the market is dying and the incumbents at various stages are pulling out.
When not to vertically integrate: Sometimes it is seen that vertical integrations is necessary but mostly it is very expensive, risky and difficult to reverse. It is often seen that many marketers make the mistake to vertically integrate for wrong reasons. This occurs mainly for two reasons: (1) Decisions are often based on spurious reasons. (2) Managers fail to understand the quasi integration strategies which can be superior to full integration in all respect of cost and benefit. Managers often overlook the rich array of integration benefits like joint ventures, strategic alliances, long term contracts etc. which gives more solidarity and lowers cost (Stuckey & White, When and when not to vertically integrate, 1993).
In Thermax’s case, it is likely that the company will strategize and use its global sourcing strategy to outsource the product having strict governance towards legal bindings between the buyer and the supplier, during the initial years of the product life cycle, learn the product nuances, understand the market and eventually can leverage their state of the art manufacturing facilities to develop the product according to industry needs (Manoj Purohit, personal communication, 7th February, 2017, Refer Appendix A). A company should only go for insourcing when they have core competency of the product. In sourcing a product just for the sake of cost saving can have adverse effects. (Quinn & Hilmer, 1994).

5.5 Threat of new entrants
The greater the threat of entry the more difficult it is for the incumbents. Barriers to entry are the factors that the new entrants need to overcome in order to compete in an industry. The following factors are some of the important entry barriers:
‘ Scale and experience: In some industries, economies of scale plays a very important role. In industries like automobile, pharmaceuticals etc. where initial costs are very high and the incumbents have already attained a certain economies of scale, it is very difficult to match up to them and in the process lose out on revenue.
‘ Access to supply or distribution channels: In some industries manufacturers have control over supply or distribution channels. Sometimes through direct ownership or through customer or superior loyalty. In some industries, this barrier has been overcome by new entrants who have bypassed retail distributors and sold their product directly through various media (Ex. Dell, Amazon use online selling).
‘ Expected retaliation: The knowledge that the incumbents are ready to retaliate often acts as a discouraging option for new entrants as retaliation could take the form of a price war of marketing blitz.
‘ Legal restraints: This vary from patent protection (Ex. Pharmaceuticals) to regulation markets (Ex. Pension selling). Incumbents are vulnerable to new entrants if government remove legal restraints to entry as happened in the airlines business.
‘ Differentiation: It reduces the threat of entry because of customer loyalty to a specified product. Cars are differentiated by its design and brand whereas steel is more or less a commodity, undifferentiated (Johnson, Wittington, Scholes, Angwin, & Regner, 2014).
New entrants in the industry of heat pumps: As per the interview and market research it is evident that this industry is fairly new and Thermax is itself the newest player and having pioneered a certain segment in the industry is the newest supplier in the block with this new product. So, the effect of new entrants in this segment is not very high for Thermax, it is how Thermax can challenge the growth of the existing suppliers and make place for itself in the segment. But on the other hand Thermax can make use of the opportunity to be that pioneer manufacturer which the industry of heat pump is lacking in. As per survey, to mitigate the environmental impact through the technology, a number of manufacturers has surfaced who produced commercially viable heat pumps but none pioneered in making the most energy efficient product (Chan, Yueng, Chan, & Li, Hotel heat pump hot water systems: impact assessment and analytic hierarchy process, 2013). Thermax with its R&D facilities and its brand name could well vouch to become the pioneer manufacturer in the industry of heat pumps. Selling a heat pump is not specifically selling a capital equipment but it’s more like selling a concept. Having most of the product features same with the competition, its mostly about telling a better story backed up with operational savings and good service. In this segment of the industry, since differentiation in the product attributes is very less, legal restraints in the Indian market for Indian companies isn’t something that will create a hindrance to Thermax’s flow of business and a major retaliation by a big incumbent isn’t likely as except for Bluestar, others aren’t that big to avenge a price war with Thermax. Instead of ignoring the distribution channel, Thermax can actually make use of its network of well-equipped sales and service dealer network to market the product (Prashant Singh, personal communication, 11th February, 2017, Refer Appendix A). Midea (Midea group, n.d) heat pumps are doing good business in parts of Nepal and are considered as promising new entrants into the market but again it’s too small compared to the size of Thermax (Sanjay Tulshyan, personal communication, 17th January 2017, Refer Appendix A).

5.6 Threat of substitutes
Substitutes are basically the product and services that offer similar benefits to a product or service existing in the market. For example, a Tablet computer is a substitute for a laptop. Substitutes can reduce demand of a product as customers can switch to alternatives. The risk of substitution puts a cap on the prices that can be charged in an industry. A common example would be Eurostar, the train connection between Paris and London has no competition based on trains but its price is regulated based on the alternative services of flights.
There are two very important points which must be noted about substitutes:
‘ The price performance ratio is critical: A substitute even if it is expensive often scores more than the incumbent based on performance which often acts as the differentiating factor. A common example can be cited as Aluminum which is more expensive than steel are preferred more than steel based on its durability, relative lightness etc.
‘ Extra industry effect: Substitutes are not a part of the incumbent industry. Substitutes force managers to think beyond their industry and take a far stretched approach. The higher the threat of substation, the less attractive the industry is (Johnson, Wittington, Scholes, Angwin, & Regner, 2014).
Threat of substitutes in the heat pump industry: The product itself is fairly new to the industry and it’s a product of innovation and development based on certain requirements mostly in the commercial and domestic sectors (Prashant Singh, personal communication, 11th February, 2017). There are various technologies that has come up as a result of various innovations in the various stages of product life cycle and market development. In this case it must be mentioned that the substitutes are mostly subjected to specific applications and mostly have their own markets and don’t always overlap into each other’s market (Manoj Purohit, personal communication, 7th February, 2017, Refer Appendix A). The following table gives a brief of the various substitutes that are available to heat pump technology:

Type of heaters Suppliers Application Prospects
Electric Water Heater Racold, Venus, Bajaj, V-Guard, AO Smith, Crompton Mainly in small standalone hotels and hostels located in tropical climatic areas where regular particular consumption of hot water is not very high. They will always have this market intact as many hotels where hot water requirement is less still prefers buying geezers instead of heat pumps.
Solar water heater Racold, Emmvee, Tata BP Solar, Nuetech, Sudarshan, V- Guard Hotels, Hospitals and has specific application in areas where fuel and electricity availability is scarce. Good prospect as market trend is towards renewable energy. Use of the sun’s radiation to produce energy has started. This will have major specific application.
Gas water heater Racold, Bajaj Hotels and Hospitals (EPTA Ltd., 2007)
Have good prospect. The central government has sanctioned pipe line extension in the north East of India which can make gas cheaper (Hydrocarbon Vision 2030, n.d).

Free standing boilers Thermax, Forbes Marshall Hotels, Hospitals, Sauna and Swimming pool etc. A proven technology. Finds major application where electricity is scarce and has a replacement market in hotels and Military services.
Table 12 Substitutes in the heat pump industry (Refer Appendix A)

5.7 Key Success Factors
There are multiple factors responsible for a product being successful in a new market place. One has to judge the market key factors to success based on factors like goodwill, product, price, service etc. Building loyalty in business markets could be the key. Business markets are completely different to consumer markets and demands a lot of personal attention as most of the customers look for personalized products. One of the ways forward is to make an array of facilities provided to be known among customers, clear tangible and intangible financial and non-financial benefits and specifically linking and highlighting benefits to decision makers. Use word of mouth marketing, invest time into switchers to attract them to be loyal customers (Narayandas, 2005). Selling heat pump could be compared to selling a concept since product differentiation is minimal and the market is very price sensitive (Prashant Singh, personal communication, 11th February, 2017. Refer Appendix A). As per the interviews, the major factors that will differentiate the product as a key factor would primarily be price, reach and service of dealer network (Arnab Rahut, personal communication, 3rd March, 2017, Refer Appendix A). Price set by Thermax is at per with the highest in the industry and Thermax can win on price only by negotiating better price with its vendors or capitalize on reach and service. Thermax has vastly expanded dealer network with very good reach and good service capabilities. This could be a deciding factor for the product to be successful. Since Thermax is a known name in the market in the industrial product segment, they can stretch the goodwill and leverage the brand name that it has in the market. It is in a way easier for Thermax to sell a concept than its relatively smaller competition (Prashant Singh, personal communication, 11th February, 2017, Refer Appendix A). Also, since the product is presumably in the growth stage of its product life cycle, Thermax should ideally invest into promotional activities and make the product known in the market (Manoj Purohit, personal communication, 7th February, 2017, Refer Appendix A & Arnab Rahut, personal communication, March 3rd, 2017, Refer Appendix A).

5.8 Industry trends
Product wise the key trends in the hot water industry is the development and innovation of solar water heaters which are environment friendly and economical (Manoj Purohit, personal communication, 7th February, 2017). Yes, it is seen that the CAPEX (Capital expenditure) for solar water heaters are high but eventually the ROI is reached in lesser time as the OPEX (Operational Expenditure) is low (Refer Appendix C). The product is also very ecofriendly and government has announced up to 25% subsidy under the Modified special incentive package scheme (M-SIPS) on solar products (Gulia, 2016) in case Thermax develops its hybrid technology heat pump. This drives the innovation and gives a boost to the product to a very large extent. Also there has been substantial development of new technologies in form of Air water heaters which are low cost operating and user friendly. Technology wise there has been a continuous development to the product to achieve a certain level of performance with the help of renewable source of energy like solar. Companies are investing many fold on their R&D’s for the product development (Manoj Purohit, personal communication, 7th February, 2017, Refer Appendix A). Distribution wise, large players like Racold, Bluestar are expanding their retail outlets (Job, 2013), appointing new real estate dealers and increasing their presence in Tier 2 and Tier 3 cities. Marketing and Promotional strategy wise companies have started investing on new technologies to promote the product with the use of new age media. The industry segment is poised to grow at a substantial percentage of 9%-11% due to a combination of reasons like growth in tourism, industries and FDIs (Manoj Purohit, personal communication, 7th February, 2017, Refer Appendix A).
Also, as per data, the graph of the number of hot water generators sold over a period of 4 years gives a clear indication that the future of the conventional hot water boilers is on a downward slope and has not grown in spite of so many new gentrification projects lined up.

Figure. 11 Annual sales of AMW (Arnab Rahut, personal communication, 3rd March, 2017, Refer Appendix A).
The above figure clearly states that the demand of AMW is on a decreasing slope and Thermax’s introduction of heat pump clearly points that the innovation technology of heat pump is responsible for the division of the market and gives an indication of the market shift.

5.9 Long terms prospects
Indian society showcases one of the highest growing middle class in the world as India has climbed up 13 positions to get a ranking of 52 in Tourism and Travel competitive index. India promises to generate 13.45 Million jobs in the coming years in hospitality industry. Outbound trip has increased by 8.7 percent and inbound trips increased by a cumulative rate of 6.8% during 2010-2015. Arrival of foreign tourists increased by 11.8 % and in Incredible India Tourism Summit, MOU’s worth US$2.24 Billion have been signed. Accor Hotels, Marriot, Steinberger, Key, Radisson etc. to name a few, have declared and shown interest in expanding more into Indian markets specially in Tier II and Tier III touristic cities (India Brand Equity Foundation, 2017). As is evident from the above account and data it is evident that India promises to come up with new hotels and there will be a serious shift in the infrastructure of the country. The country is at present going through certain major gentrifications. This will have direct impact on the industry of heat pump as all the hotels shall require substantial supply of hot water on a regular basis. So, the product clearly has great promise for a long term growth. The industry of heat pump is poised to grow at a steady rate of 9%-11% as well (Manoj Purohit, personal communication, 7th February, 2017, Refer Appendix A). So, there is a good long term prospect of the product. The market is picking up, every supplier of the product is heavily investing time and money on getting better facilitated products into the market and also there has been a fast growth in the development of the solar hybrid heat pump which is touted to be the next big thing by the experts (Manoj Purohit, personal communication, 7th February, 2017, Refer Appendix A). Also, operational cost of heat pump as is shown in cost analysis (Refer Appendix C) is nearly half compared to hot water generator boilers with aesthetic design and minimal footprint. There is a possibility that in the future, government could introduce subsidy on the product as it has done with solar products through its governing body MNRE (Ministry of new and renewable energy) (Governement of India: Ministry of new and renewable energy, n.d) and its NABARD scheme where it provided 40% subsidy on capital cost of solar PV systems in both rural and urban set up (Bijli Bachao Team, 2016). Heat pumps are subsidized in many countries starting from the USA, UK, Australia and Japan to counter the issue of high initial cost and insufficient recognition of benefits. The use of heat pump will be highly recognized if the thermal energy they captured would be given a renewable energy status worldwide (The International Renewable Energy Agency(IRENA), 2013). Also, due to the alarming growth in pollution rate in India, the pollution norms in the country has got more stringent and as a result there are restrictions in using alternative energy solution in form of fuel fired boilers which run on nonrenewable hazardous fossil fuel (Samik Roy- BCG, personal communication, 12th January, 2017, Refer Appendix A). So, the obvious solution is the next generation heat pump or even better the hybrid solar heat pump. So, in this way as well, the long term prospect of the product seem formidable and the time also seems to be appropriate to introduce and develop a product like heat pump.

6 Testing of Hypothesis: Cost analysis
After discussing over various aspects of positioning, product portfolio, make or buy decision, late to market products strategy, various factors that affect the ecosystem of a product life cycle through various qualitative data and business literature, its apt to discuss the real applicability and acceptability of the product in terms of positioning and product portfolio decisions based on real life cost calculations:

6.1 Product portfolio:
Null Hypothesis (H0): For multiple point application/multiple machine in the same site, kind of applications (in army camps, hotels) and where electricity supply is consistent, it is a cost effective option to use heat pumps instead of the conventional hot water generating boilers considering the ancillary costs of engineering, commissioning, erection and fabrication of interconnecting pipe lines makes the cost to set up a hot water generator higher compared to a heat pump. In such condition, heat pump shall be the most popular choice.
Alternative hypothesis (H1): For multiple point and machine application (same as mentioned above) in a standards condition (consistent electricity supply), conventional hot water generator is a more feasible and cost effective option compared to heat pumps.
Product portfolio analysis: To begin with a storyline of a hotel based out of Kolkata, India which is touted as one of the metros of the country with all modern facilities and basic amenities like regular supply of electricity and water. Here, we shall discuss about the possibilities to place the product heat pump (ANX) and the hot water generator (AMW) and how. As per figure 12, though AMW equipment is cheaper to two equivalent capacity of ANX by 56.5%, but AMW attracts 21.4 times its installation cost compared to ANX which makes the CAPEX go higher for AMW in the prescribed condition. So, considering all the points of capital investment, AMW attracts a total of 19% (Refer Appendix, C, VIII, Figure 16) more capital investment against the same capacity of ANX.
Operational expenditure (OPEX) wise, AMW is 64% (Refer Appendix C, IX, Figure 17) more expensive than ANX of the same capacity in spite of ANX consuming 94.5% more in terms of cost of electricity (Refer Figure 13). The cost of diesel incurred by AMW is way higher considering its daily consumption and outruns the savings from the cost of electricity.

Figure 12 Product portfolio: CAPEX (Refer Appendix C, VI Product portfolio)

Figure 13 Product portfolio: OPEX (Refer Appendix C, VI Product portfolio)

So, as per the above data and observation it can be concluded that the above mentioned null hypothesis for product portfolio stands true and Thermax having both the products in the product portfolio has the liberty to choose wisely as to which product will attract the customer and help them bag the order (Refer Appendix C, VI, cost calculation).

6.1 Positioning:
Null Hypothesis (H0): There are certain north eastern states in India where oil (diesel and petrol) is subsidized by the state (My Petrol Price, 2016). Also there are a few states where availability of electricity is scarce (Power & Electricity Department: Government of Mizoram, n.d). There, due to the low price of diesel and scarcity of electricity, hot water generator is a more viable option and Thermax shall always position its conventional product, hot water generating boiler (AMW) ahead of the heat pumps (ANX) in those cases.
Alternative hypothesis (H1): In these special subsidized conditions, positioning the new generation heat pump (ANX) shall be more effective positioning compared to the conventional hot water generators (AMW).
Positioning analysis: In this case the storyline is of a hotel based out of Aizwal, Mizoram, India which is one of the north eastern states of the country, deficient to a certain extent towards basic amenities like regular supply of electricity (Power & Electricity Department: Government of Mizoram, n.d). Here, we shall discuss about the possibilities to position the heat pump (ANX) or the hot water generator (AMW) and how. As per figure 14, though AMW is cheaper to two equivalent capacity of ANX by 56.5%, but AMW attracts 21.4 times its installation cost which makes the CAPEX go higher for AMW in the prescribed condition. But again, since regular consistent supply of electricity in the region is under scanner, the buyers are forced to be dependent on diesel generators (DG set) for continued operation of their equipment. An equivalent capacity of DG set is priced at approximately INR 5.3 Lacs which makes the CAPEX go higher for ANX by 6% compared to AMW.
Operational expenditure wise, ANX is 42% more expensive than AMW of the same capacity for reasons as ANX consumes 94.5% more in terms of cost of electricity. The cost of diesel incurred by AMW is higher but in this case by 27.5% by consumption per day which adds up to ANX being more expensive in terms of day to day OPEX by 42% (Refer Appendix C, IX, Figure 17). Also, here it should be noted that in the north eastern states of India, there is good gas pipeline network available plus the government has plans to extend its gas pipe line networks through the North eastern states of India connecting India with Myanmar and Bangladesh (IANS, 2016). It supports the use of AMW ahead of ANX or any other heat pump technology for that matter as AMW works on both HSD and natural gas and the users will not have to be dependent on DG set for continuous operation. Also use of natural gas substantially reduces CO2 emission and though the energy saving with heat pump is high, it is compensated by a substantial increase in CO2 emission which is nullified in natural gas (Chan, Yueng, Chan, & Danny Li, Hotel heat pump hot water systems: impact assessment and analytic hierarchy process, 2013).
As per the discussion, observation and cost analysis it can be said that the above mentioned null hypothesis for positioning stands true (Refer. Appendix C, VII, cost calculation).

Figure 14 Positioning: CAPEX (Refer Appendix C, VII Positioning)

Figure 15 Positioning: OPEX (Refer Appendix C, VII Positioning)

6.2 Conclusion
So, from the above cost calculation (See Appendix C) and the primary data collected through qualitative research method, it is evident that for multiple point application, like that in large building complexes or hotels and in case of spread out camps, due to its low operational expenditure and less cost incurred in putting up the interconnecting pipe lines in the system, heat pump (ANX) stands out to be a more viable option than the hot water generating boilers (AMW). On the contrary for hot water applications in places where there is dearth in continuous round the clock supply of electricity and due to its subsidized low fuel cost, like that in the North-eastern states of India, the conventional hot water generator appears to be a more viable option compared to the heat pump. In terms of operational cost, though the basic parameters remain the same but due to the addition of a mandatory diesel generator set, the CAPEX and OPEX becomes higher for heat pumps. Another parameter why hot water generator is preferred over heat pumps in the North-eastern states is because of the reason that the government has laid gas pipe lines across most parts of the region which supports the idea that heat pump is a more viable product, in terms of availability of gaseous fuel. Also in the years to come, by 2030, there are plans to increase the pipeline capacity and plans to lay more pipelines is in the process (Hydrocarbon Vision 2030, n.d). This should encourage manufacturers and buyers of Hot water generating equipment to choose the conventional Thermax hot water boiler instead of heat pumps in these states.

7 Qualitative method of data collection
7.1 Semi-Structured Interview
The interviews conducted can be described as a semi-structured interview where predetermined candidate specific questions were asked with scope for open ended answers. The purpose of these interviews is to explore the views, experiences and beliefs of expert individuals on specific matter. Interviews are mostly important when something is already known about a specific subject and a few more specific details are required from specific experienced personnel (Gill, Stewart, Treasure, & Chadwick, 2008).

7.2 Interview methodology:
Primary Respondents Methodology
Interview with Key stake holders ‘ Thermax product manager of Heat pump
‘ Thermax Sales Manager of Eastern India and Nepal
‘ Nepal Thermax dealer proprietor
‘ Eastern India Thermax dealer proprietor
‘ Ex- Bluestar Employee who worked with Bluestar when they introduced heat pump in the Eastern Indian Market
‘ Snowballing (Edwards & Holland, What is qualitative interviewing?, 2013) concept is used in some cases where the product manager could be reached through the sales manager. ‘ Data collection and Management: Primary interview conducted among various stakeholders with open ended, neutral and sensitive relevant questions.
‘ Organizing and preparing data: Structured approach to information gathering and assessment; information aligned to meet thesis objective.
‘ Coding and describing data
‘ Classifying and categorizing respondents: Respondent groups fine-tuned based on market realities.
‘ Connecting and interrelating data
‘ Interpret and provide meaning to the interviews based in individual experiences and knowledge of the interviewees.
‘ All interviews done according to the comfort of the respondent and all data recorded over email (Edwards & Janet Holland, 2013).

Table 13 Interview methodology (Hoyos & Barnes, 2012)

7.3 Interviewee Selection
Based on substantial experience in the field, interviewees were selected, topic specific data provided and in depth knowledge about the market and the product is shared by the experienced personnel. The participants were free to express their views and the semi- structured interviews were done over formal email exchanges within specified time frames (Winstanley, n.d). The personal attributes, traits and contact profile are shared on top of every individual interview and also in the appendix A.

7.4 Method of data analysis
All the interviews are transcribed and coded manually and basic way of analytic coding is used to develop concepts. Though qualitative data analysis poses various questions on the grounds of being manipulative, biased, over suppressed among piles of data and less expressive in nature with the amount of words used to explain, still the data is collected (Kapoulas & Mitic, 2012), coded manually and basic or the manifest level of content analysis is done. The original versions of the interviews are displayed in the Appendix as screen shot.

7.5 Summary of research method and data collection
The data collected are examined un-biasedly with careful administration, data collection and storage ensures that no biasedness is entertained and accurate information is collected and examined. The details of the five interviews conducted can be viewed in the appendix A.

8 Conclusion
The topic describes positioning and market entry strategies considering product portfolio decisions. It describes the factors on why a company choose to enter a market late is characteristically explained by relatively similar product offering in the market, low market growth but promises to pick up, unsatisfactory customer feedback with existing products and if the distributors are willing to expand their portfolio (Paul, Marketing Strategies For Late-to-Market Products, 2010). It is interesting to analyze the topic based on the strategies a company must adapt to enable a successful run namely: Low price advantage, create or suggest added value (price and non-price value), exploit ease of use advantage, Non price incentive, outsmart or outsell competition etc. (Paul, Marketing Strategies For Late-to-Market Products, 2010). The topic throws light on the concept as to how a company pioneered in a market becomes a follower in a certain segment with the introduction of an innovation in the market and again set its path to becoming the pioneer with its existing and the new ‘innovation’ product. It describes the advantage a pioneer or a first mover in spite of the disadvantages like higher investment incurred during product innovation stage of the product life cycle, heavy spending on advertisement and promotion etc. still becomes profitable market leaders (Gurumurthy & Kalyanaram, 1998). It also describes the agility required by the late entrants by tapping the loopholes like ‘lack of superior customer service, change in cost equation by introduction of new technology, innovative distribution strategy and lastly low price offering.’ (Gurumurthy & Kalyanaram, 1998). The topic also describes the defense strategies of the pioneer like ‘increase the barriers to entry, innovate faster than late comers and build a market responsive and flexible organization’ (Gurumurthy, 1998). The study gives us the opportunity to analyze the marketing strategy framework based on market dynamics, capability assessment and offering and strategy formulation. The discussion also answers the generic constraints and questions that arise in a business place like product portfolio decision, time to market, pioneer vs. late arrivals and how to tackle the situation, insource or outsource and positioning decisions based on differentiation innovation leadership, cost leadership or focus strategy. Lastly, the study clears out the product portfolio and the positioning decision based on real life cost analysis of two different situations in a market and where and what product to be placed in which situation.

8.1 Recommendation to introduce the product in the market
The study provides enough insights as to how to position the product in the market which can be summed up in a nutshell. To start off with, Thermax should introduce the product through the technical and the operational team of potential customers, regular meeting with major consultants and push them to spread the word out, show cost benefits of the product in comparison to electric heaters and stand-alone boilers wherever applicable and point out the differentiating factors of Thermax product when competing with heat pump of other companies, organize launch program with dealer concern in strategically important locations and invite existing, loyal and potential future customers along with original equipment manufacturer, architects etc. Establish good relations with HRAEI (Hotel and Restaurant Association of Eastern India), MEP (Mechanical Electrical and Plumbing) Consultants, and architects and try to pitch in the product at their respective board meeting with their permission. Participation in various Tourism Expos, hotel expos to make the presence felt in the market. Another big advantage of Thermax is its successful water and boiler division and the vast number of products it has. A Thermax representative can always pitch in the product to clients along with their regular products on a sales call. This can be of immense advantage to Thermax to let the product out and known in the market. Also, Thermax should target the specific temperature applications like that in Dairy, Pharmaceuticals, Textile, Swimming pool complexes etc. which are still relatively unchartered territory and lacks specialized product availability and company attention. Creating a good reference always boosts the attributes of the product. Thermax can benefit by creating good references and make use of those references to increase the desirability of the product among its peers. Since the world today believes in multi-channel marketing, Thermax can make use of their android application platform to promote the product as well. Finally, since this is a fairly nascent market where no incumbent is so strong as to control the entry and exit of participants, so it is evident that market knowledge is also not extremely wide spread. So, in a way, Thermax can recruit sales engineers who have substantial knowledge about the market, having worked with companies to develop a certain market segment, can be a good option. These new faces, who have worked closely from the grass root level with competition companies can give a new outlook to developing the market for Thermax. These market-sound professionals can provide a powerful prescription to buyers in a price sensitive multi supplier market. These personnel can map the journey based on their efforts through the buying process, identify barriers by introspecting and retrospection of the challenges sellers face through the journey and how can they improve, design prescription based on real life situation and track customer progress in every step of the sale (Toman, Adamson, & Gomez, 2017). The steps can help win over customers and establish the product in the market. Also certain initiatives are to be taken to rope in urban real estate dealers who have knowledge and reach in the real estate markets and push the product through them to the growing real estate industry of India. This will be one of the major initiatives that Thermax can take so that specialized efforts could be given by these specialized dealers to establish the product in a market which is growing every year (McMillan, 2016). Lastly an experiment to introduce and implement the practice of remote hot water delivery with water trucks to various hotels and resorts. This will eliminate the emission greatly and pollutants will be strictly restricted to pollution from operation of the trucks. The hydrogen fuel truck has recently gone final testing and shows great promise. This can be a promising move for small and medium hotel owners who would not want to engage space and capital investment into setting up a hot water generating plant. Also to justify the best performance of the product, in some big buyer accounts (specially large hotel chains) who promised regular business, free on site trial could be carried out (Chan, Yueng, Chan, & Danny Li, Hotel heat pump hot water systems: impact assessment and analytic hierarchy process, 2013).

8.2 Limitation of the work
The study was limited to point of view of personnel within the organization and its competition. At the same time interviews were conducted with the best managers and Managing directors of their respective businesses which ensures the best, authentic and real market answers to my questions. Since the product is still in the introduction stage, permission to interview a customer and know his take on the product was not granted. Also, due to company policy, the details of the organization(s) from where Thermax outsources the product couldn’t be revealed.

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