Marketing Strategy and Practice
Marketing Mix and Strategy Analysis of Cincom Systems
Based on an analysis of the enterprise software industry and the unique position that Cincom Systems has within it, this firm has been chosen for an analysis of its marketing mix and international market entry strategy into China. Cincom has invested for over a decade in China, focusing on its Acquire systems for sales and product configuration (Asia Computer Weekly, 1998). The core business of Cincom is their Enterprise Resource Planning (ERP) system, CONTROL, which has achieved significant success in manufacturing and has a very stable technology platform on the Microsoft .NET architecture (Baer, 2002). The purpose of this analysis is to evaluate the market growth and trends influencing Cincom and their core ERP business, evaluating the marketing mix and international marketing strategies as well.
Market Growth and Trends
The majority of the growth in the Enterprise Resource Planning (ERP) market, which is a significant segment of the enterprise software market, is going to be in the areas of maintenance and subscriptions. These are areas that Cincom is well-positioned to excel in, as they have a large, diverse customer base in core manufacturing industries and have over time been able to attain a significant recurring revenue stream. ERP systems are used for orchestrating the many functions, processes and procedures throughout a manufacturing organization to guide the sourcing, supply chain, production planning and quality management of finished goods. Cincom has a unique niche in this market as it relies on a series of innovative mass customization strategies including configure-to-order and engineer-to-order process workflows that give its customers flexibility in how they product products for their customer bases. Cincom shares many attributes with the ERP market with its much larger competitors Oracle and SAP in that it supports the entire fulfillment and production process. Given the complexity businesses face in producing their products, ERP systems generate well over $50B in revenue globally a year. The Forecast for Global ERP market, 2011 to 2015 shows the growth of this area of the enterprise software market to the left.
Figure 1: Forecast, Global ERP Market, 2011 to 2015 source: Forrester
Key Competitors
Cincom faces competitors across many of its core manufacturing industries including Aerospace & Defense (A&D), Heating, Ventilation and Air Conditioning (HVAC) and Specialty Vehicles. Each of these industries has highly specific requirements, many of which Cincom’s larger competitors including SAP, Oracle, Sage Group, Infor and Microsoft cannot reach. An analysis of ERP vendor’s total revenue is to the right (source: Forrester and (U.S. Technology Report, 2011).
Marketing Mix
The marketing mix for the Cincom CONTROL product is provided here. The product, price, place and promotion aspects of their ERP system are next analyzed.
Starting with the CONTROL ERP platform. Which is the product, this platform has specifically been designed to support the Project Management Office (PMO) requirements of a complex manufacturing business. As the workflows are designed specifically to support Bill of Materials (BOM) definitions and engineer-to-order workflows, Cincom has created a series of analytics and key performance indicators to evaluate the performance and contribution of their systems to customers’ value.
The pricing of the Cincom CONTROL system is competitive to comparable ERP systems globally and has a wide variety of site licensing programs. Pricing is defined by per-seat, per-processor and through site licensing, which provides Cincom with greater levels of flexibility relative to competitors. Cincom is also unique in that it relies on a value-based licensing model if the customer requests it where the costs of the software are defined by the value delivered.
From the place or distribution standpoint, Cincom relies on a direct sales force for the majority of its sales. This translates into the sales force for Cincom visiting the companies who are interested in purchasing their solutions and providing conference room pilots or demos of their software. Cincom also concentrates on creating demos that match to the needs of their customers exactly, by first evaluating the process workflows and procedures that are most in need of improvement within a customers’ business. Cincom will model a customers’ entire business to provide insights into how their software can streamline the overall production process.
Finally on the promotional aspect of their marketing mix for CONTROL, Cincom relies primarily on customer references and a series of videos of customers sharing how the ERP system has helped to streamline their overall operations. There is also a series of brochures and data sheets, and self-running demos so customers can learn more about the system. Cincom uses customer references more than any other approach to gain new customers and instill trust in their ERP system.
International Marketing Strategies
Cincom has for over a decade sold into the Chinese market (Asia Computer Weekly, 1998). Starting first with the Cincom CONTROL ERP system and later with Acquire, Cincom has continually invested in this region of the world as the pace of manufacturing growth has been far above the rest of the world. As a result, Cincom has had significant success.
One of the factors that has also helped Cincom move into the Chinese market is the remarkable number of ERP system failures by its competitors. It is well-known that the majority of ERP implementations within China fail due to a lack of culture fit or consistency (Xue, Liang, Boulton, Snyder, 2005). Cincom uses a variety of strategies for ensuring success in China, with the most common being partnering in Joint Ventures (JVs) to ensure those with more expertise in a given region of China can guide the company’s success. Cincom also relies on the Hofstede model (Hofstede, McCrae, 2004) and other comparable cultural frameworks to gain greater understanding of core markets. Using the Hofstede Model of Cultural Dimensions, the cultures of the U.S. And China are compared in the figure to the right.
Source: http://www.geert-hofstede.com/hofstede_dimensions.php?culture1=95&culture2=18#compare
The Hofstede Model of Cultural Dimensions shows that the Chinese have a significantly greater tolerance non — the Personal Distance Index (PDI) meaning they tolerate hierarchical organizations and their role in them much more than Americans do. The Long-Term Orientation (LTO) of the Chinese is also significantly greater, showing how time itself is perceived completely differently by this nation relative to the U.S. All of these factors are taken into account in how Cincom chooses a Joint Venture partner and addresses An emerging market.
References
Cincom acquires a foothold in China. (1998, July). Asia Computer Weekly,1.
Tony Baer. (2002, March). Apps vendors take sides. MSI, 20(3), 16-19.
Geert Hofstede, & Robert R. McCrae. (2004). Personality and Culture Revisited: Linking Traits and Dimensions of Culture. Cross – Cultural Research, 38(1), 52-88.
Don Klaiss. (2008, May). Open source ERP. Industrial Distribution, 97(5), 20.
United States Information Technology Report – Q1 2011. (2011, January). United States Information Technology Report,1-67.
Yajiong Xue, Huigang Liang, Wiliam R. Boulton, & Charles A Snyder. (2005). ERP implementation failures in China: Case studies with implications for ERP vendors. International Journal of Production Economics, 97(3), 279-295.
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