Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e

20. Managing Marketing’s
    Link with Other Functional
    Areas

Text © The McGraw−Hill

Companies, 2002

Managing Marketing’s Link with Other Functional Areas 587

approach that Sara Lee is taking. It’s selling off the factories that make its apparel

products—brands like Champion and Hanes and Playtex. The idea is that Sara Lee

will just buy the goods that it wants from independent manufacturers who will pro-

duce to its specs. The company thinks that this is attractive to investors because it

moves the company away from running knitting machines, which “is a business of

yesterday,” and into the knowledge business of building its brands. However, this

could be risky. Sara Lee will still be competing in a low-growth, mature market

whether it does the manufacturing or someone else does. Further, the reputation of

a brand often depends on the quality of the manufacturing behind it.

Of course, some firms are making this work and work well. At the extreme, a

firm may even act like a virtual corporation—where the firm is primarily a coordi-

nator—with a good marketing concept. Consider the case of Calvin Klein fashions.

At one time Calvin Klein was a large manufacturer of underwear and jeans. How-

ever, the company was better at analyzing markets, designing fashions, and

marketing them than it was at production. So the firm sold its factories and arranged

for other companies to make the products that carry the Calvin Klein brand.^8

Outsourcing production may increase a firm’s flexibility in some ways, but costs

are often higher, and it may be difficult or even impossible to control quality. Sim-

ilarly, product availability may be unpredictable. If several firms are involved in

producing the final product, coordination and logistics problems may arise.

A company with a line of accessories for bicycle riders faced this problem when

it decided to introduce a water bottle. Its other products were metal, so it turned

to outside suppliers to produce the plastic bottles. However, getting the job done

required three suppliers. One made the bottles, another printed the colorful designs

on them, and the third attached a clip to hold the bottle to a bike.

Moving the product from one specialist to another added costs, and whenever

one supplier hit a snag, all of the others were affected. The firm was constantly

struggling to fill orders on time, and too often it was losing the battle. To avoid

these problems, the firm invested in its own production facilities.^9

Because production flexibility can give a firm a competitive advantage in meet-

ing a target market’s needs better or faster, many firms are trying to design more

flexibility into their operations. In fact, without flexible production it may not

be possible for a firm to provide business customers with just-in-time delivery or

rapid response to orders placed by EDI or some other type of e-commerce reorder

system.

A firm that outsources some or

all of its production may have

more flexibility to enter attractive

new product-markets.

Design flexibility

into operations