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DOES NICHE MARKETING LEAD TO BUSINESS SUCCESS? THE CASE OF M.C. TAMURA
Luz T. Suplico-Jeong, De La Salle University-Manila
ABSTRACT Does market niching lead to business success? Maria Cecilia G. Tamura has used this strategy in managing her businesses. These businesses are Okasaki Industrial Corporation, which is engaged in import and export, and Airily Corporation which is mainly a Business Process Outsourcing (BPO) company. The case discusses how a female employee, who later became the employer, use market niching and product life cycle as business strategies. In so doing, the case shows an example of how a highly motivated woman entrepreneur managed her businesses through good and bad times. THE ENTREPRENEUR Women entrepreneurship has been significant in economic development. The Philippines has compared favorably with other countries in women entrepreneurship. Based on a survey conducted by Let’s Go Foundation and GE Bank, Filipino women have a fairly equal chance of making it big as entrepreneurs (http://www.womenentrepreneurship.org). According to Tara Brannigan (2005), women entrepreneurs have formed businesses to make a better living for themselves. The sense of adventure and the thrill of challenge have motivated them to organize their businesses. The rise of women entrepreneurship has allowed women to create jobs for themselves and to create jobs for others. Female traits, such as patience and attention to details, have influenced their management styles and business success. One female entrepreneur that has been patient in developing markets for her products is Maria Cecilia Gumban Tamura. She joined Okasaki Industrial Corporation in the Philippines in 1985 as Head of Human Resources Department. The Philippine office was a liaison office of the mother company in Japan. It was set up to bid for the Light Railway Transit (LRT) project. Unfortunately, Okasaki lost the bid. To sustain its operation in the Philippines, Okasaki engaged in the trading business. Dealing with the business market, Okasaki’s clients are businesses that can afford to buy high-end industrial products with the best quality. A person who always wants to learn as much as she could, Tamura was also taking MBA courses while enrolled as a law student. Okasaki Industrial Corporation, like any Japanese company, was very male-oriented. In this work environment, Tamura had to prove her worth. It seemed that she was the first to arrive in office and the last to leave in spite of her law and MBA courses at that time. Tamura invested in books and technical training to be able to learn as much
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as she could about Okasaki and its industrial products. She researched as much as she could and worked on developing sales contacts for Okasaki’s products. When asked what made her an entrepreneur, Tamura said that being an entrepreneur was the last thing that she had in mind. She wanted to be an excellent medical doctor or lawyer. She was good in writing, math and the arts. She became an entrepreneur because she enjoyed challenges, especially in converting non-selling or slow-selling products to “winners”. Aware that product sales can go up and down, she was always on the lookout for products whose sales can be profitable for the company’s clients, which are industrial companies that can afford to buy quality products at expensive prices. She also enjoyed the challenge of being able to sell industrial products in a market dominated by male sellers because men are more knowledgeable about industrial products than women. Tamura and countless other Filipino women have dominated today’s business world. According to data provided by GE Money Bank Philippines, the Philippines has the second highest percentage of women in business, next only to Peru (Dumlao, 2009). Fifty- one percent of new businesses in the Philippines are put up by women, implying that Philippine society accepts or welcomes entrepreneurship among women. Unlike Tamura, however, these women are normally in the following businesses (Dumlao, 2009): manufacturing (41%), garments, jewelry and furniture (37%), marketing (9%), real estate (7 %) and other businesses (6%) such as food processing and health and beauty. MARKET NICHING AND PRODUCT LIFE CYCLE STRATEGIES AT OKASAKI INDUSTRIAL CORPORATION Okasaki’s Japanese General Manager assigned Tamura to work on an industrial product that was not generating revenues. Zinc ingots were being introduced to the market at that time. After studying this product, she knew that this was a metal for foundry use, which was stronger than cast aluminum. Armed with these products to sell, Tamura patiently marketed her products to Jacinto Steel for four long months. About to give up after many unproductive sales calls, she chanced upon the Managing Director of Jacinto Steel in one of her sales visits. Jacinto Iron and Steel Sheets Corporation is a manufacturer and distributor of galvanized iron sheets and other construction materials. With this rare opportunity to sell her products to the Managing Director directly, she talked how her zinc ingots were much better than the competitors’ products in terms of quality. Although these were more expensive than the competitors’ products, these would yield more customer satisfaction. In her heart, Tamura knew that she found a niche. Market niching is a strategy where the firm goes after a segment of the market as opposed to a large share of the market (Kotler, Armstrong, Ang, Leong, Tan and Hon-Ming, 2009). According to Kotler et al, niching is particularly viable for Asian businesses because it offers smaller companies an opportunity to compete by focusing on serving niches that maybe unimportant or overlooked by bigger
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companies (2009). Market niching allows the firm to achieve a stronger market position than its competitors because the firms become more aware of customers’ needs in the niche that it serves. It also allows the firm to market to the needs of a carefully defined niche that it can serve best and profitably. Examples of firms that that were successful market nichers are Apple and Air Asia. With only 2% share of the market for personal computers in the world, Apple decided not to compete head-on with the market leader but it invested in research and development and became known as a trendsetter (Kotler et al, 2009). On the other hand, Air Asia served the niche of intrastate, no-frills and price-conscious commuters in Malaysia. It has expanded to serve regional destinations such as Thailand, Indonesia, Macau, Xiamen in China, Vietnam, Cambodia, Brunei and Myanmar (Kotler et al, 2009). Tamura decided to use market niching as a strategy. Further, she also studied how to deliver customer value. Customer value is the unique combination of benefits that includes price, quality, convenience, timely delivery and pre-sale and post-sales service (Kerin, Hartley, Berkowitz and Rudelius, 2006). According to Kerin et al, studies show that successful firms have chosen to deliver outstanding customer value with one of the three value strategies: best price, best product and best service (2006). Tamura chose to deliver customer value with best product and best service. Two months dragged after her sales presentation before she was finally able to get a full container load of order. Her hard work paid off when Jacinto Steel continued to order regularly after the first order. Tamura credits her feminine virtues of patience and perseverance in this lucky break. If she was a man, she would have stopped after the long and agonizing four months of sales calls to Jacinto Steel. She would never have gotten this lucky break. Tamura believes that women entrepreneurs are patient and dedicated because these traits are needed in managing a home. According to her, there are people who underestimate women entrepreneurs but women’s work from managing a company to managing a home does not end. Due to the traits of patience and dedication, women entrepreneurs excel in negotiation. Tamura believes that she is lucky that the Philippines has a supportive environment for women entrepreneurs. This support for women entrepreneurs has enhanced the success of Filipino women entrepreneurs. Hill, Carraher and Carraher (2004) explained that women were successful in their companies, whether as employer or employee of an enterprise, because of their social skills that men were observed to lack. Further, women were more stable when it came to receiving feedback from superiors, appreciative of the team concept and better in relationship-building with clients (2004). The strong relationship between Jacinto Steel and Okasaki led to steady sales of zinc ingots. Tamura knew that zinc ingots have grown from the introduction stage to the growth stage of the product life cycle. Presently, zinc ingots are in the maturity stage of the product life cycle. Although not all products follow the product life cycle, it is beneficial for the firm to know that
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products undergo different stages from product development, introduction, growth, maturity and decline (Kotler et al, 2009). Table 1 shows the product life cycle characteristics and strategies.
Table 1 PRODUCT LIFE CYCLE CHARACTERISTICS, OBJECTIVES AND STRATEGIES Characteristics Sales Costs Profits Customers Competitors Strategies Product Offer a basic product Use cost-plus pricing Build selective distribution Build product awareness among early adopters and dealers Use heavy sales promotion to entice trial Offer product extensions, service warranty Price to penetrate market Build intensive distribution Build awareness and interest in the mass market Reduce to take advantage of heavy consumer demand Diversify brand and models Price to match or beat competitors Build more intensive distribution Stress brand differences and benefits Increase to encourage brand switching Phase out weak items Cut Price Go selective : phase out unprofitable outlets Reduce to level needed to retain hardcore loyals Reduce to minimal level Introduction Low Sales High cost per customer Negative Innovators Few Growth Rising Sales Average cost per customer Rising profits Early Adopters Growing number Maturity Peak Sales Low cost per customer High profits Middle Majority Stable number beginning to decline Decline Decreasing Sales Low cost per customer Declining profits Laggards Declining number

Price Distribution

Advertising

Sales Promotion

Source: Kotler, Armstrong, Ang, Leong, Tan and Hon-Ming, 2009

Tamura knew that there were other products which had increasing sales, As a strategy for a product in the growth stage of the product life cycle, she offered service warranty for her capillary tubes. Capillary tubes are used for air-conditioning units. It took her twelve months of persistent sales calls to be able to have her much-needed sales break from Concepcion Industries. Founded in 1960s, Concepcion Industries produces electrical appliances such as air-conditioning units and refrigerators. Its famous brands include Carrier, Condura and Kelvinator. Knowing that she had to build strong relations with this client, she offered customer value. This meant that she delivered the best product with the best service.
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Tamura’s marketing efforts did not go unnoticed. When there was a vacancy for the General Manager position of Okasaki in 1988, Tamura was appointed as General Manager. During this time, she would also meet Mr. Tom Tamura; Chairman of the Board of Okasaki. Mr. Tamura courted Tamura for years before Tamura finally said yes. After their marriage in Hawaii, they decided to settle in the Philippines and manage Okasaki. As General Manager and co-owner of Okasaki, Tamura embarked on selling soldering iron from Japan. Okasaki is known as the distributor of soldering iron whose service, quality and delivery became the company’s hallmarks. Tamura has even advocated a delivery at 2 am if the client urgently needs the soldering irons. Most of the clients for soldering iron were Japanese companies in the export zones. This was her company’s market segment. Her constant sales pitch was her market niching strategy; that her products were more expensive than the competitors’ products but her post-sales service was reliable. She constantly harped on customer value. Through the years, Okasaki became the preferred supplier of Japanese companies in the Philippines. One of Okasaki’s clients is Matsushita Electric Philippines Corporation. This is part of the Matsushita Group of Companies, which is an electronic equipment producer. In 2005, the company changed its name to Panasonic Manufacturing Philippines Corporation. As Okasaki’s client, this company experienced savings in electrical consumption, production time and rejects when they started using Okasaki’s soldering irons. It was initially difficult to sell to them since the soldering irons from Okasaki are 20% more expensive than the competitor’s products. Used to niche marketing, Tamura relied again on selling high-quality soldering iron at a higher price. Okasaki’s satisfied clients urged Tamura to supply soldering iron tools aside from soldering irons. As a market nicher, it was easier for Okasaki versus its competitors to know the needs of its customers. Thus, Tamura started selling pneumatic soldering iron tools, which were sold to car companies. Initially, it was difficult to sell to penetrate the market for soldering iron tools. It took Tamura another year to have a sales breakthrough. Unfazed by the length of time to make a sale due to her past experiences, Tamura knew that she could gain clients because she was selling real tools as opposed to fake soldering iron tools in the market. From soldering iron tools, Tamura continued to sell electric screw drivers and parts to car companies. She also ventured to selling conveyor belts to other clients. Knowing that each product would have a product life cycle (Kotler et al, 2009), Tamura would be prepared to develop new products once existing products would experience declining sales. Familiar with the product life cycle strategy, she would always be on look-out for products that can be introduced to the company’s niche of growing clients. When the soldering iron experienced declining sales due to the unfavorable business environment for electronic products, Tamura knew that she should switched to other potential products that can be cash cows or stars. She began selling dispensing equipments for hard disk manufacturers. Sales were increasing until Intel moved out of the Philippines and the country was not spared from the financial crisis that started in 2008.
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While studying the market for fine dining, Tamura thought of selling high-end spoons and forks priced at 800 Philippine peso (or 17 U.S. dollars) per piece versus the 15 Philippine peso (or 0.32 U.S. dollar) per piece offered by the competitor. These would not be under the industrial products that Okasaki has been accustomed to selling but there are lines that are needed by high-end restaurants, hotels and airlines. Switching from industrial products to consumer products was easy for Tamura. In this niche, she became reliable in delivering best quality spoons and forks. Soon enough, she was also asked to supply cutlery, pots and pans. Her customers were airlines, hotels and high-end restaurants. Tamura thought of more products that were the domain of women entrepreneurs. She sold high-end fashion jewelry designed by Harumi, who is a famous Japanese designer based in Switzerland. Sales were good but were also affected by the financial crisis in 2008. She coped with the financial crisis by selling less for more. She sold less high-end jewelries at more expensive prices. Always on the lookout for new products to sell, Tamura thinks that she may venture into selling small-scale wind turbine in the near future. Instead of using electricity for household needs, this new product will harness wind power. Thus, it is more environment-friendly. Her strategy will be to build more product awareness among early adopters and dealers when this product will be introduced in the marketplace. A NEW BUSINESS OPPORTUNITY FROM THE BPO BOOM: THE BIRTH OF AIRILY CORPORATION On July 2007, a Japanese businessman was looking for a partner to sell videoconferencing equipment in the Philippines. Tamura saw this as a new business opportunity as the equipment was different from yahoo and skype because of its high resolution. She also saw that this equipment will not require the user to report to a conference room where the video conferencing equipment has been set up as in the case of the video conferencing facilities of the Philippine Long Distance Telephone Company. At this time, she also wanted to set up a BPO company. Tamura became President of Airily Corporation in the Philippines. Although Airily is engaged in video conferencing equipments, internet provided convergence and video on demand, its major income would come from BPO activities. BPO activities emerged because of rising labor costs in developed countries such as the U.S., Canada, U.K. and Australia. Businesses in these countries outsource their non-core business functions to developing countries. Processes that are outsourced include call centers, medical transcription, animation, engineering design, legal transcription, payroll and other financial services (Alave, 2006). Outsourcing and offshoring are cost-effective strategies that led the BPO boom (Friedman, 2005). In an interview with Manila Bulletin, which is a major newspaper in the Philippines, Tamura said that the Philippines has competitive edge against its rivals on the BPO boom
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(Retrieved October 24, 2009 from nhttp://www.mb.com.ph/node/197600). According to her, there are many Filipinos who are capable of doing legal transcription, accounting, engineering, information technology and other high-end outsourcing services or non-voice BPO activities. She also believes that Filipinos excel in voice activities which include call centers. According to her, the country’s competitiveness lies in the low cost of services, good infrastructure and good business environment. The Philippine advantage in the BPO boom is as follows (Suplico, Garcia and Esguerra, 2007):
1. English Proficiency. Next to the U.S. and the U.K., the Philippines is considered as the third largest English-speaking nation. Since English is the major language used in most BPO activities, the Philippines is an ideal hub for BPOs. It is known for its dedicated, customer-friendly and Englishspeaking human resources. Affordable Telecommunication Infrastructure and Office Spaces.The Philippines has an affordable telecommunication infrastructure and abundant office spaces that have lower lease rates than Singapore, India and China. The Global 50 index has reported that the Philippines has one of the lowest office occupancy costs inspite of the growth of BPO. The country’s 12-hour difference with the West also makes it an ideal BPO hub, especially for call centers. World- Class Technologies.There are available world-class technologies like Customer Relationship Management (CRM) softwares, interactive voice response systems, computer telephony integration technologies, call management systems, automated quality monitoring and recording systems that BPOs can use. Lower Turn-Over Rate Compared to U.S. and Indian counterparts. Even if there is high personnel turnover in the Philippine call center industry, Philippine agents stay for an average length of 2.5 years versus only 8-9 months for their U.S. counterparts (Manaloto, 2006). Lower Costs.A Philippine agent is said to cost 1/5 as that of his U.S. counterpart. Philippine agents have lower salaries than their Indian counterparts (Ros, 2006).

2.

3.

4.

5.

6. Highly-Trainable and Adaptable Work Force. Filipinos are highly-trainable and adaptable versus their counterparts in India, China and other Asian countries (Ros, 2006).

The heart of this BPO boom is voice activities or the call centers (70% to 80% of the market). Call centers are customer service operations where the agent, or commonly known as the customer care specialist or customer service representative, handle telephone calls on behalf of the client (Manaloto, 2006). The other non-voice activities (30% of the market) include general transcription, subtitling of films, finance, accounting, research, logistics, engineering, retail, etc. Most of the call center work that is done in the Philippines focuses on high-end work which requires highly-skilled and educated agents (Manaloto, 2006). Although the call center industry started with technical support, it is now capable of handling any customer interaction
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from travel services, financial services and online business support. It is now rare for Philippine call centers to handle low-end work such as dealing with directory assistance. The top call center companies such as Convergys, Sykes, Teletech, West and Sitel have set up offices in the Philippines. Most call centers handle inbound calls. The companies that have outsourced their call centers in the Philippines are Citibank, Dell, American Express, Microsoft, Procter and Gamble, Nokia, Chevron, MCI, JP Morgan, etc. The size of a call center operation is described in terms of “seats” (Manaloto, 2006). A seat is a station with 2 or 3 people alternating in several shifts to provide a 24-hour call center service (Manaloto). Since these people have to work at odd hours, the personnel turnover in the call center industry is high. Because of its high growth rate, the Philippine call center industry is considered a sunshine industry. Table 2 shows the growth trends of the Philippine call center industry versus the call centers in other Asian countries (Manaloto, 2006):
Table 2 Growth Rates of Asian Call Centers Country China HK India Malaysia Philippines Singapore Thailand Total Seats in 2003 38,000 10,000 96,000 12,000 20,000 10,000 11,000 Total Seats in 2004 53,500 10,700 158,000 13,750 40,000 10,100 12,650 % Growth 41 7 65 15 100 1 15

Table 2 shows that the Philippine call center industry had the highest growth rate (100%) from 2003 to 2004. As number one in the Asian region, it secured 20% of the total global market share in call center services in 2004 (Philippine IT Offshore Network, 2009). Philippine call centers have less seats but higher growth rates compared to call centers in other Asian countries (Ros, 2006). According to Ros, all the seats in Philippine call centers are often sold out (2006). The Philippine call centers earned 862 million U.S. dollars in 2004 and employed 70,000 Filipinos (Manaloto, 2006). In 2005, the Philippine call centers earned revenues exceeding one billion U.S. dollars and employed 112,000 call center professionals (Philippine IT Offshore Network, 2009). The Philippine IT Offshore Network has predicted that the industry will generate more than a million jobs and over 12 billion U.S. dollars in revenues in 2010 (2009). Encouraged by this bright outlook in the BPO industry, especially in the call center industry, Airily engaged in BPO activities. Tamura studied the niche where Airily can excel.

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She found this market niche in non-voice BPO activities. Thus, Airily has handled the following activities for clients in Canada, U.K. and U.S.:
1. General Transcription. These involve transcribing thesis, books and lectures. Airily has also been handling academic publishing. Academic journals which used to be published in the US or other developed countries are now outsourced to companies such as Airily. Subtitling of films. Films which are in other languages should have English subtitles. Airily handles this work.

2.

Tamura believes that because of the U.S. financial crisis which started in 2008, there would be an outsurge in BPO activities because companies would like to minimize their costs. Using market niching at Airily, Tamura acquired new clients who paid three times more than the regular price for the specialized jobs such as transcribing lectures, subtitling of films in English and academic publishing. As with Okasaki, Tamura believed in offering customer value; best product and best service. While Airily’s BPO activities result to steady sales, Tamura has gotten 40 subscribers for Airily’s video conferencing equipment. The subscribers pay a subscription fee of 40 U.S. dollars a month aside from paying for the video equipment which is 700 U.S. dollars. The equipment is very portable. It has customer-friendly instructions on how it would be set-up and connected to a TV and Local Area Network (LAN). Just like the previous products that she handled, the sales for the video equipment took off in 2009, some 2 years after Airily was organized. In the future, Tamura hopes that their subscribers would enjoy multipoint video conferencing which means that a subscriber can connect to 8 different screens on various parts of the world. BUSINESS ENVIRONMENT Okasaki Industrial Corporation and Airily Corporation have been affected by the macroenvironment which include demographic, economic, natural, technological, political and cultural factors (Kotler et al, 2009). The financial crisis that started in 2008 caused Intel to pull out of the Philippines. This affected the sales of Okasaki’s dispensing equipment for hard disk. The business slowdown in 2009 has affected the overall sales of Okasaki’s industrial products. Typhoon Ondoy which flooded Manila, the Philippine capital, on September 26, 2009 damaged the goods in Okasaki and Airily’s warehouses (http://www.philstar.com). The extent of the damage is still being evaluated. Tamura has remained optimistic in spite of the challenges in the economic and natural environment. She said that the upcoming Philippine election on May 2010 has caused the increase in the demand for Airily’s video conferencing equipments because political candidates

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are now investing in these to gain more exposure. She also plans to target the Overseas Filipino Workers as a niche for these equipments in the near future. The technological environment has been favorable for Okasaki’s industrial products and Airily’s BPO activities. Both Okasaki and Airily have continued to enjoy the support of the Japanese firms in the Philippines. Tamura has continued to practice market niching in Okasaki and Airily. Armed with product life cycle strategies, she has noted down the trend in sales of companies’ various products. Although she has not been discouraged by zero or low sales, she has looked forward to rapidly growing sales and peak sales of various product lines. When there is a steady decline in sales, she has to reduce her price or phase out weak items. She knows that if she has been successful in managing a busy household for a husband and three growing kids, she believes that there is a bright future for Okasaki and Airily. After all, business success is secondary to having a happy and successful family. REFERENCES
Alave, Kristine (June 9-10, 2006). Back-Office Business Growing in Local Outsourcing Industry. BusinessWorld. Brannigan, T. (2005). The New Age of Female Entrepreneurship. Young Money Media. Retrieved on February 16, 2009, from http://www.youngmoney.com/entrepreneur/advice/041019 Dumlao, Tina Arceo. Go Girl Into Business. Retrieved on November 11, 2009, http://showbizandstyle.inquirer.net/sim/sim/view/20090301-191677/Go-Girl-Into-Business. from

Friedman, Thomas (2005). The World is Flat: A Brief History of the Twenty-First Century. U.S.: Farrar, Straus and Giroux. Hill, Carraher, and Carraher. (2004). Women Entrepreneurs: A Driving Force. Retrieved on January 28, 2009, from http://www.sbaer.uca.edu/research/asbe/2004_fall/10.pdf Kerin, Roger, Steven Hartley, Eric Berkowitz, and William Rudelius (2006). Marketing. U.S.: McGraw Hill International. Lopez, Edu. Philippines Competitive http://www.mb.com.ph/node/197600 on BPO. Retrieved on October 24, 2009, from

Kotler, Philip, Gary Armstrong, Swee Hoon Ang, Siew Leong, Meng Leong, Chin Tiong Tan and Oliver Yau HonMing (2009). Principles of Marketing: A Global Perspective. U.S.: Pearson/Prentice Hall. . Manaloto, J. (2006). A Marketing Research Study About Critical Call Center Skills. A Thesis Paper Presented to DLSU’s Marketing Management Department. Philippines Manila Flooded by Typhoon Ondoy. Retrieved on October 24, 2009, from http://www.philstar.com

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Page 73 Personal Communication with Cecilia G. Tamura, General Manager of Okasaki Industrial Corporation and President of Airily Corporation (October 16, 2009). Manila, Philippines Personal Communication with Malu Ros of Convergys (May 2006). Jacksonville, Florida, U.S. Philippine IT Offshore Network (2009). The Growing Call Center Industry in the Philippines. Retrieved on November 10, 2009, from http://www.piton-global.com/resource18.html Suplico, Luz; Garcia, Leonardo and Esguerra, Renato (2007). International Marketing. Publishing. Women Entrepreneurs Want Training. Retrieved http://www.womenentrepreneurship.org/we_new/news/26 on November 11, Philippines.C & E

2009,

from

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