1

Alcoa

Alcoa-Promotion

Promotion is an important part of the marketing strategy irrespective of the type of product or the nature of the

industry. It may, on basis of this, however take form of Above the Line or Below the Line promotions. ATL

promotions are necessarily used when the product is to marketed at the mass level (Crane, 1993). BTL

promotions work well when the target is a certain niche market (Economy-point.org, 2006) although this also

follows with the ATL promotions for the mass market.

As a part of its promotional plans, Alcoa has been engaged in various environment friendly promotional

campaigns. For instance, it’s the company initiated the Energy Efficiency Network the aim of which was create

amongst its employees, value for efficient utilization of energy as well as to contribute to positive climatic

change. This, and the various other initiatives including the Greenhouse Gas Network, has been a contributor to

Alcoa’s positive image as an organization concerned with reducing the impact that its production plants might

be having on the environment. Such campaigns help strengthen the brand image and thus improve buyer trust in

the company and its products. Also, just as the Iceland government invited the company to set up a smelting

plant due its concern for production that has the minimum effect on the environment and that propound efficient

utilization of resources. With the same perspective, the company has also announced fellowships to encourage

knowledge creation about leaders in the field of conservation and sustainability.

Along with this, the company uses these direct selling to it business customers. However, its buyers such as

Ford Motors act as a catalyzing agent for its products when it advertises about using its products for its

automotives. For instance, Ford advertised about the usage of Huckbolt fasteners which is a product of Alcoa.

It also shows its presence in various related events such as a short introduction of the company and its products

at Paris Air Show 2009. Such activities help the company to promote itself amongst its existent and potential

clients alike also allowing it to introduce any new products that it may be producing.

Top Grade Papers

2

Alcoa- Strategy Analysis

As the largest supplier of aluminum products to various industries within and outside USA, Alcoa’s

management has been successfully implementing various strategies to ensure the long term profitability of the

company. Its management staff comprises of the individuals with years

Considering generally, one is able to observe that Alcoa is related to various industries that are operating either

at the micro consumer level or macro level relating the operations to government and semi-government

organizations. With a quality long experience working either in the same industry with other companies or with

organizations that have contributed to their excellent skills in sales and marketing. that is unmatched in the

industry, this company has a history 120 years of aluminum products supply to various industries including

commercial transportation, aerospace, consumer goods etc.

Analysis of the marketing strategies employed by the company follows this section.

Product

The two products under consideration include Aluminum Lithium Alloys and the buses. The former is related to

the Aerospace industry while the latter is concerned with the Commercial Transportation Industry.

Alcoa has been providing wheels, wheel accessories, extrusions, castings, rivets and bolts and many other

aluminum products to the commercial transportation industry. Amongst its clients is Ford motor company. This

only strengthens the company’s image as the quality product provider since Ford is a top ranked, world class

automobile manufacturer. And because the aluminum sheets and other aluminum products sold by Alcoa are

heat resistant, resistant to fungus and bacteria, and strong yet very light weight, it becomes an ideal choice for

automobile products including the light weight vehicles such as sedans heavy weight vehicles including the

lorries, trucks and towing vehicles. Now, the company’s introduction of specially designed eco-friendly bus

along with Yutong, China’s largest bus manufacturer, would allow it to profit too especially with the increasing

concern about the hazards to the environment.

Other than this, apart from the aforementioned features, the high quality aluminum sold by Alcoa is ideal also

for aerospace machinery including those used by NASA for its most important programs and launches. These

additional characteristics include moisture resistance, sound absorption, noise & vibration damping,

Top Grade Papers

3

electromagnetic wave blockage and recyclability. These features, along with high quality rating is what has

made Alcoa’s products the first choice for all industries.

Some also caters to some other industries including the consumer electronics, packaging and building and

construction.

By using a strategy of catering to multiple industries, firstly, enables the company to diversify the risk to a very

large extent. This is so because if one of the industries is undergoing a temporary slump, at least some revenues

would be realized from those that are under normal conditions. Also, this would enable the company to explore

innovative product opportunities in line with innovations that might be coming in to each of the industries.

However, with such a strategy, it is difficult to maintain a focus on all products and to track profitable

opportunities. With Alcoa, on the other hand, this isn’t much of an issue due, primarily to the sheer size of the

company and its operations. It would, however need to ensure that it has enough production capacity to satisfy

the demand in all relevant industries.

Pricing

A company can use various methods for pricing its products. In a highly competitive market, it is important that the

product is priced such that the consumer gets the same product at a lower relative price. In such a situation, in aim is to

maximize value to the consumer/ customer by offering the same quality at a lower price so that the customer sees benefit

in buying from the low price offering company. At another extreme end, is the high, premium price. This proves to be

effective when the target market is a certain niche capable of paying the price and can differentiate more expensive items

as a better offering. Such a pricing strategy would also work well when there are few competitors in the market and the

buyers have less options to choose from. This empowers the selling organization to charge a higher price for its products.

These principles apply to both consumer and business markets alike. Similarly, the seller may price the product according

to the price being charged by the rival firms in the same industry. The basis of the pricing technique used may be the

product cost (cost-plus pricing) or the profit (profit target pricing) objective.

As was pointed out by Klaus Kleinfeld (2010), Executive Vice President and Chief Executive Officer , Alcoa, the

aluminum products are being charged at a high price from the buyers. Specifically, the charged prices are approximately

15% percent above the market price. Look at this strategy critically, we observe that while this premium pricing strategy

would increase the company’s profits, it would also cause the company to appear expensive to the buyers. As a result,

especially during the current recessionary period, it may cause the buyers to switch to relatively lower priced aluminum

suppliers. However, because the quality of the material provided by Alcoa is unmatched by any other supplier in the

industry, no buyer concerned about the product quality is likely to switch at least very quickly. This would especially be

true for the aerospace industry due to the nature of sectors that it relates to it.

Top Grade Papers

4 Alcoa has recently shifted to following a pricing strategy based on the market price of core aluminum and related products

(Kleinfeld, 2010). Firstly, this strategy would allow the company to stay profitable in the long run. Having fixed price

contracts would have made it unable to take advantage of any price increases in the market. However, it must be noticed

as well, that a mark-to- market pricing strategy is going to negatively impact the profits if they market prices fall due to

any reason. Therefore, in order to reap positive results from such a strategy, the company may fix a certain percentage of

the price while leaving the remaining percentage dependent on the market forces. This way, at least some profit

realization would be ensured even during recessionary periods.

Promotion

The major contributor to its current position as a market leader is Alcoa’s high quality innovative aluminum products.

With this however, the concern for environment and efficient utilization of energy resources has immensely played a

supporting role in the company’s success as well. This is primarily because by doing so, while it continues to provide the

basic product to the buyers, it ensures its quest for achieving production methods that cause the minimum hazard to the

environment. Along with this, such CSR initiatives act as a strategy that indirectly results in high level of R&D to take

place in-house. As a result, two pronged objective is achieved- the buyers view it as a responsible firm buying from which

they can rest assured that no issues would be created against their own responsibility towards the environment. Along with

this, the R&D and practical measures carried out for energy conservation and efficient utilization of the resources may

translate in reduced production costs in the long term.

Alcoa is a business-to-business seller of aluminum products. This essentially limits the amount and type of promotional

activity that it can carry out (Fill, 2005). For instance, any other consumer oriented organization could utilize direct

advertisements for the target market or consumer promotions to encourage greater sales and brand building. Alcoa, on the

other hand, cannot use a similar strategy for its brand. Alternatively, what it does is that it leverages its association with

other B2C organizations such as Ford and Coca Cola when they include the usage of products manufactured especially by

Alcoa, in their advertisements. As a result, not only is the cost of marketing is saved but these associated companies play

the role of a spokesperson for Alcoa’s products.

Additionally, the company’s presence at some of the major industrial events allows it to create brand awareness, attract

more customers and stay abreast the most recent developments in the industry being undertaken by the rival firms.

Top Grade Papers

5

Placement

Placement represents various modes, methods and places that an organization chooses to distribute its products

to its customers (Frain, 1999). Alcoa’s distribution strategy is based on a combination of different modes of

getting the product to the buyer.

Alcoa has set up it distribution/ logistic centers across countries such as USA, Simi Valley, sand Aichach,

Germany. This allows the company to manage the distribution in all regions touching these centers. For

instance, it can easily furnish the demand generated from Europe, Asia Pacific and Australia from its

distribution hub in German. Similarly, the orders from North and South America can be taken care of by the

Simi Valley logistics center.

Along with this, Alcoa has been actively pursuing a strategy for mergers and partnerships. As a result of this

strategy, not only can improve its distribution channel in more countries but can also leverage the business

networks of the partner companies as well. However, the partnership strategy would only be fruitful if the

partner organization is reliable in terms of timely delivery (or whatever reason the partnership has been initiated

for). Not taking care in this regard can greatly impact the company’s current repute and potential for future

business with existent and potential buyers. Furthermore, its presence is found in more than 200 locations across

31 countries worldwide. Such as massive level of business network is essential for a business such as Alcoa’s

primarily due to the fact that it would enable it to promote and sell its product even in the currently untapped

countries through its existing offices. Once the business is strengthened in the territory, the company may set up

a separate officer thereof too.

Conclusion

The analysis of the company and its marketing strategy reveals some interesting points. It is important however,

to realize that certain tactics, such as premium pricing can back fire if a contingency plan has not been prepared

well in advance. The company may mitigate this issue by using some approach by which some portion of the

price can be kept fixed while the remaining stays variable with respect to the market forces. The distribution

strategy of the company is sufficiently adequate only if it also tries to ensure that the partner companies would

be efficient enough in working in alignment with the goals of Alcoa and not in opposite directions. The

promotional strategy for this B2B organization has been carefully designed and is appropriately serving the

brand building objectives of the company as well as attracting more buyers. Its inclusion in the major related

Top Grade Papers

6

events, is one example of this. Furthermore, the environment friendly and energy conservation initiatives taken

by the company would strengthen its position in the short as well as the long run by exposing it to various

opportunities that could be observed during the R&D process.

Finally, one observes that the company is operating as a supplier of aluminum products to various industries.

This reduces the impact of systematic risk related to one industry so that a slump in one does not completely

bring Alcoa’s business down. Yet, the company needs to realize the importance of high requirement for

maintaining focus on operations for all these industries because bad performance in one may impact its business

with other industries as well. However, the sheer size of the company, its operations and performance track

record may be used as an indicator of future good performance as well provided the same standards of product

quality is maintained as that is amongst the major factors impacting sales of aluminum and related products.

Top Grade Papers

7

References

The free library by Farflex Team. (2004). Alcoa Flexible Packaging Launches Distribution Partnership

with KSP of Korea. Retrieved from

http://wcom/Alcoa+Flexible+Packaging+Launches+Distribution+Partnership+with+KSP...-

a0124263193ww.thefreelibrary.

Alcoa official website team. (2010). Commercial Transportation. Retrieved from

http://www.alcoa.com/com_transport/en/advertising.asp

Alcoa official website team. (2010). Aerospace. Retrieved from

http://www.alcoa.com/aerospace/en/info_page/home.asp

Mullin, R., Cummins, J. (2002). Sales promotion

Alcoa official website team. (2010). Alcoa Executive Highlights Aluminum’s Successes and Shares

Bright Outlook Retrieved from

http://www.alcoa.com/aerospace/en/news/releases/2010_aluminum_successes_bright_outlook.asp

Bnet team. (2010). ALCOA, Inc. Q1 2010 Earnings Call Transcript Retrieved from

http://www.bnet.com/2462-14049_23-413024.html?tag=col1

Top Grade Papers

8

.

Top Grade Papers